Document ofThe World Bank

Report No: 25588 - IN

PROJECT APPRAISAL DOCUMENT

ONA

PROPOSED CREDIT

IN THE AMOUNT OF SDR 82.20 MILLION(US$ 112.56 MILLION EQUIVALENT)

TO INDIA

FOR THE

CHHATTISGARH DISTRICT RURAL POVERTY PROJECT

March 24, 2003

Rural Development Sector UnitSouth Asia Regional Office

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CURRENCY EQUIVALENTS

(Exchange Rate Effective January 2003)

Currency Unit = Indian Rupees1.00 Rupee = US$0.20

US$1.00 = Rs. 47.9

FISCAL YEARApril I - March 31

ABBREVIATIONS AND ACRONYMSAG Auditor GeneralAO Accounts OfficerAP Andhra PradeshAPPs Anti Poverty ProgramsAR Annual ReviewARCS Audit Report Compliance SystemBPL Below Poverty LineCAA&A Controller of Aid Accounts and AuditCAG Comptroller and Auditor GeneralCAPART Council for Advancement of People's Action

and Rural TechnologyCAS Country Assistance StrategyCBO Capacity Building OrganizationCDD Community Driven DevelopmentCG ChhattisgarhCEO Chief Executive OfficerCIG Common Interest GroupCQ Selection based on Consultants QualificationsDEA Department of Economic AffairsDGS&D Directorate General of Supplies and DisposalsDPIP District Poverty Initiatives ProjectDRDA District Rural Development AgencyDRPP District Rural Poverty ProjectEA Environment AgencyEIA Environmental Impact AssessmentEMF Environmental Management FrameworkEU European UnionFM Financial ManagerFMM Financial Management ManualFMR Financial Management ReportFMS Financial Management SystemGol Government of IndiaGoCG Govermnent of ChhattisgarhGP Gram PanchayatGS Gram SabhaHRD Human Resource DevelopmentIFAD International Fund for Agricultural DevelopmentIMI Institutional Maturity Index

IPM Integrated Pest ManagementJFM Joint Forest ManagementLEA Limited Environmental AssessmentM&L Monitoring and LearningMIS Management Information SystemMoU Memorandum of UnderstandingMP Madhya PradeshNCB National Competitive BiddingNGO Non Governmental OrganizationNRM Natural Resource ManagementOM Operational/ManualO&M Operation and MaintenancePESA Panchayat (Extension to Scheduled Areas) ActPFT Project Facilitation TeamPIP Project Implementation PlanPMP Pest Management PlanPMR Project Management ReportPRI Panchayat Raj InstitutionRD Rural DevelopmentQCBS Quality and Cost Based SelectionSC Scheduled CasteSHG Self Help GroupSOE Statement of ExpenditureSPU State Project UnitST Scheduled TribeTSP Tribal Sub-PlanTDS Tribal Development StrategyTOR Terms of ReferenceWHO World Health OrganizationZP Zilla Panchayat

Definitions:

Gram Panchayat: Elected village government representing one or more villagesGram Sabha: Village assembly comprising all eligible voters of the villageZilla Panchayat: District level government of elected representatives

Vice President: Mieko NishimizuCountry Manager/Director: Michael F. Carter

Sector Manager/Director: Constance A. BernardTask Team Leader/Task Manager: Luis F. Constantino/Madhavi M. Pillai

INDIACHHATTISGARH DISTRICT RURAL POVERTY PROJECT

CONTENTS

A. Project Development Objective Page

1. Project development objective 2

2. Key performance indicators 2

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2

2. Main sector issues and Government strategy 3

3. Sector issues to be addressed by the project and strategic choices 4

C. Project Description Summary

1. Project components 5

2. Key policy and institutional reforms supported by the project 6

3. Benefits and target population 6

4. Institutional and implementation arrangements 6

D. Project Rationale

1. Project alternatives considered and reasons for rejection 10

2. Major related projects financed by the Bank and/or other development agencies 11

3. Lessons learned and reflected in the project design 12

4. Indications of borrower commitment and ownership 13

5. Value added of Bank support in this project: 13

E. Summary Project Analysis

1. Economic 13

2. Financial 13

3. Technical 14

4. Institutional 14

5. Environmental 17

6. Social 18

7. Safeguard Policies 22

F. Sustainability and Risks

1. Sustainability 24

2. Critical risks 24

3. Possible controversial aspects 25

G. Main Loan Conditions

1. Effectiveness Condition 252. Other 25

H. Readiness for Implementation 27

L. Compliance with Bank Policies 27

Annexes

Annex 1: Project Design Summary 28Annex 2: Detailed Project Description 31Annex 3: Estimated Project Costs 51Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 52Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 54Annex 6: (A) Procurement Arrangements 55

(B) Financial Management and Disbursement Arrangements 61Annex 7: Project Processing Schedule 69Annex 8: Documents in the Project File 70Annex 9: Statement of Loans and Credits 71Annex 10: Country at a Glance 75

MAP(S)IBRD 32254

INDIAChhattisgarh District Rural Poverty Project

Project Appraisal DocumentSouth Asia Regional Office

SASRD

Date: March 24, 2003 Team Leader: Luis F. ConstantinoSector Manager/Director: Constance A. Bernard Sector(s): General agriculture, fishing and forestry sectorCountry Manager/Director: Michael F. Carter (50%), Sub-national government administration (30%),Project ID: P076467 Other social services (20%)Lending Instrument: Specific Investment Loan (SIL) Theme(s): Other social development (P), Poverty

strategy, analysis and monitoring (S), Other ruraldevelopment (S)

Project Financing Data . --- . *n-,, -*

[ ] Loan [XI Credit ] Grant I ] Guarantee [ Other:

For LoanslCreditslOthers:Amount (US$m): US$ 112.56 million equivalent

Proposed Terms (IDA): Standard CreditGrace period (years): 10 Years to maturity: 35Commitment fee: 0.50% Service charge: 0.75%

LFirianj Souree .a .'' . 2 -fLoeal; i. .7- rF6beig n, - .TotallBORROWER 5.40 0.00 5.40IDA 110.26 2.30 112.56LOCAL COMMUNITIES 11.39 0.00 11.39Total: 127.05 2.30 129.35

Borrower: GOVERNMENT OF INDIAResponsible agency: GOVERNMENT OF CHHATTISGARHAddress: Panchayats and Rural Development Department, Government of Chhattisgarh, Dau Kalyan Singh Bhawan,Raipur, Chhattisgarh, IndiaContact Person: Mr. M.K. RautTel: +91-771-2221358 Fax: +91-771-22341 10 Email: dpip.cg@rediffinail.com

Estimated Disbursements ( Bank FY/US$m):¢,FY V.1 - .;-.2003 2o04 2 . ,005' 2006 2007 809 : , rT ,2O8. .

Annual 1.13 7.96 24.27 38.04 28.00 10.29 2.87Cumulative 1.13 9.09 33.36 71.40 99.40 109.69 112.56

Project implementation period: 5Expected effectiveness date: 05/31/2003 Expected closing date: 03/31/2009

A. Project Development Objective

1. Project development objective: (see Annex 1)

The project's development objective is to improve opportunities for the poor and vulnerable, especiallywomen and tnbals, to meet their own social and economic development objectives. To achieve thisobjective the project would: (i) create infrastructure and income opportunities for the rural poor; (ii)empower active groups of disadvantaged people; and (iii) support village governments in becoming moreresponsive and effective in assisting them.

The project builds on the lessons from the three District Poverty Initiatives Projects (DPIPs) underimplementation in India [MP DPIP (Cr. 3430-IN), AP DPIP (Cr. 3332-IN), and Rajasthan DPIP (Cr.3339-IN)]. Chhattisgarh was created as a state on November 1, 2000, and was previously part of MadhyaPradesh (MP), sharing with MP a similar legal, policy and institutional framework. Therefore, manyaspects of the design of MP DPIP are immediately relevant for Chhattisgarh.

2. Key performance indicators: (see Annex 1)

o number of families benefited;o average cost of subprojects compared with government standards;o increase in income of project beneficiaries;o increase in access to clean drinking water by poorest habitations in each Panchayat;o reduction in migration among beneficiaries;o participation of disadvantaged people, particularly women and tribals, in subproject activities and

decision-making;o community contributions in cash;o number of beneficiaries with access to banking system;o improved people's perceptions of Gram Sabhas (GSs) and Gram Panchayats (GPs); ando number of GSs and GPs practicing participatory budgeting.

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: R2002-0203[IDA/R2002-0177;IFC/R2002-0214] Date of latest CAS discussion: 12/05/2002

A key objective of the Bank Group assistance to India is to reduce poverty by strengthening the enablingenvironment and supporting critical pro-poor interventions. The Country Assistance Strategy (CAS)highlights a specific need of improving government's effectiveness through decentralization andaccelerating pro-poor rural development through more effective delivery mechanisms, and bystrengthening the rural safety net and beneficiary participation. The CAS also includes a focus on stateswith high poverty, or where a high development or demonstration impact is likely, in addition to statesembarking on a comprehensive program of reforms. Chhattisgarh and the proposed project meet thesecriteria. The proposed project targets some of the poorest villages in Chhattisgarh, and is to beimplemented by communities and local governments thus addressing both the CAS objectives ofpro-poor rural development and decentralization. Chhattisgarh, a new state, has already demonstrated itscommitment to poverty reduction, for example, through the effective implementation of pro-poorprograms, such as computer education for girls and pensions for destitute women, and through its StatePolicy for Women Empowerment. Chhattisgarh is in reasonable fiscal health compared to most otherstates and is focusing first on strengthening its basic institutional framework. The state has alsocommitted itself to maintaining a lean administration and relying on the private sector and localgovernments for development and delivery of public services. The proposed project would have an

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important demonstration effect at a time when new policies and institutions are being created.

2. Main sector issues and Government strategy:

Among the main rural sector issues throughout India, including Chhattisgarh, are (1) the high rural

poverty and lagging human development indicators in rural areas; (2) the need to improve the

effectiveness of public expendituies; and (3) the lack of success in fostering more responsive,

accountable and inclusive rural institutions through rural decentralization. Despite the considerable

success in establishing elected local governments in rural areas, India's rural institutions are still plagued

by poor governance and the country continues to have some of the poorest social indicators in the world

despite the large share of public spending targeted for rural development.

Rural Poverty: Poverty in Chhattisgarh remains pervasive, and is not much different from the parent

State of Madhya Pradesh. About 43% of the population lives below the poverty line (BPL), and among

these, the conditions of the tribal and scheduled caste populations, which together amount to 57% of the

BPL population, are particularly bad. About 42% of the rural population does not have access to either

electricity, safe drinking water or sanitation. Rural areas have high levels of migration which worsens in

periods of drought. One of the reasons behind poverty and low human development indicators is the

inaccessibility of many villages. Women and tribals are among the most disadvantaged groups. While the

gender ratio is the second highest in India after Kerala, female literacy is low (21 percent in rural areas)

and infant mortality is high. Literacy is lower among tribal people (25 percent) and tribal women (11

percent) than for the population at large (37 and 21 percent respectively). Tribal families live on the

margin of the agrarian economy serving it with their cheap labor and skills. Tribal people constitute 70%

of the work force in the state and are mostly employed in the primary sector.

Anti-poverty programs: Today, the central and state governments spend close to 3% of state GDP in

rural development programs in Chhattisgarh. While this high level of expenditure shows the commitment

to rural poverty alleviation, there are concerns regarding the effectiveness of these expenditures. Key

issues include: proliferation of programs; tied funds and supply driven investments; poor targeting; lack

of funding for group based activities; high administrative costs; complex procedures; by-passing of

emerging local governments; lack of transparency; and dubious sustainability of benefits.

Rural decentralization: Despite the 73rd Constitutional Amendment of 1992 that created local

governments in rural areas and GoCG's commitment to rural decentralization (such as increased

expenditure authority, knowledge hubs at the Gram Panchayat (GP) level, etc.), obstacles still stand in

the way of this process and in the emergence of effective and inclusive rural governments. First, local

governments do have neither the capacity nor the means for basic public management and service

delivery. Second, there is a need to improve the capacity for collective action and inclusion, particularly

in non-tribal villages. Third, while committed to deepening pro-poor decentralization, the government

lacks the expertise to do so.

Government strategy. GoCG's poverty alleviation strategy identifies six priorities:

* developing partnerships with funding organizations and NGOs to reach grassroots level

beneficiaries more effectively;* promoting accountable Panchayati Raj institutions that deliver pro-poor planning and effective

services;* greater empowerment of the poor, especially women and scheduled castes and scheduled tribes,

through the formation of Self-Help Groups;* better management of natural resources and common property at the Panchayat level;

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a more effective investment in infrastructure to provide sustainable employment to the poor, and toreduce migration; and

o improving delivery of education, health, drinking water, sanitation and roads.

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

The state government requested the Bank to support a project to: (1) reduce rural poverty; (2)demonstrate to the numerous stakeholders (state and local governments, communities, NGOs) innovativeand effective ways of addressing the needs of the poor; and (3) improve local governments, deepeningdecentralization.

To reduce rural poverty, the project would:

o improve social, economic and productive infrastructure and public services, and create incomeopportunities for the poor in about 2,000 villages.

To demonstrate more innovative and effective ways of addressing rural poverty, the proposed projectwould:

o finance community and village investments to be decided by beneficiaries;o empower disadvantaged groups by putting funds under their direct control in their bank accounts;a avoid bureaucratic interference and allow rural people to procure technical and NGO support;o support groups that self select themselves around common interests and problems;o ensure inclusion and participation by appropriately targeting communications and information

towards the most disadvantaged by closely monitoring participation and inclusion in localdecision-making processes, and tying subproject approval and budgets to the quality of thisdecision-making;

o ensure transparency, widespread infornation, communications and learning about the project'sand group's performance, successes and failures, through formal and informal mechanisms; and

o facilitate changes in attitude and behavior of institutional stakeholders through human resourcedevelopment.

To improve local governments, the project would:

o require that all commnunity and village investments be approved in a Gram Sabha (villageassembly);

o ensure ownership, create credibility and foster a culture of local financing, cost recovery andtaxation by requiring cash contributions for group subprojects and establishing village funds tobe financed by communities;

o increase the capacity of local governments for financial management, participatory budgeting(Panchayat plans) and dissemination of information;

o put in place a graduation process by which, in order to access more project resources, localgovernments (GPs and GSs) would need to first demonstrate that the poorest habitations haveaccess to clean drinking water, and that participatory methods and adequate financialmanagement are bemg used;

o co-finance subprojects in Panchayat plans (village plans);o increase the capacity of four training institutes in Chhattisgarh to provide support to PRIs; ando provide support to GoCG on policy matters related to decentralization.

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C. Project Description Summary

1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost

breakdown):

, ' ''l ' f..'. ' W, , ,,-/; - l. _-' i,' _. ' - ..' ; ' lIndicative. Biak-.' .n -%of

*.;,,~ i. :,, .Component: .. co..s .Cots % of financing Bank-(US$M) ,- Total. . (US$M). . financing

(1) institutional and human capacity building: (a) fornation 23.57 18.2 18.22 16.2

and strengthening of organizations; (b) comrnunicationsand information; (c) human resource development; (d)

strengthening of Panchayats; (e) monitoring, learning and

special studies; and (f) project administration105.78 81.8 94.34 83.8

(2) Community Investments:(a) matching grants for community investments; (b)

matching grants for Panchayat plans; (c) village fund

(Gram Kosh); and (d) innovations fundTotal Project Costs 129.35 100.0 112.56 100.0

Total Financing Required 129.35 100.0 112.56 100.0

Institutional and Human Capacity Building would create an enabling environment and capacity for

project success and sustainability. It would consist of (a) Formation and Strengthening of Organizations

to recruit and build the capacity of NGOs and Project Facilitation Teams (PFTs) in supporting groups of

the most disadvantaged people in accessing project resources; (b) Communications and Information to

ensure that the project and its rules are disseminated to all target beneficiaries through appropriate

means; (c) Human Resource Development for project stakeholders to build skills and change behavior

through orientation, reward and perfornance appraisal, and supply-driven and demand-driven training,

(d) Strengthening of Panchayats to develop training programs, supporting training institutes and

delivering training on a range of subjects from financial management to participatory planning for the

Panchayats in the state to enable them to deliver services to the poor; (e) Monitoring and Learning and

Special Studies to support information gathering about the project, carry out special studies, analyze the

information and communicate lessons to project beneficiaries and decision-makers; and (f) Project

Administration to focus on day-to-day project management and to support executing agencies at the

district and village levels.

Community Investments would consist of the investment part of the project and would include: (a)

Matching Grants for Community Investments to finance collective income-generating activities to be

decided and proposed by groups of poor people such as micro-imgation, drinking water, small spot dams,

land improvements, mnicro-enterprises, animal husbandry, etc.; (b) Matching Grants for Panchayat Plans

to finance investments in village infrastructure and other public goods such as road ugrading, drinking

water, village ponds, village markets, community halls, schools, etc., included in participatory Panchayat

Plans; (c) Village Funds to be entirely financed by community contributions and to finance operation and

maintenance of village infrastructure as well as further village development beyond the life of the Credit;

and (d) Innovations Fund to provide small grants for demonstration subprojects to be initiated by PFTs,

NGOs, private sector, or any other entities.

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

The project would seek to establish processes demonstrating to government and other stakeholdersoptions for reforms to improve:

o governance of district and village governments, enhanced collective action at the village level,local resource mobilization, monitoring and better inforrnation flow;

o public expenditures, through more efficient and effective delivery of services and ruraldevelopment programs for the poor, and improved cost recovery;

o access to the financial system, by opening bank accounts in the name of communities, assistingthem with their first interactions with bank officials, and changing perceptions of banks of theirreliability as customers; and

o administrative reform, through greater accountability, transparency and responsiveness of thelocal administration to locally elected officials and constituents.

3. Benefits and target population:

Benefits (see Annex 4). The major benefits to the rural poor participating in the project wouldinclude:

o increased incomes from greater access to productive assets (infrastructure, skills and resources);o greater capacity of disadvantaged groups for collective action; ando more responsive, accountable, effective and inclusive Gram Panchayats and Gram Sabhas.

Target Population. The target population would be about 150,000 families (750,000 people) amongthe most socially and economically disadvantaged in Chhattisgarh. Three mechanisms for targetingwould be used:

o geographic targeting by first selecting the poorest two or three blocks (depending on districtsize) in each district and the poorest villages (for a total of 2000 villages) within these blocksaccording to objective criteria developed by GoCG (Annex 2); blocks would be selected on thebasis of published data, and villages would be setected after field visits;

o group targeting by actively putting in place a communications strategy about the project targetedat the poorest and most marginalized groups first by promoting collective action, organization,information and skills among these and by enhancing their ability to negotiate with formalorganizations and demand project and other program resources; and

o individual targeting for income generating activities to be carried out by the Gram Sabhas(village assemblies) based on the following criteria: (a) all Scheduled Castes and Tribes; (b) allhouseholds with migrant wage earners; (c) households without permanent dwellings or whosehouses need repair; (d) women and women headed households; (e) all landless and marginalfarmers; and (f) lower 70% of households ranked in order of poverty in a participatory way.

4. Institutional and implementation arrangements:

Executing agencies:

Common Interest Groups: Common Interest Groups (CIGs) would be the key organizations of the poorin project villages. These would be either existing groups such as self-help groups, forest comrnittees,watershed associations, savings and credit groups or groups as yet to be forrned. Disadvantaged peoplewould self select themselves and come together around a common need or an interest and develop asubproject concept, plan and budget.

Gram Sabhas (Village Assemblies): Gram Sabhas would be responsible for identifyfing the target

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beneficiaries in each village based on objective wealth ranking criteria, would approve CIG subprojects,

Gram Panchayat plans and capacity building activities, would monitor subproject implementation (for

both CIG and GP), would determine how local contributions for village investments would be collected,

would review all aspects of subproject management by CIGs and Panchayats, would evaluate the

performance of GPs and PFTs, would decide on the use of the Village Funds (see below), would ensure

coordination with other programs, and would address any disputes arising at the village level.

Gram Panchayats (Village Governments): Gram Panchayats would be responsible for calling and

chairing Gram Sabha meetings, would execute the decisions of the Gram Sabha, would prepare village

plans, budgets and public subprojects in consultation with the Gram Sabha, would disseminate DRPP at

the village level, and would assist villagers in forming CIGs.

Project Facilitation Teams: Project Facilitation Teams, either specially trained groups of government

staff or NGOs, would be the "stewards" of the "rules of the garne". They would assess the quality of

CIGs and Gram Sabhas in terms of participation, would be the first to disseminate the rules of the

project, would ensure the authenticity of the wealth ranking exercise, would initially assist GPs with the

formation of the first groups, and would be available as facilitators and resource people to assist, if

requested, with all aspects of project implementation at the village level. About 40 PFTs would be

formed, with about 4 to 5 people, covering about 25 villages each. Four PFTs are already functioning in

the pilot district of Bilaspur. All PFTs would be in position within six months of start of implementation.

About 20 percent of the PFTs would be staffed and monitored by NGOs and the other 80 percent by

govemment staff seconded to the project. Both NGOs and government staff would receive special

orientation and training related to their roles. To the extent possible PFTs would mclude women, tribal

people and members from the project villages.

Zilla Panchayats (District Governments): Zilla Panchayats would be the key institutions in charge of

project implementation in each district. For administrative purposes, they would be supported by the

Chief Executive Officer and staff specifically dedicated to the project (with expertise on financial

management, gender, tribal and environment issues, communications, monitoring and human resource

development). They would define budget ceilings for CIGs and GPs based on population and

performance, would disburse to CIGs and GPs, would monitor all aspects of project implementation,

would manage the communications campaign, and would ensure compliance with the tribal strategy and

environmental framework. They would also be responsible for PFTs, and for the capacity building

programs. Finally, they would ensure coordination and complementarity with other government

programs.

Coordination Committee and State Project Unit (SPU): At the state level, the project would be

overseen by a Coordination Committee chaired by the Chief Minister and including the Ministers of

Rural Development, Finance and Tribal Affairs and others (See Annex 2). Govemment Orders for this

purpose have been issued. The committee would meet twice a year to address issues of coordination with

other government programs and agencies. An SPU has been established in the Panchayats and Rural

Development Department and is responsible for the administration of the project. It is staffed with a

Project Director and includes seven staff members covering the following areas: financial management,

procurement, communications, tribals and environment, monitoring and leaming, and capacity building.

Implementation Arrangements:

Core Processes: The project would be implemented through nine core processes: (1) human resource

development, (2) strengthening of Panchayats, (3) communications and information, (4) formation and

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strengthening of organizations, (5) community investments of CIGs, (6) Panchayat plans, (7)establishment of village funds, (8) funds flow, and (9) monitoring and learning and special studies.

(1) Human Resource Development would ensure that (a) project staff and PFTs share projectvalues and have the capacity to contribute to project objectives; and (b) beneficiaries can develop theskills (technical and non-technical) needed to implement and manage subprojects, to make informedchoices and contribute to village development. Human resource development would be the responsibilityof one or more Capacity Building Organizations (CBOs - these could be NGOs or government agencies)which would cover several districts. CBOs would be supervised by a capacity building coordinator in theSPU.

(2) Strengthening of Panchayats would assist Panchayats to attain a basic level of capacity forfinancial management, accounting, participatory village planning, revenue generation, access togovernment schemes, information and knowledge dissemination and transparency. These Panchayatswould also be eligible to receive technical assistance on special activities undertaken by them, through ademand driven process. Finally, it would also strengthen the state training institutes responsible forcapacity building of Panchayats.

(3) Communications and Information would ensure that the target population has full knowledgeof the project, its rules, and funds available, as well as of other development programs and of decisionstaken by implementing agencies. Communications would be the responsibility of the GPs, PFTs, ZPs andSPU, which could contract out services at their level.

(4) Formation and Strengthening of Organizations would ensure that disadvantaged people(women, low caste, tribals) have the first opportunity to organize themselves into groups capable ofvoicing their demands, accessing project resources and eliciting responses from local governments andother project organizations. This activity would also assist CIGs involved in similar activities indeveloping higher level agency functions and in linking up with the private sector and markets.

(5) Community investments of CIGs would ensure that disadvantaged groups have a choice overlocal investments, control the funds, and are responsible for their implementation. CIGs would identifyand submit subproject proposals (primarily for income generating activities), as they become ready, tothe Gram Panchayats, which would call a meeting of the Gram Sabha to review and approve (or modify,or reject) them. CIGs would contribute 5% in cash towards project costs.

(6) Panchayat Plans, covering public goods and services within the functions devolved toPanchayats in the State Panchayat Act, would be elaborated annually in a participatory manner andtaking into consideration available schemes, own resources and the funds available from DRPP. Thisplanning process is currently underway in Chhattisgarh, and the project would improve its quality andco-finance specific subprojects included in the Panchayat Plans of the poorest Panchayats. The projectwould initially allocate a fixed budget to each Panchayat based on population (US$5 per capita). Beforebeing eligible for an additional budget, Panchayats would need to meet the following criteria: (a) positivesupport to the project through communications, CIG formation and conducting of participatory GramSabhas; (b) provision of safe drinking water to the poorest habitation from project sources or other

funds; and (c) satisfying basic financial management standards. All GP subprojects would requirecommunity contributions of up to 5% in cash, and the GS would decide how funds would be raised. ThePanchayat plans would be discussed and approved in a Gram Sabha.

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(7) Funds Flow: The project has been budgeted in the Panchayat and Rural Development

Department budget as an identifiable line item for the first year and this would continue for subsequent

years. GoCG would pass on the funds to the SPU in the Panchayat and Rural Development Department

through a Treasury check. GoCG would ensure adequate advance fund reserves with the SPU during the

entire project period. During the first year of implementation, GoCG would make the entire annual fund

requirement available to the project and in subsequent years make six monthly releases equivalent to

50% of the fund requirement on submission of the annual work plans by the SPU. The SPU would retain

a part of the funds to finance its own activities (costs associated with M&E, special studies etc.) and pass

on the balance to the sixteen ZPs for project implementation. The ZPs would use the funds for activities

at the district level, including subprojects being implemented by CIGs and GPs. Both at the SPU and at

the ZP levels, the project funds would be maintained in a separate bank account earmarked for the

project. CIGs would not need to be registered bodies. The Financial Management Manual and

Operational Manual along with the subproject Agreements entered into between CIG/GP and ZP on

approval of the proposal would include information on the agreed financial management arrangements.

(8) Village Funds (Gram Kosh) would be funds financed through CIG contributions to cover

operation and maintenance costs and further village development beyond the lifetime of the project. They

would thus help ensure the sustainability of subprojects. These CIG contributions would be deposited in

the Village Fund bank account and would not be used to finance the specific subproject investment they

are associated with.

(9) Monitoring, Learning and Special Studies would ensure that project stakeholders learn from

the project successes and failures. Monitoring would cover (a) inputs, outputs and outcomes; (b)

performance of project organizations; (c) project processes; and (d) project impacts. Monitoringfor

supervision would initially focus on: (i) quality and quantity of participation of different social and

economic groups in the CIG, GS and GP; and (ii) on the cash contributions of communities. Monitoring

of CIGs would be the responsibility of GPs and PFTs while monitoring of GPs would be the

responsibility of PFTs and ZPs. Monitoringfor learning would be undertaken by different levels of

stakeholders - both for their own decision making purposes and to improve management's understanding

of project processes. Another dimension of project learning would be cross-learning among the four

states - Andhra Pradesh, Rajasthan, Madhya Pradesh and Chhattisgarh. In addition, special studies would

address specific policy issues: (a) support to the State Finance Commission on fiscal decentralization;

(b) own revenues of Panchayats; (c) traditional system of governance of tribal people; (d) land

administration and common land management issues; and (e) others.

Subproject Agreements & Beneficiary Contributions: The financial management arrangements for

the implementation of the subprojects would comprise of the following:

* The subproject agreements would be based on lump sum contracts with payments linked to

achievement of physical milestones. The milestones and the payment of installments would be

defined in the agreements. These agreements would also need to indicate the beneficiary

contributions required for each of the milestones. In the case of GPs, the existing MOU formats

between ZPs and GPs would be used.* The lump sum contracts based on achievement of physical milestones would allow the CIGs and

GPs to retain savings, which could arise from efficiency and economy in projectimplementation. The savings so retained would be used only to meet expenditures of operations

and maintenance or to enhance the value of the assets created under the project, as agreed by the

CIG or GP collectively. This requirement would be documented in the subproject agreements.

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o CIG/GPs would open a separate subproject bank account where an upfront 5% cash contributionfor subproject activities from the beneficiaries would be deposited. The funds in this bankaccount would only be used for project related payments. Operations and maintenancecontributions, savings from subproject and related payments, would not be made into thissubproject bank account.

o The Credit would finance the cost of the subprojects to the extent of 95% of the total costs. Thebalance 5% would be contributed by the beneficiaries as above. The entire 95% of the cost ofthe subproject would be released in one tranche into the bank account of the CIG/GP afterconfirmation of the receipt of the 5% beneficiary contribution.

o There would be an arrangement between the ZPs and the bank that an amount equivalent to 45%of the cost of the subproject would be immediately made accessible to the CIG. The balance50% of the amount would be released on the confirmation of the PFT that the CIG has met theconditions as laid out in the MOU and is eligible to draw the second installment from the bank.This confirmation would be endorsed and forwarded to the bank by the ZP. The bank wouldalso confirm the release to the ZP. The second tranche of the subproject funds would becomeeligible for disbursements from the Credit only on its release on certification and not when thefunds are transferred to the bank accounts.

a On top of the total cost of the subproject, beneficiaries would contribute and extra 10% (in lieuof partial cost recovery) towards a Village Fund called Gram Kosh before the release of thesecond tranche from the project. These contributions would be in cash only. The Village Fundwould be maintained by the Gram Panchayat. This fund would remain operational beyond thelife of the Credit and help ensure sustainability in the funds available to the villages for O&M ornew investments.

o The release of the payments would be subject to (i) signing of the Agreement; (ii) opening ofthe subproject bank account; (iii) deposit of cash contributions for each milestone into the bankaccount; (iv) services of trained book-keeper; (v) certification of achievement of physicalmilestones; and (vi) submission of monthly financial reports.

Phasing: The project would be implemented in a phased manner. This would maximize learning effect,creating incentives for good performance, and would avoid overburdening project administration. About120 CIGs have been formed in the pilot district of Bilaspur during project preparation. During the firstyear of project implementation, all the target villages in Bilaspur would be covered, and at least onevillage in each of the other districts would be targeted. All selected blocks in all the districts would beeligible for project funding during the second year. Within blocks, the project would address villagessequentially instead of covering all villages at the same time.

D. Project Rationalle

1. Project alternatives considered and reasons for rejection:

1. Support for existing anti-poverty programs sponsored by the Government of India was rejectedbecause:

o they are financed by the central government with limited state contributions and it would bedifficult to influence this through a state project;

o per capita administrative costs are high;o poor targeting, tied funds, supply driven; ando they have no focus on organization and skills of the poor.

2. A large specific investment project supporting a few selected activities identified by state governmentsand implemented through the existing line departments, and a pilot Community Fund for smallcommunity investments, was rejected because:

- 1 0 -

* tied funds and supply driven;* relying on line departments and no support for decentralization;* likely to increase the fiscal liabilities of the state; and* no focus on organization and skills of the poor.

3. The independently managed "social fund" approach relying mostly on NGOs was rejected because:

* doubtful long-term sustainability;* lack of a sufficient number of good NGOs, limited geographical coverage and loose

accountability of NGOs; and* less ability to support local governments.

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

Latest.;Supervision;-IrSector Issue Project (PSR), Ratings

, _________________________________ . __________. __________ ._ _ (Bank-flnanced projects 6onlyjImplementation Development

Bank-financed Progress (IP) Objective (DO)

Reclamation of salt affected lands Uttar Pradesh Sodic Lands S S

using participatory methodologies Reclamation Project Phase I(1993) and Phase 1I (1999)

Watershed management Integrated Watershed S SDevelopment Projects I (1990)and II (2000)Karnataka Watershed 2001 S S

Rural water supply and sanitation Karnataka Project (1993) S S

Social sector, gender specific initiative Uttar Pradesh Project (1996) S S

for micro-enterprise developmentRural Women's Development S Sand Empowerment Project(1997)

Poverty reduction Andhra Pradesh District S SPoverty Initiatives Project(2000)Rajasthan District Poverty S SInitiatives Project (2000)Madhya Pradesh District S SPoverty Initiatives Project(2001)

Other development agenciesRajiv Gandhi Mission, 1994for Education (EducationGuarantee Scheme), Health(Iodide Campaign), NaturalResource Management(Watershed management)IFAD Project

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

3. Lessons learned and reflected in the project design:

The proposed project has drawn on the Bank's global experience. The design of the project incorporateslessons from projects that were effective at delivering basic infrastructure and services to the poor. Inparticular, it reflects lessons learned from Bank-financed rural development projects in India (e.g. UPSodic Lands Project, Integrated Watershed Development Projects, Rural Water Supply and SanitationProjects and Forestry Projects). Finally, the project is the fifth DPIP/Rural Poverty Project in India, theothers being under implementation in Andhra Pradesh (two projects), Madhya Pradesh and Rajasthan,and it includes early lessons from those projects, namely:

o put the community in the driver's seat through control over funds and investment decisions toachieve efficiency and sustainability;

o communities contribute towards investment and operational costs if they are assured of goodservice;

o it is not enough to mobilize communities for social action - they want economic opportunitiesand need investments to be made in these, alongside social mobilization;

o where there is an ongoing process of decentralization and local governments are emerging, it isimportant to work through these institutions to reflect local needs, expedite decision making andto ensure the institutional sustainability of the programs;

o ensure speedy implementation through development of streamlined procurement anddisbursement rules and regulations, detailed operational manuals, computerized MIS,standardized financial management procedures, regular and rigorous auditing, and quantitativemonitoring and evaluation;

o create competitive employment conditions for the project management staff to attract and retaincompetent and motivated individuals; and

o implementation through government channels at the district level facilitates coordination acrossagencies in supporting beneficiaries.

Project design incorporates the following features and lessons from MP DPIP, as Chhattisgarh was untilNovember 2000 a part of MP:

o groups of disadvantaged people have full capacity to choose what is best for them, procuretechnical assistance, manage project funds and implement the subprojects;

o one of the main challenges is the top down and supply driven approach of government officialsand NGOs in proposing solutions to communities; hence it is necessary to carefully select projectstaff and orient and train them on the values of the project;

o the Gram Sabhas (village assemblies) do an excellent job in applying the project criteria forselecting the poorest families;

o a communication strategy for the target population is important;a disbursements start slow because of community mistrust of the government but increase quickly

as trust and information are established; communities tend to move from small group basedincome generating activities to village or multi-village infrastructure projects;

o for transparency and ease of implementation project rules need to be kept as simple as possible;o a separate body such as a Society is not necessary for efficient implementation as long as

appropriate financial arrangements are put in place; ando matching grants create incentives for savings since communities need to make substantial cash

contributions; after a first stage in which they receive matching grants for productive projectsand develop a relationship with bank officials, groups of poor people are often able to deepentheir relationship with financial institutions, with increased access to credit.

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4. Indications of borrower commitment and ownership:

Although Chhattisgarh is a new state, GoCG already has a good track record in poverty alleviation and

empowerment, with the formation of a large number of women self-help groups and effective use of

funds under vanous programs (e.g. Food for Work Program). The GoCG has created a high level SPU

and has carried out field visits in MP to review the experience of MP DPIP. The GoCG has initiated a

pilot covering two of the poorest blocks in the district of Bilaspur and has allocated their own budget and

initiated pilot activities in these blocks. GoCG has selected and Environmental agency and shortlisted a

Baseline agency.

5. Value added of Bank support in this project:

* The Bank brings its global expenence on decentralized community driven rural development to

India. There is still a great need in India to promote 'alternative' approaches to rural development

and poverty alleviation, and the Government of Chhattisgarh specifically requested the project as

a means to access the Bank's international experience.* Bank support of five DPIP type projects (MP, AP and Rajasthan under implementation and the

proposed Chhattisgarh DRPP and AP Rural Poverty) would facilitate the sharing of information

among them and enhance both the quality of each project and their demonstration impact and

total value to India's development.

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

1. Economic (see Annex 4):0 Cost benefit NPV=US$ million; ERR = % (see Annex 4)

0 Cost effectiveness

0 Other (specify)

The proposed project focuses on social organization and empowerment, improved local governance,

capacity building and community-initiated subprojects, from income generation to rural infrastructure.

Hence, economic opportunities from subprojects are but one of the project's outputs, the other two being

empowered and active groups of disadvantaged people and their ability to promote more effective,

accountable and inclusive local institutions. Due to its demand driven character, the project does not lend

itself easily to a detailed ex-ante cost-benefit analysis and rate of return calculations. It will be the

beneficiaries who ultimately determine the scope and mux of the investments. Because beneficiaries

would have to contribute at least 15 percent of project costs in cash, they would face incentives to invest

in activities that contribute most to their livelihoods. In other DPIPs, it is being found that often

investments chosen by poor people are not those that have the most immediate financial results, such as

increasing the productivity of their assets. Instead they often choose first investments that help reduce

migration in the household, improve the conditions for children to attend school, or increase security

against criminal actions. A real case analysis of five types of subprojects popular in MP (goatery, dairy,

land levelling, tailoring and brass band) showed positive economic net present values ranging from

US$603 (land levelling) to US$4450 (brass band) at a 15% real interest rate.

2. Financial (see Annex 4 and Annex 5):NPV=US$ million; FRR = % (see Annex 4)

A sample of real case subprojects popular in MP indicated positive financial net present values of $4,426

for a buffalo dairy, $4,685 for a tailoring enterprise, $5,315 for a goatery and $6,208 for a brass band

corresponding to increases in monthly household incomes of $14.76, $15.60, $17.00 and $20.70,

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respectively.

Fiscal Impact:

Chhattisgarh DRPP is expected to have both positive and negative fiscal impacts. The positive impactswould be as follows: First, it would implement a more cost-effective approach to anti-poverty programs.It is expected that over the long term, through the demonstration effect, the project would bring aboutreforms in state and national anti-poverty programs with fiscal savings. The willingness of the populationto contribute a higher share of investment costs is expected to increase as credibility of the government isestablished, reducing the burden on the government budget. Second, an output of the project would bevillage funds from community contributions which would improve the fiscal situation at the village level,create a culture of local taxation and cost recovery and leave in place funds to cover operation andmaintenance of village investments. Third, the project would improve financial management at the localgovernment level, likely to have a positive fiscal impact. Finally, the project would generate localeconomic growth which could potentially increase revenues of local, state and central governments. Thenegative impacts would result from the repayment by GoCG of 70% of IDA funds to GoI at a 12%interest rate (under current rules). While it is difficult to assess ex-ante if the overall fiscal impactswould be positive or negative, compared to other states Chhattisgarh is in reasonable fiscal situation andthe government has put poverty reduction at the core of its development a strategy.

The project would also involve some upfront government expenditures as counterpart funds, but GoCGput special care during project preparation in ensuring that the project would not increase the fiscalliabilities of the state during the project years. Government contribution is US$5.40 million (4.2 % ofproject cost), which would finance recurrent costs, mostly salaries and allowances of PFTs andGovernment staff in the SPU and ZP. However, no incremental staff would be created. Instead, currentlyunder-utilized state field staff would be seconded to the project, and thus the government salary billwould not increase. No increases in recurrent expenditures of the state government are expected duringthe post-project period. All the recurrent expenditures of subprojects would be met by communitycontributions.

3. Technical:

The technical quality of subprojects would be ensured by first, allowing communities to choosetechnologies they are familiar with; second, allowing communities to procure technical assistance fromthe public, NGOs or private sector if they choose to do so; and third, ensuring that through the ZP, GPsand PFTs, the expertise of line agencies would be available to assist communities which request technicalexpertise from govermment. Activities in different sectors would be carried out within the policyframework and general guidelines established for other Bank-assisted projects, where applicable, orwithin existing GoCG policies.

4. Institutional:

4.1 Executing agencies:

The SPU in the Panchayats and Rural Development Department would be responsible for projectadministration. At the District level project implementation would be the responsibility of ZillaPanchayats. Special training and capacity building activities of the project would address the weaknessesof these agencies, both in the beginning and during implementation. Implementation would be inpartnership with Gram Panchayats, Gram Sabhas and Common Interest Groups. While all these localagencies are weak, an objective of the project is to strengthen them, both through a learning-by-doing

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process and through specific organizational and skills building activities.

4.2 Project management:

A State Project Unit in the Panchayats and Rural Development Department is in charge of project

administration and would disburse funds to the districts and carry-out routine project monitoring. The

Project Director is supported by a team with specialized skills in financial management and procurement,

communication, environmental and tribal issues, gender and capacity building and monitoring. In

addition to their administrative role the team would help address institutional weaknesses at the state and

district levels by assisting the executing agencies at these levels with performance of their functions

under the project. Careful selection, recruitment and training of project staff would ensure that the basic

skills are in place for proper project administration.

Project Facilitation Teams, either NGOs or groups of government officials, would be the "stewards of

the rules of the game". Initially, they would also communicate the project to the target population and

help the first groups in each village walk through project procedures. The project's decentralized and

flexible approach represents a new departure from the administrative tradition in India. Hence, there is

currently limited capacity both within existing government staff or structures and most NGOs to

effectively implement the project. Behavioral changes in the manner in which they apply procedures or

approach decision making would be brought about through the staff and NGO recruitment and selection

(R&S) process, and intensive training programs. Four PFTs are already in place in the pilot district of

Bilaspur and the rest are expected to be in position within six months after effectiveness.

Zilla Panchayats would oversee project implementation at the district level and ensure that the support

of line agencies would be provided and that there is coordination with relevant government programs. To

address capacity limitations at the district level each ZP would be assisted by the CEO office, which

would be strengthened with additional staff as needed. ZPs would also be eligible for capacity building

activities.

Gram Panchayats and Gram Sabhas would promote the project, make decisions regarding priorities,

select beneficiaries, screen proposals, approve CIG projects and monitor the project. Gram Panchayats

would also prepare participatory Panchayat plans. Although Gram Panchayats and Gram Sabhas are weak

the situation is better in scheduled areas (mostly tribal areas) that fall under the Extension to the

Scheduled Areas Act. In these areas local governments and Gram Sabhas are controlled by the majority

tribal population, exhibiting less social divisions and building upon traditional procedures of

decision-making. Both in tribal and non-tribal areas Gram Panchayats would receive technical assistance

on financial management, participatory budgeting and other areas. Experience from the DPIPs shows

that where groups have been formed and relevant resource allocation decisions are taking place, Gram

Sabhas become an effective forum for discussion and participation.

Common Interest Groups: Experience from the DPIPs shows that once the poor and disadvantaged

people learn the "rules of the game" and develop trust for the project they are able to form groups,

identify priorities, prepare proposals (or seek assistance to do so), look for technical assistance, call

Gram Sabha meetings to discuss and approve the proposals, manage bank accounts and subproject flows

in a transparent manner, carry out procurement, implement the subproject, collect cash contributions and

operate and maintain the subproject. The situation in Chhattisgarh will be equal or better, given the

homogeneity of tribal areas.

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4.3 Procurement issues:

The matching grants component involves small subprojects requiring procurement of works, goods andservices costing less than US$ 50,000 equivalent. These subprojects would be implemented by thecommunities, through direct contracting. Looking to the different procurement needs, the followingprovisions have been made under the project. At the State level the SPU would have a trainedprocurement officer conversant with Bank's procurement procedures, especially those related to smallcommunity-based investments. S/he would also: (a) play a coordinating role in response to emergingdemands from the district units; and (b) standardize technical details for the community works to be usedas an aid for preparation and review of the subproject proposals. Since most of the procurement activitieswould be managed by ZPs, each district unit would have a trained full-time staff to handle theprocurement work. Given that the formation of CIGs and hiring of NGOs and PFTs would be acontinuous process spread over the entire project period, workshops and seminars on procurement issueswould be organized at regular intervals to ensure good understanding of procurement procedures amongstthe district staff, the beneficiary institutions and NGOs.

4.4 Financial management issues:

The project has a financial management system which would be capable of accounting for projectresources and expenditures adequately. A financial management manual for the project has beenprepared. The Manual lays down the accounting policies and procedures applicable to the project. Anintegrated computerized system would also be developed - in the interim a manual accounting systemwould be followed.

The Panchayats and Rural Development Department, Government of Chhattisgarh, would be the nodalexecuting agency for the project. The program would be implemented through CIGs and GPs at thevillage level. The Financial Management Manual and Operational Manual along with the subprojectAgreements entered into between CIG/GP and ZP on approval of the proposal would include detailedguidelines on the agreed financial management arrangements. Important lessons learnt from theimplementation experiences in other DPIPs/CDD projects were incorporated into the design of thefinancial management system. The financial management arrangements set up would emphasize locallevel transparency, social audit and self-accountability.

Since the capacity at the CIGs is clearly not adequate, one of the critical functions of the Zilla Panchayat(CEO office) and the PFTs would be to provide hands on support in order to enhance the capacity of theCIGs in bookkeeping and accounting. Training on the accounting arrangements at the CIG level would beprovided to the PFT team members.

A detailed staffing plan has been drawn up, which is a part of the Project Implementation Plan (PIP). Thefinance function would be managed by a Financial Manager at the SPU, who has been inducted in theproject, and is of the rank of Deputy Director Treasury & Accounts. The finance function at the ZP/CEOoffice would be managed by accounts officers.

Disbursements: Disbursements from the IDA credit would initially be made in the traditional system(reimbursement with full documentation and against statement of expenditure) and could be converted tothe report based disbursements at the option of the GoCG and Gol after successful demonstration ofregular, timely and adequate Financial Monitoring Reports.

Audit: The audit of the project would be carried out by Auditor General of India (CAG). The Terms ofReference of the auditors and the format of the annual financial statements have been agreed with the

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Association and form part of the Financial Management Manual. The audit would be carried out in

accordance with the International Standards of Auditing. The audit would cover all the accounting

centers and include an audit of financial transactions and an assessment of the operation of the financial

management system (including internal control mechanisms). On completion of the subproject, the

CIG/GP would submit final statements of expenditures duly audited by a firm of chartered accountants.

5. Environmental: Environmental Category: B (Partial Assessment)

5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including

consultation and disclosure) and the significant issues and their treatment emerging from this analysis.

Environmental issues may arise in the village investments component, but these are likely to be minor

since subprojects would not exceed US$50,000, are expected to average US$5,000, and most would cost

less than US$ 1,000. An Environmental Management Framework (EMF) has been developed instead of

an EMP following the usual practice in projects of this type where types of investment are not known

ex-ante. The EMF would:

* prevent execution of subprojects with potentially significant negative environmental impacts;

* decrease potential minor negative impacts through modifications in subproject design, location

or execution; and* prevent or mitigate cumulative negative impacts as the result of multiple small-scale

investments.

5.2 What are the main features of the EMP and are they adequate?

The EMF incorporates the following elements, which together ensure the adequate management of the

project's environmental risks, and would help achieve positive environmental outcomes:

* a methodology and administrative structure for environmental management;

* an environmental capacity-building and awareness-raising program; and

* an environmental supervision, monitoring and audit plan.

These elements are summarized in Annex 2, Attachment 1. All subprojects would be subject to a process

of environmental screening which would ensure that no activities are undertaken that require the use of

hazardous pesticides, entail the construction or rehabilitation of dams more than ten meters in height,

occur within National Parks, or adversely affect cultural property. The screening process would also

identify those activities for which standard measures to mitigate minor, local environmental risks, should

be adopted, and those for which a more detailed, site-specific assessment is required. Based on this

exercise, the subproject would be assigned to one of four categories, requiring either (a) no further

environmental input, (b) Environmental Review, (c) Limited Environmental Assessment, or (d)

Environmental Impact Assessment, through which appropriate measures to mitigate environmental risks

would be established.

To ensure that environmental screening and assessment are adequately implemented, the EMF also

specifies environmental capacity-building and awareness-raising activities to be supported by the project.

Capacity-building and awareness-raising would be led by an Environment Agency (EA) to be appointed

by the SPU. The EA would also supervise the effective implementation of the EMF by the ZP and

CIGs/GPs. To provide an independent assessment of the effectiveness of the design and implementation

of the EMF, once every two years the SPU would contract an environmental audit of the DRPP to be

conducted by an independent agency.

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5.3 For Category A and B projects, timeline and status of EA:Date of receipt of final draft: January 27, 2003 (EMF)

Date on which draft EA was sent to Infoshop: December 13, 2002

5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EAreport on the environmental impacts and proposed environment management plan? Describemechanisms of consultation that were used and which groups were consulted?

Translated summaries of the tribal strategy and environmental management framework have beendisplayed at 16 district offices (Zilla Panchayats), 12 blocks and all the pilot Gram Panchayats of theproject. Consultations were held during project preparation with a broad cross-section of communitiesincluding women, tribals, elected representatives, a number of NGOs operating in the state, Governmentofficials including line agencies, academics and independent researchers. During subproject preparation,local stakeholders would lead the environmental screening and review process, as this would beconducted by the CIGs/GPs, initially supported by PFTs. To assist the CIGs in this process, the projectwould support environmental awareness-raising for beneficiaries and other local stakeholders.

5.5 What mechanisms have been established to monitor and evaluate the impact of the project on theenvironment? Do the indicators reflect the objectives and results of the EMP?

Environmental supervision would be conducted by the ZPs and environmental assessment andenvironmental audit of DRPP would be conducted by an independent organization. Supervision by theEA of a sample of subprojects would ensure that the EMF procedures are followed and mitigationmeasures implemented. The EMF also suggests parameters to be examined during the independent auditto identify any cumulative impact of the DRPP subprojects. See Annex 2 Attachment 1 for a briefaccount of the environmental supervision, monitoring and auditing requirements.

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

Outcomes: The project seeks to improve opportunities for the poor and the vulnerable, especially womenand tribals, by addressing: (a) their capacity to act collectively; and (b) their ability to effectively usesocial and economic infrastructure and services. Disadvantaged groups would express their demands anddictate which kinds of subprojects would be financed, would manage Bank accounts, procure technicalassistance and materials, and implement subprojects. Early experience from other similar projects showsthat this approach is effective in strengthening social capital among the poorest. By providingcommunities the opportunity to address their needs through a genuinely participatory decision-makingprocess the project would improve Gram Panchayats and Gram Sabhas by: (a) reducing clientelism andpolitical interference; (b) strengthening the capacity of both communities and local governments toselect, prioritize and implement investment decisions; (c) creating partnerships between communities andGPs; and (d) more generally increasing the community voice in the use of public resources.

Ensuring the poor are included: The project would be pro-active in targeting poor people andmarginalized groups in several ways:

o Geographic targeting: project blocks and villages were and are to be selected by applyingpoverty indicators to secondary source information according to a methodology agreed withGoCG. These include representation of scheduled castes and scheduled tribes in any givenlocation.

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* Participatory social assessments: primary data collection and analysis at the village level would

be undertaken by PFTs during project implementation and as one of the first activities at the

village level. These would identify the social, economic and physical characteristics of the

poorest people in blocks selected through the above processes and provide information for a base

line scenario (an agency to assist PFTs in conducting the baseline study would be contracted by

GoCG).* Wealth ranking: Gram Sabhas would select project beneficiaries based on objective criteria and

through a process to be monitored through PFTs.

* Communications: a communication campaign would target the most disadvantaged groups to

give them an early advantage in accessing project resources.* Identification ofparticularly vulnerable groups: the project recognizes that the poor are diverse

and some are more vulnerable than others, within the overall strategy of poverty targeting special

efforts have been made to assess the position and condition of women, tribal people and lower

caste groups.

The continuing effectiveness of targeting poor and marginalized people would be an important and

integral part of the project's monitoring and leaming system. (See: Annex 2 and the Project's Operational

Manual).

Women: The Government of Chhattisgarh has shown its concern over gender issues by being one of the

first states to prepare a State Policy For Women Empowerment. This policy is committed to: revise laws

to eliminate all forms of discrimination against women; extend land rights to women; enforce all relevantlegal provisions including the Child Marriage Restraint Act and the Dowry Prevention Act; advocate on

women's rights; implement laws regarding prenatal gender selection, practices of female infanticide,child marriage, etc., providing concessions in court fees for poor and landless women; and deployingwomen police personnel in rural police stations. The State policy also includes measures to promote and

empower self-help groups of women, to improve women's entitlements whether to inputs, resources or

credit, to establish women's control over decisions relating to their livelihood, and facilitate organizationto strengthen their ability to establish their rights as equal citizens. This represents a major departurefrom the earlier anti-poverty and welfare programs, which, although important, have characterizedwomen as passive beneficiaries of, rather than active participants in, the development process. The Policy

provides a sound and useful framework which DRPP can begin to articulate in both word and action.

Structurally, the project would address women's issues in a number of ways:

* conceptual and applied capacity building of rural women and project staff, in particular PFTs;

* targeting women who are especially disadvantaged such as SC/ST women, widows and sex

workers;* positive discrimination and recruitment of women to the PFTs and the CEO office in the ZP;

* making the effectiveness of support to women form part of project staffs performance appraisals;

and* using communications (a) to ensure that women have full access to information; and (b) as a tool

to change the behavior towards women.

Operationally, at least 30 per cent of CIGs' membership would be women - thus immediately givingwomen access to economic opportunity and the empowerment that accompanies economic opportunity

and group action. This would be closely monitored. CIGs themselves would decide on their specificactivities, but the experience with other similar CDD projects indicates that savings and credit groups,

drinking water provision, agriculture and kitchen gardening, and small animal husbandry, are likely to be

- 19-

preferred. Attention would also be paid to supporting other actions and existing government/donorprograms which focus on issues identified as important for women. These include health-relatedinformation and programs, provision of toilet facilities, functional literacy and general motivationalschemes and confidence building interventions. A summary of the GoCG's women's developmentstrategy and plan is given in Annex 2 Attachment 2. The full paper can be found in the ProjectImplementation Plan and is available in the project file.

Tribal: Chhattisgarh has several Acts which protect the interests of tribal people. These include theChhattisgarh Land Revenue Code, prohibiting transfer of tribal lands in tribal sub-plan (TSP) areas andrestricting such transfers in non-TSP areas, the Chhattisgarh Money Lending Act and the Panchayat Act(Extension to Scheduled Areas) which allocates extensive powers to Gram Sabhas in Scheduled Areas(predomninantly tribal areas). This Act attempts to make local governments in tribal areas a reflection ofthe traditional social organization of tribal people. Chhattisgarh has also created special organizations toprotect the interests of tribal people. These include the Scheduled Tribal Commission (a "watchdog"headed by an NGO representative) and the Minor Forest Produce Cooperative Federation. There areNGOs in all districts of Chhattisgarh working with tribal people, but few of these NGOs have a proventrack record and demonstrated capacity of effective assistance and service delivery. A number of NGOsare activist groups, including mass tribal organizations, which focus their work on tribal rights andentitlements. These groups tend to oppose foreign aid, although they lobby government for moreresponsive assistance to tribal people. Finally there are rebellious groups such as the naxalite committedto overthrowing the state and these groups are active in parts of Chhattisgarh such as Dantewada andBastar.

Because tribals are among the poorest people in Chhattisgarh, they would be one of the mainbeneficiaries of the project. The project is intended for their own development with all choices ofwhether or not to participate in the subproject, the selection of groups, the choice of activities, themanagement of funds, and the implementation of the subproject, to be made by them. The project wouldtherefore improve their well-being in terms wished by them. While the project would not addressdirectly some of the major issues faced by tribals, such as land alienation and access to forest produce, itwould help empower tribal groups and villages and improve their capacity to negotiate with formalinstitutions. Two studies to be completed in the project's first year would guide the project in dealingwith such land and governance obstacles: (a) land administration and common land management; and (b)traditional systems of governance of tribal people. Recommendations of these studies would be used bythe PFTs to ensure that the project's strategies in tribal areas are tailored to, rather than ignore, the socialcontext. They would clarify the project's relationships with existing formal and informal institutions andpropose measures to prevent future obstacles.

The project would cover both Tribal Sub-Plan (Scheduled areas or tehsils in which the tribal populationexceeds 50 percent), and non-tribal areas. In Tribal Sub-Plan areas, which are covered by the Provisionsfor Extension to Scheduled Areas Act, the project would not only improve the well being of the majoritytribal population and vulnerable non-tribal groups, but would also make assistance available to improvethe planning, management and communications capacity of tribal governments. Many tribal people livein non-tribal areas. In these areas the project would specially target tribal people through targetedcommunication and information campaigns, by giving them priority as for other disadvantaged groups forgroup formation and access to resources, and by monitoring performance. This approach is provingsuccessful in MP where the minority tribal people are over-represented as project beneficiaries. Asummary of GoCG's tribal development strategy for the project is given in Annex 2, Attachment 3. Thefull paper is in the project file.

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

The entire project is designed to be participatory in terns of structures, processes and activities. Keystakeholders include the following:

* The rural poor, in particular women and tribal people: the project would provide support for thepoor to form and work together as CIGs. CIGs are perceived to be the local organizationalmechanism which would strengthen and enable the poor to take advantage of developmentopportunities. CIG members would participate in the identification, planning, implementation,operation and maintenance of all activities at the local level throughout the project, and wouldmanage their own project bank accounts. PFTs would carry out detailed consultations andassessments at the village level as the first activity when starting in a new village, to identify thetarget population and understand the key issues faced by them.

* Project implementors: these include government administration and NGOs. Ownership andidentification with the ideas, activities and processes of the project would be further encouragedby a highly decentralized decision making system (see 6.4 below) supported by a high qualityproject information and monitoring system (Annex 2).

* Political bodies: The role of the Gram Sabha, Gram Panchayat and the Zilla Panchayats as thekey executing agencies were described above.

6.3 How does the project involve consultations or collaboration with NGOs or other civil societyorganizations?

The project has displayed translated summary versions of the project, the tribal strategy and the EMF inall the 16 district offices (Zilla Panchayats), and in 12 blocks and all the pilot Gram Panchayats of theproject. Consultations were held during project preparation with a broad cross-section of communitiesincluding women, tribals, elected representatives, a number of NGOs operating in the state, Governmentofficials including line agencies, academics and independent researchers. The draft Tribal DevelopmentStrategy (TDS) emerged out of State level consultations held in Raipur on March 19-20, 2002, and wasrefined after consultations held in nine villages in the pilot district of Bilaspur (two villages betweenAug. 25-26 and seven between Nov. 16-18, 2002). A summary of the draft TDS was translated into thelocal language and communicated to the Zilla Panchayat. The summary was also communicated amongthe key tribal stakeholders, NGOs, officials and non-officials to facilitate fruitful discussions during theconsultation process. Notifications were also issued inviting the views and suggestions of NGOs formodifications in the TDS. During appraisal, the participation of scheduled tribes in the planning processwas confirmed.

6.4 What institutional arrangements have been provided to ensure the project achieves its socialdevelopment outcomes?

Institutional arrangements have been selected to:

* achieve a balance between minimal design (allowing for community driven choice and evolutionand the specificity of different districts) with some basic features to protect the interests of thepoor and marginalized (such as the initial organizational foundations, monitoring and learningsystem, information systems, accountability mechanisms, and control of the poor over resourcesand decisions);

* factor into all organizational levels of the project the mandate to use information for decisionmaking over activities, processes and structures; this would increase local ownership and ensurethat outcomes more closely meet local needs; and

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o pay considerable attention to staff selection, recruitment, compensation packages, and terms ofemployment; these would ensure that staff have the professional profiles appropriate to a povertyfocused, community dnven project, are happy in their jobs, and are subject to performanceappraisal by their clients.

The Tribal Development Strategy would be implemented through PFTs and District Tribal DevelopmentOfficers, as described in Annex 2, Attachment 3, with management oversight and accountability assignedto the Tribal and Environment Specialist in the SPU. The feasibility of the proposed activities and theroles and capacity of agencies involved in the strategy were confirmed during appraisal.

6.5 How will the project monitor performance in terms of social development outcomes?

Annex 2 provides details on the project's performance monitoring. The Monitoring and Learning systemis designed to (a) support information gathering and analysis by primary users, (b) link this to decisionmaking for opportunities, and (c) develop optimal information flows between these groups of users ordecision makers. Within the project's administrative structure there would be monitoring cells within theSPU and in each ZP. The district units would work closely with PFTs. SPU and ZPs would be therepositories for the data generated through the performance tracking component and would be theprimary users of this data. The ZP's M&L Officer, assisted by project assistants would oversee the dataflow, analysis and reporting. In addition, two types of extemal agencies would be appointed: (a) an M&Lfacilitation agency; and (b) an impact evaluation agency. The M&L facilitation agency would play acrucial role in the early stages on the project as the ideas and techniques of a monitoring learning systemare introduced and developed. The role of this agency would be to facilitate, i.e. its ultimate objectivewould be to establish a system and the capacity to use, manage and evolve the system with differentlevels of stakeholders (CIG, GP, GS, ZPs, SPU). In addition, an independent impact evaluation agencywould be contracted to undertake the baseline survey at the beginning of the project and impactevaluation at the end. The TOR for this assignment has been advertised and a shortlist prepared.

7. Safeguard Policies:7.1 Are any of the following safeguard policies triggered by the pro ect?

L.. .. ; r-. . '',','Policy gTl ed--Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) (__Yes C) NoNatural Habitats (OP 4.04, BP 4.04, GP 4.04) (U Yes (U) No

Forestry (OP 4.36, GP 4.36) U Yes U NoPest Management (OP 4.09) () Yes (_) No

Cultural Property (OPN 11.03) (U Yes (U) NoIndigenous Peoples (OD 4.20) (9 Yes (9 No

Involuntary Resettlement (OP/BP 4.12) (3 Yes () No

Safety of Dams (OP 4.37, BP 4.37) (9 Yes ( No

Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) ( Yes (9 No

Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* (9 Yes 0 No

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

Policy Compliance Measures and CommentsEnvironmental Based on the EMF, CIG/GP subprojects would be screened to determine anAssessment (OP 4.01) appropriate level of environmental assessment. Screening includes

verification against a negative list designed to ensure compliance with all

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safeguard policies, and a determination of the extent of environmentalassessment required. Following environmental review or assessment,measures to control environmental risks and enhance benefits are built intosubproject design. The EMF also provides for training in its application to begiven to State, district and community-level project staff, and for theEnvironment Agency contracted under the Project to supervise theimplementation and continuing refinement of the Framework.

Pest Management (OP 4.09) A Pest Management Plan has been developed and incorporated in the EMF. Nosubprojects using banned pesticides or agrochemicals in WHO classes IA, IB,and II would be supported. Crop-related subprojects would incorporateIntegrated Pest Management (IPM) approaches.

Indigenous Peoples (OD 4.20) A Tribal Development Strategy has been prepared as an integral part of theproject in accordance with the OD 4.20 on Indigenous People. The tribalstrategy covers two aspects: (1) institutional, relating to participation,representation, decision-making and resource allocation to tribal development;and (2) capacity building. The activities identified include: (a) as part ofbaseline studies in villages, identify key indicators for participation andperformance; (b) annual review of perforrnance and participation of CIGs andPFT staff; (c) cross visits between CIGs within a regional cluster; (d) biannualstaff meetings to review progress and exchange experience; (e) annual tribalCIG representative meeting in each district to review draft report monitoringresults and identify obstacles to tribal participation; (f) annual Progress Reporton impact on tribals with comparative expenditures by district and block; and(g) training and capacity building of CIGs and PFTs. Two studies to becompleted in the project's first year would guide the project in dealing withland and governance obstacles: (i) land and livelihood of forest poor, and (u)traditional systems of governance of tribal people.

Involuntary Resettlement The project does not envisage any involuntary resettlement. Land requirements(OP 4.12) under the project would be from CIG's own land, CIG purchase or leases, or

voluntary donations. Construction of community infrastructure is to be metfrom voluntary donations and documented by agreements signed with theowners. Any subprojects where Involuntary Resettlement (OP 4.12) isrequired, would be disallowed.

Safety of Dams (OP 4.37) No subproject involving a dam (existing or new) of a height of 10 meters ormore would be permitted. To ensure the safety of subprojects involving damsbelow 10 meters, the Dam Safety Manual incorporated into the EMF would befollowed.

The Forestry Policy (OP 4.36) and the Natural Habitats Policy (OP 4.04) are not triggered because nosubprojects within national parks would be supported, nor would commercial logging, or any activitieswithin reserve forests that are prohibited by state or national law. All road rehabilitation andimprovement subprojects would be subject to Limited Environmental Assessment.

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F. Sustainability and Risks

1. Sustainability:

There are several dimensions of sustainability relevant to the project: (i) sustainability of collectiveaction and social mobilization; (ii) sustainability of governance reforms at the local level; (iii)sustainability of flow of investment funds for the village; (iv) sustainability of subprojects; and (v)sustainability of institutions. The sustainability of community and disadvantaged people's capacity forcollective action would be promoted through the project's demonstration effect. The sustainability ofgovernance reforms at the local level would depend on the acquired capacity of communities anddisadvantaged groups to exert vigilance and control over government officials. This would be promotedby creating a habit for good practices, such as public availability of information, inclusion, andparticipation in meetings, etc. The sustainability of investment funds for village investments would bepromoted through the constitution of village funds to be financed through community contributions. It isexpected that by the end of the project each village would have on an average about US$9,000 in a bankaccount to finance village O&M and investments beyond the life of the project. The sustainability ofsubprojects would be promoted by first ensuring that villagers want the subprojects and share in theircost, and second ensuring that relevant subprojects include an O&M plan proposed by communities.Finally the sustainability of the various processes piloted through the project would be promoted byrelying on existing, stable, and constitutionally sanctioned institutions to implement the project, such asZPs, GPs and GSs.

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

Risk Risk Rating Risk Mitigation MeasureFrom Outputs to ObjectiveInterference of line agencies or NGOs M Careful design of institutional arrangementsover group and village decisions. and processes and monitoring of their

implementation to ensure participation of therepresentatives of the poor in decision-makingand priority given to communications and theample flow of and accessibility of information.

Poor are unable to create space in local N Give priority to supporting groups of poororganizations. people and use adequate communications about

"rules of the game" under the project.

PFTs have the capacity to support M Special orientation and training would bevaluable and vibrant CIGs, GSs and GPs. carried out for PFTs upfront

GSs and GPs have limited incentives to M Special training programs for GPs andpractice participatory budgeting. stakeholders and performance based incentives

From Components to OutputsLimited staff with adequate skills and M Intensive training programs.training.

Beneficiaries are unable or inadequately N Closely monitoring and review after one yearorganized to contribute to costs of with changes introduced if necessary.implementation or O&M in cash, kind,labor and/or participation.

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Funds advanced by the state government N Upfront agreements on funds needed annually.not adequate.

The project funds would be spread S The project design recognizes that CIGs wouldwidely across CIGs and Gram need substantial hands-on support inPanchayats, who have limited capacity to bookkeeping and accounting. The financialhandle funds, possessing risks of management arrangements have been designeddiversion of funds, inadequate accounting to recognize the risks and provide for separaterecords etc. bank accounts, adequate book keeping

arrangements as conditions for the approval ofthe subprojects. Submission of expenditurestatements is also necessary for release ofsubsequent tranches of the subproject. Inaddition, the project would prepare trainingplans to ensure that a cadre of book keepersand accountants are provided with ongoingtraining. Suitable formats of accounting andreporting have been designed and included inthe Financial Manual.

The SPU would be receiving financial S The SPU would closely monitor the financialreports from sixteen CEO offices that aspects. Formats for monthly expenditures andwould require analysis and follow-up. bank reconciliation progress would be made aThere is a risk that financial controls may part of the reporting system.be diluted.

Overall Risk Rating M

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)

3. Possible Controversial Aspects:

None

Type of Risk:

Risk Minimization Measure:NA

G. Main Loan Conditions

1. Effectiveness Condition

Standard conditions of Effectiveness

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

Covenants related to Project Implementation

a) Government of Chhattisgarh shall not later than January 31 of each year, starting in 2004,prepare annual action and procurement plans for implementation of the Project activities, and taking intoaccount the Association's recommendations, and finalize, not later than March 15 of each year, such

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plans.

b) Government of Chhattisgarh shall maintain the SPU with the staffing and responsibilities agreedwith the Association.

c) Government of Chhattisgarh shall cause the Beneficiary Institutions to select and appraise thesubprojects under Part B of the Project in accordance with the criteria and procedure specified in theOperations Manual.

d) Government of Chhattisgarh shall carry out the Project in accordance with the agreed EMF,ensure that the environmental and social screening criteria are updated regularly throughoutimplementation of the Project, and are at all times consistently and satisfactorily applied.

e) To ensure that the tribal population in the State benefit fully from the activities under the Project,Government of Chhattisgarh shall implement, in a manner satisfactory to the Association, the TribalDevelopment Plan.

f) Government of Chhattisgarh shall select the NGOs assisting in the implementation of the Projectin accordance with criteria and procedures agreed with the Association.

g) Government of Chhattisgarh shall:

(i) maintain policies and procedures adequate to enable it to monitor and evaluate on anongoing basis, in accordance with indicators satisfactory to the Association the carryingout of the Project and the achievement of the objective thereof;

(ii) prepare, under terms of reference satisfactory to the Association, and furnish to theAssociation not later than September 30, 2005, a report integrating the results of themonitoring and evaluatin activities performed pursuant to paragraph (a) of this Section, onthe progress achieved in carrying out the Project during the period preceding the date ofsaid report and setting out the measures recommended to ensure the efficient carrying outof the Project and the achievement of the objective thereof during the period followingsuch date; and

(iii) review with the Association by December 31, 2005, or such later date as the Associationshall request, the reports referred to in paragraph (b) of this Section, and thereafter, takeall measures required to ensure the efficient completio of the Project and the achievementof the objective thereof, based on the conclusions and recommendations of the saidreports and the Association's views on the matter.

h) Chhattisgarh shall, for the purpose of implementing the Environmental Management Framework,retain consultants with terms of references satisfactory to the Association.

Covenants related to Financial Management Requirements

(a) Government of Chhattisgarh shall maintain a financial management system, including recordsand accounts, and prepare financial statements, in a format acceptable to the Association, adequate toreflect in accordance with sound financial management and accounting practices the operations,resources and expenditures in respect of the Project.

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(b) Government of Chhattisgarh shall prepare and furnish to the Association separate financialmonitoring reports, (each such a Financial Monitoring Report) in form and substance satisfactory to theAssociation, which:(i) sets forth sources and uses of funds for the Project, both cumulatively and for the period covered bysaid report, showing separately funds provided under the Credit, and explains variances between theactual and planned uses of such funds; (ii) describes physical progress in Project Implementation, bothcumulatively and for the period covered by said report and explains variances between the actual andplanned Project Implementation; and (iii) sets forth the status of procurement under the Project, as at theend of the period covered by the said report.

(c) The first Financial Monitoring Report shall be furnished to the Association no later than 45 daysafter the end of the first calendar quarter after the Effective Date, and shall cover the period from theincurrence of the first expenditure under the Project through the end of such first calendar quarter;thereafter, each Financial Monitoring Report shall be furnished to the Association not later than 45 daysafter each subsequent calendar quarter, and shall cover such calendar quarter.

H. Readiness for Implementation

2 1. a) The engineering design documents for the first year's activities are complete and ready for thestart of project implementation.

E 1. b) Not applicable.

Z 2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.

3 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.

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

The GoCG has taken significant steps to ensure readiness:* The SPU has been established and counterpart budget for the first year has been allocated.* GoCG has selected the Environment Agency and shortlisted agencies for the Baseline survey.* PFTs are in place in the pilot district of Bilaspur.

1. Compliance with Bank Policies

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

with all other applicable Bank policies.

Luis F. Constantino Constance A. Bernard Michael F. CarterTeam Leader Sector Manager/Director Country Manager/Director

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Annex 1: Project Design Summary

INDIA: Chhattisgarh District Rural Poverty Project

Key P'erforrnance Data Collection Strategy-Hierarcty of O3bjectives Indicators .Critical AssumptionsSector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission)

Support pro-poor rural Selected human State data and impact Fiscal reform.development interventions. development indicators. evaluation. Improved delivery of rural

roads, health andeducation.Reform of anti-povertyprograms.Decentralization andprivatization.

Project Development Outcome / Impact Project reports: (from Objective to Goal)Objective: Indicators:To improve opportunities (1) Increase income of (1- 3) Household surveys The project would have afor the poor and vulnerable, project beneficiaries. by an independent agency scale-up effect and

especially women and (pre and post project) influence the waytribals, to meet their own 2) Reduction of migration anti-poverty programs are

social and economic among beneficiaries. administered.development objectives.

(3) Participation of GoCG sustains itsdisadvantaged people, decentralization drive andparticularly women and realistically addressestribals, in village processes. associated problems of

governance, jurisdictionand financing.

No interference by politicalactivists in projectdecisions.

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'- '. KeyPerformance; , , Data Collection Straitegy Hierarchy of.Objectives',| Ir J i

Output from each Output Indicators: Project reports: (from Outputs to Objective)Component:(1) Income opportunities (la) Number of subprojects (la) Performance tracking. No interference of line

for the poor improved. submitted, funded and agencies or NGOs over

implemented. (lb) Performance tracking. group and village decisions.

(I b) Number of familiesbenefited. (1c) Project monitoring(1c) Costs of subprojects system.by category.

(2) Empowered groups of (2a) Percentage of CIG (2a) Performance tracking Poor would come together

disadvantaged people members belonging to poor reports. in groups and would be

interacting with more and vulnerable groups. able to create space in local

effective, accountable and (2b) Performance of (2b) Institutional tracking organizations.

inclusive GSs and GPs. para-professionals reports and annualsupporting CIGs and GPs. performance evaluations. PFTs have the capacity to

(2c) Percentage of villagers (2c) Household surveys. support valuable and

with bank accounts. vibrant CIGs, GSs, and

(2d) Percentage of GSs and (2d) Institutional tracking GPs.

GPs practicing reports.participatory budgeting.

(3) Village governments (3a) Peoples, and in (3a) Performance tracking GSs and GPs have

more effective and particular the poor's reports. incentives to practice

responsive to the needs of perceptions of GS's and participatory budgeting.

the poorest. GP's.(3b) Percentage of poorest (3b) Institutional trackinghabitations with clean reports.drinking water.

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Hierarchy Objectives ] - -.. 'rforrian.< * iori .ptions

Project Components Inputs: (budget for each Project reports: (from Components toSub-components: component) Outputs)(1) Institutional and US$ 23.57 million Project financial Staff with adequate skillsHuman Capacity Building (Total costs) management system and training are available

(a) Formation and (a) Number of CIGsstrengthening oforganizations

(b) Communications (b) Percentage ofpopulation aware of project

(c) Human Resource (c) Percentage of projectDevelopment stakeholders receiving

training

(d) Strengthening of (d) Percentage ofPanchayat Panchayats benefitting

from strengtheningactivities

(e) Monitoring andLearning (e) Timeliness of the

reports and SPU, ZP fullystaffed

(2) Community US$ 105.78 million (Total Project financial Adequate funds are madeInvestments costs) management system available in time by the

state government to ZPs(a) Matching grants for (2a & b) 98.30 million and executing agencies,community investments including counterpart

funds. Beneficiaries are(b)Matching grant for able, willing andPanchayat plans. adequately organized to

contribute to costs of(c) Village Funds (2c) 6.48 million of implementation or O&M in

community contributions cash, kind, labor and/orparticipation. CIGs and

(d) Innovation Funds (2d) I million disbursed as GPs have the capacity toInnovation Funds handle funds. The SPU has

the capacity to process alarge number of reports

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Annex 2: Detailed Project Description

INDIA: Chhattisgarh District Rural Poverty Project

By Component:

Project Component I - US$23.57 millionHuman and Institutional Capacity Building.

The main objective of this component would be to create an enabling environment and capacity forproject success and to help develop self-reliant and self-managed community based organizations (formal

and informal). This component would have six main activities:

* Human Resource Development* Strengthening of Panchayats* Formation and Strengthening of Organizations* Communications and Information* Monitoring, Learning, and Special Studies* Project Administration

(a) Human Resource Development (US$3.89 million). Human Resource Development (HRD) is theprocess by which project stakeholders acquire or improve their ability to meet project objectives. HumanResource Development activities would be overseen by a capacity building coordinator at the SPU. Thisactivity would focus on building skills and changing behavior and would comprise the followingelements (full descriptions of each element can be found in the Project Implementation Plan): (1)Orientation; (2) Reward and performance appraisal system; and (3) Supply-driven and demand-driventraining. Not all project stakeholders would necessarily go through the three elements.

Orientation. Orientation would focus on ensuring that stakeholders understand and are committed toadopting the project's core values of: participation, empowerment, process orientation, decentralization,learning, transparency and collaboration. Orientation would be targeted at project staff, electedrepresentatives (both to the legislative assembly and PRIs), members of the bureaucracy, projectbeneficiaries and NGOs. Early Orientation would consist of a foundation course, including an"orientation camp", which would be mandatory for all project staff. This course would be modeled onpedagogues of adult education including interactive, experiential learning. Emphasis would be placed onchanging traditional roles of government staff and on community driven development. This course wouldassist in identifying further training/learning needs among staff.

Reward and performance appraisal system. The project would develop a reward system to recognizehigh quality performance. These rewards would be for the following teams - best CIG in a block; bestGram Panchayat in a District, best PFT in a district and best ZP in the state. Selection of teams would be

carried out by the SPU and a Coordination Committee, using carefully developed assessment criteria,with the CIGs having a role in the selection of the best PFT, Panchayat and ZP. In addition, an effective

performance appraisal system giving weight to client assessment of staff performancc would bedeveloped. This would be linked to the outputs from the project's M&L system.

Training. Broadly two types of training would be provided: (1) basic training to CIGs, GPs GSs, PFTs,ZPs, SPU staff and staff of line agencies at block level and below, and (2) specialized training to thesegroups on demand. Training would be conducted within the state, or where necessary in other parts of

the country. In addition to structured class room courses, learning events, experience sharing seminarsand workshops and cross visits to other similar projects in India and abroad would form a part of the

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training. Time schedules, locations, and language would take into account the needs of women, tribals,poor villagers, field staff and staff and politicians from local governments. Residential training would beheld to the extent possible to enhance infornal interaction. On-going training needs assessment would bea regular part of project management. To date, the following training needs have been identified:

Common Interest Groups Basic training on managing groupsAccount keeping and record keepingTechnical trainingParticipation

Project Facilitation Teams Orientation to objectives, content, and systems of DRPP"Rules of the Game"Sensitization to gender, tribals and deprived groupsLinkages between DRPP and other programsSocial Assessment, Baseline and PRA techniquesDispute resolutionParticipation

Zilla Panchayats Orientation to objectives, content, and systems of the projectSensitization to gender, tribals and deprived groupsLinkages between DRPP and other programsMonitoringProject administrationFinancial ManagementProcurement

State Project Unit Project administrationProject Systems

Field staff of line departments Orientation to objectives, content, and systems of DRPPSensitization to gender, tribals and deprived groupsLinkages between DRPP and other programs

Commercial Bank officers Exposure to the projectSensitization to needs of CIGs, especially women, tribals and deprivedgroups

Implementation. A lead training organization would be contracted to develop a detailed training plan andstrategy. The strategy would: (i) identify resource persons and specialized training agencies inconsultation with the SPU; (ii) design and develop basic training materials for trainers; (iii) train PFTs;and (iv) provide regular feedback on training activities. The capacity building coordinator in the SPUwould be responsible to ensure that the PFTs, CIG members and other project staff are able to access therelevant training programs.

(b) Strengthening of Panchayats (US$5.96 million). The project would provide funds to build thecapacity of Panchayats to deliver public services to the villages and become more responsive andeffective in assisting the poorest in the villages. The strategy would be to (a) ensure that these Panchayatsattain a basic level of proficiency in financial management and budgeting, awareness of role andresponsibility of Panchayats, information dissemination and transparency; (b) facilitate participatoryplanning by Gram Panchayats in the functions devolved in the state Panchayats Act; (c) build capacity ofthe four state training institutes of the state responsible for training of Panchayats; the project wouldstrengthen the infrastructure of these institutes, develop training and materials and deliver trainingprograms; (d) provide a lump sum grant to a few Panchayats on a demand basis to finance specialtechnical assistance needs such as revenue generation management of common resources, etc.; and (e)provide small grants for Panchayat infrastructure (offices) in about 200 Panchayats, following the

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allocation principles of the state government.

An assessment of the strengths and weaknesses of Panchayats (Gram Panchayats, Block Panchayats and

ZPs) in the state would be carried out by an independent agency to ascertain the kind of training and

exposure needed. Initially, however, it is expected that all Panchayats would need focussed programs on:

* rights and responsibilities of PRIs;* sensitization to issues of gender, tribal groups and deprived groups;

* "rules of the game" of DRPP;* financial management;* participatory planning;* government schemes;* participatory meetings; and* communications and public relations.

(c) Formation and Strengthening of Organizations (US$5.80 million). The objective of the activity is

to ensure that the most disadvantaged people such as women, tribals, scheduled castes and the disabled

have an early advantage in accessing the project. This would be accomplished by ensuring that the

persons selected to become members of PFTs have the requisite skills and motivation. PFTs would be

either NGOs or government staff seconded to the project based on the following criteria:

* ability to communicate well and motivate target groups;

* ability to let communities take charge and lead the process; and

* ability to spend long hours in the villages.

The PFT selection process for both NGOs and govemment staff would be on the basis of interviews

conducted by a committee comprising the CEO of the relevant ZP, the Project Director and one other

member from the applicant's department. At least 20 percent of the PFT members would be women.

Those selected would be given promotion to one grade higher. The PFT would be under observation for

about one month to assess the quality of its interaction with the community and the intemal team

dynamics. The PFTs would have block level offices and spend about 80 percent of their time in the

villages, explaining the "rules of the game", training CIGs, helping with subproject proposals, interacting

with GPs, attending Gram Sabhas, conducting training and assessing subproject proposals, sending them

to the ZP for technical clearances if needed and certifying the achievement of milestones during

implementation of subprojects. After the first six months, once the CIGs have taken off, the PFTs would

spend more time monitoring the subproject implementation, the GP and GS processes, and provide

information on technical assistance to the CIGs which request it.

All PFT members would undergo a compulsory training on the project processes for about 2 weeks

followed by refresher programs and cross visits for a week during each year of the project. The PFTs

would also carry out the baseline survey data collection and the Panchayat plan preparation.

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(d) Communications and Information (US$1.35 million). Communications and information wouldserve as a behavior change tool, and would disseminate information and the "rules of the game" of theproject to all stakeholders, and generate interest and support for the project concept among them. Themain objectives of this sub-component are to: (i) provide timely and well targeted information on theproject; (ii) raise awareness, motivate and engage the poor in the project processes, both initially andlater on, to challenge existing barriers and constraints to their development; and (iii) promote aresponsive and cooperative environment within the villages, and among administration, civil society andpolitical establishment across the state, to endorse the new systems and behaviors initiated by the project.

General Public, Political and Administrative Establishment and the Civil Society: Once the project islaunched, announcements would be made in the state television, radio and local newspapers, givingbroad details about its purpose and how it would be different from other anti-poverty schemes in the ruralareas, how it would increase employment opportunities, and how it would improve income flows.

Villages, PRIs and CIGs: In order to foster greater awareness, build up a sense of being part of an effortbigger than one's group and village, as well as to facilitate interchange of best practices, ideas andexperiences, so as to bring about greater efficiencies, cooperation and healthy competition among CIGs,PRIs and villages, the following methods and instruments would be adopted:

o Groups involved with folk media such as Kala Jaththas (local genre of theatre), folk dances,puppet shows etc. (with different groups for the three linguistic zones of the state), would bebrought together and introduced to the project so that they understand its purpose, spirit, approachand methodology. These groups would be given the responsibility to develop various ways ofcommunicating the project specific to their art form so as to create awareness, enthusiasm,participation and sharing and transmission of lessons and best practices between the CIGs andvillages.

o A regular wall newsletter in the local language which acts as a forum for sharing of experiencesand views of CIGs and individuals would also be published and widely disseminated to allvillages, Gram Panchayats and government departments across the state. Periodic campaigns forsocial messaging involving dissemination of hand bills as well as wall writings with educativeslogans would also be conducted. Local schools would be involved in this effort by way of essay,painting competitions and cultural events that promote the values, hopes and approach of theproject.

o Since the level of literacy is rather low, a 'video newsletter' would be developed and circulated ona quarterly basis. The newsletter would capture the process, events, impacts and the humandynamics of various activities with an inspirational and leaming quality. Such videos would bemade in the local dialect and would capture reality in a manner that the villagers would identifywith.

o Melas (fairs) and social gatherings are an important forum where rural communities cometogether and interact with one another. These provide a platform for establishing and buildingrelationships, sharing information and experiences, discussing problems of mutual interest andconcern, and conducting commerce and trade, and are also an important source of entertainment.Suchfora, therefore offer an unique opportunity to create supportive and collaborative networksand arrangements, which may prove fruitful in the overall success of the project. Such gatheringswould take place biannually at the block level and annually at the district level. From the secondyear of the project an annual state level event would be organized with participation from the

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highest levels of the political and administrative establishment.

Establishment of a Documentation Unit at the District Level: The project would develop a data base(visual, pnnt and multi media) that can be used to disseminate information, create awareness andengender support. For this (as well as a network of journalists) would be created to document and archivethe processes, achievements, impacts, problems, best practices, experiences and life stories of individualsand groups on a representative basis. The SPU would draw up on this rich data and archive base todevelop programs and material for widespread dissemination.

Implementation: The primary responsibility for implementing this strategy rests with thecommunications coordinator in the ZP team. At the state level an initial communication design consultantwould be contracted to work out the details of the strategy and provide initial training to the district levelcommunications coordinators, the kala jathas and the PFTs. After the first year of the project the districtlevel coordinator in collaboration with the PFTs would be responsible to ensure that the messages goingout to villages and PRIs reflect the project developments. The state HRD/communication coordinatorwould be responsible to put out the state wide project awareness messages through audio-visual and pnntmedia, development of short films and organizing the awards and fairs.

(e) Monitoring and Learning and Special Studies (US$1.07 million). The Monitoring and Learningsystem is designed to (a) support information gathering and analysis by primary users; (b) link this todecision making for opportunities; and (c) develop optimal information flows between these groups ofusers or decision makers. The SPU would issue quarterly reports that would consist of: (a) physical andfinancial expenditure data; (b) performance indicators; and (c) briefing notes on successes, problems andproject responses. Annual Reviews (AR) would be carried out jointly by the Govemment and IDA withthe first review to be completed six months after effectiveness. The ARs would be in-depth assessmentsof progress and an opportunity to change course where appropriate. As an input to the AR, the SPUwould utilize monitoring information for analysis or, when necessary, commission specific studies of (a)effectiveness and efficiency of institutional and implementation arrangements; (b) impact of theinstitutional and human capacity building activities; and (c) other studies considered necessary by theGovernment or IDA. The TORs for the proposed studies would be developed by the SPU and amended asnecessary based on comments provided by the project. The third year AR would be a morecomprehensive Mid-Term Review addressing all aspects of the project.

The table below summarizes the parts of the M&L system, the subject matter of each, instruments to beused and frequency of reporting.

Summary of M & L SystemComponent Subject Instrument FrequencyPerformance tracking Inputs/outputs/outcomes Pro-forma reporting CIG - ZP monthly

ZP - SPU quarterlyInstitutional Tracking Organizational performance Institutional Maturity Indexing Annualntemal Learming Project processes 1. Group Self Assessments 1. Six monthly

2. Exchange Visits 2. Annual (minimum)Evaluation Project Impacts & outcomes 1. Peer Reviews I Annual

2 Development Audit 2. Biennial3. Impact Evaluation 3. Before & after project

Indicators, Instruments, Periodicity and Responsibility. Components and instruments of M&L would berefined over the life of the project as information needs emerge and as capacities and systems toundertake different monitoring activities develop.

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(i) Performance tracking would monitor the following indicators:

o number of CIGs projected/formed;o percentage of CIG members belonging to poor & vulnerable groups (key indicator);o number of CIG and GP members receiving training by type of training;o participation in CIGs, GS and GP activities and decision making;o purpose and amount of subprojects: submitted, approved, implemented;o time taken for submission, approval and release of funds for subprojects;o number of subprojects abandoned, delayed, completed on time, continuing to function;o number of assets created by category;o number of CIG groups/group members obtaining bank loans (key indicator);o number of families benefitted (key indicator);o average cost of subproject component to government standards (key indicator);o amount of cash contributions by CIG members to CIG activities; ando number of GPs providing clean drinking water to the poorest habitations.

All data would be disaggregated by social and economic group and gender, where relevant. The aboveindicators would be monitored on a quarterly basis. Performance tracking information would bereviewed at a monthly district level meeting of the ZP. ZP staff would periodically monitor PFTsfunctioning and attend CIG/GS meetings to obtain first hand information of the implementation process.The ZP would pass on to the SPU electronic summaries of performance data along with any narrativecommentary on a quarterly basis. The SPU would prepare summaries of this information for the entireproject area and submit input and output reports on a six monthly basis to Gol and the World Bank.

(ii) Institutional Tracking would monitor:

o overall institutional maturity score of CIG/GS/GP;o inclusiveness rank of CIG/GS/GP; ando autonomy rank of CIG/GS/GP.

An Institutional Maturity Index (TM!) comprises an aggregate of indicators but only (a) the overallaggregate score, (b) the inclusiveness rank and (c) the autonomy rank of each organization would beentered into electronic monitoring base. While the construction of IMIs may vary between CIGs, GPs andGSs levels, the IMI and all its component indicators would be used consistently within organizationallevels across all project locations e.g. the same indicators would be used for all CIGs, or all GSs or allGPs. The IMI would be applied on an annual basis for all levels of project organization. Data would beentered into the project's computerized data base by the ZP M&L officer. Analysis of these data maytrigger a special study. Summary reports, containing data and commentary would be forwarded to theSPU on an annual basis.

(iii) Internal Learning would monitor indicators to be generated by Group Self Assessments andExchange Visits. The objective of groups self assessments and exchange visits is generation ofinformation about processes and cause-effect relations. This would enable (a) learning within groups(CIG/PFT/GS/GP); (b) horizontal learning between groups of the same nature (CIG to CIG etc); and (c)vertical learning within the project e.g. CIG to GP.

Group Self Assessment. These would take place at regular intervals throughout the project. The purposeis to enable staff and organizations/groups within the project to (a) reflect on information availablethrough the monitoring system and benchmarks designed by themselves; (b) relate that to their own

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performance; and (c) use that analysis to re-frame activities, systems and approaches. These scheduled

events would also enable the project to learn from experience and refine policy governing what the

project does and how it does it. Each CIG, PFT, GP and ZP would periodically undertake

self-assessment on the goals it sets for itself and measure them using indicators it selects.

Self-assessments would track levels of satisfaction/dissatisfaction of the groups, capacities to manage

activities, to solve problems, to mobilize resources and manage responsibility. PFTs would be

responsible for reporting on the outcomes of CIG and GP group self assessments and exchange visits to

the concerned ZP. The ZP would make this information publicly available and work with the

conmmunications of the project to develop appropriate mechanisms. Annual summaries would be passed

on to the SPU. In order for these group self assessments to be useful and be taken seriously by

group/organization members, each must be empowered to take decisions on the basis of their collective

analysis. They may also need to be effectively linked to a higher level of decision making body who

would respond quickly and effectively when required.

Exchange visits would be used for cross-group learning. These would involve expenence sharing and

learning from groups with similar interests e.g. CIGs formed around the same activity, GPs addressing

similar issues, ZPs managing particular project components. Peer reviews would focus on a limited

number of activities or topics. Because the emphasis is on constructive lessons, topics of the exchange

would normally be those with which at least one group is having positive experiences. A minimum of

two exchange visits per year between CIGs is anticipated.

(iv) Evaluation would comprise of two activities: Peer reviews and Impact Evaluation.

Peer Reviews combine cross-group learning with evaluation. Each group (CIG, GP, PFT, ZP) would be

peer reviewed. Outcomes of these exercises would contribute to performance appraisals but would also

support experience sharing and generate information which can be used to track project effectiveness.

Where possible peer reviews would be undertaken by a group of the same type and with experience of

similar activities. Descriptive information would be generated and reported using narrative text but

certain indicators would be extracted from this for feeding into the quantitative project monitoring data

base.

Impact evaluation would as far as possible establish the net effect of the project on economic

opportunity, inclusion, vulnerability and capabilities of different groups of poor people. Findings would

be relevant for subsequent phases of the DRPP, for designing other similar projects and would be of

sufficient quality to inform policy discourse. Measuring impact would involve comparing qualitative and

quantitative outcomes before and after the project, and between project and control areas. It is accepted

that attribution of causality would be difficult and involve acknowledging some very major assumptions.

The impact study would require a rigorous methodology and high quality analysis. Changes in poverty

and poverty causing factors would be assessed through indicators such as increase in earnings of the

target groups, in land yield, in access to water, health and education facilities, and in their skills and

organizing capacity. The project impact would also be measured in terms of increased and strengthened

social capital of vulnerable groups in project villages. The indicators of social capital include strength of

formal and informal village networks, capacity of members to form new groups, members' knowledge

and participation in existing government programs and the responsiveness of PRI and government

administration to the needs of the poor. An independent organization would be appointed to undertake

the baseline and end survey in a sample of project and control villages.

(v) Special Studies. An additional source of learning would be studies on economic, institutional and

social aspects of the project including: (a) Government's Rural Development Programs and other

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Safety-nets; (b) Land Administration/Common Land Management with a focus on the forest poor; (c)Fiscal Decentralization and Revenue Generation at the state, district and village level; and (d) TraditionalSystems of Governance of Tribal People. Other studies may also be recommended as thought necessaryby the Association and GoCG.

09 Project Administration (US$5.50 million). Project Administration would focus on (a) day to dayproject management; and (b) supporting executing agencies at the district and village levels. Details ofProject Administration including duties and responsibilities of implementing agencies are included in theOperational Manual.

At the state level, a Coordination Committee would ensure that the relevant state departments andprograms support the project in a coordinated fashion. The Committee would be chaired by the ChiefMinister, vice-chaired by the Minister of Rural Development and Panchayats and would also include theMinister of Tribal Affairs, the Secretary (Finance), Secretary RD, and the Project Director (Secretary). Itwould also include four representatives from the districts (2 each from administrative and politicalgovernment) and representatives from two NGOs. District and NGO seats would rotate every two years.A small SPU has been established in the Department of Panchayats and Rural Development and wouldassume monitoring and supervision functions, but would not intervene in project implementation anddecision-making. The SPU is staffed with a Project Director, a Capacity Building Coordinator, aMonitoring and Learning Coordinator, a Communications Manager, a Tribal and Enviromnent Specialist,a Financial Management Specialist, and an Administration and Procurement Specialist.

At the district level, the Zilla Panchayat in each of the sixteen project districts would be responsible forproject implementation and management. The ZP would also assume important monitoring andevaluation functions, as well as decision-making responsibilities regarding district level issues, capacitybuilding activities, and assess village performance in targeting the poor and fostering participation, andmake budget allocation decisions. For project administration the ZP would be assisted by its CEO whowould be supported by a small number of project specific staff, including a financial managementspecialist, a gender and capacity building specialist, communications specialist, a tribal andenvironmental specialist and a technical and procurement specialist.

At the village level, project decision-making and implementation would be shared between the villageGram Sabha and the Gram Panchyat. Gram Sabhas would ratify subproject proposals and Panchayatplans and be a forum for discussion. GPs would receive CIG project proposals, prioritize them, search foralternative financing sources including from the project, submit them to the Gram Sabha for ratification,and channel them to the ZP for financing. GPs would develop village plans and submit to the GSs forapproval. Some of the subprojects in the village plans would be co-financed by the project followingprocedures similar to CIG subprojects.

At the people's level, the key project organization would be informal groups of people, CIGs. CIGs wouldcomprise disadvantaged people with a shared interest who come together to act upon them. These couldbe existing groups such as watershed associations or self-help groups, or groups to be formed. CIGswould undertake initiatives using their own resources, by accessing on-going programs, or by submittingproposals for project support. In most cases CIGs would assume responsibility for their implementation.Group formation would be promoted and assisted by Gram Panchayats.

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Project Component 2 - US$105.78 million

Village Investments

(a) Matching grants for community investments (US$64.79 million). The project would provide

matching grants to groups of disadvantaged people to finance priority, small-scale, collective

investments, identified by the groups themselves. Groups would be composed of people who come

together around a common need, and could be as small as five people or as large as the entire population

of several villages (for larger multi-village projects). It is expected that about 20,000 subprojects would

be financed, covering primarily productive investments (e.g. micro-enterprises, minor irrigation, animal

husbandry, etc.). Subproject proposals for all forms of investments would observe standard procedures,

documentation and technical, social, environmental and sustainability criteria, as set forth in the project's

Operational Manual (in the project file). In addition to contributing 5% towards the cost of each

subproject, groups would have to raise 10% in cash on top of subproject costs (in lieu of cost recovery)

which would be deposited in village funds for future use by communities.

(b) Matching grants for Panchayats Plans (US$33.51 million). The project would co-finance

subprojects in Panchayat plans in about 2000 Panchayats covering the selected villages. These small

subprojects would cover investments within the functions devolved to Panchayats, such as small rural

roads, health posts, community halls, school rehabilitation, drinking water, sanitation, electrification,

management of Panchayat lands, management of tanks, etc. All target Panchayats would initially be

eligible to receive a small budget from the project, but for continuing project support they would need to

meet the following criteria: (a) positive support to the project through communications, CIGformation

and conducting of participatory Gram Sabhas; (b) provision of safe drinking water to the poorest

habitations; and (c) satisfying basicfinancial management standards. All GP subprojects would require

community contributions of up to 5% in cash and the GS would decide how funds would be raised.

Panchayat plans would be financed from other sources of funding as well, and would need to be

discussed and approved by the Gram Sabha.

(c) VillageFunds (US$6.48 million). Communities would have to contribute 10% of subproject costs

upfront (before second tranche is released) towards cost recovery which would be deposited in a village

fund under the GP. The main purpose of the Village Fund is to create a culture of local taxation and cost

recovery in exchange for improved services and to ensure project sustainability at the village level

beyond its lifetime. Community contributions could be met by own savings (e.g. of Credit and Savings

Groups), Bank loans, or labor. Wage earners would be paid wages and could contribute a proportion of

this income towards the village fund. The village funds would create village capital to be used for village

and group investments beyond the life of the project.

(d) Innovation Funds (US$1.00 million). About one million dollars would be earmarked for

demonstration subprojects to be initiated by PFTs, NGOs, private sector, or any other entities. These

would be reviewed and approved by the SPU. They could for example include subprojects to

demonstrate improved technologies that communities are initially hesitant to adopt, subprojects to

demonstrate improved environmental management, and others.

Targeting. The project would cover all the 16 districts of Chhattisgarh. Within each district two or

three blocks have been chosen on the basis of poverty and backwardness. Published data on the

following indicators was used to select blocks:

* proportion of scheduled tribe population and their literacy;

* proportion of scheduled caste population and their literacy;

* gender ratio and change in gender ratio;

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o juvenile gender ratio and change in juvenile gender ratio;o illiteracy and female illiteracy;o un-enrolled children in primary schools;o incidence of malaria;o percentage of working population engaged as agricultural and mining laborers;o children below the age of 14 engaged as workers;o percentage of area under agriculture;o percentage of cropped area under irrigation;o existing markets and mandis;o percentage of population that migrates;o villages not connected by pucca roads;o roads per 100 km;o level of ground water availability;o rainfall data during the last 3 years;o number of schemes or provision of piped drinking water in the block (indicator of development);o distance from district headquarters or large city; ando connectivity.

The number of indicators used and relative weights differ from district to district to account for theirspecific situation. For example in a district with poor agriculture, the percentage of population workingas agricultural laborers received greater weight than in a district with rich, irrigated, agriculture.Similarly, the proportion of tribal population received greater weight in non-tribal areas, since in theseareas tribal people are worse-off. Similar criteria has or would be used to select clusters of villageswithin a block, but selection would also be based on field visits. All villages within a Gram Panchayatwould be included.

Household targeting would be carried out for income generating activities. Groups (CIGs) eligible toreceive matching grants for income generating activities would need to meet the following criteria:

o all Scheduled Tribe and Scheduled Caste households;o all women and women headed households;o households where at least one member migrates as wage labor;o households having no permanent dwellings or whose houses need repair every year;o all landless and marginal farmers; ando the 70% poorest households as identified by the Gram Sabha through a wealth ranking exercise.

It is expected that in most villages the entire village would be eligible for subprojects and in these casesthe 70% criteria would not be used. For GP subprojects included in village plans all households in thevillage would be eligible as beneficiaries.

Rules of the Game. There is a simple set of rules to determine the eligibility of subprojects, whichwould be enforced and/or monitored by PFTs, GSs and GPs. These rules are that:

o subproject must benefit the poor (see above);o subproject must be initiated by CIGs or GPs (as part of village plans) and not by NGOs, PFTs, or

state government officers or politicians;o CIG members would self select themselves;o subproject funds are deposited in a CIG account or GP account;o subproject must be technically sound, simple and manageable;

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* CIGs can implement the subproject or contract it (or parts of it) out; GPs would form CIGs or

contract out;* where relevant the subproject must include an O&M plan, and in certain cases, it should also

include provisions for community contributions towards an O&M fund;* subprojects should be in addition to investments under government schemes;* land based subprojects should be carried out on public or group land, and if the proposed land is

private, there must be an appropriate voluntary contract between the'land owner and CIG;

* if subproject is for completion of damaged or incomplete work, an investigation of why work

was not completed would be necessary;* at least one CIG member should have experience relevant to the subproject;* the subproject must adopt practices of transparency and economy;* CIGs must contribute at least 15% of the cost of the subproject in cash (5% to the subproject and

10% to a village fund);* GPs must contribute at least 5% of the cost of the subproject;* maximum subproject cost would be $650 per family and no family would benefit more than $650

during the lifetime of the project, except through GP subprojects;* there is no involuntary resettlement;* subproject must not have adverse environmental impacts and if it does appropriate mitigating

measures must be undertaken; and* all decision-making meetings, whether within CIGs or GSs, must be participatory and inclusive,

particularly towards women and scheduled tribes and castes.

Negative list. A wide range of group activities would be eligible for financing. The following activities

would not be financed (details in Operational Manual):

* individual projects;* consumption activities;* facilities which do not increase the productivity of the poor such as public administration

buildings, facilities for political or labor organizations, or religious buildings;

* resettlement or construction on private land, unless there is consensus among all;* land acquisition;* subprojects not screened for environmental impacts;* activities likely to cause damage to wildlife, or likely to cause damage to a sanctuary by setting

fire, injuring wildlife, or involving indiscriminate felling of trees or indiscriminate removal of

plant, animal or mineral produce from a sanctuary;* activities located within a national park;* construction/rehabilitation of a dam (old or new) of 10 meters or more in height;

* agricultural activities that do not incorporate integrated pest management (IPM) approaches;

* subproject that intends to use banned pesticides, agrochemicals in WHO Classes IA, IB and II;

* subproject that involves manufacturing, sale, stocking, distribution or exhibiting for sale of

pernissible pesticides without a licence; and* activity that could damage cultural property.

Technical assistance. CIGs/GPs would procure technical assistance for project preparation or

implementation from private sector, NGOs or govemment agencies. Seven percent of subproject costs

would be earnarked for technical assistance.

Subproject Cycle. The identification, preparation and implementation of subprojects would be the

responsibility of Common Interest Groups or GPs. The first priority would be to ensure that everybody

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knows the "rules of the game", that the project is "trusted" and has credibility, that the mostdisadvantaged groups have the first chance to benefit from the project, and that they are sufficientlyempowered to participate in village decision-making.

o CIG subprojects. PFTs would play a critical role in communicating the project, assisting the firstgroups prepare proposals and monitor the quality of decision-making at the village level. CIGsubprojects would be approved by the Gram Sabha (GS) based on rules included in theOperational Manual and which would ensure appropriate targeting, the quality of the CIGs, theadequacy of contributions and the technical, financial, environmental and operation andmaintenance aspects. Technical, environmental and O&M sanctions would be given by the PFTup to $5000 and by appropriate government experts at the block or district level for largerprojects (details in Operational Manual). PFTs would monitor the quality of participation at theGram Sabha level.

o GP subprojects. GP subprojects would be included in Panchayat plans (village plans). Thesewould cover public goods and services devolved to Panchayats. GPs would call GSs meetingsto discuss village plans where villages would come up with their proposals for inclusion in thevillage plan. GPs would be responsible for prioritizing investments, finalizing the plans,identifying funding sources including from DRPP, resubmitting them to the GS for approval andchannelling them to the District for any final sanction needed or to kick-off disbursements.

Multi-village subprojects would be approved by the ZP. Subprojects to be financed by the InnovationFund would be approved by the SPU.

Budgets and financial limits. The project budget available for each village would be on the basis of$650 per eligible household. The average budget per Panchayat would be $5 per capita initially andanother $5 per capita once performance milestones are reached.

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Annex 2Attachment 1

Environmental Assessment

From an environmental perspective, only the community investment component raises issues. To address

this concern, an EMF was developed. To ensure the effective implementation of the framework, an EA

has been selected and would be contracted by the SPU shortly after Board approval. This summary

presents the principal elements of the EMF, and then briefly discusses the role of the EA. The Terms of

Reference for the EA are included in the Project Implementation Plan.

Environmental Management of the Community Investments

The community investments to be financed under the project would consist both of income-generating

activities and small-scale infrastructure. In most cases, the small scale of these interventions would

prevent environmental impacts of significance. All subproject proposals would, however, be subject to an

environmental screening exercise in order to:

* prevent execution of subprojects with potentially significant negative environmental impacts;

* decrease potential minor negative impacts through modifications in subproject design, location or

execution;* prevent or mitigate cumulative negative impacts as the result of multiple small-scale investments;

* enhance the positive impacts of subprojects;* prevent additional stress on environmentally-sensitive areas; and

* through learning by doing, introduce environmental concerns into local decision-making.

To meet these objectives, an Environmental Assessment Report (EAR) has provided the following inputs

to the design of the overall project:

* a methodology and administrative structure for environmental management;

* an environmental capacity-building and awareness-raising program; and

* an environmental supervision and monitoring plan.

The requirements of the EAR are included in the projects' Operational Manual.

Methodology and Administrative Structure for Environmental Management

All subprojects submitted for funding would be subject to an environmental screening process with the

following steps:

(a) Determination of the Level of Environmental Analysis Required. Using the Environmental

Screening Criteria included in the Environmental Assessment Report, the PFT/GP would

determine the level of environmental analysis required. Some subprojects, included in a negative

list, would not be eligible for funding (see Annex 2, main text). The options would be as

follows:

* Environmental Review (ER) - to be applied to subprojects considered to be environmentally

beneficial or benign;* Limited Environmental Assessment (LEA) - required for subprojects with minor potential

impacts; and* Environmental Impact Assessment (EIA) - required for subprojects with significant

potential impacts. In most cases these subprojects would not be eligible for funding.

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(b) Environmental Analysis and Mitigation If the subproject requires an ER, this would becompleted by the PFT/GP using the Environmental Review Guidelines, an environmentalmitigation checklist providing standard guidance for mitigation of potential minor environmentalimpacts. The completed checklist would be submitted with the subproject proposal to the ZP forreview prior to subproject approval. In the case of subprojects requiring an LEA, the ZP wouldbe responsible for ensuring that it is conducted according to a generic TORs by a local consultantapproved by the EA. Subprojects requiring an ELA would be forwarded for review to the SPU,which would request an estimate of the EIA cost from the EA.

Environmental Capacity-building and Awareness-raising

One of the principal tasks of the EA appointed by the SPU would be to provide adequate training toallow the PFTs, GPs/ZPs and SPU staff, and approved local environmental consultants, to fulfill theirenvironmental responsibilities. To meet this goal, the EA would prepare four training courses as follows:

o Environmental Awareness - raising for DRPP beneficiaries and GPs;o Basic Environmental Screening and Mitigation for PFTs;o Environmental Screening and Mitigation for ZP and SPU Staff; ando Limited Environmental Assessment for environmental consultants.

These courses would be prepared and delivered in close consultation with the SPU, HumanDevelopment, and Tribal and Environment Coordinators.

Environmental Supervision, Monitoring and Auditing

(a) Environmental SupervisionL Supervision of EMF implementation would be conducted at twolevels. At the district level, as part of their overall supervisory responsibilities, ZP staff wouldverify that PFTs are correctly using the environmental screening and mitigation checklists andguidelines, and that the environmental mitigation measures included in the approved subprojectproposal are implemented. The ZPs would verify these matters for the same sample ofsubprojects as they use for other supervisory requirements, and the results would be included intheir overall supervision reports provided to the SPU. These supervision reports would besubmitted to the EA for review of EMF implementation. At the state level, the EA wouldconduct six-monthly supervisions of EMF implementation, of a representative sample of ER,LEA and EIA category subprojects. The EA would verify whether the screening process wascorrectly applied, suitable mitigation measures specified, and the measures correctlyimplemented. The supervision report, to be submitted to the Project Coordinator, would includerecommendations for improving either the EMF approach, or its implementation.

(b) Environmental Monitoring It would be the responsibility of the EA to remain abreast ofchanging environmental conditions and emerging environmental concerns in DRPP areas. Thiswould not be achieved through the collection of primary data, but rather through monitoringinformation collected and provided by government and civil society sources. On the basis of thisinformation, the EA would recommend revisions to the EMF, and highlight local concerns to theZPs. Details of changing conditions, emerging concerns, recommended revisions, and localissues would be included in the six-monthly supervision reports provided to the SPU.

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(c) Environmental Auditing. To provide an independent assessment of the effectiveness of the

design and implementation of the EMF, once every two years the SPU would contract an

environmental audit of DRPP, to be conducted by an independent organization competent in this

field. The principal focus of the audit would be the extent to which the EMF has led to the

implementation of appropriate environmental mitigation measures in DRPP subprojects, and has

promoted the implementation of environmentally-beneficial subprojects. A secondary goal of the

audit would be an assessment of the extent to which the DRPP may have led to improvement or

deterioration in environmental quality.

Role of the Environment Agency

At the state level, the SPU would appoint an EA to undertake a range of environmentally-related

activities. The mission of the EA would be to:

* prevent environmental degradation as a result of either: (a) the cumulative effects of many small

DRPP investments that individually have a negligible impact; or (b) the impact of individually

harmful subprojects. This duty would be fulfilled without imposing an unnecessary

administrative burden on the project;

* promote the implementation of subprojects that would be expected to lead to improvements in

local environmental quality; and

* build capacity for environmental management at the local, district and state levels.

In order to achieve this mission, the EA would undertake six principal tasks:

* the design and provision of training in environmental management;

* supervision of the implementation of the Environmental Management Framework of DRPP;

* monitoring of environmental conditions to ensure that the EMF remains responsive to

environmental concerns;* estimation of the cost of undertaking specific subproject EIAs as requested by the SPU;

o specific subproject EIAs which may be requested by the SPU, but undertaken under separate

contracts; andc the provision of ad hoc technical support on environmental issues, as requested by the SPU or

ZPs.

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Annex 2Attachment 2Women's Development Strategy

While the gender ratio is higher in Chhattisgarh than in all other Indian states except Kerala, mostly dueto a high gender ratio among tribal people, women are still marginalized as evidenced by low femaleliteracy and other human development indicators. Malnutrition is a common feature amongst women inrural areas and among these widows and old women are a specially vulnerable group. The experience ofwomen in local governments has shown that gender disadvantage in literacy translates into genderdisadvantage in political participation.

Government Strategy

The Government of Chhattisgarh is firmly committed to capitalize on its 'new state advantage'. TheState has taken a conscious decision to adopt a new State Policy on Women's Empowerment. The State'sstrategy recognizes the need for increased participation of women for achieving rapid social, economicand cultural development of the state. GoCG's strategy proposes to address a number of issues includinggender based occupational stereotyping, male selective migration in the context of industrialization,female illiteracy, impeding cultural practices and attitudes, dominance of women in marginalemployment, lack of access to basic facilities, discrimination against the girl child, etc. Salient features ofChhattisgarh's Women's Empowerment Policy are to:

o adopt, enact, review and revise wherever necessary laws to eliminate all forms of discriminationagainst women; and implement laws regarding prenatal sex selection, practices of femaleinfanticide, child marriage, etc, to eliminate all forms of discrimination against the girl child;

o earmark at least 10 % of the social sector spending for supporting women's income generatingactivities, encourage access to low cost credit to women groups through financial institutions,and encourage and recognize women as farmers;

o encourage the use of common lands in rural areas by women groups to cater to the fuel andfodder needs of the villages;

o provide safe drinking water to the entire village to reduce the burden on women in the carrying ofheavy head loads of water;

o provide training to women to promote skills for income generating activities like handloomweaving, traditional Chhattisgarh arts, handicrafts, terracotta, sale of compost, collection ofwaste, use of sewing machines as well as focus on information, technology, biotechnology, etc.;

o facilitate the formation of women groups and their training for collection, value addedprocessing, preservation, storage and trade of non- timber forest produce; and

o ensure women have access to affordable and proper health care, information and related services;

Women's Strategy in DR]PP

There is a need for intensive efforts in developing the confidence and capability of women particularlythe more marginalized groups so that they are enabled to tackle the more complex issues under theproject. Women's empowerment would cover social, economic, and political aspects. Some of the areasfor action are:

o Capacity Building: The strategy is to build the capacity of the PFTs and the leadership of theproject to understand the needs of women. The primary thrust would be therefore in building thecapacity of key staff (PFT members, and the leadership at the ZP) to develop skills in social andpolitical analysis as they relate to women. A gender sensitization module would be included in

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the project's orientation program;* Targeting There is a need to work with SC/ST women in particular. This would be highlighted

in all training and PFTs would be equipped to address this requirement. The review and

monitoring processes would assess the status and effectiveness of this training;

* Developing a Learning Culture: Meetings to discuss women's issues within DRPP would be

facilitated carefully because the experience elsewhere has been that they become routine affairs

with very little reflection and analysis and feed back into the project process;

* Recruitment of women in the PFTs: At least twenty, and possibly fifty percent members of PFTs

would be women. To attract women for these positions the project would offer: (a) an attractive

compensation package; (b) safe living and working environment; and (c) mobility. In addition to

mobility, women would also be provided safe and secure living conditions where they are based

and during travel to project areas;* State and District Staffing: The SPU would include a gender specialist. The gender specialist

would play a proactive role in mainstreaming women's issues in project processes. This would

entail working closely with all technical managers at the district level and strengthening the on

going processes of communication, training, documentation, group formation, and investment

opportunities (including marketing);* Creation of a pool of women development workers: As a long term goal, DR.PP would help in the

creation of pool of women development workers through experience in project implementation

combined with formal training through seminars, guest lectures, and optional courses in gender

studies;* Activities likely to be demanded by women: the project would support activities chosen by

women. Among activities expected to benefit women are: (a) health related interventions; (b)

drinking water; (c) provision of toilet facilities; (d) functional literacy and confidence building

activities; (e) women only village meetings; (f) exposure visits to successful initiatives by

women; (g) kitchen gardens and small animal husbandry; and (h) agriculture and related

activities; and* Information and communication: special attention would be paid to the design of messages and

the method of communication to ensure that women receive the intended messages. Places

frequented by women, household level messaging and focus groups would be organized to

disseminate information about the project.

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Annex 2Attachment 3

Tribal Development Strategy for D]ORPPI

The following are the goals of the strategy for tribal development within the project over and above thefundamental strategies of DRPP (participation, equity and decentralization):

o fair participation and representation of tribals at all levels of the project with a view to influenceits decisions and outcomes for the tribal constituents;

o ensuring protection of social, economic and cultural interest of tribal communities in projectinterventions among both the tribal and non-tribal groups;

o overcoming structural constraints to poverty and deprivation among tribals through directsocio-economic interventions as well as induced actions under other available public resourcesand legal provisions of the Government;

o optimizing productivity of community and privately held land, water, forest and livestockresources among tribal people to ensure food security and generate sustainable surplus;

o enhancing options for labor and improving conditions surrounding returns from labor as agrowing basis for livelihood activity for most tribal families in the region; and

o rigorous capacity building of tribals' village level organizations and its leadership to plan,prioritize and place demands on the project services and resources.

At the village level, the tribal strategy would ensure the following:

o The project would attempt to cover and facilitate the participation of all the tribal BPL familiesin a settlement.

o In those villages where the ST population is above 30 percent, tribal women would beencouraged to form the first CIG. This would demonstrate the priorities of the DRPP andestablish clearly the population with which it is most concerned.

o Number of proposals approved, investments made in tribal CIGs, and the quality of performanceand participation of tribal CIGs would count as key indicators of a village's performance andwould influence the decisions related to future allocations in that village. Target area would getless money if the number of proposals, investments made and participation quality fall below aminimum threshold. Annual reviews would be done in a humane manner, so that a community isnot penalized for bad performance for reasons beyond its control such as natural disaster.

o The state government has made laws and rules for distributing surplus land to the landless andsafeguarding tribal's land. But lack of awareness regarding these land laws is a root cause ofalienation of tribals from their land through illegal means. The project would support a specialmodule targeted at PFTs and PRIs for making the landless and tribals aware of provisions madeby the state government to safeguard tribal's land.

o Most tribal villages are situated in remote areas and their accessibility to government programs isbelow average. Therefore, PFT members would make frequent contacts in those villages andorganize frequent orientation programs. To ensure this ZPs would identify those villages andwould monitor the progress regularly.

At the district level, the following are envisaged:

o Coverage of the tribal population, investments in tribal CIGs and performance would bemonitored and reported and form part of staff/PFT performance appraisal and reward systems.

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* An annual meeting of all tribal CIG representatives from within the district would be organized

by the project office in order to collectively review progress and problems faced by the project

and its tribal partners. Separate budget provision of about Rs. 2,500/ per meeting would be made

under the project for these meetings.* The project office would remain alert to moves to subvert equal participation of tribal CIGs in

DRPP. This would be carried out through extensive review with PFTs and the monitoring of

norms specified under village level measures above.O To ensure adequate pooling of experience and formulation of shared strategies to work with

tribal communities, project teams would interact at the regional level. Though there are no

regional level structures envisaged in DRPP, project teams from five districts would be formed

into one regional cluster on the basis of the homogeneity of tribal's socio-economic profile.

There would be three such clusters, two with five districts and one with six districts. CIGs that

perform well would be selected for cross visits so that healthy exchange of ideas would take

place. Separate budget provisions within the project would be made for cross visits. One cross

visit within each regional cluster would be organized every year. Cross visits would begin from

the second year of the project.o ZPs would identify local influential people, tribal PRI members, and NGO organizations to work

with PFTs in the orientation program.

The SPU would convene a six monthly regional meeting of district officers responsible for overseeing

and monitoring tribal development activities. These meetings would be used to review the progress with

tribal CIGs, exchange experiences and share strategies relevant to tribal development. There would be six

meetings of this kind every year and separate budget provisions have been made for each meeting.

At the state level, the SPU would:

o monitor the project's tribal development strategy and programs in and across districts; and

* produce an annual public report, together with comparative expenditure, on the impact of DRPPon tribal people's lives and livelihoods in the DRPP districts.

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Identification of specific activities

Tasks that relate to the tribal strategy would be built into DRPP operations and work strategies. Tribalsconstitute a vast number of the poor in the state and the areas they reside are also the poorest in the state.However, tribals in Chhattisgarh are not as marginalized, voiceless of powerless as in other states andthey are recognized both for their poverty, for their strengths and potential, and for political and socialvoice. PRI institutions have a large number of local tribal leaders as members or office bearers. Thestrategy for tribal development is to utilize this strength in awareness building and furthering the projectactivities. Several activities to promote developmnent of tribals have been identified and are summarizedin the box below.

a. As part of baseline study, set realistic minimum ST thresholds.b. Identify key indicators for:

o number of proposals approved;o investments made by CIG;o quality of participation of tribals; ando quality of performance of tribal CIGs

c. Set the minimum participation and performance threshold based on the above indicators (These may bedifferent for different areas and groups).

d. Monitor performance of CIGs based on the minimum threshold.e. Annual review of performance and participation of CIGs.f. Design an annual allocation pattern sensitive to the performance of the CIGs.g. Monitor participation results for CIGs and PFT staff.h. Organize cross visits between CIGs within a regional cluster.i. Biannual staff meeting to review progress and exchange experience.j. Annual tribal CIG representative meeting in each district to review draft report monitoring results and identify

obstacles to tribal participation.k. Annual Tribal Strategy Progress Report on impact on tribals with comparative expenditures by district and

block.1. Training and Capacity building of CIGs and PFTs on tribal issues.

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Annex 3: Estimated Project Costs

INDIA: Chhattisgarh District Rural Poverty Project

- ~; | . v. dri onrtrl- ~ .i! " - ;r > | ; r j 1;; a . ;; 9 - Local F'voreignr ' TotalI ~~~~~~~~~~~~~~~~ ~~~~~~~~~'! ,C n'6 -' .. .... US$miilo U.rilo .U'~hI6

Institutional and Human Capacity Building 22.25 0.26 22.51Subprojects for Community and Village Investments 99.30 1.88 101.18Total Baseline Cost 121.55 2.14 123.69

Physical Contingencies 0.06 0.01 0.07

Price Contingencies 5.45 0.14 5.59

Total Project Costs 127.06 2.29 129.35

Total Financing Required 127.06 2.29 129.35

,~2 - sr .'Xr>;t. , et, n ' l.; -' "'-" ' -Lo'c-aP ' Forbigr!:,, r Toa

't .Prbject.Cot-ByiCategory. :US$million - US miion . S $illo

Civil Works 1.04 0.02 1.06Goods Equipment and Vehichles 2.26 0.25 2.51NGO Services and Consultancies 2.10 0.00 2.10

Training 7.97 0.00 7.97Community Investment Grants, Panchayat Grants and 97.28 2.02 99.30Innovations GrantsVillage Fund 6.48 0.00 6.48

Recurrent Cost 9.93 9.93

Total Project Costs 127.06 2.29 129.35

Total Financing Required 127.06 2.29 129.35

Identifiable taxes and duties are 0.33 (US$m) and the total project cost, net of taxes, is 129 02 (US$m). Therefore, the project cost shanng ratio is

87 24% of total project cost net of taxes.

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Annex 4

INDIA: Chhattisgarh District Rural Poverty Project

Economic Assessment

The main objective of the project is to alleviate poverty by improving the capacity and opportunities ofthe poor to participate in and control their own development. The community investments component isan incentive for the organization of these groups and their active inclusion in village life. Further, themain criteria for the subprojects is whether the projects are effectively targeting the poor and promotingtheir participation. Given that the project has a hard-budget constraint both at the village and householdlevels, and that the funds are untied in nature, it is expected that poor groups will choose the best projectsfor themselves, which are also likely to be those with the highest economic returns.

Experience from similar projects in India (Andhra Pradesh, Rajasthan and Madhya Pradesh), as well as inother regions, indicates that demand-driven projects of this type, involving beneficiary contributions, arehighly cost efficient. Communities have a vested interest in achieving the best quality-price ratio andseek to maximize cost-savings and ensure accountability. Furthermore, because communities are activelyinvolved in prioritization, implementation, operations and maintenance, the subprojects they select areusually financially viable. This is even more so in projects, such as this one, where transparentinformation flows are in place, enabling communities and villages to learn from each other regardingcosts and technologies.

Results from subprojects implemented in Madhya Pradesh and other DPIPs indicate that:

o CIGs implement subprojects of higher quality and less cost than government agencies;o productive investments have high rates of return;o often first choices of communities are subprojects that reduce migration or improve health (e.g.

safe drinking water, an access road, sanitation);o CIGs have the ability to procure the least cost highest quality contractors; ando there is no leakage due to transparency of accounts and information.

An analysis of real case subprojects implemented in the MP DPIP indicated both positive financial andeconomic net present values at a 15% real interest rate:

Type of Subproject Financial Net Present Value Monthly Income Economic Net Present Value(1US$) per Household

Goatery$5315 $17.00 $2059

Buffalo Dairy$4426 $14.76 $3287

Land levelling$603

Tailoring$4685 $15.60 $4012

Brass band$6208 $20.70 $4450

Fiscal Impact. Under current rules GoCG would need to repay 70% of the IDA financing in IndianRupees to GoI at a 12% interest rate. It is expected that this liability would be offset over the medium to

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long term because: (i) the project would spur economic activity in rural areas and, therefore, expand the

tax base for both state and local governments; and (ii) the willingness of the population to contribute a

higher share of investmnent costs would increase, reducing the burden on government budget. On the

macro-front, the project's objective is to demonstrate to the government that there could be a more

cost-effective approach to anti-poverty programs. It is expected that, over the long-term, through a

demonstration effect, the project would bring about reforms in state and national anti-poverty programs

with substantial positive fiscal impacts. Also, an output of the project would be village funds which

would improve the fiscal situation of village governments. The project also supports local resource

mobilization activities and cost-recovery practices which would reduce future O&M liabilities on village,

district and state governments. GoCG has put special care during project preparation that the project

would not increase the fiscal liabilities of the state. Minor increases in current expenditures are expected

during the post-project period, due to one grade promotions of government officials joining the project

(about 200) as PFTs or project staff. All the recurrent expenditures of subprojects would be met by

community organizations.

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Annex 5: Financial SummaryINDIA: Chhattisgarh District Rural Poverty Project

Years Ending

I I :.rr ? 3.

I Year 1j Year 2 l Year 3 | Year 4 | Year 5 | Year 6 | Year 7Total Financing Required

Project CostsInvestment Costs 2.3 13.5 37.4 44.7 16.0 5.5 0.0Recurrent Costs 0.2 1.6 1.9 2.0 2.0 2.1 0.0

Total Project Costs 2.5 15.1 39.3 46.7 18.0 7.6 0.0Total Financing 2.5 15.1 39.3 46.7 18.0 7.6 0.0

FinancingIBRDIIDA 2.2 13.2 34.2 40.6 15.7 6.6 0.0Govemment 0.1 0.6 1.6 1.9 0.7 0.3 0.0

Central 0.0Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0Beneficiaries 0.2 1.4 3.5 4.2 1.6 0.7 0.0Total Project Financing 2.5 15.2 39.3 46.7 18.0 7.6 0.0

Main assumptions:

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Annex 6(A): Procurement ArrangementsINDIA: Chhattisgarh District Rural Poverty Project

ProcurementA. Procurement Implementation Capacity

Chattisgarh is a new State carved out of the State of Madhya Pradesh. Although, as part of MadhyaPradesh, some of the officials of Chhattisgarh gained experience in undertaking procurement underBank financed projects, such as Hydrology, DPEP, etc, these officials are not part of the team handlingthe proposed project. Thus, the project does not have any previous experience in carrying outprocurement under Bank financed projects. Further, the nature of the project (community driven) issuch that most of the procurement would be carried out by CIGs and Panchayats. An outsideprocurement agent for the project would not, therefore, be an appropriate solution, since it is necessaryto build the capacity of the CIGs, GPs, PTFs, NGOs and ZPs in addition to the SPU in implementationof community driven procurement.

Procurement in the project would be carried out under the overall supervision and guidance of the SPU.Its actual management would be at the distnct level (ZP). Capacity building would be a continuousprocess requiring a series of workshops and training programs for the entities that would implement theproject. The project has prepared a broad timetable for capacity building for the first year of the project.The project also has a small component for procurement of works, goods and equipment. The contractsare very small value contracts. For these contracts, the project would identify and appoint an officer inthe SPU who has previous experience of implementation of Bank financed projects, and is trained inprocurement for Bank financed projects at the Administrative Staff College of India (ASCI) inHyderabad.

Procurement Risk

There is a potential risk from a large volume of contracting at the community level. There is, therefore, aneed for a strong monitoring mechanism including social audits which considerably reduce the inherentrisk. The proposed project has a detailed mechanism for monitoring and evaluation to ensure efficientcompletion of the project and achievement of its obj ectives. The Termns of Reference (TOR) for themonitorng agency would specifically include physical verification of the assets created byCIGs/Panchayats.

Disbursement Profile

The Project is designed on the concept of bottom-up planning and demand-driven activities. In terms ofpriority, the first task would be to support groups of the most disadvantaged people and empower themto participate in village development processes. Experience has shown that this takes around six months.Therefore, the disbursement profile would be flat during the initial period and pick-up gradually.

Procurement Arrangements

All project activities to be financed under the Credit would be procured in accordance with the BankProcurement Guidelines for Procurement of Goods, Works (January 1995, Revised January and August1996, September 1997 and January 1999) and Consultancy Guidelines (January 1997 and revised inSeptember 1997, January 1999, and May 2002) for hiring Consultancy Services (including NGOServices). All civil works, goods and services would be procured using India specific Bank's model

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documents as well as the formats of the community contracts specifically approved for the project.Specific procurement arrangements summarized in Table A are as follows:

Community Subprojects and Gram Panchayat sub -projects (USS 93.38 million): The project wouldfinance matching grants for small subprojects proposed by Common Interest Groups or GramPanchayats such as village approach or link roads, community halls, watershed development,strengthening of health care centers, improving animal health care and breed upgradation facilities,drains, minor irrigation works, wells, drinking water arrangements, etc. The subprojects would alsoinclude the hiring of services or training of community members, wherever these would be managed bythe communities themselves. The project would cover about 2000 villages spread over 16 districts. Theaverage value of each subproject would be about US$ 5,000 and the maximum would not exceed US$50,000 equivalent. There would be in all about 20,000 subprojects financed. Procurement would be inaccordance with para 3.15 of the Guidelines. The agreed procedures for community procurement are asfollows:

Works: (a) direct contracting with registered NGOs or local community organizations such asCommon Interest Groups; (b) lump-sum fixed-price/unit rate contracts with qualified contractorsawarded on the basis of quotations obtained from at least 3 qualified domestic contractors inresponse to a written invitation; or (c) community carrying out the works themselves and taking uptechnical/managerial assistance from govemment agencies or NGOs or hiring services of individualexperts.

Goods: The goods estimated to cost less than US$ 500 per contract upto an aggregate amount notexceeding US$200,000 may be procured through Direct Contracting procedures. Goods estimatedto cost less than US$ 30,000 per contract would be procured under Shopping procedures on thebasis of at least 3 quotations.

The format for contracts with community groups has been agreed with the Govemment ofChhattisgarh. In the case of Gram Panchayats, the existing MOU formats between Zilla Panchayatsand Gram Panchayats would be used.

Civil Works (US$1.06 million): The project supports construction of about 200 Panchayat buildingsestimated to cost equivalent to approximately US$5,000 per contract. These are small civil works andwould not be suitable for competitive bidding due to the small amounts and scattered nature. Therefore,the works would be carried out following National Shopping Procedures in accordance with Para 3.5and 3.6 of the Guidelines.

Goods, Equipment, Furniture and Supplies (US$ 2.51 million): Goods would be procured followingBank Procurement Guidelines (January 1995, Revised January and August 1996, September 1997 andJanuary 1999):

NCB: Goods estimated to cost less than the equivalent of US$200,000 per contract (e.g., fumiture,computers and peripherals, office equipment, training equipment etc.) up to an aggregate value of US$0.51 million would be procured following NCB procedures in accordance with the provisions with para3.3 and 3.4 of the guidelines. There would be 7 packages to be procured following NCB proceduresfor computers and peripherils (bid documents ready), fumiture, office equipment, training equipment,media equipment, audio-visuals and software. All NCB contracts to be financed from the proceeds ofthe credit shall follow the following procedures:

(a) Only the model bidding documents for NCB agreed with the GoI Task Force (and asamended from to time) shall be used for bidding.

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(b) Invitations to bid shall be advertised in at least one widely circulated national dailynewspaper, at least thirty days prior to the deadline for the submission of the bids.

(c) No special preference would be accorded to any bidder when competing with foreignbidders, state-owned enterprises, small-scale enterprises or enterprises from any given state.

(d) Except with the prior concurrence of the Bank, there shall be no negotiation of price withthe bidders, even with the lowest evaluated bidder.

(e) Except in cases offorce majeure and/or situations beyond the control of the project,extension of bid validity shall not be allowed without the prior concurrence of the Bank (a) for thefirst request of extension if it is longer than eight weeks; and (b) for all subsequent requests forextension irrespective of the period.

(f) Re-bidding shall not be carried out without prior concurrence of the Bank. The systemof rejecting the bids outside a predetermined margin or "bracket" of prices shall not be used.

(g) Rate contracts entered into by DGS&D would not be acceptable as a substitute for NCBprocedures. Such contracts would be acceptable for any procurement under the national shoppingprocedures.

National Shopping: Goods (except vehicles) estimated to cost less than US$ 30,000 per contract (e.g.,small items of equipment, urgent requirements of computers, audio-visual equipment, furniture, etc.)would be procured by the various implementing agencies in small lots using National Shoppingprocedures in accordance with paragraphs 3.5 and 3.6 of the Guidelines, up to an aggregate amount ofUS$ 0.9 million. Rate contracts of the DGS&D would be acceptable as a substitute for NationalShopping.

Direct Contracting: Goods and equipment of proprietary nature estimated to cost less than US$ 10,000equivalent per contract upto an aggregate of US$0.3 million (e.g., books, periodicals, extension andpublicity materials, software, proprietary equipment and spares, etc.) would be procured using directcontracting procedures in accordance with paragraph 3.7 of the Guidelines. Petty items costing US$500equivalent or less subject to an aggregate amount of US$100,000 would be procured followingparagraph 3.7 of Guidelines.

Vehicles(US$ 0.7 million) : The requirement of vehicles is small and thus would not be amenable tocentral and lumped procurement. Vehicles estimated to cost the equivalent of up to US$ 0.1 million percontract up to an aggregate amount not to exceed US$ 0.7 million would be procured using the NationalShopping procedure in accordance with Para 3.5 and 3.6 of the Guidelines or DGS&D rate contracts.

Training and Consultancies (US$ 10.07 million): The technical assistance and consultancy services,includes the hiring of NGO services, non government members of Project Facilitation Teams (PFT), andquality supervisors for community works. About sixty percent of training expenditures would be for thetraining and capacity building of Panchayats. About forty percent of training expenditures would be forthe training of beneficiaries. Consultancies and studies would be contracted on Terms and Conditionswhich are in accordance with IDA Guidelines for the use of Consultants (January 1997 and revised inSeptember 1997 and January 1999 and May 2002). Technical assistance and consultancy serviceswould be procured using QCBS procedures. For contracts with consulting firms/institutions valuedbelow US$100,000 equivalent per contract, procurement would follow QCBS or methods based onconsultant's qualifications or Single Source Selection depending upon the appropriateness of the

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procedures relevant to the requirements. The method of procurement for services of NGOs and CBOswould be either Consultants' Qualifications or Single Source Selection. These services are estimated tocost less than US$100,000 per contract. For individual consultants, this threshold would be US$50,000equivalent per contract. The Standard Request for Proposals and Conditions of Contract would be usedfor all contracts. For consultancies estimated to cost US$200,000 or less, the shortlist can compriseentirely national consultants. The bulk of the expenditure would be on capacity building i.e. training,workshops and study tours, which account for US$ 7.97 million out of an amount of US$ 10.07 million.

Procurement methods (Table A)

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

- ' S tt t t -, > s i , i. g ,-IProcurement Metnodu , , .,EipenditureXCategory ICB NC1 Other . N.2.F. .Total Cost

I. Works 0.00 1.06 0.00 0.00 1.06

(0.00) (0.85) (0.00) (0.00) (0.85)

2. Goods 0.00 0.51 2.00 0.00 2.51

(0.00) (0.41) (1.60) (0.00) (2.01)3. Services 0.00 0.00 10.07 0.00 10.07

NGO Services (0.00) (0.00) (9.89) (0.00) (9.89)Other ConsultanciesTraining, workshops and Study

Tours

4. Grants 0.00 0.00 99.30 0.00 99.30

(0.00) (0.00) (94.30) (0.00) (94.30)

5. Fund 0.00 0.00 0.00 6.48 6.48(0.00) (0.00) (0.00) (0.00) (0.00)

6. Recurrent Costs 0.00 0.00 9.93 0.00 9.93(0.00) (0.00) (5.50) (0.00) (5.50)

Total 0.00 1.57 121.30 6.48 129.35

(0.00) (1.26) (111.29) (0.00) (112.55)

"Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies.2'Includes civil works and goods to be procured through national shopping, consulting services, services of contracted

staff of the project management office, training, technical assistance services, and incremental operating costs relatedto (i) managing the project, and (ii) re-lending project funds to local government units.

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Prior review thresholds (Table B)

Procurement Planning

Prior to the issuance of any invitations to pre-qualify for bidding or to bid for contracts, the proposedprocurement plan for the project shall be furnished to the Bank for its review and approval, inaccordance with the provisions of paragraph I of Appendix 1 to the Guidelines. Procurement of allgoods and works shall be undertaken in accordance with the procurement plan which shall have beenapproved by the Bank and with the provisions of said paragraph 1. Annual Procurement Plans wouldbe reviewed by by the Bank.

Prior Review of Contracts

Civil Works, Goods, Community contracts and Gram Panchayat Contracts: With respect to anycontract for goods and works to cost the equivalent of US$ 250,000 or more, and for the first twocontracts for works, the first two contracts for goods, estimated to cost equivalent of US$ 30,000 ormore, and the first two contracts for Common Interest Groups / Gram Panchayats, the procedures setforth in paragraphs 2 and 3 of Appendix 1 to the Bank Guidelines would apply.

Consultancy Contracts. Prior review procedures would be as follows:

(a) Firms: (i) Contracts of value of more than US$ 100,000 - Full Prior Review; and (ii)Contracts of value between US$50,000 and US$ 100,000 - only TORs and Shortlists to be PriorReviewed.

(b) Individuals: Contracts of value of more than US$ 50,000 - to be reviewed.

Post Review

Works and Goods: The contracts below the prior review threshold for Works and Goods shall besubject to post-review as per the procedure set forth in paragraph 4 of Appendix I of the BankGuidelines; and

Technical Assistance, Studies and Training: Contracts for the employment of consulting firmsestimated to cost less than US$100,000 and contracts for the employment of individuals estimated tocost less than US$50,000 shall be subject to post-review provided that the generic TORs andshortlists for critical assignments have been cleared with the Bank.

Procurement Information: Procurement information would be collected and recorded as follows:

(a) Prompt reporting of contract award information by the SPU.(b) Comprehensive semi-annual reports by the SPU indicating:

(i) revised cost estimates for individual contracts and the total cost;(ii) revised timings of procurement actions, including advertising, bidding, contract award,

and completion time for individual contracts; and(iii) compliance with aggregate limits on the specified methods of procurement; and

(c) Completion report by the Borrower within three months of the Credit Closing Date.

Procurement Schedule and Proposed Procurement Arrangements: The proposed packages andthe Procurement Schedules for goods/equipment required for capacity-building and projectmanagement have been provided by the SPU. The project elements, their estimated costs, andproposed methods of procurement are summarized in Table A. Figures in parentheses are therespective amounts to be financed through the IDA credit.

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Table B: Thresholds for Procurement Methods and Prior Reviews

I, D &.i ,, , . -*Co'ntract Value 'Contracts S6bect '-.n -.- i , -> - X Threshold Procurement Prior Review

Expenditure Category i eUS$ thousands), Methoid. .(U$ milfions),,

1. Works National Shopping (at least First two and all contractsthree quotations) above US$ 250,000)

2. Goods >30 to <200 NCB First two contracts above<30 Shopping US $ 30,000 and all

>10 to <30 Direct contracting contracts above US$250,000

3. Services4. Vehicles < 100,000 Shopping/DGS&D Rate

contract5. Community Sub <50 Quotation/Direct First twoProjects Contracting/Comnmunity

Participation

<0.5 Direct Contracting6. Consulting services >100 QCBS Prior reviewby NGO services,Training by firms >50 and >100 CQ, sole source or any TOR and the short - list

other method as per Prior Review7. Consulting Services guidelines QCRSby Individuals.gudlnsQB

Prior award review>50

CQ, sole source Post award review<50

Total value of contracts subject to prior review: Less than 5% of contracts. The contractvalues are very small and there will be onlyone contract for goods above US$100,000.Therefore almost all contracts will besubject to post award review

Overall Procurement Risk Assessment: AverageFrequency of procurement supervision missions proposed: One every 6 months

(includes special procurement supervisionfor post-review/audits)

Thresholds generally differ by country and project. Consult "Assessment of Agency's Capacity to ImplementProcurement" and contact the Regional Procurement Adviser for guidance.

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Annex 6(B) Financial Management and Disbursement ArrangementsINDIA: Chhattisgarh District Rural Poverty Project

Financial Management

1. Summary of the Financial Management Assessment

The following country issues will apply:

(a) Availability of funds on a timely basis to the SPU and ZPs applies to the project to the extent thatthis is a state sector project and that state sector projects are generally more vulnerable to thisproblem. The State of Chhattisgarh, being a new state, has not reported any fund flow problemsto date and GoCG has demonstrated a high level of commitment to the project and has assuredthe Bank that counterpart funding for the project will be accorded the highest priority.

(b) GoCG's existing accounting system concentrates mainly on bookkeeping and transactionalcontrol over expenditures. There is no concept of financial management information being usedfor decision-making. However, SPU and ZPs will follow the commercial double bookkeepingsystem and a separate financial reporting system has been designed to address this issue.

(c) Quality and timeliness of audit reports and response/follow-up of audit findings has been notedin many states/administrations. However, the State AG has been very responsive and the TORsfor the audit and the formats of the annual financial statements would be agreed with the CAG.

The following country issues do not apply:

(s) Though at the country level delays in submitting withdrawal applications has been an area ofconcern, GoCG proposes to set up a system that would ensure timely submissions of withdrawalclaims. However, it is recognized that community driven projects have a longer start up periodrequired for mobilization and formation of groups.

Strengths and Weaknesses

Strengths

The project has the following strengths in the area of financial management:

(i) The Zilla Panchayats will have well established accounting systems and follow double entrybookkeeping.

(ii) GoCG has demonstrated a high level of commitment to the project and during discussions on thefund flow processes assured the Bank that the releases of funds during the life of the projectwould be accorded the highest priority.

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Significant weaknesses

Significant weaknesses ResolutionAn existing accounting system which primarily An operations manual with focus onfocuses on bookkeeping and not on financial financial reporting and monitoring hasmanagement been developed.Accounting for subproject payments (on receipt of The Financial Management Manual (FMM)certification of physical achievements), may not be has clear guidelines on the accountingclearly understood and uniformly implemented. processes to be followed for subproject

payments and accounting for beneficiarycontributions in cash.

The capacity of CIGs for bookkeeping and One of the critical functions of the project isaccounting and financial management is very to enhance the capacity of the CIG officelimited. They will need support in maintaining the bearers in bookkeeping and accounting.books of account. Training on the project's expectations of the

accounting arrangements at the CIG levelwould be provided to the PFT/ZP staff bythe SPU or SPU appointed consultants.

Staffing & Training:

Staffing: A detailed staffing plan has been drawn up which is a part of the Operations Manual (OM).The finance wing at the SPU is headed by a Finance Manager (FM), who is of the rank of DeputyDirector Treasury & Accounts. He would be assisted by an Accounts Officer (AO). Both the FM and theAO would be supported by adequate staff. The FM would be responsible for establishment of the agreedfinancial management arrangements, providing timely.financial reports to the stakeholders including theBank, facilitating smooth and timely flow of the funds and providing overall guidance in respect offinancial management issues including monitoring of expenditures, audit and internal control to the ZPs.

At the ZP level the finance function would be headed by an Accounts Officer who would be assisted withadequate accounts staff. (S)he will be responsible for providing timely consolidated financial reports tothe state authorities and the SPU, monitoring of expenditures, providing overall guidance to the CIGs,ensuring smooth flow of funds to all CIGs as per the MoUs and conducting of timely audits.

The CIGs would have a trained accounts bookkeeper. This would be a condition for the signing of thesubproject agreement.

Training: Since the project financial staff, many of whom would be newly recruited, have not beeninvolved in the design of the project and the design of the financial management system, they would betrained in the requirements of accounting and reporting under the project. This is an important priority inthe early stages of the project and would be the main responsibility of the Finance Manager at the SPU.All the project managers and staff would be sensitized on the importance of financial managementaspects for effective project management and success. The accounting staff would be trained to operatethe computerized financial management system, once it is ready.

The management of ZP funds would need additional capacities to be built at community organizationlevels. The SPU would pay special attention to the capacity building interventions and prepare a

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comprehensive training strategy and plan to provide training and build well trained community levelcadre of book-keepers and accountants.

Model books of accounts and reports prepared need to be widely circulated and used during the trainingprograms as resource material.

Some of the important lessons learnt from the other DPIPs/Rural Poverty projects are:

* The members of the PFTs need to be trained in bookkeeping and accounting requirements for theCIGs. They work in close touch with the CIGs and can be an important resource to train andbuild capacity at the community level.

* Special initiatives taken to provide training in bookkeeping to identified semi-literate personsfrom the communities can build a cadre of bare-foot bookkeepers. These trained resource personscan be promoted to provide services to multiple CIGs on payment of fees; and

* At the Block level, accounting hubs would be set up if necessary by hiring the services of anaccountant/bookkeeper and all the CIGs could be encouraged to bring their vouchers and bankbooks on a regular basis to the hubs for the accounting books to be updated and reports prepared.

Accounting Policies and Procedures

The Financial Management Manual prepared covers the accounting and reporting arrangements for theproject. The Manual lays down in detail the applicable accounting policies and procedures. The Manualhas separate sections for the bookkeeping and accounting arrangements for SPU, ZPs and the CIGs / GPs.

Books of accounts for the project would be maintained using double-entry bookkeeping principles.Standard books of accounts (cash and bank books, journals, ledgers, etc.) would be maintained by theSPU and ZPs. The books of accounts would be maintained on a manual basis until the integratedcomputerized accounting system being developed and tested is operational.

A Chart of Accounts has been developed to enable data to be captured and classified by expenditurecenter, budget heads, procurement methods, project components/activities, and disbursement categories.This would match closely with the classification of expenditures and sources of funds indicated in theproject documents (Project Implementation Plan and Project Cost Tables).

The key issues to be addressed in the design of the accounting policies and procedures are:

* releases of installments against the subproject agreements would be recorded as expenditures inthe books of accounts of ZPs;

* all other releases of funds to ZPs would be accounted for as advances in the books of accounts ofand adjusted to expenditures only on submission of expenditures;

* at all accounting centers, separate books of accounts would be maintained for the project fundsas per the requirements specified in the Financial Management Manual; and

* registers of assets acquired and created (including CIG assets) would be maintained at eachaccounting center.

The Operations Manual for the Project documents in detail the financial management arrangements beingput in place at different stages of the subproject cycle. The selection and appraisal criteria of thesubprojects require that detailed assessment of the group's track record of managing their savingsschemes are camed out and documented. At each of the subsequent stages of the subproject preparation,

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supporting documentation provides details of the accounting and fund management arrangements agreedfor the implementation of the subproject. Release of flmds on the approval of the sub project are based onthe subproject meeting the conditions required for ensuring that satisfactory financial managementarrangements (as documented in Addendum 2 of the model Agreement) are in place. These conditionsinclude (a) the CIG has a trained bookkeeper; (b) the CIG has demonstrated financial managementcapacity on its initial savings activities; and (c) up to date submission of monthly financial statements.The monitoring responsibilities rest largely with the Project Facilitation Teams, whose specific tasks inthe areas of accounting and financial management include: (a) working out fund managementarrangements; (b) opening of separate bank accounts and collection of upfront contributions; (c)facilitating signing of MoU and release of funds; and (d) following-up on monthly financial reports.

CIGs/GPs would maintain accounts records/registers as follows: (a) cash/bank book; (b) contributionsreceived in cash/labor/materials; (c) materials purchased and utilized. In addition, the CIGs would retainall vouchers, bills, supporting documents and ensure that the Bank pass books are regularly updated.Similar accounts would be maintained for the Operation & Maintenance Bank account and reportssubmitted to its members and Gram Sabha.

Peoples contributions which do not form part of the project costs and are earmarked for operation andmaintenance of the assets created under the subproject would be deposited in a separate bank account.

2. Audit Arrangements

The statutory audit for the project would be carried out by the Comptroller and Auditor General of India.The Terms of Reference of the auditors as well as the formats of annual financial statements would beagreed with the Association and would form part of the Financial Management Manual. The audit wouldbe carried out in accordance with the International Standards of Auditing. The audit would cover all theaccounting centers and include an audit of financial transactions and an assessment of the operation ofthe financial management system (including internal control mechanisms). The Bank would receive aconsolidated project audit report along with the financial statements, duly certified, submitted within 6months of the close of GoCG's fiscal year.

On completion of the subproject the CIG, project accounts would be audited by a firm of charteredaccountants.

As part of the management control functions, the CIGs would be required to get the final statements ofexpenditures, on completion of the subproject, certified by a firm of chartered accountants. The ZPswould maintain a panel of approved chartered accountants with pre-determined fee rates, available to theCIGs for conduct of the audit. The TORs for the audit would be agreed and included in the FinancialManagement Manual. In addition, the books of accounts of the Gram Panchayats would be audited by theLocal Fund Auditors of the State. These audit reports would be used by the project for monitoring andmanagement purposes, but would not be required to be submitted to the Bank.

The following audit reports would be monitored in the Audit Reports Compliance System (ARCS):

Implementing Agency Audit AuditorsDepartment of Panchayats & Rural Development, SOE/Project Audit Comptroller and AuditorGoCG (including 16 District level Zilla Parishads) GeneralDepartment of Economic Special Account Comptroller and AuditorIAffairs/GOI General

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The nature of the project is such that project funds would be made available to a large number ofcommunity groups who are not registered legal entities. These groups would be new and established forthe project. The financial management arrangements set up would emphasize providing local leveltransparency, social audit and self-accountability. These measures would include a simple summary ofthe accounts (amounts received from the members and the project, amount spent and balances in hand)and would be publicly posted in the notice board of the Gram Sabha. In addition, the books/registers,vouchers and bank pass books would be open for perusal by members. This would be in addition tosample audit by the project auditors.

3. Disbursement Arrangements

Reporting and Monitoring

The monthly reporting formats from each of the accounting centers, SPU and the ZPs would be designedto provide summarized monthly financial information on the fund flows, balances in cashibank, status ofadvances and expenditures classified by project components/activities, disbursement categories,procurement methods, etc. These reports would be compiled by the SPU on a monthly and quarterly basisto provide meaningful Financial Monitoring Reports (FMRs). These reports would be prepared from thestart of the project, submitted to the Bank within 45 days of the close of the quarter, and used by SPU andthe Bank for monitoring and management decision making.

The annual audited project financial statements, to be provided by GoCG to IDA would comprise: (a) aconsolidated Project Sources and Application of Funds for the whole project; (b) classification ofexpenditures by project activities/components and disbursement categories; (c) consolidated statement ofwithdrawals (for the whole project) from the IDA Credit made on the basis of Statements ofExpenditures (SOEs) and documented claims; and (d) reconciliation of reported expenditures with thetotal withdrawal claims submitted during the year.

The financial arrangements between the CIGs and ZPs (as are envisaged) would not require financialaccounting for the CIG funds in the ZPs books to be based on actual statements of expenditures. Allpayments against the contracts would be recorded as expenditures in ZP books. However, the CIGswould be required to submit quarterly statement of expenditures summarizing sources and uses of fundsagainst the plans in order to build accountability and demonstrate the presence of adequate accountingand bookkeeping arrangements.

CIGs would prepare a simple report each month summarizing: (a) the sources and uses of funds,indicating the balances in cash/bank; (b) activities completed, cost and activities to be completed in thenext month); and (c) contributions in labor and materials. The report would be presented to its membersand in the Gram Sabha and provide all records for scrutiny by members. The financial report would alsobe submitted to the ZP by the 7th day of the next month.

Computerized Financial Management System

An integrated financial management software shall be developed to allow multi project accounting andmulti bank operations. The software once implemented would not only be used for project accounting butwould also result in complete computerization of the SPU and the Zilla Panchayats. It would also caterto the requirements of accounting and reporting under various Central and State Government Schemes.The key issues that would be considered while developing the design of the software are:

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o integration with the MIS system - qualitative information on the sub project proposals/contractstracked in the MIS are linked by common code numbers in the FMS. Financial informationrelating to the subproject contracts is tracked by the same code numbers;

o the system would allow accounting of multiple projects and overall consolidation at the entity

level; ando the system would be used by SPU and ZP for project accounting for CG DRPP as well as from

other activities.

Since the design and development of the computerized software would take some time, the design of thefinancial management system for the proposed project is based currently on manual books of accounts.

After successful testing and parallel runs of the proposed computerized financial management system for

at least one year, the manual systems may be discontinued.

l[mpact of Procurement Arrangements

The nature and type of the contractual arrangements with the CIGs lay the basis of accounting at the ZPs.

The ZPs would enter into contractual arrangements with CIGs/GPs. These agreements would be based onlump sum contracts with payments based on performance milestones agreed and documented in thecontracts. The achievement of the performance milestones would be certified. Thus, ZPs would onlyneed to account for the release of performance-based installments.

Disbursement Arrangements

Disbursements from the IDA credit would initially be made in the traditional system (replenishment andreimbursement with full documentation and against statement of expenditure) and could be converted tothe Report based disbursements at the option of the GoCG and Gol after the successful demonstration of

regular, timely and adequate Financial Monitoring Reports.

A Special Account would be maintained in the Reserve Bank of India; and would be operated by theDepartment of Economic Affairs (DEA) of Government of India (Gol). When the withdrawals are notbased on report-based disbursements, the authorized allocation of the Special Account would be US$ 10

million that represents about 4 months of initial estimated disbursements from the IDA Credit. The initialdeposit into the Special Account would be US$ 5 million until the aggregate disbursements from the IDACredit equal or exceed SDR 25 million. The Special Account would be operated in accordance with the

Bank's operational policies.

When disbursements are based on FMRs, the authorized allocation of the Special Account would bedetermined on the basis of project's requirement of funds for 6 months of expenditure. The SpecialAccount would be replenished quarterly and be based on the next 6 months funds forecast.

The SPU would compile the financial information from all its management constituent agencies andprepare reimbursement claims on a monthly basis. ZPs would forward the monthly expenditure claims to

SPUs, who would be responsible for submission of the withdrawal applications to CAA&A in DEA foronward submission to the Bank for replenishment of the special account or reimbursement.

Disbursements would be made on the basis of statement of expenditure for (a) subprojects under Part Bof the Project; (b) goods under contracts not exceeding $100,000 equivalent, and works under contractsnot exceeding $100,000 equivalent; (c) services under contracts not exceeding $100,000 equivalent for

employment of consulting firms and $50,000 equivalent for employment of individual consultants,respectively; (d) training and workshops and study tours; and (e) incremental operating costs.

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Retroactive Financing: Retroactive financing up to an amount of US$ 1.0 million would cover eligibleexpenditures for implementing activities after July 1, 2002. Retroactive financing would support projectexpenditures on civil works, purchase of goods, equipment & vehicles, consultancies, training,incremental operating costs and sub projects.

Action Plan

Action Responsible Completion DatePerson

Actions Required for Strengthening FinancialManagement (i.e. to be taken up after Projectimplementation commences)(i) Development of computerized financial SPU By December 31, 2004management system

Supervision Plan

From a financial management perspective, the project would need intensive supervision. The focusduring supervision would be on building capacity of CIGs, PRIs and functioning of accounting andfinancial reporting at these levels.

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Allocation of credit proceeds (Table C)

Table C: Allocation of Credit Proceeds

Expenditure Categgry - - mount Iru ULjml- .Eiriancino Parcen~age1.Goods, including equipment, 1.98 100% of foreign expenditures, 100% ofmaterials and vehicles (excluding Part local expenditures (ex-factory cost) andB of the Project) 80% of local expenditures for other

items procured locally.

2. NGOs' services and CBO 1.04 100%education/research institutionsconsultancies

3. Training, workshops and study tours 7.97 100%4. Other consultancies 0.85 80%5. Civil Works (excluding Part B of the 0.83 80%Project)6. Incremental Operating Costs 5.50 80% until September 30, 2004; 60%

from October 1, 2004 until September30, 2006; and 40% thereafter

7. Community Investments 93.38 95%(a) Subprojects under Part B. 1 of the

Project(b) Innovation Funds under Part B.2 of 0.95 95%the ProjectUnallocated 0.06

Total Project Costs 112.56

Total 112.56

Use of statements of expenditures (SOEs):

Special account:

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Annex 7: Project Processing ScheduleINDIA: Chhattisgarh District Rural Poverty Project

PvotS,ch edule ,, ;),n>,h'Y< " ; -7*1n', *j , . a;,

Time taken to prepare the project (months) 12 7

First Bank mission (identification) 03/02/2002 03/02/2002Appraisal mission departure 12/12/2002 12/12/2002Negotiations 01/30/2003 03/13/2003

Planned Date of Effectiveness 05/31/2003

Prepared by:Govermnent of Chhattisgarh

Preparation assistance:India Country Department

Bank staff who worked on the project included:Name Speciality

Luis Constantino Task Team LeaderMadhavi Pillai Co-Task Team Leader and Natural Resources ManagementSyed 1. Ahmed Senior CounselAli Awais CounselD.J. Baxi ProcurementGrace Domingo Program AssistantSara Gonzalez-Flavell Senior CounselPaul Martin Environmental EconomicsManvinder Mamak Financial ManagementYoshiko Masuyama Program AssistantRanjit Nayak Tribal IssuesSarita Rana Program AssistantGeeta Sethi EconomicsWarren Waters Social DevelopmentLuis Coirolo Commnunity Development (peer reviewer)Hans Binswanger Economics (peer reviewer)Parmesh Shah Community Development (peer reviewer)

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Annex 8: Documents in the Project File*

INDIA: Chhattisgarh District Rural Poverty Project

A. Project Implementation Plan

Project Implementation PlanOperational Manual

B. Bank Staff Assessments

C. Other

List of Participants of Consultation Workshop on March 19-20, 2002, in RaipurCommunications Strategy for Chhattisgarh DRPPTraining and Capacity Building StrategyTribal Development Strategy for Chhattisgarh DRPPCriteria for Selection of Blocks for Chhattisgarh DRPPFinancial Management Manual for Chhattisgarh DRPPEnvironment Management Framework for Chhattisgarh DRPPWorking of Panchayats in Chhattisgarh in the light of the 73rd Constitutional Amendment Act, 1992Project Concept Paper for Chhattisgarh Poverty Reduction Project

*Including electronic files

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Annex 9: Statement of Loans and CreditsINDIA: Chhattisgarh District Rural Poverty Project

01-Mar-2002Difference between expected

and actualOriginal Amount in us$ mililions disbursements;

Project ID FY Purpose IBRD IDA GEF Cancel Undisb Orig Frmn Rev'dP040610 2002 RAJ WSRP 0 00 140 00 0 00 0.00 137.15 0 00 0 00

P050647 2002 UTrAR PRADESH WATER SECTOR 000 149 20 0 00 0 00 145 88 0 00 0 00

P050653 2002 RESTRUCTURING 0 00 151 60 0 00 0 06 151 22 0 00 0 00PO050658 2001 KARNATAKA RWSS It 0 00 64 90 000o 0 00 57 44 5 62 0 00

P055454 2001 TECHN EDUC III 0 00 65 50 0 00 0.00 59 00 4 35 0 00

P059242 2001 KERALA RWSS 0 00 110 10 0 00 0 00 102 79 -3 79 0 00P010566 2001 MPODPIP 381 00 0 00 0 00 0 00 329 52 50 52 0 00

P055455 2001 GUJARAT HWYS 0 00 74 40 0 00 0 00 70 72 *0 16 0 00P038334 2001 RAJ OPEP 11 180 00 0 00 0 00 0 00 160 85 14 35 0 00P067543 2001 RAJ POWER I 000 30 00 0 00 0 00 25 57 -0 31 0 00

P070421 2001 LEPROSY 11 360 00 0 00 0 00 0 00 343 ia 8 18 0 00

P067216 2001 KARN HWYS 0 00 100.40 0 00 0 00 97 20 1 41 0 00P071244 2001 KAR WSHO DEVELOPMENT 589 00 0 00 0 00 000 563 11 2211I 0 00

P035173 2001 Grand Trunk Road Inrrovement Project 450 00 0 00 0 00 0 00 395 07 50 73 0 00

P050657 2000 POWERGRID It 0 00 I110.00 0 00 0 00 100 ao 13658 0 00

P045049 2000 UP Health Systemrs Development Project 0 00 111 00 0 00 0 00 99 77 910 0 00P049770 2000 AP OPIP 80 00 50 00 0 00 0 00 122 24 13 80 0 00

P035172 2000 REN EGY II 150.00 0 00 0 00 0 00 `103 69 24 81 0 00

P010505 2000 UP POWER SECTOR RESTRUCTURING PROJECT 0 00 100 48 0 00 0 00 69 30 14 39 a000

P009972 2000 RAJASTHAN DPIP 516 00 0 00 0 00 0 00 458 97 65 31 0 00

P059501 2000 NATIONAL. HIGHWAYS Illt PROJECT 0 00 45 00 0 00 0 00 40 93 7 40 000OP067330 2000 TA for EconReform Project 0 00 142 60 0 00 0 00 80 42 1 08 0 00

P050667 2000 IMMUNIZATION STRENGTHENING PROJECT 0 00 182 40 0 00 0 00 109 73 33 77 0 00

P055456 2000 UP DPEPtItl 62 00 0 06 0 00 000 58 16 26 16 0 00P045050 1999 Telecomm,unlcabjons Sector Reform TA 0 00 85.70 0 00 0 00 66 65 56 71 a000

P049537 1999 RAJASTHiAN DPEP 210 00 000 0 00 000O 84 68 84 68 0 00

P045051 1999 AP POWER APL I 0.00 191 00 0 00 0.00 117.66 26 11 0 00

P050637 1999 2ND NATL HIVIAIDS CO 105 00 0 00 0 00 0 00 31 72 -5 40 0 00

PD41264 1999 TN URBAN DEVII1 85 00 50 00 000O 0 00 94 28 29 35 0 00P050646 1999 WTRSHD MGMT HILLS It 0 00 194 10 0 00 0 00 138693 64 13 0 00

P050651 1999 UP SODIC LANDSII1 0.00 134 00 0 00 0 00 113 26 53 82 0 00

P010496 1998 MAH-ARASH HEALTH SYS 0.00 76 40 0 00 0 00 59 86 32 10 0 00P010561 1998 ORISSA HEALTH SYS 96 80 100 00 0 00 0 00 120 76 72 27 0 00P049385 1998 NATL AGR TECHNOLOGY 301 30 241 90 0 00 0 00 284 05 156 56 0 00

P049477 1998 AP ECON RESTRUCTURIN 0 00 3900 0 00 0.00 19 36 605 0 00P038021 1998 KERAL.A FORESTRY 0 00 152 00 0 00 0 00 109 54 93 07 0 00

P035824 1998 DPEP Ill (13IHAR) 79 90 50 00 0 00 0 00 95 39 69 42 0 00P036827 1998 UP DIV AGRC SUPPORT 000 3800 0 0 00 0 00 219 41 70 45 0 00

P0351 69 1998 WOMEN & CHILD DEVLPM 0 00 52 94 0 00 000 24 51 21 87 0 00

P049301 1997 UP FORESTRY 50 00 100 00 0 00 19 00 32 12 5578 3 47P010511 1997 A P EMERG CYCLONE 0 00 164 80 0 00 0.00 103 11 97 32 0 00

P010531 1997 MALARIA CONTROL 0 00 246.30 0 00 0 00 80 84 76 05 49 54

P035158 1997 REPRODUCTIVE HEALTH1 175,00 150 00 0 00 000 186804 145 90 000O

P010473 1997 AP IRRIGATION Ill 0 00 142 40 0 00 0 00 91 03 100 56 0 00P009995 1997 TUBERCULOSIS CONTROL 35000 0 00 0 00 0 00 174 39 107 73 0 00P044449 1997 STATE HIGHWAYS I(AP) 0 00 1950o 0 00 000O 13 94 15 86 -1 71P043728 1997 RURAL WOMEN'S DEVELOPMENT 0 00 50 00 0 00 0 94 22 46 24 63 0 00

P009584 1997 ENV CAPACITY BLDG TA 0 00 0 00 0 00 0 00 7 56 9 47 0 00P036062 1997 ECODEVELOPMENT 0 00 28 00 20 00 0 00 13 89 15 75 0 00

P010480 1996 ECODEVELOPMENT 167 00 25 00 0 00 10 00 65.86 75 68 35 82P010484 1996 BOMBAY SEW DISPOSAL 59 60 0.00 0 00 720 22 62 27 02 17 62

P010485 1996 UP RURAL WATER 0 00 142 00 0.00 19 64 30 47 74 33 29 25

P035821 1996 HYDROLOGY PROJECT 000 425 20 0 00 0 00 7949 30 73 0 00

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Difference between expectedand actual

Original Amount in US$ Millions disbursements

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

P035170 1996 ORISSAPOWERSECTOR 35000 000 000 6000 14012 18678 000

P010529 1996 ORISSAWRCP 000 29090 000 000 7713 7637 000

P035825 1996 STATE HEALTH SYS II 0.00 350 00 0.00 0.00 107 06 152.90 0 00

P043310 1996 COAL ENV & SOCIAL MITIGATION 0 00 63.00 0 00 6.09 15 70 28 89 0 00P010461 1995 MADRAS WATSUPII 27580 000 000 18930 1610 204.55 1150P010463 1995 INDUSPOLLUTIONPREV 143.00 2500 000 68.31 52.36 12311 2503P010464 1995 DISTRiCT PRIMARY ED 0 00 260 30 0.00 0.00 62.76 78 72 0 00

P010476 1995 TAMIL NADU WRCP 0 00 282.90 0 00 0 00 100 03 13819 109.04

P010489 1995 AP 1ST REF HEALTH S 0.00 133.00 0 00 0 00 17 52 30 30 0 00

P010522 1995 ASSAM RURAL INFRA 0.00 126.00 000 0.00 4446 43.23 49.51P010455 1994 BLINDNESSCONTROL 000 11780 000 1000 26.39 4125 000P009977 1993 ICDS II (BIHAR & MP) 0 00 194.00 0 00 0.00 18.95 23 81 23 82

P009963 1992 POPULATION ViII 000 7900 0.00 0.00 1638 1978 000P009946 1992 NAT HIGHWAYS II 153.00 15300 0.00 273 19.25 11.27 1127P009869 1989 NATHPAJHAKRIHYDRO 48500 000 0.00 0.00 53.10 53.10 4256

Total. 5854 40 6864.72 20.00 393.21 7147 94 3264 64 406 70

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INDIASTATEMENT OF EFC's

Held and Disbursed PortfolioJan - 2002

In Millions US Dollars

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic2001 Mahlnfra 0.00 10.00 0.00 0.00 0.00 0.00 0.00 0.001996/99/00 Moser Baer 22.02 14.80 0.00 0.00 8.15 14 80 0.00 0.00

NICCO-UCO 2.60 0.00 0.00 0.00 2.60 0.00 0.00 0.001992/96/97 NIIT 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Orchid 0.00 0.00 30.00 0.00 0.00 0 00 20.00 0.002001 Owens Coming 25.00 0.00 0.00 0.00 25.00 0.00 0.00 0.002001 Pennar Steel 0.00 0.07 0.00 0.00 0.00 0.07 0.00 0.001997 Prism Cement 13.13 5.02 0.00 9.00 13.13 5.02 0.00 9 001981 RCIHL 0 00 1.97 0.00 0.00 0.00 1.97 0 00 0.001995 RTL 0.00 0.45 0.00 0.00 0.00 0.45 0.00 0.002001 Rain Calcining 14.82 5.46 0.00 0.00 14.82 5.46 0.00 0.002001 SAPL 0.00 0.07 0.00 0.00 0.00 0 07 0.00 0.001995 SREI 10.00 0.00 5.00 0.00 5.00 0.00 5.00 0.001997 Sara Fund 0.00 5.94 0.00 0.00 0.00 5.94 0 00 0.001997/00 Spryance 0.00 2.00 0.00 0.00 0.00 2.00 0 00 0 001995 Sundaram Finance 0.00 0.00 0.00 0.00 0.00 0.00 0 00 0 00

2001 SundaramnHome 0.00 2.19 0.00 0.00 0.00 1.67 0.00 0.001986/93/94/95 TCW/ICICI 0.00 7.15 0.00 0.00 0.00 7.15 0.00 0 002000 TDICI-VECAUS II 0.00 0.54 0.00 0.00 0.00 0 54 0 00 0.001998 TISCO 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001990 Tanflora Park 0.00 0.51 0.00 0.00 0.00 0.00 0.00 0.001981/86/89/92/94 Tata Electric 0.00 0.00 0.00 0.00 0.00 000 0.00 0002000 Titan Industries 0.00 0.52 0.00 0.00 0.00 0 52 0.00 0.001989/90/94 UCAL 0.00 0.54 0.00 0.00 0.00 0.54 0.00 0 001987/88/90/93 United Riceland 10.00 0.00 0.00 0.00 1.00 0.00 0.00 0.001989 VARUN 0.00 0.00 0.36 0.00 0.00 0.00 0.36 0.001996 Vysya Bank 0.00 7.30 0.00 0.00 0.00 7.30 0.00 0.001991/96/01 WIV 0 00 2.39 0.00 0.00 0.00 2 39 0.00 0.002001 Walden-Mgt India 0.00 0.03 0.00 0.00 0.00 0.03 0 00 0 001997 AEC 3.90 0.00 0.00 0.00 3.90 0.00 0.00 0.001997 Ambuja Cement 0.47 4.94 0.00 0.00 0.47 4.94 0.00 0.001989 Arvind Mills 0.00 5.02 0.00 0.00 0 00 5.02 0.00 0.001994 Asian Electronic 0.00 5.50 0.00 0.00 0.00 5.50 0.00 0 001992/93 BTVL 0.00 20.00 0.00 0.00 0.00 20.00 0.00 0.001997 Basix Ltd. 0.00 1.00 0.00 0.00 0.00 0.98 0.00 0 002001 Bihar Sponge 0.00 0.05 0.00 0.00 0.00 0 05 0.00 0 002001 CCIL 9:00 0.00 0.00 11.50 5.50 0.00 0.00 7 001984/91 CEAT 19.60 0.00 0.00 0.00 19.60 0.00 0.00 0.002001 CESC 18.00 0.00 0.00 40.20 18.00 0.00 0.00 40.201997 Centurion Bank 4.00 0.00 0.00 0.00 4.00 0.00 0.00 0.001990/92 Chinai 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001995/97 Chowgule 10.27 4.58 0.00 15.75 10.27 4.58 0.00 15.752000 Duncan Hospital 7.00 0.00 0.00 0.00 7.00 0.00 0.00 0 001994 EEPL 0.00 0.03 0.00 0.00 0.00 0.03 0.00 0.0019971997

Total Portfolio: 197 74 185.55 50.36 76.45 154.07 152.14 40 36 71 95

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Approvals Pending Comnutment

FY Approval Company Loan Equity Quasi Partic

2000 APCL 7.10 0.00 1.90 0.002001 GI Wind Farms 9.79 0.98 0.00 0.002001 GTF Fact 10.00 0.00 0.00 0.002000 IL&FS-GF 40.00 0.00 0.00 0.002000 Orissa NESCO 28.00 0.00 0.00 0.002000 Orissa WESCO 11.00 0.00 0.00 0.002001 Samtel 21.30 0.00 0.00 0.001999 Sarshatali Coal 4.00 0.00 0.00 0.002002 Sundaram Home II 10.42 0.00 0.00 0.002002 Webdunia 0.00 0.00 2.00 0.00

Total Pending Commitment: 141.61 0.98 3.90 0.00

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Annex 10: Country at a GlanceINDIA: Chhattisgarh District Rural Poverty Project

POVERTY and SOCIAL South Low-India Asia income Development dlamond-

2001Population, mid-year (millions) 1,015.9 1,380 2.511 Life expectancyGNI per capita (Atlas method, USS) 450 450 430GNI (Atlas method, USS billions) 453.4 616 1,069

Average annual growth, 1994-00

Population (%) 1.8 19 1.9Labor force (9%) 2.2 2 4 2.3 GNI Gross

per I-pnmaryMost recent estimate (latest year available, 199400) capita . enrollment

Poverty (% of population below national poverty line) 29Urban population (% of total populatlon) 28 28 31Life expectancy at birth (years) 63 62 59Infant mortality (per 1,000 live births) 68 73 76Child malnutntion (% of children under 5) 47 49 Access to improved water sourceAccess to an improved water source (% of population) 88 87 76Illiteracy (% of population age 15+) 43 44 37Gross primary enrollment (% of school-age populatlon) 101 101 96 India Low-ncome group

Male 109 109 103Female 92 93 88

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1981 1991 2000 2001Economic ratlos'

GDP (US$ billions) 182.1 316.8 445.2 457.0Gross domestic investment/GDP 18.7 24 1 23.6 22 9Exports of goods and services/GDP 6.2 7.3 12 0 140 TradeGross domestic savingslGDP 15.1 21.4 20 5 20 3Gross national savlngslGDP 16.7 20 9 22 5 22.3

Current account balance/GDP -2 0 -3.2 -1.1 -0 6 Domestic Interest payments/GDP 0 3 1.2 0.8 0 9 siInvestmentTotal debtVGDP 11.4 26.4 22 1 227 sav7gsTotal debt service/exports 4.4 19 1 15 3 13.8Present value of debt/GDP .. 15 9Present value of debt/exports . 107 0

Indebtedness1981-91 1991-01 2000 2001 2001-05

(average annual growth)GDP 57 5.9 6.1 40 54GDP per capita 3.5 4.1 4 2 2 1 3.9 ndia Low-icome groupExports of goods and services 5 9 13 3 16.7 20 9 6.3

STRUCTURE of the ECONOMY1981 1991 2000 2001 Growth of Investment and GDP l#)

(% of GDP) 30Agflculture 389 31.3 26.2 24 9Industry 24 5 27 6 26.0 26 9 1s

Manufacturing 16 3 171 15 2 15 8Services 36.6 41.1 478 482 o Be \;/ 98 99 00 01

Private consumption 74 8 67 0 66 6 66 5 -15General government consumpion 10 1 11.6 129 13.2 GDI OGDPImports of goods and services 9 8 9 9 15.1 16 6

1981-91 199141 2000 2001 Growth of exports and Imports(average annual growth)Agriculture 31 31 1 3 -02 45Industry 6 9 6 3 4 9 6 3 30

Manufactunng 74 7 0 4 2 6 7Services 6 9 7 9 9 5 4 8 15

Private consumptin 5 8 4.6 0 4 1 7 a -,General government consumpUon 4.2 6 9 12 0 6.5 -15Gross domestic investment 6.2 7.8 15 7 2.0 - Expons - importsImports of goods and services 5 9 10.3 12.7 10 6

Note Data are for fiscal year ending March 31 of the year shown, excopt for populabon (mid-year 2000), 2001 data are prelimmnary eshniates,The diamonds show four key indicators In the couniry (in bold) compared vwith its lnoomergroup average If data are rdssing, the diamond will be Incomplete

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IndiaPRICES and GOVERNMENT FIWANCE

1981 1991 2000 2001 Inlatton (%)Domestkc prkes(X change)Consumer pries 12.8 3.4 3.8ImplidtGDPdeflator 11.5 10.5 4.5 4.1

Govemment flnance(% of GOP, Includes cunant grants) o,,Current revenue .. .. 18.9 19.9 98 97 99 99 00 e1Current budget balance . .. -8.3 -8.6 GDP delator COverall surptusldeficit .. .. -11.2 -11.3

TRADE

(US$ mfilions) 1981 1991 2000 2001 Export and import lovuls (USS mili.)Total exports (fob) 8,501 18,477 37,542 44,894 aoooo

Tea .. 535 1,183 1,394Iron . 970 916 1,158 |o,o0-Manufactures 5,105 12,996 29,714 34,511

Total Imports (cif) 15,862 27.914 55,383 59,264 MO.00Food 1,348 557 2,417 1,432 201Fuel and energy 6,869 6.028 12,611 15,650Capital goods 2,416 5,836 8.965 8.785 o

95 9e 97 D 99 00 9lExportprice index (1995=100) 25 51 116 122importpnceIndex(1995=100) 27 46 150 162 lEVxotas DiMpotsTerms of trade (1995=100) 105 109 77 75

BALANCE d PAYMENTS1991 1991 2000 2001 Current account balance to GDP %)(US$ miHMons)

Exports of goods and servrces 11,249 23,028 53,251 83,784 Importsofgoodsandservices 17,821 31,485 67,028 75,856 (-Resouroe balanoce 4,572 4,457 -13,777 -11 .892 If '

Net inoome 325 -3,153 -3,559 -3,821 - LINet current transfers 2,693 2,068 12,256 12,798

Current acoount baiance -34554 -10,142 -5,080 -2,915 I

Financing ltems (not) 2,564 7,650 11,482 8,771Changes In net reserves 990 2,492 4,402 -5, 856 2

Mlemo:Reserves Including gold (USS millions) 6,823 5.834 38,036 42,281Conversion rate (DEC, localJUS$) 7.9 17.9 43.3 45.7

EXTERNAL DEBT and RESOURCE FLOWS1981 1991 2005t 2001

(USS mimlions) Conornposton of 2001 debt (US$ mill.)Total debt outstanding and disbursed 20.695 83,717 98312 103,677

IBRD 827 7,685 7816 7080 0 3,482 A- 7,080IDA 5,142 13,312 18.930 18,888

Totaldebtservice 645 4,815 10.110 10727IBRD 137 1,087 1390 1423 22IDA 50 211 469 506 F 39,539/ t

Composition of net resource flowsOffcdal grants 750 461 382 336 -,Official creditors 908 2,334 1,088 589 1/4.64Pnvate creditors 789 1,606 -1,658 4,340 0 164Foreign direct Investment .. 97 2.155 2,346Portfolio equity .. 6 3,036 2,756 |E 20c060

Wortd Bank programCommitments 2,503 2,186 817 2,064 A- IBRD E -BlateralDisbursenents 826 1,981 1.460 1.760 8 -IDA D-Other niultlabtral F-F PnvatePrincipal repayments 86 586 1.229 1,361 C IMF G- Short-tefifNet flows 739 1,395 231 399Interest payments 101 712 630 568Net transfers 639 683 -399 -169

uevewopment toonomics 1 1ulvjuzNote Data are for fiscal year ending March 31 of the year shown, except for population (mid-year 2000), 2001 data are preliminary estimates.

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IBRD 32254

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INDIA

STATE OF CHHATTISGARH -- ,

DISTRICT RURAL40 POVERTY PROJECT 240

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