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Document o f
The World Bank
FOR OFFICIAL USE ONLY
Report No: 3 1839-IN
PROJECT APPRAISAL DOCUMENT
ONA
PROPOSED L O A N
INTHE A M O U N T OF USD 300 M I L L I O N
TO
THE REPUBLIC OF INDIA
FOR THE
THIRD TAMIL NADU URBAN DEVELOPMENT PROJECT
May 25,2005
Infrastructure and Energy Sector Unit
South Asia Region
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. I t s contents may not otherwise be disclosed without World
Bank authorization.
CURRENCY EQUIVALENTS
(Exchange Rate Effective M a y 9,2005)
Currency Unit
RS 1
US$1
=
=
=
Indian Rupee
US$0.023
Rs.43.415
FISCAL YEAR
April 1 March 3 I
BOT
CAS
CCP
CCTP
CMA
CMC
CMDA
DHRW
DMAWS
DMC
ESF
FIs
GO1
GOT"
HUDCO
HDFC
ICICI
IDC
IL&FS
MUDPA
PPP
RDMA
SFC
TNIUS
TNUDF
TNUIFS
TNUITCL
TUFIDCO
ULB
URIF
Vice President:
Country Managermirector:
Sector Manager:
Task Team Leader:
ABBREVIATIONS AND ACRONYMS
Build Operate Transfer
Country Assessment Strategy
City Corporate Plan
Chennai City Traffic Police
Commissioner for Municipal Administration
Chennai Municipal Corporation
Chennai Metropolitan Development Authority
Department o f Highways and Rural Works
Department o f Municipal Administration and Water Supply
Debt Monitoring Cell
Environmental and Social Framework
Financial Institutions
Government o f India
Government o f Tamil Nadu
Housing and Urban Development Corporation
Housing Development Finance Corporation
I C I C I Ltd.
Institutional Development Component
Infrastructure Leasing and Finance Society
Ministry o f Urban Development and Poverty Alleviation
Public Private Partnerships
Regional Directorate o f Municipal Administration
State Finance Commission
Tamil Nadu Institute for Urban Studies
Tamil Nadu Urban Development Fund
Tamil Nadu Urban Infrastructure Financial Services Ltd.
Tamil Nadu Urban Infrastructure Trustee Company Ltd.
Tamil Nadu Urban Finance and Infrastructure Development
Corporation
Urban Local Body
Urban Reform Incentive Fund
Praful Patel
Michael F. Carter
Sonia Hammam
Abha Joshi-Ghani
INDIAFOR OFFICIAL USE ONLY
Third Tamil Nadu Urban Development Project
CONTENTS
Page
.
A STRATEGIC CONTEXT AND RATIONALE
...................................................................
1. Country and Sector Issues.......................................................................................................
2. Rationale for Bank Involvement .............................................................................................
3 . Higher level objectives ...........................................................................................................
.
B PROJECT DESCRIPTION
....................................................................................................
3
3
4
4
5
1. Lending Instrument................................................................................................................. 5
2 . Project Development Objective and Key Indicators ............................................................... 6
3 . Project Components ................................................................................................................
6
A . Institutional Development component ...............................................................................
7
B. Urban Investment component ............................................................................................
8
4. Lessons Learned...................................................................................................................... 8
5 . Alternatives Considered ........................................................................................................ 10
.
C IMPLEMENTATION
..........................................................................................................
1. Partnership Arrangements.. ...................................................................................................
2 . Institutional and Implementation Arrangements ..................................................................
3 . Monitoring and Evaluation ...................................................................................................
4 . Sustainability ........................................................................................................................
5 . Critical Risks.........................................................................................................................
Component A: Institutional Development Component ........................................................
Component B: Urban Investment Component......................................................................
6. Loan Conditions ....................................................................................................................
.
D APPRAISAL SUMMARY
....................................................................................................
1. Fiscal Impact ofthe Project ..................................................................................................
2. Economic and Financial Analyses ........................................................................................
3 . Technical ...............................................................................................................................
4 . Fiduciary ...............................................................................................................................
5 . Social ....................................................................................................................................
6 . Environment ..........................................................................................................................
7. Safeguard Policies .................................................................................................................
7. Policy Exceptions and Readiness .........................................................................................
10
10
10
12
13
15
16
16
17
17
17
18
21
22
23
23
24
25
This document has a restricted distribution and may be used by recipients only in
the performance of their official duties Its contents may not be otherwise disclosed.
without World Bank authorization.
.
I
ANNEXES
Annex 1: Country and Sector Background ...................................................................................
26
Annex 2 : Major Related Projects Financed by the Bank andor other Agencies .......................... 30
Annex 3 : Results Framework and Monitoring..............................................................................
31
Annex 4: Detailed Project Description .........................................................................................
33
Annex 5: Financing Plan............................................................................................................... 40
Annex 6: Implementation Arrangements.,....................................................................................
41
Annex 7 : Financial Management and Disbursement Arrangements ............................................ 48
Annex 8: Procurement Arrangements ...........................................................................................
57
Annex 9 A: Economic and Financial Analysis .............................................................................
62
Annex 9 B: Economic and Financial Analysis .............................................................................
66
Annex 9 C: Economic and Financial Analysis ............................................................................. 77
Annex 12: Project Processing Schedule .......................................................................................
84
Annex 13: Documents in Project File ...........................................................................................
85
Annex 14: Statement o f Loans and Credits ..................................................................................
86
Annex 15: Country at a Glance .....................................................................................................
90
Additional Annex 16: Analysis of Technical & Institutional issues in Sub-project Cycle ..........92
Map(s): IBRD 33970 .General Map of Tamil Nadu
INDIA
THIRD T A M I L NADU URBAN DEVELOPMENT PROJECT
PROJECT APPRAISAL DOCUMENT
SOUTH ASIA
SASE1
Team Leader: Abha Joshi-Ghani
Sectors: General water, sanitation and flood
protection sector (65%); Roads and highways
(25%); Sub-national government administration
(10%)
Themes: Municipal finance (P); Municipal
governance and institution building (P); Other
urban development (P)
Environmental screening category:
Project ID: PO83780
Financial Intermediary (FI)
Lending Instrument: Specific Investment Loan Safeguard screening category:
(FI)
Financial Intermediarv
,-.
Date: May 25,2005
Country Director: Michael F. Carter
Sector Manager: Sonia Hammam
I
[XILoan
[ ]Credit
[ ]Grant
[ ]Guarantee
[ ]Other:
For Loans/Credits/Others:
Total Bank financing (US$m.): 300.00
?Y
lnnual
lumulative
FY06
30
30
FY07
60
90
FY08
60
150
FY09
60
210
FYI0
60
270
FYI1
30
300
Ref: PAD C.5
Does the project meet the Regional criteria for readiness for implementation?
[XIYes [ ] N o
Ref: PAD D. 7
1. The objective o f the project i s to improve the delivery o f urban services through enhancing
the quality- of urban infrastructure and strengthening the institutional and financial framework.
The proposed repeater project would build on and consolidate the achievements o f TNUDP 11,
continuing to improve urban infrastructure services in Tamil Nadu in a sustainable manner, The
two main objectives are:
to strengthen the empowerment o f Urban Local Bodies (ULBS)' by continuing the
decentralization process through delegation o f powers from state level bodies to ULBs; and
through continuing and expanding the capacity building programs started under TNUDP 11;
and
to mobilize resources on a sustainable basis for urban infrastructure investments through:
- mobilizing private financing for ULB infrastructure investments by linking ULBs to the
financial markets through the intermediation o f the Tamil Nadu Urban Development Fund
(TNUDF);
- providing incentives for investments in low income neighborhoods through the use o f
supporting capital grants.
Project description:
The Project will consist o f two complementary components, an Institutional Development
component (IDC) and an Urban Investment component. The I D C provides the Technical
Assistance (TA) and training needed to build capacity to further the devolution process. The
Urban Investment component finances: i)part o f the ULBs urban infrastructure pipeline over the
next five years through a line o f credit and capital grants to the TNUDF; and ii)a grant for the
develoPment o f urban roads and related components in the Greater Chennai Metropolitan Area
through the Chennai Metropolitan Development Authority (CMDA). (Ref: PAD B.3, Technical
Annex 4)
Which safeguard policies are triggered, if any? Ref: PAD D.6, Technical Annex 10
Environment Assessment (OP/BP/GP 4.0 1)
Significant, non-standard conditions for:
(Ref: PAD C.6)
Board presentation: None
Loadcredit effectiveness: None
Covenants applicable to project implementation:
TNUDF to complete Business and Risk management strategy by December 3 1,2005;
TNUDF to raise at least US$ 40 million in co-financing BY September 30,2009.
Government Order enhancing delegation o f powers for clearance o f infrastructure projects
will be in place by December 3 1, 2005.
The term ULB, wherever i t appears in this document, shall mean Corporations, Municipalities and such special
village Panchayat's as may be decided to be urban by GoTN fiom time to time.
2
A.
STRATEGIC CONTEXT AND RATIONALE
1. Country and Sector Issues
1. Key elements of India’s urban sector strategy: With nearly 300 million urban residents,
India’s cities contribute over 60% o f GDP and account for more than 90% o f Government
revenues. Their efficiency has a significant and direct bearing on the country’s overall economy.
Yet, few cities, if any, are able to provide the kinds o f urban services required o n a regular and
sustainable basis. In addition, even fewer adequately collect tariffs for the services provided or
have credible financing systems that would allow them to access India’s emerging financial
markets. India’s cities could contribute more effectively to the country’s economic growth, and
poverty reduction, if they did not suffer from severe infrastructure bottlenecks, service
deficiencies, weak finances, poor local governance and distortions in land and factor markets.
The National Planning Commission estimates that achieving meaningful urban reform, could add
1.25-1.4 percentage points to India’s economic growth rate over the Tenth Plan Period (20022007). Thus for India, accommodating the needs o f i t s growing urban populations i s now and
will continue to be a strategic policy issue for many years to come.
2. The Tenth Plan estimates urban investment needs to be about US$7 billion for the Plan
period (2002-2007) o f which only about a third is available through budgetary resources. Over
the past decade, growing concern about the ability o f cities to provide the level o f urban services
commensurate with their contribution to economic activity has led to significant changes in
India’s urban development policies, through complementary strategies o f decentralization and
financial sector reform. The 74’ Constitutional Amendment aimed to decentralize what had
been highly centralized and regulated policies which had directed investments away from cities,
particularly away from long term urban infrastructure investments. Financial sector reforms,
begun in 1991, allow for urban local bodies (ULBs) to raise financial resources to meet their
infrastructure needs independently o f state loans or grants. Together, these policies aim to
empower ULBs through greater self sufficiency. Part o f these reform efforts and new approaches
aim at tapping additional private resources for traditionally public investments.
3. Key issues constraining achievement of better urban sector results: Despite reforms at the
central level, urban development has remained very much a state issue. The resources provided
to cities as well as the regulations governing their management have continued to be decided
lar ely at the state level. While the process o f establishing elected local governments under the
74t Amendment has been largely successful, the devolution o f functions and funds to the newly
elected bodies and ULBs remains incomplete. State governments continue to take decisions on
such matters as rates o f user charges, property tax, octroi and the role o f parastatals in water
supply and sanitation services with little reference to the ULBs ,that are affected by these
decisions. Few ULBs have the wherewithal to be demand responsive or to access India’s
emerging financial system. Despite major reforms since 1992 and a high degree o f liberalization,
the financial sector i s not yet able to meet the resource needs o f ULBs because of, among other
factors, sector policies and ULB institutional constraints. The result is that urban institutions are
not yet integrated into the fabric o f the broader deregulation and financial reforms o f the Indian
economy. This is an important issue that the project aims to address.
a
4. Actions to address the above issues: Recognizing that continuing reform in governance and
service delivery arrangements o f Indian cities is required to position them as engines o f national
3
growth and development, the Government o f India’s (GOI) Tenth Plan (2002-2007) emphasizes
urban reform as critical to growth and poverty alleviation. It underscores the centrality o f
reforms at both State and local levels to achieving sustainable investments. Given the important
role that States play in determining local revenues and the regulations that govern urban
economies, the GO1 introduced the Urban Reform Incentive Fund (URIF) in 2002 to provide
incentives for reforms o f State policies on housing and local finances (taxes and user charges).
2. Rationale for Bank Involvement
5 . Rationale based on defined country/sector issues and alternatives considered: The Bank
recognizes the importance o f efficiently functioning cities in India’s overall economic
development and poverty alleviation strategy. As outlined in the 2004 Country Strategy (CAS),
the Bank’s strategy i s to support the urban reform agenda o f the Tenth Plan in the context o f the
broader decentralization framework, while strengthening citizens’ empowerment, urban
management, governance and resource mobilization. The proposed project would directly
contribute to the strategy by connecting financial markets with urban infrastructure, assisting in
mobilizing private financial resources and by strengthening the financial and administrative
capacity of ULBs to plan, finance and deliver services in a fiscally sustainable manner. The
proposed project also addresses the issue o f urban roads and traffic management through costeffective long-term solutions.
6. Bank’s comparative advantage/@ with other stakeholders: Both the GO1 and the
Government of Tamil Nadu (GoTN) have strong interests in continuing the Bank’s assistance to
urban sector development in the state o f Tamil Nadu. The Second Tamil Nadu Urban
Development Project (TNUDP 11) made a very strong impact on urban reform and strengthening
of ULB capacity. The Tamil Nadu Urban Development Fund as established under TNUDP I1has
been successful in bringing ULBs to the market and exposing them to commercial borrowing
practices. Both GoTN and GO1 see the continuation o f this collaboration as a way to consolidate
urban reforms in Tamil Nadu and to provide sustainability and continuity to the access to
financial markets for urban local bodies. In addition, GO1 sees this as a way to bring to fruition a
model that could be replicated at the national level and in other states as they reach Tamil Nadu’s
level o f urbanization and implement reforms similar to those that have been implemented there:
while GoTN sees it as a continuation o f a long and fruitful relationship with the Bank.
3. Higher level objectives
7. Project contribution to India’s overarching urban sector development objectives and to
poverty reduction: The proposed Third Tamil Nadu Urban Development Project (TNUDP 111)
would contribute directly to a number o f the GOI’s urban reform objectives for the Tenth Plan
period (2002-2007). The Plan proposes a reform agenda which, inter alia, aims to begin the
process of: (i)enhancing the capacity o f ULBs to assume their functions in accordance with the
74th Constitutional Amendment to ensure greater sustainability and accountability; (ii)
strengthening local finances through rationalization and improvement o f property tax and levy o f
sufficient user charges; (iii)
ensuring better maintenance o f existing assets; and (iv) introducing
better accounting and financial management. TNUDP I11 will provide additional momentum to
* Tamil Nadu i s the most urbanized state in India, with 43 percent o f the population living in cities. As discussed
later in the text, i t i s also one o f the most advanced reformers in terms o f i t s urban policies.
4
the overall reform process being undertaken at GO1 and State levels. The project will support
sound financing at the local level, enabling ULBs to access capital markets and reduce their
dependence on limited central and state budgetary resources for their capital investment needs.
8. Project contribution to CAS objectives: The project i s consistent with the Bank Group
Country Strategy discussed by the Executive Directors on August 26, 2004. To achieve its
primary goal o f poverty reduction, the CAS aims to foster the decentralization process, support
effective governance and promote private sector-led growth. TNUDP I11 would directly
contribute to these CAS objectives by extending the benefits o f privately mobilized financial
resources to the financing o f urban infrastructure investments o f newly empowered ULBs and by
strengthening the financial and administrative capacity o f ULBs to plan, finance and deliver
services in a fiscally sustainable manner. It i s fully consistent with the CAS focus on working
with interested states “through both i t s governance dialogue and i t s sectoral projects” in three
priority areas: (i)
clarifying the roles and functions o f the three levels o f local governments; (ii)
promoting financial devolution and improving local taxation and cost recovery; and (iii)
improving accountability to local constituents. The urban roads and traffic management
component supports the CAS objective o f minimizing high cost investments in mass transit
schemes through more cost effective traffic engineering and management improvements. The
selected low cost sub-projects aim to relieve congestion at key choke-points in the metropolitan
transport network and contribute to improved traffic safety. The Bank loan size was envisaged in
the CAS to be in the amount o f US$ 200 million. However, in view o f the large number o f
municipalities undertaking underground sewerage projects and the addition o f the transport and
traffic component for the Greater Chennai Metropolitan Area, the loan amount was increased to
US$ 300 million. The proposed project i s a repeater o f TNUDP 11, which closed on November
30, 2004. In accordance with the procedures for repeater projects, approved by the Board in
January 2003, a Regional Review Panel was constituted to review the advisability o f preparing a
repeater project. The Panel’s recommendations were positive, based on: performance to date,
project design, sustainability, financial management and procurement performance, and
performance related to social and environmental safeguards. The panel’s recommendations have
been incorporated into the proposed project.
B. PROJECT DESCRIPTION
1. Lending Instrument
9. A sector investment loan i s considered the most suitable instrument to finance the variety of
infrastructure investments proposed under the project. The proposed loan i s directed to the urban
sector and meets the requirements o f OP 8.30 for Financial Intermediary Lending as it aims at
removing the impediments in the development o f market access to ULBs. Subsidized credit i s
not an issue for the project since funds w i l l be provided to ULBs at market rates3. The project
would facilitate access to financial markets by ULBs, by changing policies affecting their
creditworthiness, by building their financial management capabilities, introducing financial
discipline and by supporting their efforts to access the markets for their resource needs. The
project design supports the long term sustainability o f the financial intermediary, TNUDF, b y
underscoring market orientation, flexibility and range o f financing instruments, the articulation
While there i s an opportunity cost o f funds directed to the urban sector, this i s out weighed by benefits such as
creation o f fiscal space and enhancement in the capacity and efficiency o f ULBs to deliver improved urban services
in a sustainable manner to the citizens.
5
o f a long term strategy including a long term business plan and risk management strategy as
well as profitability goals.
2. Project Development Objective and Key Indicators
10. The objective o f the project i s to improve the delivery o f urban services through enhancing
the quality o f urban infrastructure and strengthening the institutional and financial framework.
The proposed repeater project would build on and consolidate the achievements o f TNUDP 11,
continuing to improve urban infrastructure services in Tamil Nadu in a sustainable manner. The
two main objectives are:
.
.
.
to strengthen and deepen the empowerment o f ULBs by continuing the decentralization
process through delegation o f powers from state level bodies to ULBs; and through
continuing and expanding the capacity building programs started under TNUDP 11; and
to mobilize resources on a sustainable basis for urban infrastructure investments through:
mobilizing private financing for ULB infrastructure investments by linking ULBs
to the financial markets through the intermediation o f the Tamil Nadu Urban
Development Fund (TNUDF);
providing incentives for investments in low income neighborhoods through the
use o f supporting capital grants.
11. Project performance indicators are:
enhanced financial soundness o f ULBs, as indicated by improvement in own source
revenues o f participating ULBs and better debt management;
improved urban governance and accountability in ULBs, through reforms undertaken
such as accounting and financial management reforms and e-governance;
improved cost recovery with regard to urban services and improvements in urban services
delivery coverage;
reduction in travel time on key transport project corridors, and reduction in fatal accidents
in Chennai; and
improved long- t e r m sustainability o f TNUDF through market orientation, diversification
o f i t s resource base and products and implementation of a business and risk management
strategy.
.
3. Project Components
12. The Project w i l l consist o f two complementary components, an Institutional Development
component (IDC) and an Urban Investment component. The I D C provides the Technical
Assistance (TA) and training needed to build capacity to further the devolution process. The
Urban Investment component finances: i)part o f the ULBs urban infrastructure pipeline over the
next five years through a line o f credit and capital grants to the TNUDF; and ii)a grant for the
development o f urban roads and related components in the Greater Chennai Metropolitan Area
through the Chennai Metropolitan Development Authority (CMDA). The first and second State
Finance Commissions established the deficit in urban infrastructure in Tamil Nadu at around
US$2.5 billion, while studies undertaken during project preparation established the effective
capacity o f ULBs to invest in sustainable urban infrastructure over the next five years to be
6
approximately US$950 million (Rs. 41,390 million). The project provides funding for US$254
million equivalent, or 27% o f this overall investment capacity.
INDIA: Third Tamil Nadu Urban Development Project
cost
Component
Bank financing
Us%Mill% o f Total US$ Mill %
A Institutional Development component
A1 Capacity Building of Municipal Staff
Front End Fee
Total Project Cost
7*65
1.76
5.70
1.90
1.50
434
0.35
100
1.50
0.50
100
300
A. Institutional Development component
13. This component provides support for management improvements and institutional changes,
including provision o f goods, technical assistance, workshops, and staff training to support the
implementation and sustainability o f urban policy reforms, organizational performance, and
urban services delivery. The component includes:
Managerial capacity enhancement within ULBs and related urban and municipal sector
(a)
(b)
(c)
(d)
(e)
organizations to enable and sustain effective urban policy reforms.
Information communication and technology support to streamline work flows within and
between ULBs and strengthen ULBs’ global information system mapping capacities.
Establishment o f a Debt Monitoring Cell within the C M A for ULBs.
Establishment o f a Tamil Nadu Project Preparation Facility within C M A to provide
consultancy services to ULBs to prepare and implement infrastructure projects.
Project management support including the financing o f incremental operating costs o f
C M A and RDMA.
7
B. Urban Investment component
14. The Urban Investment component w i l l aim at developing sustainable urban investments such
as water supply, waste water collection, solid waste management, storm water drains, roads and
common facilities such as transportation networks, and sanitation facilities, based on demand
driven investment plans developed by ULBs. While investments will be spread over ULBs
throughout the State, part o f the component will also support grants for urban road infrastructure
and traffic management programs in the Greater Chennai Metropolitan Area which includes
surrounding peri-urban areas. The investments would include road widening, small bridges,
traffic studies and traffic management, and road safety sub-components.
15. The Urban Investment component includes support to TNUDF through a line o f credit and
provision o f grant funds for the Project Development Advisory Facility (PDAF) for preparing
and/or supervising projects that involve innovative sub-proj ect financial structuring and Capital
Grant component to finance environmental and social mitigation actions, sub-projects serving the
lowest income groups where required viability gap funding for Public Private Partnerships
(PPP). However, in addition to the line o f credit, project design would seek to expand TNUDF’s
financial role to include credit enhancement support through other instruments-such as debt
service reserve funds, partial guarantees, first loss guarantees, bond insurance and subordinated
debt instruments which would assist the overall objective o f providing sustainable access to the
capital markets and commercial financing to ULBs. Collaboration and participation with subsovereign funds such as IFC Municipal Fund i s also envisaged.
16. The Urban Investment component also includes a grant for transport and traffic management
sub-projects which fall within multi- jurisdictional areas and as such no single ULB i s
responsible for undertaking these investments. These investments would include road widening
and strengthening, pedestrian walkways, Road Under Bridges, Road Over Bridges, grade
separators as well as traffic management measures. A Comprehensive Urban Transport Study
would also be carried out under this component. These investments would address a key urban
and economic growth issue in terms o f infrastructure choke points around Greater Metropolitan
Chennai. In order to facilitate these investments, it was agreed that this component would be
overseen by the Chennai Metropolitan Development Authority (CMDA), a statutory body under
GoTN responsible for urban planning in the Greater Chennai Metropolitan Area. The C M D A
would therefore act as the nodal agency for the implementation o f these specific urban roads
components and would be supported by the Department o f Highways and Rural Works (DHRW)
and the Chennai City Traffic Police (CCTP) in their implementation. Project management
support including the incremental operating costs of C M D A would also be financed under this
component. TNUDF, however, would have over all monitoring role for all fiduciary and
safeguards aspects o f the investment component (for implementation details see Annex 6).
4. Lessons L e a r n e d
17. Substantial experience has been gained from previous projects implemented in India and
specifically in Tamil Nadu. O n the sectoral level the Operations Evaluation Department’s review
o f Bank’s assistance (April 2000) in the urban sector underscores the importance o f local
capacity and client ownership of projects as ingredients of success. The review also underscores
that the Bank’s decreased involvement in the urban sector in the 90’s led to many lost
opportunities. In the current climate where devolution and decentralization are a priority for GO1
8
and both state and urban reforms are on the agenda, there i s an opportunity for the Bank to
further strengthen urban reform initiatives and assist with capacity building and financial
strengthening o f the ULBs.
18. Lessons learned and reflected in the project design include:
State-level commitment to urban policy reform i s essential to enhancing fiscal,
administrative, and management capacities at the local level. I t requires agreement on the
scope o f reform and demonstrated up-front actions at both state and local level. GoTN
has proved its commitment in previous projects and has now adopted a very proactive
strategy to transfer more responsibilities to urban local bodies within the broader
framework of the medium term fiscal framework.
A consistent state wide policy towards financial institutions w i l l be essential to maintain
a level playing field for participating financial institutions and ensure maximum resource
mobilization for ULBs.
Transparent rules o f engagement for sub-loans help ULBs to understand the cash flow
implications of borrowing and to plan and prioritize the commitments entered into.
TNUDF will actively market a range o f financing products to the ULBs to help them
make better informed choices.
Information on ULBs’ loan repayment capabilities has been relatively limited. The
ongoing improvements in ULB accounting practices, which will be consolidated and
extended under the project, will make their financial statements more transparent and
enhance their creditworthiness. The debt monitoring cell to be established in C M A will
be responsible for consolidating this information on a consistent basis.
In the past there have been long delays in obtaining technical approval for ULB subprojects from the overseeing state agency, CMA. This was due partly to lack o f qualified
and experienced staff in CMA, but also due to lack of ownership by CMA. To resolve
this issue, CMA’s human resources have been strengthened and a closer working
relationship established between TNUIFS4 and CMA, with C M A participating actively
on the Board o f TNUIFS.
In the case of roads sub-projects where multiple jurisdictions are involved, the use o f a
nodal agency would facilitate the implementation o f these sub-projects by streamlining
implementation issues. Under TNUDP I1 such projects had to be heavily escrowed due to
a lack o f debt reflows and therefore the use o f a grant facility i s considered more practical
to implement this category o f sub-projects under the nodal agency, CMDA.
One o f the most important lessons learnt from TNUDP I1 i s the need for more flexible
interest rate guidelines. TNUDF was caught in a downward interest rate market with
lagged benchmarks and fixed margins which made i t s on-lending rates uncompetitive.
Tamil Nadu Urban Infrastructure Financial Services ltd. (TNUIFS), i s the asset management company for TNUDF.
9
New, more market responsive benchmarks have been designed under the proposed
project.
0
Achievement o f long term sustainability i s critical for TNUDF to achieve it’s stated
objectives and have a greater impact on linking ULBs to the capital markets for their
infrastructure investment needs.
5. Alternatives Considered
19. Although several alternatives were considered, they were mainly variations on the theme of
how to ensure sustainability. The underlying issue was one o f private versus public sector
involvement, which, in the proposed project has been resolved in favor o f continuing private
sector participation and maintaining market orientation o f the Fund. This would be achieved
through the continued partnership with the Financial Institutions (FIs) in the Fund and the Asset
Management Company, TNUIFS, and also through mobilization o f debt by TNUDF in the
capital markets. Arguments favoring public funding o f urban infrastructure through Government
departments were overruled by the size o f the investments needed, which could only be met
through the mobilization o f funds on the market. In the case o f the roads and traffic component
for the Chennai Greater Metropolitan Area, it was first considered that TNUIFS should be the
implementing agency. However, given the fact that this component i s grant financed by GoTN, it
was agreed that C M D A i s better placed for the implementation o f this multi-jurisdictional non revenue component.
C. IMPLEMENTATION
1. Partnership Arrangements
20. As in TNUDP 11, the project envisages continuing private participation in TNUDF. TNUDF
was established in 1996, by restructuring the Government owned Municipal Urban Development
Fund. As o f date, about 30% of TNUDF’s capital i s provided by three private financial
institutions: ICICI, Housing Development Finance Corporation (HDFC) and Infrastructure
Leasing and Financial Services (IL&FS).
2. Institutionaland Implementation Arrangements
2 1. Executing Agencies: The agencies involved in the execution o f TNUDP I1 would also
execute most o f the components o f TNUDP 111. There are however some changes with some
changes in responsibilities to benefit from lessons learnt, and the addition o f specialized agencies
to implement the Chennai Metropolitan Area transport and traffic component. The Department
o f Municipal Administration and Water Supply (DMAWS) will have overall responsibility for
project coordination and urban sector reform. A Government Committee, headed by the Chief
Secretary has been established to lead the implementation o f the project and provide policy
direction. In addition, a Monitoring Committee, headed by Secretary D M A W S would be
established, to review project progress on a quarterly basis and provide coordination support.
Institutional Development component. C M A under D M A W S will implement the Institutional
Development component. The Project Management Unit o f TNUDP I1has been mainstreamed
into C M A to carry out the technical assistance, training programs and reform related assignments
10
for the ULBs. C M A will also manage a Project Preparation Facility (PPF) funded by GoTN and
establish a Debt Monitoring Cell (DMC) to maintain a data base on ULB finances and to monitor
debt servicing capabilities o f ULBs.
22. Urban Investment component. Tamil Nadu Urban Infrastructure Financial Services Limited
(TNUIFS) as the manager o f TNUDF w i l l implement the urban investment component, making
loans to ULBs, administering the capital grants to ULBs and channeling grant funds to CMDA.
The administration o f TNUDF i s entrusted to a Board o f Trustees nominated by GoTN and
participating financial institutions. The Board has been incorporated as the Tamil Nadu Urban
Infrastructure Trustee Company Limited (TNUITCL) and, as such, approves the business and
financial plans proposed by the asset management company, TNUIFS. The TNUDF i s run as an
autonomous Fund with full management autonomy to the Board.
23. TNUIFS will manage a separate Project Development and Advisory Facility (PDAF) funded
by the Bank, to allow for preparation and/or supervision o f more complex and innovative
projects, including Public Private Partnerships (PPPs), BOTS, and projects with energy efficiency
and new technology aspects.
24. For Sub-components related to investments in the municipalities, C M A will take the primary
responsibility for project preparation progress. C M A will help ULB’s prepare the sub-projects
and give Technical and Administrative sanctions. TNUIFS will be responsible for implementing
the sub-projects and the implementation would be jointly reviewed by TNUIFS and CMA.
25. C M D A will be responsible for planning and oversight o f the transport and traffic subcomponent within the C M D A area, to be executed by the Department o f Highways and Rural
Works (DHRW) and Chennai City Traffic Police (CCTP). A multi-agency P M U would be
constituted in CMDA, fully responsible for implementing this sub-component. The management
of funds for the transport and traffic sub- component will be carried out by TNUIFS.
26. Implementation Arrangements: Implementation will follow broadly the same procedures as
those established under TNUDP 11. Institutions wishing to borrow for infrastructure investments
(predominantly ULBs, but also including Statutory Boards and private investors) w i l l submit
applications for sub-project financing to TNUDF, which will undertake a detailed appraisal o f
the proposed project, including review o f technical, financial, economic, social, environmental
and legal aspects. In practice, project preparation will be undertaken by consultants in
accordance with TNUDF’s operational manual, including the Environmental and Social
Framework (ESF), and financed out o f the PPF or PDAF. The preparation process would be
concurrently reviewed both by TNUIFSL and C M A as it progresses, as part o f a joint review
committee. After a satisfactory appraisal, financing o f the sub-project would be approved by the
relevant authority. TNUDF along with C M A will monitor the implementation o f sub-projects,
for which the borrowers will be required to submit regular progress reports, and will undertake
post-implementation evaluations. C M D A will supervise the preparation and implementation o f
transport and traffic sub-projects in the Chennai Metropolitan area. The benefits o f the initiatives
taken and the lessons learned under TNUDP I1 have been integrated into the design o f the
institutional arrangements (see Annex 16).
11
27. Implementation Capacity: TNUIFS has a proven capacity for selection o f well designed and
sustainable urban infrastructure projects and supervision o f their implementation. It’s capacity
will be further strengthened by the actions listed below which have been and initiated and/or
completed:
.
.
hiring o f additional project finance staff to assist with project identification, appraisal and
supervision;
strengthening project development and marketing skills by appointing adequate and
appropriate staff to support ULB’s;
focus by senior level staff on areas such as financial advisory, project appraisal and social
and environmental issues. I t i s expected that the social development specialist w i l l also focus
on consultation on key project related policies at the local level;
adoption o f an Operations Manual which would also address generic issues raised through
sector guidelines as part o f the operating procedures; and
establishment o f joint review procedures with the office o f the Commissioner o f Municipal
Administration (CMA) on technical assistance and approvals.
28. At the ULB level, implementation w i l l be supervised by consulting engineers, where
necessary. The capacity o f C M A to implement the institutional strengthening component will
be strengthened by training and recruitment o f qualified personnel (see Annexes 6 and 7 for
details o f institutional development and financial management action plans).
29. C M D A has experience o f implementing Bank financed projects under Madras Urban
Development Project I,while D H R W i s currently the main implementing agency for the Bank
funded Tamil Nadu State Roads Project; as such it has adequate capacity to implement the road
improvement sub-projects. C M D A will also be able to call upon the experience o f TNUIFS in
project implementation through assistance to the Technical Review Committee. TNUIFS will
provide clearance for Environmental and Social Safeguards and monitor ESF compliance during
implementation for C M D A sub-projects.
30. Flow of Funds and Financial Reporting:
Bank funds will be channeled through GOI,
which w i l l operate the Project’s Special Account. GoTN will, in turn, on-lend funds to TNUDF
under a subsidiary loan agreement. GoTN will disburse funds through i t s budget, for all project
components. For the Institutional Development component, funds will flow to C M A as grant.
Funds for on lending to ULBs on sub projects will flow to TNUDF through an on-lending
agreement. Funds which will be provided as capital grant to ULBs will flow to Grant Fund I.
Funds for Technical Assistance through PDAF will flow through to Grant Fund 11. The grant
funds on account o f the C M D A component will flow to Grant Fund 111. All the Grant Funds I,I1
and I11 as well as TNUDF will be managed by TNUIFS through management agreements.
Financial Monitoring Reports will be prepared on a quarterly basis for all project components.
Audit Reports for each component including TNUDF, undertaken by auditors acceptable to the
Bank w i l l be submitted within six months o f the close o f each financial year. (See Annex 7 for
details).
3. Monitoring and Evaluation
31. Project performance indicators and the agencies responsible for monitoring them are as
follows:
12
enhanced financial soundness o f ULBs, as indicated by improvement in own revenues o f
participating ULBs and better debt management; to be monitored by the Debt Monitoring
Cell;
improved urban governance and accountability at ULBs, as indicated by the number o f
ULBs undertaking reforms such as accounting and financial management reforms, and
computerization o f functions, including e-governance; to be monitored by C M A on a
regular basis;
improved cost recovery with regard to urban services; to be monitored by DMC;
improvements in urban services delivery coverage; benchmarked with information
collected b y the State Finance Commissions (described in Annex 3); to be monitored by
CMA;
improved market orientation o f TNUDF through realistic market based costing o f funds
and adoption o f a more commercially oriented lending policy; to be monitored by GoTN
and World Bank.
improved long-term sustainability o f TNUDF through diversification o f its resource base
and products, and implementation o f a business plan and risk management strategy; to be
monitored by GoTN and World Bank; and,
reduction in travel time along project corridors, decrease in congestion and choke points,
decrease in fatal accidents in Chennai; to be monitored by CMDA.
4. Sustainability
32. Commitment to the project and relevant policies: Both GO1 and GoTN have demonstrated
strong commitment to urban sector reforms and to continuing the Bank’s assistance in this area,
which would help ensure project sustainability. Considerable progress has been made towards
implementing the reforms under the Urban Reform Initiative Fund (URIF) in Tamil Nadu,
particularly the following: (i)
reduction in stamp duty on transfer o f property from 15 percent to
8 percent and further agreement to reduce the Stamp Duty to 5 YOby 2007; (ii)
implementation o f
accrual accounting system in all 107 urban local bodies; (iii)
introduction o f modified area based
property tax system; (iv) computerization o f sub-registrar’s offices; (v) repeal o f the Land
Ceiling Act, while a reformed Rent Control Act i s being considered’; (vi) commitment to levy
user charges, and improvement in rate setting and collection levels for water and sanitation
services. Tamil Nadu i s one o f the leading states in undertaking urban reforms. (See Annex 1).
33. Other factors critical to sustainability: At the TNUDF level, sustainability will need to be
ensured by GoTN through: (i)
evolving a consistent approach to urban financing in the state
between the different state financed institutions ensuring a level playing field for different
institutions; (ii)ensuring that the state on-lending interest rates to TNUDF remain largely
competitive, flexible and consistent with market rates; and (iii)
TNUDF i s able to offer a larger
selection of products, including credit enhancement products.
34. TNUDF’s long-term role in infrastructure finance would require for it to develop a strategy
to become a self-sustaining commercially viable institution, drawing i t s financing from the
domestic market. India has a high savings rate and high liquidity in the financial sector. The
role of an intermediary financial institution like TNUDF should be to tap the domestic credit
Currently there are only 50 rent controlled properties in Chennai and 25 in Coimbatore. N o new properties have
come under Rent Control Since 1999.
13
market for urban infrastructure finance, and reduce i t s dependency on external lines o f credit and
government funds in the medium term, and be self sustaining in the long term. As a first step
towards becoming a self-sustaining financial intermediary, TNUDF would develop as part o f the
project by December 3 1, 2005:
e A comprehensive lending strategy. This strategy would identify and price a variety o f
lending and credit enhancement instruments to replace the single 15-year fixed rate loan
0
e
e
e
instrument n o w available. Lending rates would be differentiated by credit risk.
A n investment strategy. This strategy would establish procedures and consider the
opportunities/risks for equity investments in local infrastructure projects, typically in
collaboration with other FIs and private sector partners. Funds for this purpose would be
raised o n the domestic market or via international financing that permits equity
participation. Following i t s strategy assessment, TNUDF may or may not conclude that
equity investment should be part o f its operations.
A risk management strategy. This strategy would identify and price the risk associated
with different lending and investment opportunities, then determine an overall risk
profile that is appropriate for TNUDF, given its sources o f financing. The risk
management strategy would also address t e r m intermediation risk o f the kind that has
been experienced by TNUDF over the past three years. This will require it to match the
overall tenor and terms o f its borrowing with the tenor and terms o f i t s on-lending (see
below).
A domestic Jinancing strategy. This component would identify a specific strategy for
raising financing f i o m the domestic market so as to make TNUDF self-sustaining in
terms o f financial sources. TNUDF currently has an under-leveraged balance sheet.
Therefore, the first steps in such a strategy should involve accessing the domestic credit
market. Eventually, a self-sustaining TNUDF will need to increase the equity on i t s
balance sheet. It should develop a specific strategy for doing so, including targets for the
proportion o f equity that will be held by private investors and h o w this goal will be
achieved.
A commercial operations strategy. Many o f the services that TNUIFS has provided free
on a pilot basis should appropriately be fee-based in the future. Services include
bundling of local loans for pooled financing, advisory services to other states looking to
establish infrastructure financing intermediaries, assembling comprehensive packages
for financing local infrastructure projects, etc. This component o f strategy development
should establish guidelines as to when fees will be charged for services and h o w fee
levels will be determined. In addition, the management fee basis o f TNUIFS, the Asset
Management Company, would also be reviewed to make it more performance linked and
incentive based.
35.At the ULB level, sustainability will be enhanced by the project’s capacity building
component, which will improve transparency and accountability. The scope o f investments will
also be strictly correlated with ULB’s creditworthiness in terms o f demonstrated financial
performance and investment capacity, which in turn would promote the enhancement o f ULB
financials, primarily through increased mobilization o f user charges and property tax. A t the
project level, increased community participation will help ensure cost recovery and long t e r m
sustainability. O&M arrangements, which will be a key part o f investment decisions, will also
help guarantee the sustainability o f assets.
14
36. For the C M D A road and traffic management components, sustainability will depend largely
upon adequate O&M provision by the Department o f Highways and Rural Works (DHRW).
DHRW i s responsible for the maintenance o f all the main roads in the state and they have
indicated that the C M D A roads component would be incorporated under their O & M program
and would be fully funded by GoTN. Sustainability will also depend partly o n selection o f the
most appropriate schemes through rigorous economic analysis, o n the increase in economic
activity generated and, in part, on peoples' perception o f the benefits generated and on
acceptance o f the sub-projects through appropriate information dissemination, public
consultation and satisfactory compensation.
5. Critical Risks
37. The key risks are primarily related to the viability o f the local bodies supported under the
project. ULB viability will be significantly strengthened by implementation o f key elements o f
the Common Municipal Act and the resulting enhancement o f the delegation o f powers to local
bodies. This will also involve some restructuring o f the state level Municipal Administration
from the current system o f control to one o f greater facilitation, together with further reduction o f
the role of para-statals in urban infrastructure investments. T o assist the Municipal
Administration in developing its role as a facilitator, the implementation o f the proposed project
would be placed within the administration rather than through a PMU structure. The Debt
Monitoring Cell to be established under the project will maintain an up to date database on
municipal finances.
38. O n the investment front, as regards the line o f credit component, the risk will depend to a
large extent on TNUDF's competitiveness in terms o f interest rates and tenor, the financial
credibility o f ULBs, market conditions during the course o f implementation, the pace o f ongoing reforms and sustainability o f investments. This competitiveness could be enhanced in a
number o f ways: by developing a more market-based interest rate setting policy, by adjusting the
rate setting formula to follow market trends more closely; by focusing o n a range o f investment
products by TNUDF rather than just the standard loans used in TNUDP 11; by increased
flexibility in funding structures; and by continuing to increase the transparency and
accountability o f ULBs. The sustainability o f investments would be enhanced through a set o f
investment guidelines for each sector, which are described in the TNUDF Operations Manual.
39. In the case o f the urban roads component in the Greater Chennai Metropolitan Area, there is
the risk related to the fact that C M D A was not an implementing agency under TNUDP If.
However, CMDA's roads and traffic component will be implemented by DHRW. DHRW has
gained experience, implementing a number o f other projects including the Bank supported Tamil
Nadu Road Sector Project. The roads sub-projects have been selected as those with the least
expected land acquisition. Moreover, this component will fall under the w e l l established TNUDF
framework for safeguards and fiduciary reviews which will mitigate this risk. The CMDA's
traffic safety program will be implemented by the Chennai City Traffic Police which although
new to implementing Bank supported projects has demonstrated as very good ongoing traffic
safety program.
CMDA has previously implementedBank projects such as Madras Urban Development Project and the roads
component under TNUDP IProject, and i s familiar with Bank's Guidelines and requirements.
15
IRisk
Risks from Components in achieving:PDOs
I-
Timely implementation o f ULB level Institutional
Development activities across the target ULBs and
ULB’s commitment and capacity to undertake the
same.
M
GoTN commitment to undertake state level
facilitation measures for implementation o f this
activity,
including utilization o f Technical
Assistance for state level reform measures.
Component B: Urban Investment Component
M
ULBs’ commitment t o urban sector reforms in
general and willingness to participate and meet the
requirements under TNUDP 111.
M
ULBs’ institutional, financial and technical
capacities to identify and implement viable
investment sub-projects across different sectors.
M
TNUDF’s ability to access the domestic capital
markets and other funding resources to finance the
pipeline o f investment projects.
M
CMDA’s capacity to oversee the implementation of
the roads sub-component for the greater Chennai
Metropolitan Area.
M
Compliance with safeguards under all sub-projects.
M
16
I Risk Minimization Measure
I
The capacity enhancement program
was successfully started under
TNUDP I1 with high uptake levels.
TNUDP I11 will continue and
consolidate this. Additionally, the
program under TNUDP I11 i s
demand driven with high level o f
ULB uarticiuation expected.
GoTN i s among the leading states in
undertaking urban reforms.
TNUDP I11 i s designed as a demanddriven project wherein all ULBs are
not automatically selected for
participation and open to only those
ULBs that meet certain access
criteria and agree on a reform
program.
Access to funds for ULBs would be
preceded by detailed sub-project
well
preparation
support
as
implementation support provided
through TNUDF and CMA, and
funded out o f the grant facility.
TNUDF has successfully accessed
the markets before and has an under
leveraged balance sheet. It will
develop a comprehensive domestic
finance strategy to move towards self
sustainability.
C M D A has previously implemented
Bank supported projects; they will
have implementing assistance from
DHRW and CCTP. Implementation
arrangements including a PMU
based in C M D A and a multi
organizational Technical Review
Committee.
A robust Environment and Social
Framework has been put in place for
the urban investment component.
Safeguards
and
Fiduciary
requirements will be overseen and
I Risks from Comuonents in achievinp PDOs
IRisk
I~
I Risk Minimization Measure
I
capacity
monitored by TNUIFS.
for
monitoring and
implementation will be suitably
enhanced both at the TNUIFS and
closely
CMDA level.
6. Loan Conditions
Dated covenants:
..
TNUDF to complete Business and Risk management strategy by December 3 1, 2005;
TNUDF to raise at least US$40 million in co-financing by September 30,2009; and,
Government Order enhancing delegation o f powers for clearance o f infrastructure projects to
be issued by December 3 1,2005.
Financial Covenants:
C M A to maintain a qualified Financial Officer (FO) with experience and qualifications
agreed with the Bank throughout the project period.
C M A to produce accounts in the formats specified and acceptable to the Bank.
The audited financial statements fkom all implementing entities specified to be provided to
the Bank within 6 months o f the close o f the financial year.
TNUIFS to employ during the l i f e o f the project a qualified senior officer in finance who w i l l
be the single contact point for the Bank on all matters relating to accounting, financial
reporting, submission o f accounts to audit, claims, disbursements and work plan for all
project components being implemented by TNUIFS.
C M D A to employ an Accountant with qualifications acceptable to the Bank throughout the
l i f e o f the project to liaise with TNUIFS and GoTN on funds flow, accounting,
disbursements, claims and other FM issues.
D. APPRAISAL SUMMARY
1.
Fiscal Impact o f the Project
40. Fiscal situation of the state: While the state --onom ' 1 growing at a reasonable r a -,
investments were constrained by a large revenue (current) deficit. To address the fiscal
imbalance, the Government initiated a series o f fiscal reform measures beginning late 2001. The
reform program focused on increasing the state's revenue and controlling growth in current
expenditure such as salaries, pensions, interest and subsidies. The highlights o f the reform
program implemented over the last three years are: the development o f a multi-year framework
for fiscal adjustment; improving legislative oversight and fiscal transparency; improving the
efficiency and equity o f tax administration; rationalizing user charges and reforming state-owned
enterprises and ailing manufacturing cooperati\;es. Power tariffs were raised 30%, free power to
agriculture was done away with and the Tamil Nadu Electricity Board's (TNEB) payment arrears
of Rs. 1962 crores securitized with GoTN taking over the debt. This contributed to improving the
1
17
financial position o f the TNEB, the key source o f balance sheet risk to fiscal adjustment for the
Government o f Tamil Nadu.
41. The impact o f the reform program has been favorable. The fiscal turnout in 2003/04, the base
year for the Medium Term Fiscal Program (MTFP) has improved upon the MTFP targets. As
against a projected fiscal deficit o f 4.1 % o f GSDP in 2003/04, the realized fiscal deficit has been
2.4%. Similarly, as against projected current deficit o f 2.2% for 2003/04, the realized current
deficit was 0.9%. GoTN achieved a primary surplus against a projected primary deficit. Tamil
Nadu has thus embarked on a solid path towards fiscal sustainability.
42. However, following national elections in April-May 2004, certain critical reforms were
reversed. Electricity was made free for agriculture. But more importantly, power tariffs were
slashed by over 30% for the domestic consumer segment. The resulting subsidy o f close to Rs.
712.5 crore in 2004105 (Rs. 900 crore in a full year) i s being provided to the Tamil Nadu
Electricity Board as budget support for domestic consumers. Public Distribution System reform
involving subsidy targeting was given up and subsidized bus transportation was restored to
private school and college students. These actions w i l l expand revenue expenditure by over
Rs. 1000 crore over the budgeted estimates for 2004/05. However, with reduction in expenditure,
salaries and pension related items, the revised estimates for 2004/05 shows an increase o f only
Rs. 606 crores over the budget estimate o f 2004/05.
43. Expenditure on Tsunami relief and rehabilitation i s expected to be largely deficit neutral
since the expenditure will be met mostly out o f revenue grants received by the government. But
four broad sets o f factors will help the state to generally stay on the fiscal adjustment path: (i)
salaries and pensions have remained virtually flat in nominal terms in 2002/03 and 2003/04; (ii)
the government expects conservatively to realize Rs. 1,380 crore o f savings under salaries as
compared to the budget in 2004/05; (iii)interest expenditure savings consequent to debt
restructuring in 2004/05; and (iv) revenues have been growing well during the fiscal year
2004/05 exceeding the Budget projections ( 21-96% y-0-y growth achieved up to December 2004
end as opposed to annual 9% in the projections). If the revenue trend holds through the rest of
the year, the budgeted revenue target for the year w i l l be exceeded. Together with anticipated
expenditure savings detailed above, budgeted fiscal deficit target will most likely be achieved in
2004/05.
44. The MTFP has provided adequate budgetary resources for externally aided projects. For
instance, in 2005/06 the MTFP provides for Rs. 800 crore against Externally Aided Projects
(EAP), Rs. 900 crore in 2006/07 and Rs. 1000 crore in 2007/08. Against this, the preliminary
indications are that the GoTN will initially provide Rs. 700 crore in the 2005/06 budget with
possibilities o f budgeting more resources should project spending pick up. This i s adequate for
sustaining projected expenditure under the two outstanding World Bank projects in the health
and road sectors while supporting new projects in their initial phase. Since recoveries from
TNUDF have been good under TNUDP 11, the fiscal impact o f the project i s expected to be
minimal and manageable.
2. Economic and Financial Analyses
Economic Analysis
18
45. The proposed line o f credit will be instrumental in increasing the efficiency o f delivery o f
urban services and the sustainability o f ULBs. Although the proposed line o f credit does not
have an explicit subsidy, the opportunity cost o f dedicated funding, difficult to quantify, i s
expected to be more than compensated by the benefits o f increased efficiency o f delivery o f
urban services and the sustainability o f ULBs. The demand-driven nature o f the Project implies
that U L B s will determine the nature and scope o f each sub-project. Therefore, the costs and
benefits of individual sub-projects can not be completely identified and, hence, the economic rate
of return for the whole Project estimated ex-ante. The cost-benefit analysis will be carried out for
each sub-project with total costs o f US$ 500,000 and above, except sub-projects with nonquantifiable benefits. Such cost and benefit analysis for the individual sub-projects shall
demonstrate a positive N P V and an ERR equal or above the appropriate opportunity cost o f
capital estimated at 12%. This is consistent with recently Bank approved projects and i s above
the current real interest on long-term deposits. The Project Team will review on a no-objection
basis all sub-projects with total costs o f US$ 750,000 and above and a sample o f sub-projects
below this threshold at its discretion. This procedure will be reviewed as needed to ensure
adequate quality o f the investment analysis. The detailed methodology for economic analysis for
typical sub-projects is included in Annex 9. Economic analysis o f the transport and traffic
management sub-projects in the CMDA area would be based on traffic counts, using savings in
vehicle operating costs and vehicular and travel time savings.
46. International experience suggests that infrastructure investments have broad positive
economic benefits such as:
0
0
e
Investments in local infrastructure will create jobs for local contractors and develop local
technical skills and raise demand for local inputs by small local contractors.
Improved water supply and sewage services will result in substantial direct and indirect
benefits such as better health and reduced household costs o f fetching water.
Rehabilitation o f access roads, sidewalks and street drainage will improve mobility o f the
population and develop trade and local service activities in previously inaccessible
neighborhoods. Investments in street lighting will, among other things, increase security and
extend potential hours for education and economic activities.
47. While the impact o f technical assistance for institutional development and capacity building
of ULBs in planning and management infrastructure investments i s very hard to quantify, Bank
assistance in this area is expected to result in significant benefits. In particular, the Project will
empower communities and establish a partnership between communities and ULBs. It will lay
the basis for more participatory development planning, more responsive local services and better
accountability o f the U L B s towards communities. In addition, it will facilitate:
e
Better city planning and management processes that are more responsive to the local needs
and conducive to local economic development.
0
Improved financial management capacity o f U L B s to implement and operate infrastructure
projects.
0
Incorporation o f currently substandard neighborhoods into the service delivery area and the
municipal revenue stream.
Financial Analysis
48. The financial assessment methodology would focus on three aspects:
19
Sub-Droiect level viabilitv: This would apply only to green-field revenue generating subprojects (water, waste-water, solid waste projects) and would seek to ascertain sub-project
level N e t Present Value (NPV) / Internal Rate o f Return (IRR). At the sub-project level, most
urban projects are not expected to be financially viable on a stand-alone basis (i.e. based on
sub-project revenues alone), TNUDP I11would seek to improve cost-recovery levels for such
sub-proj ects.
Overall ULB level financial sustainabilitv: This assessment seeks to ascertain that the subprojects being undertaken are financially sustainable for the ULB as a whole, taking into
account all i t s revenue and expenditure drivers. This assessment was carried out at a broad
level for all ULBs in TN by projecting the overall revenue and expenditure position o f the
ULBs into the future under reasonable assumptions and calibrating the extent o f sustainable
investment capacity such that the following conditions are met: (i)
ULB has no cash deficit in
any year, after taking into account additional operating costs, ULB counterpart funding and
debt servicing obligations; (ii)
debt service ratio (principal repayment and interest payable,
divided by total revenue) i s maintained at a maximum o f 30 percent; (iii)
debt service
amount, including existing debt service obligations, i s maintained at less than 40 percent o f
operating surplus. This assessment indicated that overall borrowing capacity o f all ULBs in
TN was about US$ 4 18 million and on an aggregate basis, ULBs would be in a position to
absorb the line o f credit component under TNUPD I11o f US$ 110 million. In addition a more
detailed assessment o f a sample o f 29 ULBs (out o f the total 151 ULBs in the state o f Tamil
Nadu) was carried out in-house by TNUIFSL and the findings are summarized in Annex 9E.
Financial Viabilitv o f TNUDF: TNUDF’s financial statement for the years 1999/00 until
2003/04 are shown in Annex 9D. External factors such as the macroeconomic conditions,
financial markets and urban sector conditions have had a major impact on TNUDF’s
financial performance. Over the past five years Government security yields in general have
fallen and the financial system has experienced high levels o f liquidity, resulting in a
declining interest rate regime. At the same time, competition in the financing o f urban
infrastructure projects has been increasing, with the existence o f multiple government owned
specialized agencies with access to large amounts o f l o w cost funding resources. The time
lag in the adjustment of TNUDF’s interest rate setting and the inability to renegotiate lending
rates have rendered TNUDF’s lending rates inflexible and non- responsive to market
conditions impacting adversely the competitiveness o f TNUDF’s lending products. This has
in the last two years, resulted in significant loan assets reduction, excess cash in hand and, in
turn, reduced profitability for TNUDF.’ In terms o f competition from other state owned
agencies, GoTN would on i t s part ensure that there i s a level playing field between i t s
agencies. Other state agencies would also be encouraged to co-finance projects with TNUDF
where appropriate and beneficial to borrowers. The issue o f refinancing o f TNUDF loans by
other state agencies would also be addressed by the fact that under TNUDP 111, TNUDF
would have more flexible lending terms and would be able to respond to changing market
conditions in a more agile way than before.
49. TNUDF has taken steps to minimize the impact on i t s financial position by repaying i t s
outstanding high cost borrowings and by maintaining a steady average return on loans.
Consequently, TNUDF’s financial position remains profitable. Overall, TNUDF’s financial
performance as o f FY 2003-04 i s summarized as follows:
20
Profitability indicators and interest spread remained positive, with gross interest margin
o f 48.25%, net margin o f 23.71%, average return on loans o f 8.04%, average cost o f
borrowings o f 5.18% and average cost o f funds o f 4.77%;
Post Tax surplus was Rs. 10 crores (USD 2.2 million equivalent), down Rs. 1.6 crores
(USD 0.36 million) or 14% from FY2002-03;
Loan assets were Rs. 85.48 crores (USD 19 million), about 77% lower than in the
previous FY2002-03 o f Rs. 373.85 crores (USD 83 million). This significant decline was
due to prepayment o f loans by borrowers who had refinanced their loans with other state
government funding agencies at lower rates o f interest. Investments, on the other hand,
increased by 45% from Rs. 282.85 crores (USD 63 million) to Rs. 409.96 crores (USD 91
million);
As loan assets declined and investments rose, the income structure o f TNUDF has shifted
considerably since FY1999-00. Investment income to total income increased from 40% to
56%, whereas lending income to total income decreased from 60% to 44%;
The significant ratios as o f FY04, with projections at appraisal in parenthesis, are as
follows: return on net worth 3.72% (13.7%); return on assets 1.48% (4.09%); debt to
equity ratio 1.36 (2.3); and debt service coverage ratio (DSCR) 2.47 (1.42); and,
Loan recovery rate was at 99%, higher than the projected 95%.
50. Factors such as ULB’s financial creditworthiness, market conditions, sub-project pipeline,
pace o f sector reforms and sustainability o f investments would remain key, and the following
measures are being undertaken under TNUDP I11 for enhancing and maintaining TNUDF’s
competitiveness and will be developed as a part o f the business strategy and strategic plan for
TNUDF by December 2005:
a more market-based interest rate setting policy through regular but more frequent
adjustments to the base rate and also linked to TNUDF’s own market borrowings and cost o f
funds has been developed and agreed;
expanding the range o f investment products outside standard loans, such as credit
enhancement;
increasing the flexibility in TNUDF’s funding structures through market borrowings and
thereby allowing it to offer more tailored loan structures to clients in terms o f tenors and
rates; and continuing to increase the transparency and accountability o f ULBs;
TNUDF to mobilize co-financing aggregating at least US$ 40 million from any or all o f the
following sources: (i)proceeds from TNUDF public bond issues; (ii)TNUDF private
placements; (iii)
co-financing with TNUDF by private financial institutions / banks at the
sub-project level; (iv) securitization o f TNUDF loans or “secondary market” purchases by
private financial institutions / banks o f TNUDF loans to ULBs, or re-financings o f TNUDF
loans to ULBs (through local bond issues, pooled bond issues, or loans from private financial
institutions) as arranged by TNUDF; (v) net increases in equity investment in TNUDF by
private financial institutions; and,
accelerating the pipe-line of sub-projects for TNUDF through better marketing / outreach to
ULBs and faster processes for clearances for ULBs wanting to take up sub-projects.
3. Technical
51. The likely investments under the project include water supply, sewerage, solid waste
management, storm water drainage, urban roads, vegetable markets, bus stands, street lights,
21
crematoria, urban transport, etc. Substantial investments are expected under the sewerage sector,
as GoTN i s giving priority to providing improved sanitation in municipalities. The project would
thus finance most o f the municipal obligatory services, some o f which are remunerative and
some non-remunerative, contributing to the improvement o f living standards o f the urban
population. The project would not finance commercial facilities such as shopping complexes,
power or telecommunication facilities.
52. The subprojects will be designed primarily on the basis o f Indian Standards, following
respective technical guidelines issued by the line ministries / agencies (e.g. Central Public Health
and Environmental Engineering Organization, Indian Roads Congress etc.). The subprojects will
comply with CentraUState Pollution Control Board norms. The borrower’s needs will be
reflected by following the sustainable local adaptations being used by Tamil Nadu Water and
Drainage Board, Chennai Metro Water Supply and Sewerage Board etc; and taking up the subprojects identified as priority by the ULBs.
53, To ensure sustainability o f investments, “Sector Investment Guidelines” have been
developed, including appropriate technical design standards and these would be complied with
for sub-project investments. To ensure readiness for both appraisal and implementation, and
avoid the risk o f implementation delays or weaknesses in operationalizing the sub-projects, a set
o f “Readiness Filters” have been developed. These are also incorporated in the Operations
Manual (OM) o f TNUDF. The consideration o f technical and institutional issues arising during
the sub-project cycle, integrating the lessons learned from implementation o f TNUDP 11, i s
discussed in Annex 16.
54. TNUIFS has prepared a l i s t o f likely sub-projects costing US$254 million to be included in
the Project. Out o f this l i s t of likely sub-projects, the first year’s pipeline o f US$88 million
would be ready for implementation in the first year.
4. Fiduciary
Procurement
55. The current Operations Manual o f TNUIFS documents i t s internal procedures, steps involved
from borrower’s loan application stage till project completion. I t covers an outline o f project
preparation, appraisal procedures, project sanctioning, progress monitoring during
implementation, procurement, disbursement and audit. The lending and investment guidelines of
TNUDF are discussed separately.
56. The proceeds o f the Loan will be used to finance the procurement o f civil works such as
construction and maintenance of water pipe lines, solid waste management works, storm water
drainage, bus stands, widening and strengthening o f roads, road over bridge, road under bridge,
grade separators, pedestrian subways etc; goods (machinery, equipment, waste collection
vehicles, traffic control equipment etc.) and services (consulting services, training, etc) under
sub-loans by TNUIFSL, C M A and CMDA.
57.Under the project, procurement o f goods and works by the implementation agencies
including ULBs will follow the “Guidelines for Procurement under IBRD Loans and IDA
Credits” o f May 2004. Similarly, consultants will be selected and employed according to the
22
“Guidelines for Selection and Employment o f Consultants by World Bank Borrowers” o f May
2004. Detailed procurement arrangements are discussed in procurement Annex 8.
Financia1 M a nagement
58. A financial management (FM) assessment was carried out to evaluate the FM arrangements
o f the proposed project and to assess the capacity o f the executing agencies to effectively
manage and implement the project and to provide the Bank with accurate and timely
information. On the basis of the assessment conducted, the financial management team
concluded that, although some project specific adjustments will be needed, the existing financial
management arrangements for TNUDP I1 are operational and are considered to form a sound
basis. For the C M D A implemented component FM risks are rated as medium. As for CMA,
intensive supervision i s envisaged in the early stages o f the project as FM capacity in C M A i s
enhanced. (See Annex 7 for a complete description o f FM arrangements).
5. Social
59. Under the previous project, TNUDP 11, TNUIFS had incorporated the suggestions made by
the Bank to address issues related to social safeguard requirements o f the Environmental and
Social Report (ESR) in the context o f O D 4.30 on Involuntary Resettlement. Since social
safeguard requirements o f the Bank are currently based on OP 4.12 and BP 4.12, TNUDF has
updated i t s ESR by replacing i t s existing ‘Appendix 5 - Social Impact and Entitlement
Framework for World Bank Financed Projects’, with a new Environmental and Social
Framework (ESF), to meet Bank’s current requirements. TNUIFS has also strengthened its
social safeguards framework by including field tested formats for social screening, classification
o f categories, reporting and monitoring. The appointment o f an officer or a consultant in
TNUIFS to specifically focus on social safeguards related issues would be an important aspect o f
institutional strengthening o f TNUIFS. The social safeguard arrangements in the proposed
TNUDP I11 cover lending by TNUDF to Urban Local Bodies (ULBs), including up-gradation of
services in l o w income areas, and to grants for transport and traffic improvements in the C M D A
area.
6. Environment
60. The Project will directly contribute to the improvement o f environmental conditions in urban
areas by providing basic infrastructure, including solid-waste and sanitation facilities, storm
drainage and water supply facilities and urban roads. Nevertheless, some o f the subprojects to be
financed under the project may have adverse environmental implications/issues requiring careful
assessment and mitigation. The framework approach used under TNUDP I1 will continue to be
used to identify and mitigate the potential negative environmental impacts o f such sub-projects
under TNUDP 111. As part of the preparation for TNUDP 111, a comprehensive review o f the
existing environmental framework (titled Environmental and Social Report) has been undertaken
to identify the gaps/concerns/inadequacies and opportunities for enhancing the effectiveness o f
the framework. The updated framework, renamed as Environmental and Social Framework
(ESF) has the following critical enhancements:
0
Reflecting the regulatory changes related to environment in the context o f the project and
changeshpdates in applicable Bank policies/guidelines.
0
Strengthening the framework including formats for monitoring and reporting progress of
EMP implementation.
23
a
0
Strengthening institutional and implementation framework including contractual obligations
between the borrower (such as municipalities) and the civil contractors.
Strengthening the policy framework to include environmental enhancement as part o f
environment management at sub project levels.
61. Based upon the potential magnitude o f environmental impacts involved, sub-projects would
be classified into three categories (El major impact, E2 moderate impact, and E3 no impact) and
appropriate mitigation and enhancement actions w i l l be included in sub-project design. As the
manager o f the Fund, TNUIFS will be responsible for ensuring that all sub-projects including
those implemented by C M D A have carried out appropriate levels o f environmental and social
assessments and have prepared EAPs and RAPS as per the guidelines provided in ESF (Annex
11). TNIUFS will further ensure that EA/EMPs o f all E-I category sub-projects are approved by
the Bank during sub-project appraisal stage and before finalization o f the DPRs. Process details
are included in the Operations Manual.
62. To strengthen the institutional capacity, and to improve environmental management in
TNUDP 111, TNUIFS will recruit environment specialist or contract the services o f a reputable
firm with the dedicated responsibility o f overseeing the environment management process in
TNUDP 111. Suitable training and capacity building initiatives will be designed and implemented
to ensure effective implementation o f the ESF.
7. Safeguard Policies
63. The subprojects to be financed under the project are likely to have varying levels o f
environmental impacts depending upon the location o f subprojects, and scale and nature o f
activities envisaged in the subproject. Since the subprojects are restricted to urban areas, which
have higher than normal population density, the environmental impacts associated with the
subproject activities are expected to be significant warranting proper assessment and mitigation
and OP4.01 i s therefore triggered. Applicability o f other safeguard policies such as OPN 11.03
on Cultural Properties, OP/BP 4.12 on involuntary resettlement, etc. and the need for appropriate
mitigatiordmanagement plans will be evaluated and addressed during subproject
preparatiodscreening stage.
Safeguard Policies Triggered by the Project
Environmental Assessment (OP/BP/GP 4.0 1)
Natural Habitats (OPBP 4.04)
Pest Management (OP 4.09)
Cultural Property (OPN 1 1.03, being revised as OP 4.1 1)
Involuntary Resettlement (OP/BP 4.12)
Indigenous Peoples (OD 4.20, being revised as OP 4.10)
Forests (OPBP 4.36)
Safety of Dams (OP/BP 4.37)
Projects in Disputed Areas (OPBP/GP 7.60)*
Projects on International Waterways (OPBP/GP 7.50)
Yes
[XI
11
[I
[xi7
[XI
[I
11
El
[I
[I
No
[I
[XI
[X 1
[I
11
[XI
[XI
[XI
[XI
[XI
Applicability of these safeguard policies will be determined at a subproject level through screening and assessment tools
provided in the Environment and Social Framework. If applicable suitable mitigation plans will be developed as part of
subproject preparation.
* By supporting the proposedproject, the Bank does not intend to prejudice thefinal determination of the parties' claims on the
disputed areas.
24
7. Policy Exceptions and Readiness
64. The first year’s pipeline of projects has been reviewed in relation to certain “readiness filters”
to ensure that the sub-projects are ready to be implemented. These readiness filters include:
0
draft Detailed Project Reports (DPR) ready;
0
generic and sector specific guidelines complied with;
0
Administrative Sanction and Technical Sanction obtained;
0
bid documents under preparation;
0
statutory approvals obtained from other agencies;
0
land acquisition complete; and,
0
proposed implementation and O&M arrangements substantially developed.
65. The sub-projects currently reviewed as being ready to start implementation in the first year
amount to approximately US$88 million which i s approximately 20 percent o f the total project
cost.
25
Annex 1: Country and Sector Background
INDIA: Third Tamil Nadu Urban Development Project
1. In recognition o f the key role played by India’s cities in the drive for economic growth, the
past decade has seen significant changes in India’s approach to urban development through
decentralization of powers and reform o f the financial sector. Highly centralized and regulated
policies which had directed investments away from cities, particularly away from long term
infrastructure investments, were decentralized under the 7 4 Constitutional
~
Amendment, which
gave constitutional status to municipal governments. Municipal responsibilities were defined in
broad terms, leaving the task o f defining financial relations between state and local governments
to individual State Finance Commissions (SFC). In parallel, financial sector reforms, begun in
1991, allowed for Urban Local Bodies (ULBs) to raise financial resources to meet their
infrastructure needs independent o f state loans or grants.
2. However, despite the reforms at the central level, urban development has remained very
much a state issue and the resources provided to cities as well as the regulations governing their
management have continued to be decided large1 at the state level. While the process o f
establishing elected local governments under the 74 amendment has been largely successful, the
devolution o f functions and funds to the newly elected bodies and ULBs remains incomplete.
State governments continue to take decisions on such matters as rates o f user charges, property
tax, octroi and the role o f parastatals in water supply and sanitation services with little reference
to the ULBs that are affected by these decisions. Few ULBs have the wherewithal to be demand
responsive or to access India’s emerging financial system. The result i s that, for the most part,
urban institutions are not yet integrated into the fabric o f the broader deregulation and financial
reforms o f the Indian economy.
P
3. Recognizing that continuing reform in governance and service delivery arrangements o f
Indian cities i s required to position them as engines o f national growth and development, the
GOI’s Tenth Plan emphasizes urban reform as critical to growth and poverty alleviation. I t
estimates that about U S $7 billion are needed for urban development over the Plan period, but
underscores the centrality o f reforms at both State and local levels to achieving sustainable
investments. Given the important role that States play in determining local revenues and the
regulations that govern urban economies, the GO1 introduced the Urban Reform Incentive Fund
(URIF) in 2002 to provide incentives for reforms o f State policies on housing and local finances
(taxes and user charges) in particular:
0
0
0
0
0
0
0
Reform o f the Urban Land Ceiling Regulation Act;
Rationalization o f Stamp Duty;
Reform o f rent control laws;
Introduction o f computerized processes o f land registration;
Reform o f property tax;
Levy o f user charges; and
Introduction o f double entry accounting in ULBs.
Tamil Nadu
4. Tamil Nadu, one o f the most highly urbanized states in India, with an urbanization level o f
43% out of a state population o f 62 million (2001 census), has been one o f the showcases o f the
26
new approach to municipal development. Two SFCs have laid the groundwork for the stateULB relationship and, with the assistance o f two previous World Bank funded projects, TNUDP
Iand 11, considerable progress has been made in developing an independent, sustainable Fund for
financing urban infrastructure.
5. Urban Tamil Nadu consists o f 6 Municipal Corporations, 102 Municipalities and 43
upgraded ULBs. The rate o f growth o f urban population in the State has been in the region o f
4.2% (1991-2001), one o f the highest since 1961. While Chennai i s the most populous urban
center (4.6 million), urban population i s fairly evenly distributed in secondary centers and other
towns.
Progress in implementation of URIF in Tamil Nadu
Tamil Nadu i s one of the most advanced states in India in implementing urban reforms and URIF
compliance.
6. Property taxes: Property tax in Tamil Nadu was revised after a gap o f 16 years in 1987. The
Municipal Corporations and District Municipalities Act, requires a quin-quennial revision
(every five years) to the base (Annual Rental Value). The revision due in October 2003 has been
delayed', and i s now postponed to 2006. The State as part o f URIF i s committed to adoption o f
an objective assessment, doing away with exemptions in a phased manner and improving
collections to 85% through a concerted effort o f mapping un-assessed and under assessed
properties, Currently the tax computation i s based on a modified area method.
7. Accounting Reforms: The conversion o f cash based municipal accounts to the accrual
system o f accounting was initiated in 1997-98 and was piloted in 10 ULBs. Under the previous
system, the local bodies had a multiple fund based accounting system (General, Water and
Sanitation, Remunerative, Lighting and Education Fund).Under the accrual system, the local
accounts are maintained under three heads: General, Water and Sewerage and Education.
8. In 1999-2000, the new accounting system was rolled out statewide covering the remaining 97
local bodies and has now been successfully in operation for three years. Under the new system,
local bodies generate trial balances on a monthly basis and are in a position to assess their
financial status more clearly. 25 1 o f the 6 11 Town Panchayats have also implemented an accrual
system o f accounting.
9. Urban Land Ceiling: The Tamil Nadu Urban Land (Ceiling and Regulation) Repeal Act,
1999 (Tamil Nadu Act 20/99) was enacted to replace the Tamil Nadu Urban Land (Ceiling and
Regulation) Act, 1978 with effect from June 1999. The Repeal Act does not apply to the lands
already acquired and possession o f which was taken over by the Government as on the date o f
repeal and also to the lands exempted under section 2 1(1) o f the Principal Act.
One of the reasons that the revision in property tax has not been effected i s the fact that the State Government i s
considering a proposal to revise the method o f property tax assessment fiom the present annual rental value method
to the unit area method. A switchover to the unit area method may also involve the constitution o f Property Tax
Guidelines Committees in each Urban Local Body to classify zones and suggest rates for each zone. GoTN has
decided to refer the issue o f modification in property tax assessment methodology to the Third State Finance
Commission which has been recently constituted. The Commission i s expected to give it s fmal recommendations
by May, 2006 and based on this, it i s expected that the system o f property tax assessment in the State would be
revised towards the latter part o f 2006-07.
27
Rent Control Act (RCA): The revision/ repeal o f the RCA i s under consideration. Rent controls
are no longer applied to new properties and have not been applied since 1999. Currently, there
are a small number of properties [Chennai (50) and Coimbatore (25)] under rent control with
minimal impact o n ULB revenue sources.
10. Cost Recovery: The State i s committed to cost recovery policies and municipalities seeking
financing from previous Bank funded projects have been required to demonstrate willingness to
revise tariffs and to focus on improvements in revenue realization. Current levels o f overall
revenue realization indicate that five major municipalities present a very high level o f collection
performance o f around 80% o f current billing and are in a position to meet O&M costs and also
cover part o f debt servicing. In ongoing sewerage projects, deposits from beneficiaries are being
collected upfront to meet up to one third o f the project costs. Comparatively, the progress
amongst Town Panchayats has been slow.
11. Stamp Duty: The State reduced Stamp Duty to 8% in November 2003. This i s an important
first step with regard to one o f the key requirements o f URIF. Furthermore, GoTN has recently
concluded a supplementary Memorandum o f Agreement with GO1 under the URIF in which
GoTN has agreed to achieve the rationalization o f Stamp Duty in phases to bring it down to no
more than 5%.
12. Computerization o f Land Registration: The computerization o f land registration
(REGINET) was launched in 1997-98. TN was one o f the first States to initiate computerization
of registration functions and currently 350 o f the 650 Sub-Registrar’s offices are computerized
and networked. Computerization has resulted in a remarkable improvement in service delivery.
Encumbrance certificates and copies o f scanned documents can now be obtained on request in
less than 15 minutes as compared to number o f days before the introduction o f computerization.
Developingthe municipal finance market and other achievements under TNUDP 11:
13. TNUDP I1has significantly advanced progress towards sustainable market finance for urban
infrastructure. I t has financed the creation o f US$128 million o f urban infrastructure in Tamil
Nadu by investing in projects undertaken by creditworthy ULBs. TNUDF has leveraged World
Bank funds (US$60 million) by issuing bonds, raising co-financing and raising contributions
from beneficiaries. Additionally, grant funds provided under the project have assisted the
preparation o f US$154 million worth o f sub-projects. Throughout the implementation o f TNUDP
11, TNUDF has proven to be financially sustainable, meeting or exceeding the financial ratios
specified in the World Bank Loan Agreement. The project has contributed to capacity building
and institutional strengthening through training o f ULB staff, support for computerization o f
ULBs and implementation o f accrual based accounting. The implementation performance for
TNUDP I1has been strong in general and exceptionally good in comparison to similar projects in
developing countries. Over all disbursements have exceeded projections throughout most o f the
project period. More specifically, the achievements under the investment and institutional
building and capacity enhancement component are listed below.
28
Kev Achievements under TNUDP I1
Institutional and Capacity Building Component
Investment Component (TNUDF)
The project has completed implementation (by way
o f training and services) o f statewide double-entry
accrual-based accounting in all 107 Urban Local
Bodies.
1. US$60 million o f Bank financing catalyzed urban
infrastructure investments o f US$ 128 million by
TNUDF.
2. TNUDF mobilized US$28 million o f private cofinancing for infrastructure.
Through computerization and web enabled systems,
local bodies have facilitated collection o f property
taxes and user charges.
3. TNUDF raised US$25 million through issuance o f
non -guaranteedbonds in the domestic markets.
Revenue realization between 1996-2002 increased
by 130% primarily due to properly tax revision and
increased state devolutions.
4. Outstanding repayment performance on sub-loans
with a 99.7% recovery rate from ULBs.
5. Return on Equity was 12.6% in FY03
TNUDF has pioneered:
- the f i r s t pooled finance initiative in India with
U S A I D (US$6.3 million);
- the first revenue bond in India for Madurai ring road
( U S 6 m);
- PSP in municipal solid waste management; and
- BOTSfor toll bridge and underground sewerage.
6.
e
TNUDF has encouraged better cost recovery in
water b y requiring tariff increases before approving
loans to ensure sustainability o f projects.
e
TNLJDF i s recognized as an effective and capable
institution in Tamil Nadu and as a model for urban
development funds.
Some 5400 municipal officials have been trained
under TNLJDP I1on various aspects o f municipal
functions.
Bank’s presence helped sustain reform momentum
in Tamil Nadu e.g., state-wide double-entry
accounting, fiscal devolution, partial reform of
property tax, partial relaxation o f state regulation of
ULB decision making, compliance with URIF
requirements.
Under the Integrated Sanitation Program (US$lO
million)- US$7.9 million has been invested for
providing community run sanitation facilities in low
income areas resulting in a vast improvement of
quality o f life for women and children.
The project has contributed to significant
improvements in service levels in beneficiary ULBs.
14. The systems and structures set up under TNUDP-I and I1have enabled Tamil Nadu to make
good progress in addressing existing and emerging urban infrastructure problems; in particular
the TNUDF has been an effective instrument in enabling urban local bodies to improve finances
and support them in the introduction o f fiscal and other reforms. This has enabled them to
develop sustainable projects and in a number o f cases, strengthened their capacity to tap the
capital markets for additional financing for new capital projects. I t i s clear that the urban local
bodies in the State will continue to need additional assistance in capital investment in the
medium term to improve core civic services, particularly in water supply, sewerage and solid
waste management, urban roads and transport.
29
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
INDIA: Third Tamil Nadu Urban Development Project
I
Project
Latest Supervision
(PSR) Ratings
(Bank-financed 'ojects only)
Implementation Ievelopment
Objective
Progress (IP)
(DO)
Tamil Nadu Urban Development
S
S
Project 1 (Cr. 19234" completed
on Sep.30, 1997)
S
Tamil Nadu Urban Development
S
Project I1 (Ln. 44780-IN, closed
Nov. 30,2004)
Sector Issue
Bank-financed
Improvement o f Urban Management
Capacity and Support Basic Urban
Service Investment
Improvement o f Urban Management
Capacity and Support Basic Urban
Service Investment and access to
sustainable forms o f infrastructure
financing
Improvement in cost recovery and
service delivery levels. Provision o f
water and sanitation facilities.
Provision o f WaterISeweragel Solid
Waste facilities and improvement o f the
related sector policies
Cost-recovery, service delivery
Karnataka Urban Water Supply
and Sanitation Project (ongoing)
Hyderabad Water Supply Project
(Cr.2 115-INLn.3 18 1-IN) (closed)
Madras Water Supply Project I1
(Ln.3907-IN) (closed)
Provision o f sewerage facilities
Bombay
Sewerage
Disposal
I Project (Cr.2763-InLn.3923-IN) I
Promotion o f Private Infrastructure Private Infrastructure Finance [
(IL&FS) Project (Ln.3992-IN)
Investment
(closed)
Other development agencies
Financial Institutions Reform and
USAID
Expansion Project (FIRE I)
(completed)
FIRE I1 (ongoing)
Asian Development Bank
Karnataka Urban Development
Project (ongoing)
Karnataka Urban Development
and
Coastal
Environment
Management Project (ongoing)
Rajasthan Urban Infrastructure
Development Project (Ongoing)
I
Department
Development
I
for
S
S
S
S
S
S
International Andhra Pradesh Urban Poverty
Support Project (Ongoing)
Kolkata Urban Service Project
(Ongoing).
I P D O Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisf :tory)
I
30
Annex 3: Results F r a m e w o r k and M o n i t o r i n g
INDIA: Third Tamil Nadu Urban Development Project
Results F r a m e w o r k
Outcome Indicators
Project Development
0bjectives
Improve urban infrastructure Improved urban service delivery, in
services in TN in a sustainable terms o f coverage and quality to be
tracked by monitoring improvement
manner.
Intermediate Results
Component I
1. Strengthen empowerment o f
ULBs and increase credit
worthiness
and
financial
sustainability.
from baseline indicators.
Results Indicators
1. Increased Delegation o f powers to
ULBs;
2.Improved financial soundness o f
ULBs through cost
recovery,
increased own revenues, better debt
management;
3.
Improved
governance
and
accountability o f ULBs through
accounting reforms.
1. Expanded resources o f TNUDF
Component 2
2. Expand resource mobilization through private equity contributions
urban
infrastructure and bond issues;
for
2. Increased lending to wider range o f
investments
ULBs
through
loan
product
diversification (rates and terms).
Monitoring
Use of Outcome Information
Outcome information w i l l be used to
modify state level policies on
provision o f urban services.
Use o f Results Monitoring
1. Use successful delegation o f
powers to modify State - ULB
relations.
Use
improved
financial
2.
management o f ULBs to enhance
their creditworthiness.
3. Use improved transparency to
develop access to capital markets.
1. Learning from initial market
borrowings w i l l help develop
capacity to raise funds on capital
markets.
2. Feedback on successful loan
products w i l l be used to improve
financial services to ULBs.
1. Overall Project performance indicators and the agencies responsible for monitoring them are
as follows:
enhanced financial soundness o f ULBs, as indicated by improvement in own revenues o f
participating ULBs and better debt management; to be monitored by the Debt
Monitoring Cell;
improved urban governance and accountability at ULBs, as indicated by the number o f
ULBs undertaking reforms such as accounting and financial management reforms, and
computerization o f functions, including e-governance; to be monitored by C M A on a
regular basis;
improved cost recovery with regard to urban services; part o f the monitoring functions o f
the DMC;
improvements in urban services delivery coverage; based on the information collected by
the State Finance Commissions and described in Annex 3, to be monitored by CMA;
improved market orientation of TNUDF through realistic market based costing o f funds
and adoption of a more commercially oriented lending policy; to be monitored by GoTN
and the Bank;
improved long-term sustainability o f TNUDF through diversification o f i t s resource base
and products, and implementation o f a business plan and risk management strategy; to be
monitored by GoTN and the Bank; and,
reduction in travel time on key transport project corridors, and reduction in fatal accidents
in Chennai; these will be monitored by the responsible agency, CMDA.
2. The following urban service and performance indicators have been collected for the most
recent year available for all ULBs in Tamil Nadu (6 Municipal Corporations, 102 Municipalities
and 43 upgraded ULBs). These indicators w i l l be updated regularly (at least annually) as a
measure o f project performance. Baseline indicators are available from the State Financial
Commissions and from the studies undertaken during project preparation. The extent o f
improvement expected during project implementation w i l l be determined on a case by case basis.
6 Municipal
102
Corporations Municipalities
Water Supply Sewerage and Sanitation
2 Percentage Assessment Covered by House Service
Connections, %
47.84
52.60
4 1.29
47.24
3 Slum Population per Public Stand Post, persons
32.42
70.30
74.72
59.15
4 Daily Per Capita Supply (Year 2003/2004), liters
78.00
53.00
37.00
56.00
10 Percentage Assessment having Sewer Connections
9.50
23.87
23.29
18.89
80.97
6.60
69.63
85.32
6.00
53.12
55.18
2.88
5 1.27
44.00
46.42
36.00
15.14
24.00
18.67
35.00
26.74
230.47
I 383.93
. (“/I
Roads, Storm Water Drains and Street Lighting
19 /PercentageMunicipal Roads Surfaced (%)
20 Density o f Surfaced Roads (Km per sq. km)
23 Percentage o f Road Length Covered with Pucca
Drains (%)
25 No. o f Streetlights per km Road Length
A16 Percentage High Power Fixtures in Streetlights (%)
~
43 ULBs
(upgraded) Average
Solid Waste Management
28 ]EstimatedWaste Generation per Capita per Day
29 Percentage Waste Collected (as per the Estimates o f
ULB)
32 Vehicle Rated Capacity to Waste Generated (%)
A26 No. o f Sanitary Workers per 1000 Population
47
48
53
54
Expenditure to Income Ratio
Share o f Personnel Cost (Establishment)
Outstanding Loan Per Capita (Rupees)
DS/TR (Debt Service as % o f Total Revenue)
56 /SlumConcentration (%)
I
523.57
I
397.76
I
I
73.82
5.16
58.01
93.81
88.20
79.94
87.32
102.22
72.76
79.48
87.32
2.10
2.10
0.72
1.64
0.80
37.40
666.93
9.91
0.82
37.30
635.42
12.75
0.87
3 1.48
408.25
2.73
0.83
35.39
570.20
8.46
21.07
20.07
16.22
I
19.12
Annex 4: Detailed Project Description
INDIA: Third Tamil Nadu Urban Development Project
1. The project comprises o f two components: (i)
Institutional Development (ID) component and
(ii)
Urban Investment component.
A. Institutional Development Component (US$25 million)
2. The institutional development component focuses on advancing the urban sector reforms in
Tamil Nadu, building capacity o f urban local bodies, improving managerial and financial
performance o f ULBs through performance benchmarking and monitoring. The sub-components
are listed below:
3. Sub-component A l : Municipal Capacity Building (US$7.65 Million): This subcomponent will consolidate and advance the capacity building work under TNUDP 11. The
Government o f Tamil Nadu acknowledges the need for continuous institutional as well as human
resource capacity enhancement leading towards the professionalization o f urban management at
state and ULB levels. Under this project, financial resources w i l l be provided for technical
assistance and capacity building (CB) activities which support the implementation and
sustainability o f urban reforms including the enhancement and professionalization o f managerial
capacity within ULBs and related urban and municipal sector organizations. CB inputs w i l l be
provided at the state and local levels to enable and sustain effective policy reform as well as
improve organizational performance and service delivery. Training requirements o f Municipal
accounts staff w i l l be met through this component.
A l . l Mainstreaming capacity enhancement for urban management at the state and ULB Levels
{$O.lOOmillion): This sub-component w i l l provide resources to: (a) establish a Capacity
Enhancement Cell (CEC) within the C M A headed by a Capacity Enhancement Coordinator; (b)
assist in the development of a state-level Urban Management Capacity (UMC) framework to
institutionalize, mainstream and guide institutional as well as human resource capacity
enhancement for urban management in the state; (c) based on experience gained during TNUDP
11, establish a roster o f training institutions specializing in select areas from whom state, ULB
and related organizations can receive training; (d) assist ULBs to articulate demands and
prioritize investments through consultative workshops; and (e) design and implement an
information system for monitoring and evaluation o f urban sector institutional and human
resource CB activities in the state.
A1.2 Professionalization o f municipal management (US$1.30 million): There i s a lack o f
standardized and up to date knowledge management in the urban sector. Creating a standardized
system of knowledge and s k i l l training with testing and accreditation i s therefore essential in
creating and retaining a professional body o f staff that are responsible for different aspects o f
urban management. This sub-component will fund the establishment and operationalization o f a
system of professional certification programs for (a) City Management for Municipal
Commissioners; (b) Municipal Accounting and Finance for Municipal Accountants and Revenue
Officers; and (c) Municipal Public Health Management for Municipal Engineers and Public
Health Officers. This will involve the design o f a system o f certification including the listing o f
“core competencies” for each sub-group o f staff and the incorporation o f social and
environmental safeguards in the regular work stream o f municipal management. This sub
33
component will make efforts to establish a Tamil Nadu State program in close consultation with
similar efforts which will be underway in the neighboring state o f Andhra Pradesh under the AP:
Urban Reform and Municipal Services Project.
A1.3 Training;, Skills Transfer and Dissemination (US$5.90 million): The project will fund a
state-wide training initiative to be managed by the CEC. Training will be provided to (a) elected
municipal officials; (b) new staff; (c) staff members who have been in-service for at least five
years; and for (e) specialized training for specific skill upgrading.
A1.3 (a) Training (US$ 5.87 million):
A1.3 (a) (i)Orientation Traininn for Elected Representatives (USI. 74 million): Using lessons
learned during TNUDP 11, C M A will continue orientation training programs for elected
representatives of municipalities including those currently in office and those elected in
municipal elections expected in 2006.
A1.3 (a) (ii)Staff Training (US$ 4.13 million): Training will be divided in three different
segments. (a) New Stafi staff promoted to the next management / supervisory level will go
through a basic orientation through key courses similar to those conducted as part o f TNUDP I1
(b) Intermediate Stafl those staff members who have received training under TNUDP 11can opt
for intermediate programs which will provide advanced skill and knowledge input in select
subjects related with the staff members position and job profile; and (c) Advanced Program: This
will address specific nature o f reforms and/or projects to be taken up by ULBs. This would
include a combination of classroom-oriented programs, exposure visits, transfer o f skills and
specialized training programs.
A1.3 (b) Dissemination (US$0.03 million):
The project will support (a) design and organization o f workshops, seminars and conferences; (b)
documentation of case studies and effective initiatives; and (c) w e b as w e l l as non-web based news
letters.
A1.4 Evaluation and Monitoring of Capacitv Building: Activities (US$ 0.35 million): The project
will support the design and conduct of evaluation and monitoring o f all activities undertaken
under this component. Each learning activity will be evaluated through participant feedback and
post-training satisfaction polling of immediate supervisors regarding knowledge and skills
obtained by participants.
Sub Component 1 - Municipal Capacity Building
IMainstreaming capacity enhancement for urban management at the
state & ULB Levels
A. Caoacitv Building Cell
IB. U M C Framework Preparation
C. Establish a roster o f training institutions
D. Assist ULB articulate CB demands
E. Information system for monitoring CB activities
Sub-total
11. Professionalization o f municipal management
A. Curriculum Development for three certification programs
B.1 Certification o f City Managers
B.2 Certification o f Municipal Finance & Accounts Officers
Rs.
Trainees '
I
I
U S $m
1.o
1.51
0.75
0.85
0.50
4.60
4.5
17.5
17.5
0.10
Sub Component 1- Municipal Capacity Building
B.3 Certification o f Municipal Services Managers
Rs.
Trainees
U S %m
17.5
57.0
Sub total
1.30
4. Sub-component A2: Information and Communication Technology (US$4.30 million):
This sub component includes procurement o f goods and services to complete the e-governance
initiatives in the recently upgraded 45 ULBs and to bring them to the level o f connectivity o f the
remaining 106 ULBs which were beneficiaries under TNUDP 11. In the upgraded 106 ULBs,
support would continue to be provided for streamlining workflow and strengthening mapping
with the use o f GIs. This would include procurement o f goods and consultants services for
design o f software applications.
I
IA /Goods
B Services
Total
I n US$ Million
2.20
2.10
4.30
I
5. Sub component A3: Debt Monitoring Cell (US$030million): The knowledge o f ULB
creditworthiness will be improved through the establishment o f a Debt Monitoring Cell within
CMA. The objective of the D M C will be to collect financial information o n individual ULBs, to
assist the ULBs in making realistic financial projections and to facilitate ULB access to financial
markets by disseminating financial information to potential lenders. The project would fund
consultancy services to establish the D M C within CMA.
6. Sub component A4: Project Preparation Facility (PPF) (US$9.2million): The GoTN
funded PPF would make available grants to all municipalities for consultancy services to assist
them prepare and implement projects. Eligibility criteria for access to the Facility have been
35
agreed with the Bank. Additionally as part o f advisory work, Technical Assistance will be made
available to ULBs for developing an operational development strategy.
Units Unit US$
Costs Mill
Preparation Grants*
~ 4 . Project
1
~ 4 . Advisory
2
I
5
2 Comprehensive Traffic and Transport Plan for other Corporations
4 OperationalizingInvestmentNision Plans o f ULBs through Strategic Plans 50
slothers
I
Total
I
10
1
I
6.9
1.1
1.1
0.11
9.2
7. Sub-component A5: Project Management (US$3.55million): This would include
financing o f incremental operating costs for strengthening the office o f the C M A and RDMA for
US$ 2.55 million. Remaining would be financed by GoTN. C M A would need additional
technical staff for review and approval o f technical designs for the ULBs under i t s newly
expanded role under the Project and also for the establishment o f the Debt Monitoring Cell.
B. Urban Investment Component: (US$407.5 million)
8. The urban investment component will be channeled through TNUDF/TNUIFS and w i l l
consist of:
B. 1 (a) line o f credit sub-component to the TNUDF for lending to ULBs (US$l 10 m)
plus funds raised by TNUDF ( US$40 m) plus ULB funds (US$lO m);
B. 1 (b) Capital Grants for ULBs (Grant Fund I)
managed by TNUIFS (US$46.5 m) plus
financing from existing GoTN grants (US$48 m);
B.1 (c) Project Development Advisory Facility for project preparation including
innovative sub-project financial structuring (US$3 m);
B. 2 (a) Grant (Grant Fund 111) for transport sub-projects in C M D A (US$121.5 m).
B.2 (b) Project Management for C M D A including incremental operating (US$ 2.50 m)
plus financing from GoTN (US$2.6m)
Sub-componentB.l (a): Line o f credit (US$ 110 m):
9. The line o f credit to TNUDF w i l l be on lent to ULBs, statutory boards and private investors
for sustainable investments in basic urban infrastructure such as water supply, waste water
collection, solid waste management, storm water drains, roads and common facilities such as
transportation networks, and sanitation facilities.
The capital grant funds will finance
environmental and social mitigation actions and the capital grant element o f sub-projects serving
the lowest income groups. However, besides the line of credit, project design would seek to
expand TNUDF’s financial role to include credit enhancement support through other
instruments-such as debt service reserve funds, partial guarantees, first loss guarantees, bond
insurance and subordinated debt instruments which would assist the overall objective o f attaining
more commercial involvement in financing decisions. Collaboration and participation with subsovereign funds such as IFC Municipal Fund would also be considered.
36
10. The capacity o f ULBs in Tamil Nadu to invest in sustainable urban infrastructure subprojects over the next 5 years i s about US$950 million, o f which a major portion relates to water
and sanitation and solid waste management. The Project i s expected to finance US$254 million
equivalent of this pipeline over a five year period. The project will also finance US$l50 million
of transport projects within the C M D A area.
11. The Bank will provide a long term loan o f U S $ l 10 million through TNUDF in the form o f a
line o f credit. The Banks loan proceeds would not be used for commercial complexes which can
be financed through short t e r m commercial financing. In order to increase the private capital
inflow in to urban sector and leverage the Bank’s limited resources to the maximum, the TNUDF
will mobilize US$ 40 million equivalent at their own risk through issuing securities including
bonds and debentures or any other debt instrument. TNUDF should be able to use various credit
enhancement instruments available in the Indian capital markets. Raising funds through the
capital markets will provide TNUDF with the much required market orientation, flexibility o f
tenor and interest rate in i t s offering and would also lead to long term sustainability o f the Fund.
12. To ensure that TNUDF raises financing in the markets, a covenant has been included in the
project agreement stating that TNUDF will raise at least U S $ 40 million in co-financing from
diverse market sources by September 30,20099.
Sub-component B.l (b) - Capital Grant Component (US$46.5 million):
13. Under TNUDP 11, capital grants were available to ULBs under Grant Fund Imanaged by
TNUIFS for urban projects (though not funded under the Bank line o f credit). The guidelines for
access to the same stipulated that such grants could not exceed 30% o f project cost (excluding
cost of land acquisition) or Rs. 3 crores, whichever i s lower, provided more than 20% o f the
beneficiaries o f the project are below the poverty line and the projects were in eligible sectors
such as water supply, sanitation, solid waste management, urban transport and bus stands. Under
TNUDP 111, the Grant Fund (GF I)
would have the same criteria which would be applied to
projects: (i)
for meeting the cost o f Resettlement and Rehabilitation o f the urban poor related
which directly benefit the urban low income group such as water
sub-project assisted; and (ii)
supply, sanitation, storm water drain, street lighting, sewerage systems and bus stands.
14. Under TNUDP 111, bearing in mind that much o f the sub-project pipeline consists o f
underground sewerage projects, the level o f capital grants available to ULBs would be:
The limit per sub-project would be up to 30% o f project cost (excluding cost o f land
acquisition) or Rs. 10 Crores, whichever i s lower;
Within the aforesaid limit, part o f the capital grant may be used for sub-project viability gap
funding within the first 3 years o f operation o f the sub-project;
Capital grants under Grant Fund 1 would amount to US$ 46.5 million out o f the total urban
investment component for ULBs o f US$156.5 million funded by the Bank. The capital grants
~~
TNUDF would raise co-financing aggregating at least US$40 million f i o m any or all o f the following sources: (i)
proceeds from TNUDF public bond issues; (ii)
TNUDF private placements; (iii)
co-financing with TNUDF by
private financial institutions I banks at the sub-project level; (iv) “secondary market” purchases by private financial
institutions / banks o f TNUDF loans to ULBs, or re-financings o f TNUDF loans to ULBs (through local bond
issues, pooled bond issues, or loans f i o m private financial institutions) as arranged by TNUDF; (v) net increases in
equity investment in TNUDF by private financial institutions.
37
would apply to urban infrastructure projects only, such as water supply and sanitation, solid
waste management, urban transport and bus stands; and,
Poverty criteria would include percentage o f population in low income areas covered under
the infrastructure sub-project.
Sub-component B.l (c)
- Project Development and Advisory Facility (PDAF) (US$ 3.0 m):
15. PDAF would assist in preparation and supervision o f more complex and innovative projects
such as PPPs and BOTS, for such projects and technologies which can reduce the cost o f
services, or for a variety o f purposes based on TNUIFS’s assessment o f global innovations, and
the need from municipalities, in support o f sector sustainability.
Sub-component B.2 (a)
- Financing of Traffic and Transport Grant (US$121.5
m):
16. The Urban Investment component also includes a grant for transport and traffic management
sub-projects which fall within multi- jurisdictional areas and as such no single ULB i s
responsible for undertaking these investments. These investments would include road widening
and strengthening, pedestrian walkways, Road Under Bridges, Road Over Bridges, Grade
separators as well as traffic management measures. A Comprehensive Transport Study would
also be carried out under this component. These investments would address a key urban and
economic growth issue in terms o f infrastructure choke points around Greater Metropolitan
Chennai. In order to facilitate these investments, it was agreed that this component would be
overseen by the Chennai Metropolitan Development Authority (CMDA), a statutory body under
GoTN responsible for urban planning in the Greater Chennai Metropolitan Area. The CMDA
would therefore act as the nodal agency for the implementation o f these specific urban roads
components and would be supported by the Department o f Highways and Rural Works (DHRW)
and the Chennai City Traffic Police (CCTP) in their implementation. Project management
support including the incremental operating costs o f C M D A would also be financed under this
component. TNUDF, however, would have over all monitoring role for all fiduciary and
safeguards aspects of the investment component (for implementation details see Annex 6).
Sub-componentB.2 (b) - Project Management Support f o r CMDA (US$2.50 m):
17. This would provide project management support for C M D A and would finance incremental
operating costs for the Project Management Unit for this sub-component.
LendingTerms and Conditions for the Line o f Credit to TNUDF (US$ 110 m):
18. Lending terms and conditions of: (i)
GoTN loan to TNUDF (On-lending o f Bank Loan)
and (ii)
TNUDF loan to ULBs are as follows:
From GoTN to TNUDF
e
20 year loans, with 5 year grace period for principal
e
Fixed interest rate, set equal to:
- The average yield o f 10-year Government o f India securities issuances in the primary
market (hereafter termed “Index”) for the preceding six months. The average yield i s
calculated as the six month average o f GO1 10-year securities issuances prior to the
date o f release o f a tranche (the Reference Date). In the event that there are no GO1
38
0
IO-year securities issuances in the primary market in the six-months preceding the
Reference Date, the average yield o f the IO-year Government o f India security
issuance in the primary market in the twelve month period immediately preceding the
Reference Date shall serve as the Index.
- Plus “margin,” if any, to be mutually agreed between GoTN and TNUDF and in any
event not to exceed 100 basis points.
TNUDF has prepayment option if interest rate on an outstanding loan from GoTN to
TNUDF exceeds by 150 basis points or more the Index, as defined above.
TNUDF Loans to Sub-borrowers:
0
Interest rate shall not be less than TNUDF’s blended cost o f capital”.
0
N o restrictions on loan maturities or other loan terms.
0
N o restrictions regarding on-lending “margins” above cost o f borrowings by TNUDF.
e
The option of a pre-payment premium would be included in TNUDF loan agreements
with i t s borrowers.
lo
For
t h i s purpose the return on equity w i l l be calculated as equal to the return on 10 year GO1bonds.
39
I
---
Annex 5: Financing Plan
INDIA: Third Tamil Nadu Urban Development Project
~
Component
/Cost
Bank financing
IUS%Milll%of Total US$ Milll%
B Urban Investments through TNUDF
B 1 (a)Loans to ULBs
(b) Capital Grants to ULBs
--
II
(c) Project Development Advisnrv Fmilitv
I
40
160.00
94.50
3.00
I
I
I
36.87
21.77
0.69
. ..
1
I
I
110.00 36.67
46.50 15.50
?
no 11.00
----
d.""
I
I
Annex 6: ImplementationArrangements
INDIA: Third Tamil Nadu Urban Development Project
1. Executing Agencies. The same agencies which executed TNUDP I1will execute most o f the
components o f TNUDP 111, with relatively minor changes in responsibilities to benefit from
lessons learnt and the addition o f specialized agencies to implement the Chennai Metropolitan
Area transport and traffic component. The Department o f Municipal Administration and Water
Supply (DMAWS) will have overall responsibility for project coordination and urban sector
reform. A Government Committee, headed by the Chief Secretary has been established to lead
the implementation o f the project and provide policy direction. In addition, a Monitoring
Committee, headed by Secretary DMAWS would be established, to review project progress at
least on a quarterly basis and provide coordination support. Amongst other things, it would
review the status of project appraisal and sanctions, progress toward meeting sector guidelines
and achievement o f monitoring indicators.
2. The key agencies responsible for various sub-components o f the project, their roles,
responsibilities and coordination aspects are described below. Some o f the benefits o f the
initiatives taken and the lessons learned under TNUDP I1 (see Annex 16) have been integrated
while designing the institutional arrangements.
3. Institutional Development component (A). The C M A under DMAWS will be responsible
for implementation o f the Institutional Development Component (IDC). The Project
implementation Unit under TNUDP I1has been mainstreamed into the C M A to carry out the TA,
training programs and reform related assignments for the ULBs. C M A will also manage a project
preparation facility (PPF) financed by GoTN and establish a Debt Monitoring Cell (DMC) to
maintain a data base on ULB finances and to monitor their debt servicing capabilities.
4. Institutional Urban Investment component (B). Tamil Nadu Urban Infrastructure
Financial Services Limited (TNUIFS) will be responsible for the implementation o f the urban
investment component, managing the TNUDF, making loans to ULBs, administering the capital
grants to ULBs and channeling grant funds to CMDA. The administration o f TNUDF i s
entrusted to a Board o f Trustees nominated by GoTN and participating financial institutions.
The Board has been incorporated as the Tamil Nadu Urban Infrastructure Trustee Company
Limited (TNUITCL) and, as such, approves the business and financial plans proposed by
TNUIFS. The TNUDF i s run as an autonomous Fund with full management autonomy to the
Board.
5. TNUIFS will manage a separate Project Development and Advisory Facility (PDAF) to
allow for preparation and supervision o f more complex and innovative projects such as PPPs and
BOTS, for new projects and technologies which can reduce the cost o f services, or for a variety
of purposes based on TNUIFS’s assessment o f global innovations, and the need from the
municipalities, in support o f sector sustainability.
6. For Sub-components B 1 (a) and (b) related to investments in the municipalities, C M A will
take the primary responsibility for project preparation progress. C M A will help ULB’s prepare
the sub-projects and give Technical and Administrative Sanctions. TNUIFS will be responsible
for implementation which would be jointly reviewed by TNUIFS and C M A .
41
C M D A will be responsible for planning and oversight o f the transport and traffic sub-component
B2 within the C M D A area, to be executed by the Department o f Highways and Rural Works
(DHRW) and Chennai City Traffic Police (CCTP). A multi-agency P M U would be constituted in
CMDA, fully responsible for implementing this sub-component. The management o f funds for
this component will be done by TNUIFS. CMDA w i l l be responsible for auditing the projects
implemented under the C M D A component. This audit w i l l be part o f the statutory agency audit
o f CMDA.
7 . Implementation Arrangements. Implementation will follow the procedures established
under TNUDP 11. Additional operating procedures have been established for I D C activities and
for the CMDA’s transport and traffic sub-component.
8. For Component A, the C M A will prepare a rolling plan to be updated annually for the
implementation o f ID approved by the Government Committee. All training programs w i l l be
outsourced.
9. For Sub-components B l (a) and (b), institutions wishing to borrow for infrastructure
investments (predominantly ULBs, but also including Statutory Boards and private investors)
w i l l submit applications for sub-project financing to TNUDF, and inform CMA. C M A will take
the primary responsibility for project preparation progress, and will hire the consultants for subproject preparation through i t s PPF. Preparation would be reviewed jointly by C M A and
TNUIFS through a committee, consisting o f CMA, TNUIFS, ULB and experts. Based on this
concurrent review of project preparation, C M A will provide Administrative and Technical
Sanctions without any further review / requests for revisions in preparation. Similarly, based on
this concurrent review, TNUIFS will undertake and complete a detailed appraisal o f the proposed
project, including review o f technical, financial, economic, social, environmental and legal
aspects. For the projects to be reviewed by the Bank, the intermediate reports would be sent to
the Bank during the preparation process, and Bank’s comment sought. In practice, project
preparation will be undertaken by consultants in accordance with the Operations Manual,
including the Environmental and Social Framework (ESF), and financed out o f the PPF for
standard engineering designs or routine projects or PDAF for more innovative projects. Efforts
would be made to complete the Administrative and Technical Sanctioning process at C M A and
the TNUIFS’s appraisal almost at the same time to avoid any delays in loan approvals. After a
satisfactory appraisal, financing o f the sub-project would be approved by TNUIFS. TNUIFS
along with C M A will monitor the implementation o f sub-projects, for which the borrowers w i l l
be required to submit regular progress reports, and will undertake post-implementation
evaluations. The Operational Manual outlines the process framework and requirements. The
roles and responsibilities o f CMA, TNUIFSL and the ULBs for components B1 (a) and (b) are
described in Attachment- 1 to this Annex.
10. At the ULB level, for implementation supervision o f sub-projects, the municipal engineers
would essentially be responsible. They would be assisted in supervision by consulting engineers
on important sectors such as water supply, sewerage; and for other sectors, to the extent required
on a case by case basis. Where there i s no external consultancy support, C M A shall ensure that
there i s adequate institutional support to the ULBs through an active role o f i t s regional RDMA
offices in implementation monitoring, and through capacity building o f ULB engineers.
42
11. For Sub-Component B2 to be managed by CMDA, a Project Management Unit w i l l be
established within C M D A under the Member Secretary CMDA, for day to day management.
The officials for the posts in the P M U w i l l be drawn on deputation from the respective
implementing agencies, DHRW and CCTP. Overall coordination and management w i l l be
undertaken by a Project Management Committee which will comprise senior representation o f all
agencies concerned and will meet on a monthly basis. A Technical Review Committee (TRC),
will approve all Detailed Project Reports (DPRs) for sub-projects. TNUIFS w i l l ensure that
C M D A meets the ESF safeguards and compliance requirements during preparation and
implementation o f their sub-projects under TNUDP 111.
13. Implementation Capacity. TNUDF/TNUIFS has a proven capacity for selection o f well
designed and sustainable urban infrastructure projects and supervision o f their implementation.
I t s capacity will be further strengthened by the actions listed below which have been agreed:
.
hiring additional experienced project finance specialist for project identification,
implementation and supervision;
enhancing project development and marketing skills by appointing adequate and appropriate
staff to support ULB’s;
making senior level staff focus on areas such as financial advisory, project appraisal and
social and environmental issues. It i s expected that the social development
specialist/consultants w i l l also focus on consultation on key project related policies at the
local level;
adopting the operations manual and addressing generic issues raised through sector
guidelines as part o f i t s operating procedure; and
instituting joint review procedures with the Commissioner Municipal Administration (CMA)
on technical assistance and approvals.
14. C M D A has had experience o f implementing Bank financed projects under MUDP I,while
DHRW i s currently the main implementing agency for the Bank funded TN Roads Project, for
which i t s implementation capacity has been appraised. As indicated above, experienced
personnel from the implementing agencies w i l l be seconded to CMDA’s P M U for the duration o f
the project. C M D A will also be able to call upon the experience o f TNUIFS in project
implementation in the Technical Review Committee. TNUIFS will also ensure ESF compliance
and that all subprojects satisfy the same high standards o f ESF safeguards as those in TNUDF.
TNUIFS will employ experienced consultants to prepare and supervise the environmental and
social aspects o f subprojects and their compliance with the ESF. (See responsibility matrix in
Annex 11).
15 C M A w i l l be strengthened with adequate staff to carry out the expanded responsibility. A
senior officer will have overall responsibility for the day to day implementation o f the I D C and
the Financial Advisor will be responsible for accounting, reporting and audit o f this component.
The capacity o f C M A to implement the institutional strengthening component will be enhanced
by training and recruitment o f qualified personnel.
16. Procurement: Under component B1, ULBs will procure works, goods and services. They
w i l l have the option to outsource these functions with the use o f grants from the Project
Preparation Facility or the Project Development Advisory Facility (PDAF). At the ULB level,
implementation o f works w i l l be supervised by consulting engineers, where necessary.
43
17. Under component B2, C M D A will primarily coordinate the transport and traffic sub projects
and the responsibility to procure and implement works will be with DHRW. CCTP will procure
equipment and services for the traffic management sub-component, with assistance from CMDA.
Where consultancy services are concerned, C M D A will undertake to prepare Request for
Proposals (RFPs) following the Bank guidelines and submit the same to the Bank for clearance.
For civil works, D H R W K C T P will prepare the bidding documents following Bank guidelines.
C M D A would, however, verify and ensure that the World Bank guidelines are followed in the
preparation o f the bidding documents and submit the bidding documents to the Bank for prior
review. Bid documents cleared by Bank would be sent by C M D A to D H R W K C T P for
tendering. DHRW and CCTP would thereafter undertake the tendering o f work following the
Bank procurement guidelines. The contracts will be signed by the respective implementing
agencies viz. DHRW or CCTP. DHRW has vast experience in the implementation o f various
urban road/bridge schemes in the Chennai Metropolitan Area in the past several years, and the
engineers in the department have adequate competence in contract management and supervision.
18. Institutional Development Component: As indicated above, the management o f
institutional development activities will be mainstreamed within the C M A system. The office o f
the C M A has evolved a structure that will be more responsive to the local bodies, with Regional
Directors being strengthened with sufficiently qualified technical staff to address technical issues
at ULB level. The proposed strengthening also includes senior advisers o n governance and
social development programs including Information and Education Campaigns on state
programs.
19. The institutional development activities include strengthening capacity o f staff to manage
services, upgradation o f e-governance specifically on software applications, a demand based
migration to GIS or other applications and a series o f technical assistance inputs to improve
municipal management systems.
C M A will continue mandatory orientation programs for
municipal elected representatives (present and those to be elected in 2006).
20. Skill transfer: Staff from the municipal system will be deputed to work in the offices o f C M A
and TNUIFSL to absorb skills o n project planning, appraisal and management.
21, TraininP Delivery: C M A in consultation with TNUDF and select Municipal Chairpersons,
Commissioners and key municipal staff will define the capacity building plan. Training
programs will be conducted in the Tamil Nadu Institute for Urban Studies (TNIUS) and other
training institutions. Based on positive feedback from training institutions, C M A will identify
select municipal staff and elected officials and develop them as trainers so that programs could
be handled at the regional level.
44
I Phase
I
To monitor overall process
Facilitates identification of special
projects
ULBs to identify and
prioritize as part of their
road map /business
planJ master plan /
vision document
CMA to help ULBs prepare and
implement projects, by appointing
consultants for standard engineering
designs and routine project
management activities.
Primary responsibility for project
preparationfinanced out of the
Project PreparationFacility
TNUDF operations manual to be
followed in project preparation
TNUIFS to assist CMA in oroiect
preparationby agreeing TORS,
participating in review committees
and supervising adequacy of
consultant outputs
TNUIFS to assist ULBs in structuring
of PPPs and other complex project
structures, including O&M contracts.
Primary responsibility for project
preparation and supervision financed
out of the Project Development
Advisory Facility.
TNUIFS to assist the ULBs with
special purpose studies such as -developing city corporate cum
business plans, energy efficiency,
water efficiency, reuse o f waste
water, rejuvenation of water supply
source, laying Fly Ash-cement
concrete roads, privatization of civic
services, identification o f BOT
operators, development of -projects
under BOT format etc.
ULBs to highlight local
requirements, that need
to be integrated in
design
I
45
"
I Phase
I
Role o f CMA
CMA can use Generic TORSureuared
by TNUIFS (under TNUDP iI)’
CMA appoints individual experts in
various fields, region wise, to assist it
in “Proof Checking” the designs
before they are sent to SE, CMA
office
CMA to ensure that TNUIFS i s
involved in project preparation
monitoring
CMA’s Debt Monitoring Cell would
collect financial information on
individual ULBs, to assist ULBs in
making realistic financial projections
and to facilitate ULB access to
financial markets by disseminating
financial information to potential
lenders CMA can outsource certain
jobs of this cell to TNUIFS on fee
basis or by bidding out
Preparationreview - by a Committee
consisting of CMA (Chair), SE/CMA,
MD & CEO / TNUIFS, concerned
Municipal Commissioner & Engineer
and other experts.
The committee meets once in a
fortnight for monitoring project
preparation, approval, sanctioningand
implementation.
46
Rnle nf TNIJIFS
All TORSto be cleared by TNUIFS
To participate in project preparation
review.
To promote efficiency improvement/
innovative approaches through special
purpose studies.
TNUIFS can advise CMA in cash
flow projections for ULBs, reduction
o f indebtednessof ULBs, forming
right size of project loan, based on a
fee.
Disseminate TNUIFS’s Operations
Manual (external) to all concerned
Disseminate Environmental and
Social Framework to all concemed
+ Hire consultants for special studies
at opportune time.
Role o f ULB
ULB commissioner and
engineer to participate
in the committee for
project preparation and
implementation review.
...
47
^_.^.^_...^.
._.^."XI
"I I"
Annex 7: Financial Management and Disbursement Arrangements
INDIA: Third Tamil Nadu Urban Development Project
Implementing Entities
1. D M A W S through the office o f the Commissioner o f Municipal Administration (CMA) w i l l
implement project subcomponents Al, A2, A3, A4 and A5 under the Institutional Development
Component (IDC). The C M A w i l l receive funds, maintain accounts, procure and receive goods
and services under this component. A Financial Officer (FO) at C M A will be responsible for
maintaining accounts, submitting claims and reporting expenditures on this component.
2. TNUIFS (Tamil Nadu Urban Infrastructure Financial Services Limited), a private limited
company established by GoTN and three FIs will implement the following project components:
a. Sub loans to ULBs component B1 (a)
b. Capital Grants to ULBs component Bl(b)
c. Project Development Advisory Facility B.1 (c)
d. Grants to C M D A (B2)
On all o f the above components, Trust Funds [called TNUDF, Grant Fund I,Grant Fund I1 and
Grant Fund I11 for Bl(a), Bl(b), B.l (c) and B2] will be set up to hold project moneys (both
Bank and Counterpart contribution). TNUDF i s a registered Trust under the Indian Trusts Act,
while Grant Funds I,I1and I11are GoTN held Funds.
3. TNUIFS will be appointed the Manager o f TNUDF and the Grant Funds under a
management agreement as was the arrangement under TNUDP 11. TNUIFS will be responsible
for managing, monitoring and implementing all project activities on Bl(a), Bl(b) and B.l (c)
where it will be appointed as Fund Manager. For project component B2, while TNUIFS will act
as Fund Manager and will fulfill all the requirements relating to accounting, expenditure
reporting and audit both for GOI/GoTN as well as for the Bank, actual implementation will be
done by Chennai Metropolitan Development Authority (CMDA).
ImplementationChart and ResponsibilityMatrix
Component
Institutional Development
Component
Capacity Building o f
Municipal Staff
A
AI
I
A2
Information and
Communication Technology
A3
ULB Borrowing
Framework/ Debt
Monitoring
Project Preparation Facility
A4
A
I
I
I
Project Management
I
I
I
Funds Flows
Fund
Management and
FM responsibility
Implementation
Arrangements
Through GoTN budget to
Commercial Bank account o f
CMA
Through GoTN budget to
Commercial Bank account o f
CMA
Through GoTN budget to
Commercial Bank account o f
CMA
Through GoTN budget to
Commercial Bank account o f
CMA
Through GoTN budget to
C M A (DMAWS)
CMA (DMAWS)
C M A (DMAWS)
CMA (DMAWS)
C M A (DMAWS)
C M A (DMAWS)
48
I CMA(DMAWS) I CMA(DMAWS)
I
I
C M A (DMAWS)
1
C M A (DMAWS)
I
Funds Flows
Incremental Operating Cost
Commercial Bank account o f
CMA
Urban Investments
B
BUa)
..
Bl(b)
B. l(c)
B2
Component
I through TNUIFS
I
Loans to ULBs
Pro-iectDevelopment
I Grants to CMDA
Implementation
Arrangements
I Through GoTN to Tamil Nadu I TNUIFS
I TNUIFS
TNUIFS
TNUIFS
TNUIFS
TNUIFS
Capital Grants to ULBs
I Adiisory Facility
Fund
Management and
FM responsibility
I
I
I
UrbanDevelopment Fund
(TNUDF)
Through GoTN Capital Grant
Fund Imanaged by TNUIFS
Through GoTN Capital Grant
Fund I1managed by TNUIFS
Through GoTN Capital Grant
Fund I11managed by TNUIFS
I TNUIFS
I
I CMDA
Funds Flow
4. GO1 will open a Special Account with RBI to receive the disbursements under the project. It
will make the funds available to GoTN as per the arrangements for development assistance from
GO1 to states.
5. The entire funds requirement o f the project including the counterpart contribution will be
budgeted by GOTN as an identifiable, single head budget item annually. This allocation will
cover the fund requirements o f all project components and will be based on the work plans
prepared by the implementing entities annually. An expected schedule o f payments will also be
provided by the implementing entities to the Finance Department to help the state plan i t s cash
flows appropriately.
6. The funds flow arrangements on different project components will be as follows:
a) For Bl(a), G O T N will credit funds to TNUDF’s account in the Public Account o f the
state for on lending to ULBs. TNUIFS, on behalf o f TNUDF will be allowed to draw
funds into a commercial bank account on a quarterly basis in accordance with annual
work plans. The repayment and on lending arrangements will be governed by a
subsidiary loan agreement.
b) For Bl(b), B.l (c) and B2, GoTN will credit funds to the respective accounts o f the Grant
Funds (GFs) I,I1 and 111in the Public Account o f the state from where TNUIFS shall be
allowed to withdraw into the commercial Bank accounts o f the GFs in accordance with
the guidelines and management agreements o f the GFs. For project component B 2 where
TNUIFS i s the Fund Manager but C M D A i s the implementing agency, TNUIFS will
advance funds to CMDA’s commercial bank account o n a quarterly basis for the
transport and traffic sub projects on the basis o f estimates prepared by CMDA. C M D A
will disburse funds to DHRW and CCTP for payment to contractors engaged on subprojects.
c) For Al, A2, A3, A 4 and A5, the C M A shall be allowed to withdraw from the GoTN
Treasury on a quarterly basis and deposit moneys into a commercial bank account from
49
where project expenditures w i l l be made. The Financial Advisor in C M A w i l l present a
bill to the Pay and Accounts Officer (P&AO) for drawing the funds, based on this, the
P&AO will issue a cheque in the name o f the C M A and the funds will be physically
transferred to the commercial bank account o f the CMA.
Staffing
7. TNUDF: The finance wing o f TNUDF comprises a Senior Vice President, Finance,
supported by a Manager and Deputy Manager (TNUDF), Deputy Manager Investments, Deputy
Manager, and several other support staff. A senior financial executive in TNUIFS will be
responsible for providing timely consolidated financial reports to the state authorities and the
Bank, monitoring of expenditures, providing overall guidance, facilitating smooth flow o f funds
and conduct o f timely audit and ensuring consolidation o f withdrawal/ reimbursement claims.
8. CMA: The financial management arrangements and functionally responsibility for accounting
and financial reporting for the institutional development component within the C M A will rest
with the Financial Officer (FO). The FO will be supported by an Accounts Superintendent and
Accountants.
9. CMDA: C M D A has an experienced and qualified Accountant who will be responsible for
liaising with TNUIFS on withdrawal o f funds, payments and rendering o f accounts.
Accounting Policies and Procedures
10. CMA: C M A will maintain project accounts for the components that it will implement on
cash basis. A separate account code will be created for the project in the Department’s overall
accounting system. A simple Operations Process Note based on the manual developed for
TNUDP I1will be written by the FO and shall be regularly updated for changes and amendments
through the l i f e o f the project. The process note will lay down in detail the applicable accounting
policies and procedures to enable data to be captured and classified by expenditure center,
project sub components and disbursement categories in the accounting format agreed. Standard
books o f accounts (cash and bank books, journals, ledgers, etc.) would be maintained at the
CMA. Records o f assets created for the project will be separately maintained and will be subject
to verification by the internal auditors o f the Department.
11. TNUIFS: TNUDF follows double entry accounting book keeping in accordance with
statutory guidelines applicable to limited companies in India. The company also follows an
operations manual and accounting i s fully computerized. Well defined policies relating to
accounting, disbursement, assessment o f sub project proposals, classification o f loans and loss
provisioning are in practice.
12. ULBs: The ULBs incur project expenditures as per sub-project agreements, maintain
records showing expenditures incurred on the Project on accrual basis and report quarterly
progress through FMRs (formats to be agreed) to TNUIFS.
50
External Audit
13. The following audit reports will be received within six months o f the close o f the financial
year:
Implementing Agency
Audit
Auditors
SOE / Project Audit Report
Accountant General (Audit) o f
Tamil Nadu
Grant Fund I,Grant Fund Entity Report (including a separate Firm o f Chartered Accountants
acceptable to the Bank
disclose on project expenditures)
I1and Grant Fund I11
Audit report o f the Trust
Firm o f Chartered Accountants
TNUDF
acceptable to the Bank
Entity Report (including a separate Local Fund Audit Department
ULBs
disclose on project expenditures)
Special Account
Comptroller & Auditor General
DEA / GO1
o f India
CMA
Internal Audit
14. In addition to the external audit, a firm o f chartered accountants will carry out an internal
audit o f TNUDF and GFs I,I1 and 111. The internal audit department o f the C M A will carry out
the internal audit of the CMA. The internal auditors w i l l ensure that the correct accounting,
payment and procurement procedures are followed.
Reporting and Monitoring
15. TNUIFS shall prepare FMRs on the following project components:
a. Sub loans to ULBs component B1 (a)
b. Capital Grants to ULBs component Bl(b)
c. Project Development Advisory Facility B1 (c)
d. Grants to C M D A (B2)
16. DMAWS will submit FMRs for the entire project to the Bank.
17. All FMRs will show comparisons o f budgeted and actual expenditures and analysis o f major
variances, including on aspects such as sources o f funds and application o f funds classified by
components and expenditure. The FMRs will also show the physical progress against financial
progress.
Country Issues
18. The following country issues identified as generic to India, will apply to this project:
a. That CMA’s existing accounting system concentrates on transactional control over
expenditures with financial information seldom being used for decision making. This w i l l be
addressed through encouraging the use o f FMRs for using and analyzing financial data.
51
b. Timely availability o f funds for the project: This w i l l be circumvented by allowing all
implementing entities to draw funds into commercial bank accounts on a quarterly basis.
c. Quality o f audit reports may be an issue, as the audit o f the C M A will be conducted by the
state Auditor General (AG). This will be addressed by agreeing a Terms o f Reference with the
state AG.
Risk Analysis
I
Rating
Risk
Project Complexity: Although there are only two Medium
implementing agencies, project design i s
complicated by the outflow o f funds under the on
lending component to multiple ULBs.
Funds Flow: Project moneys will flow to Medium
TNUDF and GFs I,I1 and I11 and to DMAWS
through well established procedures and as per
agreed work plans.
Under the sub loan component, funds will flow to
multiple ULBs under the same mechanism as that
used for TNUDP 11.
There i s a risk that own cash flow problems may
impede project flows.
Disbursement Arrangements: TNUDP I11 will Medium
replicate the disbursement arrangements under
TNUDP I1 except for the CMDA and DMAWS
component.
While the disbursement arrangements from
TNUDF to the ULBs are well established, there
could be a risk of delays in disbursements to
CMDA.
Borrower Staffing: There has been considerable Medium
attrition o f staff at TNUIFS and so there i s a risk
that new staff will not be familiar with Bank
procedures.
CMA staff are new to Bank procedures.
Internal Control and Accounting Systems are Low
well established in the implementingentities.
Risk Mitigation
Although funds will flow to many
ULBs, these will be selected in
accordance with stringent screening
norms set up by TNUIFS".
Assurance on ULBs sub loans will be
received
through
quarterly
expenditure reporting by the ULBs
and their annual audit reports.
The risk of cash flow crunches
affecting project funds flows will be
mitigated by allowing implementing
entities to draw funds on a quarterly
basis into commercial bank accounts
based on work plans.
of delays of
Possible risks
disbursement to the CMDA will be
mitigated through the inclusion of
timelines within which TNUIFS shall
make funds available to CMDA. This
time frame will be included as a
Financial Covenant.
This risk will be mitigated by
providing training to new staff at
TNUIFS and CMA in Bank
procedures.
Mitigation measures not required
l1Screening criteria will include an assessment o f the accounting system, presence o f competent accountants and the
financial viability o f the sub projects proposed.
52
Risk Flags
Rating
Audit Arrangements are working well under Medium
TNUDP 11. Reports are submitted in time and are
unqualified. However quality o f AG reports has
been an issue elsewhere in India.
Medium
Overall Risk Rating
Risk Mitigation
Audit
arrangements
will
be
strengthened through the agreement
o f TORSwith the AG and the LF
auditors.
Strengths and Weaknesses
19. The Project has the following strengths in the area o f financial management:
DMAWS and TNUIFS have successfully implemented two Tamil Nadu Urban
Development Projects
An
operations manual (both for C M A and TNUIFS) has been prepared and i s in use for
(ii)
the TNUDP 11. This will be amended to set out details o f the fund flow process,
accounting arrangements, financial reporting and auditing that would be followed for the
current project as well.
(i)
Significantweaknesses
20. The existing accounting system o f GOTN followed by DMAWS/CMA focuses on bookkeeping rather than on strategic use o f information. However, quarterly progress reporting and
FMRs would help encourage use o f financial information for decision making.
Disbursement Arrangements
21. Disbursements from IBRD loan will initially be made in the traditional system
(reimbursement with full documentation and against statement o f expenditure) and can later be
converted to Financial Management Report (FMR) based disbursement at the option o f GO1 and
GOTN after the Project successfully demonstrates generation o f quality FMRs.
22. A Special Account w i l l be maintained in the Reserve Bank o f India; and will be operated by
the Department o f Economic Affairs (DEA) o f the Government o f India (GOI). The authorized
allocation o f the Special Account would be US$ 15 million, which represents about 3 months o f
average estimated disbursements from the IBRD Loan.
23. Retroactive financing up to an amount o f US$60 million would cover eligible expenditure for
implementing activities on contracts which follow Bank procurement guidelines for 12 months
prior to loan Signing. Retroactive financing would support all project activities.
53
Action Plan
Action
Responsible
Agency
Agree audit TORwith AG, pre-approved by the CMA, DMAWS
Bank
Financial Officer at C M A to prepare an CMA, DMAWS
Operations Note and agree that with the Bank
Completion
Date
Within 3 months o f Loan
effectiveness
Within 3 months o f Loan
effectiveness
Financial Covenants
i. C M A shall maintain throughout the project period a Financial Officer with experience and
qualifications agreed with the Bank;
ii. C M A shall produce accounts in the formats specified and acceptable to the Bank;
iii.The audited financial statements from all implementing entities specified shall be provided to
IBRD within 6 months o f the close o f the financial year;
iv. TNUIFS shall employ during the l i f e o f the project a Senior Executive - Finance who will be
the single contact point for the Bank on all matters relating to accounting, financial reporting,
submission o f accounts to audit, claims, disbursements and for all project components being
implemented by TNUIFS; and,
v. C M D A shall employ an Accountant with qualifications acceptable to the Bank throughout
the l i f e o f the project to liaise with TNUIFS for GF I11and GoTN o n funds flow, accounting,
disbursements, claims and other FM issues.
Supervision Plan
24. From a financial management perspective, the project will need intensive supervision in the
initial stages for establishing systems in C M A and initiating new staff at TNUIFS. Thereafter biannual supervisions would suffice.
54
Allocation o f Loan Proceeds
Amount in US$ m
Expenditure Category
Subloans under Part B.l(a) o f the Project
110,000,000
Financing Percentage
100%
~
Capital Grants under Part B.l(b) o f the
Project
46,500,000
Transport and Traffic Grants under Part B.2
o f the Project
121,500,000
100%
3,00,000
100%
Consultants’ Services and Training
10,950,000
100%
Goods under Part A o f the Project
1,500,000
100%
Incremental Operating Costs
5,050,000
100%
Project Development Advisory Facility
(4)
100%
_
.
(5)
~
1,500,000
Fee
Amount due under Section
2.04 o f this Agreement
_____
300,000,000
TOTAL
25. The term “incremental operating costs” means the incremental costs o f operation and maintenance o f
buildings, equipment and vehicles, office rental and expenses, hiring o f vehicles, salaries o f Project staff ,
and travel and other allowances, incurred by C M A and RDMA (US$2.55 million) and C M D A ( US$2.50
million) for the purposes o f carrying out the Project.
55
f
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+ s 4
W
T-
...........
F
I
I
I
I
I
I
I
I
I
I
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I
I
......................
~~~~~~
..................
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.......................................
I
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1,
L
Annex 8: Procurement Arrangements
INDIA: Third Tamil Nadu Urban Development Project
General
1. Procurement for the project would be carried out by the implementing agencies including
ULBs in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and
IDA Credits” dated May 2004; and “Guidelines: Selection and Employment o f Consultants by
World Bank Borrowers” dated May 2004, and the provisions stipulated in the Legal Agreement.
Attachment 1 to this Annex summarizes the procedures for undertaking procurement on the basis
of National Competitive Bidding (NCB). The general description o f various items under
different categories i s described below. For each contract to be financed by the Loan, the
different procurement methods or consultant selection methods, the need for pre-qualification,
estimated costs, prior review requirements, and time frame have been agreed between the
Borrower and the Bank project team.
Procurement o f Works
2. Works procured under the project include : widening and strengthening o f roads, road over
bridge, road under bridge, grade separators, pedestrian subways, construction and maintenance
of water pipe lines, solid waste management works, storm water drainage, bus stands etc.
International Competitive Bidding (ICB) will be adopted for contracts estimated to cost more
than US$ 10 million each. National Competitive Bidding (NCB) will be adopted for contracts
valued more than US$ 100,000 but up to U S $ 10 million equivalent. Shopping may be adopted
for contracts estimated to cost the equivalent o f US$ 100,000 or less per contract.
3. Invitation for Bids (IFB) will also be published in UNDB and dgMarket for all ICB contracts.
Bank’s standard bidding documents (SBDs) for I C B and Government o f India (GOI) Task Force
model documents for N C B (civil works) w i l l be adopted.
4. Since loan to Urban Local Bodies (ULBs) i s demand driven, value and number o f all
packages o f civil works can not be specified in advance.
Procurement o f Goods
5. Procurement of goods includes machinery, equipment, waste collection vehicles, etc. Each
contract o f goods and equipment estimated to cost more than US$ 1.O million equivalent would
be procured under International Competitive Bidding (ICB) and that estimated to cost more than
US$ 100,000 but up to US$ 1.0 million under National Competitive Bidding (NCB), and
contracts valued less than US$ 100,000 equivalent each under Shopping procedures. Directorate
General of Supplies & Disposals (DGS&D) rate contracts will be acceptable under shopping.
Rate contracts o f State Government will be treated as one quotation under shopping procedures.
Direct contracting may be resorted to for procurement o f satellite imagery (fiom national Remote
Sensing Agency of the GO1 which i s the sole supplier), computer software, audio, video
cassettes, books, periodicals and other proprietary items etc. costing less than US$ 100,000
equivalent per contract.
57
6. Invitation for Bids (IFB) will also be published in UNDB and dgMarket for all ICB contracts.
Bank’s standard bidding documents (SBDs) for international competitive bidding (ICB) and
Government o f India (GOI) Task Force model documents for N C B (Goods) will be adopted.
Selection o f Consultants
7. Consultants services will include individual consultants for various activities, services for
proof checking, preparation o f detailed project reports, training & workshops, study and option
for overhnder bridge, study on parking solutions, feasibility study for area traffic control,
construction supervision, environmental and social impact, economic analysis and air quality
monitoring system for road network etc.
8. Quality and Cost Based System (QCBS) w i l l generally be followed. Advertisement for
Expression o f Interest shall be published in UNDB and dgMarket also for all assignments costing
more than US$ 200,000 equivalent. Short l i s t may comprise entirely national consultants for
consultancy services valued up to US$ 500,000 equivalent each.
9. Consultancy services valued less than US$lOO,OOO equivalent may be awarded on sole
source basis keeping in view the provisions o f the Bank’s Consultancy Guidelines. Services for
audits, engineering design, strengthening the capacity o f ULBs etc. estimated to cost less than
US$ 100,000 equivalent per contract may be procured by least cost method o f selection.
Contracts for Individual would be small in value and may not exceed US$ 10,000 equivalent
each. For hiring o f individuals job description, minimum qualification and terms o f employment
shall be prepared. Bank’s standard request for proposals (RFP) for consultancy services and
Government o f India (GOI) Task Force model documents for other consultancy services w i l l be
adopted.
Assessment o f the Agency’s capacity to implement procurement
10. The Department o f Municipal Administration and Water Supply (DMAWS) will assume
over all responsibility for implementation o f Institutional Development Component through the
office of the Commissioner o f Municipal Administration (CMA). Tamil Nadu Urban
Infrastructure Finance Services Limited (TNUIFS) on behalf o f Tamil Nadu Urban Development
Fund (TNUDF) will be responsible for implementation o f the urban investment component
including the project development advisory facility grants. C M A will implement the
institutional development component. Chennai Metropolitan Development Authority (CMDA)
will implement the transport and traffic component in the Chennai metropolitan area.
11. Procurement/project management system o f the TNUIFS and the C M A was reviewed to
determine whether the systems are in conformity with the Bank’s guidelines for procurement in
the investment projects. As agreed to with the Bank under TNUDP I1Project, Tamil Nadu Urban
Infrastructure Finance Services Limited (TNUIFS) will take the following measures to maintain
i t s strength in procurement management:
58
(i)
TNUIFS will continue to employ one procurement management expert (with
engineering background and having experience in the Bank procurement
procedures) and one support engineer staff to assist the procurement management
expert in monitoring and providing guidance to various urban local bodies
(ULBs) on procurement; and,
(ii) U L B s will procure the works and goods under the loan sanctioned to them with
help from TNUIFS.
12. Widening and strengthening o f roads under C M D A component will be implemented by
Department o f Highways and Road Works (DHRW), Government o f Tamil Nadu. DHRW is
presently executing Tamil Road Sector Project (Loan 4706) funded by the Bank. and has
previously executed road works as part o f World Bank financed projects such as National
Highways - I1 Project-I [Cr.2365-IN], Agricultural Development Project -Tamil Nadu [Cr.2215IN], Tamil Nadu Urban Development Project [Cr. 1923-IN] etc. In addition, the G O T N has
implemented some other externally aided projects. The engineers who have worked on these
projects are generally conversant with the systems and procedures to be followed for
procurement in World Bank funded projects. DHRW, if need be, shall create an additional cell
to implement this component. Chennai City Traffic Police (CCTP) will implement the traffic
management component.
13. A Project Management Unit (PMU) will be set up in C M D A who will be fully responsible
for implementation o f the component. DHRW and CCTP would execute their corresponding
sub-components o f the project, the PMU would coordinate and monitor implementation o f these
sub-components. P M U in C M D A will be responsible for undertaking consultancy studies for the
detailed project reports and other consultants wherever required. DHRW/CCTP will prepare the
bidding documents following World Bank Guidelines and Bidding Documents. P M U would
verify and get clearance from the Bank as required. Similarly, P M U will refer the evaluation
reports to the Bank for clearance. Keeping in view the above mentioned arrangements, the
procurement risk i s considered average.
Procurement Plan
14. Since most o f the procurement under sub-loan component will be carried out by U L B s and it
i s uncertain at this stage for what specific activities U L B s will request for a loan, it is difficult to
assess the quantum of procurement o f goods and works. Therefore, no procurement plan can be
prepared at present for this sub-component. However, TNUIFS would get the procurement plan
prepared from ULBs at the time o f sanctioning the loan to facilitate monitoring o f the
procurement activities pertaining to that loan.
15. Procurement of office equipment, works and consultancy services required by TNUIFSL,
C M A and for use in offices o f U L B s will be o f small value and will fall under shopping.
16. C M D A has prepared a procurement plan for the f i r s t eighteen (18) months o f the project and
is placed with the project documents.
59
17. Threshold for prior review by the Bank are :Works:
Goods:
Consultancy Services:
the first three contracts awarded under N C B
(applicable to C M D A component only) and each
contract > US$3.0 million equivalent
> US$ 1.O million equivalent
> US$250,000 equivalent for firms and
> US$ 100,000 equivalent for individuals
18. For works to be financed by TNUDF, the prior review by the Bank would apply only to
contracts estimated to cost more than U S $ 3.0 million equivalent. These thresholds are indicated
in the procurement plan also. The procurement plan will be updated annually including prior
review thresholds, if necessary, in agreement with the project team or as required to reflect the
actual project implementation needs and institutional capacity.
19. The World Bank will carry out ex-post review o f contracts not subject to prior review, on
random selection basis as per the procedure set in paragraph 5 o f the Bank’s procurement and
consultants guidelines.
Frequency o f Procurement Supervision
20. In addition to the prior review supervision to be carried out from the bank offices, the
capacity assessment o f the Implementing Agencies has recommended six monthly supervision
missions to visit the field to carry out post review o f procurement actions.
60
PROVISIONS APPLICABLE TO NCB-BASED PROCUREMENT
1. The model bidding documents for N C B agreed with the Government o f India Task Force
[and as amended from time to time], shall only be used for bidding.
2. Invitations to bid shall be advertised in at least one widely circulated national daily
newspaper, at least 30 days prior to the deadline for submission o f bids.
3. N o special preference will be accorded to any bidder when competing with foreign
bidders, state-owned enterprises, small scale enterprises or enterprises from any given
State, etc.
4. Except with prior concurrence o f the Bank, there shall be no negotiations o f price with
the bidders, even with the lowest evaluated bidder.
5. Extension of bid validity shall not be allowed without the prior concurrence o f the Bank
(i)for the first request for extension if it i s longer than four weeks; and (ii)
for all
subsequent requests for extension irrespective o f the period.
6. Re-bidding shall not be carried out without the prior concurrence o f the Bank. The
system o f rejecting bids outside a pre-determined margin or ‘bracket’ o f prices shall not
be used.
7. Rate contracts entered into by DGS&D will not be acceptable as a substitute for N C B
procedures. Such contracts will be acceptable for any procurement under National
shopping Procedures.
8. Two or three envelop system will not be used.
61
Annex 9 A: Economic and Financial Analysis
INDIA: Third Tamil Nadu Urban Development Project
A. ECONOMIC ANALYSIS
1. The proposed line o f credit does not have an explicit subsidy, the opportunity cost o f
dedicated funding, difficult to quantify, is expected to be more than compensated by the benefits
o f increased efficiency o f delivery o f urban services and the sustainability o f ULBs. The costbenefit analysis will be carried out for each upgrading sub-project with total costs o f US$
500,000 and above, except sub-projects with non-quantifiable benefits. For ease during
implementation, a set o f criteria have been developed to help during the evaluation o f individual
investments. Sub-projects will have to satisfy the following criteria:
0
it i s given high priority in the ULB's corporate plan prepared in a participatory manner;
0
it supports remunerative and non-remunerative urban infrastructure contributing to the
improvement o f the living standard o f the urban populations;
0
the Cost-effectiveness Indicator (the cost o f investment per beneficiary household as a share
o f the beneficiary household income) for the sub-project does not exceed the established
hurdle rate o f around 10%; and,
0
the cost and benefit analysis for the individual sub-projects o f US$500,000 or more shall
demonstrate a positive N P V and an ERR equal or above the appropriate opportunity cost o f
capital estimated at 12%. This requirement will not be applied to sub-projects with nonquantifiable benefits or those costing less than US$500,000. Should the N P V be negative or
the ERR below 12%, additional qualitative analysis will be carried out.
2. To ensure that the proposed investments do not artificially support one another in terms o f
the economic returns, and to establish cost-effective investment parameters, the economic
analysis will be conducted for each sector investment separately, if feasible.
3. The Bank will review on a no-objection basis all sub-projects with total costs o f US$750,000
and above for works and a sample o f sub-projects below this threshold at i t s discretion. This
procedure will be reviewed as needed to ensure adequate quality o f the investment analysis.
Methodology - Overview
4. The net incremental economic costs and benefits o f the proposed sub-projects will be
assessed by constructing "with" and "without" sub-project scenarios. The cash flows will be
discounted using the appropriate opportunity cost o f capital in India (12%). The analysis will
include calculation o f the N e t Present Value (NPV) and the Economic Rate o f Return (ERR).
Finally, sensitivity analyses by testing a number o f scenarios will be conducted to assess the
impact o f changes in critical assumptions o n the economic viability o f the sub-project. The base
year will be 2004 and all amounts used in the models will be in 2004 Rupees. The period o f
analysis will be at least 10 years after each investment becomes operational and no less than then
expected useful l i f e o f the asset without re-investment during this period.
5. Data used for sub-project analysis must be actual in the specific city where the proposed
investment will be undertaken and should be obtained from socio-economic indicators, surveys,
62
interviews, focus groups, or actual on-site observations. Willingness to pay surveys should be
undertaken when necessary.
6. Estimating Economic costs and benefits. For estimating economic costs and benefits
economic prices will be used, i.e. financial prices adjusted for the impact o f taxes, implicit taxes,
subsidies and externalities, mainly on material and labor costs. Alternatively, economic costs
will be estimated by applying standard conversion factors for India (e.g. those suggested by the
IRC), if possible making distinction between conversion factors for skilled and unskilled labor.
7. For the purposes o f estimating economic costs all costs associated with the proposed
investment shall be considered, including:
0
0
0
capital costs (including designing, planning and engineering costs, construction costs, etc.);
operating and maintenance costs (O&M); and,
contingencies and complementary actions necessary to achieve the expected benefits - for
physical contingencies during the construction stage a ratio o f about 15% o f the estimated
construction costs (or one appropriate for Tamil Nadu) will be used.
8. Once all financial costs are converted into economic costs, incremental costs will be
calculated based in the comparison o f the "with" and "without" sub-project scenarios. N o
residual value will be included in the analysis. A factor o f about 10.5% shall be applied to total
investment costs to capture the costs o f program administration, community outreach and related
contingencies.
9. Some estimation o f economic benefits may require direct measurement techniques based on
potential expenditures saved (e.g. savings relative to replacement costs) or willingness to pay
(i.e. contingent valuation methods) by the beneficiaries for the new improved services (more
details on assessing the willingness to pay are discussed below).
10. The methodology to be used depends on whether or not the ULB/Area currently has or not
access to the service. For facilities in ULB/Areas with existing services, the benefits from the
investment will be established based on the direct use benefits (e.g. measured by the tariffs
charged to customers) and the opportunity cost o f not having access to these services (e.g. time
savings, health benefits in the form o f increased water consumption, productivity benefits and/or
other benefits that apply in the Indian context). For facilities in ULB/Areas with very limited or
nonexistent services, direct-use benefits method cannot be applied. Therefore, contingent
valuation techniques will be used instead and demand curves and consumer surplus reflecting all
benefits arising form the rehabilitation estimated.
Projects
Roadsand New
Streets
-
Street
Per capita Economic Benefit
Indicators
Time saved in travel time for
specific type o f road and actual level
o f pedestrian and vehicular traffic
Rehabilitation Ibid
Increase in productive time due to
New
63
Calculation Method
[Avg. Reduction in Travel
time]* av. actual wage,
Ibid
[Increased Time o f
Projects
lighting
Water
Sewage
Drainage
.
Per capita Economic Benefit
Indicators
increased safety
CalculationMethod
nocturnal traffic in streets]*
av. actual wage
Rehabilitation Ibid
Ibid
[Increase in Avg.
Rehabilitation Increased and continuous access to
water
~onsumptionj
*;ea1 cost o f
water
Reduction in health costs due to
[Avg. reduction in number
New
water-borne diseases,
o f patients] * av. actual Cost
contamination, or the like
o f Treatment
Time saved in travel time for
[Avg. Reduction in Travel
New
specific type o f road and actual level time]* av. actual wage
o f pedestrian and vehicular traffic
due to reduction in congestion
Rehabilitation Ibid
Ibid
12. The Economic Rate o f Return (ERR): ERR i s an Internal Rate o f Return o f the sub-project
when NPV calculated based on economic prices equals zero. Sub-projects to be funded should
yield an ERR equal to at least the appropriate opportunity cost o f capital (12%).
13. The cost-effectiveness indicator will be used to determine a reasonable magnitude o f the
investment costs. The hurdle rate will be set on the basis o f the average expenditures o f the lowincome households in each city and i s expected to be around 10%.
Assessment o f the Willingness to Pay (AWP)
14. The purpose o f the AWP i s to collect and analyze sufficient data to estimate what the
potential beneficiaries would be willing to pay for the improved or new services. Based on the
collected data on the beneficiary willingness to pay a demand curve and the consumer surplus
reflecting all benefits arising form the rehabilitation will be estimated.
15. In order to assess the willingness to pay a survey questionnaire shall includes the basic socioeconomic characteristics of the target population, characteristics o f water supply and/or
sanitation or other services as applicable, and the willingness to pay for the new or improved
services under different assumptions. The following are the main steps to be taken to carry out an
AWP:
a. Designing sampling procedure. The sampling procedure should result in a representative
sample comprising enough customers from different income groups, locations within the
ULB/Area, and distinguishing between customers with and without access to the service:
b. Pre-testing and, if necessary, adjusting the questionnaire.
C. Analyzing the socio-economic indicators and water and sanitation characteristics o f the target
population.
d. Analyzing the data from the willingness to pay survey and investigating the significance o f
various socio-economic and service specific (for example, water and sanitation)
characteristics. This may be done in Probit or Logit regression models so as to quantify the
willingness to pay for tariffs and the willingness to use standpipes and the like.
64
Sensitivity analysis/Switching values o f critical items
16. For the purposes o f the sensitivity analysis the variables conveying major risk to the subprojects will be identified and the impact o f these variables analyzed. This analysis w i l l show
whether or not the results o f the economic analysis are robust for all cases analyzed. The
following are some o f the potential critical variables to be considered for sensitivity analysis:
0
two-year delay in sub-project implementation;
1O%increase in costs;
0
0
10% decrease in revenues (for revenue-generatingsub-projects only), and others.
Distributive Analysis
17. Distributive analysis will be carried out to identify the winners and losers from the subprojects financed, and indicate whether the distribution o f costs and benefits i s acceptable to the
society.
65
Annex 9 B: TNUDF Financial Analysis and Projections
INDIA: Third Tamil Nadu Urban Development Project
A. Past Performance
1, A financial assessment o f TNUDF for the period 1999-2004 was undertaken through external
consultants and the key highlights o f the same are presentedbelow:
1, Profitability Indicators
DSCR
Collection Performance
(in %)
3.43
1.52
1.32
1.19
2.47
99
100
99.75
99.9
98.8
2. TNUDF has seen a declining trend in profitability and t h i s i s also observed in the net interest
margin which i s a result o f the declining interest rate environment over the last four year period.
Similarly the return on assets and net worth also display a declining trend. The average cost o f
funds for TNUDF has come down from 10.74 % (2003-04) to 8.10 % (current).
66
Investment Income vs. lending income
3. Typically about 20-30% o f TNUDF’s earnings since 1999-2000 have been from
treasuryhnvestment income. In 2003-04, however, investment income was 55 %. As seen from
the table below lending income has been a healthy 60-80 % in the first four years o f TNUDP 11,
however, 2003-04 has seen sharp fall in total income and the lending income. As the lending
terms of TNUDF funds needed to factor in a) the cost o f i t s borrowings from the Go% (based
on a formula linked to 10- year GO1 security yields during the previous year with a one year lag
for reviewheset options) and b) the fixed lending terms to ULBs (where a markup o f at least 150
bp over cost o f borrowing was required), the cost o f TNUDF loans were higher than i t s
competitors. The fall in lending income therefore appears to have been a consequence o f this
inflexible lending policy leading many ULBs to borrow from other government financial
institutions such as TUFIDCO (TNUDF lowered i t s lending rates in 2003-04 following large
pre-payments o f their high cost loans).
Figures in brackets represent percentage to total income.
Source: Consultant report, staff calculations
4. While, the profitability o f the fund has been declining due to a range o f factors mentioned
above, the overall performance o f the fund has been satisfactory. Over the period o f
implementation o f TNUDP 11, TNUDF’s operations have been consistently profitable, with high
rates o f loan recovery (over 98% in all o f the years). TNUDF has been able to maintain high
rates of loan recovery due to i t s rigorous appraisal skills, lending to creditworthy ULBS,
requiring cost recovery in projects and in the case o f certain loans (urban roads) having access to
intercepts o f state devolutions to ULBs.
Balance Sheet: As on March 3 1, 2004, the loan assets o f TNUDF stood at Rs. 85 crores, down
from a peak o f Rs. 418 crores in FY02. The reduction in loan assets has been due to take over o f
TNUDF’s loans mainly by other state government financial institutions, besides some by other
commercial sources o f financing. Part o f this refinancing was driven by dramatic reduction in
general interest rates in the financial markets (covered below in greater detail). Over the period
of implementation (till September 30, 2004), TNUDF has approved sub-loans amounting to Rs.
768 crores and disbursed Rs. 452 Crores (implying ratio o f sanctions to disbursements at
62.36%). Partly owing to pre-payment o f i t s loans, TNUDF had high levels o f liquidity with ratio
o f current assets to current liabilities (working ratio) at 6.1 as on March 3 1, 2004, however the
same i s expected to be used as pipeline o f new sub-projects pick-up. For all sub-loans made
under TNUDP 11, TNUDF has been making loan loss provisions as per RBI (Reserve Bank
India) guidelines on Asset Classification and Provisioning norms applicable to Indian Financial
Institutions and this would continue to be case during TNUDP I11 as well. Liabilities include Rs.
275 crores of loans borrowed and about Rs. 202 crores o f Unit Capital, Reserves and Surplus.
Loans borrowed include Rs. 44 crores outstanding out o f bonds raised b y TNUDF for satisfying
67
one o f the financial covenants under the earlier Bank project. TNUDF has low levels o f leverage
(debt / equity ratio i s 1.36 as on close o f FY04 as against a cap o f 4: 1 stipulated under TNUDP
II)
implying
,
that i t i s in a position to take on additional debt and ramp up lending operations.
Income & Expenditure: The main sources o f income are interest on long term loan assets and
also interest income from cash and liquid investments held by TNUDF in various financial
instruments. The returns on liquid investments are much lower than core lending operations and
high levels o f liquidity carried by TNUDF also to an extent adversely impacts income o f
TNUDF. For the FY 2003-04, TNUDF had a total income o f Rs. 42 crores and a net profit after
taxes o f Rs. 10 crores. On expenditure side, besides interest on borrowings, the main operating
expenses are management fees paid to TNUIFSL, the Asset Management Company (AMC) for
managing the funds. Starting from FYOl, TNUDF has had to pay taxes on net income, something
that was not envisaged at the time o f TNUDP IP2. This, combined with the lower volume o f
lending operations have meant that TNUDF, while continuing to be profitable, has lower than
projected levels of profits and returns on equity. Restoring the levels o f profitability would
require TNUDF to have progressively higher volumes o f lending operations during TNUDP 111.
B. Issues
5. The most critical issue i s the future sustainability o f TNUDF, resolution o f which will require
flexible, market based costing o f i t s funds, adoption o f a more commercially oriented lending
policy/rates, diversification of i t s narrow resource base and widening o f i t s product range from
i t s existing single business product. Under TNUDP I11all these issues are being addressed.
6. Overview o f the Financial Sector. Financial reforms were central to India’s economic
liberalization program initiated in the early 1990s. After more than a decade o f reforms, India’s
financial sector i s now substantially liberalized, competitive and sound. While the banking
sector continues to dominate the financial system and remains overwhelmingly govemmentowned, prudential norms have been tightened and competition has increased. Capital markets
are deeper, more liquid and much more open, whereas private entry has also been progressively
allowed into N o n Bank Financial Institutions such as mutual funds and insurance. However,
success with mobilization o f the much needed long-term capital to finance infrastructure remains
limited, and India’s financial sector has not been able to efficiently allocate resources to the
private sector, to finance the higher levels o f investment demands. As an illustration, the ratio o f
private credit (from deposit money banks and other FIs) to GDP in India remains low at below
40%, compared to over 100% for countries such as China, Korea and Malaysia.
7 . Infrastructure Finance M a r k e t Interest Rates. The interest rates regime in India has
declined significantly, particularly during the period o f 1999-2004. Market interest rates have
declined both at the short end as well as for long term (See chart below). This has impacted
TNUDF in two ways: first, the lower lending rates offered by competitors has weaned borrowers
away from TNUDF, whose lending rates have tended to be higher. Secondly, the average return
on cash and short-term surplus has declined. The former has proven to have significant impact on
TNUDF performance, as reflected in the sharp decline their in loan assets. Two principal
l2The Trust structure of TNUDF was considered to be tax exempt. The same however has been contested by tax
authorities on the grounds that private FIs are a part o f this company
68
agencies in the market for urban infrastructure in Tamil Nadu are TUFIDCO (a State owned
entity) and HUDCO (an all-Indian financial institution). Apart from market borrowings, both
these agencies receivehake a fairly large amount o f l o w cost resources from both GO1 and
GoTN, which enables them to maintain an overall cost o f funds that is much lower than that o f
TNUDF’s.
I
I4.O0
12.00
10.00
!
d
8.00
6.00
4.00
2.00
0.00
1
!
.
-
1
+GO1
-Call
-
sec
money
~
1999-00 2000-01 2001-02 2002-03 2003-04
Year
8. Borrowing/On lending Terms. Under TNUDP 11, Bank funds were on lent by Tamil Nadu
State to TNUDF at a weighted average yield o f GOI’s 10 year bond (previous one year) plus 100
basis points. In turn, TNUDF lent, at fixed rates, to i t s customers at i t s borrowing rate plus 250
basis points (water supply and sewerage subprojects) and 300 basis points (all other). Because o f
the recent fall in the general interest rates in the country, this mechanism resulted in a situation
whereby TNUDF’s lending rates exceeded the market interest rates forcing many borrowers to
refinance their loans from other lenders (mostly, State/GOI owned). This phenomenon reduced
the loan assets o f TNUDF by over 75% in 2004, threatening its business prospects and financial
viability. While in a strict sense the competition did not emerge from real market player^'^, the
fact remains that TNUDF had not been operating under a commercially realistic regime. The
revised lending terms agreed for TNUDP I11will address these issues:
.
The on lending rate from Tamil Nadu State to TNUDF will be such that it reflects the
currently prevailing market conditions. This will be achieved by continuing to use the
current reference index (GOI’s 10 year bonds) and mark-up, but, instead o f the weighted
average o f the previous year, the most recent issue will be used.
TNUDF’s o w n lending rates to subprojects will be more commercially priced by linking to
the credit worthiness o f the borrower rather the sector. Also, the sub-loan maturity will be
linked to cash-flow prospects rather a uniformly fixed period (15 years). Such changes will
provide an incentive to ULBs to strive for better efficiency and creditworthiness and
l3It should be noted that the financial market liberalization did not bring a resource flow to the municipal fmancing
sector due to policy and institutional constraints. Municipal bond issues and commercial borrowings remain largely
limited. In the case o f TNUDF re-financings, the state government i s reported to have played a proactive role in
encouraginglasking public sector financial entities to provide the refinancing to assist ULBs discharge their high
interest debt.
69
.
minimize the risk o f prepayments. Moreover, the proposed flexibility in sub-loan maturity
will generate re-flows that can be re-cycled for lending purposes.
A prepayment premium in the legal agreements with U L B s would also be adopted.
9. Diversification of resources. At present, TNUDF i s almost totally dependent on Bank
Line o f Credit. Under the project, TNUDF will diversify i t s resources through bond issues, short
term borrowings, co-financing arrangements, securitizations as described in the forecasts shown
below. TNUDF would raise co-financing aggregating at least US$ 40 million, in the medium
term, from any or all of the following sources: (i)
proceeds from TNUDF public bond issues; (ii)
TNUDF private placements; (iii)
co-financing with TNUDF by private financial institutions /
banks at the sub-project level; (iv) “secondary market” purchases by private financial institutions
/ banks o f TNUDF loans to ULBs, or re-financings o f TNUDF loans to U L B s (through local
bond issues, pooled bond issues or loans from private financial institutions.
10. Widening the Product Range. Similarly, the range o f financial products offered by
TNUDF will be reviewed in the Business Plan and Strategic Vision Study to be completed by
December 31, 2005, and it is expected to include medium term loan products (5-7 years) for
urban sub-projects/initiatives with shorter economic life cycles, credit enhancements products,
and bridge financing among others.
I.
Summarized Financial Results o f TNUDF (FY 1999/00 - FY2003/04)
LACTUAL INCOME AND EXPENDITURE FOR 2000-2004)
1999-00
2000-01
2001-02
(Financial yr ended Mar)
INCOME
2577.3 1
4810.28
6322.83
Interest recd on Loans
60.47
42 1.45
0.00
Interest recd from Invest.
1309.00
1706.78
914.53
Income from cash balances
4.00
122.19
0.00
Profit on sale o f investments
1.62
0.00
0.00
Other Income
152.18
0.00
2.23
Excess provision written back
4436.27
5790.90
8177.70
TOTAL INCOME
EXPENDITURE
2108.99
2876.19
4674.91
Interest paid on borrowings
186.2
1
432.68
166.80
Operating expenses
78.06
2100.00
0.00
Provisions made
3386.93
694 1.7 1
2295.20
TOTAL EXPENDITURE
Rs. Lakhs
2002-03
2003-04
6135.99
33 1.94
1331.11
92.70
7.36
6.69
7905.79
1841.46
670.25
1477.92
174.74
0.00
53.83
4218.20
5123.40
281.12
1344.00
6748.52
2064.75
253.29
900.00
3218.04
SURPLUS
2141.07
2403.97
1235.99
1157.27
1000.16
ROA
RONW
DebtIEquity
DSCR
LIABILITIES
Unit Capital
Reserves
5.40%
13.56%
1.17
3.43
4.44%
13.51%
2.28
1.52
1.84%
6.58%
2.18
1.32
1.56%
4.33%
2.62
1.19
1.48%
3.72%
1.36
0.30
17595.00
266.41
17715.41
266.41
19606.06
266.41
19606.06
266.41
19959.74
266.41
KEY RATIOS
70
(ACTUAL INCOME AND EXPENDITURE FOR 2000-2004)
1999-00
2000-01
2001-02
(Financial yr ended Mar)
Borrowings
Rs. Lakhs
2002-03
2003-04
GoTN borrowings
Current Liabilities & provisions
20873.28
20873.28
3798.55
41080.07
30074.94
6689.66
43263.45
34459.45
5757.79
TOTAL LIABILITIES
42533.24
65751.55
68893.71
79403.01
55418.79
22980.36
0.00
6656.24
12896.64
42533.24
43695.15
3440.24
10935.96
7680.21
65751.56
41843.89
4122.97
14431.90
8494.95
68893.71
37291.92
5850.10
22972.10
13288.89
79403.01
8526.42
663.25
32473.06
13756.06
554 18.79
ASSETS
Net Loans Outstanding
Investments
Current Assets
Loans and advances
TOTAL ASSETS
11.
52165.08
45562.08
7365.46
27577.61
23175.61
7615.03
Financial Projections of TNUDF (FY2004/05-FY2009/10)
14. Detailed financial projections will be made under the Business Strategy to be prepared by
TNUDF by December 2005. These will then determine the interest rate policy and other
parameters. Pending that an attempt i s made below to carry out financial projections o f
operations, income and expenditure, cash flow and balance sheet for the six-year period 2004-05
to 2009-10. These are broadly indicative but form a good basis to demonstrate that TNUDF i s
financially viable. A brief summary o f the assumptions underlying the projections, salient
features o f projected operations, financial performance and cash flows are given below:
Assumptions UnderlyingFinancial Projections for TNUDF
15. The major assumptions made for the base case scenario for TNUDF for the period 2005-10
are given below. TNUDP I11 i s expected to be operational only from 2005-06 onwards and
therefore the projections for 2004-05 are based on current half-year performance and estimates
provided by TNUIFS.
71
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Disbursement (Rs.cr)
102.50
203.10
183.00
157.00
159.00
183.00
- existing projects@ipeline)
102.50
49.00
13.00
19.00
0.00
0.00
- short termprojects
0.00
50.00
50 .OO
0.00
0.00
0 .oo
- new projectspNUDP 119
0.00
104.10
120.00
138.00
159.00
183.OD
Rate o f i n t e r e s t yo)
- existing projects@ipeline)
9.00%
9.00%
9.00%
9.00%
9.0OYo
9.00%
7.50'%0
7.50%
- short termprojects
7.50%
7.50%
7.50%
7 .SO%
9.00%
9 .OO%
9.00%
- new projects(TNUDP IIT)
9.00%
9.OOYo
9.00%
170.00
150.00
100.00
90.00
190.00
New borrowings (Rsxr)
0.00
150.00
150.00
150.00
0.00
0.00
50.00
- TNUDP-I11
20.00
0.00
40 .oo
0.00
0.00
40 .oo
- short t e r m brgs.
0.00
0.00
0 .oo
100.00
0 .oo
0.00
- market access brgs.
Rate o f i n t e r e s t o n brgs
- e i s t i n g loans (GoTN)
7.63'%0
- existing loans ponds)
11.85%
- new brgs ONUDP-III)
6.50%
- new brgs (short term)
6.50'Xo
- new brgs (market access)
7.00%
Return o n investments
11l6Yo
Return o n cash surplus
5.50Yo
ProjectedNPAs
1% in2005
(% ofgross loan o h )
2% in2006 and 2007
3% in2008
4% in2009
5% in2010
10% o f t h e increase inNPAs
Provisioning for NPAs
Short t e r m loans repayable in5 years (1 year moratorium)
Short t e r m borrowings repaid in5 equal annualinstalments
Market access brgs repaidin 10 equal annualinstalments
Projected Income and Expenditure Statements
(Base Case scenario)
16. The projected Income and Expenditure statement for TNUDF for the six-year period 2004-05
till 2009-10 i s given below. This i s the base-case scenario based on the assumptions stated in the
previous section. The base case scenario has been formulated. O n the basis o f gradually
achieving a ROE o f around 10% in the final year o f projections (Le. 2009- 10).
17. Total income from lending operations i s projected to increase from Rs. 1211.3 l a b s in 200405 to Rs. 8241.09 l a k h s in 2009-10, reflecting the increase in disbursements and loan assets. The
projected income takes into account the proposed reduction in lending rates on existing loans to
9%, in order to be more competitive in the present market conditions. Income from short term
cash balances i s projected to decline steeply from Rs. 2254.8 lakhs in 2004-05 to Rs.922.18
lakhs in 2009-10. This reflects both the steady drawdown o f cash surpluses to meet increased
level o f disbursements as also the declining rate o f return on short-term funds.
72
TAMILNADU URBAN DEVELOPMENTFUND (TNUDF)
{PROJECTED INCOME AND EXPENDITUREFOR 2005-2010)
Rs. Lakhs
(Financial yr ended Mar)
2004-05 2005-06 2006-07 2007-08 2008-09
INCOME
Interest recd on Loans
1211.32 3144.40 4711.78 5846.78 7009.29
Interest recd fiom Invest.
66.24
44.02
5.26
5.26
5.26
Income from cash balances
2254.80 1314.00
611.14
678.83
833.95
Other Income
TOTAL INCOME
3532.35 4502.43 5328.17 6530.87 7848.49
9168.52
EXPENDITURE
Interest paid on borrowings
Operating expenses
TOTAL EXPENDITURE
Provisions made for tax
NETSURPLUS
5633.04
583.56
6216.61
885.57
2066.34
2009-10
------
1932.26
212.66
2144.92
416.23
971.21
1963.94
364.17
2328.1 1
652.29
1522.02
2613.13
360.46
2973.59
706.38
1648.21
3783.13
430.12
4213.24
695.29
1622.34
4823.13
488.01
5311.14
761.21
1776.15
8241.09
5.26
922.18
18. O n the expenditure side, total interest expenses are projected to increase steeply from Rs.
19.32 crore in 2004-05 to Rs.56.33 crore by 2009-10, which is due to the increased level o f
borrowing projected under TNUDP I11 (Rs. 500 crore) and also short term borrowings (Rs.lOO
crore) and market access borrowings (Rs.lOO crore). Provisions for bad and doubtful debts have
been made based on a graded increase in NPAs. Other expenditures are expected to follow past
trends. Though the tax liability o f the Fund is still under arbitration, provisions for taxation have
been made at 30% of the surplus.
19. The net surplus of the Fund i s thus projected to increase from Rs. 9.71 crore in 2004-05 to
Rs. 20.66 crore by 2009-10.
TAMILNADU URBAN DEVELOPMENT FUND (TNUDF)
(PROJECTED BALANCE SHEET FOR 2005-2010)
Rs. Lakhs
(Financial yr ended Mar)
LIABILITIES
Unit Capital
Reserves
Borrowings
- GoTN (TNUDP 11)
Non Conv Bonds (1 1AS%)
New Borrowings(TNUDP 111)
Short term borrowings
Market access brgs
Current Liabilities & provisions
2004-05
2005-06
2006-07
2007-08
19959.74 19959.74 19959.74 19959.74
266.41
266.41
266.41
266.4 1
2070 1.O 1 26700.01 44100.01 59500.01
18500.01 18500.01 18500.01 18500.01
220 1.oo
0.00
0.00
0.00
0.00
5000.00 20000.00 35000.00
0.00
3200.00
5600.00
6000.00
0.00
0.00
0.00
0.00
7586.08
9572.19 10105.78
8774.35
TOTAL LIABILITIES
48523.24 55700.52
ASSETS
Loans disbursed (Gross)
Less: provisions
N e t Loans Outstanding
Investments
18370.39
39.73
18330.66
464.21
37761.87
86.88
37674.99
116.82
73
2008-09
19959.74
266.41
72538.26
18138.26
0.00
50000.00
4400.00
0.00
10752.64
2009-10
19959.74
266.4 1
80938.26
18138.26
0.00
50000.00
2800.00
10000.00
11478.48
73898.35
89832.94 20352 7.05
222642.89
53944.28
111.25
53833.03
116.82
66517.56
199.91
66317.65
116.82
78131.69
313.89
77817.80
116.82
91514.08
463.93
91050.15
116.82
------
LIABILITIES
Current Assets
Loans and advances
2004-05
15962.30
13756.06
2005-06
4152.64
13756.06
2006-07
6192.44
13756.06
2007-08
9641.41
13756.06
2008-09
11826.37
13756.06
2009-10
7719.86
13756.06
TOTAL ASSETS
48513.24
55700.51
73898.35 89831.94
10351 7.05
112642.89
20. The total assets o f the Fund are expected to grow from Rs. 485.13 crore as at end o f March
2005 to Rs. 1126.43 crore by end o f March 2010, representing almost a three-fold growth. This
is driven largely by the increased loan disbursements. Loan assets are projected to grow from Rs.
183.31 crore as at end o f March 2005 to about Rs. 910.50 crore by end o f March 2010. The
increased level o f operations has necessitated large level o f borrowings and therefore the total
debt outstanding i s projected to increase from Rs. 207.01 crore as at end March 2004 to Rs.
809.38 crore by end March 2010. Thus the Debt Equity ratio (DER) i s projected to gradually
increase from 1.02 in March 2005 to 4.00 by March 2010.
21. The largest requirement o f funds i s for disbursement o f loans, which is projected to range
from a level o f Rs. 102.50 crore during 2004-05 to Rs. 183.00 crore in 2009-10. To meet the
increased requirement, cash deposits (which were at Rs. 319.10 crore as at end March 2004) are
projected to be steadily drawn down (since the return o n such balances has been declining
steeply). Further, borrowings under TNUDP I11 are estimated t o be Rs.500 crore (USD 111 m).
Short term borrowings during 2005-08 (Rs.100 crore) would be t o meet short term lending
requirements. Market access borrowings o f Rs.100 crore are projected during 2009-10 to meet
the overall gap in resources. Thus, total borrowings during the period are estimated at Rs. 700
crore , of which under TNUDP I11would be Rs.500 crore (approx $ 111 m).
Projected Balance Sheets
TAMILNADU URBAN DEVELOPMENT FUND (TNUDF)
{PROJECTED BALANCE SHEET FOR 2005-2010)
Rs. Lakhs
(Financial yr ended Mar)
2004-05
2006-07
2007-08
2008-09
2005-06
LIABILITIES
19959.74 19959.74 19959.74 19959.74
19959.74
Unit Capital
266.4
1
266.4
1
266.41
266.4
1
266.4 1
Reserves
26700.01
44100.01
59500.01
72538.26
2070
1
.O
1
Borrowings
18500.01 18500.01 18500.01 18500.01
18 138.26
- GoTN (TNUDP 11)
220 1.oo
0.00
0.00
0.00
0.00
Non Conv Bonds (1 1.85%)
0.00
5000.00 20000.00 35000.00
50000.00
New Borrowings(TNUDP 111)
3200.00
5600.00
6000.00
4400.00
0.00
Short term borrowings
0.00
0.00
0.00
0.00
0.00
Market access brgs
9572.19 10105.78
7586.08
8774.35
10752.64
Current Liabilities & provisions
48513.24 55700.51 73898.35 89831.94 103517.05
TOTAL LIABILITIES
2009-10
19959.74
266.41
80938.26
18138.26
0.00
50000.00
2800.00
10000.00
11478.48
112642.89
ASSETS
Loans disbursed (Gross)
Less: provisions
N e t Loans Outstanding
Investments
Current Assets
Loans and advances
TOTAL ASSETS
91514.08
463.93
91050.15
116.82
7719.86
13756.06
112642.89
18370.39 37761.87 53944.28
39.73
86.88
111.25
18330.66 37674.99 53833.03
464.21
116.82
116.82
15962.30 4152.64
6192.44
13756.06 13756.06 13756.06
48513.24 55700.51 73898.35
74
66517.56
199.91
663 17.65
116.82
9641.41
13756.06
89831.94
78131.69
313.89
77817.80
116.82
11826.37
13756.06
103517.05
22. The total assets of the Fund are expected to grow from Rs. 485.13 crore as at end o f March
2005 to Rs. 1126.43 crore by end o f March 2010, representing almost a three-fold growth. This
i s driven largely by the increased loan disbursements. Loan assets are projected to grow from Rs.
183.31 crore as at end o f March 2005 to about Rs. 910.50 crore by end o f March 2010. The
increased level of operations has necessitated large level o f borrowings and therefore the total
debt outstanding i s projected to increase from Rs. 207.01 crore as at end March 2004 to Rs.
809.38 crore by end March 2010. Thus the Debt Equity ratio (DER) i s projected to gradually
increase from 1.02 in March 2005 to 4.00 by March 2010.
Projected Cash-Flow Statements
TAMlLNADUUREANDEVELOP113ENTFUNI)LTNLTI)~
(PROJECTED CASHFLOW FOR 2005-20105 Rs.lakhs.
(Financial yr ended Mar)
2004-05 2005-06 2006-07
2007-08
SOURCES OF FUNDS
Increase inUnit Capital
Increase in Resemes
Increase inB o t ~ o ~ h g s
- G o T N T N U D P 119
Short t e r m brgs
- Market access brgs
Increase inprovisions
Increase in other c w l i a b
Decrease ininvestments
Internalaccruals
-
- principal
-income
TOTAL SOURCES
0 .oo
0.00
0.00
5000.00
15000.00
4000.00
4000.00
0.00
0.00
0.00
0.00
47.15
18.37
24.36
0.00
671.65
637.46
347.39
199.04
0 .oo
3959.74
7445.77
5420.94
918.52
427.39
21 17.59
3532.35
5328.17
4502.43
41 77.15 15452.95 2 7141.78
15000.OO
2000 .oo
0.00
88.46
559.47
0.00
9657.58
3126.71
6530.87
2 7305.71
0 .oo
0.00
USES OFFLTNDS
Disbursement o f assistance
existing projects(pipeline)
10250.00
4900.00
1300.00
- short termprojects
0.00
5000.00
5000.00
new projects(TNUDP 119
0.00
10410.00
12000.00
Payment o f i n t e r e s t
1932.26
1963.94
2613.13
Repayment o f borrowings
-GQTN
4675.60
0.00
0.00
-Bonds
2201 .oo
2201.oo
0 .oo
-TNUDP 111
0.00
0 .oo
0 .oo
-short t e r m brgs
0.00
800.00
1600.00
-market access brgs
0.00
0.00
0.00
Other expenses/provns
628.89
1016.46
1066.84
809.12
Increase incurrent assets
594.71
969.57
1522.02
Income distribution
1000.16
971.21
TOTAL USES
21282.62 28232.18 25911.20
-
-
Opening Cash & bank balanl 31909.70
Add: increase/(decrease)
-17105.46
Closing Cash& bank balanc 14804.24
1804.24
-12779.24
2025.00
75
2025.00
1230.68
3255.67
1900.00
0 .oo
13800.00
3783.13
0 .oo
0 .oo
0 .oo
1600.OO
0 .oo
1125.40
628.66
168.21
24485.40
3255.67
2820.31
6075.98
2008-09
0.00
2009-10
0.00
15000.00
0.00
0 .oo
0 .oo
10000.00
113.97
150.04
435.65
493.05
0.00
0.00
12134.37
14086.13
4285.88
49 17.6 1
7848.49
9168.52
2 7741.39 24671.82
0.00
0.00
15900.00
4823.13
0.00
0.00
18300.00
5633.04
36 1.75
0.00
0.00
0.00
0.00
0.00
1600.00
1600.00
0.00
0.00
1249.22
1469.14
580.71
669.12
1622.34
1776.15
2613 7.14 2 M 7 . 4 5
6075.98
1604.25
7680.23
7680.23
-4775.63
2904.61
23. The largest requirement of funds i s for disbursement o f loans, which i s projected to range
from a level o f Rs. 102.50 crore during 2004-05 to Rs. 183.00 crore in 2009-10. To meet the
increased requirement, cash deposits (which were at Rs. 319.10 crore as at end March 2004) are
projected to be steadily drawn down (since the return on such balances has been declining
steeply). Further, borrowings under TNUDP I11are estimated to be Rs.500 crore (USD 111 mn.).
Short term borrowings during 2005-08 (Rs.100 crore) would be to meet short t e r m lending
requirements. Market access borrowings o f Rs.lOO crore are projected during 2009-10 to meet
the overall gap in resources. Thus, total borrowings during the period are estimated at Rs. 700
crore, o f which under TNUDP I11 would be Rs.500 crore (approx $ 111 mn). The closing cash
balances as at end March 2010 are estimated to be around Rs. 29.05 crore.
24. Scenario/ Sensitivitv Analysis: Further as part o f this financial assessment, sensitivity
analyses was also carried out to examine the likely impact o f changes in key variables such as
volume o f disbursements, drop in lending rates / spreads, etc. and results o f this analyses i s
available in project files.
25. Oualitv o f Portfolio: The portfolio o f assets for TNUDF consists mainly o f loans for water
supply (8 %), sewerage and sanitation (38 %), street lighting (l%),
storm water drains (1% bus
stations and markets (4%), and urban bridges and roads projects (48%)14. The loan recovery rate
has been very good at close to 99.7 percent. This i s largely due to high quality o f appraisals and
their careful selection o f creditworthy ULBs. Cost recovery under financed projects, community
contributions and escrow accounts have also played a significant role in the good quality o f their
portfolio. The fact that a large proportion o f their loans were refinanced with other institutions i s
indicative o f a good portfolio.
26. The Annual Financial Statements o f TNUDF have received unqualified audit opinions from
independent auditors acceptable to the Bank. Under TNUDP I11TNUDF will continue to submit
Audited financial statements to the Bank within six months o f the end o f the financial year (See
Annex 7).
27. In conclusion, TNUDF i s a sustainable financial intermediary and has had a satisfactory
performance under the Second Tamil Nadu Urban Project despite the interest rate down turn and
its inability to be responsive to market changes. Under TNUDP 111, changes have been made to
ensure that TNUDF would have the benefit o f market orientation, a diverse resource base and a
wider product range ensuring i t s sustainability in the long term. TNUDP I11 also addresses the
institutional constraints which impeded loan approvals under the previous project. This has been
addressed by integrating approval processes between the municipal administration governing
ULBs and TNUDF. Moreover, the proposed project aims at removing the impediments in the
development o f market access o f ULBs through changes in policies affecting their
creditworthiness (greater empowerment through decentralization, property tax revisions, etc.),
strengthening their financial management capabilities, and support to their efforts to access the
markets for their resource needs. The project meets the requirements o f OP 8.30 as TNUDF i s
structured to play the critical role o f a sustainable financial intermediary for the ULBs through i t s
market based borrowing and on-lending terms and the diversification o f i t s resource base and
line o f products.
l4TNUDF
Annual Report 2003-2004)
76
Annex 9 C: ULB FinancialAssessment
INDIA: Third Tamil Nadu Urban Development Project
1. An assessment on the finances o f 151 ULBs in Tamil Nadu, comprising 6 Municipal
Corporations and 155 Municipalities, was carried out during project preparati~n'~.The
assignment was undertaken with a view to estimate their financial status and borrowing capacity
and provide a basis for designing the proposed TNUDP I11project. A detailed report i s available
in project files. In general, the ULBs financial situation would permit them to sustain proposed
debt financing under TNUDPIII. The major sources o f revenue for ULBs are property taxes,
accounting for about 35% o f total revenue income for Municipal Corporations and 32% for
Municipalities. Whereas devolution funds account for about 7% o f total revenue income for
Municipal Corporations and 19% for Municipalities. On the expenditure side, personnel costs
account for the largest driver, accounting for about 42% o f total revenue expenditure for
Municipal Corporations and 3 5% for Municipalities.
2. Further, an analysis o f investment and borrowing capacities was undertaken individually on a
sample o f 29 ULBs (6 Municipal Corporations and 23 Municipalities), based on future cash
flows that the ULB i s expected to generate over the next 20 years, under the following key
assumptions:
0
Property tax receipts were estimated based on the assumption that demand would grow based
on historical growth rate, with 30% base tax revision every 5 years;
0
Collection efficiency for property and professional taxes would increase by about 5% over a
ten year period, whereas that for water charges would remain at historical average;
0
Each ULB receives SFC devolutions based on the projected figures from the GoTN budget,
wherein 8% o f state's own tax revenues would be available for distribution. Out o f that, 48%
would be devolved to ULBs on a per capita basis;
0
For the purpose o f project cash flows, means o f finance would be 20% grant, 10% ULB
contribution, 15% user contribution and the remaining as loan. In cases where cost recovery
i s not possible, O & M on new investments and debt servicing would be factored in;
0
The effect o f Pay Commission Recommendations (once in 10 years) i s factored in, along
with the increase in salary on account o f DA and increments in the years 2009- 10 and 20 1920; and,
0
TNUDF funds would carry 8% interest rate and 20 years repayment period, including 5 years
grace period.
3. The extent o f sustainable investment and borrowing capacity i s calculated such that the
following conditions are met: (i)
ULB has no cash deficit in any year, after taking into account
additional operating costs, ULB counterpart funding and debt servicing obligations; (ii)
debt
service ratio (principal repayment and interest payable, divided by total revenue) i s maintained at
maximum o f 30 percent; (iii)debt service amount, including existing debt servicing, i s
maintained at less than 40 percent o f operating surplus.
~
l5As o f June 14,2004, there are 166 ULBs in the state of Tamil Nadu, consisting o f 6 Municipal Corporations, 149
Municipalities and 11 Village Panchayats.
77
SUMMARY OF 29 ULB INVESTMENTS AND BORROWING CAPACITY
Base Case
Planned invt.
No. Name of the Local body Investment Capacity as per
Borrowing Capacity*
*Base case: SFC as per GoTN budget, existing revenue & expenditure growth trends, property tax revision in 200607 and existing collection performance; Optimistic: collection efficiency o f property tax increased by 10% fiom the
trend, capped at 99%; Pessimistic: SFC decreased by 10% from budget, with decline in property tax collection
efficiency b y 10%
78
Annex 10: Safeguard Policy Issues
INDIA: Third Tamil Nadu Urban Development Project
Social
1. TNUDF’s Environmental and Social Framework (ESF) and i t s process o f social screening
would facilitate TNUDF, the ULBs and CMDA to address various social impacts, including
some temporary and permanent adverse impacts, likely to be caused by implementation o f
specific project components and their sub-projects. The adverse impacts could include
temporary/permanent loss o f income, sources o f livelihood, homes and structures and other
common resources on which communities depend for their social, economic and cultural needs.
Such a process would also enable TNUDF to categorize the sub-projects as S l y S2 and S3 as a
basis for finalizing the kind o f response required to avoid, reduce and mitigate adverse social
impacts.
2. The ESF meets the requirements o f Involuntary Resettlement OP 4.12 and BP 4.12 in that it
very clearly and explicitly recognizes all those whose sources o f income and livelihood and
whose houses and such structures are affected by the project irrespective o f their legal status and
define project affected families, project affected persons and their entitlements in a way that all
those who are likely to be adversely affected are appropriately resettled and rehabilitated. The
ESF also contains appropriate process e.g. o f Rehabilitation and Resettlement (R&R) that
includes cut-off date, social assessment, process o f consultation for participatory preparation,
implementation and monitoring o f Rehabilitation Action Plan (RAP), redressal o f grievances and
arrangements for Monitoring and Evaluation. These would be complemented by strengthening
institutional arrangements at TNUDF that would center around the appointment o f a consultant
or a consulting organization (Social Manager) for the duration o f the project.
Environment
3. Environmental issues associated with the sub-projects under TNUDP I11 are expected to be
varied in nature with complexities o f such issues largely depending upon the specific subproject
types and their locations. The different safeguard policies to be triggered by the project can be
determined only after identification o f the specific subprojects. However, from the information
available at this stage on the various subproject types, it i s apparent that the safeguard policy on
Environmental Assessment OP4.01 i s triggered requiring the project to carry out an
Environmental Assessment. Applicability o f other safeguard policies such as OPBP 4.04 on
Natural Habitats, OP/BP 4.36 on Forests, OPN 11.03 on Cultural Properties and the need for
appropriate mitigatiodmanagement plans will be evaluated and addressed during subprojects
preparatiodscreening stage. The framework approach, already in use during previous TNUDP
projects to manage the environment issues in sub projects, has necessary provisions to address
this concern. The same approach will continue to be used in TNUDP I11 with specific
enhancements to improve the effectiveness of the Environment and Social Framework.
4. Based upon the potential magnitude o f environmental impacts involved, sub-projects would
be classified into three categories (El major impact, E2 moderate impact, and E3 no impact) and
appropriate mitigation and enhancement actions will be included in sub-project design.
Assessment and studies will be undertaken to prepare subproject specific EA/EMPs for E l and
79
E2 projects. Each subproject, which i s classified as E l and E 2 will be approved by the Bank
during the sub-loan appraisal stage.
5. The Environmental and Social Framework (ESF) has the following enhancements:
0
Reflects the regulatory changes related to environment in the context o f the project and
changedupdates in applicable Bank policies/guidelines;
0
Strengthens the framework including formats for monitoring and reporting progress o f E M P
implementation;
0
Strengthens institutional and implementation framework including contractual obligations
between the borrower (such as municipalities) and the civil contractors; and,
0
Strengthens the policy framework to include environmental enhancement as part o f
environment management at sub project levels.
6. To strengthen the institutional capacity, and to improve environmental management in
TNUDP 111, TNUIFS will recruit an environment and social manager (or retain a consulting
firm) with the dedicated responsibility o f overseeing the environment management process in
TNUDP 111. Additionally, suitable training and capacity building initiatives will be designed and
implemented to ensure effective implementation o f the ESF.
7. C M D A would hire consultants to prepare the DPR for the Traffic and Transport sub-projects.
The Terms o f Reference for the DPR would include both Environmental and Social Assessment.
DPR consultants will propose a category (El, E2, E3/S1, S2, S3) based on their findings. The
proposed category would need to be agreed by C M D A and TNUIFS and confirmed by TNUIFS.
DPR consultants will, ifrequired, develop the relevant Environmental Management Plan (EMP)
and the Resettle Action Plan (RAP). C M D A would forward to TNUIFS for review and approval.
Once TNUIFS has provided approval, C M D A would send the E M P and R A P for no-objection to
the Bank. C M D A would proceed to bid the works once the Bank’s No-objection has been
received. Contracts for the works would be signed only when the land is clear and available for
construction. A grievance committee and procedure would be set up by TNUIFS and C M D A to
investigate any complaints received from affected persons. A summary o f ESF, procedures and
contact numbers would be made available to the public in the form o f a short brochure in Public
Information Centers. The matrix below describes the implementation process in greater detail.
80
Annex 11: ResponsibilityMatrix for the TNUDF - CMDA Component
INDIA: Third Tamil Nadu Urban Development Project
~
Stages
[mmediate
:Before
I'NUDP 111
Negotiation)
R o l e of CMDA
"Traffic and
rransport
Projects"
Preparation
Accessing
hnds from
TNUDF
1
1
1
1
C M D A identifies individual
"Traffic and Transport
Projects"
C M D A hires consultants to
prepare DPRs o f individual
"Traffic and Transport
Projects"
CMDA, based on DPR
consultants findings,
consults TNUIFSL on
El/E2/E3 and SllS21S3
categories as per the ESF
C M D A P M U make any
adjustments to the DPR
TORSbased on TNUIFSL
recommendation.
DPR Consultants carry out
E N S A and develop EMPs
and also R A P as required
C M D A P M U reviews the
DPR consultants outputs.
C M D A ensures that
implementation o f E M P and
also R A P as an obligation
i s explicitly mentioned in
the biddinglcontract
documents as well as in the
DPRs
C M D A submits the DPRs
along with the EAISA
reports to TNUISF
C M D A provides
clarificatiordinformation
sought by TNUDF
C M D A undertakes
necessary changes as
required by TNUDF
C M D A obtains approval o f
the EAtEMP for all E 1 E 2
"Traffic and Transport
Projects"and RAPs for all
S U S 2 "Traffic and
Transport Projects" from
Role of TNUIFS
Prepare TOR and start
recruitment process with a
view to establishing
environmental and social
capacity for ESF in TNUIFS
by July 3 l",2005.
TNUIFS agrees with
C M D A on the
environmental category
E l E 2 E 3 and the social
category S 1lS2lS3 o f the
sub-project as per the ESF.
Remarks
I
Training o f environmental
and social specialists on
ESF o f TNUDF
I
C M D A should develop a
standard TORfor
undertaking the EA/EMP
and also S N R A P
Guidelines on "Traffic and
Transport Projects"
categorization available in
TNUDF's ESF
C M D A P M U proactively
consults with the
TNUIFS's Environmental
and Social Specialist for
confirming the category o f
"Traffic and Transport
Projects" as well as
guiding the EA and SA
E A E M P s and SAiRAPs
are fmalized in
concurrence with
TNUDFIWorld Bank
C M D A maintains a public
information center
C M D A needs to set up a
conflict resolution
mechanism to address any
community/public concerns
on the project.
TNUIFS provides
advice/guidance to C M D A
on EA/EMP and also
SA/RAP o f individual
"Traffic and Transport
Projects".
1
1
TNUIFS provides approval
o f the E A E M P for all
E1 E 2 "Traffic and
Transport Projects" and
RAPs for all S 1/S2 "Traffic
and Transport Projects" to
C M D A in line with the
C M D A Project Agreement.
TNUIFS checks
compliance with ESF
(including the level o f
EkIEMPs, S N R A P and
regulatory requirements) In
case TNUDF observes any
discrepancies in
81
1
C M D A ensures that all
regulatory
approvals/clearances are
obtained at appropriate
stages
Stages
Project
Implementati
on and
Monitoring
Role of CMDA
TNUIFS in line with the
C M D A Project Agreement.
After TNUIFS approval,
C M D A obtains no objection
o f the EA/EMP for all
E l m 2 "Traffic and
Transport Projects" and
RAPSfor all S 11S2 "Traffic
and Transport Projects"
from the World Bank in line
with the C M D A Project
Agreement.
Thereafter C M D A ensures
that Transport and Traffic
Projects are carried out in
accordance with the relevant
environmental assessment,
environmental management
plan, or resettlement action
plan, as the case may be,
satisfactory to the Bank.
C M D A i s responsible to
ensure that the EMPSIRAP
are implemented in line with
the C M D A Project
Agreement. C M D A w i l l
"contract" with an
implementing agency
(DHRW) to implement the
civil works and the
EMPSIRAPSand w i l l ensure
that the implementing
agency (DHRW) has made
adequate arrangements for
such implementation.
C M D A engages an
independent agency (or
includes in the scope o f the
supervision consultant) to
monitor the E M P M P
compliance (including
implementation o f
conditions stipulated by
regulatory authorities while
according
approvalslclearances) for all
E l m 2 and SllS2 category
moiects. Works contracts
Role o f TNUIFS
categorization o f ""Traffic
and Transport Projects"
(especially any down
grades from what i s
mentioned in the ESF),
advice o f the World Bank
should be sought. All the
down grades should -have
no objection o f the World
Bank.
TNUIFS ensures that
adequate arrangements are
in place for implementation
o f EMPs/RAPs.
TNUIFS ensures that all
key environmental and
social clearances are
obtained before committing
funds
TNUIFS's Environmental
and Social Specialists
prepare an environmental
and social due diligence
summary for each E l m 2
and also^ S11S2 project.
TNUIFS undertakes its own
reviewlassessments o f projects
periodically
reviews the monitoring reports
provided by C M D A
Provides commentslsuggestions
for improving E M P and R A P
implementation
Reports to Bank on quarterly
basis on the environmental
performance o f all E l m 2 and
also SllS2 Projects
82
iemarks
C M D A needs to ensure that any
changeslmodifications
warranted during project
implementation are carried out
to the satisfaction o f TNUIFS
IWB
Stages
Role of CMDA
can only be signed when the
resettlement plan has been
fully implemented.
1
CMDA seeks regular reports
from the implementing
agency for all projects.
Quarterly reports are
forwarded to TNUDF.
1
CMDA ensures that
comments/suggestions from
TNUIFS are addressed and
recorded.
Role of TNUIFS
83
Remarks
Annex 12: Project Processing Schedule
INDIA: Third Tamil Nadu Urban Development Project
Project Schedule
Time taken to prepare the
project (months)
First Bank mission
(identification)
Appraisal mission departure
Negotiations
Planned date o f
Effectiveness
Planned
10 months
Actual
9 months (May 2004 February 2005)
05/27/2004
02/14/2005
4/18/2005
09/30/2005
02/14/2005
05/02/2005
Preparation Assistance:
Proceeds o f Ln. 4478-IN
Bank staff who worked on the project included:
Name
Abha Joshi-Ghani
Raghu Kesavan
K. Mukundan
N.V.V. Raghava
Priya Goel
Sam Thangaraj
Kirtan Chandra Sahoo
Mam Chand
Dara Lengkong
Varsha Marathe
Nina Masako Eejima
Sally Burningham
Graham
Douglas I.
Christopher Juan Costain
George Peterson
Oscar Alvarado
Barjor Mehta
Eliotaro Codato
I Lawrence Hanna
Jayashree Srinivasan
Mamata Baruah
I
Specialty
Sr. Infrastructure Finance Specialist/Task
Leader
Infrastructure Finance Specialist
Urban Specialist
Municipal Engineer
Financial Management Specialist
Sr. Social Development Specialist
Environment Specialist
Sr. Procurement Specialist
Young Professional
Financial SDecialist
Sr. Legal Counsel
Senior Transport Specialist
Urban Infrastructure ( Consultant)
Lead Finance Specialist
Municipal Finance ( Consultant)
Senior Infrastructure Specialist
Sr. Urban Specialist
Peer Reviewer
Peer Reviewer
Program Assistant
Program Assistant
84
I
Annex 13: Documents in Project File
INDIA: Third Tamil Nadu Urban Development Project
A. Project Implementation Plan
1. TNUDF Operations Manual
2. Procurement Plan for C M A and C M D A
B. Bank Staff Assessments
1. Aide Memoires
C.
1.
2.
3.
4.
5.
Other
Note o f Action Plan o f TNUDF
TNUDF - Urban Finance Assessment Study (Vol I,I1&III)
Financial Review o f TNUDF
Note on Interest Rate Mechanism Setting for TNUDF
A Note on Institutional Framework for Implementation o f Transportation Component o f
TNUDP I11
6. Environment and Social Framework Document
7. Note on Revision o f Property Tax in Urban Local Bodies in Tamil Nadu
8. Minutes of the Regional Review Meeting
85
Annex 14: Statement o f Loans and Credits
INDIA: Third Tamil Nadu Urban Development Project
Difference between
expected and actual
disbursements
Original Amount in US$ Millions
Project ID
FY
Purpose
IBRD
IDA
SF
GEF
Cancel.
Undisb.
Orig.
Frm. Rev’d
6.65
0.00
0.00
300.00
0.00
0.00
0.00
120.00
0.00
0.00
0.00
0.00
120.00
0.00
0.00
154.00
0.00
0.00
0.00
148.98
-12.50
0.00
2005
Lucknow-Muzaffarpur National Highway
620.00
0.00
0.00
0.00
0.00
620.00
0.00
0.00
2005
Hydrology I1
104.98
0.00
0.00
0.00
0.00
104.98
1.55
0.00
0.00
106.23
-7.50
0.00
Rural Roads Project
PO77977
2005
PO86518
2005
IN SME Financing & Development
PO84792
2005
Assam Agric Competitiveness
PO77856
PO84632
PO75058
2005
TN HEALTH SYSTEMS
99.50
0.00
110.83
0.00
0.00
415.65
PO73651
2005
DISEASE SURVEILLANCE
0.00
68.00
0.00
0.00
0.00
65.67
-3.83
0.00
PO73370
2005
Madhya Pradesh Water Sector
Restructurin
394.02
0.00
0.00
0.00
0.00
372.05
-18.64
0.00
PO50655
2004
RAJASTHAN HEALTH SYSTEMS
DEVELOPMENT
0.00
89.00
0.00
0.00
0.00
90.37
12.75
0.00
PO55459
2004
ELEMENTARY EDUCATION
PROJECT (SSA)
0.00
500.00
0.00
0.00
0.00
372.73
-11.91
0.00
PO78550
2004
Uttar Wtrshed
0.00
69.62
0.00
0.00
0.00
68.25
-3.48
0.00
MAHAR RWSS
0.00
181.00
0.00
0.00
0.00
186.25
5.76
0.00
0.00
0.00
214.68
34.68
0.00
PO73369
2004
PO73776
2004
ALLAHABAD BYPASS
PO79865
2004
GEF Biosafety Project
PO82510
2004
Kamataka UWS Improvement Project
2003
Food & Drugs Capacity Building Project
PO75056
240.00
0.00
0.00
0.00
0.00
0.00
1.oo
0.00
0.90
0.12
0.00
39.50
0.00
0.00
0.00
0.00
39.50
11.70
0.00
0.00
54.03
0.00
0.00
0.00
55.59
15.36
0.00
0.00
0.00
0.00
0.00
331.63
42.87
0.00
PO50649
2003
TN ROADS
348.00
PO76467
2003
Chatt DRPP
0.00
112.56
0.00
0.00
0.00
119.42
5.00
0.00
PO73094
2003
AP Comm Forest Mgmt
0.00
108.00
0.00
0.00
0.00
90.77
-1.85
0.00
PO67606
2003
UP ROADS
488.00
0.00
0.00
0.00
0.00
418.22
97.27
0.00
2003
TechEngg Quality Improvement Project
0.00
250.00
0.00
0.00
0.00
279.29
50.26
0.00
150.03
0.00
0.00
0.00
112.58
65.76
0.00
PO72123
PO71272
2003
AP RURAL POV REDUCTION
0.00
PO40610
2002
RAJ WSRP
0.00
140.00
0.00
0.00
0.00
137.16
64.60
0.00
PO69889
2002
MIZORAM ROADS
0.00
60.00
0.00
0.00
0.00
46.84
2.97
0.00
PO71033
2002
KARN Tank Mgmt
0.00
98.90
0.00
0.00
0.00
109.30
3 1.49
0.00
2002
KERALA STATE TRANSPORT
255.00
0.00
0.00
0.00
0.00
186.05
7.72
0.00
0.00
442.80
0.00
0.00
0.00
299.64
324.15
0.00
PO72539
Gujarat Emergency Earthquake
Reconstruct
PO74018
2002
PO50647
2002
UP WSRP
0.00
149.20
0.00
0.00
0.00
157.96
102.62
0.00
PO50653
2002
KARNATAKA RWSS I1
0.00
151.60
0.00
0.00
0.00
151.62
46.45
0.00
PO50668
2002
MUMBAI URBAN TRANSPORT
PROJECT
463.00
79.00
0.00
0.00
0.00
461.59
104.78
0.00
PO10566
2001
GUJARAT HWYS
381.00
0.00
0.00
0.00
31.00
179.96
162.63
83.57
PO35173
2001
POWERGRID I1
450.00
0.00
0.00
0.00
0.00
135.78
94.78
8.46
PO50658
2001
TECHN EDUC 111
0.00
64.90
0.00
0.00
0.00
31.11
12.13
-6.98
PO71244
2001
Grand Trunk Road Improvement Project
589.00
0.00
0.00
0.00
0.00
347.42
240.42
0.00
0.00
65.50
0.00
0.00
10.00
37.64
17.51
-1.14
0.00
PO55454
2001
KERALA RWSS
PO70421
2001
KARN HWYS
360.00
0.00
0.00
0.00
0.00
214.05
90.72
PO55455
2001
RAJ DPEP I1
0.00
74.40
0.00
0.00
0.00
44.42
10.86
0.00
PO59242
2001
MP DPIP
0.00
110.10
0.00
0.00
0.00
81.76
38.76
11.75
PO38334
2001
RAJ POWER I
PO67216
2001
KAR WSHD DEVELOPMENT
180.00
0.00
0.00
0.00
2.02
68.83
69.18
0.00
0.00
100.40
0.00
0.00
0.00
99.29
68.99
0.00
516.00
0.00
0.00
243.71
209.65
-39.62
PO09972
2000
NATIONAL HIGHWAYS I11PROJECT
0.00
0.00
PO10505
2000
RAJASTHAN DPIP
0.00
100.48
0.00
0.00
0.00
64.88
43.10
15.81
PO50667
2000
UP DPEP 111
0.00
182.40
0.00
0.00
0.00
50.41
50.01
28.49
PO67330
2000
IMMUNIZATION STRENGTHENING
PROJECT
0.00
142.60
0.00
0.00
0.00
5.46
-83.17
0.00
PO50657
2000
UP Health Systems Development Project
0.00
110.00
0.00
0.00
0.00
83.94
52.92
0.00
PO49770
2000
REN EGY I1
80.00
50.00
0.00
0.00
0.00
83.00
58.17
27.22
PO45049
2000
AI)
DPIP
0.00
111.00
0.00
0.00
0.00
39.08
6.72
0.00
PO59501
2000
IN-TA for Econ Reform Project
0.00
45.00
0.00
0.00
0.00
37.06
5.30
7.94
PO55456
2000
IN-Telecommunications Sector Reform
TA
62.00
0.00
0.00
0.00
20.00
11.57
31.57
1.96
PO50646
1999
UP Sodic Lands I1
0.00
194.10
0.00
0.00
0.00
47.85
38.79
0.00
PO50651
1999
MAHARASH HEALTH SYS
0.00
134.00
0.00
0.00
16.96
39.65
50.48
2.57
PO45051
1999
2ND N A T L HIV/AIDS CO
0.00
191.00
0.00
0.00
0.00
44.09
39.57
0.00
PO45050
1999
RAJASTHAN DPEP
0.00
85.70
0.00
0.00
0.00
23.61
20.01
18.64
PO41264
1999
Wtrshd Mgmt Hills I1
85.00
50.00
0.00
0.00
0.00
5.87
8.40
0.00
PO38021
1998
DPEP 111(BIHAR and Jharkhand)
PO49385
1998
AP ECON RESTRUCTURM
PO35827
1998
WOMEN & CHILD DEVLPM
PO10561
1998
Natl Agr Technology
0.00
152.00
0.00
0.00
0.00
64.21
53.87
21.35
301.30
241.90
0.00
0.00
0.00
85.42
81.77
33.72
0.00
300.00
0.00
0.00
0.00
136.92
121.44
10.72
96.80
100.00
0.00
0.00
18.00
22.25
45.26
0.61
76.40
0.00
0.00
0.00
23.85
17.39
-4.19
PO10496
1998
ORISSA HEALTH SYS
0.00
PO44449
1997
RURAL WOMEN'S DEVELOPMENT
0.00
19.50
0.00
0.00
6.72
3.59
11.07
3.71
PO105 11
1997
MALARIA CONTROL
0.00
164.80
0.00
0.00
46.50
28.20
73.14
26.75
PO10473
1997
TUBERCULOSIS CONTROL
0.00
142.40
0.00
0.00
13.04
39.70
55.33
36.75
6,273.10
6,277.15
0.00
1.00
164.24
8,308.48
2,771.57
288.09
Total:
INDIA
STATEMENT OF IFC's
Held and Disbursed Portfolio
In Millions o f U S Dollars
Committed
Disbursed
IFC
IFC
Loan
Equity
Quasi
Partic.
ADPCL
42.12
0.00
0.00
0.00
0.00
0.00
0.00
0.00
AP Paper Mills
35.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2002/03
ATL
1.69
0.00
0.00
0.00
1.37
0.00
0.00
0.00
2003
Alok
17.50
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1992/93
h i n d Mills
0.00
0.50
0.00
0.00
0.00
0.50
0.00
0.00
2003
BHF
10.99
0.00
10.99
0.00
10.99
0.00
10.99
0.00
2001/04
BILT
0.00
0.00
15.00
0.00
0.00
0.00
15.00
0.00
2001
BTVL
0.00
5.80
0.00
0.00
0.00
5.80
0.00
0.00
2003
Balrampur
16.02
0.00
0.00
0.00
16.02
0.00
0.00
0.00
2001
Basix Ltd.
0.00
0.98
0.00
0.00
0.00
0.98
0.00
0.00
1984/91
Bihar Sponge
0.00
0.05
0.00
0.00
0.00
0.05
0.00
0.00
FY Approval
Company
2005
2005
Loan
Equity
Quasi
Partic.
2001103
CCIL
1.61
0.00
0.00
0.00
0.70
0.00
0.00
0.00
1990192
CESC
14.73
0.00
0.00
32.83
14.73
0.00
0.00
32.83
2004
CGL
15.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2004
CMScomputers
10.00
10.00
2.50
0.00
5.00
0.00
0.00
0.00
2002105
COSMO
0.00
4.20
0.00
0.00
0.00
4.20
0.00
0.00
2004
Caim Energy
40.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1995105
Centurion Bank
0.00
0.07
0.00
0.00
0.00
0.07
0.00
0.00
2005
DCM Shriram
30.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2003
DQEL
0.00
1.50
1.50
0.00
0.00
1.50
1.50
0.00
2003
Dewan
12.96
0.00
0.00
0.00
12.96
0.00
0.00
0.00
EXB-STG
0.3 1
0.00
0.00
0.00
0.3 1
0.00
0.00
0.00
1995
GE Capital
0.00
0.78
0.00
0.00
0.00
0.78
0.00
0.00
2001
GTF Fact
0.00
1.20
0.00
0.00
0.00
1.20
0.00
0.00
1994
GVK
0.00
7.45
0.00
0.00
0.00
7.45
0.00
0.00
1998
Global Trust
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1.oo
3.00
Gujarat Ambuja
1.oo
3.00
1994
2003
HDFC
100.00
0.00
0.00
100.00
100.00
2001
HIWEL
0.00
1.64
0.00
0.00
1998
IAAF
0.00
1.45
0.00
0.00
1995100
ICICI-SPIC Fine
0.00
2.19
0.00
0.00
1998
IDFC
0.00
15.46
0.00
0.00
2001
IIEL
0.00
3.20
0.00
1990193198
IL & FS
0.00
2.11
1992195
IL&FS VC
0.00
0.60
0.00
0.00
0.00
0.00
100.00
0.00
1.64
0.00
0.00
0.00
1.29
0.00
0.00
0.00
2.79
0.00
0.00
0.00
15.46
0.00
0.00
0.00
0.00
2.06
0.00
0.00
0.00
0.00
0.00
2.1 1
0.00
0.00
0.00
0.00
0.00
0.60
0.00
0.00
1996
India Direct Fnd
0.00
6.17
0.00
0.00
0.00
5.69
0.00
0.00
2001
Indian Seamless
6.00
0.00
0.00
0.00
6.00
0.00
0.00
0.00
1993
Indo Rama
5.24
0.00
0.00
0.00
5.24
0.00
0.00
0.00
1996
Indus I1
0.00
1.73
0.00
0.00
0.00
1.73
0.00
0.00
1992
Indus VC Mgt Co
0.00
0.01
0.00
0.00
0.00
0.01
0.00
0.00
1992
Info Tech Fund
0.00
0.60
0.00
0.00
0.00
0.60
0.00
0.00
2001
Jetair
0.00
0.00
15.00
0.00
0.00
0.00
15.00
0.00
2005
K Mahindra INDIA
22.00
0.00
0.00
0.00
22.00
0.00
0.00
0.00
2003
L&T
50.00
0.00
0.00
0.00
50.00
0.00
0.00
0.00
1990193
M&M
0.00
0.01
0.00
0.00
0.00
0.01
0.00
0.00
2002
MMFSL
10.10
0.00
8.01
0.00
10.10
0.00
8.01
0.00
2003
MSSL
0.00
2.29
0.00
0.00
0.00
2.20
0.00
0.00
2001
MahInfra
0.00
10.00
0.00
0.00
0.00
0.70
0.00
0.00
1996/99100
Moser Baer
23.22
9.68
0.00
0.00
23.22
9.68
0.00
0.00
1997
NICCO-UCO
1.88
0.00
0.00
0.00
1.88
0.00
0.00
0.00
200 1
NIIT-SLP
6.41
0.00
0.00
0.00
0.0s
0.00
0.00
0.00
2003104
NewPath
0.00
3.00
0.00
0.00
0.00
2.03
0.00
0.00
2003
Niko Resources
40.00
0.00
0.00
0.00
20.00
0.00
0.00
0.00
2001
Orchid
0.00
3.03
0.00
0.00
0.00
3.03
0.00
0.00
1997
Owens Corning
8.59
0.00
0.00
0.00
8.59
0.00
0.00
0.00
2004
Powerlinks
77.84
0.00
0.00
0.00
21.63
0.00
0.00
0.00
1995
Prism Cement
10.90
3.63
0.00
5.45
10.90
3.63
0.00
5.45
2004
RAK India
20.00
0.00
0.00
0.00
5.00
0.00
0.00
0.00
1995104
Rain Calcining
10.00
0.00
0.00
0.00
10.00
0.00
0.00
0.00
2001
SBI
50.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1997/00
SREI
8.00
0.00
0.00
0.00
8.00
0.00
0.00
0.00
1995
Sara Fund
0.00
5.94
0.00
0.00
0.00
5.94
0.00
0.00
2004
SeaLion
5.15
0.00
0.00
5.15
0.00
0.00
0.00
0.00
0.00
0.00
1.oo
0.00
Spryance
1.oo
0.00
2001/03
0.00
0.00
2004
Sundaram Finance
45.79
0.00
0.00
0.00
45.79
0.00
0.00
0.00
2000/02
Sundaram Home
10.02
0.00
0.00
0.00
10.02
0.00
0.00
0.00
1998
TCW/ICICI
0.00
3.31
0.00
0.00
0.00
3.31
0.00
0.00
2002
TML
50.00
0.00
0.00
0.00
50.00
0.00
0.00
0.00
1989
UCAL
0.00
0.01
0.00
0.00
0.00
0.01
0.00
0.00
2004
UPL
17.50
0.00
0.00
0.00
17.50
0.00
0.00
0.00
1996
United Riceland
7.50
0.00
0.00
0.00
7.50
0.00
0.00
0.00
2002
Usha Martin
21.00
3.60
0.00
0.00
21.00
3.60
0.00
0.00
200 1
Vysya Bank
0.00
3.66
0.00
0.00
0.00
3.66
0.00
0.00
1997
WIV
0.00
1.97
0.00
0.00
0.00
1.97
0.00
0.00
1997
Walden-Mgt India
0.00
Total portfolio:
855.07
0.02
0.00
0.00
0.00
0.02
0.00
0.00
120.44
56.00
138.28
521.65
98.30
53.50
138.28
Approvals Pending Commitment
FY Approval
Company
2005
Ap
2000
Equity
Quasi
Partic.
0.00
Loan
0.01
0.00
0.00
APCL
0.01
0.00
0.00
0.00
2005
Allain Duhangan
0.00
0.01
0.00
0.00
2005
Bharal Biotech
0.00
0.00
0.00
0.00
2004
CGL
0.01
0.00
0.00
0.00
2004
CIFCO
0.00
0.00
0.02
0.00
2001
GI Wind Farms
0.01
0.00
0.00
0.00
Paper Mills
2005
H & R Johnson
0.03
0.00
0.00
0.00
2004
Ocean Sparkle
0.00
0.00
0.00
0.00
2005
SRF Ltd.
0.02
0.00
0.00
0.00
2001
Vysya Bank
0.00
0.00
0.00
0.00
0 02
0.02
0.00
~
0 08
Total pending commitment:
89
Annex 15: Country at a Glance
INDIA: Third Tamil Nadu Urban Development Project
POVERTY and SOCIAL
2003
Population, mid-year (millions)
GNI per capita (Atlas method, US$)
GNI (Atlas method, US$ billionst
India
South
Asia
LOWincome
1,064.4
540
569.8
1,425
51 0
726
2,310
450
1,036
1.6
2.1
1.8
2.3
1.9
2.3
29
28
63
65
47
84
39
99
107
90
28
63
66
46
64
41
95
103
68
30
56
62
44
75
39
92
99
85
Average annual growth, 1997-03
Population (%)
Labor force (%)
Most recent estimate (latest year available, 1997-03)
Poverty (% of population below national poverty line)
Urban population (% of total population)
Life expectancy at birth (years)
Infant mortality (par i,OOO live births)
Child malnutrition (% of children under5)
Access to an improved water source (% ofpopulation)
Illiteracy (% of population age 15+)
Gross primary enrollment I%of school-age population)
Male
Female
Development diamond'
Life expectancy
I
1
GNI
per
capita
Gross
primary
nroiiment
Access to improved water source
-lndia
Low-income group
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1983
1993
2002
2003
212.3
19.7
6.0
17.6
16.4
273.9
21.3
10.0
22.5
23.1
510.2
22.6
15.2
24.2
26.3
603.3
23.8
14.5
22.2
24.4
-1.7
0.4
15.1
16.5
-0.6
1.3
34.4
25.2
0.7
0.7
20.6
13.9
1.4
16.3
19.6
18.3
1983-93
1993-03
2002
2003
2003-07
5.4
3.3
8.0
5.9
4.2
13.4
4.6
3.0
21.8
8.3
6.7
7.0
6.0
4.6
9.2
1983
1993
2o02
ZOO3
36.6
25.6
16.3
37.6
31.0
26.3
16.1
42.6
22.7
26.6
15.6
50.7
22.2
26.6
15.8
51.2
71.8
10.6
6.1
67.4
11.4
10.0
65.0
64.9
12.5
15.6
12.6
16.0
1983-93
1993-03
3.1
6.4
8.1
6.7
2.4
5.9
6.0
8.1
-5.2
6.4
6.2
7.1
9.1
6.7
7.3
8.7
5.2
5.6
5.3
6.3
4.5
7.1
7.5
10.6
-0.8
3.1
9.5
8.1
7.6
9.9
12.0
11.1
GDP (US$ billions)
Gross domestic investmenUGDP
Exports of goods and serviceslGDP
Gross domestic savingslGDP
Gross national savings/GDP
Cumnt account baiance1GDP
Interest paymentslGDP
Total debVGDP
Total debt servicelexports
Present value of debVGDP
Present value of debvexports
(average annual growth)
GDP
GDP per capita
Exports of goods and services
STRUCTURE of the ECONOMY
(% of GDP)
Agriculture
Industry
Manufacturing
Services
Private consumption
General government consumption
Imports of goods and services
(average annualgrowth)
Agriculture
industry
Manufacturing
Services
Private consumption
General govemment consumption
Gross domestic investment
Imports of goods and services
Economic ratios'
Trade
T
Iomestic
savings
Investment
i
Indebtedness
-Low-income group
-India
1 Growth of Investment and GDP (X)
;1: 1
10
a
ea
ee
-GDI
2a
00
ai
a2
a3
-O-GDP
I
T
in
a
O3
-10
-10
-Exports
+Imports
~~
Note 2003 refers to 2003-04 data are preliminary Gross domestic savings figures are taken directly from India's central statistical organization
The diamonds show four key indicators in the country (in bold) compared with its income-group average if data are missing, the diamond will
be incomplete
90
I
1
l5
II
India
PRICES and GOVERNMENT FINANCE
1983
1993
2002
2003
14.4
8.9
5.0
9.5
4.1
3.5
3.7
3.7
..
..
..
17.5
-4.3
-8.3
17.5
-6.0
-10.2
18.7
-4.9
-9.3
1983
1993
2002
2003
9,861
348
434
5,234
16,575
1,694
4.703
3,069
22,683
814
888
16,657
26,739
327
5,754
6,243
52,512
1,432
1,996
40,245
65,422
2,411
17,640
13,498
62,952
1,321
2,341
47,616
79,658
3,059
20,570
17,132
101
106
96
104
96
109
80
96
92
93
100
94
1983
1993
2002
2003
13,141
18,767
-5,626
27,947
31,468
-3,521
77.475
83,620
-6,145
90,568
96,590
-6,022
-527
2,558
-3,270
5,265
-4,935
14,807
-4,703
18,885
Current account balance
-3,595
-1,526
3,727
8,160
Financing items (net)
Changes in net reserves
2,777
818
10,160
-8.634
13,253
-16,980
8,820
-16,980
Memo:
Reserves including gold (US$ miiiiOnS)
Conversion rate (DEC, iocal/US$I
5,649
10.3
19,254
31.4
75,428
48.4
I 11,648
46.0
1983
1993
2002
2003
32,139
1,779
7,820
94,342
10,123
16,192
105,210
5,141
21,642
118.075
4,128
22,632
Total debt service
IBRD
IDA
2,618
246
91
8,345
1,509
294
13,042
3,029
637
20,545
2,048
693
Compositionof net resource flows
Ofkial grants
Official creditors
Private creditors
Foreign direct investment
Portfolio equity
380
1,360
1,318
0
0
368
1,754
2,634
668
3,567
410
-3,657
-1,861
3,611
944
559
-2,765
-1,963
3,137
11,355
World Bank program
Commitments
Disbursements
Principal repayments
Net flows
Interest payments
Net transfers
1,072
1,345
120
1,225
216
1,009
929
1,716
964
753
838
-86
1,523
1,465
3,196
-1,730
470
-2,200
1,169
1,557
2,403
-846
338
-1,184
Domestic prices
(% change)
Consumer prices
Implicit GDP deflator
Government finance
(% of GDP, includes current grants)
Current revenue
Current budget balance
Overall surplusldeflcit
TRADE
(US$ miiiions)
Total exports (fob)
Tea
Iron
Manufactures
Total imports (tin
Food
Fuel and energy
Capital goods
Export price index (7995=100)
Import price index (1995=700)
Terms of trade (1995=700)
BALANCE of PAYMENTS
(US$ millions)
Exports of goods and services
Imports of goods and services
Resource balance
Net income
Net current transfers
EXTERNAL DEBT and RESOURCE FLOWS
(US$ millions)
Total debt outstanding and disbursed
IBRD
IDA
1
98
O'
99
-GDP
a0
01
deflator
ml
02
'O'CPI
Export and import levels (US$ mill.)
00,000
T
1
75,000
,
97
98
99
.
W
Exports
.
.
02
01
03
m Imports
Current account balance to GDP 1%)
'T
Composition of 2003 debt (US$ mill.)
A - IBRD
8 - IDA
C - IMF
D - Other multilateral
E - Bilateral
F - Private
G Short-term
~
9120104
Development Economics
91
Additional Annex 16: Analysis o f Technical and Institutional issues in Sub-project Cycle
INDIA: Third Tamil Nadu Urban Development Project
1. The sub-project cycle runs as shown in the figure below.
Maintenance
A
Implementation
The technical and institutional issues identified at various stages, deriving lessons leamed from
TNUDP 11, are described below.
i. The sub-projects would be identified and prioritized by the U L B s through their demand
based investment plans or business plan.
ii. For preparation o f sub-projects, the ULBs would use the services o f consultants financed
through the Project Preparation Facility or the Project Development Advisory Facility
under component A. During this process, C M N T N U I F S germinate various ideas /
altemative approaches and disseminate knowledge o n appropriate technical standards to
the ULBs. The U L B s would use the “Engineering Software” prepared under TNUDP I1
for preparing their project reports and cost estimates, which will ensure standardization.
The Economic and Social Framework o f the Project (ESF) shall form the basis for
studying the social and environmental aspects o f the sub-projects. The same shall be
addressed during project preparation. During preparation, C M A would facilitate
institutional coordination and benchmarking o f current service levels in the ULBs. The
project provides incentives for investments in l o w income neighborhoods through the use
o f supporting capital grants.
iii.TNUIFS will appraise all sub-projects. Through the experience gained under TNUDP 11,
particular emphasis will be placed o n thorough analysis o f issues related to
implementation and sustainability o f sub-projects.
Salient issues focused on are:
implementation readiness with all approvals, clearances, inter-agency coordination, user
contributions etc; economic analysis for all major projects; institutional options for
O&M; mechanisms for preparing the ULBs for taking over the assets built; ensuring
quality o f supervision during implementation. Most o f these issues are captured under
Sector Investment Guidelines, Readiness Filters and a set o f sector related planning
92
requirements (developed based on lessons learned from TNUDP I1 and other urban sector
investments in India and included in Operations Manual o f TNUDF), compliance with
which needs to be ensured. With C M A participating in the Board o f TNUIFS, the CMA’s
ownership o f projects appraised and cleared by TNUDF Board i s also likely to improve.
During sub-project appraisal TNUIFS will ensure that all the sub-projects including those
implemented by C M D A w i l l comply with the requirement o f the ESF.
iv . Another key aspect to focus on during appraisal i s procurement and implementation
planning. Given the unpredictability o f its portfolio, TNUIFS could not prepare a
procurement plan under TNUDP 11, which would have guided i t s work and helped in
monitoring and reporting to TNUDF’s Board / the Bank. For the current project, it i s
proposed to have a procurement and implementation plan at least for the first year’s
pipeline o f approved sub-projects. The procurement plan has been prepared for the
C M D A component.
V.
For implementation and supervision o f sub-projects, the ULBs can use the services o f
consultants through PPF and PDAF. The scope would include supervision works quality,
environmental and social issues, and project management. The quality o f works
implemented under TNUDP I1 was in general satisfactory; the quality control manual
(with quality guidelines and formats etc) developed under TNUDP I1 would be actively
used under TNUDP 111, to further improve works quality. Activities for ensuring
consolidation o f institutional arrangements (e.g., training activities, setting up the
identified establishment, and gearing up for O&M), would be undertaken during
implementation. Progress o f implementation would be jointly monitored by TNUIFS and
CMA, with a post implementation evaluation.
vi. For Operation and Maintenance, with a number o f initiatives taken by ULBs so far for
smaller / local level outsourcing (helped by TNUIFS and CMA), there i s scope to further
expand outsourcing o f activities. Suitable capacity building activities would be
undertaken under the project in this regard. The service improvements and efficiency
gains achieved in various municipalities would be monitored by C M A .
93