Project Administration Manual · 2020. 11. 5. · 9 Saubhagya is a government of India project...

Meghalaya Power Distribution Sector Improvement Project (RRP IND 51308-004)

Project Number: 51308-004 Loan and Grant Numbers: {LXXXX; GXXXX} October 2020

India: Meghalaya Power Distribution Sector

Improvement Project

Project Administration Manual

http://www.adb.org/Documents/RRPs/?id=51308-004-3

ABBREVIATIONS

ADB – Asian Development Bank AFS – audited financial statements APFS – audited project financial statements AT&C – aggregate technical and commercial CAAA – controller of aid accounts and audit DSR – distribution sector roadmap EMP – environment management plan FIRR – financial internal rate of return FMA – financial management assessment FY – fiscal year IEE – initial environment examination kV – kilovolt PAM – project administration manual MeECL – Meghalaya Energy Corporation Ltd. MEPDCL – Meghalaya Power Distribution Corporation Ltd. MNREDA – Meghalaya New and Renewable Energy Development

Agency MW – megawatt RRP – Report and Recommendation of the President to the

Board

CONTENTS

I. PROJECT DESCRIPTION 1

II. IMPLEMENTATION PLANS 5

A. Project Readiness Activities 5 B. Overall Project Implementation Plan 6

III. PROJECT MANAGEMENT ARRANGEMENTS 8

A. Project Implementation Organizations: Roles and Responsibilities 8 B. Key Persons Involved in Implementation 12 C. Program Organization Structure 14

IV. COSTS AND FINANCING 15

A. Cost Estimates Preparation and Revisions 16 B. Key Assumptions 16 C. Detailed Cost Estimates by Expenditure Category 17 D. Allocation and Withdrawal of Loan/Grant Proceeds 18 E. Detailed Cost Estimates by Financier 19 F. Detailed Cost Estimates by Outputs and/or Components 20 G. Detailed Cost Estimates by Year 21 H. Contract and Disbursement S-Curve 22 I. Fund Flow Diagram 23

V. FINANCIAL MANAGEMENT 23

A. Financial Management Assessment 23 B. Disbursement 34 C. Accounting 35 D. Auditing and Public Disclosure 35

VI. PROCUREMENT AND CONSULTING SERVICES 36

A. Advance Contracting and Retroactive Financing 36 B. Procurement of Goods, Works, and Consulting Services 37 C. Procurement Plan 38 D. Consultant's Terms of Reference 43

VII. SAFEGUARDS 43

VIII. GENDER AND SOCIAL DIMENSIONS 47

IX. PERFORMANCE MONITORING, EVALUATION, REPORTING, AND COMMUNICATION 51

A. Project Design and Monitoring Framework 51 B. Monitoring 54 C. Evaluation 55 D. Reporting 55 E. Stakeholder Communication Strategy 56

X. ANTICORRUPTION POLICY 58

XI. ACCOUNTABILITY MECHANISM 58

XII. RECORD OF CHANGES TO THE PROJECT ADMINISTRATION MANUAL 59

Project Administration Manual Purpose and Process

1. The project administration manual (PAM) includes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with the policies and procedures of the government and Asian Development Bank (ADB). The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM.

2. The State of Meghalaya acting through the Meghalaya Energy Corporation Ltd. (MeECL), further through the Meghalaya Power Distribution Corporation Ltd. (MePDCL) and the Meghalaya New and Renewable Energy Development Agency (MNREDA), both reporting to the MeECL are wholly responsible for the execution and implementation of the project, as agreed between India as the borrower and ADB, and in accordance with the policies and procedures of the government and ADB. ADB staff is responsible for supporting implementation including compliance by MeECL, MePDCL, and MNREDA of their obligations and responsibilities for project execution and implementation in accordance with ADB’s policies and procedures.

3. At loan negotiations, the borrower, state and MeECL, and ADB have agreed to the PAM and ensured consistency with the loan and grant agreement, and project agreement. Such agreement is reflected in the minutes of the loan negotiations. In the event of any discrepancy or contradiction between the PAM and the loan/grant agreement, the provisions of the loan/grant agreement shall prevail.

4. After ADB Board approval of the project's report and recommendations of the President (RRP),

changes in implementation arrangements are subject to agreement and approval pursuant to relevant government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval, they will be subsequently incorporated in the PAM.

I. PROJECT DESCRIPTION A. Rationale 1. Meghalaya is a state in northeastern India with a population of approximately 3 million which shares its border on the north and east with Assam, and on the south and west with Bangladesh. The state has the highest rainfall in India, recording an average of 12,000 millimeter of rain annually. About 70% of the state is covered with forest. Meghalaya has some of the thickest primary forests in the country and therefore, constitutes one of the most important ecotourism circuits in India. Meghalaya is predominantly an agrarian economy with a significant commercial forestry-based industry. The state has abundant natural resources and mineral deposits (coal, limestone, granite, clay, etc.) and offers significant opportunities for investment. As per data from state budget fiscal year (FY) 2018–2019, the primary sector (agriculture, forestry, mining, and quarrying) contributes to 25.92% of gross state domestic product, secondary sector (hydropower, agro-based and food processing, chemical, and allied industries) contributes 16.83% and the tertiary sector which is the fastest growing sector driven by trade, hotels, real estate, finance, insurance, transport, communications, and other services, contributes to the remaining 57.24%.1 Despite its rich resource endowments and potential for tourism, the state continues to be industrially backward due to poor infrastructural facilities. Meghalaya has an average per capita of ₹90,213 and is one of the poorest states in the country and the north eastern region.2 Meghalaya is also one of the few states in India which despite having surplus availability, has lower per capita electricity consumption of 832 kilowatt-hours (kWh) against the national average of 1,122 kWh in 2017.3

2. Power sector overview. Under the Meghalaya Power Sector Reform Scheme 2010, the state government on 31 March 2010 unbundled Meghalaya State Electricity Board (MeSEB) into four separate companies along with their physical assets, properties, liabilities, obligations, and respective manpower. The four successor companies are: (i) Meghalaya Energy Corporation Ltd (MeECL); (ii) Meghalaya Power Generation Corporation Ltd. (MePGCL); (iii) Meghalaya Power Transmission Corporation Ltd (MePTCL); and (iv) Meghalaya Power Distribution Corporation Ltd. (MePDCL).

3. Meghalaya has a total installed generating capacity of 612.7 megawatts (MW) as of June 2018. Of this, 425.7 MW was generated from hydropower (354.7 MW owned by state utility and 71 MW from central allocation), and the remaining 187 MW from thermal-based generation capacity from the central government allocation to Meghalaya state.4 Meghalaya draws upon this central allocation to meet winter season deficits. Peak demand in FY2017 reached 399 MW and is expected to reach 470 MW in FY2021. This requires additional generation capacity additions to meet the 24X7 power supply program within Meghalaya even under the normal load growth scenario. Meghalaya has surplus generation capacity during summer due to high hydro availability and low demand but a capacity deficit during winter due to high demand and low hydro availability.

4. Distribution issues. Though Meghalaya has achieved 100% electrification for rural and urban households (635,802 consumers) as of February 2019, the voltage at the consumer premises drops below the allowable limit of 6% of the rated voltage at peak load periods. Further, power interruptions of more than 6 hours per day is common in remote rural networks. The average aggregate technical and commercial (AT&C) losses of the distribution network in 2017

1 India Brand Equity Foundation. 2019. IBEF Report. Delhi. 2 According to 2017-18 data, only five states- Assam, Bihar, Manipur, Jharkhand and Uttar Pradesh have lower per

capita than Meghalaya. http://statisticstimes.com/economy/gdp-capita-of-indian-states.php. 3 State wise per capita electricity consumption in India. energysector.in/power. 4 Data obtained from Meghalaya State Load Dispatch Center (SLDC) - June 2018.

https://www.ibef.org/download/meghalaya-apr-2019.pdf

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was 32.65%.5 Of the six circles in the Meghalaya distribution network, AT&C losses attributable to three of them (East Garo Hills, West Garo Hills, and Central) are estimated to be more than 50%. Further, the existing distribution network is overloaded. Majority of the 33/11 kilovolt (kV) substations in rural areas consist of outdated technology and are without control rooms. This has led to difficult system operation particularly during heavy rains and mist which is prevalent all year round in many geographical areas of the state. The consumers in rural areas are connected to long low-voltage distribution lines that contribute to high technical losses and low power quality. The billing efficiency of MePDCL is only 67.35% as most of the consumer meters (approximately 75%) installed by MePDCL are outdated resulting in high commercial losses. Meghalaya has a mountainous terrain with poor road conditions in most rural areas. This means maintenance of distribution lines and transformers and bill collection in remote areas are a daunting task. Higher AT&C losses, aged distribution assets and subsidized tariff for the poor and agricultural consumers are the major reasons for the below-cost revenue recovery which has led to poor financial state of the distribution utility. The need for huge capital to develop the aged infrastructure and the subsidized tariff in rural areas make it less attractive for private sector in rural electrification.

5. Government programs for the distribution sector. 24X7 Power for All was a joint initiative of Government of India and Government of Meghalaya to provide 24X7 quality, reliable and affordable power to all domestic, commercial, agricultural, and industrial consumers. MePDCL also signed an agreement with Ministry of Power and Government of Meghalaya under the Ujwal DISCOM Assurance Yojana (UDAY)6 to reduce their AT&C losses from 34.76% in FY2015 to 15% by FY2020. This has to be achieved through various central government supported schemes such as (i) Integrated Power Development Scheme (IPDS)7; (ii) Deen Dayal Upadhyaya Gram Jyoti Yojna (DDUJGY);8 and (iii) Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya).9 Though 100% electrification was achieved through Saubhagya, the implementation of identified measures under other schemes are progressing slow due to lack of sufficient funds. The proposed project will help MePDCL to implement some of these measures such as metering, distribution network strengthening and billing efficiency improvement. The AT&C losses are estimated to exceed 42% by 2024 without this proposed intervention. 6. Alignment with ADB and country priorities. The proposed project is well aligned with ADB’s Strategy 2030 operational priorities of (i) promoting rural development and addressing poverty by strengthening and modernizing the distribution network thereby improving the access to electricity and creating economic opportunities in rural areas; (ii) accelerating progress in gender equality by creating gender inclusive income generation activities using renewable mini grids in remote villages; and (iii) tackling climate change by reducing AT&C losses and ensuring efficient distribution of state generated indigenous renewable hydropower. The proposed investment is also aligned with the India country partnership strategy for 2018–2022 for inclusive infrastructure in hinterlands and low-income states and support economic growth in the less developed region of the country. The project will support India’s Nationally Determined Contribution (NDC) goals10

5 The AT&C losses and billing efficiency data are obtained from detailed project report prepared by MePDCL. 6 UDAY is the financial turnaround and revival package for electricity distribution companies of India (DISCOM) initiated

by the Government of India. 7 IPDS is to support the strengthening of sub-transmission and distribution networks in urban areas, metering and IT

enablement of distribution network etc. 8 DDUGJY is designed to support reforms in rural electrification such as separation of agriculture and non-agriculture

feeders, strengthening and augmentation of sub-transmission and distribution in rural areas. 9 Saubhagya is a government of India project aimed to attain 100% electrification and provide free electricity to

households below poverty line. Meghalaya achieved 100% electrification in February 2019. 10 Emission intensity of economy reduced by 33-35% by 2030 from 2005 levels (Government of India’s Intended

Nationally Determined Contributions)

https://en.wikipedia.org/wiki/Government_of_India

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through reduction of distribution losses and Sustainable Development Goal (SDG) 7 by improving access to electricity and quality of power in the poor and rural areas. 7. ADB value addition. This will be the first energy sector intervention for ADB in the state of Meghalaya. ADB has rich experience in India through previous projects in other states including northeastern state of Assam. ADB also has experience in financing distribution network improvement including loss reduction in India and other south Asian countries. ADB will be able to share the lessons learned and experiences gained from distribution improvement and strengthening projects in Madhya Pradesh and Sri Lanka, and rural electrification projects in Bangladesh and Nepal, and translate these experiences into robust project design and implementation. ADB will assist MePDCL in establishing dedicated project management unit for implementing the project. In addition, ADB has assisted MePDCL in improving its procurement and safeguard monitoring capacity to meet the requirements of ADB’s Safeguard Policy Statement (2009) and procurement policy for ADB-financed investments. It is expected that MePDCL will mainstream the good practices embedded in ADB policies. A fully-fledged smart meter project incorporating online meter reading and billing with auto disconnection and reconnection of services will be implemented in the capital city of Meghalaya with a potential extension of covering entire state in the future. ADB’s experience in developing mini grid interventions using indigenously available energy resources to support gender inclusive income generation activities in the backward and poor remote villages will also be explored. ADB has also assisted MePDCL in carrying out survey, Geographic Information System (GIS) based mapping of distribution networks, network simulation in selected areas to ensure the proposed project solution has the optimal design configuration. Several distribution components with technology improvements11 will be introduced under this project to modernize their distribution system, adapt to extreme weather, and improve the robustness of the system. These project components will also reduce the power outages and the operation and maintenance cost of the distribution system. 8. Climate mitigation is estimated to cost $92.6 million, and climate adaptation is estimated to cost $27.8 million. ADB will finance 98% of mitigation cost, and 100% of adaptation cost. The Japan Fund for Poverty Reduction (JFPR) grant will finance 2% of mitigation cost. By modernizing and improving the distribution network, the project will contribute to climate change mitigation in terms of efficient transfer of renewable hydropower, and reduced AT&C losses. The distribution investments are designed to withstand heavy rainfall, lightning and windspeed to adapt to potential climate change risks in the region. The details on mitigation and adaptation financing are presented in the climate change assessment and climate risk vulnerability assessment.12 B. Impact and Outcome 9. The project is aligned with the following impact: government’s target of power-cut free state and better performance of electricity distribution business in Meghalaya.13 The project will result in the following outcome: reliability and quality of power supply to consumers at distribution level in Meghalaya improved.14

11 Distribution components with technological improvements include hermetically sealed transformers, maintenance

free dehydrating breathers for transformers, fault passage indicators, auto-reclosures, polymer insulators, higher fault rating lightning arrestors, containerized mobile emergency substations and modern network planning software. The details on this can be found in the supplementary document - 21. Innovative Components and Technology Improvements Proposed in the Project.

12 Climate Change Assessment and Climate Risk Vulnerability Assessment (accessible from the list of linked Documents in Appendix 2 of the RRP). 13 Government of India, Ministry of Power. 2015. 24X7 Power for All Meghalaya. Delhi. 14 The design and monitoring framework is in Section IX.

https://powermin.nic.in/sites/default/files/uploads/Meghalay_24x7-PFA_Final_Doc_14_Sep_15.pdf

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C. Outputs 10. Output 1. Distribution network in Central, East Garo Hills and West Garo Hills strengthened and modernized. This will include (i) construction of 23 new 33/11 kV substations, and renovation and modernization of 45 units of 33/11 kV substations including control room equipment and protection systems; (ii) installation of auto reclosers and fault passage indicators at 11 kV and 33 kV lines; (iii) installation and upgrading of 2,214 km of 33 kV and 11 kV distribution lines; (iv) upgrading of distribution transformers in high load growth areas; and (v) renovation of rural distribution network to support mini-grid generation in three selected villages. 11. Output 2. System for meter reading, billing and collection improved. Existing outdated electromechanical meters will be replaced with smart meters targeting approximately 180,000 households (about 29% of consumers at distribution level) and new meter testing laboratory will be commissioned. A smart metering scheme with online meter reading, billing and collection with auto disconnection and reconnection of services will also be implemented in the capital city of Meghalaya for up to 75,000 consumers. This project will also be used for evaluation of technical and commercial feasibility for extension of fully-fledged smart metering across the state in future. 12. Output 3. Capacity of executing agency to plan and implement distribution sector projects strengthened. This will include support for (i) preparation of distribution sector roadmap (DSR) to plan the adequacy and effectiveness of the existing distribution system for meeting future system demands and service standards, and determine the developments needed in respective years; (ii) preparation of financial roadmap to separate financial and HR functions of MePDCL from MeECL; and (iii) implementation support to effectively monitor the project and ensure its technical, procurement and safeguard compliances as required. The DSR will help MePDCL identify the immediate, medium-term and long-term investments, strategies and policies for systematic development of the distribution sector for its modernization, improved financial performance, and make distribution business viable in the long run. The DSR and implementation support is also aimed at developing the capacity of MePDCL for systematic planning, design and management of distribution networks. 13. Output 4. Efficient and productive use of gender and socially inclusive mini grid energy systems pilot-tested and promoted. Renewable energy mini grids will be pilot tested in Lower Jambal, Dilma Ading and Kosigre villages and in three selected schools in the villages. The mini grids will improve power quality and support income generation, especially for women and other socially disadvantaged groups, using available indigenously resources. The villagers will be engaged in income generation activities and awareness sessions on mini grid and its productive use will be conducted for villagers and students. This component will be supported by a grant from JFPR. The JFPR grant will support the development of new income generation activities in the villages by providing relevant skills training, start-up capital and market support for the activities. 14. The proposed project will strengthen the state’s rural distribution network, reduce AT&C losses, improve the power quality and reduce the outages in East Garo Hills, West Garo Hills and Central Circles of the state. This will enable a conducive atmosphere for stimulating local economic activities and attracting industries, thereby improving job creation in rural areas which will boost the state’s economy.

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II. IMPLEMENTATION PLANS

A. Project Readiness Activities

Table 1: Project Readiness Activities Indicative Activities

Month 2019 Month 2020

Responsible Unit 10 11 12

1 2 3 4 5 6 7

8 9 10

Advance contracting actions

X

X

X X X X

MeECL , MePDCL & MNREDA

Retroactive financing actions

X X X X X X X MeECL , MePDCL & MNREDA

Establish project implementation arrangements

X X X

MeECL , MePDCL & MNREDA

ADB Board approval X ADB

Loan signing X DEA and ADB

Government legal opinion provided

X DEA / MeECL / MePDCL / MNREDA

Government budget inclusion

X DEA

Loan effectiveness X DEA / ADB

ADB = Asian Development Bank, DEA = Department of Economic Affairs, MeECL = Meghalaya Energy Corporation Ltd., MePDCL = Meghalaya Power Distribution Corporation Limited, MNREDA = Meghalaya New and Renewable Development Agency. Source: Asian Development Bank.

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B. Overall Project Implementation Plan

Table 2: Implementation Schedule

Indicative Activities 2019

(Mth/Qtr) 2020

(Mth/Qtr) 2021

(Mth/Qtr) 2022

(Mth/Qtr) 2023

(Mth/Qtr) 2024

(Mth/Qtr) 2025

(Mth/Qtr)

Project Formulation Q

1 Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Project preparation and signing

Loan effectiveness

A. DMF

Output 1: Distribution network in central, East Garo Hills and West Garo Hills strengthened and modernized

Activity 1.1 – Bid documents for substation packages prepared & issued

Activity 1.2 – Bid documents for distribution line packages prepared and issued

Activity 1.3 – Contract for substation packages awarded

Activity 1.4 – Contracts for distribution line packages awarded

Activity 1.5 – Distribution substations constructed and commissioned

Activity 1.6 – Distribution line packages constructed and commissioned

Output 2: System for meter reading, billing and collection improved

Activity 2.1 – Bid documents for smart meter package prepared & issued

Activity 2.2 – Contract for smart meter package awarded

Activity 2.3 – Smart meters installed and commissioned

Output 3: Capacity of EA to plan and implement distribution sector projects improved

Activity 3.1 – RFP to recruit consultancy firm for implementation support prepared and issued

Activity 3.2 – Initiate recruitment of Individual consultants to support DSR

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Indicative Activities 2019

(Mth/Qtr) 2020

(Mth/Qtr) 2021

(Mth/Qtr) 2022

(Mth/Qtr) 2023

(Mth/Qtr) 2024

(Mth/Qtr) 2025

(Mth/Qtr)

Activity 3.3 – RFP to recruit consultancy firm for DSR prepared and issued

Activity 3.4 – Submission 1 for consultancy firm for implementation support prepared

Activity 3.5 – Individual consultants to support DSR recruited

Activity 3.6 – Submission 2 & 3 for consultancy firm for implementation support prepared

Activity 3.7 – Submission 1 for consultancy firm for DSR prepared

Activity 3.8 – Contract for implementation support firm awarded

Activity 3.9 – Submission 2 & 3 for consultancy firm for DSR prepared

Activity 3.10 – Contract for DSR firm awarded

Activity 3.10 – DSR completed and published

Activity 3.11 – Distribution projected implemented

Output 4: Capacity and awareness of selected rural communities to use mini grid power efficiently and for livelihood developed

Activity 4.1 – Consultants for site identification and feasibility studies recruited

Activity 4.2 – Feasibility studies for project sites completed

Activity 4.3– Bid documents for mini grid prepared and issued

Activity 4.4– contract for mini grid awarded

Activity 4.5– Mini grids constructed and commissioned

Activity 4.6– Training on mini grids and efficient electricity use completed

Project completion report

DMF = design and monitoring framework, mth = month, qtr = quarter, RFP = request for proposal Source: Asian Development Bank estimates.

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III. PROJECT MANAGEMENT ARRANGEMENTS

A. Project Implementation Organizations: Roles and Responsibilities

Table 3: Project Implementation Organizations – Roles and Responsibilities Project Implementation Organizations

Management Roles and Responsibilities

Power Department, Meghalaya Overall responsibility for ensuring the project implementation on behalf of Government of Meghalaya

Finance Department, Meghalaya

Providing ADB loan disbursements in timely manner to the executing agency

Providing periodic equity injections to the MeECL to meet its counterpart fund requirement

Executing agency:

• State Government of Meghalaya acting through the MeECL

• Board of Directors o Overall responsibility for execution of the project and

subprojects; o Periodic review of the project activities to ensure timely

implementation of the project; o Ensuring compliance with loan covenants including social and

environmental safeguards, financial, economic and others.

• Chair cum Managing Director o Coordinating the communication with the government of India

and the government of Meghalaya with respect to the project; o Timely approval of bid documents, bid evaluation reports and

contract award by MeECL Board; o Periodic monitoring of the project implementation activities in

coordination with the director, transmission projects and director, finance;

o Ensuring coordination between technical department responsible for project implementation and finance department to ensure timely availability of counterpart funds.

Implementing Agency

(i) MePDCL (for Outputs 1-3)

(ii) MNREDA for Output 4

MePDCL and MNREDA as implementing agencies will be reporting to the MeECL. MePDCL will be responsible for the timely implementation of the Outputs 1-3 and MNREDA will be responsible for Output 4 of the project. The key personnel for purposes of this project are as follows: MePDCL (Distribution Project Components)

• Director (Distribution) o Timely submission of bid documents and bid evaluation

reports to tender committee and board of directors of MeECL; o Timely administering of the tender, issue of contract award

including the environmental management plan (EMP) and implementation approvals thereof etc.;

o Bi-monthly monitoring of the implementation of the project components, the EMP and resettlement and indigenous peoples plan (RIPP) for distribution substations and distribution lines along with the chief engineer (Rural Electrification);

o Ensure grievance redress per Initial Environment Examination (IEE) and RIPP during construction and operations;

o Periodic reporting to the board of directors, chair cum managing director and ADB on project implementation status.

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Project Implementation Organizations


• Director (Finance) and Chief Accounts Officer o Ensuring availability of counterpart funds for the smooth

implementation of the project; o Managing the advance account including timely submission of

withdrawal applications based projected project expenses for replenishment of advance account;

o Keeping records of payment made through advance account for liquidation of advance account and auditing purposes;

o Keeping records of project-related expenses incurred through counterpart funds;

o Engaging project auditors to audit all expenses incurred with respect to the project;

o Final approval and payment of bills/invoice of the contractor; o Taking responsibility for implementing institutional capacity

building activities related to improving financial management capacity;

o Financial reporting of the project to the joint managing director/project steering committee/funding agency;

o Creating separate budgets for environment and social supervision and monitoring, grievance redress, and to fund the EMP and RIPP measures falling to MePDCL e.g. corrective action for existing facilities (substations).

• Chief Engineer (Rural Electrification) Distribution substation and distribution line packages o Preparation of working estimate of the project scheme, land

acquisition, technical specification, commercial terms, floating and administering of tender, tender negotiation and award of contract and issuance of implementation approvals for distribution substations and distribution lines in coordination with the procurement team and responsible for the respective circles;

o Approval of design drawings, inspection of equipment at factory location etc. in coordination with the procurement, technical and safeguards team;

o Day to day monitoring of project implementation in coordination with the distribution circles, resolving project implementation issues and reporting to the director on overall project implementation status;

o Review monitoring activities conducted by project implementation consultancy firm and ensure timely submission of progress reports, safeguards and other project related documents to director (Distribution) and ADB.

• Chief Engineer (Commercial) Smart meter package o Preparation of working estimate of the project scheme, land

acquisition, technical specification, commercial terms, floating and administering of tender, tender negotiation and award of contract, and issuance of implementation approvals for smart meter projects;

o Approval of design drawings, inspection of equipment at factory location etc. in coordination with the procurement and technical team for smart meter project;

o Day to day monitoring of project implementation in coordination with the distribution circles, resolving project implementation

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issues and reporting to the director on overall project implementation status;

o Review monitoring activities conducted by project implementation consultancy firm and ensure timely submission of progress reports, safeguard and other project related documents to director (Distribution) and ADB.

• Superintend Engineers at distribution circles o Upon award of tender, responsibility of site implementation of

distribution projects coming under the jurisdiction of the respective circles for both distribution substations and distribution lines. Dedicated engineers from circles will be appointed for implementation of the distribution projects;

o Handover of project site to the contractor, inspection of equipment at the factory locations required by director and chief engineer, issuing of dispatch instructions, day to day monitoring of the project activities, resolving any project site specific issues, fortnightly reporting of project implementation status to the HQ in coordination with the circle executive engineers and assistant engineers;

o Preparation of all vendor bills with breakdown of all material received in line with the vendor invoice and LOA (Letter of Award), verification of the bills with the LOA of the tender including calculating liquidated damages;

o Ensure the EMP included in the IEE is implemented, including any corrective action needed to address non-compliance;

o Ensure contractors engage an accredited third-party laboratory to test environment parameters as specified in the EMP;

o Assessment and approval of compensation payment for distribution lines in accordance with the Entitlement Matrix of the RIPP in coordination with the District Revenue Department;

o Ensure timely reimbursement of compensation payment by the contractors and maintain records of compensation payments made;

o Review and approve gender monitoring report prepared by consultants;

o Supervise contractors and their compliance with the EMP; o Prepare and submit semiannually Environment and Social

Monitoring Reports (ESMR) up until completion of construction, and then semiannually for social and annually for environment during operations to ADB;

o Monitor compliance with environment and social safeguards, continue to conduct meaningful consultations, and address grievances in accordance with the IEE and RIPP during construction and operations;

o Monitor reporting by the dedicated environment, health and safety supervision officer and for each contract package.

MNREDA (Solar Mini Grid Project Components)

• Director (MNREDA) o Timely submission of bid documents and bid evaluation

reports to tender committee of the solar mini grid components;

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o Timely administering of the tender, issue of contract award including EMP and implementation approvals thereof etc.;

o Bi-monthly monitoring of the implementation of the project components, and the EMP and RIPP for solar mini grid components and its associated components along with the project officer and junior engineers (MNREDA);

o Ensure grievance redress per IEE and RIPP during construction and operations;

o Periodic reporting to the board of directors, chair cum managing director (MeECL) and ADB on project implementation status.

• Project Officers / Junior Engineers at project sites. o Upon award of tender, responsibility of site implementation of

mini grid projects coming under the jurisdiction of the Project Officer or Junior Engineer of MNREDA assigned for the location. Dedicated engineers from MNREDA will be appointed for implementation of the mini grid projects;

o Handover of project site to the contractor, inspection of equipment at the factory locations required by director (MNREDA), issuing of dispatch instructions, day to day monitoring of the project activities, resolving any project site specific issues, fortnightly reporting of project implementation status to the HQ in coordination with MePDCL;

o Preparation of all vendor bills with breakdown of all material received in line with the vendor invoice and LOA (Letter of Award), verification of the bills with the LOA of the tender including calculating liquidated damages;

o Ensure the EMP included in the IEE is implemented, including any corrective action needed to address non-compliance;

o Ensure contractors engage an accredited third-party laboratory to test environment parameters per the EMP;

o Review and approval of gender monitoring report prepared by consultants;

o Supervise contractors and their compliance with the EMP; o Prepare and submit inputs to semiannual Environment &

Social Monitoring Reports (ESMR) to MePDCL to incorporate; o Monitor compliance with environment and social safeguards,

continue to conduct meaningful consultations, and ensure grievance redressed in accordance with the IEE and RIPP during construction and operations;

o Monitor reporting by the assigned environment and social supervision officer.

Asian Development Bank (ADB)

• Monitor implementation including compliance by the executing and implementing agency(ies) of its obligations and responsibilities for project implementation in accordance with ADB’s policies and procedures;

• Monitor the status of compliance with all loan covenants including safeguards following requirement set forth in ADB’s Safeguard Policy Statement (2009);15

• Timely approval of bid documents, contract award and withdrawal applications.

15 Review of reports by TA-funded consultants to determine if any adverse impacts are observed during construction.

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B. Key Persons Involved in Implementation

Executing Agency / Implementing Agency State acting through Meghalaya Energy Corporation Ltd (MeECL) and

(i) Meghalaya Power Distribution Corporation Ltd. (MePDCL)

(ii) MNREDA Both reporting to MeECL

Officer's Name: Mr. Arunkumar Kembhavi, IAS Position: Chairman cum Managing Director (MeECL) Telephone No.: +91 9435724426 Fax No.: 0364-2590367 Email address: [email protected] Officer's Name: Mr. E. B. Kharmujai Position: Director (MePDCL) Telephone No.: +91 94336165335 Fax No.: 0364-2591174 Email address: [email protected] Officer's Name: Mr. U. N. Madan Position: Chief Engineer (Projects) Telephone No.: +91 9436160175 Email address: [email protected] Officer's Name: Mr. P. M. Sangma Position: Director (MNREDA) Telephone No.: +91 9774101161 Email address: [email protected] Officer's Name: Mr. Marchborn Marbaniang Position: Additional CE (Monitoring and Evaluation) Telephone No.: +91 9436110759 Email address: acep&[email protected] Officer’s Name: Mr. Herman Massar Position CE (Distribution) Telephone No.: +91 9402550621 Email address: [email protected] Officer's Name: Mr. Matthew B. Kurbah Position: Addl. Chief Engineer (EZ) cum-Nodal Officer (ADB) Telephone No.: +91 9436707624 Email address: [email protected]

ADB

South Asia Energy Division Staff Name: Mr. Priyantha Wijayatunga Position: Director, South Asia Energy Division, SARD Telephone No.: +63 2 632-4444 Email address: [email protected]

Mission Leader Staff Name: Mr. Jaimes Kolantharaj Position: Senior Energy Specialist

mailto:[email protected]








13

Telephone No.: +63 2 632-4444 Email address: [email protected]


14

C. Program Organization Structure

Government of India

Government of Meghalaya (Power Department & Finance

Department)

Executing Agency MeECL

Central Level

State Level

Project Management Unit (PMU)

- Field Officers - Contracts (Procurement) - Land Acquisition - Finance/Accounts - Environment and Social Cell - Project Implementation Consultant

Project Level

Ministry of Power Ministry of Finance

(Department of Economic Affairs)

Asian Development

Bank (ADB)

CEA

Implementing Agencies

MePDCL and MNREDA

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IV. COSTS AND FINANCING

15. The project is estimated to cost $168.0 million. The investment plan is summarized in Table 4 below.

Table 4: Project Investment Plan ($ million)

Item Amount a

A. Base Cost b 1. Distribution network strengthened and modernized 121.0

2. System for meter reading, billing and collection improved 22.3 3. Capacity of executing agency to plan and implement projects strengthened 4.0 4. Efficient and productive use of gender and socially inclusive mini grid energy systems pilot-tested and promoted 1.9

Subtotal 149.2

B. Contingencies c 10.8

C. Financing Charges d 8.0

Total (A+B+C) 168.0 Source: Asian Development Bank estimates. Notes: Numbers may not sum precisely because of rounding a Includes goods and service taxes (GST) of $ 10.4 million to be financed by the government fund and $ 10.4 million to

be financed by the Asian Development Bank loan resources. The amount of taxes and duties to be financed by ADB; (i) are within the reasonable threshold identified during the country partnership strategy preparation process; (ii) is not excessive and represents a very nominal percentage (8.0% of ADB loan) of the loan; (iii) apply only to ADB-financed expenditures; (iv) and are intended to simplify and expedite disbursement arrangements; (v) and are considered material and relevant to the success of the Project. In addition, taxes on consulting service and equipment financed under the JFPR will also be charged to the JFPR. b In end-2019 price as of March 2020. c Physical contingencies computed at 3% of base costs. Price contingencies computed at average of 1.5% for foreign exchange costs and 4% on local currency costs; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate. d Includes interest and commitment fee. Interest during construction for the OCR loan has been computed at the 5-year US dollar fixed swap rate. Commitment charges for the OCR loan is 0.15% per year to be charged on the undisbursed loan amount. 16. The state government has requested a regular loan of $132.8 million from ADB’s ordinary capital resources (OCR) to help finance the project. The loan will have a 20-year term, including a grace period of 5 years; an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)b̶ased lending facility; a commitment charge of 0.15% per year and such other terms and conditions set forth in the draft loan and project agreements. Based on the straight-line repayment method, the average loan maturity is 12.75 years and the maturity based premium is therefore nil. The JFPR grant will provide a grant not exceeding the equivalent of $2.0 million to be administered by ADB. 17. The state government has provided ADB with (i) reasons for its decision to borrow under ADB’s LIBOR-based lending facility based on these terms and conditions and (ii) an undertaking that these choices were its own independent decisions and not made in reliance on any communications or advice from ADB. 18. ADB will finance eligible expenditures in relation to the turnkey contracts (including goods and service taxes), consulting services, and contingencies. The JFPR grant will finance small equipment and consulting service in relation to community interventions. Counterpart funding will

16

be provided by the government of Meghalaya. The government will also finance state taxes and duties in relation to turnkey contracts, land acquisition and resettlement cost, environmental and social mitigation cost, project administration cost, portion of contingencies and interest during implementation. The government has assured ADB that it will cover any shortfall in financing required to meet the agreed outputs. The summary financing plan is in Table 5.

Table 5: Summary Financing Plan

Source Amount

($ million) Share of Total (%)

Asian Development Bank

Ordinary Capital Resources (regular loan) 132.8 79.0% JFPRa 2.0 1.2%

Government counterpart fund 33.2 19.8%

Total 168.0 100.0% a Administered by the Asian Development Bank. Source: Asian Development Bank estimates.

A. Cost Estimates Preparation and Revisions

19. Detailed cost estimates were obtained from the detailed project report, the government’s document prepared for approval of the project. The cost estimates are based on costs of similar projects executed in the recent past. B. Key Assumptions

20. The following key assumptions underpin the cost estimates and financing plan:

(i) Exchange rate: ₹73.84 = $1.00 (as of 16 March 2020).

(ii) Price contingencies based on expected cumulative inflation over the implementation period are as follows:

Table 6: Escalation Rates for Price Contingency Calculation

Item 2020 2021 2022 2023 Average

Foreign rate of price inflation 4.0% 4.0% 4.0% 4.0% 4.0% Domestic rate of price inflation 1.5% 1.6% 1.6% 1.6% 1.6%

Source(s): ADB estimates.

(iii) In-kind contributions were calculated based on the requirements and details as outlined in the draft of development project proposals.

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C. Detailed Cost Estimates by Expenditure Category

Table 7: Detailed Cost Estimates by Expenditure Category

Item

₹ million $ million % of Total Base Cost Foreign

Exchange Local

Currency Total Cost

Foreign Exchange

Local Currency

Total Cost

A. Investment costs a 1 Turnkey Contract for Distribution Network 0.0 8,151.7 8,151.7 0.0 110.4 110.4 74.0%

2 Turnkey Contract for Smart metering 0.0 1,647.6 1,647.6 0.0 22.3 22.3 15.0%

3 Turnkey Contract for Minigrid 0.0 96.0 96.0 0.0 1.3 1.3 0.9%

4 Consulting Services 0.0 339.7 339.7 0.0 4.6 4.6 3.1%

5 Land Acquisition and Resettlement Cost 0.0 43.6 43.6 0.0 0.6 0.6 0.4%

6 Environment and Social Mitigation Cost 0.0 14.8 14.8 0.0 0.2 0.2 0.1% Subtotal (A) 0.0 10,293 10,293 0.0 139.4 139.4 93.4%

B. Recurrent costs 1 Incremental Administration cost 0.0 727 727 0.0 9.8 9.8 6.6%

Subtotal (B) 0.0 727 727 0.0 9.8 9.8 6.6% Total Base Cost (A+B) 0.0 11,020 11,020 0.0 149.2 149.2 100.0%

C. Contingencies 1 Physical 0.0 314.3 314.3 0.0 4.3 4.3 2.9%

2 Price 0.0 480.6 480.6 0.0 6.5 6.5 4.4% Subtotal (C) 0.0 794.9 794.9 0.0 10.8 10.8 7.2%

D. Financing Charges During Implementation 1 Interest During construction 0.0 556.7 556.7 0.0 7.5 7.5 5.1%

2 Commitment charges 0.0 30.5 30.5 0.0 0.4 0.4 0.3% Subtotal (D) 0.0 587.2 587.2 0.0 8.0 8.0 0.3%

Total Project Cost (A+B+C+D) 0.0 12,402.0 12,402.0 0.0 168.0 168.0 107.5% Sources: DPR and ADB estimates.

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D. Allocation and Withdrawal of Loan/Grant Proceeds

Table 8: Allocation and Withdrawal of ADB OCR Loan Proceeds

CATEGORY ADB FINANCING BASIS

Number Item

Total Amount Allocated for ADB Financing

($ million) Basis for Withdrawal from the Loan Account

1 Turnkey Contract 122.20 100% of total expenditure claimed 2 Consulting Services 4.00 100% of total expenditure claimed 3 Unallocated 6.60

Total 132.80 ADB = Asian Development Bank. Source: Asian Development Bank estimates.

Table 9: Allocation and Withdrawal of JFPR

CATEGORY ADB FINANCING BASIS

Number Item

Total Amount Allocated for ADB Financing

($ million) Basis for Withdrawal from the Loan Account

1 Turnkey Contract 1.30 100% of total expenditure claimed 2 Consulting Services 0.60 100% of total expenditure claimed 3 Unallocated 0.10 100% of total expenditure claimed

Total 2.00 ADB = Asian Development Bank Source: Asian Development Bank estimates

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E. Detailed Cost Estimates by Financier

Table 10: Detailed Cost Estimates by Financier ($ million)

Item ADB OCR Loan (regular loan)

JFPR GOM Total Cost

Amount

% of Cost Category

Amount % of Cost Category

Amount % of Cost Category

Amount Taxes and

duties

A. Investment costs

1 Turnkey Contract for Distribution Network 101.8 80.0% 0.0 0.0% 8.6 6.8% 110.4 16.8 2 Turnkey Contract for Smart metering 20.4 79.5% 0.0 0.0% 1.9 7.3% 22.3 3.4 3 Turnkey Contract for Minigrid 0.0 0.0% 1.3 86.8% 0.0 0.0% 1.3 0.2 4 Consulting Services 4.0 75.4% 0.6 11.3% 0.0 0.0% 4.6 0.7 5 Land Acquisition and Resettlement Cost 0.0 0.0% 0.0 0.0% 0.6 100.0% 0.6 0.0 6 Environment and Social Mitigation Cost 0.0 0.0% 0.0 0.0% 0.2 100.0% 0.2 0.0

Subtotal (A) 126.2 78.6% 1.9 1.2% 11.3 8.1% 139.4 21.1

B. Recurrent Costs

1 Incremental Administration cost 0.0 0.0% 0.0 0.0% 9.8 100.0% 9.8 0.0

Subtotal (B) 0.0 0.0% 0.0 0.0% 9.8 100.0% 9.8 0.0

Total Base Cost 126.2 74.1% 1.9 1.1% 21.1 12.4% 149.3 21.1

C. Contingencies

1 Physical 2.4 58.7% 0.1 2.3% 1.6 39.0% 4.3 0.0

2 Price 4.2 65.0% 0.0 0.0% 2.5 35.0% 6.5 0.0

Subtotal (C) 6.6 62.5% 0.1 0.9% 4.1 36.6% 10.8 0.0

D. Financing Charges During Implementation

1 Interest During Implementation 0.0 0.0% 0.0 0.0% 7.5 100.0% 7.5 0.0

2 Commitment Charges 0.0 0.0% 0.0 0.0% 0.4 100.0% 0.4 0.0

Subtotal (D) 0.0 0.0% 0.0 0.0% 8.0 100.0% 8.0 0.0

Total Project Cost (A+B+C+D) 132.8 79.0% 2.0 1.2% 33.2 19.8% 168.0 21.1

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F. Detailed Cost Estimates by Outputs and/or Components

Table 11: Detailed Cost Estimates by Components ($ million)

21

G. Detailed Cost Estimates by Year

Table 12: Detailed Cost Estimates by Year ($ million)

Item Total Cost Year 1 Year 2 Year 3 Year 4

A. Investment costs

1 Turnkey Contract for Distribution Network 110.4 11.0 33.1 44.2 22.1

2 Turnkey Contract for Smart Metering 22.3 2.2 6.7 6.7 6.7

3 Turnkey Contract for Minigrid 1.3 0.1 0.4 0.5 0.3

4 Consulting Services 4.6 0.9 1.4 1.8 0.5

5 Land Acquisition and Resettlement Cost 0.6 0.6 0.0 0.0 0.0

6 Environment and Social Mitigation 0.2 0.2 0.0 0.0 0.0

Subtotal (A) 139.4 15.1 41.6 53.2 29.5

B. Recurrent Costs

1 Incremental Administration cost 9.8 1.0 3.0 3.9 2.0

Subtotal (B) 9.8 1.0 3.0 3.9 2.0

Total Base Cost 149.2 16.1 44.5 57.1 31.5

C. Contingencies

1 Physical 4.1 0.5 1.3 1.6 0.8

2 Price 6.6 0.7 2.0 2.5 1.3

Subtotal (C ) 10.8 1.2 3.3 4.1 2.2

D. Financing Charges During Implementation

1 Interest During Implementation 7.5 0.2 1.1 2.5 3.7

2 Commitment Charges 0.4 0.2 0.1 0.1 0.0

Subtotal (D) 8.0 0.4 1.2 2.6 3.7

Total Project Cost (A+B+C+D) 168.0 17.7 49.1 63.8 37.4

% Total Project Cost 100.0% 10.6% 29.2% 38.0% 22.3%

Source(s): ADB estimates

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H. Contract and Disbursement S-Curve

Figure 1: Contract Awards and Disbursement S-Curve

21. Table 13 indicates the same details of contract awards and disbursements for the allocated amounts over the life of the project, on a quarterly basis, based on projections of contract.

Table 13. Contracts and Disbursements

Quarter/Year Cumulative

Award ($million) Cumulative

Disbursement ($million)

Q1/2020 - -

Q2/2020 - -

Q3/2020 - -

Q4/2020 63.2 4.2

Q1/2021 63.2 12.2

Q2/2021 98.2 20.2

Q3/2021 128.2 26.2

Q4/2021 134.8 38.7

Q1/2022 134.8 49.3

Q2/2022 134.8 57.7

Q3/2022 134.8 70.2

Q4/2022 134.8 78.2

Q1/2023 134.8 98.2

Q2/2023 134.8 110.2

Q3/2023 134.8 113.2

Q4/2023 134.8 124.8

Q1/2024 134.8 132.8

Q2/2024 134.8 134.8

Q = quarter Source: MePDCL

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I. Fund Flow Diagram

22. Figure 2 shows how the funds will flow from ADB to MeECL to implement project activities and how documents for requests for disbursement will flow to ADB.

Figure 2: Fund Flow Diagram

AAAD = Aid and Audit Accounts Division; ADB = Asian Development Bank; CAAA = controller of aid accounts and audit; EA = executing agency; MeECL = Meghalaya Energy Corp. Limited; RBI = Reserve. Bank of India advance account. Source: Asian Development Bank.

V. FINANCIAL MANAGEMENT

A. Financial Management Assessment

23. The financial management assessment (FMA) was conducted in January 2020 in accordance with ADB’s Guidelines for the Financial Management and Analysis of Projects and the Financial Due Diligence: A Methodology Note. The FMA considered the capacity of the MePDCL together with MeECL, including funds-flow arrangements, staffing, budgeting, accounting and financial reporting systems, financial information systems, and internal and external auditing arrangements.

24

24. Based on the assessment, MePDCL has certain strengths in the financial management in the following perspectives:

(i) Financial management of MePDCL, like other public sector companies in India, is governed by a robust legislative framework. Its financial statements are audited by a chartered accountant firm and are also audited by the Comptroller and Auditor General (CAG), the supreme audit institution of India. CAG’s independence is established and protected by the Constitution of India.

(ii) MePDCL operates in a regulated environment, where categorized tariffs are approved by MESRC, after a detailed scrutiny of its financial and operational performance including submission of business plan and capital investment plan.

(iii) Transparent and collaborative tariff-setting process includes a public consultation process, where general public and other stakeholders can highlight issues linked to its performance and financial management. Public comments are formally documented and considered seriously by the regulators. This arrangement adds an additional layer of external control and procedures governing MePDCL’s financial management.

(iv) MePDCL follows a systematic approach and maintains an adequate and up-to-date cashbook recording receipts and payments. MePDCL has a well-established cash management system, which maintains adequate amount of cash in hand which has been noted and commented upon by the statutory auditors as well.

25. However, the following weaknesses in the financial management have been identified as well:

(i) Urgent need to strengthen finance and account functions. MePDCL does not have a separate and independent finance and accounts function. Currently, a single finance unit in MeECL handles all finance and accounts functions of MeECL and its three subsidiary companies including MePDCL. Key positions in finance and accounts such as Director (Finance) and Chief Accounts Officer (CAO) remain vacant for a long time, although CAO position is temporarily filled by giving additional charge to existing staff. Moreover, the level of staffing in finance and account unit should be further enhanced. Vacant positions in accounts personnel should be filled in a timely manner considering MePDCL’s operation size and future investment projects.

(ii) Significant delays in finalization of accounts. These delays led to

corresponding delays in filing of tariff truing-up petitions before MSERC as well as disallowance of expenditure by MSERC claimed in the petitions and consequent delay in recovery of revenue.

(iii) Persistent qualified opinion on the audited entity financial statement over

the last few years. MePDCL has adopted the Indian Accounting Standard (Ind-AS) for the first time for preparation of its financial statements for FY2016-2017. Statutory auditors have highlighted persistent issues of non-compliance with some applicable Ind-AS provisions with regard to disclosure of information, fixed asset management and inventory etc.

25

(iv) Lack of effective budgetary planning and control system and delay in

approval of budget from Board of Directors. There is no system in place (i) to compare the budgeted figures with the actuals; (ii) to analyze the extent and reasons for variations between the actual and budgeted figures and initiate timely corrective action; and (iii) the sources to arrange the corresponding funding part of projects had not been identified and incorporated in the budget. Due to delay of collecting financial data, the approval of budget from board of directors is delayed.

(v) Incomplete fixed assets and inventories management. MePDCL has

maintained fixed assets register, however, the register is not in standard format and does not contain quantitative details and exact physical condition of the fixed assets. MePDCL has conducted physical verification of fixed assets and inventory for some of sub-divisions and division offices, but it needs to be streamlined and reconciliation with general ledger is still pending. Absence of documentary evidence for current stage of completion, the expected date of its completion, and physical verification, along with delays in capitalization are the key concerns over capital work in progress.

(vi) Need to improve the internal audit function for transparent and independent

financial management. Internal audit unit is headed by a Deputy Chief Accounts Officer (Audit) and reporting to CAO or Director (Finance), not directly report to Board of Directors. Moreover, the head of internal audit currently holds additional position of AGD (establishment, funds, administrative general duties). The level of staffing in the audit department is not adequate to meet its current operation.

26. Based on the assessment, the key financial management risks identified are (i) absence of separate and independent administrative and financial function of MePDCL; (ii) significant delays in finalization of accounts; (iii) lack of effective budgetary planning and control system; (iv) incomplete fixed asset management; and (v) and weak internal audit system. It is concluded that the overall pre-mitigation financial management risk of MePDCL and MNREDA is Substantial.

Table 14: Key Risks and Mitigation Measures Risk Assessment

Risk Type Risk Rating Risk Description Mitigation Measures

A. Inherent Risks

1. Country specific risks (State Level)

Medium Overall public financial management in the state of Meghalaya is weak and furthermore the financial management information system of the government of Meghalaya (the government) is mainly dependent on manual procedure leading to delay in budget execution.

The government has shown some improvements in the overall fiscal management as the fiscal deficit of the state had decreased significantly during 2017–2018 compared to previous year. However, there is a need to identify the key bottlenecks in the PFM system and henceforth conduct strengthening and modernization of the system.

2. Entity Specific Risk

Substantial Tariff risk: The allowed tariff is insufficient to recover costs undermining financial sustainability of MePDCL. MESRC has consistently disallowed a proportion of revenue requirements

MePDCL should (i) prepare the audited annual accounts for the respective accounting year in timely manner to claim the appropriate level of return on equity; (ii) should have

26

Risk Assessment


claimed in MePDCL’s tariff petitions.

complete details on the fixed assets to claim the depreciation. MePDCL should adequately justify capital expenditure in preparation for tariff filing to ensure tariffs cover all the costs.

Low Foreign exchange risk: MePDCL is not exposed to foreign exchange risk. The foreign exchange risk would be borne by the government of India, as the on-lending of 10% of total loan to MePDCL will be in local currency.

Not Required.

Overall Inherent Risk

Medium

B. Control Risks

1. Executing Agency

Substantial Compliance Risk: MePDCL does not have any experience in implementing ADB projects.

Adequate training of finance staff in the PMU and/or finance unit with respect to loan disbursement process should be provided and ADB financial management requirements should be provided. Designated finance officer above manager level with finance or accounting background is needed in the PMU.

2. Funds Flow Moderate Delays in receipt of funds or release of loan amount, on account of delays in forwarding requests or non-compliance of procedure

MeECL/MePDCL will ensure that regulatory report such as tariff petition to MSERC, subsidy claim to the government and counterpart fund claim to the government should be submitted in a timely manner. Adequate assurances are provided by the government and MeECL for timely release of ADB funds to MePDCL. In addition, direct payment procedure is also recommended for disbursement of ADB funds to prevent the possible risk of delays in the fund flow through government procedure.

3. Personnel Substantial Urgent need for strengthening finance and accounting function Organization. MePDCL does not have separate and independent finance and accounts function. Currently, a single finance unit in MeECL handles all finance and

MeECL/MePDCL should apportion the responsibilities of the MePDCL staff and allocate the responsibility for individual

27

Risk Assessment


accounts functions of MeECL and its three subsidiary companies including MePDCL. This has led to delays in operational functions of finance and accounts department. Staff. Key positions in finance and accounts such as Director (Finance) and Chief Account Officer (CAO) remain vacant, although CAO position is temporarily filled by giving additional charge to existing staff. The vacancy and lack of adequate number of qualified personnel for major positions in the finance department is a concern. Moreover, the level of staffing in finance and account unit should be further enhanced. PMU Staff. The project management manpower should include at least staff with accounting experience for efficient financial management in project level.

entity under the finance and account unit. The Director (Finance) and Chief Account Officer (Finance) positions should be filled with full time qualified designated personnel with proper accounting/finance background. MeECL/MePDCL should recruit new and qualified resources with MBA or CA backgrounds in the finance unit to fill up the vacant positions. MeECL/MePDCL should include at least one manager (accounts) supported by assistant manager level staff for the proposed project.

4. Accounting Policies and Procedures

Substantial Persistent qualified opinion on the audited entity financial statement over the last few years. MePDCL has adopted the Indian Accounting Standard (Ind-AS) for the first time for preparation of its

financial statement for FY2016–2017. Statutory auditors have highlighted persistent issues of non-compliance with some applicable Ind-AS provisions with regards disclosure of information, fixed asset management and inventory etc. Lack of accounting manual or policies and procedures related to the functions of accounting & finance department leads to

MeECL/MePDCL will hire financial management consulting service which will provide hand holding support to MeECL/MePDCL finance wing in systematic data management to resolve the persistent audit observations of the auditor on lack of data. In addition, various reforms, as detailed in FM action plan are also in process, which will improve overall financial management and reporting of MePDCL and will result in resolution of key audit observations. These reforms include ERP implementation, fixed asset register preparation, review and improvements in accounts receivables, etc. MeECL/MePDCL will develop and approve financial management related manuals–accounting manual, inventory

28

Risk Assessment


persistent qualified opinion from auditors.

management system manual with the support of consulting service.

5. Budgeting System

Substantial Delay of timely approval of budget from board of directors and lack of effective budgetary planning and control system. Main reason of delay is the delay of receiving data from field offices and departments of head offices. Budgeting section receives data in hard copy format and takes significant time to convert them into MS-Excel to prepare consolidated budget. The process of preparation of budget in Microsoft Excel also delays the whole process. Budgetary planning and control are important tools for effective financial management. However, there was no system in place (i) to compare the budgeted figures with the actuals; (ii) to analyze the extent and reasons for variations between the actual and budgeted figures and initiate the timely corrective action; and (iii) the sources to arrange the corresponding funding part of projects had not been identified and incorporated in the budget.

MeECL/MePDCL will hire financial management consulting service which can provide hand holding support to MeECL/MePDCL finance wing in systematic data management system to resolve the delay of collecting data from all concerned departments.

MeECL/MePDCL will develop and approve budgeting manual with the support of consulting service.

6. Cash and Bank

Low MePDCL follows a systematic approach and maintains an adequate and up-to-date cashbook recording receipts and payments. MePDCL has a well-established cash management system, which maintains a large amount of cash in hand which has been noted and commented upon by the statutory auditors as well.

Not required

7. Safeguard over Assets

Substantial Incomplete fixed asset management and proper register for fixed assets and inventories not maintained MePDCL has maintained fixed assets register, however, such fixed assets register does not contain quantitative details and exact situation of its fixed assets. Further, the fixed assets register is not in the standard format. MePDCL has conducted physical verification of fixed assets and inventory for some of sub-divisions

MeECL/MePDCL will develop and approve an inventory management system manual with the support of consulting service to identify and streamline various inventory management techniques and processes.

29

Risk Assessment


and division offices, but its needs to be streamlined and reconciliation with general ledger still pending.

8. Internal Audit Substantial Improving the internal audit function for transparent and independent financial management Internal audit unit is headed by a Deputy Chief Accounts Officer (Audit) and reporting to CAO or Director (Finance), not directly report to Board of directors. Moreover, the head of internal audit currently holds additional position of AGD (establishment, funds, administrative general duties). The head of internal audit unit should be independent from the operations and require higher authority since the head has to meet regularly with board of directors and proactively inform board of director and management of significant risks or exposures requiring prompt attention. The level of staffing in the audit department is not adequate to meet its current operation. Manpower crunch in internal audit unit and carrying out internal audit function for MeECL and three subsidiary companies lead in challenges in efficient internal control and impact audit quality.

Establish independent internal unit directly reporting to the Chairman or Board of Directors on regular basis Appoint designated internal audit head above general manager level (CAO level)

9. External Audit Low External audit of MePDCL is carried out by a chartered accountant firm on behalf of CAG, and CAG itself also carries out audit of financial statements of MePDCL.

Not required

10. Reporting and Monitoring

Substantial Significant delay of finalization of accounts: MeECL and MePDCL failed to finalize their accounts within the due dates. These delays led to corresponding delays in filing of truing-up petitions before MSERC as well as disallowance of expenditure by MSERC claimed in the petitions and consequent delay in recovery of revenue. Delay comes from (i) lack of staff in finance division and field offices;

MeECL/MePDCL will hire financial management consulting service which can provide hand holding support to MeECL/MePDCL finance wing in systematic data management system to resolve the delay of collecting data from all concerned departments

30

Risk Assessment


(ii) delay in receiving financial data from field offices; (iii) manual compilation of accounts in MS-Excel; and (iv) lack of data on inventory management and assets, which is accompanied by delayed reporting of the account details.

11. Information

System

Substantial Currently, Tally ERP 9 is used to record data and create initial trial balance and further adjustments. Consolidations are done manually using Microsoft Excel spreadsheets.

MeECL/MePDCL are preparing to adopt ERP under the Integrated Power Development Scheme (IPDS), driven by the Ministry of Power in India. MeECL selected Rural Electricity Corporation (REC) for managing the ERP implementation. REC will be recruiting consultants for planning and designing of ERP.

Overall Control Risk Substantial

Overall Combined Risk Substantial

27. MePDCL together with MeECL and ADB have agreed an action plan to address the following issues that the financial management assessment identified. The financial management action plan is provided in Table 2.

31

Table 15. Financial Management Action Plan Issues Key actions required Targeted timeline

Strengthen financial management

Key vacancies in finance and accounts function: MePDCL does not have separate and independent Finance and Accounts function. Currently, a single finance unit in MeECL handles all finance & accounts functions of MeECL and its other three subsidiary companies including MePDCL. The key positions of finance and account such as Director (Finance) and Chief Account Officer (CAO) remain vacant or filled temporarily by giving additional charge for a long time.

Filling of vacancies of Director Finance and Chief Accounts Officer position with qualified and experienced personnel Hiring of adequate number of staffs for finance, accounts and internal audit functions at divisional accountants’ level Assigning of qualified finance and accounts staff for project PMU, at least one manager (accounts) supported by assistant manager level staff having CA or MBA(Finance) qualifications Hiring of qualified and experienced financial management consultant to support project PMU in maintaining books of accounts and preparation of project financial statements

By 30 March 2021 By 31 December 2022 Within six months from loan signing Before loan effectiveness

Administrative unbundling from MeECL: Even after unbundling of MeECL and three subsidiary companies from MeSEB, MePDCL is unable to get full financial and administrative autonomy in its functionalities.

MeECL needs to make a time frame plan to provide financial & administrative autonomy to MePDCL and other subsidiaries for performing their day to day functions. MeECL is currently in process of unbundling the accounting functions of subsidiaries. Following action items were agreed in this regard: a. Hiring of technical and financial roadmap

consultants to be funded from project sources;

b. Preparation and submission of a time bound roadmap to provide financial and administrative autonomy to MePDCL and other subsidiaries; and

c. Quarterly updates to ADB on implementation of roadmap referred to in item “a” above.

By 30 March 2021 By 30 March 2022 Within 45 days of end of each quarter starting from September 2020

Delays in finalization of audited financial statements and filing of tariff true up petitions

Reduce time gap between due date for finalization and the actual date of certification by the statutory auditor by at least 3 months from FY2019–2020 onwards. Due to delays in finalization of financial statements, MePDCL is unable to file tariff true up petitions on time. With the decrease in finalization of financial statements, MePDCL will ensure: a. Timely submission of tariff true up petitions for

recovering the shortfall in revenue of the respective year through increase tariff; and

b. Timely submission of subsidy claims to the

government.

Within one year of end of each fiscal year Within two months of finalization of audited financial statements Within two months of finalization of audited financial statements

Preparation of fixed assets register and inventory register

Hiring of financial consultant for preparation of fixed asset and inventory registers. The consultant will work in close coordination with technical consultants involved in mapping of distribution of network assets

By 30 March 2021

32

Issues Key actions required Targeted timeline

and utilize technical surveys for preparation of fixed assets register. Completion of physical verification and preparation of fixed asset register and inventory register, in line with requirements of Indian Accounting Standards

By 31 December 2023

Action plan for addressing audit qualifications

With the assistance of chartered accountants firm hired by MePDCL for assistance in preparation of financial statements for FY2018–2019, prepare an action plan for addressing persistent audit observations, and share with ADB

By 30 December 2020

Improvements in internal audit function

Prepare a financial roadmap with action plan including segregation of internal audit function from finance and accounts function Appointment of a CAO as head of internal audit

By 31 December 2021 By 31 December 2020

Development of policies and procedures manual and capacity building support to MePDCL

Preparation and approval of comprehensive policies and procedures manual for financial management and accounting, with the support of PMU financial management consultant. The manual will include but not limited to:

• Streamlining timely budget preparation system and executing effective budgetary controls;

• Development of templates for recoding fixed assets and inventory at divisional offices, and preparation of fixed assets and inventory registers;

• Update chart of accounts, particularly to remove duplicate account codes, add appropriate accounting codes to assist in preparation of project financial statements for ADB, and corrections in existing accounting records due to incorrect recording of financial transactions;

• Policy for conversion of CWIP to fixed assets;

• Policy for cash management;

• Detailed policies and procedures to ensure compliance with requirements of Ind-AS;

• Trainings of staff on policies and procedures developed.

Within six months of hiring of consultant

ERP implementation under IPDS

Hiring of consultant for planning, design and monitoring of ERP under IPDS funded by central government. MeECL has selected Rural Electricity Corporation (REC) for managing the ERP implementation under IPDS. Implement the Enterprise Resource Planning (ERP) system with finance, accounting, Human Resources, inventory, projects and other relevant functions, to ensure timely preparation of audited accounts and timely submission of tariff petitions.

By December 2020 By 31 December 2022

MePDCL and MNREDA lacks experience of implementing ADB funded projects.

Training of MePDCL and MNREDA finance and accounts staff on ADB financial management requirements and disbursement procedures to be provided by ADB.

Within three months of loan signing

MNREDA capacity building MNREDA is implementing foreign funded project for the first time and need capacity building support. Financial consultant hired under ADB TA will support MNREDA in the following:

Within three months of hiring of consultant Annually

33


• Development of FM policies and procedures manual, including chart of accounts, to ensure compliance with ADB financial management requirements;

• Assistance in preparation of project financial statements;

• Assistance in preparation of quarterly progress reports;

• On the job trainings to MNREDA finance and accounts staff.

Ongoing, throughout the project implementation period.

Improve financial sustainability

Immediate FRP implementation under the UDAY scheme

Immediate FRP implementation under the UDAY scheme. GOM should implement the above FRP actions as per the UDAY scheme. They should be implemented in timely manner to attain the MePDCL’s financial turnaround and sustainability. (i) Outstanding debt transfer. Settle the remaining

balance of the MePDCL outstanding debt (25% of debt as equity) for transfer to the State as per the FRP;

(ii) Transitional support for year-wise cash shortfall. GOM to take over and fund future financial losses of MePDCL from FY2019-2020 onwards over 3 years;

(iii) Periodic review of MePDCL’s financial and operational performance on a monthly basis as per the FRP.

By March 2021 Within 3 months after issuing audited financial statements for each year Monthly

Prepare financial roadmap of MePDCL for further improvement

Prepare financial roadmap of MePDCL for further improvement. With the support of ADB fund, MePDCL will prepare financial roadmap.

Hiring TA consultant by 30 March 2021

Reducing high account receivables

MEPDCL will review options and adopt a plan to address and reduce outstanding accounts receivables. Such a plan shall lay out a trajectory, including annual targets with following suggested actions: (i) Preparation of age-wise analysis of

unrecovered dues;

(ii) Obtain confirmation of balances from institutional customers;

(iii) Prepare comprehensive provisioning policy;

(iv) Report the position of long pending receivables of MePDCL for appropriate actions;

(v) Disconnect power supply and make appropriate allowances for any customers under doubtful debts of trade receivables.

Review options by June 2021 Adopt a plan by September 2021

Improving operational efficiency

MePDCL will prepare the action plans for (i) franchising schemes to improve the collection efficiency in problematic areas and (ii) demand side management schemes including differential tariffs in the peak seasons.

Adopt a plan by June 2021

34


Improving liquidity The government will ensure MePDCL to improve liquidity with following actions: (i) Provide adequate guarantees to facilitate

MePDCL to raise the necessary funds for working capital requirements;

(ii) Make an equity investment of the counterpart

funds of the project without delay; In case of reimbursement procedure, the government should release the ADB loan proceeds to MePDCL.

From time to time From time to time Not more than 2 weeks upon approval from the relevant authority

B. Disbursement

1. Disbursement Arrangements for ADB {and ADB-administered cofinancier} Funds

28. The loan and grant proceeds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2017, as amended from time to time),16 and detailed arrangements agreed upon between the government and ADB. Online training for project staff on disbursement policies and procedures is available.17 Project staff are encouraged to avail of this training to help ensure efficient disbursement and fiduciary control. ADB’s reimbursement, advance fund, direct payment, and commitment procedures will be used where available.

29. Advance fund procedure. The Controller of Aid Accounts and Audit (CAAA) will establish and maintain an advance account for the ADB loan (including ADB administered fund) with the Reserve Bank of India in US dollars. The CAAA is accountable and responsible for the proper use of advances to the account. MeECL will establish a commercial bank account, into which the Indian Rupee equivalent of the advance received by CAAA will be transferred. The advance account is to be used exclusively for ADB’s share of eligible expenditures. As the currency of the advance account is US dollar, CAAA would use the spot rates for conversion of expenditure incurred in currencies other than the US dollar (principally the India Rupee) and submit liquidation requests to ADB.

30. The total outstanding advance to the advance account should not exceed the estimate of ADB’s share of expenditures to be paid through the advance account for the forthcoming 3 months. MeECL/MNREDA may request for initial and additional advances to the advance accounts based on an Estimate of Expenditure Sheet18 setting out the estimated expenditures to be financed through the account(s) for the forthcoming 6 months. Supporting documents should be submitted to ADB or retained by MeECL/MNREDA in accordance with ADB’s Loan Disbursement Handbook (2017, as amended from time to time) when liquidating or replenishing the advance account.

16 The handbook is available electronically from the ADB website (http://www.adb.org/documents/ loan-disbursement- handbook 17 Disbursement eLearning. http://wpqr4.adb.org/disbursement_elearning 18 Estimate of Expenditure sheet is available in Appendix 8A of ADB’s Loan Disbursement Handbook (2017, as

amended from time to time).

http://wpqr4.adb.org/disbursement_elearning

35

31. Statement of expenditure procedure.19 The statement of expenditure (SOE) procedure may be used for reimbursement of eligible expenditures or liquidation of advances to the advance account(s). The ceiling of the SOE procedure is the equivalent of $100,000 per individual payment. Supporting documents and records for the expenditures claimed under the SOE should be maintained and made readily available for review by ADB's disbursement and review missions, upon ADB's request for submission of supporting documents on a sampling basis, and for independent audit. Reimbursement and liquidation of individual payments in excess of the SOE ceiling should be supported by full documentation when submitting the withdrawal application to ADB.

32. Before the submission of the first withdrawal application (WA), the borrower should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the government, together with the authenticated specimen signatures of each authorized person. The minimum value per WA is $100,000 equivalent unless otherwise accepted by ADB. Individual payments below such amount should be paid (i) by the MeECL and subsequently claimed to ADB through reimbursement, or (ii) through the advance fund procedure, unless otherwise accepted by ADB. The borrower should ensure sufficient category and contract

balances before requesting disbursements. Use of ADB’s Client Portal for Disbursements (CPD)20 system is encouraged for submission of withdrawal applications to ADB.

2. Disbursement Arrangements for Counterpart Fund

33. Disbursement for counterpart funds will be carried out in accordance with guidelines and practices of the state government. The quantity and timing of counterpart funding will be determined and advised by the executing agency, who will then initiate defined processes to ensure that counterpart funding is reflected in the approved state government budget and the annual capital expenditure budget of the executing agency. This will be undertaken on an annual basis.

C. Accounting

34. MePDCL and MNREDA will maintain, or cause to be maintained, separate books and records by funding source for all expenditures incurred on the project following accrual-based accounting following the equivalent national accounting standards. MePDCL and MNREDA will prepare project financial statements in accordance with the government's accounting laws and regulations which are consistent with international accounting principles and practices. D. Auditing and Public Disclosure

35. MePDCL and MNREDA will cause the detailed project financial statements to be audited in accordance with International Standards on Auditing, by an independent auditor acceptable to ADB. The audited project financial statements together with the auditor’s opinion will be presented in the English language to ADB within 6 months from the end of the fiscal year by MePDCL and MNREDA.

19 SOE forms are available in Appendix 7B and 7D of ADB’s Loan Disbursement Handbook (2017, as amended from

time to time). 20 The CPD facilitates online submission of WA to ADB, resulting in faster disbursement. The forms to be completed

by the Borrower are available online at the Guide to the Client Portal for Disbursements.

https://www.adb.org/documents/client-portal-disbursements-guide

36

36. The audited entity financial statements, together with the auditor’s report and management letter, will be submitted in the English language to ADB within 1 month after their approval by the relevant authority. 37. The audit report for the project financial statements will include a management letter and auditor’s opinions, which cover (i) whether the project financial statements present an accurate and fair view or are presented fairly, in all material respects, in accordance with the applicable financial reporting standards; (ii) whether the proceeds of the loan were used only for the purpose(s) of the project; and (iii) whether MePDCL was in compliance with the financial covenants contained in the legal agreements (where applicable). 38. Compliance with financial reporting and auditing requirements will be monitored by review missions and during normal program supervision, and followed up regularly with all concerned, including the external auditor. 39. The government, MeECL, MePDCL, and MNREDA have been made aware of ADB’s approach to delayed submission, and the requirements for satisfactory and acceptable quality of the audited project financial statements.21 ADB reserves the right to require a change in the auditor (in a manner consistent with the constitution of the borrower), or for additional support to be provided to the auditor, if the audits required are not conducted in a manner satisfactory to ADB, or if the audits are substantially delayed. ADB reserves the right to verify the project's financial accounts to confirm that the share of ADB’s financing is used in accordance with ADB’s policies and procedures. 40. Public disclosure of the audited project financial statements, including the auditor’s opinion on the project financial statements, will be guided by ADB’s Public Communications Policy 2011.22 After the review, ADB will disclose the audited project financial statements and the opinion of the auditors on the project financial statements no later than 14 days of ADB’s confirmation of their acceptability by posting them on ADB’s website. The management letter, additional auditor’s opinions, and audited entity financial statements will not be disclosed.23

VI. PROCUREMENT AND CONSULTING SERVICES

A. Advance Contracting and Retroactive Financing

41. All advance contracting and retroactive financing will be undertaken in conformity with ADB Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers: Goods, Works, Nonconsulting and Consulting Services (2017, as amended from

21 ADB’s approach and procedures regarding delayed submission of audited project financial statements:

(i) When audited project financial statements are not received by the due date, ADB will write to the executing agency advising that (a) the audit documents are overdue; and (b) if they are not received within the next 6 months, requests for new contract awards and disbursement such as new replenishment of advance accounts, processing of new reimbursement, and issuance of new commitment letters will not be processed.

(ii) When audited project financial statements are not received within 6 months after the due date, ADB will withhold processing of requests for new contract awards and disbursement such as new replenishment of advance accounts, processing of new reimbursement, and issuance of new commitment letters. ADB will (a) inform the executing agency of ADB’s actions; and (b) advise that the loan may be suspended if the audit documents are not received within the next 6 months.

(iii) When audited project financial statements are not received within 12 months after the due date, ADB may suspend the loan.

22 ADB. 2011 Public Communications Policy (PCP): Disclosure and Exchange of Information. 23 This type of information would generally fall under public communications policy exceptions to disclosure. ADB. 2011.

Public Communications Policy. Paragraph 97(iv) and/or 97(v).

https://www.adb.org/documents/pcp-2011?ref=site/disclosure/publications

37

time to time). The issuance of invitations to bid under advance contracting and retroactive financing will be subject to ADB approval. The borrower, MeECL, MePDCL, and MNREDA have been advised that approval of advance contracting and retroactive financing does not commit ADB to finance the project. 42. Advance contracting. ADB has approved the advance contracting including preparation of tender documents, bid evaluation and contract award. 43. Retroactive financing. Except as otherwise agreed with ADB, the eligible expenses incurred for works will be eligible for retroactive financing, provided these are incurred before the effectiveness of the related loan/grant agreement, but not earlier than 12 months preceding the signing of the related loan/grant agreement, and as long as they do not exceed an amount of 20% of the loan.

B. Procurement of Goods, Works, and Consulting Services

44. All procurement of goods and works will be undertaken in accordance with ADB’s Procurement Policy (2017, as amended from time to time) and Procurement Regulations (2017, as amended from time to time). Open competitive bidding procedure will be used for procurement of goods and turnkey packages estimated to cost $1,000,000 and above. 45. Before the start of any procurement, ADB and the government will review the public procurement laws of the central and state governments to ensure consistency with ADB’s guidelines. 46. Value for Money. A procurement capacity assessment of MePDCL was conducted as part of due diligence. Strategic procurement planning was conducted to maximize the value for money, and the following project procurement arrangements were chosen to lower transaction costs and realize economy and transparency: (i) strategic contract packaging by grouping dozens of sub-packages with identical nature (substations or distribution lines) and proximity into one package for each one of 4 regional circles, respectively; (ii) use of borrower’s e-procurement system; (iii) qualification criteria based on lowest evaluated cost; and (iv) consideration of the least cost combination. 47. An 18-month procurement plan indicating threshold and review procedures, goods, works, and consulting service contract packages and national competitive bidding guidelines is in Section C. 48. All consultants and nongovernment organizations (NGOs) if appropriate will be recruited according to ADB’s Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers: Goods, Works, Nonconsulting and Consulting Services (2017, as amended from time to time).24 The terms of reference for all consulting services are detailed in Section D.

49. An estimated 132 person-months (18 international, 114 national) of consulting services are required to (i) prepare the distribution road map based on survey, asset mapping and simulation and (ii) project monitoring and financial management support. Consulting firms will be engaged using the quality- and cost-based selection (QCBS) method with a standard quality–cost

24 Checklists for actions required to contract consultants by method available in e-Handbook on Project

Implementation.

https://www.adb.org/documents/handbook-project-implementation

https://www.adb.org/documents/handbook-project-implementation

38

ratio of 90:10.

C. Procurement Plan

50. The procurement plan is prepared in accordance with the generic or country-specific templates prepared by the Operations Services and Financial Management Department.25

Procurement Plan

Basic Data Project Name: Meghalaya Power Distribution Sector Improvement Project

Project Number: 51308-004 Approval Number: TBD

Country: INDIA Executing Agency: Meghalaya Energy Corporation Limited (MeECL) and Meghalaya Power Distribution Corporation Limited (MePDCL)

Project Procurement Classification: B Implementing Agency: Meghalaya Power Distribution Corporation Limited (MePDCL) and Meghalaya New and Renewable Development Agency (MNREDA)

Procurement Risk: Medium

Project Financing Amount: $168.0 million ADB Financing: 132.8 million Cofinancing (ADB Administered): 2.0 million Non-ADB Financing: 33.2 million

Project Closing Date: TBD

Date of First Procurement Plan: TBD Date of this Procurement Plan: 02/04/2020

A. Methods, Thresholds, Review and 18-Month Procurement Plan

1. Procurement and Consulting Methods and Thresholds

51. Except as the Asian Development Bank (ADB) may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works

Method Threshold Comments

Open Competitive Bidding (OCB) Internationally Advertised for Works

$1,000,000 and above

OCB Internationally Advertised for Goods $1,000,000 and above

Consulting Services

Method Comments

Quality and Cost Based Selection (QCBS)

25 ADB. Procurement Plans and National Procedures.

http://wpqr2.asiandevbank.org/LotusQuickr/cosopedia/PageLibrary48257599000668D1.nsf/h_Toc/5EA6EACF755AA652482575D9002FCB8F/?OpenDocument

39

2. Goods and Works Contracts Estimated to Cost $1 Million or More 52. The following table lists goods and works contracts for which the procurement activity is either ongoing or expected to commence within the next 18 months.

Package Number

General Description

Estimated Value

($ million)

Procurement Method

Review

Bidding Procedure

Advertisement Date

(quarter/year)

Comments

1 Replacement of 180,000 nos. existing energy meters with smart meters including vending stations for prepaid meters and smart metering pilot project

19.8 OCB Internationally

Advertised

Prior 1S2E Q3/2019 Prequalification of Bidders: N Domestic preference: N Advance contracting: Y Bidding document: SBD for Goods (2018 version)

2 Central Circle (East Khasi) - Distribution System Improvement: 33/11 kV Substation Developments


Advertised

Prior 1S2E Q3/2019 Prequalification of Bidders: N Domestic preference: N Advance contracting: Y Bidding document: SBD for Plant (2018 version)

3 Central Circle (West Khasi) - Distribution System Improvement:33/11 kV Substation Developments


Advertised


4 West Garo Hills Circle - Distribution System


Advertised

Prior 1S2E Q4/2019 Prequalification of Bidders: N Domestic

40

Package Number

General Description

Estimated Value

($ million)

Procurement Method

Review

Bidding Procedure

Advertisement Date

(quarter/year)

Comments

Improvement: 33/11 kV Substation Developments

preference: N Advance contracting: Y Bidding document: SBD for Plant (2018 version)

5 East Garo Hills Circle - Distribution System Improvement: 33/11 kV Substation Developments


Advertised


6 Central Circle (East and West Khasi) - Distribution System Improvement: 33kV and 11kV Distribution Lines and associated facilities


Advertised


7 Garo Hills (East and West) Circle - Distribution System Improvement: 33kV and 11kV Distribution Lines and associated facilities


Advertised


3. Consulting Services Contracts Estimated to Cost $100,000 or More

41

53. The following table lists consulting services contracts for which the recruitment activity is either ongoing or expected to commence within the next 18 months.

Package Number

General Description

Estimated Value

($ million)

Recruitment Method

Review

Advertisement Date

(quarter/year)

Type of Proposal

Comments

C1 Preparation of distribution road map based on survey, asset mapping and simulation

1.5 QCBS Prior Q3/2020 FTP Type of Assignment: National Quality-Cost Ratio 90:10

C2 Project Implementation Consultants including financial management support

1.5 QCBS Prior Q1/2020 FTP Type of Assignment: National Quality-Cost Ratio 90:10

C3 Preparation of financial road map for MePDCL

0.50 QCBS Prior Q4/2020 STP Type of Assignment: National Quality-Cost Ratio 90:10

4. Goods and Works Contracts Estimated to Cost Less than $1 Million and

Consulting Services Contracts Less than $100,000 (Smaller Value Contracts) 54. The following table groups smaller-value goods, works, and consulting services contracts for which the activity is either ongoing or expected to commence within the next 18 months.

Goods and Works

Package Number

General Description

Estimated Value

Number of

Contracts

Procurement Method

Review

Bidding Procedure

Advertisement Date

(quarter/ year)

Comments

none

Consulting Services

Package Number

General Description

Estimated Value

Number of

Contracts

Recruitment Method

Review (Prior / Post)

Advertisement Date

(quarter/ year)

Type of Proposal

Comments

none

B. Indicative List of Packages Required Under the Project 55. The following table provides an indicative list of goods, works and consulting services

42

contracts over the life of the project, other than those mentioned in previous sections (i.e., those expected beyond the current period).

Goods and Works

Package Number

General Description

Estimated Value

(cumulative)

Estimated Number

of Contracts

Procurement Method

Review [Prior /

Post/Post (Sampling)]

Bidding Procedure

Comments

none

Consulting Services

Package Number

General Description Estimated

Value (cumulative)

Estimated Number

of Contracts

Recruitment Method

Review (Prior / Post)

Type of Proposal

Comments

none

C. List of Awarded and On-going, and Completed Contracts 56. The following tables list the awarded and on-going contracts and completed contracts. 1. Awarded and On-going Contracts

Goods and Works

Package Number

General Description

Estimated Value

Awarded Contract

Value

Procurement Method

Advertisement Date

(quarter/ year)

Date of ADB Approval of

Contract Award

Comments

TBA

Consulting Services

Package Number

General Description

Estimated Value

Awarded Contract

Value

Recruitment Method

Advertisement Date

(quarter/year)

Date of ADB

Approval of Contract Award

Comments

TBA

2. Completed Contracts

Goods and Works

Package Number

General Description

Estimated Value

Contract Value

Procurement Method

Advertisement Date

(quarter/ year)

Date of ADB

Approval of

Contract Award

Date of Completion

Comments

TBA

43

Consulting Services

Package Number

General Description

Estimated Value

Contract Value

Recruitment Method

Advertisement Date

(quarter/ year)

Date of ADB

Approval of

Contract Award

Date of Completion

Comments

TBA

D. Non-ADB Financing

The following table lists goods, works and consulting services contracts over the life of the project, financed by Non-ADB sources. Goods and Works


Value (cumulative)

Estimated Number of Contracts

Procurement Method

Comments

Design, Installation and Commissioning of Solar photovoltaic battery hybrid systems and its associated facilities in 3 villages, and rooftop solar systems in 3 schools

1.30 1 OCB Internationally

Advertised

Prequalification of Bidders: N Domestic preference: N Advance contracting: Y Bidding document: SBD for Plant (2018 version)

Consulting Services


Value (cumulative)

Estimated Number of Contracts

Recruitment Method

Comments

Capacity building support for rural communities in sustainable operation of mini grid and income generation activities

0.60 1 QCBS Type of Proposal: STP Type of Assignment: National Quality-Cost Ratio 90:10

D. Consultant's Terms of Reference

57. The outline terms of reference for the project implementation consultant is attached.26

VII. SAFEGUARDS

58. Environment (category B). Given the nature, scale, and location of the project components, potential direct, indirect, cumulative and induced impacts are anticipated to be of minor magnitude, site-specific, generally reversible, and readily mitigated. An Initial Environmental Examination (IEE) has been undertaken in accordance with ADB’s Safeguard Policy Statement (2009) and an Environmental Management Plan (EMP) developed. Since the

26 Terms of reference: http://www.adb.org/Documents/Manuals/Consulting-Services-Operations-

Manual/CSOM.pdf?bcsi_scan_D4A612CF62FE9576=AORY9a8Nho2ezS9Xss/ligEAAAANNiAA&bcsi_scan_filename=CSOM.pdf (paras 65–72).

http://www.adb.org/Documents/Manuals/Consulting-Services-Operations-%20Manual/CSOM.pdf?bcsi_scan_D4A612CF62FE9576=AORY9a8Nho2ezS9Xss/ligEAAAANNiAA&bcsi_scan_filename=CSOM.pdf



44

project involves existing facilities (45 substations) an Environmental Audit has been conducted for all 45 and time bound, budgeted corrective actions incorporated into the EMP. The IEE adequately identifies project impacts and risks and confirms it will not impact on legally protected areas or internationally or nationally important biodiversity areas or physical cultural resources. Most project impacts and risks are of temporary duration during construction. Pollution, health and safety risks to workers and the community will remain during operation and maintenance works. Mitigation and monitoring measures reflecting international good practice are included and budgeted for (approximately $0.5 million plus contractor costs) in the EMP along with performance indicators to be achieved, such that no residual significant impacts are anticipated. Neither MePDCL or MNREDA has a dedicated group or person responsible for environmental, health and safety management. Given their limited capacity for safeguards implementation, a project implementation consultant will provide training to and support the project management units with EMP implementation. Meaningful consultation, including with women, has been and will continue to be undertaken, as detailed in the IEE, which will be disclosed locally and on the ADB website on 16 April 2020. 59. Involuntary resettlement (category B). Potential impacts of distribution infrastructure and JFPR components on land acquisition and involuntary resettlement are not anticipated to be significant. The project will involve construction of 33/11 kV new substations (23 numbers) where small patch of land is required for each substation. Approximately 5.75 hectares of land in total will be required of which 10 substations (2.5 hectares [ha] of land) are proposed on privately owned land with10 affected households, 10 (2.5 ha) are on community/clan land and the remaining 3 (0.75 ha) are on government land. Land for the substations will be acquired through willing-buyer and willing-seller mechanism and voluntary donation from communities. There should not be any coercion or threat of use of eminent domain in the process. Upgrading of existing substations will be done within their existing premises. Construction of 33 kV (771 km) and 11 kV (669 km) new distribution lines will pass mostly along the existing right of way (ROW) of roads. Routings will be designed to avoid structures and no physical displacement is required under the project. The distribution lines are pole-based which do not require land acquisition. However, some of the 33 kV lines may pass through agricultural or plantation area where there will be some impacts on trees and crops. The impacts will be avoided and mitigated, and compensation will be given to the affected persons for the residual impacts. For JFPR components, in total 3,031 square meter (m2) land is required for the solar photovoltaic system with agricultural processing unit and the ownership of the sites, and status of consents from hosting communities have been provided. Meaningful consultations including women have been undertaken. A combined draft resettlement and indigenous peoples plan (RIPP) has been prepared based on the assessment for MePDCL and JFPR components in accordance with ADB’s Safeguard Policy Statement (2009) and national regulations. Budget for RIPP implementation will need to be secured by MePDCL and MNREDA and provided in a timely manner. 60. Indigenous peoples (category B). The project falls in the territory of East Garo Hills, West Garo Hills, and Khasi Hills of Meghalaya which belong to the tribal areas as per the Schedule-VI of the Indian constitution. Meghalaya is predominantly a tribal state having 86.1 percent of the state’s total population as schedule tribe. Major tribes found in the project area are Garo, Khasi and Jaintia. However, these tribes are the dominant population in the area and are a mainstreamed population. Construction of substations and low voltage lines and the JFPR components will not affect the dignity, human rights, livelihood system or culture of the people and all other impacts will be mitigated. There will be no involuntary land acquisition or resettlement of the schedule tribe people. Scheduled tribe households have been considered as vulnerable and efforts will need to be made to create employment during construction. Support for the project

45

has been sought and expressed by communities during consultations. Consent letters are being obtained for the locations of substations and solar photovoltaic systems, and consent letters will be completely acquired before civil work contract award. There is no targeted intervention for indigenous peoples and the project impacts are addressed by implementing resettlement measures, thus a combined draft resettlement and indigenous peoples plan (RIPP) has been prepared. 61. Safeguards implementation. MePDCL and MNREDA under the oversight of MeECL are responsible for:

(i) implementing the EMP during detailed design, pre-construction, construction, operation and maintenance phases and incorporating it into the contract documents for each package before contract awards;

(ii) implementing the time bound corrective action for existing facilities (substations)

before the contractor is given access to the substation sites; (iii) implementing the RIPP and completing all land acquisition prior to physical and

economic displacement, including informing all displaced persons of their entitlements and resettlement options if required;

(iv) operationalizing a single environmental and social grievance redress mechanism

(GRM) for affected persons (construction workers and local community members) as detailed in the IEE and RIPP including establishing a grievance redress committee with representatives from MeECL, MePDCL, and, MNREDA before loan effectiveness, and promptly addressing any environmental or social grievances received. The GRM will have three-tiers, the first at project site level, the second at MePDCL and MNREDA project management level, and the third at MeECL level (GRM committee) to address the concerns, complaints and grievances that may be raised by the affected persons during project planning and implementation. Contact details for the GRM will be prominently displayed on notice boards at the project site. Field officers will receive, respond to, and seek to resolve grievances in the first instance; the second level, the project management team at MePDCL and MNREDA, will take over if a solution cannot be provided in the field. For complaints not resolved by the MePDCL and MNREDA project management, it will be filed to the third level for the MeECL (GRM Committee) to resolve. All complaint-related information such as minutes of the meetings and decisions will be documented and summarized in the environmental and social monitoring reports submitted to ADB. If a problem is not solved, the complainant can seek legal redress of the grievance in the appropriate courts. ADB’s accountability mechanism will also be informed to the affected people by the project.

(v) continuing to undertake meaningful consultation (community liaison) for

environment and social safeguards during implementation, giving particular attention to affected people’s participation in the implementation and monitoring of resettlement programs and consultations with vulnerable groups including scheduled tribes;

(vi) updating the IEE and RIPP as necessary if unanticipated impacts (including project

scope or design changes) occur during implementation, and locally disclosing any

46

updates to them, any such updates should also be submitted to ADB for clearance and disclosure on the ADB website;

(vii) allocating adequate budget, institutional support, and staff resources to implement,

supervise and monitor (see organogram) the EMP, and RIPP including an environment and social team with dedicated environment and social safeguards officers27 under MePDCL, and a dedicated environment and social safeguards officer in MNREDA. Costs for the implementation of the EMP and RIPP will be the responsibility of MeECL, MePDCL and MNREDA.

(viii) preparing combined environment and social monitoring reports semi-annually up

until the completion of construction, reverting to an annual submission of the environment component and a semi-annual submission of the social component during operation until the project is closed, or for a longer period if this is specified in the project completion report, locally disclosing them, and submitting to ADB for disclosure on the ADB website; and

(ix) developing and taking corrective action in case of any non-compliance during

implementation including repair of any property damage and financial compensation (insurance) for any health and safety incidents.

62. The contractors will be delegated to undertake mitigation and monitoring actions as set out in the EMP and RIPP and to assist with the GRM, but ultimate responsibility lies with the executing and implementing agencies. In addition to environment and social safeguards staff at MePDCL and MNREDA, the contractors will be required by the contract to (i) employ one dedicated environment officer and one dedicated health and safety officer for each contract package in order to monitor and supervise their own work, and (ii) nominate a community liaison/GRM officer for each contract package to keep affected persons informed of works and be available to receive and deal with any grievances at the project site level. These officers will provide necessary inputs to the quarterly environmental and social monitoring reports to MePDCL and MNREDA.

63. Neither MePDCL or MNREDA has a dedicated group or person responsible for environmental, health and safety management. Since the environment and social safeguards capacity of MePDCL and MNREDA needs to be strengthened, capacity development will be provided through (i) trainings as detailed in the EMP and RIPP for MePDCL and MNREDA staff and their contractors and (ii) consultant support. One environment consultant, one health and safety consultant, and one social and gender consultant, will be engaged. They will be tasked with providing formal training sessions and on-the-job training for the dedicated MePDCL environment and social safeguards team at headquarters and environment, health and safety officers allocated to each contract package, the dedicated environment and social safeguards officer in MNREDA, and the contractors’ environment, health and safety officers on understanding the SPS requirements, implementing the EMP and RIPP, and preparing the environmental and social monitoring reports.

27 Environment and social team based at headquarters will be comprised of at least one dedicated environment officer,

one dedicated health and safety officer, and one dedicated social safeguards/gender/community liaison/GRM officer. One environment, health and safety officer will be allocated to supervise and monitor each contract package with the support of the headquarters team.

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64. Prohibited investment activities. Pursuant to ADB’s Safeguard Policy Statement (2009), ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 of ADB’s Safeguard Policy Statement (2009).

VIII. GENDER AND SOCIAL DIMENSIONS 65. Gender. The project is classified as effective gender mainstreaming (EGM) and a Gender Action Plan has been prepared. A JFPR grant titled, “Enhancing the livelihood of rural community of Meghalaya through use of renewable energy systems” has been developed with an objective to pilot test a community-led income generation model through use of solar photovoltaic system and agricultural processing unit. The JFPR intervention has incorporated gender targets and indicator to promote women’s participation in rural parts of Meghalaya who have been given less economic opportunities due to lack of livelihood skills and access to social services. MNREDA will collaborate with self-help groups (SHGs) and specialized institutions such as Meghalaya Skill Development Society and the State Livelihood Mission for imparting technical training. Additionally, there is an ADB TA supporting capacity building of MeEDCL and MePDCL including gender. The loan agreements will include standard assurances on core labor standards to be complied by contractors.

49

Table 16: Gender Action Plan (GAP) Activities Indicator and Targets Responsibility Timeline

Output 3: Capacity of EA to plan and implement distribution sector projects developed

3.1 Orientation provided to MeECL and MePDCL staff for implementing, monitoring and reporting of gender action plan

3.1.1 At least 150 eligible staff of MeECL and MePDCL (including at least 20 eligible women staff) trained to monitor technical, financial, procurement, gender and safeguard compliances of distribution projects (2019 baseline = n.a.) 3.1.2 An information and awareness raising campaign conducted for construction workers on sexually transmitted infections (including HIV) and human trafficking

MeECL and MePDCL

2021

Output 4: Efficient and productive use of gender and socially inclusive mini grid energy systems pilot-tested and promoted

4.1 Skills in operation and maintenance of solar photovoltaic system and processing unit developed

4.1.1 Socio-economic and needs assessment undertaken in Lower Jambal, Dilma Ading and Kosigre villages for baseline income status and processing unit specification 4.1.2 100 individuals (at least 40% women) in Lower Jambal, Dilma Ading and Kosigre villages and 3 selected schools trained in technical skills for operation of solar photovoltaic systems (2019 baseline = 0) 4.1.3 100 individuals (at least 40% women) in Lower Jambal, Dilma Ading and Kosigre villages trained in operation of solar photovoltaic powered agricultural processing units (2019 baseline = 0) 4.1.4 100 individuals (at least 40% women) in Lower Jambal, Dilma Ading and Kosigre villages trained in business skills including marketing and accounting (2019 baseline = 0)

MNREDA 2021 2024 2024 2024

4.2 Awareness generation of community members on mini grids for power generation and efficient use of electricity

4.2.1 200 individuals (at least 40% women) from Lower Jambal, Dilma Ading and Kosigre villages and 3 selected schools (reported increased awareness on solar photovoltaic systems for power generation and efficient use of electricity 4.2.2 End line survey undertaken and at least 30% of the participants reported increased awareness on mini grids for power generation and efficient use of electricity

MNREDA 2024 2023

MePDCL = Meghalaya Power Distribution Corporation Limited, MNREDA = Meghalaya New and Renewable Energy

Development Agency

66. Poverty and social. The project’s poverty target is general intervention. Access to reliable electricity supply will help poor, vulnerable consumers especially women including those currently without access or with limited access to power are likely to benefit from the proposed project. The primary beneficiaries are the consumers of electricity in rural areas of Meghalaya and the urban

50

area. The project will contribute towards the reliability of power supply among the existing consumers and will help in providing uninterrupted electricity supply to social infrastructure. 67. HIV/AIDS. Based on the poverty and social assessment, the risk that the project will increase HIV/AIDS incidence is not high. However, contractors will carry out HIV/AIDS awareness activities for their laborers at work sites, which will be monitored by the construction supervision consultants. The executing agency will ensure compliance with national labor laws, with no child labor employed. 68. Health. MeECL, MePDCL and MNREDA will ensure that contractors adequately provide health and safety measures for the construction workers and further ensure that bidding documents include clauses on how contractors will address this, including an information and awareness raising campaign for construction workers on sexually transmitted diseases, including HIV/AIDS and human trafficking. 69. Labor. MeECL, MePDCL and MNREDA will ensure that civil works contractors comply with all applicable labor laws and regulations, including (i) not to employ child labor for construction and maintenance activities; (ii) provision of appropriate facilities for women and children in construction campsites; and (iii) do not differentiate wages between men and women for work of equal value. MeECL, MePDCL and MNREDA will ensure that specific clauses ensuring these will be included in bidding documents.

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IX. PERFORMANCE MONITORING, EVALUATION, REPORTING, AND COMMUNICATION

A. Project Design and Monitoring Framework

DESIGN AND MONITORING FRAMEWORK Impact the Project is Aligned with

24x7 power for all households, industries, commercial businesses, public needs, and other electricity consuming entities achieved (24X7 Power for All Meghalaya)a

Results Chain Performance Indicators with

Targets and Baselines Data Sources and

Reporting Mechanisms Risks

Outcome Efficiency, reliability, and quality of power supply to consumers at distribution level in Meghalaya improved

By 2026: a. AT&C losses reduced to 23.6% (2019 baseline: 34.8%) (OP 3.1) b. Duration of outages (hours/consumer/year) in project areas with total of 125,000 households reduced to 340 (Central), 105 (East Garo Hills), and 130 (West Garo Hills) (2019 baseline: 650 [Central], 210 [East Garo Hills], 255 [West Garo Hills]) (OP 1.3) c. Carbon dioxide emissions reduced by 162,022 tons per year from AT&C loss reduction, hydropower penetration, and renewable mini grid (2019 baseline: 0) (OP 3.1)

a. MePDCL annual reports b. System average interruption duration index or system average interruption frequency index monitoring reportsb c. ADB’s technical and economic due diligence reports or project monitoring reports

Extreme weather conditions beyond design assumptions destroy the distribution systems constructed by the project.

Outputs 1. Distribution network in Central, East Garo Hills, and West Garo Hills strengthened and modernized

By 2025: 1a. 23 new 33/11 kV substations commissioned (2019 baseline: 0) (OP 1.3.1) 1b. 45 existing 33/11 kV substations upgraded and modernized (2019 baseline: 0) (OP 1.3.1) 1c. 1,440 km of new 33 kV and 11 kV distribution lines installed, and 774 kms of existing distribution lines upgraded (2019 baseline: 0 km new lines, 0 km upgraded) (OP 1.3.1) 1d. 136 auto-reclosers and 597 fault passage indicators installed in the networks. (2019 baseline: 0) (OP 1.3.1) 1e. Distribution network connecting 100% of households in three selected villages to mini grid system renovatedc (2019 baseline: 0) (OP 1.3.1)

1a.–e. MePDCL annual monitoring reports or Meghalaya State Electricity Regulatory Commission reports

Increases in prices of equipment and materials exceed contingency and inflation forecasts, resulting in cost overruns and delays in project completion.

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2. System for meter reading, billing, and collection improved 3. Capacity of executing agency to plan and implement distribution sector projects developed 4. Efficient and productive use of gender- and socially- inclusive mini grid energy systems pilot-tested and promoted

By 2024: 2a. Smart meters installed in 180,000 households (2019 baseline: 0) (OP 1.3.1) 2b. Online meter reading, billing, and collection system installed for 75,000 households (2019 baseline: 0) (OP 1.3.1) 2c. One new meter-testing laboratory installed and commissioned (2019 baseline: 0) (OP 1.3.1) By 2023: 3a. Distribution sector road map completed and submitted by MePDCL to Power Department for endorsement and publication (2019 baseline: Not applicable) (OP 6.1) 3b. Financial road map prepared and submitted by MePCDL to Power Department for endorsement and publication (2019 baseline: Not applicable) (OP 6.1) 3c. At least 150 eligible staff of MeECL and MePDCL (including at least 20 eligible female staff) reported increased knowledge on monitoring technical, financial, procurement, gender, and safeguard compliances of distribution projects (2019 baseline: Not applicable) (OPs 6.1, 6.1.1, 2.3.2) Financed by JFPR grant By 2024: 4a. Solar photovoltaic-battery hybrid systems and agricultural processing units installed in Lower Jambal, Dilma Ading, and Kosigre villages (2019 baseline: 0) (OPs 5.1.1) 4b. Rooftop solar photovoltaic systems installed in three selected schoolsd (2019 baseline: 0) (OPs 5.1.1) 4c. 100 individuals (at least 40% women) in Lower Jambal, Dilma Ading, and Kosigre villages reported increased

2a.–c. MePDCL annual/monitoring reports 3a. Copy of distribution sector road map submitted to Power Department 3b. Copy of financial road map submitted to Power Department 3c. Pre- and post-training assessment records 4a.–b. Quarterly trust fund progress report and project completion report 4c.–d. Pre- and post-test survey

53




knowledge on operating solar photovoltaic-powered agricultural processing units (2019 baseline = 0) (OP 2.1.4) 4d. 200 individuals (at least 40% women) from Lower Jambal, Dilma Ading, and Kosigre villages and three selected schools reported increased awareness on mini grids for power generation and their productive use (2019 baseline: 0) (OP 2.1.4)

ADB = Asian Development Bank, AT&C = aggregate technical and commercial, km = kilometer, kV = kilovolt, MeECL= Meghalaya Energy Corporation Limited, MePDCL = Meghalaya Power Distribution Corporation Limited, OP = operational priority, Q = quarter. a Government of India and Government of Meghalaya. 2015. 24X7 Power for All Meghalaya. Delhi.

Key Activities with Milestones 1. Distribution network in Central, East Garo Hills, and West Garo Hills strengthened and modernized 1.1. Tendering for four substation packages commenced on 18 October 2019 1.2. Tendering for four distribution line packages commenced by Q2 2020 1.3. Contract for four substation packages awarded by Q3 2020 1.4. Contract for four distribution line packages awarded by Q1 2021 1.5. Construction for four substation packages completed by Q4 2024 1.6. Construction for four distribution line packages completed by Q2 2025 2. System for meter reading, billing, and collection improved 2.1. Tendering for smart meter package commenced in Q1 2020 2.2. Contract for smart meter package awarded by Q4 2020 2.3. Installation of smart meters completed by Q1 2024 3. Capacity of executing agency to plan and implement distribution sector projects developed 3.1. Tender to recruit consultancy firm for implementation support commenced in January 2020 3.2. Recruitment of individual consultants to support distribution sector road map initiated by Q2 2020 3.3. Tender to recruit consultancy firm for distribution sector road map commenced by Q3 2020 3.4. Submission 1 for consultancy firm for implementation support submitted by Q2 2020 3.5. Individual consultants to support distribution sector road map recruited by Q2 2020 3.6. Submissions 2 and 3 for consultancy firm for implementation support submitted by Q3 2020 3.7. Submission 1 for consultancy firm for distribution sector road map submitted by Q3 2020 3.8. Contract for the consultancy firm for implementation support awarded by Q3 2020 3.9. Submissions 2 and 3 for consultancy firm for distribution sector road map submitted by Q4 2020 3.10. Contract for the consultancy firm for distribution sector road map awarded by Q1 2021 3.11. Distribution sector road map completed and published by Q4 2023 4. Efficient and productive use of gender- and socially-inclusive mini grid energy systems pilot-tested

and promoted 4.1. Consultants for site identification and feasibility studies commenced by Q1 2020 4.2. Feasibility studies for project sites completed by Q3 2020 4.3. Tendering/shopping for equipment of mini grids initiated by Q2 2021 4.4. Contract for mini grids awarded by Q4 2021 4.5. Construction and commissioning of mini grids completed by Q4 2023 4.6. Training programs on mini grids and agricultural processing units conducted by Q1–Q2 2024 4.7. Awareness campaign material on safe and efficient use of energy prepared by Q2 2022–Q2 2024

Inputs ADB: $132.8 million (regular ordinary capital resources loan) Government: $33.2 million Japan Fund for Poverty Reduction: $2.0 million (grant)

Assumptions for Partner Financing Not applicable

https://powermin.nic.in/sites/default/files/uploads/Meghalay_24x7-PFA_Final_Doc_14_Sep_15.pdf

54

b System average interruption duration index and system average interruption frequency index are reliability performance indicators.

c Renovation includes installation or replacement of distribution poles and low-voltage distribution lines to allow grid connection of mini grids.

d The selected schools will be in East Garo Hills and West Garo Hills distribution circles. Contribution to Strategy 2030 Operational Priorities OP 1.3 Poor and vulnerable people with improved standards of living (number). Target: 125,000 rural households

(approximately 550,000 individuals) in Central, East Garo Hills, and West Garo Hills benefitting from reduced power outages.

OP 1.3.1 Infrastructure assets established or improved (number). Target: 4 (distribution systems in Central, East Garo Hills, and West Garo Hills upgraded and modernized, and smart meters and its associated infrastructure developed)

OP 2.1.4 Women and girls benefiting from new or improved infrastructure (number). Target: At least 40 women trained in operating agricultural processing units, and 80 women and girls reported awareness on mini grids for power generation and efficient use of electricity.

OP 2.3.2 Measures on gender equality supported in implementation (number). Target: 3 (training for 20 MePDCL and MeECL women staff, training for 40 rural women on operation of solar photovoltaic-powered agricultural processing units, training for 80 rural women on mini grids)

OP 2.4.1 Gender-responsive infrastructure assets established (number). Target: 3 solar photovoltaic-battery hybrid systems and agricultural processing units installed in 3 villages.

OP 3.1 Total annual greenhouse gas emissions reduction (tCO2e/year). Target: 162,022 tons per year resulting from reduced AT&C losses, hydropower generation, and renewable mini grid.

OP 5.1.1 Rural infrastructure assets established or improved (number). Target: 3 solar photovoltaic battery hybrid mini grid systems and agricultural processing units in 3 villages and rooftop solar photovoltaic systems installed in 3 schools

OP 6.1 Entities with improved management functions and financial stability (number). Target: 2 (MePDCL and MeECL)

OP 6.1.1 Government officials with increased capacity to design, implement, monitor, and evaluate relevant measures (number). Target: 150 MeECL and MePDCL staff

Source: Asian Development Bank estimates based on discussions with MeECL, MePDCL, and the Government of Meghalaya in April 2019.

B. Monitoring

70. Project performance monitoring. Overall monitoring of the project in terms of progress and performance will be undertaken in a timely manner by MeECL. The Director (distribution) and Director (MNREDA) will have the overall responsibility for project monitoring and updating the project progress. The field level monitoring will be undertaken by chief engineer. ADB will field review missions every 6 months to monitor project implementation progress. Disaggregated baseline data for output and outcome indicators gathered during project processing will be updated and reported quarterly through the executing agency's quarterly progress reports and after each ADB review mission. These quarterly reports will provide information necessary to update ADB's project performance reporting system.28

71. Compliance monitoring. Loan and grant covenants—policy, legal, financial, economic, environmental, and others—will be monitored through the quarterly progress reports and review missions. 72. Safeguards monitoring. MeECL, MePDCL and MNREDA are responsible for implementing the EMP and RIPP during project implementation as prepared in accordance with

28 ADB's project performance reporting system is available at http://www.adb.org/Documents/Slideshows/PPMS/default.asp?p=evaltool

http://www.adb.org/Documents/Slideshows/PPMS/default.asp?p=evaltool

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ADB’s Safeguard Policy Statement (2009) and as agreed and/or endorsed by the government. One combined environmental and social monitoring report is to be submitted by MeECL to ADB with separate sections on the environment and social safeguards of the MePDCL and MNREDA components; MNREDA will provide their inputs to MePDCL for them to combine with their own inputs in accordance with the outline template of contents provided in the EMP and RIPP. Contents include a summary of progress and any scope and design changes, compliance against loan and grant covenants, progress with EMP, and RIPP actions, quantitative environmental monitoring results, health and safety incidents, grievances received, and a time bound, budgeted corrective action plan for any breaches of performance standards or other non-compliances recorded by MePDCL, MNREDA, or their contractors. Environment and social monitoring reports will be submitted semi-annually up until the project is closed, or for a longer period if this is specified in the project completion report. MePDCL and MNREDA will be responsible for locally disclosing them by being posted on the MeECL website with a hard copy being made available at project site on request as advertised on project site notice boards. ADB will be responsible for disclosure on the ADB website once the final report has been submitted to and accepted by the safeguards team. During implementation ADB will undertake periodic site visits and, if required, supervision missions with detailed review by ADB’s safeguard specialists/officers or consultants; to facilitate this MeECL, MePDCL, MNREDA and their contractors will need to provide ADB with (i) access to all projects sites; (ii) all environment and social safeguards documentation requested; and (iii) a project site health and safety induction and adequate PPE in accordance with Table 2.7.1 of the International Finance Corporation (IFC) Environmental Health Safety (EHS) Guidelines on Occupational Health and Safety.29

73. Gender and social dimensions monitoring. The gender and social inclusive targets will be monitored, collated and analyzed to provide an indication of change in the life of beneficiaries, which in turn will be important for recording the outputs and performance of the project. Implementation status of the gender action plan (GAP) will be reported to ADB through MNREDA with routine project progress reports and other monitoring reports.30 In addition, the inclusion and compliance with labor standards, health and gender aspects will be monitored through review of bidding documents, contract awards, and progress reports. C. Evaluation

74. ADB will field regular review missions every 6 months at the minimum to review status of contract awards, disbursements, physical progress and project implementation. There will be a midterm review to determine if any corrective measures need to be taken in consultation with MeECL. Within 6 months of physical completion of the project, MeECL will submit a project completion report to ADB.31

D. Reporting

75. MeECL will provide ADB with (i) quarterly progress reports in a format consistent with ADB's project performance reporting system; (ii) combined semi-annual environment and social monitoring reports until completion of construction, reverting to annual submission of the

29 IFC. Environmental, Health, and Safety Guidelines. 30 ADB's Handbook on Social Analysis: A Working Document, is available at:

http://www.adb.org/Documents/Handbooks/social-analysis/default.asp, Staff Guide to Consultation and Participation: http://www.adb.org/participation/toolkit-staff-guide.asp, and, CSO Sourcebook: A Staff Guide to Cooperation with Civil Society Organizations: http://www.adb.org/Documents/Books/CSO-Staff-Guide/default.asp

31 Project completion report format is available at: http://www.adb.org/Consulting/consultants-toolkits/PCR-Public- Sector-Landscape.rar.

https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/sustainability-at-ifc/policies-standards/ehs-guidelines

http://www.adb.org/Documents/Handbooks/social-analysis/default.asp

http://www.adb.org/participation/toolkit-staff-guide.asp

http://www.adb.org/Documents/Books/CSO-Staff-Guide/default.asp

http://www.adb.org/Consulting/consultants-toolkits/PCR-Public-%20%20Sector-Landscape.rar

http://www.adb.org/Consulting/consultants-toolkits/PCR-Public-%20%20Sector-Landscape.rar

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environment component and semi-annual submission of the social component during operation until the project is closed; (iii) consolidated annual reports including (a) progress achieved by output as measured through the indicator's performance targets, (b) key implementation issues and solutions, (c) updated procurement plan, and (d) updated implementation plan for the next 12 months; and (iv) a project completion report within 6 months of physical completion of the project. To ensure that projects will continue to be both viable and sustainable, project accounts and the executing agency audited financial statement together with the associated auditor's report, should be adequately reviewed.

E. Stakeholder Communication Strategy

76. The stakeholder communications strategy is described in Table 14. MeECL will post relevant information on their website that will include at minimum information regarding the bidding process, bidders, contract awards, use of funds disbursed under the project and physical progress.

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Table 17: Stakeholder Communication Strategy Project

Information to be

Communicated

Means of

Communication Responsibility Audience Frequency

Final IEE and RIPP Notice informing of

availability at the

project site

Hard copy to be

made available at

project site on

request

Websites of

MeECL, MePDCL

and MNREDA

ADB website

MeECL,

MePDCL,

MNREDA, ADB

ADB, civil society,

affected persons

Once

Report and recommendation of the President with linked documents

ADB website ADB ADB, the Government of India (the government), development partners, civil society, and individuals

Once

Project information while planning/ designing

Discussions and stakeholder consultations

MeECL, MePDCL, MNREDA

Project beneficiaries, affected persons

Regular intervals during planning and design

Status of implementation during construction

Boards at project sites including details of progress and contact details for GRM

MeECL, MePDCL, MNREDA, contractors

Project beneficiaries, affected persons

All the time at construction sites

Project performance reports and project information documents

ADB website ADB ADB, the government, development partners, civil society, and individuals

Every quarter

Periodic progress reports

Website of MeECL MeECL ADB, the government, development partners, civil society, individuals

Quarterly

Environmental and social monitoring reports

Notice informing of availability at the project site Hard copy to be made available at project site on request Website of MeECL

MeECL, MePDCL, MNREDA, ADB

ADB, civil society, affected persons

Semiannually

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Project

Information to be

Communicated

Means of

Communication Responsibility Audience Frequency

ADB website

Updated IEE or RIPP

Notice informing of availability at the project site Hard copy to be made available at project site on request Websites of MeECL, MePDCL, MNREDA ADB website

MeECL, MePDCL, MNREDA

ADB, civil society, affected persons

If required, due to unanticipated impact

Project completion report

ADB website ADB ADB, the government, development partners, civil society, and individuals

Once

X. ANTICORRUPTION POLICY

77. The Government of India, state government, MeECL, MePDCL and other implementing agencies are advised of ADB’s Anticorruption Policy (1998, as amended to date). Consistent with its commitment to good governance, accountability and transparency, implementation of the project shall adhere to ADB’s Anticorruption Policy. ADB reserves the right to review and examine, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the project. In this regard, investigation of government officials, if any, would be requested by ADB to be undertaken by the Government. 78. To support these efforts, relevant provisions of ADB’s Anticorruption Policy are included in the Loan Regulations and the bidding documents. In particular, all contracts financed by ADB shall include provisions specifying the right of ADB to audit and examine the records and accounts of the state and implementing agencies and all contractors, suppliers, consultants, and other service providers as they relate to the project. Individuals/entities on ADB’s anticorruption debarment list are ineligible to participate in ADB-financed activity and may not be awarded any contract under the project.

XI. ACCOUNTABILITY MECHANISM

79. People who are, or may in the future be, adversely affected by the project may submit complaints to ADB’s Accountability Mechanism. The Accountability Mechanism provides an independent forum and process whereby people adversely affected by ADB-assisted projects can voice, and seek a resolution of their problems, as well as report alleged violations of ADB’s operational policies and procedures. Before submitting a complaint to the Accountability Mechanism, affected people should make an effort in good faith to solve their problems by working with the concerned ADB operations department. Only after doing that, and if they are still dissatisfied, should they approach the Accountability Mechanism.32

32 Accountability Mechanism. http://www.adb.org/Accountability-Mechanism/default.asp.

http://www.adb.org/Accountability-Mechanism/default.asp

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XII. RECORD OF CHANGES TO THE PROJECT ADMINISTRATION MANUAL

80. All revisions and/or updates during the course of implementation should be retained in this section to provide a chronological history of changes to implemented arrangements recorded in the PAM, including revision to contract awards and disbursement s-curves.

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