Technical Assistance Consultant’s Report
This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.
Project Number: TA 7954 September 2012
India: Karnataka Integrated and Sustainable Water Resources Management Investment Program
Karnataka Integrated and Sustainable Water Resource
Investment Programme
Urban Water Supply and Sanitation Component
Draft Final Report Volume 2
Strategic Investment Plan
September 2012
TA 7954–IND: KISWRIP Draft Final Report: Vol. 2 – Strategic Investment Plan September 2012
ii
Foreword
This Draft Final Report has been prepared as a deliverable of the PPTA-7954 IND: “Karnataka
Integrated and Sustainable Water Resources Management Investment Programme – Urban Water
and Sanitation Component”.
This, the Second Volume, sets out a Strategic Investment Plan for improved water and wastewater
service in the State of Karnataka as well as in the KISWRIP pilot Tundra-Bhadra sub basin. The Plan
is based upon the detailed assessment made of four ULBs in the Tundra-Bhadra River sub-basin.
During the course of the preparation of the Report, considerable advice, guidance and assistance has
been provided by the Steering Committee and the staff of the KUIDFC, the local ULBs, KUWS&DB
and by the engineering staff responsible for the existing on-going UWSS projects within the subject
towns. This kind assistance, without which this Report could not have been produced, is herewith duly
acknowledged and credited.
In particular, the assistance and advice offered by the Managing Director of the KUIDFC and our Core
Nodal Officer has been essential. Many of the recommendations made in the Institutional Road Map,
and upon which the Strategic investment Plan is based, are theirs. I have merely taken their
suggestions, polished them and fitted them into the overall context of the Programme.
Tony Farrar
PPTA Team: Team Leader & Water Sector Specialist
Amit Basu Deputy Team Leader and Sewerage Specialist
Jagan Kommareddy Replacement for Amit, following Amit‟s retirement due to ill health
Sougata Datta Water Supply Expert
Krishnan Padmanabhan Economic and Financial Expert
Achyutha Rao Aleti Environmental Safeguard Specialist
Saswati Belliappa Social Safeguard Specialist
Arati Nandi Poverty & Social Development Specialist
Alan Nightingale Water Engineer
Fred Gould Wastewater Treatment Specialist
Prepared under the guidance of Tatiana Gallego-Lizon, Principal Urban Development Specialist
SARD/ADB
TA 7954–IND: KISWRIP Draft Final Report: Vol. 2 – Strategic Investment Plan September 2012
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1 KNOWLEDGE SUMMARY ....................................................................................................... 1
2 INTRODUCTION TO THE PROJECT .......................................................................................... 7
2.1 BACKGROUND TO THE PROJECT ...................................................................................................... 7
2.2 PROJECT DELIVERABLES ................................................................................................................ 7
2.2.1 MFF Sector Road Map ......................................................................................................... 7
2.2.2 Feasibility Studies ................................................................................................................ 8
2.2.3 Program Implementation Plan and Materials ................................................................ 8
2.3 SCOPE OF THE DRAFT FINAL REPORT ............................................................................................... 8
2.4 ADB POLICY AND EXPERIENCE IN INDIA ........................................................................................... 8
3 PROJECT RATIONALE ........................................................................................................... 10
3.1 PILOT SUB-BASIN ...................................................................................................................... 10
3.2 DEFINITION OF SUB-SECTOR ........................................................................................................ 10
3.3 STAKEHOLDERS AND THEIR ROLE IN PROJECT .................................................................................. 11
3.3.1 Regulation ......................................................................................................................... 13
4 GOVERNMENT SECTOR POLICY & INITIATIVES ..................................................................... 14
4.1 LEGAL FRAMEWORK ................................................................................................................... 14
4.2 NATIONAL POLICY ...................................................................................................................... 14
4.3 STATE POLICIES FOR THE SECTOR .................................................................................................. 18
4.3.1 Draft Cabinet Paper .......................................................................................................... 19
4.4 PUBLIC/PRIVATE PARTNERSHIPS .................................................................................................. 19
5 ISSUES FACING THE SECTOR & KISWRMIP PROPOSALS ......................................................... 20
5.1 OVERVIEW OF ISSUES ................................................................................................................. 20
5.2 COMPARISON OF KARNATAKA URBAN SERVICE STATUS WITH NATIONAL STANDARD AND AVERAGE ........ 20
5.3 COMPARISON OF KARNATAKA URBAN SERVICE STATUS WITH NATIONAL STANDARD AND AVERAGE ........ 28
5.4 ROAD MAP PROPOSALS .............................................................................................................. 36
5.5 OUTLINE OF PROPOSALS MADE IN ROAD MAP ............................................................................... 36
5.6 SUMMARY OF ISSUES AND PROPOSALS .......................................................................................... 38
6 OPPORTUNITES FOR PPP AND RE-USE OF WASTEWATER FINAL EFFLUENT ............................ 41
6.1 PUBLIC PRIVATE SECTOR PARTICIPATION ....................................................................................... 41
6.2 RE-USE OF WASTEWATER FINAL EFFLUENT .................................................................................... 42
6.2.1 State Unit for Wastewater Re-Use .................................................................................... 43
7 FINANCIAL ASSESSMENT OF ULBS ....................................................................................... 44
7.1 INTRODUCTION ......................................................................................................................... 44
7.2 FINANCIAL STATUS OF FOUR TOWNS ............................................................................................ 44
7.2.1 Summary of Financial Data of Subject ULBs ..................................................................... 44
7.2.2 Sector Operation and Maintenance .................................................................................. 46
7.2.3 Collection Efficiency .......................................................................................................... 47
7.2.4 Accounting Standards and Status of Auditing .................................................................. 47
7.3 RING FENCING WSS SERVICE UNITS IN ULBS ................................................................................. 47
7.4 FINANCIAL MANAGEMENT ASSESSMENT ....................................................................................... 48
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8 ECONOMIC DEVELOPMENT ................................................................................................. 50
8.1 INTRODUCTION ......................................................................................................................... 50
8.2 URBAN SECTOR ......................................................................................................................... 50
8.3 EXISTING SITUATION ASSESSMENT ................................................................................................ 50
8.4 SECTOR COMPOSITION OF GSDP ................................................................................................. 51
8.5 MAJOR ECONOMIC ACTIVITIES OF KARNATAKA ............................................................................... 52
8.6 FUTURE GROWTH ...................................................................................................................... 53
9 STATE ECONOMIC ANALYSIS ............................................................................................... 55
9.1 ECONOMIC ANALYSIS ................................................................................................................. 55
9.1.1 Assignment of Resources to Local Bodies ......................................................................... 55
9.2 ECONOMIC ANALYSIS OF A SECTOR LOAN ...................................................................................... 56
9.2.1 Rationale for Government Involvement ............................................................................ 56
9.2.2 Goals of the Programme ................................................................................................... 56
9.2.3 Sector Development Plan .................................................................................................. 56
9.2.4 Associated Economic Policies ............................................................................................ 57
9.2.5 Government Capacity ........................................................................................................ 57
9.2.6 Fiscal Impact ..................................................................................................................... 57
9.2.7 Economic Risks .................................................................................................................. 57
9.2.8 Government Commitment ................................................................................................ 57
9.2.9 Coordination of Foreign Aid .............................................................................................. 58
9.2.10 Conditions Attached to the Loan. .................................................................................. 58
9.3 CONCLUSION ............................................................................................................................ 58
10 TRANCHE -1 INVESTMENTS AS PILOT INVESTMENTS ............................................................ 59
10.1 SELECTION OF TRANCHE-1 SUBJECT TOWNS................................................................................... 59
10.2 FEASIBILITY STUDY RECOMMENDATIONS ....................................................................................... 59
10.3 SUMMARY OF TRANCHE-1 INVESTMENTS ...................................................................................... 60
10.4 FORECAST FOR PILOT SUB-BASIN INVESTMENT ............................................................................... 62
10.5 TECHNICAL INVESTMENT OPTIONS ................................................................................................ 64
10.5.1 Water & Wastewater Treatment Options .................................................................... 64
10.5.2 Water and Sewer Networks .......................................................................................... 65
11 ASSUMPTIONS MADE IN THE FINANCIAL ANALYSIS ............................................................. 66
11.1 INTRODUCTION ......................................................................................................................... 66
11.2 POPULATION ............................................................................................................................. 66
11.3 INCREASE IN WATER DEMAND ..................................................................................................... 67
12 FINANCE REQUIREMENTS FOR UWSS SERVICE DELIVERY ...................................................... 68
12.1 CAPITAL EXPENDITURE ON WORKS ............................................................................................... 68
12.2 STATE FISCAL ............................................................................................................................ 69
12.3 REVENUES ................................................................................................................................ 69
12.4 DEBT POSITION ......................................................................................................................... 72
12.5 TRANSFER MECHANISM .............................................................................................................. 72
12.6 ULB REVENUE SOURCES: ............................................................................................................ 73
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12.7 INSTITUTIONAL ROAD MAP PROPOSALS ........................................................................................ 78
13 SUMMARY OF INVESTMENT PROGRAMME ......................................................................... 79
13.1 INVESTMENT OBJECTIVES ............................................................................................................ 79
13.2 PHYSICAL INVESTMENTS IN EACH SUB-SECTOR ............................................................................... 79
13.3 SOURCES OF FINANCING ............................................................................................................. 80
14 SUB-PROJECT SELECTION CRITERIA ...................................................................................... 83
14.1 PRIORITISATION OF INVESTMENTS ................................................................................................ 83
14.2 OVERALL APPROACH .................................................................................................................. 83
14.2.1 Technical Criteria ........................................................................................................... 83
14.2.2 Financial Criteria ........................................................................................................... 84
14.2.3 Economic Criteria .......................................................................................................... 84
14.2.4 Social and Environmental Criteria ................................................................................. 84
14.2.5 Cost Estimate and Procurement .................................................................................... 85
14.3 SUB-PROJECT APPROVAL PROCEDURES ......................................................................................... 85
14.3.1 Demonstration of Willingness ....................................................................................... 85
14.3.2 Concept Approval .......................................................................................................... 86
14.3.3 Subproject Approval Procedure..................................................................................... 86
14.4 PENALTIES ................................................................................................................................ 87
15 IMPLEMENTATION PLAN ..................................................................................................... 88
15.1 TRANCHE-1 INVESTMENT ............................................................................................................ 88
15.2 TRANCHE-2 AND SUBSEQUENT INVESTMENT .................................................................................. 88
15.3 IMPLEMENTATION ENTITIES ......................................................................................................... 89
15.3.1 Steering Committee ...................................................................................................... 89
15.3.2 Executing Agency .......................................................................................................... 89
15.3.3 Implementing Agency ................................................................................................... 89
15.3.4 Consultancy Services Committee .................................................................................. 89
15.3.5 Tender Evaluation Committee....................................................................................... 90
15.4 IWRM PROJECT MANAGEMENT UNIT .......................................................................................... 90
15.5 IMPLEMENTATION PROGRAMME .................................................................................................. 90
16 DESIGN & MONITORING FRAMEWORK ................................................................................ 92
17 FINANCIAL MANAGEMENT AND PROCUREMENT CAPACITY ASSESSMENT ............................ 96
17.1 INTRODUCTION ......................................................................................................................... 96
17.2 PROGRAM MANAGEMENT UNIT (PMU) ....................................................................................... 96
17.2.1 Executing Agency – PMU, KISWRMIP ........................................................................... 96
17.3 CONCLUSION AND RECOMMENDATIONS ........................................................................................ 97
17.1 PROCUREMENT CAPACITY ASSESSMENT ...................................................................................... 100
17.1.1 Expected Procurement ................................................................................................ 100
17.1.2 Assessment of the National Procurement Environment ............................................. 100
17.2 WORKS CONTRACTOR AND CONSULTANCY CAPACITY .................................................................... 101
17.2.1 Client/Contractor Partnerships ................................................................................... 101
17.2.2 Performance Guarantees ............................................................................................ 101
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17.2.3 Karnataka Competency for Process Technology ......................................................... 101
17.2.4 Operational Contracts ................................................................................................. 101
17.3 SUMMARY ASSESSMENT AND RECOMMENDATIONS ....................................................................... 102
17.3.1 Strength ....................................................................................................................... 102
17.3.2 Weakness .................................................................................................................... 102
18 TENDER EVALUATION AND SELECTION PROCEDURES ......................................................... 103
18.1 CONSULTANT PROPOSAL EVALUATION PROCEDURE ....................................................................... 103
18.2 WORKS CONTRACT EVALUATION PROCEDURE .............................................................................. 103
18.3 TRANCHE-1 WORKS AND SUPERVISION CONTRACTS ...................................................................... 103
18.3.1 Design and Works Supervision Contract ..................................................................... 103
18.3.2 Plant Construction & Strategic Network ..................................................................... 104
18.3.3 Wastewater Network Construction ............................................................................ 104
18.3.4 Water Network Construction ...................................................................................... 104
18.4 PERFORMANCE CONTRACTS ...................................................................................................... 105
18.5 CONTRACTS FOR TRANCHE-2 AND 3 INVESTMENTS ....................................................................... 105
19 CAPACITY BUILDING ......................................................................................................... 106
19.1 REQUIREMENT ........................................................................................................................ 106
19.2 ESTABLISHMENT SIZE ............................................................................................................... 106
19.3 TRAINING BUDGET ................................................................................................................... 107
19.4 EQUIPMENT AND BUSINESS SYSTEMS .......................................................................................... 107
20 SAFEGUARDS .................................................................................................................... 109
20.1 INTRODUCTION ....................................................................................................................... 109
20.2 SOCIAL ANALYSIS ..................................................................................................................... 109
20.3 IWRM PROJECT MANAGEMENT UNIT ........................................................................................ 109
20.4 ENVIRONMENT ASSESSMENT ..................................................................................................... 109
20.4.1 Sludge Management .................................................................................................. 110
20.5 RESETTLEMENT FRAMEWORK .................................................................................................... 110
20.5.1 Scope of Land Acquisition ........................................................................................... 110
20.5.2 Draft Resettlement Framework .................................................................................. 110
20.6 INDIGENOUS PEOPLES DEVELOPMENT FRAMEWORK ...................................................................... 112
20.7 CONSULTATION AND PARTICIPATION PLAN .................................................................................. 113
20.7.1 Overview ..................................................................................................................... 113
Tables Table 1: Karnataka Water Sector Stakeholders .................................................................................... 12
Table 2: Union Government Water Policies ......................................................................................... 16
Table 3: Union Government Wastewater Policies ................................................................................ 17
Table 4: Level of UWSS Service Provision ............................................................................................. 21
Table 5: Service Criticality Index ........................................................................................................... 23
Table 6: Level of Criticality for UWSS Service ....................................................................................... 26
Table 7: Level of UWSS Service Provision ............................................................................................. 29
Table 8: Service Criticality Index ........................................................................................................... 31
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Table 9: Level of Criticality for UWSS Service ....................................................................................... 34
Table 10: Proposals to Overcome Impediments to Success ................................................................. 39
Table 11: O&M and User Charge .......................................................................................................... 44
Table 12: Past Financial Performance of Subject ULBs ......................................................................... 45
Table 13: Sector O&M Costs in Subject ULBs ....................................................................................... 47
Table 14: Collection Efficiency .............................................................................................................. 47
Table 15: Summary of Financial Management Assessment ................................................................. 48
Table 16: Percentage Annual Growth ................................................................................................... 50
Table 17: India & Karnataka GDP .......................................................................................................... 50
Table 18: District Share of State NSDPV ............................................................................................... 52
Table 19: Karnataka Receipts and Expenditure .................................................................................... 54
Table 20: Summary of Tranche-1 Investments and Indicators ............................................................. 61
Table 21: Summary of Total Investment ............................................................................................... 62
Table 22: Forecast for Pilot Sub-Basin Investment Requirement ......................................................... 63
Table 23: Annual Mains Rehabilitation Investment .............................................................................. 65
Table 24: Historic and Forecast Populations......................................................................................... 66
Table 25: Capital Expenditure (CAPEX) in ULBs .................................................................................... 68
Table 26: UWSS Operation & Maintenance (OPEX) .............................................................................. 68
Table 27: Investment in Sub-Basin 2002-2011 ..................................................................................... 69
Table 28: State Budget .......................................................................................................................... 70
Table 29: State Debt Position................................................................................................................ 72
Table 30: State Interest Payments ........................................................................................................ 72
Table 31: Water Service Charges .......................................................................................................... 73
Table 32: Revenue Account for ULBs in Sub-Basin ............................................................................... 74
Table 33: Collection Efficiency .............................................................................................................. 76
Table 34: Current Initiatives to Increase UBL Revenue ........................................................................ 78
Table 35: Physical Investment Cost - Road Map Implementation (Rs.M) ............................................ 80
Table 36: Physical Investment Cost - Road Map Implementation ($.M) .............................................. 80
Table 37: Source of Financing - State Requirement - RsM ................................................................... 81
Table 38: Source of Financing - State Requirement - $M ..................................................................... 81
Table 39: Source of Financing – Sub-Basin Requirement - RsM ........................................................... 81
Table 40: Source of Financing – Sub Basin Requirement - $M ............................................................. 82
Table 41: Source of Financing –Tranche-1 Towns - RsM ...................................................................... 82
Table 42: Source of Financing – Tranche-1 Towns - $M ....................................................................... 82
Table 43: Implementation Programme ................................................................................................. 91
Table 44: Summary of PMU Assessment .............................................................................................. 98
Figures
Figure 1: Indicative Water Supply Investment ........................................................................................ 3
Figure 2: Tundra Bhadra Sub Basin ....................................................................................................... 11
Figure 3: Movement in India and State GDPs ....................................................................................... 51
Figure 4: Per Capita NSDP of India and Karnataka ................................................................................ 51
Figure 5: Indicative Water Supply Investment per Head ...................................................................... 62
Figure 6: Design & Monitoring Framework .......................................................................................... 95
Figure 7: Consultation in Davangere ................................................................................................... 113
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Abbreviations
Abbreviation Full term
ADB Asian Development Bank
CC City Corporation
CDTA Capacity Development Technical Assistance
CLIP City Level Investment Plan
CMC City Municipal Councils
DPR Detailed Project Report
DWSM Drinking Water Supply Mission (proposed)
EA Executing Agency
EARF Environmental Assessment & Review Procedure Framework
EARP Environmental Assessment & Review Procedure
EIA Environmental Impact Assessment
ELSR Elevated Storage Reservoir
EMP Environmental Management Plan
FR Final Report
FYP (GoI) Five Year Plan
GO Government (of Karnataka) Order
GoI Government of India
GoK Government of Karnataka
IEE Initial Environmental Examination
ID&IP Infrastructure Development & Investment Plan
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IPPF Indigenous Peoples Development Plan
IND India
IEE Initial Environmental Examination
IWRM Integrated Water Resource Management
KISWRMIP Karnataka Integrated and Sustainable Water Resources Management
Investment Programme
KUIDFC Karnataka Urban Infrastructure Development & Finance Corporation
KUWSDB Karnataka Urban Water Supply & Drainage Board
MFF Multi-Tranche financing facility
NGO Non-Government Organisation
NKUSIP North Karnataka Urban Sector Investment Program
NRW Non-Revenue Water
O&M Operations & Maintenance
PSA Performance Service Agreement
PCU Project Co-ordination Unit
PPP Private Public Participation
(PP)TA (Project Preparation) Technical Assistance
(P)SC (Programme) Steering Committee
REA Rapid Environmental Assessment
RF Resettlement Framework
RP Resettlement Plan
SPV Special Purpose Vehicle
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SWP State Water Policy
TMC Town Municipal Council
TP Town Panchayath
(D)TL (Deputy) Team Leader
UDD Urban Development Department
ULB Urban Local Body
UDWSP Urban Drinking Water & Sanitation Policy
WB World Bank
WRD Water Resource Department
(U)WSS (Urban)Water Supply & Sanitation
WTP (W) Water Treatment Plant (Works)
WWTP (W) Wastewater Treatment Plant (Works)
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Technical Abbreviations
Abbreviation Full term
Kl Kilolitre
km Kilometre
l/hd/dy Litres per head per day
lps Litres per second
M Million
Mld Mega litre per day
m Metre
mm Millimetre
TA 7954–IND: KISWRIP Draft Final Report: Vol. 2 – Strategic Investment Plan September 2012
1
1 KNOWLEDGE SUMMARY
1. The reasons for poor Urban Water Supply and Sanitation (UWSS) sector performance are well
known, and do not need to be detailed in this Knowledge Summary:
Poor condition of UWSS assets, often beyond their reliable working life;
Lack of overall sector coordination and control, and
Insufficient capacity, particularly at Urban Local Body (ULB) level where there are neither
sufficient operational staff members, or staff of the necessary calibre.
2. In many respects these have been due to, amongst other reasons, lack of investment and
politically driven tariffs.
3. In the context of a rapidly developing area with increasing customer expectations and yet a
scarcity of good quality water, the “Karnataka Integrated and Sustainable Water Resources
Management Investment Programme (KISWRMIP) is being developed with the assistance of the
Asian Development Bank (ADB) in order to ensure the adequacy and sustainability of water and
wastewater service provision in the state of Karnataka.
4. The Programme is specifically required to take into account two cornerstones of the Government
of India and the Government of Karnataka sector strategies – those of Integrated Water Resource
Management (IWRM) and for the maximum use of Public Private Partnerships (PPP).
5. The Multi-Tranche Financing Facility‟s (MFF) first tranche, Tranche-1, covers operationalisation of
IWRM functions and investments for four ULBs in the upper Tunga Bhadra River basin. Other
ULBs in the basin and water scarce sub-basins of Karnataka are to be covered during the
subsequent tranche(s). We understand that the Investment Program is for a period of 7 to 8 years
and will comprise of three tranches:
Tranche 1 - four years from 2013 to 2016;
Tranche 2 - four years from 2015 to 2018, and
Tranche 3 - four years from 2017 to 2020
6. Our understanding is that the total investment will be $215million, inclusive, with an ADB share of
$150million; the remainder being from the Government of Karnataka.
7. Four ULBs – Davangere, Ranebennur, Harihar and Byadgi - were selected as pilot sub-project
towns for assessment of the required sector investment in the sub-basin and across Karnataka, to
bring the water and wastewater service provision in the state to the required level for economic
development of the state and for the health and well-being of its citizens.
8. Institutional and technical issues have been addressed in the Draft Final Report: Volume 1-
Institutional Road Map and in the four sub-project water and wastewater Feasibility Studies. Our
“Road Map” proposals, based upon our own findings and upon past lessons learnt in India,
include the need for:
Ownership of and commitment to projects by ULBs through the adoption of a “bottom-up”
approach to project initiation;
Public awareness campaigns to educate people on the benefits of centralised water supply
and wastewater collection i.e. to promote a “willingness” to pay connection charges,
supported by “customer friendly” financial assistance with the connection charges;
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Water tariffs to be commensurate with customer service levels, and the reasons for tariff
increases to be clearly explained to customers who should have the option to decide,
collectively, upon service level1 and thus charges;
Sector coordination at state and local level;
Establishment of District based SPVs for service delivery or, within the larger ULBs, a distinct
water and wastewater department with staff devoted only to the sector and with ring-fenced
accounting;
Development a professional capability among ULB managerial, financial and technical staff;
Introduce means and procedures for performance and asset history data as a first step
towards fuller PPP, and
A 5yr O&M phase to be included into treatment plant works contracts to assist building of an
O&M capability in the ULBs.
9. Concerning the need for ownership of projects by ULBs, ULBs including mayors, councillors, and
ward members should be fully involved at the early stage of project initiation and formulation and
be kept fully informed during the asset creation process.
10. Customer databases need to be updated and retained as current in order to ensure that all
customers receive a water service bill, and that the ULB receives all the income to which it is
entitled. Insufficient data existed in the sub-project towns to make an assessment of these
“commercial”2 losses. From our experience, figure between 10% and 20% of water into supply is
feasible.
11. Objectives for the investments require to be focused upon the service issues facing the sector,
that is to:
Provide for full and continuous water supply within the urban areas;
Provide for wastewater collection, where the number of people willing to connect to a sewer
make the sewer economically viable;
Treat wastewater collected to Indian standards for discharge to a water course;
Reduce NRW to economic levels, and
To promote the commercial re-use of wastewater.
12. It is dangerous to draw too much from the limited sample of the four pilot ULBs, but there are
some conclusions that can be drawn and applied in a wider context:
For the water supply, the $/head indicator is fairly consistent ranging from $90 to $1443. The
highest figure is in Byadgi and reflects the lower population of the ULB over which fixed costs
are spread. The average for the other three towns is $105/head. Most of the water service
requirements are in place and the investment tends to be one to augment the existing
facilities, rather than first-time service provision, and for asset replacement, and
For the wastewater service, the required investment is more variable and is based upon the
requirements in each ULB. The $/person for Byadgi is high as the wastewater collection and
treatment is first-time, whereas in the other towns the requirement is much less due to the
current ADB and other investments taking place.
13. The following table shows the breakdown of the proposed Tranche-1 investment
1 During the sub-project household survey, a continuous supply was not seen as essential to many people.
2 “Commercial losses” includes unknown customers, meter errors and errors due to estimating consumption where there
are no meters or the meters are inoperable. 3 The indicators are based upon assessed investment requirement, not necessarily that provided in the Tarnche-1
investment
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Figure 1: Indicative Water Supply Investment
Project Element Estimated CAPEX
4
$M
Davangere Water Procurement 2.08
Water Network Phase 1 16.27
2011 population Water Network Phase 2 3.95
488,410 Total Water Investment $22.30M
Wastewater Collection 16.93
Wastewater Treatment -
Total Wastewater Investment $16.93M
TOTAL ULB Investment $39.23M
Harihar Water Procurement 3.04
Water Network Phase 1 1.85
2011 population Water Network Phase 2 6.48
101,711 Total Water Investment $11.37M
Wastewater Collection 1.19
Wastewater Treatment -
Total Wastewater Investment $1.19M
TOTAL ULB Investment $12.56M
Ranebennur Water Procurement 4.32
Water Network Phase 1 2.88
2011 population Water Network Phase 2 5.96
114,580 Total Water Investment $13.26M
Wastewater Collection 1.34
Wastewater Treatment 0.36
Total Wastewater Investment $1.7M
TOTAL ULB Investment $14.9M
Byadgi Water Procurement -
Water Network Phase 1 2.77
2011 population Water Network Phase 2 1.63
30,600 Total Water Investment $4.4M
Wastewater Collection 4.88
Wastewater Treatment 1.13
Total Wastewater Investment $6.01M
TOTAL ULB Investment $10.41M
Total of Physical Investments $77.10M
Provide for Tranche-2 preliminary works1 $20.00M
IWRM Project Management Unit2 $1.25M
Training programme (allow)3 $0.05M
Allow for plant and business systems4 $1.60M
TOTAL TRANCHE 1 INVESTMENT $100.00M
Note 1: See Paragraph 27. Note 2: See Paragraph 22. Note 3: To be confirmed by HR and Development Plan. Note 4: to
be confirmed based upon Institutional arrangement of ULBs for service delivery
14. As discussed in Paragraph 26, the investment in the water network is divided into two phases.
The first Phase is for bulk water procurement and treatment, and the second is to provide the
water distribution infrastructure for a continuous water supply to customers. The second phase
4 CAPEX is inclusive of project management costs of 10%; contingency of 15%; resettlement, compensation and land
purchase costs, and for an extended 5yr operational phase for new water and wastewater treatment plants.
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investment is predominantly for the replacement of older, leaking mains. Financial and economic
benefits to be derived from mains replacement can be difficult to demonstrate and the investment
included in the Tranche-1 investment for mains rehabilitation has been limited necessarily by:
The financial/economic cost benefit analysis, and
The anticipated total Tranche-1 investment of $100M
15. The final amount allocated for mains rehabilitation will depend upon:
The agreed Tranche-1 investment value;
Results of pipe condition surveys, sampling and destructive testing to ascertain the true
extent, cost and prioritisation of mains for replacement;
Any funding provided by the ULBs, and
The contracted rates for pipe replacement.
16. Summary of physical investment cost required for Roadmap implementation is given in the
following tables, in US$million.
Physical Investment Cost - Road Map Implementation in $M
Sector Total
State 34 Towns
Tranche-1 Subject
Towns
Amount % to total Amount % to total
Water Supply 1,094 212 19.4 108 9.9
Sewerage 844 139 16.4 38 4.6
Total 1,938 350 18.1 146 7.6
Note: 1) Base costs only - does not include contingencies, 2) 1 U S Dollar =55
17. The required investments for the 34 ULBs in the pilot sub-basin of $244m for water and $160 for
wastewater compares with the $270m and $165m derived from the four subject ULB Feasibility
Studies, if a 15% contingency is added to the above figures.
18. The difference for the water sector investment - $244m to $270m – is probably due to the large
investment proposed now for the rehabilitation of the water networks in the towns.
Source of Financing - State Requirement in $M
Sector Total
Centrally
Sponsored
Schemes
State Plan
WB / ADB
Investment
Program
Balance funds
source to be
identified
Water
Supply 1,094 76 413 223 382
Sewerage 844 14 452 234 144
Total 1,938 90 865 456 526
Note: 1) Base costs only - does not include contingencies 2) 1 U S $ = 55
Source: KUWSDB, KUIDFC, GoK and consultant estimate
Source of Financing – Sub Basin Requirement in $M
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Sector Total
Centrally
Sponsored
Schemes
State Plan
WB / ADB
Investment
Program
Balance funds
source to be
identified
Water Supply 212 18 79 57 57
Sewerage 139 3 65 49 22
Total 350 21 144 106 79
Note: 1) Base costs only - does not include contingencies
2) 1 U S $ = ` 55
Source: KUWSDB, KUIDFC, GoK and consultant estimate
Source of Financing – Tranche-1 Towns in $M
Sector Total
Centrally
Sponsored
Schemes
State Plan
WB / ADB
Investment
Program
Balance funds
source to be
identified
Water Supply 108 1 0 46 62
Sewerage 38 1 1 36 1
Total 146 1 1 81 63
Note: 1) Base costs only - does not include contingencies
2) 1 U S $ = ` 55
Source: KUWSDB
19. As the basis for investment, we have found that the Government of Karnataka‟s sector
development plan is economically sound. The plan involves only the normal functions of
government, and its goals are reasonable. The plan is generally well designed from an economic
perspective.
20. Similarly, the KUIDFC, as the project PMU, has the systems and procedures in place to manage
the project.
21. The ULBs will be the owner of any assets procured and will be responsible for their operation and
maintenance and for the setting of tariffs to finance the O&M.
22. Capacity building is required in the ULBs. We recommend that ULBs “associate” on a District
basis to form Special Purpose Vehicles that will be large enough to attract experienced operators
to work alongside ULB staff in a co-management approach. Training objectives and targets would
be a specific requirement. Such contracts can only be satisfactory after asset and performance
data is available for competitive bidding. An initial task in the project implementation will be to set
in place the procedures for the collection and recording of the data. For that purpose, we propose
the establishment, in the KUIDFC, of an IWRM Project Management Unit comprising Indian
nationals to assist and guide the ULBs, supplemented as necessary by short-term National and
International consultants. We recommend also that a small team is established in the Unit with
responsibilities for disadvantaged peoples, social and gender water sector issues.
23. The key features of current ULB finances are:
Own revenue hardly pays the revenue expenditure. ULB heavily depends on grants from the
state government for day-to-day operations;
Collection efficiency for property tax in three of the pilot ULBs needs improvement as it
ranges from 62% in Harihar to 86% in Davangere for the financial year 2011-12; In Byadagi
the collection efficiency is very good at 99%;
Collection efficiency for water is low and ranges from 50.4% in Harihar to 81.9% in
Davangere, and needs to be improved, and
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Revenue expenditure has grown in the range of 12% Harihar to 31.1% in Ranebennur.
24. Tariffs should be structured in a manner such as to act as a disincentive for „excessive‟
consumption and wastage of water, whilst ensuring at least a minimum „lifeline‟ supply to the
poor. An appropriate cost recovery mechanism based on adequate tariffs will help ensure that
revenues cover O&M costs, debt service plus a reasonable return on capital.
25. The KUIDFC has suggested that the ULBs are to show a willingness to share the responsibility to
improve the supply to customers and that Tranche-2 and subsequent investments should not be
made in a ULB until the ULB has demonstrated improved proficiency through the adoption of
various “self-help” measures. Typical of such measures could be to install bulk metering;
complete a revision of the customer database to identify unknown connections or to introduce and
publish Customer Service and Operational Performance Standards.
26. To conform to the KUIDFC proposal, the proposed Tranche-1 investment has been prepared in
two Phases:
Phase I - all wastewater work requirements and water supply works necessary to ensure the
availability of water at the strategic reservoirs, and
Phase II – additional works required to provide for a continuous supply of water to be
provided after the ULB has demonstrated improved proficiency
27. Lack of funding has been a major deterrent in the allowing the ULBs to deliver the improvements
in service that they wish to deliver. In recognition of this lack of finance, we suggest that limited
monies, $20m suggested, are made available from the Tranche-1 funding to assist ULBs to “take
the first steps” to initiate the process within their towns.
28. The necessary Safeguard surveys have been prepared and included into the Draft Final Report
as Annex, 5,6 and 7.
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2 INTRODUCTION TO THE PROJECT
2.1 Background to the Project
29. The Government of Karnataka (GoK) has declared the period from 2011 to 2020 as the “Irrigation
Decade” for achieving water and food security. The Government envisages the introduction of an
“Integrated Water Resources Management (IWRM) approach in the water resources sector to
achieve the objectives which includes the integration of issues related to irrigation, agriculture,
industrial, energy, drinking water and other allied demands for water.
30. In this context, the “Karnataka Integrated and Sustainable Water Resources Management
Investment Programme (KISWRMIP) is being developed with the assistance of the Asian
Development Bank (ADB).
31. Specifically, on 9 December 2011, ADB approved the provision of $1,200,000 for technical
assistance to prepare the Programme. On 19 January 2012, the Government of India (GoI)
signed the associated Technical Assistance (TA) Letter of Agreement. The TA is based on
outcomes of a preceding ADB financed capacity development TA which undertook institutional
analyses and consultations, and provided an IWRM roadmap covering policy, institutional, and
planning framework, specific water management functions and tools to be introduced, and
directions to manage challenging water sector agendas towards the future.
32. Consulting services for the Programme are provided by three separate teams of consultants; (i)
Integrated Water Resources Management; (ii) Irrigation and (iii) Urban Water Supply and
Sanitation (UWSS). The Irrigation consultants are responsible for overall synthesis of all outputs
and preparation of a single project design. Subsequent to the interim review mission, the
Government of Karnataka (GoK) and ADB approved the segregation of urban water supply and
irrigation into two separate but coordinated Multi-Tranche Financing Facilities (MFF) which would
be simultaneously prepared under a common IWRM umbrella.
33. The Water Resources Department (WRD) is the Executing Agency (EA) for the preparation of
Integrated Water Resources Management and Irrigation components and overall coordination of
the KISWRMIP. The Karnataka Urban Infrastructure Development & Finance Corporation
(KUIDFC) is the Executing Agency for the UWSS component of the Programme.
2.2 Project Deliverables
2.2.1 MFF Sector Road Map
34. As the PPTA UWSS consultancy team we are tasked to prepare a Final Report that can lead to
the intended sector impacts and outcome, comprising:
Sector Road Map to provide an effective basis for MFF investments. The institutional
development roadmap for UWSS, in the context of IWRM, is to contain specific reform
recommendations and associated actions to provide an enabling environment and
progressive steps for incremental improvements. Key agendas include (i) institutional setup,
skill mix, and capacities of sector agencies including opportunities for Public/Private
Participation (PPP); (ii) enabling environment such as legal, regulatory and operational; (iii)
asset operation & maintenance (O&M) sustainability with expenditure review of the concerned
agencies; and (iv) climate change adaptation/disaster prevention planning for institutional
reforms and resilience in infrastructure and O&M designs;
Strategic Sector Investment Plan to attain the set sector objectives over the medium term.
The investment plan has been prepared by compiling the relevant programs financed by the
Government of India, the State, and any other external financiers for IWRM and by updating
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the existing investment plan for UWSS. Within this framework, appropriate selection criteria of
individual subprojects have been prepared, with prioritization of specific investment
recommendations.
2.2.2 Feasibility Studies
35. Feasibility Studies have been prepared for the subject Tarnche-1 towns – Davangere, Harihar,
Ranebennur and Byadgi - to cover expansion/ rehabilitation of UWSS systems and will include,
amongst other aspects, (i) baseline surveys of the social, economic, poverty and other indicators;
(ii) subproject designs for engineering structures and other programs, cost estimates, and
implementation arrangements; (iii) economic and financial assessments; and (iv) social and
environmental safeguards including impacts, risks and their mitigation measures.
2.2.3 Program Implementation Plan and Materials
36. We are required to prepare a detailed program implementation plan with the assessment of (i)
detailed component design and cost estimates; (ii) procurement plans and implementation
scheduling with projection of physical, financial, and other progresses; (iii) institutional
arrangements for IWRM and sector specific implementation involving the concerned State and
local government agencies, consultants, NGOs, and other agents, along with associated capacity
development programs; (iv) implementation arrangements such as financial management and
planning for consultant engagements; (v) safeguards management, (vi) monitoring and evaluation
arrangements and (vii) executing and implementing agencies‟ procurement capacity assessment.
2.3 Scope of the Draft Final Report
37. The Draft Final Report comprises:
Volume 1 – Institutional Road Map;
Volume 2 – Investment Plan;
Annex 1 - Davangere Feasibility Study
Annex 2 - Ranebennur Feasibility Study
Annex 3 - Harihar Feasibility Study
Annex 4 – Byadgi Feasibility Study
Annex 5 – Safeguards Report – Environmental
Annex 6 - Safeguards Report – Social Development, Poverty and Gender Analysis
Annex 7 - Safeguards Report – Social
2.4 ADB Policy and Experience in India
38. The past urban operations of ADB confirm that implementation of urban projects is complex and
requires close coordination between multiple agencies. In several cases, staffing and capacity of
executing and implementing agencies were inadequate, and effective project leadership was
lacking. Land acquisition and other clearances take very long and implementation of safeguards
is weak and cumbersome. The special evaluation study of ADB noted that where capacities are
weak, this should be seen as a risk, and mitigation measures should be incorporated into the
design of projects5.
5 ADB. 2006. Special Evaluation Study of OED for ADB Urban Sector Strategy and Operations. Manila.
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39. The Country Assistance Program Evaluation (CAPE) of India (2007) raises concern about
sustainability due to slow implementation of financial measures for cost recovery, user charges
and taxes, and weak capacity of urban service providers to operate and maintain the assets6.
40. The recommendations of CAPE to enhance sustainability include (i) innovative lending and PPPs
and municipal bond market development; (ii) transfer of best practices and long-term capacity
building for reforms, asset management, and project design and management, and greater
consultation with stakeholders for buy-in; (iii) alignment of ADB reform agenda with JNNURM; (iv)
prioritizing local governments with commitment to reforms; and (v) considering use of policy-
based loans and continuation of MFF as an appropriate lending instrument. All these
recommendations form important elements of ADB‟s on-going operations and continue to be
pursued during Country Partnership Strategy (CPS) 2009-2012.
41. ADB‟s urban operations have been expanded to cover economically weaker states. Assessment
of the effectiveness of past urban operations reaffirms the relevance and visible impact of ADB
projects in Indian cities. In the past, ADB provided loans for integrated urban projects, including
investments in water, sanitation, drainage, urban roads and transport to Jammu and Kashmir,
Kerala, Kolkata, Madhya Pradesh, Karnataka, and Rajasthan. These were accompanied by urban
reforms and capacity building directed at improving the institutional, financial, and management
capacity of ULBs and other service providers. Schemes for targeted poverty reduction and “slum
up-gradation” were regular component of these projects. While the projects have responded well
to the Government‟s multi-pronged urban agenda and created positive synergies among sub-
sectors, their design and implementation have proven to be complex.
42. ADB continues to support the Government‟s urban development agenda with dual objectives of (i)
improving the quality of life of urban residents and (ii) enhancing the competitiveness of Indian
cities to attract investment in a globalizing world. The key outcome of ADB‟s sector assistance is
contributing to the 11th Plan‟s targets for (i) increasing access of urban population to water supply
and sanitation, which is one of the MDGs, (ii) enhancing urban accessibility and mobility, and (iii)
improving environment and public health of urban population. These key outcomes will be
achieved through investments in water supply, sewerage, drainage, and urban roads and
transport. Where feasible, investments include urban renewal and other infrastructure such as
tourism to enhance the economic potential of the cities. To ensure sustainability and quality
service delivery, ADB continues to pursue urban reforms.
6 ADB. 2007. Country Assistance Program Evaluation for India. Manila.
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3 PROJECT RATIONALE
3.1 Pilot Sub-Basin
43. The “Upper Tunga Bhadra Sub-Basin”, a part of the Krishna River Basin, has been selected as
the pilot sub-basin for KISWRMIP. There are thirty-four Urban Local Bodies (ULBs) located in the
sub-basin which is considered to be water –stressed. The total population in the sub-basin is
70lakhs, of which 22.4lakhs are urban.
44. The location of the sub-basin is shown in Figure 2, reproduced from the Report: Final Report
Integrated Water Resources Management and Sustainable Services Delivery in Karnataka. (ADB
TA No. 7418-IND) Component 3: Urban Water Supply and Sanitation.
3.2 Definition of Sub-sector
45. The sub-sectors to be included in are (i) potable water supply (ii) and wastewater collection and
safe disposal, within urban areas. Land drainage and solid waste management are excluded from
the project.
46. Rural areas are included only as much as to the extent that water can be made available to rural
communities from transmission mains passing close to communities. Any supplies made available
are of untreated water. Peri-urban areas are included where they included within local ULB
development plans.
47. “Potable water supply” from groundwater or surface water is defined as the abstraction,
conveyance, pumping, treatment, storage, distribution and delivery to domestic and non-domestic
customers via piped connections or public stand posts of water needed for daily living and for fire
fighting and operational purposes
48. “Wastewater” refers to the infrastructure that conveys sewage and covers the system of sewer
pipes, septic tanks, pump stations, sewage treatment plants and outfall arrangements necessary
to safely remove water contaminated by faecal, household or industrial wastes and thereby
preserving public health. “Wastewater” does not include for rain, storm or ground water.
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Figure 2: Tundra Bhadra Sub Basin
3.3 Stakeholders and their Role in Project
49. Karnataka‟s UWSS sector is managed by multiple agencies - the Urban Development Department
(UDD), the ULBs, the Karnataka Urban Water Supply and Drainage Board (KUWSDB), the
Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC). Specifically:
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The Urban Development Department of the State Government is the managing Government
Department for the KUIDFC, the KUWS&DB, and for the ULBs;
The KUIDFC represents the UDD as the project funding; formulation; management, and
executing agency. The UDD acts (i) as the State Government‟s interface for externally aided
projects, and (ii) as nodal agency to implement Government schemes in all sector
components, which among others also includes improvement and strengthening of urban
components in the field of UWSS facilities.
The KUWS&DB is primarily responsible for planning, designing, and implementation of water
and waste water facilities funded by the Government of Karnataka in the urban areas of
Karnataka, excluding Bengaluru city. The KUWS&DB designs and implements water supply
and underground drainage schemes in urban areas of the state and transfers them to
respective ULBs. The KUWS&DB has two administrative regions – the North Karnataka Zone
and South Karnataka.
As per the 74th constitutional amendment, the responsibility of providing municipal services
including water and sanitation services vests with ULBs. In Karnataka, there are a total of
218 elected ULBs responsible for public administration divided, according to size, into City
Corporations, City Municipal Councils, Town Municipal Councils, Town Panchayaths and
Notified Area Committees.
The ULBs are mandated to provide basic services to the urban residents including operation
and maintenance (O&M) of water and waste water facilities on a day to day basis. Once a
UWSS scheme is completed, it is handed over to the concerned ULBs for O&M. The ULBs
have the responsibility of fixing tariffs and collecting revenue for the services rendered.
50. Other involved agencies are:
The Water Resource Department (WRD) is mandated to harness surface water for major and
medium irrigation, for industry and for drinking water. The WRD comprises three major groups
of Agencies: Krishna Bhagya Jal Nigam Limited, Karnataka Nagar Nigam Limited, and
Cauvery Neeravari Nigam Ltd. The Agencies are the three corporations for new irrigation
projects. Component entities within the WRD are:
o The Water Resources Development Organization is primarily responsible for
providing technical services for developing and managing irrigation projects. The
Command Area Development Authority and Water and Land Management
Institute are primarily concerned with operation and maintenance of existing
irrigation projects;
o The IWRM Advanced Centre set up within the Water Resources Department is
mandated to serve as an Overall Programme coordination unit to implement the
IWRM component of the programme.
The Karnataka Rural Water Supply and Sanitation Agency is the equivalent body to the
KUWS&DB for rural areas.
Table 1: Karnataka Water Sector Stakeholders
Stakeholder Role
Government of India National policy and law enactment
Government of Karnataka Ultimate responsible entity within the state for water sector policy, strategy and implementation
Water Resources Department Management of water resources, surface and groundwater, within the state for public water supply, industrial water and irrigation
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Stakeholder Role
Urban Development Department
Oversees policy related to urban water supply and sanitation as well as urban planning and development, in which role the UDD supervises the function of both the Karnataka Urban Water Supply and Drainage Board and of the Karnataka Urban Infrastructure Investment Development & Finance Corporation.
Karnataka Urban Infrastructure Investment Development and Finance Corporation
The KUIDFC represents the UDD for infrastructure project formulation; management, and execution, and for the disbursement of investment funding for infrastructure projects and related capacity building.
Karnataka Urban Water Supply and Drainage Board
Primarily responsible for planning, designing, and implementation of water and waste water facilities funded by the Government of Karnataka in the urban areas of Karnataka, excluding Bangalore. The Board is, at the request of a ULB, can be responsible for the O&M of some ULB water systems
Urban Local Bodies
Responsible for local administration, mandated to provide basic services to residents including operation and maintenance (O&M) of water and waste water facilities on a day to day basis.
3.3.1 Regulation
51. There is no water services regulator in Karnataka. Customers have no recourse for complaints
other than to the ULB service provider.
52. Tariffs are set by the ULBs without out reference to customer service levels provided. The tariffs
are related to political influence; not to the service provided.
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4 GOVERNMENT SECTOR POLICY & INITIATIVES
4.1 Legal Framework
53. The major enactment concerning water supply and wastewater is the 74th Constitutional
Amendment Act 1973. The 12th Schedule devolves governmental functions to the ULBs, two of
which are for:
Water supply for domestic, industrial and commercial purposes; and
Public health, sanitation conservancy and solid waste management.
54. Various other Laws specify other associated activities e.g. the Karnataka Municipal Corporations
Act (1976) governs the management of municipal corporations and the Karnataka Municipalities
Act (1964) governs the management of city municipal and town municipal councils. Other
legislations is
Government of Karnataka (GoK) Policy on Urban Drinking Water and Sanitation, 2002;
GoK Water Policy (2002), and
KUWSDB Act, 1972.
55. A critical framework governing project implementation is the 1996 Government Order (GO)
regarding project financing patterns and contributions by ULBs to the project cost. GOs issued
from time to time deal with project specific interventions; project financing measures, service
delivery standards, etc.
56. Planning and implementation of infrastructure is governed by the appropriate GO.
57. Government Orders define the tariff structures for water supply cost recovery. For example, the
funding pattern for water supply projects is governed by GO No. UDD 204 UMS 95 dated
November 15, 1996, which details out loan: grant: own share mix in case of water supply projects
based on a town‟s 1991 population.
4.2 National Policy
58. The Government of India has a number of policy initiatives pertaining to the water resources
sector. Of most current relevance is the 12th Five Year Plan (2012-17), which is still under
preparation. The National Planning Commission has issued the document “Faster, Sustainable
and More Inclusive Growth: An Approach to the 12th Five Year Plan” in August 2011 that sets the
objectives and priorities for the 12th Five Year Plan. The document makes a detailed assessment
of water sector issues and priorities for the 12th Five Year Plan include (i) Water Resources
Management; (ii) Ground Water Management; (iii) Major and Medium Irrigation; (iv) Irrigation
Management; (v) Water Information Management; (vi) Water Pricing; (vii) Water Requirements of
Industry and Urban Centres, and (viii) River Pollution.
59. To address the critical issues identified above, the National Planning Commission has proposed
an integrated strategy to be put in place under the 12th Five Year Plan. Some of the elements of
the strategy are as follows:
Re-estimate India‟s water balance basin-wise with all aquifers being mapped over the next
five years and aquifer management plans put in place;
Incentivising irrigation reform and efficiency of water use;
Wider profile of irrigation department staff who can bridge the gap with the users;
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The Centre formulate and facilitate adoption of a model Water Resources Regulatory
Authority Bill by States; and
A National Water Commission is put in place to monitor compliance with conditionality
imposed in clearance of important water resources projects.
60. Union water and wastewater policies are contained within the following, Table 2 and Table 3,
respectively.
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Table 2: Union Government Water Policies
Government Body Plan Policy Detail
Millennium Declaration of the
United Nations, to which
Govt. of India is a signatory
Millennium
Development Plan 94% urban households access drinking water by 2015
Planning Commission, GoI 11th 5 Year Plan 07-12
100% urban water supply by 2012; JNNURM and UIDSSMT Programmes - top priority water
supply needs towns and towns, especially those contaminated source, drought prone, water
shortage, water quality problem; metering to be mandatory; use MIS data bases; penalties for
leakage and wastage; use of low volume flush toilets, waste not taps; rain water harvesting;
artificial recharge of ground water; water quality testing laboratories
Ministry of Urban
Development (MoUD), GoI Urban Water Supply &
Sanitation Programme
Sector policy prerogative State governments; Ministry Rural Development - rural water supply;
Ministry Housing - urban water supply. Central Ministries have advisory capacity only;
MoUD, GoI Handbook Service
Level Benchmarking,
June 2010.
WS coverage 100%; Per Capita Supply 135 lpcd; NRW water 15%; metering – 10%;
continuity of supply 24 hr;
Efficiency redress customer complaints 80%; quality of water supplied 100%; cost recovery –
100%; revenue collection efficiency 90%
MoUD, Central Public Health
& Environmental Engineering
Organisation, GoI
Manual on Water
Supply & Treatment,
May 1999
Sets parameters for water supply design, treatment, storage and distribution
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Table 3: Union Government Wastewater Policies
Government Body Plan Policy Detail
Millennium Declaration of
the United Nations, to which
Govt. of India is a signatory
Millennium Development
Plan
Sanitation Coverage: Have, by 2015, the proportion of people without sustainable access to
safe drinking water and basic sanitation; % households without sanitation by 2015 94%;
urban households access drinking water by 2015- 12.14% for urban area7
Planning Commission, GoI Eleventh Five Year Plan
(2007-2012)8
Coverage of urban sanitation by end of plan period (2012) Coverage of Population100%;
sewerage facility 70% ; low cost sanitation 30%
MoUD, GoI National Urban Sanitation
Policy, 2008
Allow open defecation 0%; proportion of total human excreta generation that is safely
collected 100%; proportion of total black waste water generation that is treated and safely
disposed off 100%; proportion of total grey waste water generation that is treated and safely
disposed off 100%; proportion of total storm-water and drainage that is efficiently and safely
managed 100%; preparation of State Urban Sanitation Strategy by the respective states-
within two years from 2008
MoUD, GoI Handbook Of Service
Level Benchmarking
Targets: Coverage of toilets 100%; coverage of waste water network services 100%;
collection efficiency of waste water network100%; adequacy of waste water treatment
capacity 20%; quality of waste water treatment 100%; extent of reuse and recycling of waste
water 80%; extent of cost recovery in waste water management 90%; efficiency in redressing
customer complaints100%; efficiency in collection of sewerage related charges 90%
MoUD Manual on Sewerage
and Sewage Treatment
Technical Guideline by
Ministry of Urban
Development Department
Wastewater collection efficiency 80% of the supplied water in general
7 Ref: MILLENNIUM DEVELOPMENT GOKLS, INDIA COUNTRY REPORT 2009, Mid-Term Statistical Appraisal Central Statistical Organization, Ministry of Statistics and Programme
Implementation, Government of India . The % with sanitation facility is linearly interpolated from this figure for 2010-11
8 Government of India, Planning Commission, Eleventh Five-Year Plan (2007-2012), Rural Drinking Water and Sanitation in the Eleventh Plan period – Excerpts
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4.3 State Policies for the Sector
61. The Government of Karnataka is taking a lead role in recognizing the demands for water
resources as the State undergoes rapid urbanization which will result in competing needs for
water by the various sector users including: drinking water, irrigated agriculture, industry and
environment. The GoK "Vision 2020" envisages eliminating poverty in all areas and the
achievement of the Millenium Development Goals by 2015. Achieving these goals will require
enhancing human competencies and equitable growth for all people and regions throughout the
state; institutionalizing good governance through increased transparency, accountability and
participation in water resource management and utilization
62. Significant initiatives have already been introduced by the Water Resources Department,
specifically the establishment of the Advanced Centre for IWRM (AC-IWRM), intended to be a
centre of excellence for IWRM. The Centre is intended to provide expertise and advice to improve
water resources management. It is envisaged that ADB will continue to provide support for AC-
IWRM under the proposed MFF.
63. IWRM is an “adaptive process” of prioritised strengthening water resource management systems
step by step. The AC-IWRM is to lead the change process and capacity and knowledge
development under the guidance of a Steering Committee comprising representatives of the
appropriate concerned government departments. The Committee is chaired by the Chief
Secretary.
64. There are two pertinent State policies. Both were promulgated in 2002, both are current and
between them they provide the enabling framework for the development and delivery of UWSS
service deliver. They are:
The State Water Policy (SWP), and
Karnataka Urban Drinking Water and Sanitation Policy (KUDWSP).
65. The State Water Policy sets out the sector objectives and strategies for managing the water
resources within the State. The Karnataka Urban Drinking Water and Sanitation Policy was
formulated with the primary purpose of continuing and strengthening efforts to provide all
residents of urban areas with piped water supply and sanitation services at or near their dwellings,
to be provided by their ULB.
66. The State Policy adopts the principles of IWRM and sustainable service delivery. The Policy sets
out the strategic goal of ensuring water resources planning, development and management is
done for each hydrological unit, entire river basins or sub basin, integrating multi-sectoral
objectives, addressing conjunctive management of surface and ground water resources, and
incorporating quantity, quality and environmental considerations.
67. Development projects and investment proposals are to be formulated and considered within the
framework of river or sub-basin plans so that the best possible combination of options can be
obtained for poverty alleviation, increasing incomes and productivity, equity, reduced vulnerability
to natural and economic risks and costs. Solutions to water allocation and planning issues will be
found adopting a demand management approach.
68. The Water Policy identifies that there is a lack of appropriate institutional arrangements at the
State level which can consider sector water demands, plans and manage water between them.
Water issues are fragmented between different departments without formal mechanism to ensure
co-ordination. The fragmentation of water management decision making was recognised as
resulting in sub-optimal management of Karnataka‟s limited surface and ground water resources
that need to be systematically developed and properly utilized to enable the overall development
of the State.
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69. KISWRIP, and associated investments in UWSS improvements, will contribute to the achievement
of the government‟s “Vision 2020” and implementation of IWRM and holistic water management
by 2030.
4.3.1 Draft Cabinet Paper
70. The state‟s current UWSS strategy to meet the sector Policies is contained in the 2012 draft
Cabinet Paper. The Paper endorses the establishment of regional coordination entities in the
state, and the separation of bulk water supply from distribution of water. The following institutional
proposals are made:
Setting up of a “Drinking Water Supply Mission”
Constituting a “Water Council”
Restructuring the Karnataka Urban Water Supply and Drainage Board (KUWS&DB) as a bulk
supply entity, and
Adopting a “New Contracting Model”
71. Water distribution to customers and wastewater collection will continue to be a ULB responsibility.
The segregated responsibility is intended to address present varying technical and managerial
capabilities at that level, and also varying levels of political preparedness to accept water supply
as a paid public service. ULBs will have the option of tackling this (i) either by itself or (ii) through
KUWS&DB or (iii) with private sector participation.
72. We understand that the Paper, although not as yet approved, is accepted by stakeholders. The
Paper is taken to be the state‟s institutional strategy and we make no proposals or suggestions
that diverge from the Paper.
4.4 Public/Private Partnerships
73. Both the Union and the State governments encourage private sector participation in UWSS
through their policy of Public/Private Partnerships (PPP). To quote the GoI 12th Plan, as just one
example:
“The Twelfth Plan must continue the thrust on accelerating the pace of investment in
infrastructure, as this is critical for sustaining and accelerating growth. Public investment in
infrastructure will have to bear a large part of the infrastructure needs in backward and remote
areas to improve connectivity and expand the much needed public services. Since resource
constraints will continue to limit public investment in infrastructure in other areas, PPP-based
development needs to be encouraged wherever feasible. It is necessary to review the factors
which may be constraining private investment, and take steps to rectify them.”
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5 ISSUES FACING THE SECTOR & KISWRMIP PROPOSALS
5.1 Overview of Issues
74. The issues associated with current service provision are well known to stakeholders. In summary
these are:
Poor condition of UWSS assets, often beyond their reliable working life;
Lack of overall sector coordination and control, and
Insufficient capacity, particularly at ULB level where there are neither sufficient operational
staff members, or staff of the necessary calibre.
75. In many respects these have been due to:
Lack of priority afforded to urban water supply and sanitation;
Lack of investment, and
Politically driven tariffs that are insufficient to fund the O&M of the assets, and their timely
replacement.
76. The issues have manifested themselves in poor levels of service achieved:
Intermittent and insufficient water supplies;
Supplies subject to interruption due to asset failures and power cut-outs;
High levels of leakage that aggravate water availability to customers;
Poor levels of wastewater collection, and
Untreated sewage being discharged to water courses and being used directly for irrigation.
77. The issues facing the sector, as found in the four subject Tranche-1 towns and considered typical
of ULBs across the State are fully described in “Volume 1: Institutional Road Map”, and set out in
Table 10 of this Investment Plan.
78. Our main conclusion is that at the root of the problem: centrally, there is minimal coordination and
planning and locally, ULBs operate with limited accountability in terms of (i) water use; (ii) in
maintaining efficient, coordinated and commercially viable systems, and (iii) in complying with
quality and performance standards.
79. At the heart of the matter are issues of inadequate tariff structures to support the O&M function
and so undermine the sustainability viability of UWSS investments, and the ineffective
management of non-revenue water.
5.2 Comparison of Karnataka Urban Service Status with National
Standard and Average
80. The following Table compares service provision the thirty-four ULBs in the pilot sub-basin with (i)
that in Karnataka, (ii) the National Standard and (iii) the National Average. The four Tranche-1
sub-project ULBs are highlighted.
81. We question how some of these indicators were derived considering the general lack of both bulk
and revenue metering. As such, the data must be treated with caution.
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Table 4: Level of UWSS Service Provision
Water Supply Sewerage
Water Supply
Coverage Per Capita
Non-revenue
water
Hours per
day supply
Metered
connections as
per cent of all
Sewerage
Coverage
Population
with Toilets
% l/h/d % hours % % %
National Standard 100 135 15 24 100 100 100
National Average 81 123 15 4 25 28 82
34 Town Average 52 81 40 2 0 5 na
Davangere 48 100 40 1.25 0 45 na
Ranebennur 65 113 40 1 0 30 na
Byadgi 67 67 40 1 0 0 na
Harihar 40 110 40 1 0 0 na
Channagiri na 70 40 1 0 0 na
Honnali na 23 40 1 0 0 na
Harapanahalli na 70 40 1 0 0 na
Jagalur 49 70 40 1 0 0 na
Chitradurga 51 96 40 1 0 0 na
Holalkere na 51 40 1 0 0 na
Tarikere na 135 40 1 0 0 na
Kadur 34 45 40 1 0 0 na
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Water Supply Sewerage
Water Supply
Coverage Per Capita
Non-revenue
water
Hours per
day supply
Metered
connections as
per cent of all
Sewerage
Coverage
Population
with Toilets
% l/h/d % hours % % %
Sringeri 98 135 40 2 0 0 na
Birur na 30 40 1 0 0 na
Narasimharajapura Na 135 40 1 0 0 na
Koppa Na 135 40 2 0 0 na
Bhadravati 36 135 40 20 0 25 na
Shimoga 57 124 40 1 0 0 na
Sagar 34 90 40 3 0 0 na
Shikaripura 41 70 40 2 0 0 na
Soraba 57 135 40 8 0 0 na
Thirthali 89 100 40 2 0 0 na
Shiralkoppa Na 110 40 1 0 0 na
Gadag Betageri 41 71 40 2 0 0 na
Mulagnada 53 65 40 1 0 0 na
Shirahatti Na 45 40 1 0 0 na
Lakshmeshwara Na 70 40 1 0 0 na
Hangal 56 41 40 1 0 0 na
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Water Supply Sewerage
Water Supply
Coverage Per Capita
Non-revenue
water
Hours per
day supply
Metered
connections as
per cent of all
Sewerage
Coverage
Population
with Toilets
% l/h/d % hours % % %
Hoovina-Hadagali 45 4 40 1 0 0 na
Shiggaon 42 85 40 1 0 0 na
Savanur 29 80 40 1 0 0 na
Bankapur 35 40 40 1 0 0 na
Haveri 67 65 40 2 0 66 na
Hirekerur 52 50 40 1 0 0 na
82. The Table below shows the Service Criticality Index for the thirty-four towns in the pilot sub-basin based on the ratio of the existing level of service
against the relevant National Standard norm of MOUD.
Table 5: Service Criticality Index
Water Supply Sewerage
Water
Supply
Coverage
Per Capita
Supply
Hours per
day
supply
Number metered
connections
Sewerage
Coverage
Population
with Toilets
Davangere 0.48 0.74 0.05 0.00 0.45 na
Ranebennur 0.65 0.84 0.04 0.00 0.30 na
Byadgi 0.67 0.50 0.04 0.00 0.00 na
Harihar 0.40 0.81 0.04 0.00 0.00 na
TA 7954–IND: KISWRIP Draft Final Report: Vol. 2 – Strategic Investment Plan September 2012
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Water Supply Sewerage
Water
Supply
Coverage
Per Capita
Supply
Hours per
day
supply
Number metered
connections
Sewerage
Coverage
Population
with Toilets
Channagiri Na 0.52 0.04 0.00 0.00 na
Honnali Na 0.17 0.04 0.00 0.00 na
Harapanahalli Na 0.52 0.04 0.00 0.00 na
Jagalur 0.49 0.52 0.04 0.00 0.00 na
Chitradurga 0.51 0.71 0.04 0.00 0.00 na
Holalkere Na 0.38 0.04 0.00 0.00 na
Tarikere Na 1.00 0.04 0.00 0.00 na
Kadur 0.34 0.33 0.04 0.00 0.00 na
Sringeri 0.98 1.00 0.08 0.00 0.00 na
Birur Na 0.22 0.04 0.00 0.00 na
Narasimharajapura Na 1.00 0.04 0.00 0.00 na
Koppa Na 1.00 0.08 0.00 0.00 na
Bhadravati 0.36 1.00 0.83 0.00 0.25 na
Shimoga 0.57 0.92 0.04 0.00 0.00 na
Sagar 0.34 0.67 0.13 0.00 0.00 na
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Water Supply Sewerage
Water
Supply
Coverage
Per Capita
Supply
Hours per
day
supply
Number metered
connections
Sewerage
Coverage
Population
with Toilets
Shikaripura 0.41 0.52 0.08 0.00 0.00 na
Soraba 0.57 1.00 0.33 0.00 0.00 na
Thirthali 0.89 0.74 0.08 0.00 0.00 na
Shiralkoppa Na 0.81 0.04 0.00 0.00 na
Gadag Betageri 0.41 0.53 0.08 0.00 0.00 na
Mulagnada 0.53 0.48 0.04 0.00 0.00 na
Shirahatti Na 0.33 0.04 0.00 0.00 na
Lakshmeshwara Na 0.52 0.04 0.00 0.00 na
Hangal 0.56 0.30 0.04 0.00 0.00 na
Hoovina-Hadagali 0.45 0.03 0.04 0.00 0.00 na
Shiggaon 0.42 0.63 0.04 0.00 0.00 na
Savanur 0.29 0.59 0.04 0.00 0.00 na
Bankapur 0.35 0.30 0.04 0.00 0.00 na
Haveri 0.67 0.48 0.08 0.00 0.66 na
Hirekerur 0.52 0.37 0.04 0.00 0.00 na
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83. The following Table shows this ratio with the index differentiated between High (HC), Moderate (MC) and Low Criticality (LC) based on HC< 0.5,
0.5<MC<0.75 and 0.75<LC<1.
Table 6: Level of Criticality for UWSS Service
Water Supply Sewerage
Water Supply
Coverage
Per Capita
Supply
Hours per day
supply
Number metered
connections Sewerage Coverage
Population
with Toilets
Davangere HC MC HC HC HC NA
Ranebennur MC LC HC HC HC
Harihar HC LC HC HC HC NA
Byadgi MC HC HC HC HC NA
Channagiri HC MC HC HC HC NA
Honnali HC HC HC HC HC NA
Harapanahalli HC MC HC HC HC NA
Jagalur HC MC HC HC HC NA
Chitradurga MC MC HC HC HC NA
Holalkere HC HC HC HC HC NA
Tarikere HC LC HC HC HC NA
Kadur HC HC HC HC HC NA
Sringeri LC LC HC HC HC NA
Birur HC HC HC HC HC NA
Narasimharajapura HC LC HC HC HC NA
Koppa HC LC HC HC HC NA
Bhadravati HC LC LC HC HC NA
Shimoga MC LC HC HC HC NA
Sagar HC MC HC HC HC NA
Shikaripura HC MC HC HC HC NA
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Water Supply Sewerage
Water Supply
Coverage
Per Capita
Supply
Hours per day
supply
Number metered
connections Sewerage Coverage
Population
with Toilets
Soraba MC LC HC HC HC NA
Thirthali LC MC HC HC HC NA
Shiralkoppa HC LC HC HC HC NA
Gadag Betageri HC MC HC HC HC NA
Mulagnada MC HC HC HC HC NA
Shirahatti HC HC HC HC HC NA
Lakshmeshwara HC MC HC HC HC NA
Hangal MC HC HC HC HC NA
Hoovina-Hadagali HC HC HC HC HC NA
Shiggaon HC MC HC HC HC NA
Savanur HC MC HC HC HC NA
Bankapur HC HC HC HC HC NA
Haveri MC HC HC HC MC NA
Hirekerur MC HC HC HC HC NA
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84. As shown in Table 4, there is a large gap between the present status of service delivery and
national standard and average. Substantial investment is required to bridge this gap. In some
towns projects have been taken up under the State Plan (KUWSDB), ADB assisted NKUSIP and
World Bank assisted KMRP, which are either under implementation or committed.
85. The Karnataka Urban Water Supply and Drainage Board (KUWS&DB) is responsible for providing
water supply and sewerage facility in 213 urban areas of Karnataka except the areas serviced by
the Bruhath Bangalaore Mahanagara Palike – which provides services in Bangalore city and
surrounding areas. The KUWS&DB has implemented surface based drinking water supply
schemes in 187 urban areas to provide assured safe drinking water. The Board is implementing
26 schemes for shifting the source of water from groundwater to assured surface water.
86. The issues affecting sewerage are similar to those affecting water supply except that the
sewerage system issues are more serious than water supply issues. The issues are lack of
Sewerage Master Plans, inadequate water supply, intermittent and unreliable power supply for
sewage pump stations and treatment works, lack of investment in sewerage infrastructure,
inadequate capital & O&M budget for sewerage systems, lack of specially trained sewerage
management and O&M staff, a need for training in of sewerage utility management, inadequate
revenue, lack of understanding of wastewater treatment chemistry and lack of wastewater
laboratory facilities.
87. Presently forty-two urban areas have been provided with underground drainage facilities (UGD).
In most of the urban areas, the sewerage system is covered in core areas. The new areas are yet
to be provided with sewerage systems. KUWSDB has prepared a plan for Rs.169,210 million for
providing UGD to all urban areas in the State in a phased manner depending upon the availability
of funds.
88. Urban water supply and sewerage works are being executed, besides externally aided projects,
with resources sources from financial institutions, State Government and Local Bodies in the
following categories:
Piped Water Supply Schemes;
Urban Water Supply Schemes, and
Underground Drainage Schemes.
5.3 Comparison of Karnataka Urban Service Status with National
Standard and Average
89. The following Table compares service provision the thirty-four ULBs in the pilot sub-basin with
that in Karnataka, with the National Standard and with the National Average. The four Trache-1
subject ULBs are highlighted.
90. It is questionable how some of these indicators were derived considering the general lack of both
bulk and revenue metering. As such, the data must be treated with caution.
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Table 7: Level of UWSS Service Provision
Water Supply Sewerage
Water Supply
Coverage Per Capita
Non-revenue
water
Hours per
day supply
Metered
connections as
per cent of all
Sewerage
Coverage
Population
with Toilets
% l/hd/day % hours % % %
National Standard 100 135 15 24 100 100 100
National Average 81 123 15 4 25 28 82
34 Town Average 52 81 40 2 0 5 na
Davangere 48 100 40 1.25 0 45 na
Ranebennur 65 113 40 1 0 30 na
Byadgi 67 67 40 1 0 0 na
Harihar 40 110 40 1 0 0 na
Channagiri na 70 40 1 0 0 na
Honnali na 23 40 1 0 0 na
Harapanahalli na 70 40 1 0 0 na
Jagalur 49 70 40 1 0 0 na
Chitradurga 51 96 40 1 0 0 na
Holalkere na 51 40 1 0 0 na
Tarikere na 135 40 1 0 0 na
Kadur 34 45 40 1 0 0 na
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Water Supply Sewerage
Water Supply
Coverage Per Capita
Non-revenue
water
Hours per
day supply
Metered
connections as
per cent of all
Sewerage
Coverage
Population
with Toilets
% l/hd/day % hours % % %
Sringeri 98 135 40 2 0 0 na
Birur na 30 40 1 0 0 na
Narasimharajapura Na 135 40 1 0 0 na
Koppa Na 135 40 2 0 0 na
Bhadravati 36 135 40 20 0 25 na
Shimoga 57 124 40 1 0 0 na
Sagar 34 90 40 3 0 0 na
Shikaripura 41 70 40 2 0 0 na
Soraba 57 135 40 8 0 0 na
Thirthali 89 100 40 2 0 0 na
Shiralkoppa Na 110 40 1 0 0 na
Gadag Betageri 41 71 40 2 0 0 na
Mulagnada 53 65 40 1 0 0 na
Shirahatti Na 45 40 1 0 0 na
Lakshmeshwara Na 70 40 1 0 0 na
Hangal 56 41 40 1 0 0 na
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Water Supply Sewerage
Water Supply
Coverage Per Capita
Non-revenue
water
Hours per
day supply
Metered
connections as
per cent of all
Sewerage
Coverage
Population
with Toilets
% l/hd/day % hours % % %
Hoovina-Hadagali 45 4 40 1 0 0 na
Shiggaon 42 85 40 1 0 0 na
Savanur 29 80 40 1 0 0 na
Bankapur 35 40 40 1 0 0 na
Haveri 67 65 40 2 0 66 na
Hirekerur 52 50 40 1 0 0 na
91. The Table below shows the Service Criticality Index for the thirty-four towns in the pilot sub-basin based on the ratio of the existing level of service
against the relevant National Standard norm of MOUD.
Table 8: Service Criticality Index
Water Supply Sewerage
Water
Supply
Coverage
Per Capita
Supply
Hours per
day
supply
Number metered
connections
Sewerage
Coverage
Population
with Toilets
Davangere 0.48 0.74 0.05 0.00 0.45 na
Ranebennur 0.65 0.84 0.04 0.00 0.30 na
Byadgi 0.67 0.50 0.04 0.00 0.00 na
Harihar 0.40 0.81 0.04 0.00 0.00 na
TA 7954–IND: KISWRIP Draft Final Report: Vol. 2 – Strategic Investment Plan September 2012
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Water Supply Sewerage
Water
Supply
Coverage
Per Capita
Supply
Hours per
day
supply
Number metered
connections
Sewerage
Coverage
Population
with Toilets
Channagiri Na 0.52 0.04 0.00 0.00 na
Honnali Na 0.17 0.04 0.00 0.00 na
Harapanahalli Na 0.52 0.04 0.00 0.00 na
Jagalur 0.49 0.52 0.04 0.00 0.00 na
Chitradurga 0.51 0.71 0.04 0.00 0.00 na
Holalkere Na 0.38 0.04 0.00 0.00 na
Tarikere Na 1.00 0.04 0.00 0.00 na
Kadur 0.34 0.33 0.04 0.00 0.00 na
Sringeri 0.98 1.00 0.08 0.00 0.00 na
Birur Na 0.22 0.04 0.00 0.00 na
Narasimharajapura Na 1.00 0.04 0.00 0.00 na
Koppa Na 1.00 0.08 0.00 0.00 na
Bhadravati 0.36 1.00 0.83 0.00 0.25 na
Shimoga 0.57 0.92 0.04 0.00 0.00 na
Sagar 0.34 0.67 0.13 0.00 0.00 na
TA 7954–IND: KISWRIP Draft Final Report: Vol. 2 – Strategic Investment Plan September 2012
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Water Supply Sewerage
Water
Supply
Coverage
Per Capita
Supply
Hours per
day
supply
Number metered
connections
Sewerage
Coverage
Population
with Toilets
Shikaripura 0.41 0.52 0.08 0.00 0.00 na
Soraba 0.57 1.00 0.33 0.00 0.00 na
Thirthali 0.89 0.74 0.08 0.00 0.00 na
Shiralkoppa Na 0.81 0.04 0.00 0.00 na
Gadag Betageri 0.41 0.53 0.08 0.00 0.00 na
Mulagnada 0.53 0.48 0.04 0.00 0.00 na
Shirahatti Na 0.33 0.04 0.00 0.00 na
Lakshmeshwara Na 0.52 0.04 0.00 0.00 na
Hangal 0.56 0.30 0.04 0.00 0.00 na
Hoovina-Hadagali 0.45 0.03 0.04 0.00 0.00 na
Shiggaon 0.42 0.63 0.04 0.00 0.00 na
Savanur 0.29 0.59 0.04 0.00 0.00 na
Bankapur 0.35 0.30 0.04 0.00 0.00 na
Haveri 0.67 0.48 0.08 0.00 0.66 na
Hirekerur 0.52 0.37 0.04 0.00 0.00 na
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92. The following Table shows this ratio with the index differentiated between High (HC), Moderate (MC) and Low Criticality (LC) based on HC< 0.5,
0.5<MC<0.75 and 0.75<LC<1.
Table 9: Level of Criticality for UWSS Service
Water Supply Sewerage
Water Supply
Coverage
Per Capita
Supply
Hours per day
supply
Number metered
connections Sewerage Coverage
Population
with Toilets
Davangere HC MC HC HC HC NA
Ranebennur MC LC HC HC HC
Harihar HC LC HC HC HC NA
Byadgi MC HC HC HC HC NA
Channagiri HC MC HC HC HC NA
Honnali HC HC HC HC HC NA
Harapanahalli HC MC HC HC HC NA
Jagalur HC MC HC HC HC NA
Chitradurga MC MC HC HC HC NA
Holalkere HC HC HC HC HC NA
Tarikere HC LC HC HC HC NA
Kadur HC HC HC HC HC NA
Sringeri LC LC HC HC HC NA
Birur HC HC HC HC HC NA
Narasimharajapura HC LC HC HC HC NA
Koppa HC LC HC HC HC NA
Bhadravati HC LC LC HC HC NA
Shimoga MC LC HC HC HC NA
Sagar HC MC HC HC HC NA
Shikaripura HC MC HC HC HC NA
TA 7954–IND: KISWRIP Draft Final Report: Vol. 2 – Strategic Investment Plan September 2012
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Water Supply Sewerage
Water Supply
Coverage
Per Capita
Supply
Hours per day
supply
Number metered
connections Sewerage Coverage
Population
with Toilets
Soraba MC LC HC HC HC NA
Thirthali LC MC HC HC HC NA
Shiralkoppa HC LC HC HC HC NA
Gadag Betageri HC MC HC HC HC NA
Mulagnada MC HC HC HC HC NA
Shirahatti HC HC HC HC HC NA
Lakshmeshwara HC MC HC HC HC NA
Hangal MC HC HC HC HC NA
Hoovina-Hadagali HC HC HC HC HC NA
Shiggaon HC MC HC HC HC NA
Savanur HC MC HC HC HC NA
Bankapur HC HC HC HC HC NA
Haveri MC HC HC HC MC NA
Hirekerur MC HC HC HC HC NA
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93. As shown in Table 4, there is a large gap between the present status of service delivery and
national standard and average. Substantial investment is required to bridge this gap. In some
towns projects have been taken up under the State Plan (KUWSDB), ADB assisted NKUSIP and
World Bank assisted KMRP, which are either under implementation or committed.
94. The Karnataka Urban Water Supply and Drainage Board (KUWS&DB) is responsible for providing
water supply and sewerage facility in 213 urban areas of Karnataka except the areas serviced by
the Bruhath Bangalaore Mahanagara Palike – which provides services in Bangalore city and
surrounding areas. The KUWS&DB has implemented surface based drinking water supply
schemes in 187 urban areas to provide assured safe drinking water. The Board is implementing
26 schemes for shifting the source of water from groundwater to assured surface water.
95. The issues affecting sewerage are similar to those affecting water supply except that the
sewerage system issues are more serious than water supply issues. Implementation of sewerage
systems in Karnataka lags far behind the National Standard and even the National average of
28% which itself is low for India, by comparison with international standards. The issues are lack
of Town Sewerage Master Plan, inadequate water supply, intermittent and unreliable power
supply for sewage pump stations and treatment works, lack of investment in sewerage
infrastructure, inadequate capital & O&M budget for sewerage systems, lack of specially trained
sewerage management and O&M staff, need for training in of sewerage utility management,
inadequate revenue, lack of understanding of wastewater treatment chemistry and lack of
wastewater laboratory facilities.
96. Presently forty-two urban areas have been provided with underground drainage facilities (UGD).
In most of the urban areas, the sewerage system is covered in core areas. The new areas are yet
to be provided with sewerage systems. KUWSDB has prepared a plan for providing UGD to all
urban areas in the State in a phased manner depending upon the availability of funds.
5.4 Road Map Proposals
97. Institutional proposals have been made to address the issues identified, as discussed in Section
5.2. All proposals require investment whether physical for service facilities and assets or non-
physical, such as for training and business systems.
5.5 Outline of Proposals Made in Road Map
98. Institutional issues at state level have been addressed in the Draft Cabinet Paper. We understand
that the Paper has been fully discussed and has general acceptance. We have not concerned
ourselves with institutional state issues, instead concentrating at the local ULB level.
99. In our discussions with the KUIDFC, and in line with Union and State policy, the use of a private
operator is seen to be beneficial and desirable. The use of a private operator would both bring
experience to the service provision which, if managed correctly could enable technology transfer
to the ULBs, and would provide the additional resources.
100. An objective of the project is to put in place the measures to bring the ULBs to a position
whereby they are able to issue a tender for a PPP operator, should the ULBs wish. This requires
data to be available to potential bidders on service performance, asset histories and operational
data. Using the sub-project pilot towns as indicative, the data is not currently available for
competitive bidding. There also needs to be a competency developed in the ULBs for PPP project
management.
101. Whilst some of the larger ULBs do have a customer base of adequate size to interest an
operator; most do not. We are suggesting that ULBs “associate” themselves on a District basis
and form a Special Purposes Vehicle (SPV) company to be the service provider within their
collective administrative areas i.e. a District. Such an SPV would have the requisite customer
TA 7954–IND: KISWRIP Draft Final Report: Vol. 2 – Strategic Investment Plan September 2012
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service base. A draft Performance Service Agreement (PSA) is provided as an Appendix to
Volume 1 in which the service conditions to be met are set out in a series of Performance
Indicators, based upon Customer Service Levels and Operational Standards.
102. To assist with the establishments of the SPVs, and in consultation with the KUIDFC, we
recommend that an IWRM Project Management Unit be formed in the KUIDFC. The unit, which
would continue through subsequent MFF Tranche investments, would comprise KUIDFC
employees with appropriate skills, supplemented as required by short-term consultants, national
and international. In addition to assisting the establishment of the SPVs, the Unit would also
directly assist the newly formed SVPs, and water departments of larger ULBs, to prepare
corporate documentation, provide “centre of excellence” guidance for the sector and assist in the
data collection and eventual tender dossier preparation for PPP operator contracts.
103. The IWRM project Management Unit could evolve into the Drinking Water Supply Mission,
should that become Government policy.
104. We recommend inclusion of a small team within the IWRM Project Management Unit to focus
on gender, disadvantaged people and social issues applicable to UWSS service provision. The
team will develop poverty reduction strategies to target meeting the Millennium Development
Goals and for mitigating any disincentives to serve disadvantaged customer groups, as well as
strategies to assist low-income families with the cost household water/sewer connections, e.g.
through pre-financing or subsidies, as well as on such issues as improving fee collection
efficiency and debt management within such groups. The sub-project household surveys have
identified the cost of connections as a major disincentive to poorer people. Without widespread
connection:
The full benefits of the investments will not be realised;
Wastewater treatment plant will operate at less than capacity with potential effect of process
efficiency, and
Sewers are at risk of silting due to lower-than-design flows.
105. In general, the UWSS sector is heavily subsidized, though the degree of subsidization varies
between ULBs. Almost all the ULBs are not charging water tariffs to recover at least the entire
O&M cost of water supply schemes, let alone to cover debt servicing. There are also many
unauthorized consumers or households using public taps who are not required to pay any
charges for their water use.
106. Tariffs should be structured in a manner such as to act as a disincentive for „excessive‟
consumption and wastage of water, whilst ensuring at least a minimum „lifeline‟ supply to the poor.
An appropriate cost recovery mechanism based on adequate tariffs will help ensure that revenues
cover O&M costs, debt service plus a reasonable return on capital.
107. We propose that:
Tariffs are to be set independent of political influence and to be adequate for a financially
sustainable service provision;
Charges are volumetric based, as measured by individual customer revenue meters;
Tariffs to be “affordable” up to an agreed consumption. Thereafter, to become increasingly
punitive to encourage reduced water demand and conservation of water by such as rainwater
harvesting. We suggest that the limit is the Indian design standard for domestic demand of
135litres/head/day;
Volumetric charges are introduced for wastewater collection with additional charges for
industrial customers based upon the quality of the effluent discharged to the sewer;
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An active policy is adopted to ensure the accuracy of the customer database used for
charging and that unknown connections are proactively located, and
The adequacy of existing Debt Management procedures to be reviewed or new introduced.
5.6 Summary of Issues and Proposals
108. The issues identified and the proposals made in the Road Map, are summarised in the table
below.
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Table 10: Proposals to Overcome Impediments to Success
Strategic Theme
“Impediments to Success” Proposals as “Criteria for Success”
Institutional- State
1. Lack of co-ordination among the state agencies. 2. No over-riding responsible & proficient entity for UWSS. 3. No “Centre of Excellence” for knowledge dissemination. 4. No Water Sector Master Plan with prioritised investment
programme. 5. Lack of previous investment. 6. Emphasis is on creation of new assets and not operability.
1. Provided for in the Draft Cabinet Paper 2. Prepare a sector Master Plan with prioritised Capital Investment
Programme
Institutional– Local
7. Managers not dedicated to UWSS. 8. Insufficient staff, poorly trained and lacking business
support systems and equipment. 9. Insufficient staff with establishment posts not always filled. 10. No formal training programmes resulting in untrained staff at
all levels. 11. Lack of business support systems.
3. Move towards a policy of regional service providers. 4. Establishment of a separate ULB UWSS department or of a SPV
service provider 5. Capacity building programme through an IWRM Project
Management Unit 6. Further investment in business support systems such as MIS,
GIS and network computer models
Technical
12. Inadequate O&M of assets resulting in their premature failure and inefficient operations.
13. No data collection for decision making. 14. Lack of flow metering for network management. 15. Supplies adversely affected by power failures. 16. High levels of NRW without the ability/resources to reduce
to acceptable levels. 17. Poor workmanship and incorrect materials used for new
schemes. 18. Inadequate site supervision. 19. Lack of performance guarantees in tender documents.
As for Institutional – Local, plus
7. Introduce Performance Service Agreement 8. Develop service providers to a position suitable for PPP operator
tendering, if State/ULB policy 9. Installation of flow metering 10. Installation of stand-by generators at critical sites 11. Determine Baseline NRW performance and move to a pro-active
NRW reduction programme using specialist contractor. 12. Review of all contract documentation and Specifications.
Customer Service
20. Poor service with infrequent supplies of limited quantities. 21. Lack of Customer Service Levels. 22. No formal service agreement between “asset owner” and
“asset operator”. 23. No effective monitoring of service levels. 24. No independent recourse for customer complaints.
13. Provide for a Customer Services department in service provider organisation structure
14. Prepare Customer Service Levels and with Operational performance Standards incorporate into a Public Services Agreement.
15. PSA to be subject to technical audit
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Strategic Theme
“Impediments to Success” Proposals as “Criteria for Success”
Financial
25. Inadequate service charges that were insufficient to fund sustainable O&M budget and required staff establishment.
26. Tariffs influenced by political pressures. 27. Absence of revenue meters preventing accurate income
determination and customer demand management. 28. Some poor collection efficiency
16. Segregate UWSS finances from other ULB activities. 17. Remove tariff setting from politics 18. Ensure adequacy of tariffs with a tariff setting mechanism that
includes a “demand management” element 19. Install revenue meters on supplies 20. Training in billing & income skills with modern billing systems 21. Introduce volumetric charge for wastewater service 22. Household survey to locate “unknown” connections 23. Introduce Debt Management 24. Improve collection efficiency within capacity building programme
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6 OPPORTUNITES FOR PPP AND RE-USE OF WASTEWATER FINAL
EFFLUENT
6.1 Public Private Sector Participation
109. There is a clear Government – Union and State - driven incentive to consider all options for
PPP.
110. One of the major issues related to lack of the implementation of the PPP model in the WSS
sector, is that the sector is still regarded as a State “sphere of interest”, with minimal local
involvement in strategy formation. Historically, there has been little incentive to provide for
improved service through initiatives such as PPP.
111. Issues to be overcome before there is a wide acceptance and suitability for the PPP model
are:
Acceptance of the higher water and wastewater service charges necessary for sustained
service;
Feasibility of the PPP model for water and wastewater service provision i.e. mitigation of the
financial risk to potential operators;
Political interference;
Lack of accountability on the part of the ULBs;
Perceived threat by the ULBs to their roles and authorities;
Lack of private sectors operators with proven experience in Indian conditions, and
Available information for competitive bidding.
112. A major issue is the absence of well-designed contract and contracting procedures with:
Clearly defined responsibilities of the Government and private sector partners; and
A performance linked system of payments and penalties.
113. The Infrastructure Development Department of the Government of Karnataka has taken an
initiative to explore the possibility of the PPP model for UWSS and Storm Water Drainage for six
towns - Raichur, Hospet, Davangere, Gadag, and Ilkal. The pre-feasibility Report suggested
specific measures that need to be taken for each of the towns, while opting for the PPP model.
The model would provide opportunity for:
Increased efficiency of service through structured O&M of the assets;
Application of the latest technology;
OPEX reduction, including NRW reduction;
Improvement in water quality;
Timely and effective grievance redress, and
Increased consumer satisfaction.
114. In the Road Map, we have looked at opportunities for PPP, such as:
Works construction projects – as proposed for all construction works;
O&M of the assets – new and existing – through opportunities for outsourcing non-core
business activities and in an extended O&M period for works construction contracts;
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Specialist network management skills - such as NRW reduction, and
ULB capacity building and improved UWSS service delivery through PPP management
and/or concession type contracts.
115. Before the operation and maintenance of the facilities can be successfully introduced, four
elements must be in place:
A sufficient number of experienced and competent operators to ensure a viable tendering
process;
A customer service base of sufficient size to attract competent operators;
A competency in the client ULBs to be able to manage the contracts, and
Adequate data available to the bidding operators to enable them to assess the risk and make
a viable bid without passing undue risk cost through to the client ULB.
116. We would respectfully suggest that perhaps only the first of these is currently present in
Karnataka. In our opinion, with some limitation as discussed later, full scale operation of the water
and wastewater systems by a contractor is a medium-term objective, and not for immediate
introduction.
117. An objective of the project will be to put in place the measures to bring the ULBs to a
position to be able to issue a tender for a PPP operator should they wish i.e. to ensure that there
will be available to bidders the data that they will require to be able to make a competitive bid,
such as NRW performance and asset histories.
118. Where we do consider that there is an immediate opportunity for active private sector
participation is in the design, construction and operation of the water and wastewater treatment
plants proposed. Design and Build contracts are in common practice in Karnataka and an
accepted form of PPP.
119. We are suggesting that the contracts include for a 5year extended O&M phase as a first
step to bring private sector participation into the operation of the water sector facilities.
120. Further, we propose that treatment plant contracts to include for the rehabilitation and
construction of the strategic transmission network, and of the strategic water storage facilities.
There are three reasons for the proposal:
It will introduce the private sector into the operation and maintenance of the strategic
elements of the system where risk should be minimised for security of supply;
Physical losses in the strategic network should be maintained at an acceptable level of
around 2% and in so doing the required 24x7 quantity of water will be delivered to the
strategic reservoirs - the key points for distribution of water to customers, and
As a separate contract will be let for the distribution system, it will enable the requirement of
the KUIDFC to be met whereby the investment in the distribution network to ensure a
continuous supply will be made only after the ULB has demonstrated a competency i.e. the
distribution contract will be let only when the competency has been demonstrated.
6.2 Re-Use of Wastewater Final Effluent
121. A corner-stone of IWRM is to seek opportunities for the re-use of wastewater effluent in
order to reduce the demand on scare water resources. Opportunities for re-use exist in:
Irrigation and agriculture;
Industry, and
Landscaping and development of “green” areas in towns.
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122. Currently, in the sub-basin area wastewater is effectively re-used, with or without treatment,
by farmers for irrigation. As untreated, the wastewater acts as a good fertiliser especially as in
most cases there is an absence of heavy metals.
123. In many locations, the diversion of wastewater effluent to industry would merely take from
one application, to give to another. Without a significant increase in irrigation efficiency, the loss of
wastewater for irrigation would mean that farmers would have to rely more upon depleted
groundwater sources or take surface waters the water previously taken by industry.
124. Where the water is re-used for industrial water:
There needs to be a market for the re-used water;
The supply of re-used water must be reliable and compliant with the required standard;
There must be adequate wastewater available/collected for treatment; and
The sale price to industry must be competitive with the industry‟s cost for raw water
procurement.
125. Given the costs of (i) wastewater treatment to a standard for re-use and (ii) distributing the
treated wastewater, if the sale of municipal wastewater to industry is to be financially viable, the
charge levied to industry for a “normal” potable water industrial supply must be at a cost to
encourage industry to re-use water.
126. Using treated wastewater for irrigation purposes would both be a re-use of wastewater and
would be safer than the current practice of using untreated sewage. However:
There would be a cost of the additional treatment to be met, and it is unlikely that the farmers
would be prepared to pay the charge;
The treated wastewater would need to be distributed to suitable irrigation nodal points, and
There would be a need of policing to ensure that the untreated wastewater was not “stolen”
from sewers and manholes.
127. In conclusion, whilst there are undeniable reasons for the re-use of final effluent from
wastewater treatment plants, this has to be dealt with in an integrated management framework to
ensure:
Increased irrigation efficiency to make up the deficit for wastewater being diverted from
agriculture to industry;
Farmers and industrialists are charged a realistic “abstraction” charge to encourage the re-
use of wastewater final effluent, and
Potable water service tariffs encourage industry to treat on-site and to re-use its own
produced effluent in preference to discharging to the public sewer.
6.2.1 State Unit for Wastewater Re-Use
128. There is a requirement for consistency in approach across the state to the re-use of effluent
with regard to quality standards, charging policy, performance quality and quantity guarantees,
and the inter-face between the ULB responsibility and that of the recipient industry.
129. There is also a requirement to “market” the re-use of effluent and to “sell” the concept to a
probable sceptical public. There are possible cultural issues.
130. Our recommendation is for a central unit to be established in an appropriate government
agency to pursue opportunities for wastewater re-use on a state-wide basis, albeit that the local
plants might be operated by the local service provider, or industry on their behalf.
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7 FINANCIAL ASSESSMENT OF ULBS
7.1 Introduction
131. The ULBs will be the owner of any assets arising from this or other investment. The ULBs
will also be the entity ultimately responsible for the service provided to the people within their
administrative area whether the service provider is the ULB, a SPV as recommended in the Road
Map or a concessionaire. It is important that the ULBs are able to competently discharge these
responsibilities.
132. The various issues facing the ULBs have been discussed in the previous Section.
133. Institutional and technical issues are addressed either in “Volume 1: Institutional Road Map”
or within the sub-project Feasibility Studies. As a part of the project, we have assessed the
financial performance of the four subject Tranche-1 towns as indicators of the probable issues to
be resolved in all ULBs across the state.
7.2 Financial Status of Four Towns
134. Urban local bodies (ULB) will create urban service infrastructure by creating project
implementation units as either a new cell and/or augmenting the existing cells, and by engaging
the KUIDFC. The state government has expressed its view that the assets are created and
contractual operations and maintenance period is over, these assets will be handed over to ULB.
Table 11: O&M and User Charge
Operations and
maintenance Collection of user charges
Water supply ULB ULB (monthly user charge)
Sewerage ULB ULB (no user charges but a part of
property tax)
135. In order to bring accountability in urban service delivery, it is desirable that a ULB collects
the user charges and uses them exclusively, i.e. “ring-fenced”, for the specific services for which
the user charges are levied. The section examines the current status of ULB finances to assess to
how the cost of operations and maintenance is financed.
7.2.1 Summary of Financial Data of Subject ULBs
136. The key features of current ULB finances in the sub-project towns are:
Own revenue hardly pays the revenue expenditure. ULB heavily depends on grants from the
state government for day-to-day operations;
Collection efficiency for property tax in three ULBs needs improvement as it ranges from 62%
in Harihar to 86% in Davangere for the financial year 2011-12; In Byadagi the collection
efficiency is very good at 99%;
Collection efficiency for water is low and ranges from 50% in Harihar to 82% in Davangere,
and needs to be improved, and
Revenue expenditure has grown in the range of 12% in Harihar to 31% in Ranebennur.
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137. Past financial performance for the last four years of the ULBs is shown in the following
table. Figures are Rsmillion.
Table 12: Past Financial Performance of Subject ULBs
Davangere
2007-08 2008-09 2009-10 CAGR
Actual Actual Actual %
Revenue Income
Income from Taxes 60.0 61.2 52.2 6.7%
Non Tax Income 39.6 40.5 45.7 7.4%
Total Own Revenue Income 99.6 101.7 97.9 0.9%
Government Grants 260.9 298.4 357.3 17.0%
Other Income 1.3 1.2 1.9 20.4%
Total Income 361.9 401.3 457.2 12.4%
Expenditure
Revenue Expenditure 182.1 306.4 261.2 19.8%
Revenue Surplus / (Deficit) 179.8 94.9 196.0 4.4%
Ranebennur
2006-07 2007-08 2008-09 2009-10 2010-11 CAGR
Actual Actual Actual Actual Actual
Revenue Income
Income from Taxes 6.5 6.6 9.7 11.1 13.8 20.9%
Non Tax Income 18.5 27.8 39.6 38.1 66.5 37.6%
Total Own Revenue Income 25.0 34.4 49.3 49.2 80.3 33.9%
Government Grants 37.1 83.6 94.0 127.3 91.2 25.3%
Other Income 1.9 3.2 3.6 4.2 0.9 18.3%
Total Income 64.0 121.2 146.9 180.6 172.4 28.1%
Expenditure
Revenue Expenditure 23.3 27.9 49.9 62.7 68.8 31.1%
Total Expenditure 23.3 27.9 49.9 62.7 68.8
Revenue Surplus / (Deficit) 40.7 93.3 97.0 117.9 103.6 26.3%
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Harihar 2008-09 2009-10 2010-11 2011-12 CAGR
Actual Actual Actual Actual
Revenue Income
Income from Taxes 5.4 5.6 6.1 7.3 10.8%
Non Tax Income 9.7 11.7 13.8 12.5 8.9%
Total Own Revenue 15.1 17.3 19.9 19.8 9.6%
Government Grants 77.7 87.3 70.3 82.3 1.8%
Other Income 2.0 1.0 2.5 1.4 11.9%
Total Income 94.8 105.6 92.7 103.5 3.0%
Expenditure
Revenue Expenditure 50.0 60.2 71.3 70.4 12.0%
Total Expenditure 50.0 60.2 71.3 70.4
Revenue Surplus / (Deficit) 44.8 45.4 21.4 33.1 -9.5%
Byadagi MC 2007-08 2008-09 2009-10 2010-11 CAGR
Actual Actual Actual Actual
Revenue Income
Income from Taxes 2.1 2.2 2.2 3.7 20.8%
Non Tax Income 4.5 4.2 6.6 4.9 2.9%
Total Own Revenue
Income 6.6 6.4 8.8 8.6 9.2%
Government Grants 35.0 46.4 33.8 21.7 -14.8%
Other Income 0.4 0.6 0.6 5.8 143.9%
Total Income 42.0 53.2 43.2 36.1 -5.0%
Expenditure
Revenue Expenditure 15.2 24.4 32.3 33.2 29.8%
Total Expenditure 15.2 24.4 32.3 33.2
Revenue Surplus /
(Deficit) 26.8 28.8 10.9 2.9 -52.5%
Source – MC accounts and budget
7.2.2 Sector Operation and Maintenance
138. Operation and maintenance of water and wastewater services is with the ULB. Details of the
annual O&M costs as per the accounts of the ULB are given in the following table. At present cost
recovery is to the extent of 24% in Davangere; 57.5% in Ranebennur; 34% in Harihar and 24% in
Byadagi.
139. Water sector O&M costs, Rs Million, in each of the four subject ULBs is shown in the
following table.
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Table 13: Sector O&M Costs in Subject ULBs
Particulars Byadgi 2011-12
Davangere 2010-11
Harihar 2011-12
Ranebennur 2011-12
Staff costs 1.65 11.15 4.13 4.67
Power 4.90 62.89 8.64 12.52
Consumables 0.97 14.70 0.17 1.63
Repair & Maintenance 1.11 3.68 1.80 0.47
Others 6.51 1.98
Total 8.63 98.93 16.72 19.29
Source: ULB accounts section
7.2.3 Collection Efficiency
140. Following table gives the collection efficiency of four towns in the financial year 2011-12 in
respect of property tax and water charges. Figures are Rs Million.
Table 14: Collection Efficiency
Towns Arrear
Demand
Current
Demand
Total
Demand Collection Efficiency %
Property Tax
Davangere 9.8 100.0 109.8 94.8 86.3
Ranebennur 15.2 14.1 29.3 22.8 77.9
Harihar 6.0 7.3 13.3 8.3 62.0
Byadagi 0.1 3.2 3.3 3.2 99.0
Water charge
Davangere
23.8 19.5 81.9
Ranebennur 13.8 11.1 24.9 12.6 50.8
Harihara 4.3 5.6 9.9 5.0 50.4
Byadagi 0.7 2.1 2.7 2.1 75.9
7.2.4 Accounting Standards and Status of Auditing
141. Accrual based accounting system is being followed in all the four ULBs. Audit status of the
municipal accounts is as follows:
Davangere: Completed for financial year 2009-10;
Ranebennur: Completed for financial year 2009-10;
Harihar: Completed for financial year 2010-11, and
Byadagi: Completed for financial year 2010-11.
142. All ULBs are preparing their accounts as per the E Governance software developed under
Karnataka Municipal Reforms Project (KMRP). Initially Chartered Accountants firms were
engaged to build the capacity of ULBs in preparing the financial statements under the new
system. ULB accounts section compiles the accounts and prepare financial statements under the
new system.
7.3 Ring Fencing WSS Service Units in ULBs
143. Ring-fencing includes: the separation of financial accounts; the consolidation of financial
accounts across different products and services within the ring-fenced unit; the physical and
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procedural internal divisions to contain certain information and activities; the protocols for the
disclosure and exchange of information between internal entities, and the consistent application of
rules for cost/revenue attribution and for an appropriate allocation of common or joint costs,
including overhead costs.
144. The receipts and expenditures of a ULB should be kept under separate heads of accounts,
such as those for: (i) water-supply, drainage and sewerage, (ii) solid waste management, (iii) road
development and maintenance, (iv) slum services, (v) commercial projects and (vi) other account
heads as may be specified and the general account head in order to facilitate the imposition of
user charges and preparation of any subsidy report.
145. While following the fund-based accounts, service-specific accounts against the specific
funds can be maintained. As proposed each of these specific funds would prepare separate
financial statements showing accumulated funds, retained earnings receivables, payables,
investments and unutilized balance in the form of cash and equivalents.
7.4 Financial Management Assessment
146. Five Major findings common to four ULBs are presented in following table.
Table 15: Summary of Financial Management Assessment
Particulars Findings Solution / Action
Accounting
System
Accrual based accounting system;
All four ULBs have implemented the new
accounting system developed under KMRP.
Harihar has prepared the Annual
Performance Report for FY 2011-12, Byadgi
– FY 2009-10 (FY 2010-11 final corrections);
Ranebennur FY2010-11 and Davangere FY
2009-10.
Staffing Inadequate Staff9;
Lacks training
ULBs have created PIUs for NKUSIP and
KMRP project implementation
Byadagi will be creating a new PIU
cell for IWRM project
In other ULBs where either NKUSIP
or KMRP cell is in operation as PIU,
one additional First Divisional
Assistant (FDA) with 10 year
experience needs to be posted.
Auditing Audit status:
Davanagere – FY 2009-10
Ranebennur – FY 2009-10
Harihara – FY 2010-11 and
Byadagi – FY 2010-11
State auditors have initiated audits
for FY2010-11 in both Davangere
and Ranebennur recently.
Weak
Financial
Situation
Percentage of own source income to total
revenue income:
Davanagere – 24%
Ranebennur – 29%
Harihara – 22% and
Byadagi – 31%
Upon full implementation of the new
water and sewerage tariff as per the
GoK GO dated 20th
July 2011 and
improving the collection efficiency
the ULBs aim to improve their
financial situation.
9 Number of staff in accounts department to be strengthened for accrual based accounting system
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Particulars Findings Solution / Action
ULBs dependent on GoK grants and
supports to meet its operation expenses.
Sewerage charge has yet to be
introduced in line with GO dated 20th
July 2011.
Safeguards
over Assets
and Database
Insufficient safeguards
No insurance of assets;
No physical verification
Asset module has been developed
under KMRP. Once implemented,
fixed assets records will be kept
uptodate; physical verification and
reconciliation of assets done.
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8 ECONOMIC DEVELOPMENT
8.1 Introduction
147. Karnataka is the fourth most urbanized state among the major states in India, with 39% of
61.1 million people living in urban areas. The state is also one of the top ten states by GDP and
experienced a compound annual growth rate of over 8% per annual since FY2004-2005.
148. The state‟s rapid growth in economic activities, in particular, in the tertiary sector has
centred on Bangalore in the Southern part of Karnataka and resulted in uneven economic
development within the state. North Karnataka lags behind in economic growth, urban
infrastructure development, and poverty reduction. Recognizing the importance of urbanization to
economic growth, the Government of Karnataka (GoK) has emphasized on urban development in
Karnataka through various national as well foreign aided programs.
8.2 Urban Sector
149. Karnataka accounts for about 5.83% of the total geographical area of the country with a
2011 census population of 61.1 million, equivalent to 5.05% of the total population of India. Urban
population constituted about 38.6% of total population and percentage of urban population
increased by 3.1% between 2001 and 2011. The population density increased between 2001 and
2011 from 276 to 319 persons per sq. km. compared with a population density for the whole of
India of 382.
8.3 Existing Situation Assessment
150. As a result of measures taken up by GoK, in 2011-12 the total GSDP in Karnataka, at 2004-5
constant prices, was estimated to be in excess of Rs.2,980billion, yielding a per capita income of
Rs 69,493 (US$1,264).
151. For total GSDP, at constant 2004-05 prices, this implied a growth in excess of 6% over the
year 2011-12, Table 16.
Table 16: Percentage Annual Growth
Year Growth
2005/6 10.5%
2006/7 10.0%
2007/8 12.6%
2008/9 7.1%
2010/11 5.2%
2011/12 6.4%
(Karnataka Economic Survey 2011-12).
152. The following shows the movement of India and State GDPs, in Rs. 100Billions
Table 17: India & Karnataka GDP
Year India GDP Karnataka GDP
2004-05 297.1 16.6
2005-06 325.4 18.4
2006-07 356.6 20.3
2007-08 389.9 22.8
2008-09 416.3 24.4
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2009-10 449.4 25.7
2010-11 487.9 28.0
2011-12 522.2 29.8
Source: Directorate of Economics & Statistics of respective State Governments,
and for All-India -- Central Statistical Organisation
Figure 3: Movement in India and State GDPs
153. Karnataka has a per capita income of $1,264 a year, over 14% more than India's average of
$1,10910.
Figure 4: Per Capita NSDP of India and Karnataka
154. 19% of the state population lives below the poverty line, against India's average of 22.15%.
8.4 Sector Composition of GSDP
155. The sector composition of State Income, at current prices, in 2010-1111
indicates that the
share of primary sector, secondary sector and service sector were 16.9%, 28.6% and 54.5%.
156. The sector contribution of the State Income has undergone considerable changes between
1960-61 and 2010-11. The primary sector share has declined steadily from 60% to 16.9%; the
share of secondary sector has increased from 15.2% to 28.6% while service sector has increased
from 24.8 to 54.5%, during the same period.
10 Economic Survey 2011-12, India
11 Economic Survey 2011-12, Karnataka
0
100
200
300
400
500
600
04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12
India GDP
Karnataka GDP
India Per Capita Income
Karnataka Per Capita Income
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8.5 Major Economic Activities of Karnataka
157. Government data on economic activity is available on a district-wide basis; not town specific.
The following table presents relevant data for the thirty districts of Karnataka. The seven districts
where the selected thirty-four Tranche-1 subject towns are located are shown first. In 2009-10 the
seven districts accounted for over 14.5% of NSDP12
(at constant price).
Table 18: District Share of State NSDPV
2009-10 NSDP at 2004-2005 constant prices - Rs. Millions
District Primary Secondary Tertiary Total
% to
Total
Seven Districts
Bellary 23,110 15,690 38,940 77,730 3.4
Chickmagalur 14,270 5,390 18,690 38,350 1.7
Chitradurga 12,000 7,570 22,240 41,810 1.8
Davangere 15,760 11,070 27,700 54,520 2.4
Gadag 5,070 5,590 14,900 25,560 1.1
Haveri 10,900 6,320 16,220 33,440 1.5
Shimoga 14,740 15,140 29,880 59,750 2.6
Remaining ULBs
Bagalkote 14,160 9,550 21,360 45,070 2.0
Bangalore Urban 8,680 230,300 527,320 766,390 33.9
Bangalore Rural 6,340 15,760 26,610 48,710 2.2
Belgaum 34,810 31,300 60,770 126,880 5.6
Bidar 7,030 6,310 15,510 28,850 1.3
Bijapur 13,440 8,990 19,940 42,360 1.9
Chamrajnagar 10,670 3,530 9,170 23,380 1.0
Chickballapur 8,830 6,060 12,740 27,630 1.2
Dakshina Kannada 11,950 29,800 82,320 124,080 5.5
Dharwad 7,720 18,240 53,480 79,450 3.5
Gulbarga 9,640 12,020 26,450 48,100 2.1
Hassan 17,680 9,210 26,760 53,650 2.4
Kodagu 11,370 3,130 14,650 29,160 1.3
Kolar 16,320 11,390 22,200 49,910 2.2
Koppal 10,370 6,830 12,640 29,850 1.3
Mandya 14,610 7,900 17,920 40,440 1.8
Mysore 17,830 24,780 58,770 101,380 4.5
Raichur 10,940 7,520 17,900 36,360 1.6
Ramnagara 9,410 7,150 21,620 38,190 1.7
Tumkur 23,200 17,340 33,370 73,920 3.3
Udupi 9,480 14,330 29,650 53,460 2.4
Uttara Kannada 7,510 9,990 24,690 42,180 1.9
Yadagiri 4,870 6,360 11,090 22,330 1.0
KARNATAKA 382,730 564,540 1,315,510 2,262,780
12
Economic Survey 2011-12, Karnataka
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8.6 Future Growth
158. The State‟s fiscal consolidation efforts have continued to be effective with all the fiscal
indicators having been contained within the stipulated limits of the Karnataka Fiscal Responsibility
Act, 2002 (KFRA).
159. The State has managed its expenditure well while also enhancing its revenues. The State‟s
fiscal deficit has declined to 2.88% of GSDP in 2011-12 while the capital outlay has grown to
121% of Gross Fiscal Deficit. The State‟s revenue receipts have increased to 15.27% of GSDP.
160. Revenue receipts have grown primarily due to growth of tax revenue with the State having an
overall revenue surplus. The State‟s expenditure on social services as a share of GSDP has
grown while the non-tax revenues continue to remain at low levels. Education and Water
resources development are significant components of the State‟s development expenditure. A
gradual increase is seen in the planned expenditure of the State with district plan size at about
15% of the State‟s plan size.
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Table 19: Karnataka Receipts and Expenditure
Items/ Years Rs Million
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 (RE)
2011-12 (BE)
Revenue receipts 265,697 303,521 375,869 411,511 432,907 491,557 577,846 663,133
Revenue expenditure 249,319 280,409 334,354 373,748 416,593 475,369 561,892 650,343
Capital receipts 75,038 44,015 64,448 60,297 92,852 129,427 135,468 146,500
Capital disbursements 91,320 66,831 104,166 99,480 113,649 143,107 149,460 156,342
Capital Outlay (net) 46,737 58,219 85,426 84,032 96,893 120,669 118,174 117,544
Percent to GSDP
Revenue receipts 15.97 15.53 16.55 15.23 14.07 14.28 14.49 15.27
Revenue expenditure 14.99 14.34 14.72 13.83 13.54 13.79 14.09 14.98
Capital Receipts 4.51 2.25 2.84 2.23 3.02 3.76 3.40 3.37
Capital Outlay (net) 2.81 2.98 3.76 3.11 3.15 3.50 2.96 2.71
Capital Disbursements 5.49 3.42 4.59 3.68 3.69 4.15 3.75 3.60
Source: Government of Karnataka, Accounts Recknoner, 2002-12
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9 STATE ECONOMIC ANALYSIS
9.1 Economic Analysis
9.1.1 Assignment of Resources to Local Bodies
161. Assignment of resources to ULBs is made in accordance with the recommendations of the
State Finance Commission (SFC). SFC grants are usually given under three different heads as
given below:
Salary for staff;
Pension contribution;
Electricity charges;
Untied grants (in creation or replacement of an asset)
162. Third SFC‟s principal recommendation, as regards devolution of funds, was a) delinking of
salary while working out the total share of PRIs and ULBs; b) 33% of Net Own Revenue Receipts
of state should be distributed to PRIs and ULBs; and c) the relative shares of PRIs and ULBs
would be in the ratio 70:30 out of 33% of Net Own Revenue Receipts of the state. In other words,
23% of Net Own Revenue Receipts of the state is the share PRIs and 10% of Net Own Revenue
Receipts of the state is the share of ULBs.
163. The 13th Finance Commission (13th FC) observed that there was severe lack of funds with
the ULBs to provide adequate levels of even basic services such as drinking water, sewerage,
solid waste management and street lighting to their citizens. This problem is intensified by the
increasing pace of urbanisation as well as the rising cost of providing such services in rural areas.
164. The transfer of funds, functions and functionaries to local bodies consistent with the XI and
XII Schedules of the Constitution has met with limited success so far. In recent times the local
bodies have been entrusted with funds, often directly through Centrally Sponsored Schemes
(CSS) such as the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and National
Rural Employment Guarantee Scheme (NREGS), which have stretched their already limited
planning implementation and accounting capacities.
165. While the issue of providing additional funding support to local bodies is significant, the 13th
FC highlights following points with regard to the structure & functioning of the ULBs, (i) entrusting
local bodies with implementation and expenditure responsibilities consistent with their mandate;
(ii) enhancing their capacity to meet these obligations through assigning necessary revenue
raising powers as well as providing adequate transfers; (iii) making them accountable for their
performance, including delivery of services as per previously notified standards; (iv) strengthening
the functioning of the State Finance Commissions; and (v) providing focused support to the
scheduled and excluded areas.
166. The 13th FC has adopted a platform-based incentive approach to determine the volume of
local body grants to be provided to each state. Following previous Commissions, the 13th FC will
continue to provide for a grant to all the states for meeting the needs of the local bodies for the
period 2010-15. In addition, the 13th FC have sought to incentivise devolution and performance
through the introduction of a performance-based component which will be available only to those
states which meet the stipulations related to the issues identified above by 2011-12. The year
2010-11 will be available for states to meet these stipulations. States which are unable to do so,
but meet these stipulations in subsequent years, will be eligible for grants prospectively.
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9.2 Economic Analysis of a Sector Loan
167. This Section analyses the government‟s sector development plan which consists of
investment plans in the 34 Program urban local bodies (ULBs) in the following sub-sectors: water
supply and sewerage and sanitation. The investment plans articulate the investment requirements
over the next 8 years up to 2020 in Program ULB, which amount to about $ 215 million in base
cost. In addition to the infrastructure investment requirements, reform and capacity building
requirements are also assessed for the Program ULBs to deliver the adequate, efficient and
responsive urban services in a sustainable manner.
168. The following economic analysis covers rationale for government involvement, goals of the
program, sector development plan, government capacity, fiscal impact, and economic risks.
9.2.1 Rationale for Government Involvement
169. The government intervention under the Programme is limited to basic urban services where
(i) there is natural monopoly in the sector; (ii) the services provided are public good; and (iii)
integrated and coordinated management by the government is required due to externality and
interdependence of these sectors. Where technically and commercially feasible, private sector
participation will be promoted. The government involvement in basic urban services is also in line
with the urban sector development plans and programs that the government is pursuing. The
program aims to improve water supply and sanitation infrastructure in 34 ULBs in the state.
9.2.2 Goals of the Programme
170. The goals of the Programme are to increase economic growth potential by making
investment in water supply and sewerage infrastructure in the selected Program ULBs. Promoting
urban development with a view to stimulating economic growth potential is a common strategy in
India, as spearheaded under the Government of India (GOI)‟s urban development schemes such
as Jawaharlal Nehru Urban Renewal Mission (JNNRUM) and Urban Infrastructure Development
Scheme for Small and Medium Towns (UIDSSMT). Urban growth is expected to drive the
economic growth since non-agriculture sectors with future growth potentials concentrate in the
urban areas and productivity in the urban areas is estimated to be 3.5 times as high as that in the
rural areas. Moreover, urban growth can spread its economic benefits to rural areas by providing
markets for agricultural products from the surrounding rural areas.
171. Till December 2010, under JNNRURM, projects worth Rs 3,558 million have been
sanctioned by GOI for which detailed reports for projects have been prepared for GOI‟s approval
or under preparation. Under UIDSSMT projects worth Rs.2,078 million have been sanctioned by
GOI, for which detailed reports for projects have been prepared or are under preparation for GOI‟s
approval. Hence, urban development is given priority as a vehicle to achieve higher economic
growth in both the state. Under the Program, selection of 34 ULBs is strategically made to
maximize the Program‟s contribution to economic growth potential, keeping a regional balance in
mind.
172. The goals for each sector of urban services are set in a respective plan of sector
development. The sector goals are easily measurable and specific for water supply and,
sewerage.
9.2.3 Sector Development Plan
173. The sector development programme will cover part of the 10-year period financing
requirements in the selected 34 Program ULBs to undertake short-term and medium-term
activities in a respective sector investment plan. Subprojects under the Program are also
expected to serve as a model for infrastructure development in the ULBs which are not covered
under the Program by demonstrating how the policy is translated to specific projects. In general,
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sector goals are set by GOI‟s or GoA‟s policy and/or guidelines; however, they are adjusted to
reflect a size, geography, environmental condition and capacity of each Program ULB as
appropriate.
174. The expectations arising from the 74th amendment have not been fully met. While water,
sewerage and solid waste management has been transferred to ULBs, inadequate capacities at
local government level have hindered effective service delivery.
9.2.4 Associated Economic Policies
175. Promoting urban development is a national policy of India, as spearheaded by Jawaharlal
Nehru Urban Renewal Mission (JNNRUM) and Urban Infrastructure Development Scheme for
Small and Medium Towns (UIDSSMT). The state has already taken up initiatives under State
Urban Agenda for Karnataka (SUARAJ) to advance priority projects and governance reforms.
Tariff and user charge reform is part of the Investment Program. The state has also issued
Government Order No. NAE o7 UWS 2011, Bangalore dated 21st July 2011, to provide guidance
on implementing volumetric water tariff and flat sewer tariff by the ULBs. This is a critical step
towards financial sustainability.
9.2.5 Government Capacity
176. The state government, through its nodal agency KUIDFC acting as the executing agency, is
fully capable of executing the Program. KUIDFC has implemented and is still handling several
externally aided projects, such as two ADB-assisted projects and two World Bank-assisted
projects in urban development in addition to centrally sponsored schemes.
177. KUIDFC has developed adequate capacity in managing projects, having learned from
experiences in implementing Karnataka Urban Infrastructure Development Project, Karnataka
Urban Development and Coastal Environment Management Project and North Karnataka Urban
Sector Investment Program (NKUSIP).
9.2.6 Fiscal Impact
178. The state has committed itself to a fiscally sustainable adjustment path by eliminating the
revenue deficit and lowering the overall deficit as enacted in the Financial Responsibility and
Budget Management Act. While the state, intends to decrease the revenue deficit, it is also laying
stress on increasing capital expenditure, doubling it over the last three years. Given the fiscal
challenge, it is important for the state to secure the ADB loans to augment its capital
expenditures, a crucial requirement for restoring economic growth. The state‟s budget allocation
confirms its emphasis on the social sectors, water supply and sanitation and urban development -
sectors which were relatively neglected.
9.2.7 Economic Risks
179. One of the identified risks is associated with financial sustainability of the Program, as the
required tariff and tax revisions are likely to be met with resistance from politicians and public
alike. Even though a financial reform action plan was prepared for that purpose, implementation of
reform would require the government‟s commitment and political wills, capacity building at the
relevant institutions and consultation with and awareness of the general public. The Program will
provide assistance in capacity building and public awareness campaign/consultation to mitigate
this risk.
9.2.8 Government Commitment
180. The government commitment to support urban development is firm, as demonstrated by
increased budgetary allocation to the sector. From FY2008-09 to FY2010-11, state development
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expenditures on water, sanitation and urban development have more than doubled. When
combined, water and urban development comprised almost 5% of total development expenditures
of the state for FY2010-11, rising from 2.9% in FY2008-09.
9.2.9 Coordination of Foreign Aid
181. The ADB, WB and JICA are currently the only major agencies involved in urban
development sector in Karnataka. Coordination of foreign aid is relatively easy at the state level,
and is done at Urban Development Department (UDD) of the state. The selection criteria of the
Project also ensure that there is no overlapping between the Project and the other urban
development schemes.
9.2.10 Conditions Attached to the Loan.
182. Conditions attached to the loan mainly assure that the institutional and financial
arrangements to sustain the urban services assisted under the Program are put in place in a
timely manner. They include tariff and user charge reform to gradually achieve full recovery of
O&M costs for water and sewerage sectors, implementation of capacity development programs
for the ULBs
9.3 Conclusion
183. The government‟s sector development plan is economically sound. The plan involves only
the normal functions of government, and its goals are reasonable. The plan is generally well
designed from an economic perspective.
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10 TRANCHE -1 INVESTMENTS AS PILOT INVESTMENTS
10.1 Selection of Tranche-1 Subject Towns
184. The first stage in the preparation of the Feasibility Studies was the selection of the Subject
Tranche-1 towns from the thirty four ULBs located within the sub-basin
185. Our intention behind the selection was to ensure that the sub-projects covered as diverse a
representation of ULBs as possible. In this way, all possible options for service provision; asset
creation/rehabilitation and institutional frameworks have been explored. A wide diversity will
ensure that the recommendations for the sector will have been piloted over most water resource
and WSS planning circumstances to be found within the state.
186. The overriding factor within the selection process has been that clear benefits and outputs will
be derived from the pilot studies which can be applied across Karnataka. Critically, the selection
has been based upon the ability to test the principles of IWRM and the opportunities for PPP, as
much as the priority need for investment.
187. Towns identified as the most suitable subject ULBs were Davangere, Ranebennur, Byadagi
and Harihar. The selection methodology is outlined in “Volume 1: Institutional Road Map.”
Subsequently endorsed by the project Steering Committee.
10.2 Feasibility Study Recommendations
188. Following selection of the sub-project towns, Feasibility Studies were prepared for both water
and wastewater service delivery.
189. The investments are to provide adequate water procurement and treatment facilities to enable
a continuous water supply to be made available to 95% of people within each ULB, and for the
collection and safe disposal of 80% of the water delivered to customers. The assumption was
made that 80% of all citizens would choose to be connected to the central sewer network. In
summary, the works proposed in the four towns are:
Water Procurement:
o Raw water catchment, pumping and transmission mains;
o Water treatment facilities;
o High lift pumps into supply;
o Bulk flow meters;
Water Network Phase 1:
o Strategic network and reservoirs;
Water Network Phase 2:
o Distribution network and storage reservoirs;
o Customer revenue meters;
o District metering;
Wastewater collection sewer network
Wastewater treatment plant, and
Sludge management facilities.
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190. Water Network Phase 1 works entailed those works necessary to bring adequate water
supplies to central distribution points in each town, normally a strategic reservoir. Phase 2 works
are those required to distribute the water to customers. The division was made in line with the
proposal by the KUIDFC – see Section 14.2.
191. The proposed works comprised a mixture of new assets; replacement/rehabilitation and
existing capacity enhancement.
192. Generally, the works were designed for the 2031 demands except that, in consideration of the
lack of accurate data considering existing flows etc., the treatment facilities were phased such that
those proposed under the Tranche-1 investments were adequate to around 2025. The main
question about future demands in assessing require treatment capacity will be:
The rate at which domestic demand increases to, and perhaps beyond, the Indian design
standard of 135litres/head/day,
The rate at which service coverage is increased, and
When, if ever, the design standard of 15% for non-revenue water is ever achieved.
193. Domestic demand and increased coverage will also influence the required wastewater
treatment capacity. As mentioned earlier, the willingness of people to pay for a sewer connection
charge will be critical.
10.3 Summary of Tranche-1 Investments
194. A summary of Tranche-1 investments unit indicators are contained in the following table:
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Table 20: Summary of Tranche-1 Investments and Indicators
Project Element Estimated Cost
13 $/2011
population
$m
Davangere Water Procurement 2.08
Water Network Phase 1 16.27
2011
population Water Network Phase 2 3.95
488,410 Total Water Investment $22.30M
$46
($90 for total
requirement)
Wastewater Collection 16.93
Wastewater Treatment -
Total Wastewater Investment $16.93M
TOTAL ULB Investment $39.23M
Harihar Water Procurement 3.04
Water Network Phase 1 1.85
2011
population Water Network Phase 2 6.48
101,711 Total Water Investment $11.37M $112
Wastewater Collection 1.19
Wastewater Treatment -
Total Wastewater Investment $1.19M $12
TOTAL ULB Investment $12.56M $123
Ranebennur Water Procurement 4.32
Water Network Phase 1 2.88
2011
population Water Network Phase 2 5.96
114,580 Total Water Investment $13.26M $115
Wastewater Collection 1.34
Wastewater Treatment 0.36
Total Wastewater Investment $1.7M $15
TOTAL ULB Investment $14.9M $130
Byadgi Water Procurement -
Water Network Phase 1 2.77
2011
population Water Network Phase 2 1.63
30,600 Total Water Investment $4.4M $144
Wastewater Collection 4.88
Wastewater Treatment 1.13
Total Wastewater Investment $6.01M $196
TOTAL ULB Investment $10.41M $340
Total of Physical Investment $77.10M $105
13
CAPEX is inclusive of project management costs of 10%; contingency of 15%; resettlement, compensation and land
purchase costs, and for an extended 5yr operational phase for new water and wastewater treatment plants.
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195. The total required investment is forecast to be:
Table 21: Summary of Total Investment
Project Element Estimated CAPEX
$M
Total of Physical Investments $77.10M
Provide for Tranche-2 preliminary works1 $20.00M
IWRM Project Management Unit2 $1.25M
Training programme (allow)3 $0.05M
Allow for plant and business systems4 $1.60M
TOTAL TRANCHE 1 INVESTMENT $100.00M
Note 1: See Section 14.3. Note 2: See Section15.4. Note 3: To be confirmed by HR and Development Plan. Note 4: to be
confirmed based upon Institutional arrangement of ULBs for service delivery
10.4 Forecast for Pilot Sub-Basin Investment
196. It is dangerous to draw too much from such a limited sample of ULB requirements, but there
are some conclusions that can be drawn:
For the water supply, the $/head indicator is fairly consistent ranging from $90 to $144. The
highest figure is in Byadgi and reflects the lower population of the ULB. Most of the water
service requirements are in place and the investment tends to be one to augment the existing
facilities, rather than first-time service provision, and for asset replacement, and
For the wastewater service, the required investment is more variable and is based upon the
requirements in each ULB. From the above, the $/person for Byadgi is high as the wastewater
collection and treatment is first-time, whereas in Ranebennur and Harihar the requirement is
much less due to the current investments taking place.
197. An indicator graph for the required water supply investment in a ULB as $/head against ULB
population is provided below. Above a population of 500,000, an investment of around $85/head
is probable. The graph can be fine-tuned as the requirement in more towns becomes known.
Figure 5: Indicative Water Supply Investment per Head
198. For the pilot sub-basin, and considering the ULBs in groups relating to the sizes of the four
subject towns, the following total required investment can be determined.
80
90
100
110
120
130
140
150
0 100,000 200,000 300,000 400,000 500,000 600,000
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Table 22: Forecast for Pilot Sub-Basin Investment Requirement
Town 2011
Population
Group
2011
Population
Group
water
investment
$m
Group
Wastewater
Investment
$m
Sringeri 5,475
Koppa 6,614
Soraba 9,570
Narasimharajapura 9,617
Shiralkoppa 18,685
Holalkere 18,779
Jagalur 18,998
Thirthali 19,080
Honnali 20,059
Hirekerur 20,451
Shirahatti 20,884
Mulagnada 23,319
Channagiri 23,853
Bankapur 26,187
Birur 29,252
Hoovina-Hadagali 30,169
Shiggaon 31,345
Hangal 32,224
Byadagi 33,067
Kadur 39,704
Shikaripura 40,608
Lakshmeshwara 43,058
Tarikere 43,894
Savanur 45,823
Harapanahalli 53,997
Sagar 64,594 729,306 $105m $143m
Haveri 72,044
Harihara 94,121
Ranebennur 115,473
Chitradurga 156,961
Gadag Betageri 199,694 638,293 $72m $8m
Bhadravati 207,013
Shimoga 353,503
Davangere 469,688 1,030,204 $93m $14m
Total 2,399,814
$270m $165m
$435m
199. Extrapolating these unit indicator costs beyond the sub-basin to the state level would be
erroneous over the pro-rata increase in population from 2.4m to around 53m for the state
population, excluding Bangalore and does not reflect the considerable investment that has been
made already in the major cities e.g. Mysore, Hubli and Dharwad.
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10.5 Technical Investment Options
10.5.1 Water & Wastewater Treatment Options
10.5.1.1 Water Procurement
200. We have discussed in the Road Map, the danger associated with the assumption of 15%
physical losses. Such a level is well below current levels of around 40%; will be difficult and
expensive to achieve, and will result in an under-assessment of required treatment capacity. As
service moves towards a continuous supply, leakage can be expected to increase significantly
without major NRW reduction management. Levels of 50 to 60% are not unrealistic.
201. The consequence will be that plants will require further investment for capacity augmentation
at an earlier than expected date.
10.5.1.2 Water Treatment
202. For water treatment plants, there is no reason to move from the current practice of
sedimentation and filtration. Various sub-options are possible and these can be ascertained for
each location depending on water quality, ULB existing treatment works and preferences.
203. An issue identified in the Feasibility Studies is the possible need to provide additional
treatment for pesticides. Historic river water analysis has not shown this to be a problem and
samples taken for the Feasibility Studies showed no traces. The samples taken cannot be said to
be representative. A year-long study of sampling and analysis is required to cover for all
agricultural seasons and river flows.
204. The other concern raised by the Studies is the security risk associated with direct abstraction
from the river source. The ULBs drawing directly from the river are at risk of pollution in the river
and of low flows affecting the quantity of water available. The latter is being considered by the
IWRM PPTA. Our recommendation would be for some form of bankside storage to be provided.
Such storage is expensive due to the land requirements but we recommend should be considered
as a long-term option, possibly making use of the historic tanks previously used for water storage.
205. Chlorination remains the best option for water sterilisation and has been incorporated into the
Tranche-1 sub-project investments. Where the treatment plants are located close to housing, or
there is some other risk associated with the storage and handling of gas chlorine, on-site
production should be considered.
10.5.1.3 Wastewater Treatment
206. Traditionally, stabilisation ponds have been the preferred treatment process for small to
middle sized towns. The process is environmentally and CAPEX and OPEX efficient. The
disadvantage is the large acreage required with the ensuing difficulties of finding adequate land,
and the cost. The problem was encountered in Byadgi and is likely to become an increasingly
more common.
207. The alternative processes based upon aeration require less land but are more expensive to
construct, use considerably more power and require a more skilled workforce.
208. The preferred option will need to be decided site-by-site, based totally on land
availability/cost.
10.5.1.4 Sludge Strategy
209. As wastewater treatment plants are brought into service using other than stabilisation pond
technology, sludge will be increasingly produced.
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210. We strongly suggest that, before the problem becomes critical, the sector develops a sludge
management strategy and that adequate investment funding is provided in wastewater treatment
plant projects for safe and environmentally friendly disposal of sludge.
10.5.1.5 Karnataka Hi-Tech Proficiency
211. We have made a suggestion in the Road Map that Karnataka builds upon its IT capability to
develop a proficiency in high-tech wastewater treatment plant process control and monitoring as
an exportable income earning stream.
10.5.2 Water and Sewer Networks
212. We have addressed in the Road Map issues with the quality of main laying, identified from our
site visits.
213. The major investment issue to be addressed is the need for timely replacement of assets
networks and M&E.
214. For M&E plant, the need can be determined from asset history records that we have
recommended be made in an Asset Management. From the histories, expected replacement
schedules can be produced and investment included into capital investment programmes.
215. For water and sewer networks, replacement programmes can be based upon asset histories,
specific pipe condition surveys and pipe sampling techniques. These are all developed
internationally, and the experience is available to the sector in Karnataka.
216. The investment requirement is to ensure that an adequate annual provision is made for
renewals within a annual “rolling” capital programme allocation. The following table demonstrates
the principle behind a methodology that we suggest could be adopted. The numbers and costs
are indicative, only to show the methodology. A similar exercise can be applied to sewers. The
“assessed remaining life” would be based upon the asset histories, pipe sampling etc.
Table 23: Annual Mains Rehabilitation Investment
Pipe
Size
Percentage
of Network
Length by
Size
km
Unit
cost
$/m
Cost $m
Assessed
Remaining Life
years
Weighted average
remaining life
(years) of network
DN90 25% 63 30 1.88 10
13.2
DN100 30% 75 50 3.75 15
DN150 20% 50 65 3.25 15
DN200 10% 25 80 2.00 20
DN250 7% 18 100 1.75 20
DN300 4% 10 130 1.30 25
DN400 3% 8 210 1.58 35
DN600 1% 3 400 1.00 50
Total 250km
$16.50m
Required Annual investment $1.25m
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11 ASSUMPTIONS MADE IN THE FINANCIAL ANALYSIS
11.1 Introduction
217. We have made a number of basic assumptions in our analysis. In line with Indian Standards
and Norms, a domestic per capita demand of 135litres/head/day has been assumed, as has a
non-revenue water level of 15% from the water distribution network.
218. In our analysis of future demands and required treatment capacities, we have assumed a
gradual build up to these levels. Even then, we do question the low level of non-revenue water
used, as the “standard”. To us, a level of 15 or 20% would be safer.
11.2 Population
219. Table 24 shows, for the thirty-four ULBs in the sub-basin, the past population by town in 2001
and projections for 2020, 2030 and 2040, as per the KUWSDB estimates.
Table 24: Historic and Forecast Populations
Town 2001
(Census) 2011 2020 2030 2040
Bankapur 20,324 26,187 32,898 42,389 54,618
Bhadravati 160,662 207,013 260,060 335,087 431,760
Birur 22,702 29,252 36,747 47,349 61,009
Byadagi 25,663 33,067 41,540 53,524 68,966
Channagiri 18,512 23,853 29,965 38,610 49,749
Chitradurga 121,817 156,961 197,182 254,070 327,369
Davangere 364,523 469,688 590,045 760,273 979,612
Gadag Betageri 154,982 199,694 250,866 323,241 416,496
Hangal 25,009 32,224 40,482 52,160 67,209
Harapanahalli 41,907 53,997 67,834 87,404 112,620
Harihara 73,047 94,121 118,240 152,352 196,305
Haveri 55,913 72,044 90,505 116,616 150,260
Hirekerur 15,872 20,451 25,692 33,104 42,654
Holalkere 14,574 18,779 23,591 30,397 39,166
Honnali 15,568 20,059 25,200 32,470 41,837
Hoovina-Hadagali 23,414 30,169 37,900 48,834 62,922
Jagalur 14,744 18,998 23,866 30,751 39,623
Kadur 30,814 39,704 49,878 64,268 82,809
Koppa 5,133 6,614 8,309 10,706 13,794
Lakshmeshwara 33,417 43,058 54,091 69,697 89,804
Mulagnada 18,098 23,319 29,295 37,746 48,636
Narasimharajapura 7,464 9,617 12,082 15,567 20,059
Ranebennur 89,618 115,473 145,063 186,913 240,838
Sagar 50,131 64,594 81,146 104,557 134,721
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Town 2001
(Census) 2011 2020 2030 2040
Savanur 35,563 45,823 57,565 74,173 95,571
Shiggaon 24,327 31,345 39,378 50,738 65,376
Shikaripura 31,516 40,608 51,014 65,732 84,696
Shimoga 274,352 353,503 444,087 572,207 737,288
Shirahatti 16,208 20,884 26,236 33,804 43,557
Shiralkoppa 14,501 18,685 23,472 30,244 38,970
Soraba 7,427 9,570 12,022 15,490 19,959
Sringeri 4,249 5,475 6,878 8,862 11,419
Tarikere 34,066 43,894 55,142 71,050 91,548
Thirthali 14,808 19,080 23,969 30,885 39,795
220. Questionably, all towns show a uniform total increase of 109% over the period 2011 to 2040,
and equally divided across the periods: 26% from 2011 to 2020 and then 29% for the two
subsequent periods.
221. Applied to the State, the population increase will be from 61m in 2011 to over 66m by 2040.
11.3 Increase in Water Demand
222. The Draft Cabinet Paper refers to an anticipated increase in water demand for drinking
purposes from a current 70TMC to just over 200TMC by 2050. The demand is well within the
considered economically available raw water in the State of 1,695TMC. The increase does help to
demonstrate the long-term need for continuing investment in water supply facilities, and the
advantages to be gained by adopting IWRM principles including, in particular, reducing physical
water losses to an economic level.
223. The increase in potable water demand is matched by a similar volume of wastewater to be
collected and treated. The required investment in wastewater is much greater due to the current
low level service coverage and treatment.
224. Knowledge of the future demand for water will be essential to water resource planning. We
would suggest that there is an urgent need for a State Water Master Plan. The Plan would
address issues such as realistic non-revenue water levels and domestic and non-domestic
consumption based upon historic data and relevant to the differing socio-economic groups - a
move away from rigid “Norms” and “Standards”.
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12 FINANCE REQUIREMENTS FOR UWSS SERVICE DELIVERY
12.1 Capital Expenditure on Works
225. Current and past expenditure across the state is shown in the following table.
Table 25: Capital Expenditure (CAPEX) in ULBs
Costs are Rs. Million
2011-12 2010-11 2009-10 2008-09 2007-08 2006-07
34 Towns
Water Supply 300.2 102.0 476.4 432.8 608.9 276.1
Sewerage 272.0 134.5 95.5 98.8 54.7 11.1
Four Investment Program Towns
Water Supply 31.9 0.0 0.9 0.9 0.9 0.9
Sewerage 30.7 30.7 30.7 32.6 0.8 0.8
NA – Not Available
Source: Data provided by ULBs
Table 26: UWSS Operation & Maintenance (OPEX)
2011-12 2010-11 2009-10 2008-09 2007-08 2006-07
Four Investment Program Towns
Water Supply 143.5 146.2 112.9 74.6 50.0 na
Sewerage 0.0 0.0 0.0 0.0 0.0 0.0
Na – Not available
Source: Data provided by KUWSDB, KUIDFC, ULBs
226. The Urban Development Department‟s (UDD) budget depends on the allocation it receives
from the State and is not reflective of the actual investment needs of the ULBs.
227. ULBs plan their investment schemes, as well as for operation and maintenance, and send
their request for funds to the UDD.
228. Investment data for past ten years has been collected from the thirty four towns and
presented in below for water supply and sewerage.
229. KUIDFC is the executing agency for all the externally aided projects, ongoing and planned,
under ADB assisted NKUSIP and World Bank assisted KMRP.
230. KUSWDB carries out construction of water supply, sewerage and drainage systems on behalf
of ULBs and receives money from ULBs.
231. Tables of investment data shows a pattern that investment in urban infrastructure
development has mostly happened from 2005-06 onwards. ULBs depend on the funds from UDD
for carrying out capital investment schemes as their own revenues are inadequate to meet even
the operational expenses. Capital schemes have lagged behind due to restricted fund allocation
from the UDD whose budget is once again is decided by the allocation at GoK level.
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Table 27: Investment in Sub-Basin 2002-2011
12.2 State Fiscal
232. The 2011-12 state budget had the advantage of general economic recovery particularly in the
service sector, which significantly guides the overall growth of the State‟s economy. The State has
maintained revenue surplus throughout the eleventh plan period although the revenue surplus
has declined from the high of 1.4% of the GSDP during the year 2007-08 to around 0.3% in 2011-
12.
233. Over the last few years, the fiscal deficit has been maintained within 3% of GSDP as
mandated by the KFRA except in 2009-10 when it was 3.2%, as a result of additional expenditure
for economic stimulation as prompted by the Government of India.
12.3 Revenues
234. The State‟s revenue resources are showing signs of recovery. Revenue receipts, as a
percentage of GSDP, are expected to increase to 15.27% in 2011-12 from 14.5% in 2010-11. The
State‟s tax revenues increased from Rs.259,870 million in 2007-08 to Rs 438,170million during
2011-12, at a CAGR of 14.0%. Summarized table of GoK financial performance is given below.
Name of the Town Project 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Water Supply
1 Thirthali PWSS 5.0 9.6 5.6
2 Davengere UWSS and
UIDSSMT
0.9 0.9 0.9 0.9 31.9
ADB
3 Bhadravati UWSS 35.8 4.8 18.4
4 Shimoga UWSS 33.6 49.3 83.1 133.5 20.0 84.7
5 Sringeri UWSS
6 Shikaripura UWSS 0.0 43.1 104.4 -60.2 39.3
7 Hangal UWSS 46.6
8 Narasimharajapura AUWSP 15.5 20.1 15.2
9 Harihara
10 Ranebennur ADB
11 Gadag Betageri ADB
12 Hoovina-Hadagali PWSS 2.1
13 Lakshmeshwara
14 Honnali PWSS 8.8 2.4 12.8 0.0
15 Shiggaon UIDSSMT 5.8 38.4 38.4 38.4 38.4
16 Savanur
17 Tarikere PWSS 1.1
18 Kadur UWSS 0.0
19 Byadagi UWSS
20 Birur UIDSSMT 3.4 3.4
21 Bankapur
22 Channagiri PWSS 0.1
23 Mulagnada
24 Shirahatti UIDSSMT 6.5 63.3 63.3 63.3 63.3
25 Jagalur AUWSS 135.0 4.4 8.7 3.9
26 Holalkere AUWSS 31.8 14.7 30.4
27 Shiralkoppa AUWSS / PWSS 31.7 12.7 10.3 5.3
28 Soraba
29 Haveri ADB
30 Hirekerur UIDSSMT 4.0 4.0 38.4 38.4 38.4 38.4
31 Chitradurga UWSS 423.3 65.5 50.0
32 Harapanahalli 2.1 0.4
33 Sagar UWSS 3.5
34 Koppa PWSS 0.1 4.7
Total 0.0 0.0 0.0 0.0 276.1 608.9 432.8 476.4 102.0 300.2
Four towns total 0.9 0.9 0.9 0.9 0.0 31.9
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Table 28: State Budget
Particulars 2011-12
(BE)
2010-11
(RE) 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04
Revenue Account
1. Tax Revenues 438,171 380,487 305,786 276,456 259,867 233,008 186,313 160,721 125,701
2. Non Tax
revenues 36,748 35,195 33,338 31,590 33,577 40,984 38,747 44,723 29,584
3. State's own
revenues (1+2) 474,919 415,682 339,124 308,046 293,444 273,992 225,060 205,444 155,285
4. Transfer of
central taxes 104,190 93,101 73,600 71,539 67,793 53,746 42,137 38,787 32,448
5. Grants from
centre 84,024 69,063 78,833 53,323 50,275 48,132 36,324 21,466 19,866
6. Total transfer
from centre (4+5) 188,214 162,164 152,433 124,862 118,068 101,878 78,461 60,253 52,314
7. Total revenue
receipts (3+6) 663,133 577,846 491,557 432,908 411,512 375,870 303,521 265,697 207,599
Growth (%) 14.8% 17.6% 13.5% 5.2% 9.5% 23.8% 14.2% 28.0%
Revenue
Expenditure
1. Social Services 248,788 230,341 191,189 158,730 131,237 109,367 88,988 77,228 69,650
2. Economic
Services 172,995 158,564 131,817 111,366 114,533 104,402 79,473 65,105 46,517
3. General Services 185,129 146,136 127,623 122,756 108,718 104,194 100,358 99,002 90,391
4. Grants in Aid and
Contribution 43,434 26,851 24,740 23,741 19,260 16,391 11,590 7,983 6,289
5. Total Revenue
Expenditure 650,346 561,892 475,369 416,593 373,748 334,354 280,409 249,318 212,847
Capital Account
1. Loans from Gov
of India 17,388 15,387 6,809 5,962 8,060 6,545 6,687 15,558 19,570
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Particulars 2011-12
(BE)
2010-11
(RE) 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04
2. Other Loans 128,495 118,486 117,064 86,323 51,716 57,303 36,092 59,011 62,519
3. Recoveries of
loans and advances 617 1,595 5,554 567 521 600 1,236 469 643
Total Capital
Receipts 146,500 135,468 129,427 92,852 60,297 64,448 44,015 75,038 82,732
Capital
Expenditure
1. Capital outlay 117,544 118,174 120,669 96,892 84,032 85,426 58,219 46,737 30,294
2. Repayment of
Central Loans 5,905 5,349 4,705 4,614 4,486 7,370 4,175 34,076 31,610
3. Repayment of
Market Loans 12,214 9,563 7,918 4,830 3,396 7,798 1,441 4,393 6,044
4. Disbursement of
loans & advances 20,679 16,374 9,816 7,313 7,567 3,572 2,996 6,114 10,112
Total Capital
Expenditure 156,342 149,460 143,108 113,649 99,481 104,166 66,831 91,320 78,060
Revenue Deficit (-) /
Surplus (+) 12,787 15,954 16,188 16,315 37,764 41,516 23,112 16,379 (5,248)
Fiscal deficit (-) /
Surplus (+) 2,945 1,962 2,507 (4,482) (1,420) 1,798 296 97 (576)
Revenue deficit as
a % of Revenue
Receipts
1.9% 2.8% 3.3% 3.8% 9.2% 11.0% 7.6% 6.2% -2.5%
Fiscal deficit as a %
of GSDP 0.1% 0.1% 0.1% -0.2% -0.1% 0.1% 0.0% 0.0% 0.0%
GSDP 2,979,640 2,799,320 2,571,250 2,444,210 2,282,020 2,026,600 1,842,770 1,667,470 1,309,900
Source: Department of Finance, GoK
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12.4 Debt Position
235. The standard criteria for determining the debt sustainability of the States are acceptable level
of the debt-GSDP ratio, and the ratio of interest payment to total revenue receipts.
236. Twelfth Finance Commission recommended 28% and 15% as the acceptable levels of debt-
GSDP ratio and ratio of interest payments to total revenue receipts respectively. The debt position
of the State during the last five years is shown below.
Table 29: State Debt Position
Composition of Debt Stock of the Government of Karnataka Rs. Million
Year Market
Loan
Institutional
Loans
including
NSSF loans
Central
Loans
State
Provident
Fund
Total
Debt
stock as
a % of
GSDP
2007-08 2,875 7,226 8,060 41,616 59,776 2.62%
2008-09 65,834 5,791 5,962 14,698 92,286 3.78%
2009-10 49,538 13,101 6,809 54,426 123,874 4.82%
2010-11 10,282 36,050 15,387 72,154 133,872 4.78%
2011-12 81,998 27,650 17,388 18,848 145,883 4.90%
Source: Economic Survey 2011-12, GoK
237. The position of interest payment to total revenue receipts in terms of percentage is indicated
in the table below.
Table 30: State Interest Payments
Year Total Revenue Receipts
Interest Payment
Interest Payment to Revenue Receipts (%)
2007-08 411,512 45,058 10.9%
2008-09 432,908 45,320 10.5%
2009-10 491,557 52,129 10.6%
2010-11 577,846 55,424 9.6%
2011-12 663,133 69,500 10.5% Source: Department of Finance, GoK
12.5 Transfer Mechanism
238. UDD allots funds to ULBs based on approved budgets in respect of Plan and Non-Plan
expenditure heads. Under Plan allotments money for roads, drains, e-governance, land
acquisition, water supply, public welfare, administrative buildings, twelfth finance commission, low
cost sanitation, fixed allowance to ULB‟s representatives, UIDSSMT, JNNURM, IHSDP, SJSRY,
239. Housing Board rehabilitation and detailed project report preparation is provided to ULBs.
240. Under Non-Plan allotments money for matching grants, twelfth finance commission and ULB
salary is provided to ULBs. SFC grants are usually given under three different heads as given
below:
Salary for staff;
Pension contribution;
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Electricity charges, and
Untied grants in creation or replacement of an asset .
12.6 ULB Revenue Sources:
241. Following are the revenue sources of ULBs:
Property Tax
Rental income from municipal properties;
License fees;
Fees and charges under municipal act and rules; and
Others
242. At present, monthly water charges are levied per connection. GoK order of 20th July 2011
enables the ULBs to levy water charges on volumetric basis – see Table below. The Order
enables a levy for sewerage services, as well. In addition, revenues from house tax, rental
income, etc. are used to meet the cost of urban services like sanitation, drainage and other non-
revenue generating activities of ULBs.
Table 31: Water Service Charges
Consumer Category
Volumetric Tariff for metered connections per month
Tariff Slab Tariff Rate Minimum Charges (Rs.)
Minimum KL
Maximum KL
Rs. / KL
Domestic Consumer
0 8 7.00 56
8 15 9.00 56
15 25 11.00 56
Above 25 13.00 56
Non Domestic
0 8 14.00 112
8 15 18.00 112
15 25 22.00 112
Above 25 26.00 112 Source: GoK Order of 20
th July 2011
243. Own income to total revenue comprised only 22.7%, with the balance of 77.3% being
government grants received from UDD, GoK, on average across the thirty-four towns. Revenue
expenditure in ULBs is very high at 241% of the own revenue income, on average. This is quite
high and implies that ULBs are dependent on GoK and other grants for meeting its operational
expenses.
244. Summary of revenue account for the year as indicated in the thirty-four towns is given below.
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Table 32: Revenue Account for ULBs in Sub-Basin
Summary of revenue account - 34 towns
Rs. Million
Revenue Income
Cities /Towns Year
Income
from
Taxes
Non Tax
Income
Total Own
Revenue
Income
Government
Grants
Other
Income
Total
Income
Revenue
Expenditure
Revenue
Surplus /
(Deficit)
Davengere 2009-10 52.2 45.7 97.9 357.3 1.9 457.1 261.2 195.9
Thirthalli 2009-10 2.8 3.8 6.6 28.5 0.3 35.4 15 20.4
Bhadravati 2010-11 12.8 18.5 31.3 128 0.3 159.6 122.9 36.7
Shimoga 2009-10 62.3 83.1 145.4 315.5 9.8 470.7 203.5 267.2
Sringeri 2010-11 0.8 2.6 3.4 15.8 0.2 19.4 8.5 10.9
Shikaripura 2009-10 2.8 9.6 12.4 45.7 0.9 59 30.1 28.9
Hangal 2010-11 1.2 5.7 6.9 38.6 0.1 45.6 25.9 19.7
Narasimharajapura 2010-11 0.7 1.7 2.4 7.2 0.2 9.8 6.4 3.4
Harihara 2011-12 7.3 12.5 19.8 82.3 1.4 103.5 70.4 33.1
Ranebennur 2010-11 13.80 66.5 80.3 91.2 0.9 172.4 68.8 103.6
Gadag Betageri 2009-10 15 23.2 38.2 177.5 0.8 216.5 146.8 69.7
Hoovina-Hadagali 2010-11 2.8 4.3 7.1 27.9 0.6 35.6 16.3 19.3
Lakshmeshwara 2010-11 3.3 7.9 11.2 16.4 1.6 29.2 26.3 2.9
Honnali 2009-10 1.4 4.8 6.2 7.2 0 13.4 14 -0.6
Shiggaon 2010-11 1.9 4.4 6.3 35.2 0.8 42.3 24.5 17.8
Savanur 2008-09 1.3 3 4.3 34.1 0.3 38.7 28.7 10
Tarikere 2010-11 3.1 7.8 10.9 40.6 0.1 51.6 39.4 12.2
Kadur 2008-09 1.8 4.2 6 33.7 0.7 40.4 20.7 19.7
Byadagi 2010-11 3.7 4.9 8.6 21.7 5.8 36.1 33.2 2.9
Birur 2010-11 1.7 5 6.7 37.9 0.4 45 33.3 11.7
Bankapur 2010-11 0.5 2.2 2.7 27.9 0.1 30.7 35.2 -4.5
Channagiri 2009-10 0.7 5 5.7 34.3 0.3 40.3 40.3 0
Mulagnada 2010-11 0.9 2.5 3.4 23.8 0.5 27.7 20 7.7
Shirahatti 2010-11 0 0.7 0.7 36.1 0.2 37 11.6 25.4
Jagalur 2009-10 1.2 3.2 4.4 28.3 0.1 32.8 15.7 17.1
Holalkere 2009-10 1 2.2 3.2 32.8 0.2 36.2 17.6 18.6
Shiralkoppa 2009-10 0.8 2.7 3.5 22.7 0 26.2 12.4 13.8
Soraba 2010-11 0.8 2.1 2.9 37.4 0.3 40.6 9.6 31
Haveri 2010-11 8.5 15.8 24.3 206.4 3.1 233.8 71.4 162.4
Hirekerur 2009-10 1.7 4.7 6.4 28.7 0.2 35.3 18.3 17
Chitradurga 2009-10 22.3 25 47.3 199.7 2.1 249.1 111.2 137.9
Harapanahalli 2010-11 3.5 5.3 8.8 25.7 0.2 34.7 53 -18.3
Sagar 2007-08 6.2 14.2 20.4 57 1 78.4 26.8 51.6
Koppa 2010-11 0.04 1.4 1.44 17.7 0.6 19.74 10.2 9.54
Source: Data from ULBs
245. There are multiple factors contributing to the inability of ULBs to raise their operational
revenues. Enabling provisions are prevalent in the Municipal Act. Poor financial management is
another reason.
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246. Collection efficiency is quite low – an average of 66% across the thirty-four sub-basin towns
of Karnataka. The collection efficiency of property tax and water charges across the same thirty-
four towns is given below.
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Table 33: Collection Efficiency
Collection Efficiency Year Property Tax Water
Cities /Towns Demand Collection Efficiency Demand Collection Efficiency
Rs.Million % Rs.Million %
Davengere 2011-12 109.8 94.8 86.3% 23.8 19.5 81.9%
Harihar 2011-12 13.3 8.3 62.4% 9.9 5 50.5%
Ranebennur 2011-12 29.3 22.8 77.8% 24.9 12.6 50.6%
Byadgi 2011-12 3.3 3.2 97.0% 2.7 2.1 77.8%
Thirthalli 2009-10
97.2%
84.8%
Bhadravati 2010-11
66.4%
32.0%
Shimoga 2009-10
NA
NA
Sringeri 2010-11
65.8%
87.6%
Shikaripura 2009-10
37.0%
44.0%
Hangal 2010-11
61.3%
60.8%
Narasimharajapura
NA
NA
Gadag Betageri 2009-10 23.8 22 92.4%
58.3%
Hoovina-Hadagali
90.5%
NA
Lakshmeshwara
NA
NA
Honnali
NA
NA
Shiggaon 2010-11
15.2%
NA
Savanur 2008-09
20.0%
11.0%
Tarikere
NA
NA
Kadur 2008-09
85.0%
87.3%
Birur
NA
NA
Bankapur 2010-11 20.3 12.3 60.6% 3.5 2.2 62.9%
Channagiri
NA
NA
Mulagnada 2010-11
58.5%
NA
Shirahatti
NA
NA
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Collection Efficiency Year Property Tax Water
Cities /Towns Demand Collection Efficiency Demand Collection Efficiency
Rs.Million % Rs.Million %
Jagalur 2009-10
45.4%
27.4%
Holalkere
NA
NA
Shiralkoppa
NA
NA
Soraba 2007-08
63.0%
57.4%
Haveri 2010-11
80.8%
58.6%
Hirekerur 2009-10
69.2%
89.7%
Chitradurga 2009-10 60.3 37.3 61.9% 23 17.3 75.2%
Harapanahalli
NA
NA
Sagar 2007-08
61.5%
52.5%
Koppa
NA
NA
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247. The current activities and progress in mobilizing more revenue is shown in Table below.
Table 34: Current Initiatives to Increase UBL Revenue
What are
the
Activities
What are the
intended
outputs of the
activities?
What is the current
progress against the
intended output?
Why do ULBs have to
undertake the
activities? MOU,
government order, law?
Collection
Improvement
Improving
collection
efficiency to 85
of demand.
Present collection efficiency
is averaging around 66% Implementation of the
financial and property tax
reforms as part of
JnNURM/ UIDSSMT/ 13th
Finance Commission
covenants
Augment
own
revenues
Introduce new
user charge /
Increase
existing tax rate
Action at ULB level
12.7 Institutional Road Map Proposals
248. Our “Road Map” proposals, based upon our own findings and upon past lessons learnt in
India, includes the need for:
Ownership of and commitment to projects by ULBs through the adoption of a “bottom-up”
approach to project initiation;
Public awareness campaigns to educate people on the benefits of centralised water supply
and wastewater collection i.e. to promote a “willingness” to pay connection charges,
supported by “customer friendly” financial assistance with the connection charges;
Water tariffs to be commensurate with customer service levels, and the reasons for tariff
increases to be clearly explained to customers who should have the option to decide,
collectively, upon service level14
and thus charges;
Sector coordination at state and local level;
Establishment of District based SPVs for service delivery or, within the larger ULBs, a distinct
water and wastewater department with staff devoted only to the sector and with ring-fenced
accounting;
Development a professional capability among ULB managerial, financial and technical staff;
Introduce means and procedures for performance and asset history data as a first step
towards fuller PPP, and
A 5yr O&M phase to be included into treatment plant works contracts to assist building of an
O&M capability in the ULBs.
249. Concerning the need for ownership of projects by ULBs, ULBs including mayors, councillors,
and ward members should be fully involved at the early stage of project initiation and formulation
and be kept fully informed during the asset creation process.
250. Customer databases need to be updated and retained as current in order to ensure that all
customers receive a water service bill, and that the ULB receives all the income to which it is
entitled. Insufficient data existed in the sub-project towns to make an assessment of these
“commercial”15
losses. From our experience, figure between 10% and 20% of water into supply is
feasible.
14
During the sub-project household survey, a continuous supply was not seen as essential to many people. 15
“Commercial losses” includes unknown customers, meter errors and errors due to estimating consumption where there are no meters or the meters are inoperable.
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13 SUMMARY OF INVESTMENT PROGRAMME
13.1 Investment Objectives
251. Objectives for the succeeding investments require to be focused upon the issues facing the
sector, that is to:
Provide for full and continuous water supply within the urban areas;
Provide for wastewater collection, where the number of people willing to connect to a sewer
make the sewer economically viable;
Treat wastewater collected to Indian standards for discharge to a water course, and
Reduce NRW to economic levels, and
To promote the commercial re-use of wastewater.
252. In order to meet the objectives, the investments are to provide for:
Augmentation of existing potable water treatment capacity to provide adequate capacity for
the foreseeable future;
Rehabilitation of existing water treatment facilities to improve the efficiency and reliability of
the existing plants;
Construction of strategic transmission networks and water storage facilities to be able to
transfer the water from the treatment works, and to store adequate quantities to (i) meet
customer peak demands and (ii) safeguard against supply failure;
Expansion of the distribution network to cater for increased development of the towns and for
increased customer per capita demand, which is assumed as 135litres per had per day in
accordance with Indian standards;
Rehabilitation of the existing water distribution network to ensure its continued availability for
service provision;
Formalising any unregulated connections and making new within the developing areas;
Installing customer revenue meters to enable service charges to be volume based;
Laying of new sewers to connect properties where financially viable;
Construction of new wastewater treatment plants and/or rehabilitation of the existing to match
volumes of “water into supply” with wastewater treatment capacity, and
Miscellaneous associated works such as provision of SCADA, stand-by generators and
laboratory facilities.
13.2 Physical Investments in Each Sub-Sector
253. Summary of physical investment cost required for roadmap implementation is given in the
following tables in million Indian rupees and United States dollar.
254. The investment shown is basis on the investment cost as estimated for water supply in 213
towns in the City Level Investment Plan (CLIPs), duly adjusted for cost escalation.
255. In respect of the four investment program towns, the physical investment cost as estimated by
the PPTA consultant has been considered.
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Table 35: Physical Investment Cost - Road Map Implementation (Rs.M)
Sector Total
State
34 Towns Tranche-1 Subject
Towns
Amount % to total Amount % to total
Water Supply 60,150 11,642 19.4 5,933 9.9
Sewerage 46,421 7,624 16.4 2,115 4.6
Total 106,571 19,267 18.1 8,047 7.6
Note: Base costs only - does not include contingencies
Table 36: Physical Investment Cost - Road Map Implementation ($.M)
Sector Total
State
34 Towns Tranche-1 Subject
Towns
Amount % to total Amount % to total
Water Supply 1,094 212 19.4 108 9.9
Sewerage 844 139 16.4 38 4.6
Total 1,938 350 18.1 146 7.6
Note: 1) Base costs only - does not include contingencies, 2) 1 U S Dollar =55
256. The required investments for the 34 ULBs in the pilot sub-basin of $244m for water and $160
for wastewater compares with the $270m and $165m derived from the four subject ULB
Feasibility Studies, if a 15% contingency is added to the above figures.
257. The difference for the water sector investment - $244m to $270m – is probably due to the
large investment proposed now for the rehabilitation of the water networks in the towns.
13.3 Sources of Financing
258. We have analysed capital investment programming data to assess the total investment
requirement across the state. The task has been made difficult by the project management
systems used. Perhaps the information is available and the wrong questions asked, but we have
been unable to ascertain current expenditure on projects against the original budgets. Further, the
basis for the forecasting of the total investment is the CLIPs which are not to a common time base
and have not been systematically updated.
259. For active projects where there has been disbursement of funds, there would appear to be no
direct correlation of the disbursement and the CLIP. The analysis has been complicated by the
different funding agencies and that the funds have been disbursed through the KUIDFC, the
KUWS&DB and by the ULBs.
260. We also understand that the contract scopes change depending upon the prices received,
and so the investment might not always relate to the original proposal.
261. The following assessments are the best possible that we have been able to achieve within
these constraints.
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Table 37: Source of Financing - State Requirement - RsM
Sector Total
Centrally
Sponsored
Schemes
State
Plan
WB / ADB
Investment
Program
Balance funds
source to be
identified
Water
Supply 60,150 4,181 22,728
16 12,246
17 20,995
Sewerage 46,421 781 24,85118
12,85219
7,937
Total 106,571 4,962 47,579 25,098 28,932
Source: KUWSDB, KUIDFC, GoK and consultant estimate`
Table 38: Source of Financing - State Requirement - $M
Sector Total
Centrally
Sponsored
Schemes
State Plan
WB / ADB
Investment
Program
Balance funds
source to be
identified
Water
Supply 1,094 76 413 223 382
Sewerage 844 14 452 234 144
Total 1,938 90 865 456 526
Note: 1) Base costs only - does not include contingencies 2) 1 U S $ = 55
Source: KUWSDB, KUIDFC, GoK and consultant estimate
Table 39: Source of Financing – Sub-Basin Requirement - RsM
Sector Total
Centrally
Sponsored
Schemes
State Plan
WB / ADB
Investment
Program
Balance funds
source to be
identified
Water Supply 11,642 988 4,367 3,126 3,161
Sewerage 7,624 165 3,561 2,698 1,200
Total 19,267 1,153 7,928 5,824 4,361
Source: KUWSDB, KUIDFC, GoK and consultant estimate
16
Out of this expenditure till 31st
March 2012 is Rs. 10,146 million. 17
Includes ADB assisted KUDCEMP – Rs. 2,897 million, ADB assisted NKUSIP – Rs. 5,262, proposed ADB assisted KISWRMIP – Rs. 2,271 Million, World Bank assisted KWASIP – Rs. 1,192 million and World Bank assisted KMRP – Rs. 158 Million 18
Out of this expenditure till 31st
March 2012 is Rs. 4,427 million. 19
Includes ADB assisted KUDCEMP – Rs. 3,227 million, ADB assisted NKUSIP – Rs. 7,431, proposed ADB assisted KISWRMIP – Rs. 1,090 Million, World Bank assisted KMRP – Rs. 1,104 Million
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Table 40: Source of Financing – Sub Basin Requirement - $M
Sector Total
Centrally
Sponsored
Schemes
State Plan
WB / ADB
Investment
Program
Balance funds
source to be
identified
Water Supply 212 18 79 57 57
Sewerage 139 3 65 49 22
Total 350 21 144 106 79
Note: 1) Base costs only - does not include contingencies
2) 1 U S $ = ` 55
Source: KUWSDB, KUIDFC, GoK and consultant estimate
Table 41: Source of Financing –Tranche-1 Towns - RsM
Sector Total
Centrally
Sponsored
Schemes
State Plan
WB / ADB
Investment
Program
Balance funds
source to be
identified
Water Supply 5,933 36 0 2,514 3,383
Sewerage 2,115 34 52 1,955 75
Total 8,047 70 52 4,469 3,459
Source: KUWSDB, KUIDFC, GoK and consultant estimate
Table 42: Source of Financing – Tranche-1 Towns - $M
Sector Total
Centrally
Sponsored
Schemes
State Plan
WB / ADB
Investment
Program
Balance funds
source to be
identified
Water Supply 108 1 0 46 62
Sewerage 38 1 1 36 1
Total 146 1 1 81 63
Note: 1) Base costs only - does not include contingencies
2) 1 U S $ = ` 55
Source: KUWSDB
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14 SUB-PROJECT SELECTION CRITERIA
14.1 Prioritisation of Investments
262. There is a clear need to prioritise investments both between ULBs and between water and
wastewater service provision. In line with the principles of IWRM, we recommend that priority be
given to providing a wastewater service in those towns which most seriously contaminate the
main rivers, i.e. those on the banks of the rivers.
263. Generally, as water supply issues are associated as much with physical losses as inadequate
treatment capacity, whilst adequacy of capacity must be provided, the emphasis should be upon
reduction of physical losses through performance based NRW-reduction contracts and mains
replacement/rehabilitation.
264. In proposing selection criteria for Tranch-2 and subsequent investments, criteria such as
those based upon current service levels; the benefits to be derived and the cost/beneficiary can
be proposed. Such criteria can be hard to evaluate without adequate data and are always open to
debate and influence.
265. The investments chosen this way are also top down; not necessarily customer or ULB driven
which is a requirement of IWRM.
14.2 Overall Approach
266. The KUIDFC Executing Agency will determine eligibility of a subproject for MFF based on
the various technical, financial and economic criteria, taking due regard of the above prioritisation
process and provided that the subject ULB has itself shown a willingness to share the
responsibility to improve the supply to customers.
267. By consultative agreement with stakeholders and funders, a subproject may be financed on
a stand-alone basis, and/or in parallel to other financing sources provided that ADB‟s guidelines,
and safeguard policies are fully met.
268. When the EA confirms eligibility, the IA will assess subproject feasibility in a form of a
subproject appraisal report to demonstrate compliance against the subproject selection criteria
listed below.
269. A function of the proposed IWRM Project Management Unit will be to assist ULBs to make
application for sub-project investment funding.
14.2.1 Technical Criteria
270. Prior to agreement for investment the following technical criteria are to be demonstrated, the
sub-project will:
Achieve the customer determined service level standards;
Be designed in accordance with Indian Standards and technical Codes of Practice;
Adopt accepted best international practice appropriate for Karnataka, and incorporate least
cost optioneering based upon a “whole life cost” financial analysis;
First rehabilitate the existing usable assets to achieve optimum utilization, and then create
new assets, and
Be gender neutral and take into consideration disadvantaged peoples.
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271. The town local body will have identified all lands, visually confirmed the locations, and
verified the ownership in writing. Further, the land owner is ready to have the land transferred.
272. In addition, for a water supply subproject, there is known raw water availability with
minimum of 30 years of sustainability.
14.2.2 Financial Criteria
273. The subproject will support:
Design and implementation of user charges which have special consideration to vulnerable
and/or women-headed households;
Creation of service specific accounts following the accrual-based double entry accounting
system;
Preparation of water sector service specific financial management, budgeting and monitoring
statements;
274. Further:
A financial projection of the service operations will have been prepared for 25 years;
Service user charges proposed which will fully recover the O&M expenditure of the both
existing and new assets, and accumulate internal reserves for asset rehabilitation and
replacement, and
The ULB IA, as the asset owner, will have adequate financial management capacity.
14.2.3 Economic Criteria
275. The following economic criteria will be met:
The result of a willingness-to-pay survey shows a willingness to pay what amount of user
charges;
An affordability analysis shows that the sum of user charges for water supply and wastewater
service provision is below the affordability limit;
The rationale of the subproject is the failure of either (a) market to adequately provide what
society wants, or (b) public institutions to deliver public goods or services, and
The subproject demonstrates an economic internal rate of returns at a value higher than the
economic opportunity cost of capital, with sensitivity analysis.
14.2.4 Social and Environmental Criteria
276. The sub-project submission shall show that:
The subproject follows social and environmental selection guidelines in an Environmental
Assessment and Review Framework.
The subproject has required safeguard planning documents - environment assessment and
involuntary resettlement - and indigenous peoples plan, following the Environmental
Assessment and Review Framework, the Resettlement Framework and the Indigenous
Peoples Framework;
The subproject‟s outcome, outputs and activities are consistent with the Gender Action Plan,
and
There is a record of consultation and participation with stakeholders during the preparation of
the Feasibility Study, in line with the Consultation and Participation Plan.
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14.2.5 Cost Estimate and Procurement
277. To be compliant, the following shall be demonstrated:
Cost estimates reflect the current market rate, and shows the unit costs, inputs and the
annual distribution of the inputs throughout the implementation period;
There is no provision for a charge to be levied by the IA or other specialized agencies.
The subproject has a procurement plan, and
The subproject will procure works, goods and services, including consultancy services, in
accordance with the ADB‟s then current Procurement Guidelines.
14.3 Sub-Project Approval Procedures
278. The KUIDFC has suggested that the ULBs are to show a willingness to share the
responsibility to improve the supply to customers and that Tranche-2 and subsequent investments
should not be made in a ULB until the ULB has demonstrated improved proficiency through the
adoption of various “self-help” measures.
279. Typical of such measures could be:
Installation of bulk meters on all treatment works outlets and a preliminary water audit;
Metering of transmission mains and leak detection and repair to bring physical losses to the
Indian design criteria of 2%;
Repairs and improvements in treatment works to reduce water used in the treatment process
to the Indian design criteria of 4%;
Bring water service charge collection efficiency to 90%;
Complete a customer household survey to find illegal connections;
Completing a 100% GIS record;
Install measuring devices and conduct an energy audit at all treatment works and pumping
stations;
Fit meters and automatic shut-off valves to all standpipes;
Remedial works at all storage facilities to ensure site security and water quality, and
Set out and publish customer service levels.
280. Lack of funding has been a major deterrent in the allowing the ULBs to deliver the
improvements in service that they wish to deliver. In recognition of this lack of finance, we suggest
that limited monies, $20m suggested, are made available from the Tranche-1 funding to assist
ULBs to implement such as the measures suggested above, initiating the sub-project selection
process within their towns. A limit would be applied on the maximum amount allowable to any
ULB, say $0.5m.
281. The approval process will be a two-stage process:
Demonstration of Willingness;
Concept approval, and
Sub-Project Approval.
14.3.1 Demonstration of Willingness
282. ULBs will be invited to make an application for Preliminary Works Funding to show:
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How the ULB is prepared to be proactive in bringing about improvement;
An outline of the sub-project objectives and deliverables;
The works for which the preliminary investment is required, such as those suggested in
Section 14.3;
Benefits to be derived from the investment with Performance Indicators and milestones, and
Required investment for Preliminary Works with the contribution that the ULB is prepared to
make.
283. If suitable, funding will made available; the Preliminary Works implemented and ULB
performance monitored against proposed Performance Indicators.
284. Alternatively, the “Demonstration of Willingness” can be demonstrated by a ULB without
external Preliminary Works funding.
285. As an interim measure to conform to the KUIDFC proposal, the proposed Tranche-1
investment has been prepared in two Phases:
Phase I - all wastewater work requirements and water supply works necessary to ensure the
availability of water at the strategic reservoirs, and
Phase II – additional works required to provide for a continuous supply of water to be
provided after the ULB has demonstrated improved proficiency.
14.3.2 Concept Approval
286. Once a ULB has demonstrated a willingness to itself improve the sector service, with or
without Preliminary Works funding, a PIU established in the town will prepare a water sector
Master Plan and a Sub-project Concept Paper.
287. The Concept Paper will be brief and contain:
The baseline and targets for the intended improvement in service provision, operational
performance and efficiency and environmental issues.
Reasons for current non-compliance and consequences, with targets and outline remedial
measures;
CAPEX and OPEX estimates;
Initial assessment on Safeguard requirements;
An indicative per capita cost of operations, and
Proposed tariff adjustments.
288. The PIU will have extensive consultation with the stakeholders and will add the summary
minutes of each consultation meeting in the Concept Paper.
289. The PIU will submit the Concept Paper to the KUIDFC for approval; the KUIDFC will forward
to the ADB in order to assess the proposed sub-project based on ADB‟s operational and
safeguard policies.
290. Upon receipt of a positive feedback from the ADB, the PMU will submit the Concept Paper to
the KISWRIP Steering Committee for “in-principle” approval of the sub-project.
14.3.3 Subproject Approval Procedure.
291. When the Steering Committee has approved the Concept Paper, the PIU will engage a
consultant to prepare, or prepare itself, a sub-project Feasibility Study, and present the Study to
the PMU.
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292. The Feasibility Study will be based on quantitative data, and will include sub-project rationale
and description; assessment of alternative design options; selection of least “whole-life-cost”
design; project CAPEX and OPEX estimates; implementation arrangements; O&M and
Procurement Plans; financial and economic analysis, and Safeguards assessment. Any
requirement for capacity building and institutional strengthening shall be discussed.
293. The PMU will appraise the sub-project, in the light of ADB‟s operational and safeguards
policies, together with ADB‟s relevant guidelines and handbooks. If the PMU concludes that the
sub-project fully meets ADB‟s operational and safeguards policies, it will endorse the Study and
submit it to ADB. ADB may request for site visits and PMU‟s clarifications or may ask for
reconsideration of the sub-project design and analysis.
294. The PIU and PMU will improve the Feasibility Study based on the ADB‟s recommendations,
and will submit to the ULB for council concurrence. Once concurred, the PMU will seek approval
from the Steering Committee.
14.4 Penalties
295. After receipt of a grant, should a ULB fail to deliver the required service improvements against
determined Performance Indicators, the KUIDFC will convert progressively the grant to a loan,
upon which interest payments will be due. The interest payments being, effectively, a fine for non-
performance.
296. In the absence of a regulatory regime for utility service delivery, a third party – e.g. the
KUWS&DB - could act as the Technical Auditor for ULB performance, or the KUIDFC could
appoint external consultants.
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15 IMPLEMENTATION PLAN
15.1 Tranche-1 Investment
297. Work subsequent to the submission of the Final Report for Tranche-1 investment
comprises:
Group Activity By Whom Duration
Draft Final Report
Review and comment
GoK, KUIDFC and other
stakeholders
ADB
1 month
Incorporate into Final Report PPTA Phase I 1 month
Loan
ADB Fact Finding Mission ADB with local
stakeholders 2 months
Agree and finalise loan terms GoI, GoK and ADB 3 months
IWRM Project
Management Unit Established and staff appointed KUIDFC 6 months
PMU & PIUs Establish or develop existing KUIDFC 1 month
Works &
Supervision
contracts
Draft contract for Design &
Supervisory consultants,
including for DPR preparation KUIDFC with ADB support
through PPTA Phase II
1 months
Appoint consultants 4 months
Prepare DPRs and Works
Contracts Consultants to KUIDFC 6 months
Appoint Works contractors
Consortium of Tranche-1
ULBs advised by
KUIDFC/PPTA Phase II
4 months
Sector
Reorganisation
Establish Drinking Water
Supply Mission and Water
Council Sector stakeholders led by
Department for Urban
Development/KUIDFC
On going
Establish SPVs and separate
UWSS departments in ULBs
15.2 Tranche-2 and Subsequent Investment
298. Upon the establishment of the KUIDFC PMU and the IWRM project Management Unit, the
implementation process for the Tranche-1 and subsequent investments can commence.
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15.3 Implementation Entities
299. The following Committees, Agencies and entities are proposed.
15.3.1 Steering Committee
300. The established IWRMP Steering Committee whose members include Additional Chief
Secretary (Committee Chair), MD of KUIDFC (Committee Secretary), Principal Secretary of the
Urban Development Department, Principal Secretary of Planning Department, Secretary for
municipalities and urban development authorities of Urban Development Department, secretary
for expenditure of the finance department and director of Directorate of Municipal Administration,
will continue.
15.3.2 Executing Agency
301. The KUIDFC will continue as the nodal executing agency (EA) responsible for implementing
NKUSIP. Investment Programme implementation activities will be monitored by KUIDFC through
a separate Programme Management Unit (PMU), which will be set-up within KUIDFC. The
Managing Director of the KUIDFC will head the PMU and will be assisted by an Executive Director
at the Regional office of KUIDFC at Dharwad to oversee the Investment Program progress.
302. A team of senior technical, administrative and financial officials will assist the Executive
Director in controlling and monitoring Investment Program implementation activities.
303. We suggest that the Executive Director be supported by a new Divisional Office established
at Davangere. The consultant team will be under the Divisional Programme Director and will be
involved in project planning, preparation of subproject and cost estimates, co-ordination, technical
guidance and supervision, financial control, training and overall subproject management.
304. All Investment Program decisions will be made by the Executive Director who shall operate
from the PMU, Dharwad; only interactions with GoK, GoI and ADB shall be conducted through the
KUIDFC office at Bangalore.
305. As previously discussed, an IWRM Project Management Unit is proposed to assist in the
execution of the Programme, including for the selection of Tranche-2 and subsequent towns.
15.3.3 Implementing Agency
306. Implementation Agencies (IA) in each of the Tranche-1 ULBs will oversee sub-project
component implementation at the sub-project towns, where the Investment Program ULB will
implement sub-project components.
307. A Programme Implementation Unit (PIU) is to be established in each ULB unless one or
more of the ULBs decide to form a single PIU.
308. Other than the above institutional setup, District Level Programme Steering Committee will
be set up in each district to monitor implementation of subprojects and institutional reforms. The
District Level Programme Steering Committee shall consist of Deputy Commissioner of District,
Divisional Program Director from concerned divisional office, Municipal Commissioners‟ / Chief
Officers of Investment programme ULB and President / Chair of investment programme ULB.
The District Level Programme Steering Committee will report to the PMU Executive Director:
Dharwad.
15.3.4 Consultancy Services Committee
309. The KUIDFC will set up a Consultant Selection Committee to evaluate the request for
consultant services and consultancy contract negotiations etc. The recommendations of
Committee will be submitted to the Steering Committee for approval.
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15.3.5 Tender Evaluation Committee
310. The KUIDFC will set up a Tender Evaluation Committee to evaluate tenders and prapre
evaluation reports for submission to the Steering Committee for approval.
15.4 IWRM Project Management Unit
311. In Section 5.4, we have proposed an IWRM Project Management unit be established in the
KUIDFC to assist with the implementation of the Tranche-1 investments, the selection of Tranche-
2 and subsequent investments, and with the introduction of the proposed SPVs as service
providers.
312. We recommend inclusion of a small team within the IWRM Project Management Unit to
focus on gender and social issues applicable to UWSS service provision.
313. As discussed in the Section, the Unit will comprise full-time KUIDFC employees, contract
employees and, as required, short-term national and international consultants. The main input can
be expected to be in the first five years of the project, then reducing.
314. A suggested scope for the Unit is provided as Annex 2 to “Volume 1: Institutional Road
Map”. An indicative establishment would around 10 people, comprising:
Team leader;
Institutional/Human resource expert;
Water & wastewater operational experts;
Hydraulic and process designers;
NRW reduction experts;
Social and gender experts, and
Economist/financial expert
315. Based upon the above, an indicative cost would be INR14m ($0.25m) per year, or $1.25m
over a four year period.
15.5 Implementation Programme
316. We understand that the Investment Program is for a period of 7 to 8 years and will comprise
of three tranches:
Tranche 1 - four years from 2013 to 2016;
Tranche 2 - four years from 2015 to 2018, and
Tranche 3 - four years from 2017 to 2020
317. Our understanding is that the total investment will be $215million, inclusive, with an ADB
share of $150million; the remainder being from the Government of Karnataka.
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Table 43: Implementation Programme
2012 2013 2014 2015 2016/20
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 2019 2020
Preliminary Activities
Submit Final Report
ADB Fact Finding Mission and Approve
loan etc
Establish PMU and PIUs
Establish IWRM Project Management Unit
Draft contract for Design and Supervision
Contract
Appoint D&S consultant when loan
approved
Implementation Phase
TRANCHE 1 INVESTMENT
Prepare DPRs and works contracts
Appoint contractors
Treatment Plant & Strategic network
construction
2 year construction period
O&M Phase
5yr extended O&M phase
Wastewater networks
2 year construction period
Period in which ULBs meet performance
criteria
Potable water network enhancements and
rehab. Start date dependent upon ULB
meeting performance criteria
2 year construction period.
Tranche-2
TRANCHE-2 INVESTMENTS
ULB Preliminary
Works
Feasibiluty Studies and
Tendering Construction Works
Tranche-3
TRANCHE-3 INVESTMENTS
ULB Preliminary
Works
F Studies &
Tendering
Construction
Works
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16 DESIGN & MONITORING FRAMEWORK
318. A Design and Monitoring Framework matrix is provided below.
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Ref Measuring Items
Units Base-line
Target Values as a result of:
Tranche 1 Investment Road Map
Numerical relationship Davangere Ranebennur Harihar Byadgi Davangere Ranebennur Harihar Byadgi All
Measurement of Impact
1 2 3 4 IP RM
1
Cases of waterborne diseases
in a year – based on
household survey
Cases 33 11 36 13 Around a 50% reduction can be expected
2 Primary sector income in a
year Rs Not recorded on household survey
Measuring of Outcome
As at end of 2017
1
Population with improved
access to water supply (at GoI
Standard) – taken to be a ULB
water supply
people 214,352 65,000 32,500 14,380
100% access to service, but assume 95% water and 80% sewer take-up rate
437,000 99,000 90,000 26,000 652,000 95%
2
Population with improved
access to Sanitation – taken to
be connected to a public
sewer
people 180,507 39,083 27,482 0 368,000 83,000 76,000 10,000 537,000 80%
3 Population with improved
access to SWM people Not applicable to Investment
4
Operating ratio in ULB and
state agencies for service
deliveries
unit 24% 57% 34% 24% Target 90% with tariff increase
5
Frequency of publishing
acceptable audited accounts
on time
unit Annual Annual Annual Annual Annual Annual Annual Annual Annual Annual
6 Planning, designing and
monitoring of urban services
using database
Unit 0 0 0 0 100% 100% 100% 100% 100% 100%
Measuring the outputs
As at end of 2017
7 Number of WTP and/or tube
wells Unit 3 1 1
Bulk
supply 3 1 1 1 6 As required
8
Volume of water production –
measured as “water into
supply” i.e. excluding process
water
Mld 39.2 5.1 4.8 1.3 81.2 15.0 15.0 3.3 114.5 For 135lphd
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Ref Measuring Items
Units Base-line
Target Values as a result of:
Tranche 1 Investment Road Map
Numerical relationship Davangere Ranebennur Harihar Byadgi Davangere Ranebennur Harihar Byadgi All
9 Water supply pipes – as
owned by ULB Km
485 78 55 77 537 151 129 93 910 For 95%
coverage As best able to assess from available data Including rehabilitation of existing
10 Number of households served h/h 42,870 9,282 6,527 3,154 87,473 19,791 18,079 5,128 130,471
11 Level of un/accounted-for
water
% 47% 23% 36% 23% Long-term (2031) target is 16%
12 Increase in the volume of
sewage treatment facilities Mld -- - - - 0 0 0 4.6 4.6
Capacity for
80% coverage
in MFF towns
13 Sewer networks installed Km Current length not accurately known 0 +270 +11 +13 +52 +346
14 Numbers of household
connected to septic
tanks/sewers
h/h 36,101 7,817 5,496 0 73,661 16,666 15,224 2,051 107,602
15 Increase in numbers and
capacity of sanitary landfills Tonnes Not applicable
16 Number of major collection
equipment Unit
Currently plant hired through contractors. Some equipment to be purchased in current on-going projects.
Plant “actually” purchased through current on-going investments to be assessed and requirements assessed in Phase 2 of project 17
Number of transportation
equipment / vehicle Unit
23
Number of household
captured by a sex-
disaggregated GIS database
Unit 0 0 0 0 MFF plan to achieve Indian Utilities target of 7 staff per 1000 connection-utility optimum
25
Number of O&M staff /1000
connections – taken as full
time equivalents as staff not
full time for UWSS
Unit
Negligible
use
Contractors
0.8 2.5 2.7 Long term target to be 1 staff member per 1,000 customers, with an operational to
administrative staff ratio of 5:1.
26 Number of ULB staff trained
on project planning and design Unit 0 0 0 0 15 8 8 5 36 Pro rata
27 Number of ULB staff trained
on project implementation Unit 0 0 0 0 Included in above as Asset Management department
28 Number of ULB staff trained
on O&M staff 0 0 0 0 200 83 83 55 421 Pro rata
29 Water tariff billing rate Rs/Kl Rs.175/M Rs 120/M Rs
120/M
Rs. 80/
M Rs.10/Kl Rs.10/Kl Rs. 7/Kl Rs. 7/Kl -
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Ref Measuring Items
Units Base-line
Target Values as a result of:
Tranche 1 Investment Road Map
Numerical relationship Davangere Ranebennur Harihar Byadgi Davangere Ranebennur Harihar Byadgi All
30 Sewerage tariff billing rate Rs./month
Per hh 0 15 – 60 0 0 60 90 105 120 -
31 Waste management tariff
billing rate Rs/unit Not applicable, currently 0%
32 Property tax billing rates - Self
assessment system in place
% of
Rateable
value
15-20% 15-20% 15-20% 15-20% To be re-assessed for improved service provision
33 Water tariff collection rate % 82 51 50 76 85% 85% 85% 85% 85% 85%
34 Sewerage tariff collection rate % NA NA NA NA 85% 85% 85% 85% 85% 85%
35 Water management tariff
collection rate % Not applicable, currently 0%
36 Property tax collection rate % 86% 78% 62% 99% 85% 85% 85% 85% 85% 85%
40
ULBs implementing accrual
based accounting -
Fund based accounting
system under KMRP
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Assumed “yes”
41 ULB publishing the financial
statement ULB Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
42 Number of PPP project developed &
implemented. Project
Contractors used for minor works such as mains and sewer
repairs, buildings maintenance.
Proposal for ULBs to associate in SPV service provider with PPP Co-Management contract. Various
other PPP specialist contracts e.g. NRW reduction
Figure 6: Design & Monitoring Framework
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17 FINANCIAL MANAGEMENT AND PROCUREMENT CAPACITY
ASSESSMENT
17.1 Introduction
319. Financial Management Assessment (FMA) is an attempt to determine the capacity of the
executing and implementing agencies to effectively manage their financial resources. Such a
capacity is critical for the success of the programme. FMA involves a review of the accounting
system, reporting, auditing, internal controls, cash disbursement and cash flow disbursement
arrangements.
320. The proposed IWRM Project Management Unit, Section 5.2, is concerned with the delivery
of the institutional and technical aspects of the project and, as such, has no involvement with the
loan, its disbursement, or associated financial matters except for the overall improvement of the
ULB financial management.
17.2 Program Management Unit (PMU)
17.2.1 Executing Agency – PMU, KISWRMIP
321. UDD department of the Government of Karnataka looks after the urban development. As for
other ADB assisted and other externally aided projects, the KUIDFC will be the PMU for this
Program.
17.2.1.1 Funds Flow Arrangements
322. Funds received from ADB or any other donor agency will be received through Government
of Karnataka, which in turn will receive funds from Government of India (GoI).
323. The borrower will be State Government and the KUIDFC will house the Programme
Management Unit.
17.2.1.2 Staffing and Organization
324. KUIDFC (PMU) financial functions are under the responsibility of a General Manager
(Finance) who is assisted by support staff. Finance staff is trained inter alia in ADB procedures.
17.2.1.3 Accounting Policies and Procedure
325. KUIDFC (PMU) program accounts are prepared as per the accepted government
accounting standards which are generally compatible with international accounting standards duly
disclosing the generally accepted accounting policies.
326. Important program documents are retained on a permanent basis and are preserved for
several years as per the GoK rules.
17.2.1.4 Segregation of Duties
327. Separate responsibilities for budget, payment, recording, reporting and audit are assigned
to separate groups of officers and staff.
17.2.1.5 Budgeting System
328. KUIDFC (PMU) prepares the budget once in a year according to financial year (April-March)
following an assessment of funds requirement for various activities in terms of physical and
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financial targets. General Manager (Finance) with support of the PIUs prepares the budget for
approval by the Empowered Committee.
329. Actual expenditure is compared with budget on a regular basis. PMU also prepares monthly
financial reports for comparing actual against budget figures and monthly progress reports on
program execution to monitor physical and financial progress of program execution. The budget
variances are reportedly discussed in monthly meetings. A revised budget is prepared whenever
necessary.
17.2.1.6 Payments
330. Invoice-processing and payroll preparation procedures follow the GoK procedures.
17.2.1.7 Policies Procedures
331. Accrual basis, recognizing significant items of income and expenditure following the Indian
Accounting Standard as adapted by the Institute of Chartered Accountants of India will be
adopted for program accounts.
17.2.1.8 Cash at Bank
332. Program Director of PMU is the Authorized signatory of cheque payments.
17.2.1.9 Safeguard over Assets
333. There are adequate safeguard over assets under the GoK rules. Annual physical verification
of assets will be introduced and assets insured depending upon the nature and cost of assets.
17.2.1.10 Other Office and Implementing Entities
334. For each of the sub-project towns there will be a separate sub-project implementation unit
(PIU), headed by a Program Manager reporting to PMU. Flows of funds to PIU and its town units
will be through the PMU. PIUs are the first layer of accounting with consolidation of accounts done
at the PMU. In addition to the financial statements, monthly and quarterly internal financial reports
which are useful to the management for decision making purpose will be prepared.
17.2.1.11 Internal and External Audit
335. Internal audit system will be extended by KUIDFC (PMU) to this Program as well.
336. The Annual Statutory Audit is conducted by Comptroller and Auditor General of India
(CAG). Program accounts will be audited by an external firm of Chartered Accountants
empanelled with the CAG.
17.3 Conclusion and Recommendations
337. KUIDFC (PMU) thus has the systems and procedures in place to manage the proposed
investment.
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Table 44: Summary of PMU Assessment
Area of Assessment Findings
Executing Agency (EA)
and Implementing
Agency (IA)
The EA is the Karnataka Urban Infrastructure Development Finance
Corporation (KUIDFC). KUIDFC is staffed by drawing personnel from
the state finance department, line agencies and contract employees as
required.
The IAs are the ULBs of state government under Section 4 of the
Karnataka Municipalities Act (KMA). The financial assessment has
been done for sample ULBs, including Davangere, Ranebennur,
Harihar and Byadgi.
Major Experiences of
EA and IA in Managing
ADB Financed Projects
KUIDFC has managed two ADB financed projects, Karnataka Urban
Infrastructure Development Project (KUIDP) and Karnataka Urban
Development and Coastal Environment Management Project
(KUDCEMP), in addition to NKUSIP.
KUIDFC is implementing Project 1 and Project 2 under NKUSIP. The
average annual loan utilizations are $3.4 million for loan 2312 and $15
million for loan 2638.
Fund Flow
Arrangements
Loan proceeds under Programme will follow the existing fund flow
arrangement for loan 2312 and loan 2638.
ADB disburses the loan proceeds to the Government of India
(Government) account in the Reserve Bank of India (RBI).
Government shall forward lend the loan proceeds on back to back basis
to Government of Karnataka (GoK). GoK provides funds through
budgetary support in advance.
KUIDFC, as a state nodal agency, will manage loan proceeds through
direct payment procedures, statement of expenditure procedures, and
reimbursement procedures. The Investment Program ULBs, being the
project implementation units (PIU), will receive funds from KUIDFC.
Expenditures are consolidated monthly by KUIDFC and reimbursement
claims are then preferred to ADB through Controller of Aid, Accounts
and Audit (CAAA), Department of Economic Affairs (DEA), Ministry of
Finance, New Delhi.
Organization and
Staffing of EA and IAs
There are staff at KUIDFC solely designated for KISWRMP, among
them, are finance officers / analysts with relevant experience and
qualifications.
Accounting Policy and
Procedure and
Information System
KUIDFC accounts are maintained on ERP platform of TALLY 9
accounting software based in Indian accounting standards which
compare well with international standards. The accounting system is
maintained as per Companies Act, 1956. KUIDFC‟s information system
is computerized with the accounting system being maintained in
“TALLY” accounting software.
There are established procedures for recording the transactions, record
keeping and reports, and cost accounting (including cost control and
analysis) at KUIDFC and the ULBs.
Segregation of Duties
in EA
Authorization to execute a transaction, recording of the transaction; and
custody of assets involved in transaction are performed by different
persons.
The functions of ordering, receiving, accounting for, and paying for
goods and services are segregated.
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Area of Assessment Findings
Budgeting System in
EA and IA
KUIDFC prepares the budget once in a year according to financial year
following an assessment of funds requirement for various activities – in
terms of physical and financial targets for the financial year. Finance
manager prepares the Budget which is approved by Managing Director.
Actual expenditure is compared with budget on regular basis. KUIDFC
also prepares monthly financial reports comparing actual against
budget figures and explanations are required for significant variations
from the budget. Monthly progress reports provide information about
stage of project execution.
ULBs prepare budgets once a year according to financial year. The
Accounts Section prepares the budget which is then approved by
Municipal Commissioners and Municipal Councils. Actual expenditures
are compared to budget for significant variations.
Payments in EA All bills and invoices are stamped PAID.
Cash at Bank in EA
Two authorized signatories from the Managing Director and the General
Manager are required for issuance of all check payments at KUIDFC.
Single authorized signatory from the Municipal Commissioner is
required for issuance of all check payments at the ULBs.
KUIDFC and the ULBs maintain adequate, up-to-date cashbooks,
recording receipts and payments. Bank and cash are reconciled on
monthly basis.
Safeguard over Assets
by EA and IAs
The fixed assets register exists, following the laws and rules.
KUIDFC assets are covered under insurance depending upon the
nature and cost of assets.
Except for vehicles, ULBs do not insure for other assets.
Other Offices of EA KUIDFC has established controls and procedures for flow of funds,
financial information, accountability, and audits in relation to its
Regional Office and Divisional offices.
Internal Audit in EA
Internal audit of KUIDFC is outsourced to an Indian firm of Chartered
Accountants. The professional firm for internal audit reports Managing
Director.
Local fund auditor based in the ULB does the pre-audit of all receipts
and payments. A professional firm of Chartered Accounts engaged by
KUIDFC will complement the Regional Office Assistant General
Manager Finance (AGM) to conduct in-house internal audit of the ULBs.
Local fund auditor reports to Municipal Commissioner; AGM reports to
Executive Director.
External Audit in EA
The Annual Statutory Audit is conducted by a firm of Chartered
Accountants different from the firm conducting internal audit and is
appointed by Comptroller and Auditor General (CAG) of India under the
Companies Act 1956. In addition to the Annual Statutory Audit, CAG
also conducts audit on the base of the Statutory Audit Report. The CAG
will also conduct expenditure Audit, Performance Audit from time to
time. The audit report issued by CAG is presented before the state
legislature. Detailed audit guidelines are provided by the CAG.
All external audits are outsourced to professional firms by the ULBs.
There are no major audit recommendations that need to be
implemented.
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Area of Assessment Findings
Reporting and
Monitoring in IA
Financial Statements of the ULBs are prepared in accordance with
Indian accounting standards (IAS), as issued by the Institute of
Chartered Accountants of India and in the format as prescribed by the
Companies Act, 1956 and under generally accepted accounting
principles. Financial statements are prepared implementing unit wise,
funding source wise and project wise. Project wise financial statements
are submitted to KUIDFC on a monthly basis.
In addition to the financial statements, monthly and quarterly internal
financial reports which are useful to the management for decision
making purpose are also prepared.
Financial reports are prepared on the excel spreadsheet on the basis of
the accounting report generated through automated accounting system.
17.1 Procurement Capacity Assessment
338. As discussed above, the KUIDFC is mandated to execute new works and to make
improvements to existing water sector and other works in Karnataka. The role for the water sector
is partly performed also by the KUWS&DB.
17.1.1 Expected Procurement
339. Under first tranche of the investment programme, procurement will primarily consist of:
One international competitive bidding works contract for water and wastewater treatment
plants and, we recommend, for the strategic water network, to be implemented on design,
built and operation basis with a 5year O&M period;
Two national contracts for wastewater and water distribution network contracts on a build
only, and a design supervision consultancy contract.
Design and construction supervision consultants to support the KUIDFC in implementation
and management of the projects, and supervision of the works. The consultants will be
recruited following ADB‟s QCBS selection method.
340. We have also proposed an IWRM Project Management Unit in the KUIDFC primarily to
assist the KUIDFC and the ULBs implement the institutional changes. The Unit will be available to
assist in the planning aspects of the contracts implementation, should the KUIDFC wish.
341. As discussed above the KUIDFC is well experienced and competent for the role now
envisaged.
17.1.2 Assessment of the National Procurement Environment
342. The proposed project is a state-level project and state rules and regulation will govern its
implementation. The procedures followed and bid documents used by the KUIDFC are
comparable to that of foreign assisted projects.
343. However, the Government of Karnataka will (i) use ADB‟s standard bid documents and
procedures for procurement of works contracts; and (ii) recruit consultants using ADB‟s consultant
selection procedures.
344. The KUIDFC advertise procurement information in the leading newspapers of the State and
India, and also on its website and will follow ADB‟s policy and the guidelines for disclosure of
procurement information.
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17.2 Works Contractor and Consultancy Capacity
345. The works proposed are common in Karnataka, and in India. With the exception of mains
rehabilitation, no special techniques are envisaged and we would not expect any problems arising
from insufficient contractors and consultants wishing to tender, and so not provide for fair and
competitive bidding.
346. From our site visits, we would comment that we do have concerns about the quality of
workmanship especially for smaller diameter water mains. Indeed, one of the reasons for the
current investments is due to poor quality workmanship resulting in mains being replaced well
before the end of their expected asset life. The issue is due as much to poor supervision as to
poor workmanship. Both will need special attention if the full benefits of the investment are to be
obtained.
347. Mains rehabilitation by “no-dig” technology is available in India, but has had limited use in
Karnataka. Arguably, in the expected sub-project towns there may be no financial benefit by
bringing the required expensive plant to the state. The advantages and disadvantages can only
be considered sub-project by sub-project in consultation with the contractor.
17.2.1 Client/Contractor Partnerships
348. One of the reasons we are suggesting that the treatment plant design and build contracts
are extended to the strategic network is in order to make best use of the contractor‟s experience
and knowledge about optimum on-site techniques such as no-dig.
349. We do strongly suggest that the KUIDFC considers the benefits to be derived from
“partnership” type contracts which are common now throughout the developed world and within
which “risk” is more equitably shared between client and contractor.
17.2.2 Performance Guarantees
350. We would suggest that strong, enforceable OPEX and process Performance Guarantees
are used in the contracts, and exercised.
17.2.3 Karnataka Competency for Process Technology
351. Building upon the high level of IT competency in Karnataka and with the movement away
from low-tech treatment processes such as stabilisation ponds to more technically complex
processes such as Sequential Batch Reactors, we have suggested in the Road Map that the state
Government promotes a competency for treatment process control and monitoring.
17.2.4 Operational Contracts
352. The KUIDFC has expressed a strong wish for PPP operational contracts to be introduced
for the O&M of the sector assets.
353. Before the operation and maintenance of the facilities can be successfully introduced, four
elements must be in place:
A sufficient number of experienced and competent operators to ensure a viable tendering
process;
A customer service base of sufficient size to attract competent operators;
A competency in the client ULBs to be able to manage the contracts, and
Adequate data available to the bidding operators to enable them to assess the risk and make
a viable bid without passing undue risk cost through to the client ULB.
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354. We would respectfully suggest that perhaps only the first of these is currently present in
Karnataka. In our opinion, full scale operation of the water and wastewater systems by a
contractor is a medium-term objective, and not for immediate introduction.
355. An objective of the MFF will be to put in place the measures to bring the ULBs to a position
to be able to issue a tender for a PPP operator, i.e. to ensure that there will be available to
bidders the data that they will require to be able to make a competitive bid and that the ULBs have
the competency to project manage such contracts.
17.3 Summary Assessment and Recommendations
356. Based on the above assessments, the strengths and weaknesses of the procurement and
contractor capacity can be summarised below:
17.3.1 Strength
357. The procurement procedures of the KUIDFC meet requirements. The KUIDFC is
experienced and competent for the tasks that will be required of it.
358. The KUIDFC has a nucleus of qualified staff which can be supplemented if required from
the pool of suitable people that is available in Karnataka. Being a corporate body, the KUIDFC
enjoys the flexibility to adopt professional approach in management and administration; and this
enables KUIDFC to recruit the required human resources from open market. On the other side, as
a government undertaking, it comes under the oversight mechanism of the government, which are
quite robust and time tested.
359. There are adequate consultancy and contractor companies in the state for the expected
workload.
17.3.2 Weakness
360. The major weakness is the apparent quality of workmanship and by default the site
supervision, and lack of Performance Guarantees in contracts.
361. From our discussions, the sector is traditional and shows reluctance to move away from the
traditional consultant/contractor relationship. For a major long-term project, such as KISWRIP,
advantages could be gained by entering into long-term partnerships with contractors and
contractors.
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18 TENDER EVALUATION AND SELECTION PROCEDURES
18.1 Consultant Proposal Evaluation Procedure
362. The following is an outline of the procedure shall be followed for the appointment of
consultancy services, with due attendance to ADB Procurement Rules:
Upon approval to proceed with sub-project, the PIU will issue an Expression of Interest
Notice (EoI), prepare a shortlist, finalise the Request for Proposals (RfP) and Evaluation
Criteria, and submit to the Consultant Services Committee who, on approval, shall submit to
the ADB;
The ADB will review and approve;
The PIU will issue Tender Dossier to shortlisted consultants who will prepare their Technical
and Financial Proposals, and submit to the PIU;
Technical Proposals will be opened and evaluated by Consultancy Services Committee. Pre-
bid site meetings will be held as required and tenderers questions answered;
The Technical Evaluation Report shall be submitted to the ADB for approval;
Financial Proposals will be opened in the presence of bidders and the Consultancy Services
Committee will prepare their Report and submit to the ADB for approval to negotiate and let a
contract;
Upon agreement with Preferred Consultant, a draft contract will be submitted to the ADB and,
upon approval, the contract signed.
18.2 Works Contract Evaluation Procedure
363. The following is an outline of the procedure shall be followed for the appointment of works
contractors, with due attendance to ADB Procurement Rules:
Upon approval of a sub-project, the KUIDFC, KUWS&DB or an appointed consultant will
prepare a Tender Dossier which will be submitted to the ADB for review and approval. The
ADB may appoint consultants for this task;
Upon approval from the ADB, the PIU will issue a EoI Notice, prepare a shortlist of suitable
works contractors, finalise the RfP and Evaluation Criteria and submit to the Technical
Evaluation Committee who, on approval, shall submit to the ADB;
The ADB will review and approve;
The PIU will issue the Tender Dossier to shortlisted consultants who will prepare their
Technical and Financial Proposals, and submit to the PIU;
Technical Proposals will be opened by the Technical Evaluation Committee and be evaluated
by a Team appointed by the Committee. The Evaluation Team might comprise or include
consultants. Pre-bid site meetings will be held as required and tenderers questions answered;
The Technical Evaluation Report, prepared by the Evaluation Team and endorsed by the
Technical Evaluation Committee, shall be submitted to the ADB for approval;
Financial Proposals will be opened in the presence of bidders and the Technical Evaluation
Committee, assisted by the Evaluation Team, will prepare their Report and submit to the ADB
for approval to negotiate and let a contract;
Upon agreement with Preferred Contractor, a draft contract will to be submitted to ADB and,
upon approval, the contract signed.
18.3 Tranche-1 Works and Supervision Contracts
18.3.1 Design and Works Supervision Contract
364. We propose that a single contract be awarded by the KUIDFC for:
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Preparation of the DPRs;
Preparation of the Works Construction Contracts;
Review of Treatment Plant and strategic network proposal detailed designs prepared by the
Plant Works Contractor, and
All normal site supervisory and associated activities.
365. The contract will be prepared by the KUIDFC with the assistance of this PPTA Phase II team
of national20
experts, and be entered into by the KUIDFC and the appointed contractor.
18.3.2 Plant Construction & Strategic Network
366. We propose that the procurement of all Tranche-1 water and wastewater treatment plants be
in a single two-year design and construct contract with an extended five-year operational period.
The contract is to include for all raw water transmission pipelines and pumping stations.
367. The purpose of the operational period will be to enable local operators to become fully familiar
with the works prior to their transfer to the service provider at the end of the 5yr operational
period. The extended period will also permit a full verification of the contract performance
guarantees for process and for OPEX performance.
368. We propose that the contract includes for the strategic network. Our suggestion would be for
the contractor to also design the strategic network elements. We agree that this may not be
acceptable to stakeholders.
369. As a single contract is proposed for all four Tranche-1 ULBs, the contract will require to be
entered into between a delegated representative of the four ULBs and the works contractor.
18.3.3 Wastewater Network Construction
370. In order to meet the requirement of the KUIDFC that only the IWRM components of the
investment be disbursed initially, we propose a 2yr network contract for the construction of the all
proposed wastewater network enhancements and rehabilitation.
371. The detailed design will be prepared by the Design and Works Supervision Contractor.
372. As a single contract is proposed for all four Tranche-1 ULBs, the contract will require to be
entered into between a delegated representative of the four ULBs and the works contractor.
18.3.4 Water Network Construction
373. We propose a single works contract for the construction of the water distribution network
enhancements and rehabilitation to provide for a continuous water supply.
374. The single contract will comprise a separate component for each of the four Tranche-1 towns.
Each component will commence only when a ULB meets the required performance criteria.
Alternatively, four smaller contracts can be prepared.
375. The detailed design will be prepared by the Design and Works Supervision Contractor.
376. If a single contract is provided for all four Tranche-1 ULBs, the contract will require to be
entered into between a delegated representative of the four ULBs and the works contractor. If
separate contracts are preferred, the contract will be between the appropriate ULB and the
contractor appointed for that ULB.
377. Conventionally, a contract is for the construction of fixed elements, e.g. a certain length of
pipes of a known diameter to be laid in a specified time. As an alternative, we are suggesting that
20
The scope of the PPTA International experts includes only for Phase 1.
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a “Schedule of Rates” contract be adopted. In such a contract, bidders enter their required prices
in a matrix of pipe sizes for different locations e.g. major road, secondary or un-surfaced ground.
378. As a ULB meets the performance criteria or a section of main is assessed to need
replacement, the contractor will commence the work, and be paid according to his schedule of
rates. The schedule of rates principle can also be adopted for mains repairs, meter installation
etc. The procedure might be innovative and an opportunity for Karnataka to lead, but a Schedule
of Rates approach is common throughout the UK, for example.
18.4 Performance Contracts
379. We recommend at that all contracts are performance based, with performance to be
measured by:
Physical indicators e.g. length of mains laid and treatment process units constructed;
Process and OPEX Performance Guarantees for the treatment works;
Hydraulic and purity for water mains and water retaining structures;
CCTV inspections of sewers for line, freedom from blockages etc.
18.5 Contracts for Tranche-2 and 3 Investments
380. We would recommend the same approach for Tranche-2 and 3 investments:
A design and supervision consultant;
A design and build works contract for treatment works and strategic network mains that
includes a 5 yr operational period. The contracts to be “bundled” to include at least for all
works in a ULB, preferably several ULBs on a geographical basis;
A wastewater network contract, and
A water distribution network contract.
381. We would suggest that the wastewater and distribution network contracts also be let for a
number of ULBs on a geographical basis.
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19 CAPACITY BUILDING
19.1 Requirement
382. A need has been identified, and addressed, in the Institutional Road Map for capacity
building in the ULBs as the entities responsible for service delivery.
383. The need is across all aspects of the service delivery but especially in the O&M of the
service assets and in the planning and management of the service.
384. Wider, the capacity building envisaged includes GIS provision, Management Information
System implementation, Human Resources, training and development, Customer Relation
initiatives, Pro-Poor initiatives, Asset Inventory and Management System implementation,
Financial Information System upgrade including billing for metered accounts, .
385. Capacity building requirements include:
GIS drawings to be prepared for all ULB underground assets where not available currently,
and for all new assets procured;
Implement Management Information Systems based on electronic information technologies;
Human Resources Development tasks to be undertaken include conducting an overall
assessment of existing conditions of institutional setup and human resources management of
each department; preparing and helping ULB to implement a Human Resource Management
Plan, assisting with procurement and introduction of new HR software and preparation of
general training plans and implementation details;
Improve Customer Services with the publication of Customer Service levels, by explanation of
service policies and tariffs and by informing customers of interruptions to supplies;
Prepare asset inventories and asset management plans in connection with maintenance and
rehabilitation/replacement of utility assets and to assist with implementation of annual AMPs;
Introduce international best practice of maintaining above-ground and buried including for
planned preventative maintenance and Emergency Response Planning;
The acquisition and initial operation of a new computerized billing and accounting systems
designed for meter accounts and to include for debt management;
Continuous review and revision of water supply charges and billing and income collection
systems to achieve full operating cost recovery;
Modernize the financial management arrangements of the ULB with particular regard to
budget setting and control, and
Review operational practices and procedures for improved operational performance and
efficiency.
19.2 Establishment Size
386. In the Road Map, we have suggested organisational structures with establishment sizes in
the four Tranche-1 sub-project towns. As to be expected, the required increase in establishment is
significant requiring almost a doubling of existing capacity.
387. As an indication of the establishment required for proficient water and wastewater service
delivery, the World Bank: “IBNET Water Supply and Sanitation Performance Blue Book” suggests
an establishment of around 1 staff member per 1,000 customers. Practice also suggests an
operational to administrative staff ratio of 5:1.
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19.3 Training Budget
388. Apart from stating that a training programme will be essential, until the modality for service
provision amongst the state ULBs is determined – i.e. by a single ULB, a SVP or even by
contractor, and a Human Resource and Development Plan is produced, a training budget cannot
be prepared.
389. Training would need to be provided primarily for managers, engineers and treatment plant
operators in public health engineering, network management, water and sewage treatment plant
operation and maintenance.
390. As well as specific in-house training, courses are available at training institutions such as All
India Institute of Hygiene & Public Health (AIIH&PH), Institution of Public Health Engineers,
Kolkata, Metro Water Training Centre, Chennai Metropolitan Water Supply, & Sewerage Board,
and Municipal Corporation of Greater Mumbai, Civic Training Institute.
391. The Institute of Public Health Engineering Kolkata charges a fee of around Rs.150,000 per
course, the class size (batch) being more or less 25 participants. The fee includes training
materials and working lunch. The Institute does not have hostel facility. However, it will out-source
board and lodging facilities for which, by a rough estimate, the cost per participant per day will be
around between Rs.750 at government accommodation, inclusive of food.
392. As an indication, for the four Tranche-1 sub-project towns, the suggested establishment is
540. Assuming that of these 450 require intensive training, an indicative training cost would be
around $0.05M. This is the sum included into the Tranche-1 investment.
393. Our initial thoughts would have been for ULBs to enter into a Co-Management Contract for
the service provision and the training of ULB staff to be a component of that Contract. As
discussed elsewhere, the four Tranche-1 sub-project towns are unable currently to provide the
required performance data and asset histories for competitive bidding and so, initially, such a
Contract and modality for capacity building is not possible. A similar situation can be expected to
exist in the other Karnataka towns
394. In discussion with the KUIDFC, the proposal is to first establish a IWRM Project
Management Unit which will be adequately resourced with experienced people, or with people
who will be trained, and the Unit will act as a “centre of excellence” for the ULBs.
395. As the SPV service providers become established, data can be collected for Co-
Management contract bidding and/or a Training Plan can be prepared and implemented.
19.4 Equipment and Business Systems
396. The ULBs as service providers will require both plant and equipment to be able to maintain
the equipment procured under the investment and the necessary business systems for the
management of the service.
397. Again, as with the training requirement the requirements cannot be finalised until the service
provision is agreed by the ULBs.
398. Apart from stating that a training programme will be essential, until the modality for service
provision amongst the state ULBs is determined – i.e. by a single ULB, a SVP or even by
contractor, and a Human Resource and Development Plan is produced, a training budget cannot
be prepared.
399. Training would need to be provided primarily for managers, engineers and treatment plant
operators in public health engineering, network management, water and sewage treatment plant
operation and maintenance.
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400. As well as specific in-house training, courses are available at training institutions such as All
India Institute of Hygiene & Public Health (AIIH&PH), Institution of Public Health Engineers,
Kolkata, Metro Water Training Centre, Chennai Metropolitan Water Supply, & Sewerage Board,
and Municipal Corporation of Greater Mumbai, Civic Training Institute.
401. The Institute of Public Health Engineering Kolkata charges a fee of around Rs.150,000 per
course, the class size (batch) being more or less 25 participants. The fee includes training
materials and working lunch. The Institute does not have hostel facility. However, it will out-source
board and lodging facilities for which, by a rough estimate, the cost per participant per day will be
around between Rs.750 at government accommodation, inclusive of food.
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20 SAFEGUARDS
20.1 Introduction
402. The following is a summary of the Reports of the Safeguard‟s experts as contained in Annex
5, 6 and 7. The results and conclusions of the surveys in the four sub-project towns can be
considered as being typical of those across the state.
403. Reference is to be made to the Annexes for further details of proposals and safeguard
requirements to be met.
20.2 Social Analysis
404. One of the important Millennium Development Goals is to halve the number of people
without sustainable access to safe drinking water and sanitation by 2015.
405. Social analysis in the sub-project towns will be performed with these broad goals in view as
well as the overall program objective of improved urban services and quality of life in cities and
towns of Karnataka. The rationale for conducting social analysis is to inform the project design
team of this aspect in the asset creation process and so help accurately and systematically
monitor and evaluate progress towards attaining targets set for project towns.
406. Data from baseline surveys defines the existing situation and starting point in quantitative
terms, characterizing the present gaps, needs and preferences of households. This information
helps understand household behaviour which may be deployed for policy formulation e.g. tariff
setting while taking into account affordability levels and willingness to pay, customer preferred
service levels, designing incentives / pro-poor policies, target-setting and defining baseline
indicators against which progress-monitoring and post-intervention monitoring can be conducted.
407. Social analysis for the Tranche-1 investment is based on household surveys conducted in
the four sub-project towns. Details are provided in Annex 6. Two interesting points to arise are
that (i) a fully continuous water supply is not seen as essential and (ii) people are concerned
about the cost of connections to the water mains and sewers. The latter, in particular, requires to
be addressed if the full benefit from the investment in sewers and wastewater treatment works are
to be derived.
20.3 IWRM Project Management Unit
408. As a positive move to ensure equality and fairness for all regardless of gender, social status
or disability, we have recommended that a focused small team be established in the proposed
IWRM Project Management unit specifically for that purpose.
20.4 Environment Assessment
409. ADB‟s Safeguard Policy Statement, 2009, requires the consideration of environmental issues
in all aspects of the Bank‟s operations, and the requirements for Environmental Assessment are
described in detail in ADB Environmental Assessment Guidelines, 2003. This states that ADB
requires environmental assessment of all project loans, programme loans, sector loans, sector
development programme loans, financial intermediary loans and private sector investment
operations.
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410. The nature of the assessment required for a project depends on the significance of its
environmental impacts, which are related to the type and location of the project, the sensitivity,
scale, nature and magnitude of its potential impacts, and the availability of cost-effective
mitigation measures. Projects are screened for their expected environmental impacts and are
assigned to one of the following categories:
Category A: Projects that could have significant environmental impacts. An Environmental
Impact Assessment (EIA) is required.
Category B: Projects that could have some adverse environmental impacts, but of less
significance than those for category A. An Initial Environmental Examination (IEE) is required
to determine whether significant impacts warranting an EIA are likely. If an EIA is not needed,
the IEE is regarded as the final environmental assessment report.
Category C: Projects that are unlikely to have adverse environmental impacts. No EIA or IEE
is required, although environmental implications are reviewed.
411. The nature of the works to be performed are unlikely to have major environmental impact but
there will be some impact for excavation, carriage of spoil, noise and general interference during
construction. In service, wastewater plants can be prone to causing nuisance by smell, flies etc.
but for which ample mitigating measures are available.
412. The probability is that the majority of sub-projects will fall into Category B, for which an IEE
will be conducted for each subproject, with a subproject being the water supply and sewerage
infrastructure improvements proposed in a subproject town.
20.4.1 Sludge Management
413. A problem that does not exist currently in Karnataka is that of safe sludge disposal.
414. With few wastewater treatment works, the sludge that is produced can be disposed to land-fill
or used by agriculture. As more and more plants come on stream, there will be an increasing
amount of sludge produced.
415. There is a need for a sludge management policy to be developed by the state.
20.5 Resettlement Framework
20.5.1 Scope of Land Acquisition
416. Projects are to be formulated to minimize land acquisition and resettlement impacts, ideally by
the use of municipal land.
417. For the Tranche-1 sub-projects, existing facility sites have been used as much as possible so
as not to require land acquisition and result in resettlement impacts. There is no reason why such
an approach cannot continue to be adopted.
20.5.2 Draft Resettlement Framework
418. With its focus on provision of urban infrastructure services, the KUIDFC complements GoI‟s
policies and programmes for poverty reduction. The KUIDFC is expected to have a positive
impact on the poor, chiefly in terms of environmental health benefits and productive time savings.
419. Direct benefits to the poor from the proposed interventions will also be from employment to
local poor – by giving them priority for unskilled jobs; while indirect benefits include empowerment
as a result of participation in project related activities.
420. Special attention is to be given to the benefits/opportunities to be derived by woman.
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421. The baseline socio-economic survey included for slum areas in the sample towns. The
baseline reveals the status of the urban poor in terms of basic service access and will serve as
the benchmark against which post-program benefits to the poor can be measured. The primary
survey in these towns provides baseline data on the levels of service access by the poor in urban
areas, which will help monitor progress and post-intervention impacts on the poor.
422. The resettlement principles adopted in this framework recognize the Land Acquisition Act,
Karnataka, 1894 (with Amendment Act 68 of 1984), National Resettlement and Rehabilitation
Policy, Govt of India as notified in 200721 and the relevant Asian Development Bank‟s (ADB)
Safeguards Policy Statement (SPS) of 2009 and Operations Manual F2 on Involuntary
Resettlement (2003).
423. The objectives of the National Rehabilitation and Resettlement Policy are as to:
Minimize displacement and to promote, as far as possible, non-displacing or least-displacing
alternatives;
Ensure adequate rehabilitation package and expeditious implementation of the rehabilitation
process with the active participation of the affected families;
Ensure that special care is taken for protecting the rights of the weaker sections of society,
especially members of the Scheduled Castes and Scheduled Tribes, and to create obligations
on the State for their treatment with concern and sensitivity;
Provide a better standard of living, making concerted efforts for providing sustainable income
to the affected families;
Integrate rehabilitation concerns into the development planning and implementation process;
and
Where displacement is on account of land acquisition, to facilitate harmonious relationship
between the requiring body and affected families through mutual cooperation.
424. The objectives of ADB‟s policy on Involuntary Resettlement are to
Avoid involuntary resettlement wherever possible;
Minimize involuntary resettlement by exploring project and design alternatives;
Enhance, or at least restore, the livelihoods of all displaced persons in real terms relative to
pre-project levels, and
Improve the standards of living of the displaced poor and other vulnerable groups.
425. Basic principles of ADB‟s SPS where involuntary resettlement is unavoidable prescribe
preparation of Resettlement Plan (RP) as an integral part of project preparation at the earliest
stage of project cycle. Following principles are adhered to while preparing RP.
Involuntary resettlement should be avoided whenever feasible;
Where population displacement is unavoidable, it should be minimized;
All lost assets acquired or displaced will be compensated based on the principle of
replacement cost;
Each involuntary resettlement is conceived and executed as part of a development project or
program. The displaced persons (DPs) need to be provided with sufficient resources to re-
establish their livelihoods and homes with time-bound action plan in synchronization with civil
works;
21
Gazette of India, Extraordinary, Part 1, Section I, dated the 31st October, 2007.
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The DPs are to be fully informed and consulted in details;
The absence of a formal title to land is not a bar to entitlements;
The Displaced Persons are to be identified and recorded as early as possible to establish
their eligibility, through a census, which serves as a cut-off date, and prevents subsequent
influx of Encroachers;
Particular attention must be paid to Vulnerable Households including those without legal title
to land or other assets; households headed by women; the elderly or disabled; and
indigenous groups. Assistance must be provided to help them improve their socio-economic
status, and
The full resettlement costs are to be included in the project costs and benefits.
20.6 Indigenous Peoples Development Framework
426. Indigenous peoples (IP) are defined as those having distinct social, cultural, economic, and
political traditions and institutions compared with the mainstream or dominant society.
427. Scheduled Tribes are recognized as indigenous peoples in India. The Indian Constitution
(Article 342) defines Scheduled Tribes as those with special characteristics such as (i) primitive
traits, (ii) distinctive culture, (iii) shyness with the public at large, (iv) geographical isolation, (v)
social and economic backwardness.
428. ADB Safeguard Policy Statement (2009) defines IPs as those with the following
characteristics: (i) descent from population groups present in a given area before territories were
defined; (ii) maintenance of cultural and social identities separate from dominant societies and
cultures; (iii) self-identification and identification by others as being part of a distinct cultural group;
(iv) linguistic identity different from that of dominant society; (v) social, cultural, economic and
political traditions and institutions distinct from dominant culture; (vi) economic systems oriented
more toward traditional production systems rather than mainstream; and (vii) unique ties and
attachments to traditional habitats and ancestral territories.
429. Scheduled Tribes identified in the Tranche-1 sub-project towns are scheduled in Annex 7 –
Social Safeguards.
430. The IPF sets out policy for indigenous peoples, together with screening and planning
procedures. Indigenous People Framework is a policy and procedural framework for Indigenous
People Plans that are to be developed for sub-projects, to be approved during program
implementation.
431. The IP Policy Framework is based on the overall national and local policies and ADB‟s Policy
on Indigenous Peoples as defined in the Safeguard Policy Statement (2009). The principal
objectives are to: (i) ensure that IPs affected by any sub-project will benefit from the Program; (ii)
ensure IPs‟ inclusion in the entire process of preparation, implementation, and monitoring of
program activities; (iii) ensure that benefits from sub-projects are available to IPs more than or at
least equal to other affected groups; this may require giving preference to IPs as vulnerable
groups over others on certain benefits under the Investment Program; and (iv) provide a base for
IPs in the area to receive adequate development attention.
432. The IPF is intended to guide selection and preparation of sub-projects to ensure that the
aspirations, needs and preferences of affected indigenous peoples in the program area are taken
into consideration. In recognition of the IP community‟s marginal status, the IPF seeks to offer
development options while respecting/protecting their socio-cultural distinctiveness, through
Indigenous Peoples Plan. The Plan aims at strengthening the existing capacity of the affected IP
community to participate and benefit from Program interventions.
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433. Steps in IPP preparation include preliminary screening, Social Impact Assessment, benefit
sharing and mitigation measures and monitoring; these are defined in detail in the IPF.
434. The IPF also provides consultation, participation and information disclosure processes for IPs,
institutional arrangements for IPP preparation, IPP budget and procedures for monitoring and
evaluation of IPP.
20.7 Consultation and Participation Plan
20.7.1 Overview
435. Stakeholder consultation and participation is envisaged as an intrinsic part of project
preparation and implementation strategy.
436. Critical for project sustainability and thus maximising investment benefits, projects must be
“owned” by the end beneficiaries which can only achieved when proposals are customer driven;
not imposed i.e. a bottom–up approach sought through consultation and customer participation.
The first stage of which was the household survey conducted in the four sub-project towns.
437. Stakeholder participation was sought for sub-project selection and prioritization and will
continue through detailed design and during planning, implementation, and post-implementation
phases.
Figure 7: Consultation in Davangere
438. The idea is to ensure that stakeholder needs are addressed and there is greater awareness
of the benefits and „ownership‟ of the program among stakeholders, which in turn, is expected to
ensure program sustainability. The consultation process so far has solicited inputs of a wide range
of stakeholders, including state and ULB level government officials, KUIDFC and KUWS&DB
engineers and other staff, NGOs, elected representatives, residents of sample towns,
marginalized/vulnerable beneficiary groups, program affected persons, etc. with the idea of
involvement of all interested parties.
439. The Consultation and Participation Strategy is meant to ensure that information is provided
and feedback on the proposed project design is sought early, right from the project preparation
phase, so that the views/preferences of stakeholders including potential beneficiaries and affected
people can be adequately considered in project design, and continue at each stage of project
preparation, processing, and implementation.
440. At the core of the philosophy for consultation and participation is the idea of providing
adequate opportunities for consultation/participation to all stakeholders with a view to
strengthening demand-responsiveness of the Program/sub-projects and inclusion of
poor/vulnerable/marginalized population and project-affected persons in the project process.
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Relevant information about any major changes to project scope shall also be shared with
beneficiaries, affected persons, vulnerable groups and other stakeholders. The Strategy is closely
linked to the other sub-project Plans and Strategies.
441. The Stakeholder Consultation and Participation Strategy envisages provision of services and
opportunities to marginalized/vulnerable beneficiary groups/project affected persons and
strengthening their mobilization as well as participation in social and economic development
processes. It will also support NGO capacity to plan and implement beneficiary and affected
community/gender-focused proposals and facilitating awareness and ownership of development
initiatives by civil society. The following steps are proposed for operationalising the Strategy:
Stakeholder analysis (state and city level, other);
Stakeholder consultation and participation;
Information Disclosure / IEC on websites and through consultation workshops, meetings and
other means;
Recording and incorporation of stakeholder (including poor, marginalized, vulnerable groups),
concerns, views and perceptions into project design and implementation process;
Reporting changes in project design, selection of alternatives, mitigation measures, etc. as a
result of consultation on websites and through other means.
442. Stakeholders are proposed to be consulted in a variety of ways – at state-level and city-level
workshops, Focus Group Discussions with communities, discussions with the nodal department at
state level and municipal officials, interviews of citizens, etc. at various stages in the project cycle.
Monitoring by an NGO/research institution/independent institution is envisaged, using citizen
report cards as a tool. Information disclosure (web-based and through means accessible by
literate and non-literate stakeholders in the local language/dialect) shall be an intrinsic element of
the consultation and participation and communication process.