RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF INDIA: REPRODUCTIVE AND CHILD HEALTH PROJECT II CREDIT NO IN 08/22/2008 TO THE

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF INDIA: REPRODUCTIVE AND CHILD HEALTH PROJECT II CREDIT NO IN 08/22/2008 TO THE REPUBLIC OF INDIA 04/07/2010 Report No:

2 ABBREVIATIONS AND ACRONYMS CCEA DEA DPs DPIP EAG EAP EmOC EPW FMG FP FRU GOI ICB ICDS IEC IMEP IMR JRM MCH MDGs MMR MOHFW NACO NCB NHSRC NRHM PDO PIP PP PPP RCH RCH Project I RCH Project II RCH program RTI/STI SA SDR SPIPs UC VGHP WHO-NPSP Cabinet Committee on Economic Affairs Department of Economic Affairs, GOI Development Partners District Program Implementation Plan Empowered Action Group Externally Assisted Projects Emergency Obstetric Care Empowered Procurement Wing Financial Management Group Family Planning First Referral Unit Government of India International Competitive Bidding Integrated Child Development Services Information, Education and Communication Infection Management and Environmental Plan Infant Mortality Rate Joint Review Mission Maternal and Child Health Millennium Development Goals Maternal Mortality Rate Ministry of Health and Family Welfare National AIDS Control Program National Competitive Bidding National Health Systems Resource Center National Rural Health Mission Project Development Objectives Program Implementation Plan Pooling Partners Public Private Partnerships Reproductive and Child Health The first Reproductive and Child Health Project The second Reproductive and Child Health Project All activities funded and coordinated by the GOI s DOHFW Reproductive Tract Infections/Sexually Transmitted Infections Social Assessment Special Drawing Rights State Program Implementation Plans Utilization Certificate Vulnerable Group Health Plan World Health Organization-National Polio Surveillance Project Vice President: Country Director: Sector Manager: Task Team Leader: Isabel M. Guerrero N. Roberto Zagha Julie Mclaughlin Vikram Sundara Rajan 2

3 INDIA INDIA: REPRODUCTIVE AND CHILD HEALTH PROJECT II P CONTENTS Page A. SUMMARY... 4 B. PROJECT STATUS... 4 C. PROPOSED CHANGES... 6 ANNEX 1: RESULTS FRAMEWORK AND MONITORING... 8 ANNEX 2:REALLOCATION OF PROCEEDS ANNEX 3:DISBURSEMENT ARRANGEMENTS OF POLIO OPERATING COSTS

4 SUMMARY INDIA: REPRODUCTIVE AND CHILD HEALTH PROJECT II Restructuring Paper The proposed changes include: (i) a reallocation of Credit proceeds; (ii) a modification to disbursement arrangements related to polio operating costs; (iii) a revised Results Framework; and (iv) an extension of the IDA Financing Closing Date by 18 months, i.e. from September 30, 2010 to March 31, PROJECT STATUS Background: The RCH II program, under the overall NRHM umbrella, is the main vehicle for India s progress towards MDGs 4 and 5. IDA supports the program through the RCH II project, which was approved August 2006 and is currently scheduled to close September The RCH II program of Government of India (GOI) was launched in April 2005 and is expected to close on March 31, It is the Government of India s (GOI) largest program for achieving maternal and child health outcomes, and is aligned with India s national goals as well as the MDGs. Several development partners support the RCH II program either through pooling financial assistance (DfID, UNFPA and World Bank from the beginning and more recently European Union) or through technical assistance Most recent household surveys show improvements in service delivery over a 4 year period, especially among the weakest states. For example, Bihar, Rajasthan, Orissa and Madhya Pradesh have demonstrated impressive increases in institutional deliveries, ranging from 8.4 to 18.8 percentage points. In addition, a significant improvement in routine immunization coverage is noted especially in Bihar (20.7 to 41.4%), Rajasthan (23.9 to 48.8%); and Orissa (53.3 to 62.4%), and marginal improvements in Uttar Pradesh (25.8 to 30.3) and Madhya Pradesh (30.4 to 36.2%). Use of modern contraceptive methods also has shown improvements in many populous states - Rajasthan (41.4 to 54%), Bihar (24.5 to 28.4) and Madhya Pradesh (46.7 to 53.1%). There has also been increase in exclusive breast feeding in several states. While progress towards the development objectives is being made and GOI continues to adequately finance the RCH II program, there have been challenges in project implementation resulting in low disbursement from the Bank and other pooling partners. Disbursement is currently at 48% of the total Credit amount and approximately 40% of the total credit has been for financing supply of oral Polio vaccines through UNICEF for Polio eradication. The low overall disbursements under other categories of the credit are due to: (i) a mutual agreement between the pooling partners and the Ministry of Health and Family Welfare (MOHFW) to limit financing under the RCH II financing pool to only operating costs at the state and district level due to the inability of 4

5 the implementing units at those levels to follow agreed procurement procedures 1, which differ from the country systems based procurement rules of domestically financed pool under the flagship National Rural Health Mission (NRHM); (ii) a decision by the Bank to allow the other pooling partners to disburse their annual lapsable grants ahead of the IDA credit; (iii) reporting of RCH II program expenditures by some states under the NRHM financing pool for budget line items (contractual staff, training) that are common to both the programs; and (iv) time delays in central level procurement using services of a procurement agent. The issues described above required adaptation by the pooling partners and the implementing agency to constraints and significant changes in the sector outside the direct control of the project and that could not have been anticipated during appraisal. The proposed changes described in section C would help continue the adaptive changes made by the pooling partners in response to these issues and towards achieving smoother project implementation and better program outcomes. Implementation challenges notwithstanding, significant progress and some important outcomes are being achieved. A restructured project with an accompanying extension would build on progress being made, and would enable the sustained engagement and continued provision of technical advice and knowledge by partners participating in this project towards building program implementation capacities and systems strengthening. This would also ensure that the longer-term aim to improve delivery of these types of health services to underserved populations remains within sight. In addition, as there are significant resources committed by the pooling partners (approximately USD 350 million, including USD 195 million from IDA) that remain undisbursed and would give GOI the opportunity to access these funds. Actions that have been taken to address concerns: The Ministry of Health and Family Welfare (MOHFW) and the pooling partners have initiated efforts to resolve the implementation challenges mentioned above. To facilitate disbursement, the Development Credit Agreement (DCA) has been amended twice at GOI s request to: (i) define operating costs 2 eligible for reimbursement; (ii) increase allocation for the Polio component 3 ; and (iii) allow reimbursement of vaccines procured for Routine Immunization program. In addition, the pooling partners have agreed to finance expenditures on eligible RCH II activities (contractual staff salaries and operating costs on training) reported under the NRHM funding pool from FY The MOHFW has continued efforts to improve the Financial Management (FM) systems across the country and to support strengthening procurement and supply chain management systems in 6-10 key states with DfID support. A first round of central level procurement has been completed and supplies were made available in the facilities in FY Present project performance: The Project Development Objectives continue to be relevant. Progress towards achievement of the development objectives is rated as Moderately Satisfactory. Implementation progress, FM and procurement performance has 1 This limited the expenditure eligible for pooled financing to approximately 25% of the reported expenditure under the project instead of the planned 72%. 2 Operating costs for RCH flexi-pool activities other than Polio. 3 The Polio component includes Polio operating costs but so far project has funded only vaccines. 5

6 also been recently upgraded to moderately satisfactory following actions taken by MOHFW to improve performance. Status of Financial Management: With technical assistance support from DFID, MOHFW has substantially strengthened the capacity in its Financial Management Group (FMG) and is using the services of a management consultancy firm (Deloitte Touche Tomatsu) to address some of the critical financial management issues across states, districts, block and in implementing units. The initial priorities include (a) roll out of a common IT based accounting system building on good practices in some states; (b) review and strengthening of the internal audit; and (c) development and roll out of simple accounting and financial reporting handbooks for units at and below the blocks in local language. MOHFW has also put in place a strengthened process for selection of external auditors for state and district units from FY However, improvements being made in financial management systems at the state level have been uneven across states/ institutions. This is attributable to the large number of implementing units participating in the project, and challenges posed by the federated structure of implementing arrangements found in centrally sponsored schemes such as this. Audit Compliance and Disallowances: Audit reports have been received from all states and MOHFW for the year and reviewed by the Bank. Responses on the action taken/ proposed on the findings of the auditors as well as additional break-up of expenditure to determine operating costs are awaited from the states. Since Bank financing is limited to operating costs at the decentralized level, it has been agreed with MOHFW that for FY onwards determination and disbursement against decentralized eligible expenditure will be based on expenditures reported in acceptable audit reports as against Financial Monitoring Reports. This will reduce the transaction costs, to both MOHFW and the Bank. The determination of eligible expenditures for FY is currently in progress and is expected to be completed by May 15, An amount of USD million has been determined as audit disallowances against the disbursement of USD million made against eligible expenditure (determined on the basis of financial reports), which will be adjusted against the disbursement. PROPOSED CHANGES Reallocations of Credit proceeds to category 2 for Polio operating costs: Polio vaccine and polio operating costs are included in the DCA under Category 2, Polio Eradication Activities but financing has been limited to supply of polio vaccines till now. Given the low disbursements under category 1, due to issues discussed earlier in the note, it is proposed to reallocate an amount of SDR 45 million to Category 2, Polio Eradication Activities, from categories 1(a) procurement of pharmaceuticals and medical supplies (SDR 20 million) and from category 5 Unallocated (SDR 25 million), to finance Polio operating costs (refer Annex 2 for further details). Disbursement arrangements - disbursing polio operating costs (category 2) based on the number of children immunized at standard unit costs: This proposal 6

7 is based on the existence of a robust monitoring, an independent third party data validation system and standard cost norms for various inputs. This reduces the transaction intensity of the disbursement process and also facilitates greater focus on measuring results, i.e., number of children immunized. The reallocation and disbursement changes proposed would enhance space for technical dialogue by reducing transaction intensiveness and by improving disbursement. This would shift the emphasis of the dialogue to technical issues, improving program management and quality of services, strengthening fiduciary systems, promoting intersectoral convergence with nutrition and HIV/AIDS and deepening alignment with NRHM. Disbursement of polio operating costs will be limited to states with population greater than 8 million and with satisfactory validation of coverage data (refer Annex 3 for further details). Closing date -Extension of project Closing Date by 18 months (from September 30, 2010 to March 31, 2012): The extension is requested to better align the RCH II Program with the NRHM, of which it forms a major part, and which is scheduled for closure in March 31, This is the first extension of the project. Through continuing Development Partners support for strengthening the state fiduciary systems, this extension will therefore also allow time for strengthening of the sector s fiduciary systems in the states in addition to providing an opportunity for the country to fully access the donor commitments for RCH II. The extended period would provide an opportunity to consolidate the gains seen under the program by focusing on evidence based interventions and improving service delivery to the underserved populations and mainstreaming these under the flagship NRHM. Results/indicators: It is proposed to revise the Results Framework, including revision of 4 indicators (1 PDO, 3 intermediate), addition of 1 new intermediate indicator and dropping 3 intermediate indicators. There is also a better clarification of data sources and frequency of reporting to address data quality issues. Refer Annex 1 for further details. Implementation schedule: The RCH II program will be implemented till March 31, 2012 and will be implemented as part of the umbrella NRHM. 7

8 ANNEX 1: Results Framework and Monitoring Monitoring of the RCH II Program is now included in the national monitoring framework and the Health Management Information Systems (HMIS) established under NRHM. Therefore, it is proposed to align the Results Monitoring Matrix to the NRHM framework to improve timeliness and quality of reporting. The revised results framework is provided below. These include revision of 4 indicators (1 PDO, 3 intermediate), addition of 1 new intermediate indicator and dropping 3 intermediate indicators. There is a better clarification of data sources and frequency of reporting to address data quality issues. Summary of changes is as follows Original indicator Change proposed Revised/new indicator Revised indicators Polio free status achieved (PDO indicator) Revision of indicator to focus on coverage in high risk districts Atleast 80% of households with eligible children covered during national and sub-national immunization days in high risk districts % of districts plans with specific activities to Revision of indicator to improve quality of reporting as district reporting is a % of State plans with specific activities to reach reach vulnerable groups (intermediate) % of districts reporting quarterly financial performance/annual audit reports in time (intermediate) % of upgraded FRUs offering 24 hrs. emergency obstetric care (intermediate) Indicators dropped % of sampled outreach sessions where guidelines for AD syringe use and safe disposal are followed % of districts that were able to implement M&E Triangulation Mechanism for performance awards in place necessary requirement for state reporting Revision of indicator to improve quality of reporting as district reporting is a necessary requirement for state reporting Revision to focus on access in the most lagging states Dropped as data sources unable to capture indicator reliably. This will be monitored during field visits of review missions. Dropped as data sources unable to capture indicator reliably. The new HMIS is being spearheaded under the NRHM and building capacity for data analysis and triangulation is part of the roll out. Dropped. With the NRHM providing a equally huge resource envelope as RCH II pool, this may not provide the same incentive as was envisaged during project design it also may end up providing greater resources to well performing states and hence divert resources from the states that require them the most vulnerable groups % of States reporting quarterly financial performance/annual audit reports in time % of districts (in EAG states+assam) having the following (i) District hospitals conducting at least 25 C-Section in a quarter (ii) At least one sub-district hospital conducting 10 C-section in a quarter

9 Additional indicator Outcome Indicators % of eligible couples using any modern contraceptive method* % of deliveries conducted by skilled providers % of months children fully Immunized % of mothers and newborns visited within 2 weeks of delivery by a trained worker Atleast 80% of households with eligible children covered during national and sub-national immunization days in high risk districts Additional indicator to monitor progress in training of human resources Disaggregat ed by Base -line Arrangements for results monitoring Yr / 06 Yr / 07 Yr / 08 Yr / 09 Yr / 10 Target Values Yr. 6 Yr / Permanent 34% 35% 36% Methods Spacing 11% 12% 16% Methods Overall 45% 47% 52% SC/ST 41% 45% EAG States 33% 35% 40% Overall 48% 55% 60% SC/ST 35% 40% 45% EAG States 32% 35% 45% Female 44% 60% 75% Male 45% 60% 75% Overall 45% 60% 75% SC/ST 39% 50% 75% EAG States 28% 45% 60% Overall <10 20% 40% % * Female Methods: Tubectomy, IUD, Pill and others. ** Male Methods: Vasectomy, NSV and Condoms % of districts conducted following training in the last three months for (i) SBA; and (ii) IMNCI Frequenc y of Reportin g Mid line & End line surveys Data Collection and Reporting Data Tools Household surveys 80% 80% 80% Validated data from monitors engaged by NPSP covering 1% of households Responsibility for Data Collection M&E division National Polio Surveillance Project (NPSP) 9

10 Results indicators for each Component Output Indicators Baseline Yr / /06 Component I Number of states/uts successfully completing institutional mobilization phase % of State plans with specific activities to reach vulnerable groups % of States reporting quarterly financial performance/annual audit reports in time % of district not having at least one month stocks of critical inputs % of 24 hrs. PHCs conducting more than 10 deliveries per month % of districts (in EAG states+assam) having the following (i) District hospitals conducting at least 20 C- Section in a quarter (ii) At least one sub-district hospital conducting 10 C- section in a quarter % of districts conducted following training in the last three months for (i) SBA; and (ii) IMNCI Number of states/uts contracting non-government sector to improve delivery of essential RCH services Target Values Yr. 2 Yr / /08 Yr /09 to 2011/12 Frequency of Reporting Data Collection and Reporting Data Tools Responsibility for Data Collection Annually Annual Reports Director, Donor Coordination, MOHFW NA 25% 50% 75% Annually State Plans Designated Nodal officer, MOHFW State RCH officers NA 60% 80% 100% 100% Quarterly/Annually FMRs Financial Management Group, Audit Reports MOHFW State/SOCIETIES Financial Consultants NA <25% <10% <5% <5% Six-monthly Review Mission reports M&E Division, MOHFW State Demographers NA 10% 25% 50% 60% Midline and Endline NA NA 15 states/uts Facility surveys and review mission reports M&E Division External reviews Annually MIS reports M&E Division Annual Management Reviews M&E Division Annually State PIPs PPP Unit, MOHFW and State RCH Officers 10

11 Results indicators for each Component II and III Output Indicators Base-line 2003/04 Yr /06 Component II Institutional arrangements for NHSRC finalized % of EAG and NE states visited by the MOHFW State facilitation teams Timely completion of mid and end line surveys and studies Component III Non-polio acute flaccid paralysis rate of at least one per 100,000 children below 15 years NA Target Values Yr /07 Yr /08 Inst. Arr. Finalized Yr /09 to 2011/12 Achieved Frequency of Reporting Data Collection and Reporting Data Tools Annual Reports NA 50% 75% 100% 100% Annually Annual Report NA Midline survey End-line survey AFP rate 3.4 AFP rate >1 AFP rate >1 AFP rate >1 AFP rate >1 In and Annually Survey reports Reports of NPSP Responsibility for Data Collection Donor Coordination Division, MOHFW NRHM and Donor Coordination Division, MOHFW M&E Division, MOFHW and International Institute for Population Sciences National Polio Surveillance Project, India Stool Samples collected from at least 80% of acute flaccid paralysis cases within 14 days 82% >80% >80% >80% >80% Annually Reports of NPSP National Polio Surveillance Project, India Additional notes: a. Endline targets for the extended project would remain the same with the exception of Polio Given that Bank s support to the program was delayed by more than 1 year, implementation issues post DIR, reaching better alignment with the NRHM and that the targets are reasonably ambitious, it is proposed to retain the end-line targets. b. PDO indicators (for indicators 1-4) will be measured using mid-term and end-line surveys only to ensure comparability and good data quality c. Lagging (EAG) states progress will be measured as the number of EAG states having achieved the respective targets 11

12 ANNEX 2: Reallocation of Proceeds INDIA: REPRODUCTIVE AND CHILD HEALTH PROJECT II P CREDIT NO IN Restructuring Paper 1. Proceeds for INDIA: REPRODUCTIVE AND CHILD HEALTH PROJECT II 2. P075060, CREDIT NO IN, will be reallocated as follow: Category of Expenditure Allocation Current 4 Current 5 Revised (as on March 2010) (1) Eligible RCH II Project Activities: (a)procurement of 55,000,000 35,000,000 pharmaceuticals and medical supplies % of Financing Current 29% of Eligible RCH II Project Expenditures in Fiscal Year 2005/06, 31% in Fiscal Year 2006/07, 32% in Revised 29% of Eligible RCH II Project Expenditures in Fiscal Year 2005/06, 31% in Fiscal Year 2006/07, 32% in 4 No revision of categories 5 Amended as on Oct 2008

13 (b) other Eligible RCH II Project Activities (2)Polio Eradication Activities (3)Consultant services under Part B.2 of the Project (Procurement Agent) (4)Consultant Services, training and Operating Cost under Part B.3 of the Project (5) Unallocated 25,000,000 67,000,000 67,000, /07, 32% in Fiscal Year 2007/08, and 36% in Fiscal Year 2008/09 or any other percentage that the Association may establish from time to time in consultation with the Borrower. 90,000, ,000, % 100% 7,000,000 7,000, % 100% 1,000,000 1,000, % 100% TOTAL 245,000, ,000, /07, 32% in Fiscal Year 2007/08, and 36% in Fiscal Year 2008/09 and 100% from Fiscal Year 2009/10 to 2011/12 or any other percentage that the Association may establish from time to time in consultation with the Borrower. 13

14 ANNEX 3: Disbursement Arrangements of Polio Operating Costs It is proposed to disburse polio operating costs (under category 2) based on the number of children immunized at standard unit costs. This proposal is on the basis of assessment of existence of (a) robust monitoring and an independent third party data validation system and (b) standard cost norms for various inputs (other than cost of vaccines). The monitoring and independent third party data validation arrangements, standard cost norms and the methodology to determine eligible expenditure are detailed below. Monitoring Arrangements and Information Sources: There are mainly two sources on information on the number of children immunized for polio. The first source of information is from the program data reported and compiled during each round by the Immunization Officer (DIO), which is aggregated at the state and national level to give the aggregate number of children immunized during each round. In addition there is an independent mechanism carried out by the WHO-National Polio Surveillance Project (WHO-NPSP) to validate number of children immunized based on sampled households. Even if there is one child not immunized the entire household is marked as a false positive ( P ). The sample of households are biased towards areas which are at greater risk of poor program implementation and is thereby more likely to over-estimate children not immunized. Since household is taken as a unit of sample the results of the validation is most likely to overestimate the children not immunized but reported as actually immunized. Since the sample is from the same universe of children to be immunized the results of this survey serve as a good proxy for confirming the numbers reported to be immunized. A low false P % indirectly indicates that most children that are reported to be immunized are actually being immunized. Creating universal enumeration beneficiary lists was tried but not continued as it was not practical for program implementation. Standard Unit Cost (Cost Norms) for Polio Operating Costs: Funding to the states and districts for meeting operating costs are determined on the basis of financial guidelines (standard unit cost for each activity) approved by the Cabinet Committee on Economic Affairs (CCEA). The unit cost is broken down into various elements of the operating costs as given below. S.No Activity Average Cost/Child (INR/ Child) Total Cost/ NID * (INR Million) 1 Honorarium for vaccinators and supervisors 4.07 ** Mobility Costs 2.12 ** Local level IEC Others- Training, stationary & Contingency Total Costs In USD 15 cents/child mn 14

15 * Total Cost has been determined on the basis of number of children reported to have been immunized in the previous round, which in this instance was 173 million children ** The CCEA approved an increase in unit rate for honorarium for vaccinators and supervisors from INR 25/day and INR 50/day respectively to INR 75/day and for mobility cost of supervisor to INR 650/day from INR 400/ day from FY onwards As per our assessment the cost norms are reasonable with the honorarium for supervisors and vaccinators being close to the minimum wages. The standard operating cost per child immunized for the year works out to INR 7.19 (or USD 0.15) per child. Funds Flow & Financial Controls: Fund requirement for each round is estimated by MOHFW based on best reported coverage of number of children immunized in the last 3 rounds and the unit cost norm. The amount determined for each state is transferred to the State Societies which in turn transfer the funds to the District or to the Director (Family Welfare) who transfers funds to various lower level implementing units. Given the nature of the program (wide geographical dispersion and campaign mode) and the activities (honorarium to vaccinators and supervisors, mobility and local level IEC), most payments, especially at the peripheral level, are being made in the form of cash. Utilization Certificates (UC) are required to be sent from sub-district level upwards to the state, where these UCs are consolidated and sent to MOHFW. Given the decentralized nature of the program, these activities are often delayed, leading to a lag between the program implementation and financial reporting, both in the interim financial reports and also in the audit reports. Determination of Eligible Expenditure: For the purpose of financing by the pooling partners the eligible expenditure will be determined as follows: a) State with a population greater than 8 million 6 and reporting over 90% validated coverage (less than 10% 7 false P cases) will be considered as an eligible state. b) The eligible expenditure will be calculated by multiplying the number of children vaccinated by the standard unit cost norm for polio operating cost per child. The IEC costs are excluded as it does not fall within the definition of operating cost in the DCA. c) 100% of this eligible expenditure will be reimbursed by the pooling partners. The disbursement will be done annually in-line with the current disbursement arrangements for the Reproductive and Child Health (RCH-II) pooled funds. Audit Reports for Polio Operating Costs: Audit Reports for this program will also be submitted along with RCH-II and National Rural Health Mission (NRHM), i.e., within six months of the close of the Indian financial year. These reports will be reviewed for any serious accountability issues only and not as a basis to review the standard costs or adjusting the excess/short expenditure since: (i) the standard unit costs are periodically determined by MOHFW and approved by CCEA; (ii) the expenditure (un-audited and audited expenditures are reported with a lag); However, in case a eligible state does not provide the audit report for polio operating costs and/or the report has serious accountability issues the same will be considered for adjustment. 6 According to 2001 census of Government of India; covering about 15 major states 7 As 90% coverage is considered to be good from a epidemiological perspective as it provides herd immunity to reduces transmission of the wild polio virus 15

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