India: Supporting the Second West Bengal Development Finance Program

Transcription

1 Second West Bengal Development Finance Program (RRP IND 49209) Technical Assistance Report Project Number: Transaction Technical Assistance (TRTA) August 2017 India: Supporting the Second West Bengal Development Finance Program This document is being disclosed to the public in accordance with ADB s Public Communications The views expressed herein are those of the consultant and do not necessarily represent those of ADB s Policy members, Board of Directors, Management, or staff, and may be preliminary in nature.

2 CURRENCY EQUIVALENTS (as of 1 August 2017) Currency Unit Indian rupee/s ( ) 1.00 = $ $1.00 = ABBREVIATIONS ADB Asian Development Bank GOWB Government of West Bengal TRTA transaction technical assistance NOTES (i) (ii) The fiscal year (FY) of the Government of India and its agencies ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2017 ends on 31 March In this report, $ refers to United States dollars unless otherwise stated. Vice-President W. Zhang, Operations 1 Director General H. Kim, South Asia Department (SARD) Director B. Carrasco, Public Management, Financial Sector and Trade Division, SARD Team leader Team members Peer reviewer N. Karan, Senior Public Management Economist, SARD A. Gacutan, Senior Operations Assistant, SARD L. Gamolo, Operations Assistant, SARD P. Gutierrez, Project Analyst, SARD J. Moreno, Senior Project Assistant, SARD H. Mukhopadhyay, Principal Public Management Specialist, Central and West Asia Department A. Sen Gupta, Senior Economics Officer, SARD Y. Seo, Senior Counsel, Office of the General Counsel J.L. Gomez Reino, Principal Public Management Specialist, Southeast Asia Department In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

3 2 CONTENTS Page I. THE PROPOSED PROGRAM 1 II. THE TECHNICAL ASSISTANCE 1 A. Justification 1 B. Outputs and Activities 2 C. Cost and Financing 2 D. Implementation Arrangements 2 APPENDIXES 1. Cost Estimates and Financing Plan 4 2. List of Linked Documents 5

4 I. THE PROPOSED PROGRAM 1. The proposed Second West Bengal Development Finance Program seeks to facilitate the continuation of a comprehensive fiscal consolidation program in West Bengal initiated in This will generate fiscal savings and thereby assist West Bengal to augment growth-enhancing development financing and improve the delivery of public services. The impact of the program will be improved accessibility, quality, and affordability of public services. The outcome of the program will be improved and sustained investment in the state, particularly in the social and economic sectors. 1 The program has three output areas: (i) expenditure rationalization efforts accelerated, (ii) facilitation of private investment improved, and (iii) revenue administration strengthened. 2. Based on the development financing requirements of the policy reform program, the Government of India has requested a regular loan of $300 million from the Asian Development Bank s (ADB s) ordinary capital resources to help finance the program. The loan will have a 15-year term, including a grace period of 3 years, an annual interest rate determined in accordance with ADB s London interbank offered rate (LIBOR)-based lending facility, a commitment charge of 0.15% per year, and such other terms and conditions as set forth in the draft loan and program agreements. There is no maturity premium payable to ADB. The Government of India will relend to the Government of West Bengal (GOWB) the local currency generated from the proceeds of the total loan amount in accordance with its arrangement for transfer of external assistance to GOWB. Two tranches of $150 million each are envisaged, with the first tranche disbursed upon loan effectiveness, and the second tranche 22 months after the first tranche, or earlier. 3. At the request of the Government of India, ADB will provide the borrower with an option to request disbursement in Indian rupees (INR) for either or both of the tranches under the Second West Bengal Development Finance Program. In effect, withdrawals under either or both of the tranches may be made in INR or United States dollar (USD), on terms and conditions as set forth in the draft loan and program agreements. The tenor and grace period of the INR portion of the loan will match that of the USD loan, and will have a 15-year term, including a grace period of 3 years. The local currency financing option is at the discretion of the borrower. It can choose not to exercise it. At the same time, ADB has provided this option to the borrower on a best efforts basis. II. THE TECHNICAL ASSISTANCE A. Justification 4. The proposed transaction technical assistance (TRTA) is being processed at the request of the Department of Finance, GOWB to support the Second West Bengal Development Finance Program. The results framework, implementation arrangements, cost estimate, and terms of reference of the TRTA were discussed with GOWB during the fact-finding mission and updated during the pre-loan negotiations mission. 5. The rationale of the second program is to cover a comprehensive reform plan for developing the state s finances combined with an investment component that provides viability gap funding to finance public private partnership infrastructure projects. The primary outcome of the TRTA is strong GOWB institutions that are responsible for reform programs across various 1 The design and monitoring framework is in Appendix 1 of the Report and Recommendation of the President.

5 2 activities so that they can improve fiscal management performance. A key objective of the TRTA is to support the GOWB to comply with all policy conditions under the second program. B. Outputs and Activities 6. An assessment of the institutional capacity of the GOWB was carried out for the second program. The proposed TRTA will enhance capacity in the following areas: 7. Output 1: Revenue administration strengthened. The TRTA will support the GOWB in (i) implementation of the goods and services tax; (ii) implementation of a supply chain management system in state excise, and (iii) strengthening of the property registration system. 8. Output 2: Project appraisal and monitoring capacity strengthened. The TRTA will train and assist the Fiscal Policy and Management Unit in project appraisal and monitoring. 9. Output 3: Medium-term expenditure frameworks developed. Support will be provided to update the medium-term expenditure frameworks prepared under the first program, and link the updated frameworks with actual budget allocations for FY Output 4: West Bengal Investment and Infrastructure Development Fund (WBIIDF) operationalized. Technical support will be provided to support and build capacity of the FPMU staff to select, structure, and develop the public private partnership projects that will be provided viability gap funding under the second program. 11. Output 5: Internal audit strengthened. The TRTA will help strengthen the internal audit department within the Finance Department, including the introduction of a risk-based audit manual. C. Cost and Financing 12. The TRTA is estimated to cost $600,000, of which $500,000 will be financed on a grant basis by ADB s Technical Assistance Special Fund (TASF-other sources). The GOWB will provide counterpart staff remuneration, office accommodation and supplies, local transport, other logistical support, and other in-kind contributions. The key expenditure items are listed in Appendix 1. The GOWB was informed that approval of the TRTA does not commit ADB to finance any ensuing project. D. Implementation Arrangements 13. The administration of the TRTA will be delegated to the Finance Department, GOWB, which will be the executing agency. The implementation arrangements for the TRTA will be aligned with those of the policy-based loan (Table 1). The Fiscal Policy and Management Unit will implement the TRTA components. A total of 28 person-months of national consultancy services will be required intermittently. The TRTA is estimated to begin in October 2017 and will be implemented over 24 months until October Table 1: Implementation Arrangements Aspects Arrangements Indicative implementation period October 2017 October 2019 Executing agency Consultants Finance Department, Government of West Bengal To be selected and engaged by ADB

6 3 Aspects Disbursement Arrangements QCBS 28 person-months $410,000 The TRTA resources will be disbursed following ADB s Technical Assistance Disbursement Handbook (2010, as amended from time to time). ADB = Asian Development Bank, QCBS = quality- and cost-based selection, TRTA = transaction technical assistance. Source: Asian Development Bank estimates. 14. Consulting services. A consulting firm will be engaged for recruiting the national consultants using the quality- and cost-based selection method with a standard quality cost ratio of 90:10. The consultants will be engaged by ADB in accordance with the Guidelines on the Use of Consultants (2013, as amended from time to time). 2 Lump-sum payments and output-based contracts will be considered for consulting services under the TRTA. All disbursements under the TRTA will be made in accordance with ADB s Technical Assistance Disbursement Handbook (2010, as amended from time to time). 2 Terms of Reference for Consultants (accessible from the list of linked documents in Appendix 2).

7 4 Appendix 1 COST ESTIMATES AND FINANCING PLAN ($ 000) Item Amount Asian Development Bank a 1. National consultants a. Remuneration and per diem 335 b. Out-of-pocket expenditures (i) Local travel 5 2. Training, seminars, and conferences Pilot testing a. Goods 4. Contingencies Total 500 Note: The transaction technical assistance (TRTA) is estimated to cost $600,000, of which contributions from the Asian Development Bank are presented in the table above. The government will provide counterpart support in the form of counterpart staff remuneration, office accommodation and supplies, local transport, other logistical support, and other in-kind contributions. a Financed by Asian Development Bank s Technical Assistance Special Fund (TASF-other sources). Source: Asian Development Bank estimates.

8 Appendix 2 5 LIST OF LINKED DOCUMENTS Terms of Reference for National Consultants