India: Madhya Pradesh Irrigation Efficiency Improvement Project

Transcription

1 Madhya Pradesh Irrigation Efficiency Improvement Project (RRP IND 45371) Project Administration Manual Project Number: Loan Number: LXXXX April 2018 India: Madhya Pradesh Irrigation Efficiency Improvement Project

2 ABBREVIATIONS ADB Asian Development Bank CAG Comptroller and Auditor General of India CCA culturable cultivation area CRVA Climate Risk and Vulnerability Assessment DBO design build operate DEA Department of External Affairs EIA environmental impact assessment EMP environmental management plan GRM grievance redress mechanism ha hectare KIP Kundalia Irrigation Project KMMP Kundalia Major Multipurpose Project km 2 square kilometer LAF land acquisition framework LAP land acquisition plan MCM million cubic meters MPIEIP Madhya Pradesh Irrigation Efficiency Improvement Project MPWRD Water Resources Department Madhya Pradesh PDPC project design and procurement consultant PIU project implementation unit PMU program management unit PSC project steering committee SPS Safeguard Policy Statement SSIP Sanjay Sarovar Irrigation Project TA project preparatory technical assistance

3 CONTENTS PROJECT DESCRIPTION 1 A. Rationale 1 B. Impact and Outcome 3 C. Outputs 3 II. IMPLEMENTATION PLANS 5 A. Project Readiness Activities 5 B. Overall Project Implementation Plan 6 IX. PROJECT MANAGEMENT ARRANGEMENTS 8 A. Project Implementation Organizations: Roles and Responsibilities 8 B. Key Persons Involved in Implementation 12 C. Project Organization Structure 12 COSTS AND FINANCING 15 A. Cost Estimates Preparation and Revisions 16 B. Key Assumptions 16 C. Detailed Cost Estimates by Expenditure Category 17 D. Allocation and Withdrawal of Loan Proceeds 18 E. Detailed Cost Estimates by Financier 19 F. Detailed Cost Estimates by Output 20 G. Detailed Cost Estimates by Year 21 H. Contract and Disbursement S-Curve 22 I. Fund Flow Diagram 22 FINANCIAL MANAGEMENT 24 A. Financial Management Assessment 24 B. Disbursement 25 C. Accounting 25 D. Auditing and Public Disclosure 26 PROCUREMENT AND CONSULTING SERVICES 27 A. Advance Contracting and Retroactive Financing 27 B. Procurement of Goods, Works, and Consulting Services 28 C. Procurement Plan 29 D. Consultant's Terms of Reference 29 SAFEGUARDS 29 A. Environment 29 B. Involuntary Resettlement 30 C. Implementation Arrangements 31 D. Grievance Redress Mechanism 33 E. Health and Safety 34 F. Prohibited Investment Activities 35 GENDER AND SOCIAL DIMENSIONS 35 PERFORMANCE MONITORING, EVALUATION, REPORTING, AND COMMUNICATION 36 A. Project Design and Monitoring Framework 36 B. Monitoring 38 C. Evaluation 40

4 D. Reporting 40 E. Stakeholder Communication Strategy 41 X. ANTICORRUPTION POLICY 41 XI. ACCOUNTABILITY MECHANISM 41 XII. PROJECT SUSTAINABILITY 42 XIII. RECORD OF CHANGES TO THE PROJECT ADMINISTRATION MANUAL 42 APPENDIXES 1. Financial Management Risk Categorization Procurement Plan Terms of Reference for Implementation Support and Capacity Building Consultant Terms of Reference for Project Design and Procurement Consultant (PDPC) Project Preparation of Sanjay Sarovar Irrigation Project (SSIP) Modernization Project Participation and Communication Strategy Concept Paper on Water Pricing for Pressurized Irrigation Service Delivery for Agriculture Use 80

5 Project Administration Manual Purpose and Process The project administration manual (PAM) describes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with the policies and procedures of the government and Asian Development Bank (ADB). The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM. The Madhya Pradesh Water Resources Department is wholly responsible for the implementation of ADB-financed projects, as agreed jointly between the borrower and ADB, and in accordance with the policies and procedures of the government and ADB. ADB staff is responsible for supporting implementation including compliance by the Madhya Pradesh Water Resources Department of their obligations and responsibilities for project implementation in accordance with ADB s policies and procedures. At loan negotiations, the borrower and ADB shall agree to the PAM and ensure consistency with the loan agreement. Such agreement shall be reflected in the minutes of the loan negotiations. In the event of any discrepancy or contradiction between the PAM and the loan agreement, the provisions of the Loan agreement shall prevail. After ADB Board approval of the project's report and recommendations of the President (RRP), changes in implementation arrangements are subject to agreement and approval pursuant to relevant government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval, they will be subsequently incorporated in the PAM.

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7 PROJECT DESCRIPTION A. Rationale India requires irrigation water use efficiency and productivity improvement. Water plays a critical role in India s food security and welfare of the rural poor as 84% of all water withdrawals are dedicated to agriculture and 42% of all agricultural land is irrigated. India benefits from only 4% of the world s renewable fresh water but has 16% of the world s population. 1 With intense urbanization and industrialization, the need for water from the nonagriculture sector is fast increasing and water shortage is becoming a major concern for industries. At the same time population growth and change in dietary habits require continued growth in agricultural production. By 2050, annual water availability per capita in India is expected to drop from 1,530 cubic meters to 1,140 cubic meters, indicating severe water stress. 2 The current average irrigation water use efficiency of 38% points towards the need for serious performance improvement in this sector. 3 The productivity of irrigation water is further hampered by low crop yields and cultivation of low-value crops. Therefore, most of India s utilized water not only supports activities with low economic value but is also inefficiently used. In the meantime, water shortages are constraining water-dependent power production and the development of high-value industries that are required to fuel the country s economic growth. These problems will worsen in the future with the projected impacts of population and economic growth, and with climate change, which will increase both irrigation water demand and uncertainty around the reliability of water resources. Irrigation modernization is a key strategy to reducing water wastage. The Government of India recognizes the situation. Both the Three Year Action Agenda ( to ) 4 and the 2015 Pradhan Mantri Krishi Sinchayee Yojana program have acknowledged the necessity to improve water use efficiency in irrigation. 5 In 2014, the Asian Development Bank (ADB) funded the Scoping Study for a National Water Use Efficiency Improvement Support Program. 6 The study identified the following three main causes for low water use efficiency: (i) inadequate irrigation and drainage infrastructure because of faulty designs and lack of maintenance; (ii) inadequate management, operation and maintenance (MOM) of the irrigation systems; and (iii) inadequate capacity building and training services. The study highlights the need to modernize the design and management of major- and medium-sized irrigation (MMI) schemes to reduce system inefficiencies and substantially improve water delivery services to farmers. It proposed a framework for assessing and improving water use efficiency on MMI schemes. Under a subsequent regional technical assistance, the framework was successfully pilot tested on such schemes within South Asia. The study also developed comprehensive modernization strategies for existing irrigation systems and recommended a tailored investment plan for the SSIP. 7 1 T. A. Bhat An Analysis of Demand and Supply of Water in India. 4 (11). Journal of Environment and Earth Science. 4(11). p Government of India, Central Water Commission Water and Related Statistics. New Delhi; Government of India Census of India. New Delhi. 3 Water use efficiency is the ratio between the fraction of irrigation water used for productive crop evapotranspiration within the boundaries of the scheme and the total volume of water diverted at the intake to the irrigation system. 4 Government of India, NITI Aayog Three Year Action Agenda ( to ). New Delhi. 5 Government of India, Ministry of Agriculture and Farmers Welfare Pradhan Mantri Krishi Sinchayee Yojana. New Delhi. 6 ADB Support for the Implementation of the National Water Mission by State Governments in India: Scoping Study for a National Water Use Efficiency Improvement Support Program. Manila. 7 ADB Technical Assistance for Innovations for More Food with Less Water into Regional Cooperation. Manila. (TA 7967-REG, completed in 2015).

8 2 Madhya Pradesh plan to expand and modernize irrigation. Since 2010, the Government of Madhya Pradesh has embarked on an ambitious irrigation expansion and modernization plan. New developments, infrastructure modernization and substantial management and operation improvement led to an increase in net irrigation area from 0.85 million ha in 2006 to 3.6 million ha in These efforts have been rewarded by record annual agricultural growth of 20% in The state plans to further increase the total irrigated area to 7.2 million ha by This will be achieved by maximizing irrigation efficiency and water productivity in both new and existing irrigation systems. It includes development of pressurized irrigation, adoption of micro-irrigation and production of high-value crops. The state has set the ambitious target of developing pressurized irrigation in 80% of all irrigated areas by The plan is estimated to cost $20 billion. The Water Resources Department Madhya Pradesh (MPWRD) has requested ADB assistance to help finance this plan and, more importantly, to provide advice on developing highly efficient and sustainable model for MMI schemes that will serve as reference for future modernization investments. The KIP will include the design and construction of a highly efficient and productive new pressurized irrigation system with automated volumetric control for efficient, reliable and flexible water delivery services. The KIP will be supplied by the reservoir being built under the Kundalia Major Multipurpose Project (KMMP). Modernization being conducted under the SSIP will include (i) upgrading infrastructure to improve conveyance efficiency and flow regulation, and (ii) extending the command area and partially converting to pressurized irrigation and micro-irrigation. 8 Innovation and ADB value addition. The project supports both technical and institutional innovations. The technical innovation involves designing and constructing a very large scale pressurized and automated irrigation system that will allow considerable gains in water use efficiency. On the institutional side, the project introduces the design build operate (DBO) contracting modality. There are very few examples of irrigation DBO contracts in India and none on such large systems and with such a long MOM period. The DBO approach addresses critical lessons from past projects. It aims to address recurrent publicsector inefficiencies in irrigation MOM. The DBO modality will also substantially enhance irrigation service delivery to farmers and encourage contractors to build quality and efficient irrigation systems to reduce MOM costs. Value added by ADB assistance consists of providing state of the art technical support for designing the KIP and SSIP, supervising KIP construction, MOM and agriculture support services, preparing DBO bidding documents and providing support for efficient management of the DBO contracts. The current limited expertise of MPWRD with pressurized irrigation, irrigation modernization and performance-based irrigation management will be substantially enhanced through the project. The project is consistent with the objectives of ADB s country partnership strategy, for India. 9 It will support the country s Three Year Action Agenda ( to ) (footnote 4) and the Pradhan Mantri Krishi Sinchayee Yojana program objectives (footnote 5) to increase irrigation water productivity. 8 Micro-irrigation is an irrigation method that is localized to the crop root zone and uses low volume of water and low pressure. Micro-irrigation systems used under the project are drippers and micro-sprinklers. 9 ADB Country Partnership Strategy: India, Accelerating Inclusive Economic Transformation. Manila.

9 3 B. Impact and Outcome The project is aligned with the following impacts: (i) India farmers income doubled by 2022 (footnote 4); (ii) India s more crop per drop achieved (footnote 5); and (iii) resilience of farmers in the project area to ongoing and uncertain future climate change increased. 10 The project will have the following outcome: higher irrigation efficiency, agricultural water productivity and climate resilience in Madhya Pradesh achieved. 11 C. Outputs The project will have four Outputs: Output 1: Kundalia Irrigation Project infrastructure constructed. The KIP will consist of two large pumping stations pumping water to distribution chambers from where water will be distributed by gravity pressure through a network of buried pipelines that gradually reduce in size up to end user and/or farm outlets (hydrants every 1 2 ha). The system is designed to provide pressure of 200 kilopascal at the outlet for field micro-irrigation systems. Output 2: Kundalia Irrigation Project performance-based operation and maintenance established. This output will be delivered by contracting a private sector operator under a DBO contract modality. The contractor will be tasked to operate and maintain the system for a period of 5 years after completion of the construction. During this period the contractor will need to meet several performance indicators related to system leakage, electricity consumption, and noninterruption of operation. The contractor will provide on- the-job training to MPWRD staff. A supervisory control and data acquisition system and a decision support system will be installed to facilitate the MOM of the system. Output 3: Farmers capacity for rapid uptake of micro-irrigation technology in the Kundalia Irrigation Project command area enhanced. This output will be achieved by (a) establishing and building the capacity of the water users associations (WUAs), (b) establishing micro-irrigation farm demonstration sites, and (c) establishing farmers service centers and conducting farmers field schools to support adoption of micro-irrigation and productive irrigated agriculture including high-value crops. These activities will be carried out by the DBO contractor(s) in a collaborative relationship with government agencies and stakeholders. The DBO contracts include performance guarantees for the area equipped with microirrigation systems at year 1, 3 and 5 after commissioning. Output 4: Modernization of the Sanjay Sarovar Irrigation Project welldesigned with project readiness criteria met. This output will be achieved by (a) preparing a comprehensive SSIP modernization plan, (b) undertaking a feasibility study and detailed design of the proposed plan, (c) developing an institutional strategy to enhance the performance and sustainability of SSIP MOM, (d) preparing bidding documents for the modernization works and consultant request for proposal for the ensuing project implementation and construction quality supervision, and (e) supporting MPWRD and ADB to meet the project processing requirements. 10 Defined by the project. 11 The design and monitoring framework is in Appendix 1.

10 4 Figure 1: Map of Investment Project

11 5 II. IMPLEMENTATION PLANS The tentative schedule for the investment project is based on initiating bidding of contracts in Q via advance contracting and retroactive financing. The project is designed for an 8- year implementation period. A. Project Readiness Activities Indicative Activities Table 1: Project Readiness Milestones Publish IFB of Left Bank DBO contract X MPWRD Publish IFB of Right Bank DBO contract Q2 MPWRD Responsible Individual/ Unit/ Agency/ Government Approval of EIA and IEE and initiate implementation of resettlement plans Q2 ADB, MPWRD Recruitment of ISCBC Q1 MPWRD Mobilization of ISCBC Q2 MPWRD Recruitment of PDPC Q2 MPWRD Mobilization of PDPC Q4 MPWRD Establish project implementation arrangements X MPWRD Award of Left Bank DBO contract Q2 MPWRD Award of Right Bank DBO contract Q4 MPWRD ADB Board approval Q2 ADB Loan signing Q2 ADB, DEA, MPWRD Government legal opinion provided Government budget inclusion Loan effectiveness Q3 ADB = Asian Development Bank, DBO = design build operate, DEA = Department of Economic Affairs, EIA = environmental impact assessment, IEE = initial environment examination, IFB = invitation for bids, ISCBC = implementation support and capacity building consultants, MPWRD = Water Resources Department Madhya Pradesh, PDPC = project design and procurement consultants. Source: Asian Development Bank. Q3 Q3

12 6 B. Overall Project Implementation Plan Indicative Activities A. DMF Output 1: KIP infrastructure constructed Activity 1.1: Finalize DBO bidding documents and award contracts for design and construction (Q Q4 2018) Activity 1.2: Supervise detailed design preparation (Q Q2 2019) Activity 1.3: Supervise construction (Q Q3 2021) Activity 1.4: Commission scheme and monitor technical performance (Q Q3 2022) Output 2: KIP performance-based operation and maintenance Activity 2.1: Design and install SCADA (Q Q3 2021) Activity 2.2: Develop irrigation planning decision support system and prepare irrigation plan (Q3 Q4 2020) Activity 2.3: Develop a management, operation and maintenance manual (Q4 2020) Activity 2.4: Train MPWRD staff on management, operation and maintenance (Q Q4 2025) Activity 2.5: Supervise contractors management, operation and maintenance performance (Q Q4 2025) Output 3: Farmers capacity for rapid uptake of micro-irrigation technology in KIP command area enhanced Activity 3.1: Promote formation and capacity building of water users associations (Q Q1 2021) 2017 (Qtr) 2018 (Qtr) Table 2: Implementation Schedule 2019 (Qtr) 2020 (Qtr) 2021 (Qtr) X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 2022 (Qtr) X X X X X X X 2023 (Qtr) 2024 (Qtr) 2025 (Qtr) X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 2026 (Qtr)

13 7 Indicative Activities Activity 3.2: Establish farmers service centers and conduct farmers field schools (Q Q1 2024) Activity 3.3: Establish micro-irrigation demonstrations site over 1% of the command area (Q Q4 2025) Activity 3.4: Monitor and evaluate the performance (Q Q1 2026) Output 4: Modernization of the Sanjay Sarovar Irrigation Project well-designed with project readiness met Activity 4.1: Recruitment PDPC SSIP modernization preparation consulting services (Q2 Q4 2018) Activity 4.2: Develop SSIP modernization plan (Q1 2019) Activity 4.3: Prepare feasibility study and detailed design (Q Q2 2020) Activity 4.4: Prepare bidding documents and award 30% civil works contract (Q1 Q3 2020) B. Management Activities Set-up financial management system Recruitment of ISCBC Set-up project performance monitoring system 2017 (Qtr) 2018 (Qtr) 2019 (Qtr) 2020 (Qtr) 2021 (Qtr) X X X X X X X 2022 (Qtr) 2023 (Qtr) X X X X X X X X X X X X X X X X X X X X 2024 (Qtr) 2025 (Qtr) X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Annual and/or midterm review X X X X X X X X Project completion report X DBO = design build operate, DMF = design and monitoring framework, ISCBC= implementation support and capacity building consultants, KIP = Kundalia Irrigation Project, mth = month, PDPC= project design and procurement consultants, qtr = quarter, SCADA = supervisory control and data acquisition, SSIP = Sanjay Sarovar Irrigation Project. Source: Asian Development Bank (Qtr)

14 8 PROJECT MANAGEMENT ARRANGEMENTS A. Project Implementation Organizations: Roles and Responsibilities Table 3: Project Roles and Responsibilities Project Implementation Management Roles and Responsibilities Organizations MPWRD (executing agency) Provides overall coordination of all project activities Leads interagency coordination Provides policy guidance, strategic direction, and oversight Ensures adequacy of overall investment project financing Establishes the PMU and ensuring staffing positions are continuously filled with appropriately qualified and experienced officers and support staff Secures annual budgetary allocations proposed by the PMU Ensures approval of contract packages by Engineer-in-Chief Monitors and ensures compliance of loan covenants and environmental and social safeguards, and facilitate the implementation of corrective actions Chairs and establishes the PSC. PSC Chaired by Secretary, Water Resources Department. PMU Members include: Chair: Secretary, Water Resources Department Secretary: MPIEIP Project Director Member: Department of Finance Member: Department of Agriculture Member: Department of Horticulture Member: Department of Energy Member: Department of Rural Development Member: Department of Animal Husbandry Member: Madhya Pradesh Agricultural Marketing Board Member: Madhya Pradesh State Cooperative Bank (Apex Bank) Member: WALMI The PSC will be responsible for: - meeting semi-annually or more frequently as needed - providing policy guidance and support for project implementation - facilitating inter-departmental coordination for implementation at the state level - overseeing compliance to covenants of loan agreements and central government requirements - approving annual project plans - monitoring project progress including achieving development objectives and safeguard compliance The PMU will be accommodated within MPWRD PICU offices in Bhopal. It will be led by a Project Director with the rank of Chief Engineer, who will be responsible for overall execution of the investment project. The project director will liaise directly with ADB. The core functions of the PMU include: - design and planning - procurement of goods, works and services - contract supervision and quality assurance control

15 9 Project Implementation Organizations PIUs Management Roles and Responsibilities - project finance management - approving site environmental management plan submitted by DBO contractors - reviewing the land acquisition plans submitted by DBO contractors and submit to ADB for approval - implementation of environmental and social safeguards - project monitoring and evaluation. The specific functions of the PMU include: preparing implementation plans and annual budgets liaising and corresponding with ADB on all issues relating to the investment project coordinating with other government agencies to resolve any interdepartmental issues, and other aid agencies for implementation of non-physical activities as necessary approving all planning, design and contract documents associated with the investment project preparing and submitting to ADB: (i) quarterly progress reports; (ii) quarterly disbursement projections; and (iii) updated implementation plans, etc. recruiting and managing ISCBC acting as the Employer for all civil works packages overseeing and managing the procurement of services, works and goods maintaining investment project accounts and comprehensive loan financial records, and submitting consolidated quarterly reports monitoring physical and non-physical investment activities under the project preparing and submitting (i) reports to the PSC for consideration and approval; (ii) quarterly project progress report; (iii) audit reports; and (iv) reports mandated under the loan and project agreements submit environmental monitoring, EMP implementation, and land acquisition monitoring implementation reports to ADB in semi-annual basis preparing and submitting withdrawal applications to CAAA/ ADB reviewing, approving and transferring request for payments preparing media information and implementing the investment project s communications plan updating and monitoring of the satisfactory implementation of resettlement plans, environment management plans (EMPs), and any correction action plans including resettlement plans for additional facilities such as access roads and camps, consistent with safeguards requirements and ADB s Safeguards Policy Statement (2009), and submitting updated safeguards and monitoring reports for review and disclosure. Under the PMU, MPWRD will establish four separate PIUs: two each for the left bank and right bank command areas. The specific functions of the PIUs include managing contracts awarded under the KIP reviewing and approving submissions from contractors

16 10 Project Implementation Organizations DSU Management Roles and Responsibilities monitoring the implementation of EMPs related with construction works, and implementation of resettlement (land acquisition) plans for temporary acquisition by the contractors in compliance with the government and ADB s requirement work closely with the District Revenue to implement resettlement (land acquisition) plans for permanent acquisition Assist the peoples who are affected by permanent acquisition of land to renew their land certificate/registration preparing quarterly safeguards progress reports acting as focal point for the implementation of the grievance and redress mechanism and complaint resolutions day-to-day monitoring physical and non-physical investment activities under the project coordinating with the field staff of concerned line departments coordinating with WUAs and individual farmers of beneficiary villages served by the irrigation system implementing safeguards actions following the relevant plans conducting stakeholder consultations Under an executive engineer (Seoni), DSU will be responsible for identifying requisite staff and placing them in the DSU The DSU will be responsible for: technical supervision of project activities and monitoring of PDPC providing inputs to the project planning and design process collecting and providing PDPC with data and information, as needed undertaking any necessary additional surveys and investigations to support designs and implementation, if not done by PDPC reviewing and validating feasibility study and detailed designs liaising and corresponding with PMU and BODHI on all issues relating to the SSIPM ensuring all stakeholders are effectively consulted and information disseminated as required during project preparation ISCBC Provide MPWRD with training for capacity building in program financial management Review and approve the DBO Contractor s detailed design and enhance the technical capacity of MPWRD s engineering staff Support with supervision and quality monitoring during construction Assist the PMU in implementing safeguards requirement including monitoring reports according to the requirements of ADB s SPS (2009) Provide technical and management advice in specialized topics such as pump station engineering and high-performance irrigation PDPC The PDPC will be recruited as an international consulting firm comprising 63 person-months for international consultants and 107 person-months for national consultants. The main services will support MPWRD by preparing feasibility study, detailed designs, safeguard documents, and bidding documents for a high-performance modernization upgrade of the SSIP. DBO Contractors Two DBO Contracts will be awarded for the KIP Right and Left banks command areas. The specific responsibilities of the contractors include: Detailed design and engineering Civil works construction

17 11 Project Implementation Management Roles and Responsibilities Organizations Installation and connection of electrical utilities Design, installation and testing of SCADA and DSS Implementation of the EMP Commissioning of pumping stations and pipelines Training of MPWRD operators and stakeholders Micro irrigation demonstrations and Farmers Field Schools Operation and maintenance of KIP Preparing land acquisition plans and site environmental management plan to obtain approval from the PMU ADB Monitors and reviews overall implementation of the investment project in consultation with MPWRD, including compliance with ADB s guidelines and loan and project agreements.: Reviews and approves SSIPM feasibility and detailed designs, safeguard documents and other due diligence to be prepared by PDPC and process SSIPM additional financing Undertakes periodic review and supervision of the implementation of the investment project through regular review missions, midterm and final review missions ADB = Asian Development Bank, BODHI = Bureau of Design and Hydroelectric and Irrigation, DBO = design build operate, DSU = design support unit, EMP = environmental management plan, KIP = Kundalia Irrigation Project, MPIEIP = Madhya Pradesh Irrigation Efficiency Improvement Project, MPWRD = Water Resources Department Madhya Pradesh, PDPC = project design and procurement consultant, PIU = project implementation unit, PMU = project management unit, PSC = project steering committee, SPS = safeguard policy statement; SSIPM = Sanjay Sarovar Irrigation Project Modernization; WALMI = Water and Land Management Institute. Source: Asian Development Bank.

18 12 B. Key Persons Involved in Implementation Executing Agency Madhya Pradesh Water Resources Department Mr. Ashok Jain Project Director Telephone: / ce.mpwrd.projects@gmail.com Office of the Project Director Jal Sansadhan Bhavan Link Road No.-2 Bhopal Fax: Asian Development Bank India Resident Mission Environment, Natural Resources and Agriculture Division (SAER) Mission Leader Mr. Kenichi Yokohama Country Director 4 San Martin Marg Chanakyapuri, New Delhi , India PO BOX Chanakyapuri HPO, India Telephone: Fax: Ms. Mio Oka Director, SAER Telephone: Fax: moka@adb.org Mr. Arnaud Cauchois Principal Water Resources Specialist Telephone: Fax: acauchois@adb.org C. Project Organization Structure Figure 2 shows the reporting lines and essential internal structures of key organizations involved in implementation of the project. The PMU staffing are in shown in Table 4.

19 13 Figure 2: Project Organizational Structure Project Steering Committee chaired by the Secretary. Representatives of relevant ministries, project director, heads of relevant departments Water Resources Department Secretary Engineer-in-Chief Asian Development Bank Implementation Support and Capacity Building Consultants Program Management Unit in the Project Implementation and Coordination Unit Chief Engineer, Projects 4 Project Implementation Units Circle (Superintending Engineer Office) 4 Divisions (4 Executive Engineer s Offices) Design Support Unit Sanjay Sarovar Irrigation Project Chief Engineer, Seoni Project Design and Procurement Consultants Left Bank DBO Contractor Right Bank DBO Contractor Water User Associations and Farmers Water User Associations and Farmers DBO = design build operate.

20 14 No Table 4: Project Management Staffing Requirements Name and roles of staff in PMU PMU CE Office No. of Posts for KIP a SE Office PIUs EE Offices Sub- Div. Total 1 Chief Engineer (Project Director) Superintending Engineer (Deputy Project Director) Executive Engineers (1 for contract management of KIP Right Bank and 1 for KIP Left Bank contracts) Engineering Administrative Officer (Administration Manager) Finance Manager Finance Officer 1 1 SSIPM DSU b 7 Account Officer Assistant Engineer (contract management 2, M&E 1, procurement 1, administration 1) Environmental Officer Social Development Officer Head Draftsman Draftsman Sub Engineer Assistant Draftsman Assistant Grade Assistant Grade Assistant Grade Personal Assistant Grade Personal Assistant Grade Stenographer Steno Typist Tracer Record keeper Peon Watchman Total a Full-time b Additional duties, as required CE = Chief Engineer, DSU = decision support unit, EE = Executive Engineer, KIP = Kundalia Irrigation Project, M&E = monitoring and evaluation, PIU = project implementation unit, PMU = project management unit, SE = Superintending Engineer, SSIPM = Sanjay Sarovar Irrigation Project Modernization.

21 15 COSTS AND FINANCING The cost of the project is estimated at $ million, inclusive of taxes and duties, and financing charges during implementation (Table 5). The ADB loan will finance the cost of the following items (excluding applicable taxes and duties): (i) DBO contracts for left and right banks, (ii) individual consultant contracts, (iii) consulting services for the SSIP preparation, and (iv) training. The Government of Madhya Pradesh will provide counterpart fund contributions equivalent to finance (i) taxes and duties, (ii) incremental salaries and running costs of the PMU, (iii) vehicles and offices for the PMU, (iv) resettlement cost and permanent land acquisition triggered by the construction of pumping stations, (v) part of the cost of the DBO contract for right bank that is not covered by the ADB loan, and (vi) financing charges on the ADB loan during implementation. Table 5: Project Investment Plan ($ million) Item Amount a A. Base Cost b 1. Kundalia Irrigation Project infrastructure constructed Kundalia Irrigation Project performance-based operation and maintenance established Farmers capacity for rapid uptake of micro-irrigation technology in the KIP command area enhanced Modernization of the Sanjay Sarovar Irrigation Project well-designed with project readiness criteria met 3.57 Subtotal (A) B. Contingencies c C. Financing Charges During Implementation d Total (A+B+C) a Includes taxes and duties of $19.69 million to be financed in cash contribution from government resources. b In October 2017 prices. c Physical contingencies computed at 10% for civil works and goods. Price contingencies computed at 1.5% on foreign exchange costs and 4.6% on local currency costs; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate. d Includes interest and commitment charges. Interest during construction for OCR loan has been computed at the 5- year forward London Interbank Offered Rate plus a spread of 0.7% (including a maturity-based premium of 0.1%). Commitment charges for an OCR loan are 0.15% per year to be charged on the undisbursed loan amount. Source: Asian Development Bank estimates. The government has requested a regular loan of $375 million from ADB s ordinary capital resources to help finance the project. The loan will have a 26-year term, including a grace period of 5 years; an annual interest rate determined in accordance with ADB s London interbank offered rate (LIBOR)-based lending facility; a commitment charge of 0.15% per year; and such other terms and conditions set forth in the draft loan and project agreements. Based on the straight-line method, the average maturity is years, and the maturity premium payable to ADB is 0.10% per year. The remainder of the project cost will be financed by counterpart fund contributions provided by the Government of Madhya Pradesh ($ million).

22 16 Table 6: Financing Plan Source Amount ($ million) Share of Total (%) Asian Development Bank Ordinary capital resources (regular loan) Government of Madhya Pradesh Total Source: Asian Development Bank estimates. A. Cost Estimates Preparation and Revisions Estimates of the cost of the DBO contracts, resettlement cost and permanent land acquisition, and incremental PMU costs were prepared by MPWRD and reviewed by ADB. Cost estimates for consulting services, the Dispute Adjudication Board, and financing charges during implementation were prepared by ADB in consultation with MPWRD. The cost estimate model was prepared using Microsoft Excel. It is available with the project team and the PMU. During implementation, the PMU will be responsible for updating cost estimates from the model. B. Key Assumptions The following key assumptions underpin the cost estimates and financing plan: Exchange rate: = $1.00 (as of 17 October 2017) Price contingencies based on expected cumulative inflation over the implementation period are as follows: Table 7: Escalation Rates for Price Contingency Calculation Item and after Foreign rate of price inflation 1.4% 1.5% 1.5% 1.5% 1.5% Domestic rate of price inflation 4.0% 4.6% 4.6% 4.6% 4.6% Sources: ADB staff estimates based on MUV Index (foreign rate of price inflation), Asian Development Outlook 2017 (domestic rate of price inflation). The borrower will not provide in-kind contributions.

23 17 C. Detailed Cost Estimates by Expenditure Category Item Table 8: Detailed Cost Estimate by Expenditure Category Foreign Exchange Amount ($ million) Local Currency Total Cost % of Total Base Cost A. Investment Costs 1. Civil works a. Kundalia Left Bank DBO Construction b. Kundalia Right Bank DBO Construction c. Office construction Equipment Environment and social mitigation Consulting services a. Project implementation support b. SSIP preparation and design c. Independent internal audit Subtotal (A) B. Recurrent Costs 1. Incremental PMU expenditures Training Equipment operation and maintenance Subtotal (B) Total Base Cost C. Contingencies 1. Physical Price Subtotal (C) D. Financing Charges During Implementation 1. Interest during implementation Commitment charges Subtotal (D) Total Project Cost (A+B+C+D) DBO = design build operate, PMU = project management unit, SSIP = Sanjay Sarovar Irrigation Project. Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank estimates.

24 18 D. Allocation and Withdrawal of Loan Proceeds Number Table 9: Allocation and Withdrawal of Loan Proceeds Allocation and Withdrawal of ADB Loan Proceeds Item Amount Allocated $ Category % 1a Civil Works, left bank 176,390, b Civil Works, right bank 151,600, Consulting services 4,850, Training 410, Unallocated 41,750,000 Total 375,000,000 * exclusive of taxes and duties within the territory of the Borrower. Percentage and Basis for Withdrawal from the Loan Account percent of total expenditure claimed* percent of total expenditure claimed* percent of total expenditure claimed* percent of total expenditure claimed*

25 19 E. Detailed Cost Estimates by Financier Table 10: Detailed Cost Estimates by Financier Item ADB Loan Government Total Taxes $ million % a $ million % $ million and Duties A. Investment Costs 1. Civil works b a. Kundalia Left Bank DBO Construction b. Kundalia Right Bank DBO Construction c. Other Equipment Environment and social mitigation Consulting services a. Project implementation support a b. SSIP preparation and design a c. Independent internal audit Subtotal (A) B. Recurrent Costs 1. Incremental PMU expenditures Training a Equipment operation and maintenance Subtotal (B) Total Base Cost C. Contingencies 1. Physical a Price a Subtotal (C) D. Financial Charges During Implementation 1. Interest during implementation Commitment charges Subtotal (D) Total Project Cost (A+B+C+D) DBO = design build operate, PMU = project management unit, SSIP = Sanjay Sarovar Irrigation Project. Note: Numbers may not sum precisely because of rounding. a Percentages are computed excluding taxes and duties paid by the government. b ADB will finance its share in this cost category on a net-of-tax basis Source: Asian Development Bank estimates.

26 20 F. Detailed Cost Estimates by Output Table 11: Detailed Cost Estimates by Output 1. Kundalia Irrigation Project infrastructure constructed 2. Kundalia Irrigation Project performancebased operation and maintenance established 3. Farmers capacity for rapid uptake of microirrigation technology in KIP command area enhanced 4. Modernization of the Sanjay Sarovar Irrigation Project welldesigned with project readiness criteria met Item Total Cost $ million % $ million % $ million % $ million % A. Investment Costs 1. Civil works a. Kundalia Left Bank DBO Construction b. Kundalia Right Bank Construction c. Other Equipment Environment and social mitigation 4. Consulting services a. Project implementation support b. Other consulting services Subtotal (A) B. Recurrent Costs Incremental PMU expenditures 2. Training Equipment operation and maintenance Subtotal (B) Total Base Cost C. Contingencies 1. Physical Price Subtotal (C) Financing Charges During D. Implementation 1. Interest during implementation Commitment charges Subtotal (D) Total Project Cost (A+B+C+D) DBO = design build operate, PMU = project management unit, SSIP = Sanjay Sarovar Irrigation Project. Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank estimates.

27 21 G. Detailed Cost Estimates by Year Item A. Investment Costs 1. Civil works Table 12: Detailed Cost Estimates by Year Total Cost ($ million) a. Kundalia Left Bank DBO Construction b. Kundalia Right Bank Construction c. Other Equipment Environment and social mitigation Consulting services a. Project management b. Other consulting services Subtotal (A) B. Recurrent Costs 1. Incremental PMU expenditures Training Equipment operation and maintenance Subtotal (B) Total Base Cost C. Contingencies 1. Physical Price Subtotal (C) D. Financing Charges During Implementation 1. Interest during implementation Commitment charges Subtotal (D) Total Project Cost (A+B+C+D) %Total Project Cost Source: Asian Development Bank estimates.

28 2018-II 2018-III 2018-IV 2019-I 2019-II 2019-III 2019-IV 2020-I 2020-II 2020-III 2020-IV 2021-I 2021-II 2021-III 2021-IV 2022-I 2022-II 2022-III 2022-IV 2023-I 2023-II 2023-III 2023-IV 2024-I 2024-II 2024-III 2024-IV 2025-I 2025-II 2025-III 2025-IV 2026-I 2026-II (US$ million) 22 H. Contract and Disbursement S-Curve Source: Asian Development Bank estimates. I. Fund Flow Diagram The funds for this project will be provided by the state government which will undertake the financing of this project along with the other projects as part of annual budgetary allocation and claim reimbursement from ADB for the eligible expenditure after deducting the share of state government. However, payments in foreign currency to consultants and contractors may be done at MPWRD request through the direct payment procedure subject to prior approval of DEA. The fund flow arrangements for the project will be on reimbursement basis from the ADB loan proceeds. Detailed movement of funds is summarized in the diagrams below (figures 3 and 4).

29 23 Figure 3: Reimbursement Procedure Source: TA Consultant. Figure 4: Direct payment procedure

30 24 A. Financial Management Assessment FINANCIAL MANAGEMENT A financial management assessment (FMA) of MPWRD was conducted in July 2016 in accordance with ADB s Guidelines for the Financial Management and Analysis of Projects and the Financial Due Diligence: A Methodology Note. The FMA considered the capacity of MPWRD, including funds-flow arrangements, staffing, accounting and financial reporting systems, financial information systems, and internal and external auditing arrangements. Based on the assessment, the key financial management risks identified are as follows: (i) inherent risk was assessed as moderate resulting in the decision to require the PMU to include accounting staff to ensure the adequate monitoring of construction activities and preparation of withdrawal applications. Separate project books of accounts will be maintained, and project financial statements will be prepared; and (ii) control risk was considered moderate partly due to previous experience in implementing donor-funded projects. MPWRD will maintain separate books of account for the project finances. The PMU will (i) maintain manual books of account, and MPWRD will use its own computerized accounting system; (ii) ensure that the annual work plan process begins early enough to identify both counterparts funding and budget allocation requirements for the project, allowing MPWRD to execute necessary budget release in time; and (iii) include adequate level of human resources for technical and financial management, and ensure their orientation and training in the government s and ADB s rules, procedures and reporting requirements. It is concluded that the overall pre-mitigation financial management risk of MPWRD is moderate. MPWRD have agreed to implement an action plan as key measures to address the deficiencies. The financial management action plan is listed in Table 13 and the financial management risk categorization is presented in Appendix 1. Agreed Action Table 13: Financial Management Action Plan An experienced finance manager will be appointed to head the accounts functions of the PMU. Staff to be trained in handling ADB accounting procedures. The Accountant General (Audit) office of the state government has agreed to undertake timely annual audit of MPIEIP s annual project financial statements and has committed to completing the audit for the current fiscal year within 6 months after the end of fiscal year. Internal audit function of the project will be outsourced to a qualified independent chartered accounting firm. It will report to the MPWRD at least semi-annually, and is expected to be adequately independent, competent, perform risk based internal audit in line with internationally recognized internal auditing principles Responsible Person Chief Engineer Projects, MPWRD Finance Management Expert Chief Engineer Projects, MPWRD Finance Management Expert - PMU Chief Engineer Projects, MPWRD Chief Engineer Projects, MPWRD Agreed Completion Date July 2018 August 2018 September 2018 April/May 2019 ADB = Asian Development Bank, MPIEIP = Madhya Pradesh Irrigation Efficiency Improvement Project, MPWRD = Water Resources Department Madhya Pradesh, PMU = project management unit.

31 25 B. Disbursement 1. Disbursement Arrangements for ADB Funds The loan proceeds will be disbursed in accordance with ADB s Loan Disbursement Handbook (2017, as amended from time to time), 12 and detailed arrangements agreed upon between the government and ADB. Online training for project staff on disbursement policies and procedures is available. 13 Project staff are encouraged to avail of this training to help ensure efficient disbursement and fiduciary control. Two types of disbursement procedures will be used under this project: (i) direct payment for foreign currency payments subject to prior approval of DEA. At the borrower's request, ADB pays a designated beneficiary directly (Chapter 9 of the Loan Disbursement Handbook); and (ii) reimbursement procedure (with or without full supporting documents), where ADB pays from the loan account to the borrower's account for eligible expenditures which have been incurred and paid for by the project out of its budget allocation or its own resources (Chapter 7 of the Loan Disbursement Handbook); Both disbursement procedures are subject to the minimum amount discussed under para. 19. Statement of expenditure procedure: 14 The statement of expenditure (SOE) procedure will be used for reimbursement of eligible expenditures. The ceiling of the SOE procedure is the equivalent of $100,000 per individual payment. Supporting documents and records for the expenditures claimed under the SOE should be maintained and made readily available for review by ADB's disbursement and review missions, upon ADB's request for submission of supporting documents on a sampling basis, and for independent audit. Reimbursement and liquidation of individual payments in excess of the SOE ceiling should be supported by full documentation when submitting the withdrawal application (WA) to ADB. Before the submission of the first WA, the state government should submit to Controllers of Aid Accounts and Audits (CAAA) sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the borrower, together with the authenticated specimen signatures of each authorized person. The minimum value per WA is stipulated in the Loan Disbursement Handbook (2017, as amended from time to time). Individual payments below such amount should be paid by MPWRD and subsequently claimed to ADB through reimbursement. The borrower should ensure sufficient category and contract balances before requesting for reimbursements. Use of ADB s Client Portal Disbursements (CPD) 15 system is encouraged for submission of WAs to ADB. C. Accounting MPWRD will maintain separate project accounts and records by funding source for all expenditures incurred on the project. Project financial statements will follow the government of India s cash-based accounting laws and regulations which are consistent with international accounting principles and practices. Template financial statements provided in the Standardized Terms of Reference for audit of ADB assisted projects, agreed with the Comptroller and Auditor 12 The handbook is available electronically from the ADB website (Loan Disbursement Handbook Asian Development Bank) 13 Disbursement elearning SOE forms are available in Appendix 7B and 7D of ADB s Loan Disbursement Handbook (2017, as amended from time to time). 15 The CPD facilitates online submission of WA to ADB, resulting in faster disbursement. The forms to be completed by the Borrower are available online at