The World Bank IN National Ganga River Basin Project (P119085) REPORT NO.: RES33540 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF IN NATIONAL GANGA RIVER BASIN PROJECT APPROVED ON MAY 31, 2011 TO MINISTRY OF JAL SHAKTI WATER GLOBAL PRACTICE SOUTH ASIA REGION Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Regional Director: John A. Roome Practice Manager/Manager: Michael Haney Task Team Leader: Xavier Chauvot De Beauchene, Rajesh Balasubramanian The World Bank IN National Ganga River Basin Project (P119085) ABBREVIATIONS AND ACRONYMS AMRUT Atal Mission for Rejuvenation and Urban Transformation BOD Biological Oxygen Demand CAPEX Capital Expenditures GRM Grievance Redressal Mechanism HAM Hybrid Annuity Model IP Implementation Progress MLD Million Litres per Day MOEF Ministry of Environment and Forests MoJS Ministry of Jal Shakti MOWR Ministry of Water Resources, River Development and Ganga Rejuvenation MS Moderately Satisfactory MU Moderately Unsatisfactory NGC National Ganga Council NGP Namami Gange Program NGRBA National Ganga River Basin Authority NGRBP National Ganga River Basin Project NMCG National Mission for Clean Ganga O&M Operation and Maintenance PPP Public-Private Partnership PDO Project Development Objective RTWQM Real-Time Water Quality Monitoring SMCG State Missions for Clean Ganga SPMG State Project Management Groups ULB Urban Local Bodies ZLD Zero Liquid Discharge The World Bank IN National Ganga River Basin Project (P119085) BASIC DATA Product Information Project ID Financing Instrument P119085 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 31-May-2011 31-Dec-2019 Organizations Borrower Responsible Agency Ministry of Jal Shakti, Department of Water Resources, National Mission for Clean Ganga River Development and Ganga Rejuvenation Project Development Objective (PDO) Original PDO The objectives of the project are to support the National Ganga River Basin Authority (NGRBA) in: (a) building capacity of its nascent operational-level institutions, so that they can manage the long-term Ganga clean- up and conservation program; and (b) implementing a diverse set of demonstrative investments for reducing point-source pollution loads in a sustainable manner, at priority locations on the Ganga. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-80650 31-May-2011 14-Jun-2011 18-Aug-2011 31-Dec-2019 801.00 120.56 680.44 IDA-49550 31-May-2011 14-Jun-2011 18-Aug-2011 31-Dec-2019 199.00 173.86 5.41 The World Bank IN National Ganga River Basin Project (P119085) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Background 1. The National Ganga River Basin Project (NGRBP) was approved in May 2011 with the twin objectives of building institutional capacity for long-term clean-up and conservation; and financing investments for reducing point- source pollution load. Infrastructure investments were initially envisaged in domestic wastewater collection and treatment, common effluent treatment plants for treating industrial pollution, solid waste management and river front development including ghats and crematoria. The total project cost was $1,556 million, of which the World Bank financing share is $1,000 million. The original Project closing date is December 31, 2019. 2. Several important developments have taken place since 2011, including (a) the launch of the $ 3 billion Namami Gange Program (NGP) in 2014, which provides infrastructure support to selected cities in the 11 basin states to manage their liquid and solid wastes and prevent pollution from entering the river; (b) the launch of the Swachh Bharat Mission in 2014 which has given a renewed thrust to eliminating open defecation and improving solid and liquid waste management in both rural and urban areas; (c) increased investments in improving water and sanitation infrastructure across cities through the Atal Mission for Rejuvenation and Urban Transformation (AMRUT); and (d) the adoption of Zero Liquid Discharge (ZLD) and stricter enforcement of discharge standards for industries along the Ganga River. Another major development is the global shift from the MDGs to SDGs in 2015, which changed the focus from infrastructure to providing sustainable services to all by 2030. 3. The NGP has set out priority areas for intervention over different time horizons: (a) short-term – river surface cleaning; (b) medium term (over 5 years) – municipal and industrial effluent treatment; and (c) long-term (over 10 years) – ensuring adequate water flow. Over 80% of the pollution (measured as Biological Oxygen Demand – BOD) discharged into the Ganga is from domestic sewage with the remainder coming from industrial discharge. Therefore, the focus of Bank-financed investments has been on domestic wastewater collection and treatment in cities on the main stem of the river. Ongoing NGRBP-funded investments account for approximately 43% of the wastewater treatment capacity (new or rehabilitated) and 75% of the wastewater network being implemented under NGP on the main stem of the river Ganga. B. Institutional Arrangements 4. In 2009, the National Ganga River Basin Authority (NGRBA) was formed as the apex authority with the National Mission for Clean Ganga (NMCG) as the implementing agency. In 2014, NMCG was designated as the The World Bank IN National Ganga River Basin Project (P119085) implementing agency for the NGP, including the NGRBP. Initially under the administrative supervision of the Ministry of Environment and Forests (MOEF), the work of rejuvenation of river Ganga and its tributaries, including the NGRBP, was transferred with effect from August 1, 2014 to the Ministry of Water Resources, River Development and Ganga Rejuvenation (MOWR). In May 2019, the Government of India notified the Ministry of Jal Shakti (MoJS) which incorporated various water-related functions from other ministries, including the MOWR, which became the Department of Water Resources, River Development and Ganga Rejuvenation (DOWR) of the MoJS. The implementation responsibilities for the NGRBP now lies with the DOWR of the MoJS. 5. State Project Management Groups (SPMG) are present in each of the states along the main stem – Uttarakhand, Uttar Pradesh, Bihar, Jharkhand and West Bengal – each with different executing agencies. 6. A Government Order issued in October 2016 dissolved the NGRBA and established the National Ganga Council (NGC) as the apex authority headed by the Prime Minister. All functions of the NGRBA were subsumed under the NGC. Through the same Government Order, the NMCG was converted into an Authority under the Environment Protection Act 1986 with mandates and powers to enforce actions to prevent pollution and monitor environmental flows. Similar authorities have been set-up at the state and district levels. 7. Since October 2016, there has been a renewed vigor to plan and execute investments targeted to intercept and treat the untreated sewage flowing into the river. Between October 2016 and June 2019, US$ 1,500 million worth of investments were approved and US$ 1,093 million were contracted under NGP (including those under NGRBP). NMCG is now an organization with more than 100 full-time staff and consultants. SPMGs have also steadily improved their staffing and over 90% of the staff vacancies have been filled. NMCG is working to make SPMGs into State Missions for Clean Ganga (SMCG) to align them as per the revised institutional structure (October 2016 Order) and to expedite hiring and improve implementation capacity at the State level. 8. Most investments under the NGRBP are implemented through public-private partnership contracts which include the funding of between 5 and 15 years of O&M. This is to ensure that the assets are adequately operated so that they can perform well during their useful life. As several investments approach construction completion, there is an increasing momentum from NMCG to help strengthen the capacity of Urban Local Bodies (ULB) so that they function as credible counterparts to private operators and can ensure proper O&M of these investments. NMCG has also started to integrate septage management into the investments and to promote city-wide coverage of sanitation. Further, NMCG is also keen to further engage in institutional development activities, in particular to accompany its evolution into becoming a river basin agency. C. Project Status 9. The NGRBP has completed eight years of implementation and is in the final year of implementation. The PDO rating has been consistently MU for almost 7 years, as was the IP rating, which was upgraded to MS in June 2019. There has been limited progress against the PDO-level indicators (see Table 1 below). Table 1: Progress against the water-related PDO level indicators as of May 30, 2019. PDO Level indicator End of Project Target Actual value Progress to target The World Bank IN National Ganga River Basin Project (P119085) New Programme institutions are set up & are 6 6 100% effectively functioning Volume of untreated wastewater prevented from 270 38 14.1% entering the Ganga due to project interventions (installed capacity) Direct project beneficiaries (number in million) 15.1 1.93 12.8% 10. However, the consistent efforts to turn the Project around are starting to show results. The total disbursement more than doubled in a year and is steadily increasing. Twenty-eight investments are being implemented, of which five have been completed, ten show physical completion rate of over 75% and six report physical completion rates between 50%-75%. The total value of World Bank financing committed to investments (contracts signed) has reached US$ 644 million. An additional US$ 356 million is under procurement (Bank no objection to bidding documents and bidding ongoing), bringing the cumulative value of contracts committed or under procurement to US$1 billion, compared to US$579 million in May 2018 and US$250 million at the beginning of 20171. 11. The Project has designed a new and innovative model of PPP called the Hybrid Annuity Model (HAM), which consists in paying only 60% of the CAPEX to the private operator during the construction phase and in spread the remaining 40% of CAPEX payments over the O&M period of the contract, to incentivize good performance during the O&M phase and secure O&M payments over a period of up to 15 years. The first HAM contract under the Project was awarded in March 2019 for US$ 72 million equivalent. Another innovative contract (combination of HAM and Design Build Operate Transfer) has since been awarded for a value of US$ 170 million and a third for about US$ 40 million is under evaluation. 12. To support institutional development, NMCG has advanced the procurement of the expansion of the Real-Time Water Quality Monitoring (RTWQM) system to add 40 stations and to bring to 76 the number of RTWQM stations by the end of 2019. It also strengthened its communications capacity and has prepared a national communications strategy and city-level communications material targeting different stakeholders. Discussions are ongoing on additional institutional development activities, sector studies and analyses to inform the evolution of NCMG into a river basin agency. There has also been improvement in the review, monitoring and reporting on safeguards across several investments and significant progress has been made towards strengthening the Grievance Redressal Mechanism (GRM). 13. The Project has already experienced three level 2 restructurings since 2011. The first restructuring (June 2015) revised the Results Framework to better align it with Project activities. The second restructuring (December 2016) aligned the Project more closely with the NGP by increasing the central share from 70% to 100%, increased the World Bank’s share of reimbursement of central share from 89% to 100%, and introduced a sub-component under Component 1 to support PPPs. The third restructuring (June 2017) reallocated proceeds across components to prioritize the use of the IDA Credit. 14. There are no pending audit reports and the internal audit for NMCG for FY 2018-19 has been completed. 1 All figures are referenced to World Bank share of USD 1 billion. The actual total value of the contracts is higher, as some of the contracts were funded at 70% under the Loan and some at 100%. The World Bank IN National Ganga River Basin Project (P119085) 15. INT is investigating an alleged fraudulent activity by one bidder under this project. D. Rationale for Restructuring 16. It is clear that the project in its current design cannot achieve its development objective before the closing date of December 31, 2019. As per current estimates, approximately US$ 400 million is expected to be disbursed by that date. NMCG, DEA and the World Bank discussed and exchanged letters about various options to restructure the Project. 17. In a letter dated July 31, 2019, the Government of India requested the Bank to: (i) ) extend the Project closing date by two years; (ii) resize the Project to a total of US$ 600 million, which represents the estimated total disbursement by December 2021 under the ongoing and planned investments on the main stem of the Ganga river; and (iii) revise the results framework to better align it with the current reality of the Project and the reduced financing envelope. This letter also requested World Bank support to a new Project which would focus on the entire river basin including the tributaries and would finance any rolling-over of expenditure from the current project. 18. The transfer of administrative responsibility of the Project from the MOEF to the MOWR in 2014 was agreed by the Bank, but the legal agreements were not modified at that time. Following the integration of the MOWR into the MOJS in May 2019 to become the DOWR of MoJS, the implementation responsibilities for the NGRBP currently lies with the MoJS’ DOWR. This restructuring seeks to change the name of the Ministry responsible for Project implementation in the legal agreements from MoEF to the MoJS’ DOWR. 19. Although discussions of a revised result framework are at an advanced stage, the Borrower needs more time to finalize revised target values and ensure adequate monitoring mechanisms. To be responsive to the Borrower’s request, the current restructuring is being processed on the other aspects. Another restructuring will be processed to amend the results framework, once finalized. II. DESCRIPTION OF PROPOSED CHANGES 20. The changes proposed under this restructuring are as follows: a. Cancel US$400 million of the IBRD Loan; b. Extend the closing date by two years, to December 30, 2021; c. Update the name of the line Ministry in the legal documents; The World Bank IN National Ganga River Basin Project (P119085) d. Update the disbursement projections based on disbursements to date and projected progress until the extended closing date; and e. Reflect the overall risk ratings as they are reported in the ISRs. III. SUMMARY OF CHANGES Changed Not Changed Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Legal Covenants ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Disbursements Arrangements ✔ Safeguard Policies Triggered ✔ EA category ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ The World Bank IN National Ganga River Basin Project (P119085) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component One: Institutional Component One: Institutional 200.00 No Change 200.00 Development Development Component Two: Priority Component Two: Priority 1356.00 Revised 956.00 Infrastructure Investments Infrastructure Investments TOTAL 1,556.00 1,156.00 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-80650 Effective 31-Dec-2019 30-Dec-2021 30-Apr-2022 IDA-49550 Effective 31-Dec-2019 30-Dec-2021 30-Apr-2022 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation BORROWER' Disburs S REQUEST IBRD- 801,000,000.0 400,000,000.0 401,000,000.0 ing&Re USD 31-Jul-2019 FOR 80650-001 0 0 0 paying COUNTRY REASONS BORROWER' Disburs S REQUEST IDA-49550- 123,020,000.0 123,020,000.0 ing&Re XDR 0.00 31-Jul-2019 FOR 001 0 0 paying COUNTRY REASONS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES The World Bank IN National Ganga River Basin Project (P119085) Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IBRD-80650-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: Gds,Wks,Cons,Op Cst fr Prt A of Prj 99,673,350.00 0.00 99,673,350.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: Gds,Wks,Con,OpCst fr Prt B excl Lnd 699,324,150.00 118,558,397.60 299,324,150.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: Front End Fee 0.00 0.00 0.00 100.00 100.00 Total 798,997,500.00 118,558,397.60 398,997,500.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2011 0.00 0.00 2012 0.00 44,363,821.98 2013 0.00 578,723.56 2014 60,000,000.00 17,795,953.00 2015 156,000,000.00 112,685.60 2016 184,000,000.00 1,438,019.22 2017 228,000,000.00 24,965,647.22 2018 230,000,000.00 94,895,730.21 2019 142,000,000.00 110,119,419.21 2020 0.00 140,000,000.00 The World Bank IN National Ganga River Basin Project (P119085) 2021 0.00 140,000,000.00 2022 0.00 25,730,000.00 2023 0.00 0.00 OPS_DETAILEDCHANGES_SORT_TABLE SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating at Approval Current Rating Political and Governance  Moderate Macroeconomic  Moderate Sector Strategies and Policies  Substantial Technical Design of Project or Program  Substantial Institutional Capacity for Implementation and  Substantial Sustainability Fiduciary  Substantial Environment and Social  Substantial Stakeholders  Moderate Other Overall  Substantial OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action Finance Agreement :Ref. PAD Section III.E. | Description :MOEF and the States shall maintain throughout the project period the PMG and the SPMGs, respectively, with suitably qualified personnel and with resources Partially complied IDA-49550 sufficient to carry out project management including Revised with technical and fiduciary supervisions, monitoring and evaluation, and public communication to achieve the Project Development Objectives in a timely and effective manner. | Frequency :Monthly Finance Agreement :Ref. PAD Section III.E. | Description: DOWR and the States shall maintain Proposed CP throughout the project period the PMG and the SPMGs, respectively, with suitably qualified personnel and with The World Bank IN National Ganga River Basin Project (P119085) resources sufficient to carry out project management including technical and fiduciary supervisions, monitoring and evaluation, and public communication to achieve the Project Development Objective Finance Agreement :Ref. PAD Section III.E. | Description :MOEF and the States will ensure continuity of the leadership of the PMG and the SPMGs, and will plan for Partially complied IDA-49550 replacement and/or succession of leadership, in such a Revised with manner that disturbance to project implementation is minimum and that institutional memory remains intact throughout the project period. | Frequency :Monthly Finance Agreement :Ref. PAD Section III.E. | Description: DOWR and the States will ensure continuity of the leadership of the PMG and the SPMGs, and will plan for replacement and/or succession of leadership, in Proposed CP such a manner that disturbance to project implementation is minimum and that institutional memory remains intact throughout the project period. | Frequency: Monthly Finance Agreement :Ref. PAD Section III.E. | Description :MOEF and the States will prepare, through PMG and SPMGs, and no later than December 31 of each year, the Annual Action Plan and procurement plans for After delay complied IDA-49550 implementation of the activities under each component Revised with of the project for the next Financial Year; and taking intoaccount Bank’s recommendations, finalize these plans no later than March 31 of each year. | Frequency :Yearly FA :Ref. PAD Section III.E. | Description: DOWR and the States will prepare, through PMG and SPMGs, and no later than December 31 of each year, the Annual Action Plan and procurement plans for implementation of the Proposed Not yet due activities under each component of the project for the next Financial Year; and taking intoaccount Bank’s recommendations, finalize these plans no later than March 31 of each year. IDA-49550 Finance Agreement :Ref. PAD Section III.E. | Description Partially complied Revised :MOEF and the States shall maintain a dedicated, multi- with disciplinary team of suitably qualified personnel in each The World Bank IN National Ganga River Basin Project (P119085) Executing Agency (EA) with resources sufficient to carry out their respective parts of the project. | Frequency :Monthly Finance Agreement :Ref. PAD Section III.E. | Description: DOWR and the States shall maintain a dedicated, multi-disciplinary team of suitably qualified Proposed CP personnel in each Executing Agency (EA) with resources sufficient to carry out their respective parts of the project. | Frequency: Monthly Finance Agreement :Ref. PAD Section III.E. | Description :MOEF and the States will place in position, within six Partially complied IDA-49550 months from effectiveness, suitable external and Revised with internal auditors pursuant to terms of reference acceptable to the Bank. | Due Date :29-Feb-2012 Finance Agreement :Ref. PAD Section III.E. | Description: DOWR and the States will place in position, After delay complied Proposed within six months from effectiveness, suitable external with and internal auditors pursuant to terms of reference acceptable to the Bank. | Due Date: 29-Feb-2012 Finance Agreement :Ref. PAD Section III.E. | Description :MOEF and the States shall take all necessary measures to ensure implementation of the project is in accordance with the provisions of, among others, the IDA-49550 Financial Management Manual, the Procurement Complied with Revised Manual, the Governance and Accountability Acton Plan (GAAP), and the Environmental and Social Management Framework (ESMF), which may be amended from time to time with prior approval. | Frequency :Monthly Finance Agreement :Ref. PAD Section III.E. | Description: DOWR and the States shall take all necessary measures to ensure implementation of the project is in accordance with the provisions of, among Proposed others, the Financial Management Manual, the C Procurement Manual, the Governance and Accountability Acton Plan (GAAP), and the Environmental and Social Management Framework (ESMF), which may be amended IDA-49550 Finance Agreement :Ref. PAD Section III.E. | Description Not complied with Revised :MOEF and the States shall (a) undertake suitable The World Bank IN National Ganga River Basin Project (P119085) baseline surveys such that each Annual Action Plan starting from Year Two of the project period have adequate baselines; (b) engage external consultants for detailed third-party monitoring and quality assurance services in a continuous manner; and (c) undertake third party evaluation twice during the project period. | Frequency :Yearly FA:Ref. PAD Section III.E. | Description: DOWR and the States shall (a) undertake suitable baseline surveys such that each Annual Action Plan starting from Year Two of the project period have adequate baselines; (b) engage Proposed NC external consultants for detailed third-party monitoring and quality assurance services in a continuous manner; and (c) undertake third party evaluation twice during the project Finance Agreement :Ref. PAD Section III.E. | Description :MOEF and the States, through the PMG and the SPMGs, shall ensure, unless otherwise specifically IDA-49550 provided by the Government of India, that all Complied with Revised information in the project be made public, including reports on physical and financial progress, monitoring, evaluation, and external audits. | Frequency :Monthly Finance Agreement: Ref. PAD Section III.E. | Description: DOWR and the States, through the PMG and the SPMGs, shall ensure, unless otherwise Proposed specifically provided by the Government of India, that C all information in the project be made public, including reports on physical and financial progress, monitoring, . evaluation, and external audits. | Frequency: Monthly