Document of The World Bank FOR OFFICIAL USE ONLY Report No: 74373-IN RESTRUCTURING PAPER ON A PROJECT RESTRUCTURING OF INDIA: VOCATIONAL TRAINING IMPROVEMENT PROJECT CREDIT NUMBER 4319-IN JUNE 05, 2007 TO THE REPUBLIC OF INDIA December 19, 2012 HUMAN DEVELOPMENT DEPARTMENT SOUTH ASIA REGION This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS AM Advanced Module ATI Advanced Training Institutes CFIs Centrally Funded Institutes COE Center of Excellence CSS Centrally Sponsored Scheme CSTRI Central Staff Training and Research Institute DEA Department of Economic Affairs GoI Government of India IDP Institutional Development Plans IMC Institutional Management Committees ITIs Industrial Training Institutes ITOTs Institutes of Training of Trainers ITWs Instructors Training Wing MIS Management Information Systems MOLE Ministry of Labor and Employment NCVT National Council of Vocational Training NIMI National Institute of Media Instruction NPIU National Project Implementation Unit PPR Post Procurement Reviews PWD Public Works Department SPIU State Project Implementation Unit UTs States/Union Territories VTIP Vocational Training Improvement Project Regional Vice President: Isabel M. Guerrero Country Director: Onno Ruhl Sector Manager/Sector Director: Amit Dar/Jesko S. Hentschel Task Team Leader: Nalin Jena 2 INDIA INDIA: VOCATIONAL TRAINING IMPROVEMENT PROJECT Restructuring Restructuring Type: Level 2 1. Basic Information Project ID & Name P099047: IN: Vocational Training Country India Task Team Leader Nalin Jena Sector Manager/Director Amit Dar/Jesko S. Hentschel Country Director Onno Ruhl Original Board Approval Date 06/05/2007 Original Closing Date: 12/31/2012 Current Closing Date 12/31/2012 Proposed Closing Date [if applicable] 11/30/2014 EA Category B-Partial Assessment Revised EA Category B-Partial Assessment EA Completion Date 05/19/2006 Revised EA Completion Date NA 2. Revised Financing Plan (US$m) Source Original Revised BORR 79.00 79.00 IDA 280.00 280.00 Total 359.00 359.00 3. Borrower Organization Department Location Government of India Department of Economic Affairs India 4. Implementing Agency Organization Department Location The Ministry of Labor and Directorate General of India Employment (MOLE) Employment and Training 3 5. Disbursement Estimates (US$m) Actual amount disbursed as of 12/19/2012 151.27 Fiscal Year Annual Cumulative 2013 41.00 192.27 2014 60.00 252.27 2015 27.73 280.00 Total 280.00 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? Y An exception in accordance with BP 10.02-Financial Management for outstanding audit reports has been approved by the Management. Does the restructured project trigger any new safeguard policies? If yes, please select from the N checklist below and update ISDS accordingly before submitting the package. 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes The Project development objective is to improve the employment outcomes of graduates from the vocational training system, by making the design and delivery of training more demand responsive. 7b. Revised Project Development Objectives/Outcomes [if applicable] Not Applicable 4 CONTENTS Contents A. SUMMARY ........................................................................................................................... 6 B. PROJECT STATUS .............................................................................................................. 7 C. PROPOSED CHANGES ...................................................................................................... 8 ANNEX 1 RESULTS FRAMEWORK AND MONITORING ............................................... 11 ANNEX 2 REALLOCATION OF PROCEEDS ...................................................................... 15 5 INDIA: VOCATIONAL TRAINING IMPROVEMENT PROJECT (VTIP) RESTRUCTING PAPER A. SUMMARY 1. The VTIP supports the vision, goals and activities of the National Skills Development Policy and the Prime Minister’s National Skills Development Council. The Project is an important part of the larger Government of India’s (GoI) ambitious initiative on strengthening the skills development system to deliver relevant and quality skills training that is required for the economy. 2. The VTIP is a Centrally Sponsored Scheme (CSS) implemented by the Ministry of Labor and Employment (MOLE) of the GoI. The Project was approved in June 2007 with an IDA allocation of USD 280 million (SDR 185.1 million) and became effective in December 2007. The Project Development Objective is, “to improve the employment outcomes of graduates from the vocational training system by making the design and delivery of training more demand- responsive”. The project is a first generation reform project in skills development in India managed by the Ministry of Labor and Employment, Government of India. There are three components of the project: (1) Improving Quality of Vocational Training; (2) Promoting Systemic Reforms and Innovations; and (3) Project Management, Monitoring and Evaluation. 3. The key reforms being implemented under the project are: (i) institutions selected competitively for financing; (ii) introduction of a multi entry and exit dual mode vocational training course imparted through the selected institutions (Center of Excellence (COE)); (iii) improving institution management by establishing Institutional Management Committees (IMCs) with significant private sector participation; (iv) establishing an instructors training network with inclusion of private training providers and decentralizing instructors training to states; (v) enhancing transparency and accountability in resource allocation; and (vi) developing a comprehensive monitoring and evaluation system with feedback into decision making. 4. The Project is implemented through a National Project Implementation Unit (NPIU), State Project Implementing Units (SPIUs) in 33 States/Union Territories (UTs) and 14 Centrally Funded Institutes (CFIs). This project – a pilot in the Indian context - is the first attempt to institute reforms in skills development in India supported by the Bank. The project has performed well and has already achieved the end targets of two of the three outcome indicators and several intermediate indicators. The PDO is rated moderately satisfactory and overall implementation progress is rated satisfactory. 5. The Ministry of Labor and Employment, Government of India, has proposed a no-cost extension of the project closing date from December 31, 2012 to November 30, 2014. The Department of Economic Affairs (DEA), Ministry of Finance, has endorsed the proposal vide its communication dated July 03, 2012 (attached). The proposal listing out the activities which will be implemented during the extension period entails the following changes: (a) project closing date extension; and (b) minor changes in Component 1, the Results Framework and to the categories of expenditure with reallocation of proceeds. 6. The IDA task team has assessed the activities that the MOLE has proposed to implement during the extended period and the task team is of the view that implementation of these activities will take about twenty three months and that the proposed extension will help consolidate the 6 gains of the systemic reforms, implement some related capacity enhancing measures, further improve achievements of key performance indicators, and ensure sustainability. B. PROJECT STATUS 7. Background: The project has supported up-gradation of 400 Industrial Training Institutes (ITI), of which 311 are COEs offering courses in 21 industry sectors. Eleven Advanced Training Institutes (ATI) have been upgraded and enabled to offer Advance Module (AM) instructors training, refresher training and craftsmen basic training. The Central Staff Training and Research Institute (CSTRI), National Institute of Media Instruction (NIMI), and Apex Hi-Tech Institute have been significantly upgraded enhancing capacity for curricula development/revision and development of text books, and teaching and training aids. In the last five years, nearly 200,000 trainees have enrolled in COE programs and other trades have been up-graded under the project. Nearly 15,000 instructors have also been trained, and, in general, the project has strengthened the overall vocational training system. The reforms pilot under the Project is beginning to be extended by MOLE through its other related Centrally Sponsored Schemes. 8. Project Performance: The project performance has been good. The project has achieved the end targets of two out of three outcome indicators: (i) employment rate, and (ii) real monthly earning. Employment rates for beneficiaries have increased to 60% over the baseline of 32% as against the end target of 50%. Monthly earning has increased to INR 3,553 in real terms over a baseline value of INR 2,421 (an increase of 117%) as against an end target of INR 3,026. Increase in pass rate from training institutions, the third indicator, is yet to be fully achieved. The current pass rate is 63% as against the baseline of 61% and the end target of 73%. The extension will enable achievement of the end target. On most intermediate targets, achievements have been encouraging. Significant progress has also been made in key reforms such as multi entry and exit dual mode of vocational training course, joint management of institutions with significant private sector participation making the system responsive to market demand, decentralization of instructors training to states and private sector, and a sector wide information system feeding back into decision-making. The PDO is rated moderately satisfactory and overall implementation progress satisfactory in the last ISR dated August 2012. 9. Fiduciary: The ratings for financial management and procurement are moderately satisfactory. The project uses country systems for Budgeting, Accounting and Audit. Disbursements are made on the basis of quarterly Interim Un-audited Financial Reports (IUFRs). The use of country systems is building sustainable FM capacity of the states and reducing project transaction costs. To date, the MOLE has submitted acceptable audit reports for 25 of the 48 implementing entities with 23 Audit Reports overdue. Authorization of an audit exception in accordance with BP 10.02 – Financial Management, to proceed with the extension of the closing date of VTIP Project, has been obtained. The MOLE has committed to a time bound action plan for submission of the final and acceptable audit reports for the relevant states by April 30, 2013. Disbursements for the states, union territories and centrally funded institutions, which have not submitted audit reports will be suspended until the audit reports are received and all ineligible expenditure with respect to June and September 2012 interim financial reports has been recovered. The issue of funds having been withdrawn from the treasury to subsidiary accounts in Maharashtra is being addressed through a special review of expenditure in the State and disbursement to the State has been suspended until the veracity of expenditure is verified through the special review. The MOLE has committed to implement a dated action plan for submission of the outstanding audit reports and enhance the capacity of the NPIU with hiring of an additional qualified accountant. 7 10. Annual post procurement reviews (PPR) have been conducted by the Bank covering about 25 to 30 percent of the implementing entities. The PPR reports are being shared with the implementing agencies, who in turn submit their action plans. So far, no Fraud and Corruption issues have been identified in the PPRs. The PPR for 2012-13 is underway. Procurement arrangements shall remain the same during the extension period, as agreed in Legal Agreements for the Project. 11. Safeguard compliance: The rating of implementation of environmental management framework (EMF) and equity assurance plan (EAP) is satisfactory. Implementation of EMF has been a good practice, as many states have scaled up EMF to all the public ITIs in the state. Several states have taken initiatives and successfully increased the amount of student stipend/scholarship and improved timeliness of payment. The safeguard arrangements will remain the same during the extension period, as agreed in Legal Agreements for the Project. C. PROPOSED CHANGES Extension of Project Closing Date 12. The proposal from the Government of India is to extend the Project Closing Date from December 31, 2012 to November 30, 2014 in order to fully implement project activities, consolidate the gains of reforms, and ensure sustainability. This would be the first extension of the Project Closing Date. 13. The extension is required as mentioned above to complete the remaining tasks which could not be completed because of initial delays. Project implementation was initially delayed due to: (i) creating shared understanding among all key stakeholders on and implementation of reforms introduced by the project took time; (ii) due to delays in startup about 50 percent of the institutions have got about three years of implementation support and full five year implementation period will equip them to obtain National Council of Vocational Training (NCVT) affiliation and accreditation ; (iii) initial delays in funds flow from the state finance departments to the line departments and capacity constraints slowed down the pace of implementation. However, most of the bottlenecks hindering implementation have now been overcome. Hence, implementation during the extended period is not likely to be affected by the above implementation bottlenecks, although some of the capacity challenges remain and are being addressed. No additional financing is requested. 14. In order to harness fuller benefit of the project and ensure long term sustainability, the MOLE proposes to complete the following activities during the extended period. a. All institutions will get full cycle of support for five years which will enable the Centre of Excellence (COEs) to be fully equipped and eligible for National Council of Vocational Training (NCVT) affiliation. Only the institutions having NCVT affiliation could issue the National Trade Testing Certificate, which has national and international value. This will mean some resources and significant technical support still need to flow into these institutions, which justifies a two-year extension. b. The first ever sector wide web-based Management Information System (MIS), which is in advanced stage of development, will be made fully functional and could be extended to cover all the states/Union Territories and all public and private training institutions; about 4500 personnel will be trained to use the MIS during the extension period. 8 c. Five Institutes of Training of Trainer (ITOTs) will be established under the state government as a part of the major reform of decentralizing training of trainer from the center to the state. The states have already done the necessary preparatory work. d. Majority of the new instructors appointed to teach Advance Module (AM) will be trained. e. Training of all project ITI principals on “excellence in leadership” will be completed at Indian Institute of Management, Ahmedabad f. Capacity of Institutional Management Committee will be further strengthened to improve private sector participation in institutional management, based on the result of a mid-term review study. 15. The IDA task team has reviewed the proposal with the NPIU and has assessed the feasibility of their implementation within the proposed extended period and their impact on the overall project outcomes. The team is of the view that implementation of all the above proposed activities could happen during the extended period, which would benefit the project and, in turn, the skills development sector. Component Level Changes: Sub-component 1.2: Strengthening Instructor Training 16. To expand instructor training capacity, the project originally envisaged the establishment of 10 Instructor Training Wings (ITWs) as a part of selected project ITIs to provide basic level training, with little additional investments. However, based on detailed discussions with employers and realizing the need to provide high quality instructor training the National Council of Vocational Training (NCVT), the apex policy level body governing vocational training under the MOLE, has now resolved to invest in instructor training more comprehensively. In accordance with the new policy, the project would now support establishment of 5 Institutes of Training of Trainers (ITOTs) as full-fledged institutions with separate infrastructure and human resource with the mandate to offer basic and advanced instructors training. With these ITOTs, the capacity of training the trainer in the vocational training sector will increase from the current capacity of only 1200 to 3200. States have done all the preparatory work, including preparation for civil works, for establishment of ITOTs and once extension is approved, implementation will commence. Establishment of ITOT will adhere to all the safeguard measures agreed for the project implementation. The costs of ITOTs will be met from reallocation within the original project amount. 17. The project also envisioned to start refresher training courses for instructors in 20 selected COEs. The idea behind this activity was to provide training for instructors in the Project ITIs upgraded to COEs. However, currently the Advance Training Institutes upgraded under the Project have started offering refresher training and the new ITOTs will also offer such training. Hence, this sub-component of Component 1 of the project will be dropped. Results Framework 18. There are two types of changes proposed in the revised Results Framework: (i) changes in the targets for selected sub-components level intermediate indicators to be more realistic based on the experience of project implementation; and (ii) change in one intermediate indicator to reflect the current state of development of an initiative introduced for the first time under the project. Therefore, there is no substantial change in the Results Framework. The detail changes are presented in Annex 1. 9 Intermediate Indicators (Sub-Component 1.2:Training of Trainers): Indicator 1 (Number of Instructor Training Wings (ITWs) established or upgraded to provide entry level instructor training has been modified to “Number of Institutions for T raining of Trainers (ITOTs)” which is a more comprehensive and complex organizational concept and structure than the ITW. Given the gestation period an ITOT will require to become fully functional, with the proposed extension of the project, the target value of this indicator is being set at 5. Intermediate Indicators (Sub-Component 1.3: Incentive Funds): The target value for the indicator (Number of grants provided to well performing States/UTs, and the distribution of these resources to project/non-project ITIs) has been reduced from 10 to 6 during the extension period. Despite several rounds of announcements for proposals for incentive funds from the states, only three states have come forward so far. Hence, award of another 3 incentive funds proposals during the extension period seems to be a realistic target. Intermediate Indicators (Component 2.2: Innovations Fund): The target value for the indicator (Number of innovation proposals financed by innovations fund) has been reduced from 10 to 5 with the extension period. Despite several attempts, this sub-component did not take off due to lack of technical capacity at the state level. Having assessed constraints towards the initiation of this sub-component, it has been deemed more realistic to support selected progressive-minded and willing states with technical assistance to develop innovations proposals which can be funded during the extension period of the project. Disbursement Categories and Reallocation of Proceeds 19. It is proposed to insert “works” in Category 2. Although the activities financed under Category 2 include works and it was intended to finance works under this Category, inadvertently mention of “works” was missed out. It is proposed to reallocate SDR 11,000,000 from Category 3 to Category 2 and the undisbursed amount under Category 1 to category 2. The reallocation is necessary to finance establishment of ITOTs. The revised allocation under Category 3 is adequate to finance the innovation and incentive sub-projects. The revised allocation under Category 2 is necessary to finance establishment of ITOTs. The revised disbursement table with reallocation is in Annex 2. Other amendment to Financing Agreement 20. It is proposed to delete Schedule 2: Section IV.B.1 (b) from the Financing Agreement. The Withdrawal Conditions are no more relevant as the timeframe for achievement of these conditions or milestones which were up to December 31, 2009 is already past. 10 ANNEX 1 Results Framework and Monitoring Project Development Objective (PDO): Revised Project Development Objective: D=Dropped Data Responsibility C=Continue Extended Source/ Cumulative Target Values** Frequency for Data N= New Period*** Method Core PDO Level Results Unit of Collection R=Revised Baseline ology Indicators* Measure YR 1 YR 2 YR 3 YR4 YR5 YR6 YR7 Indicator One: C %age All: 61 Yearly MIS SPIUs Percent of pass-outs from 60 63 67 70 73 73 73 forward data project ITIs that exit from to NPIU to the CTS system with a M: 61.5 60 63 67 70 73 73 73 put on the NCVT certificate, as F: 74.2 73 77 81 85 89 89 89 project web compared to the baseline; - disaggregated by gender Indicator Two: C %age All: 32 36 39 43 46 50 50 50 Mid-term Tracer Percent of project ITIs’ and End- Study NPIU pass-outs who find M: 33.4 37 41 45 48 52 52 52 term working with employment within one F: 18.7 22 27 32 40 48 48 48 3rd party year of finishing training, SC: 29.4 33 36 39 43 46 46 46 survey firm as compared to the ST: 27.6 31 34 37 40 43 43 43 and baseline; consultants - disaggregated by gender, caste Indicator Three: C Real All: 2421 2542 2663 2784 2905 3026 3026 3026 Mid-term Tracer NPIU Real monthly earnings value and End- Study working with (INR) of employed M: 2474 2598 2721 2845 2969 3093 3093 3093 term 3rd party pass-outs from project F: 1961 2059 2157 2255 2353 2451 2451 2451 survey firm ITIs measured one year and after completing consultants 11 training, as compared to the baseline; - disaggregated by gender INTERMEDIATE RESULTS Intermediate Result (Component One): Revised Intermediate Result (Component One): Intermediate Result C Percent indicator One: age Yearly MIS SPIUs Percent of project ITIs forwarding having active private 75 80 100 100 100 100 100 data to NPIU sector participation in IMCs measured by their attendance at IMC meetings and through field visits by SPIU staff; Intermediate Result C Percent indicator Two: age Yearly MIS SPIUs The proportion of 50 75 80 90 100 100 100 forwarding relevant instructor data to NPIU vacancies that are filled; Number of Institute for R Number Training of Trainers 0 0 0 0 (0) (5) (5) Yearly MIS NPIU (ITOTs) established at the state level Number of new and R Number current instructors given 500 2500 3500 3500 5000 (1250 (15000) Yearly MIS SPIU entry-level or refresher / 0) forwarding specialized instructor data to NPIU courses annually Number of grants R Number provided to well- 0 0 (3) (6) (6) (6) Yearly MIS, SPIU performing States/UTs, Reports forwarding and the distribution of data to NPIU these resources to 12 project/non-project ITIs Intermediate Result (Component Two): Revised Intermediate Result (Component Two): Intermediate Result R Number indicator One: 0 0 0 (3) (3) (4) (5) (5) Yearly MIS, NPIU Number of studies Reports commissioned by NPIU Intermediate Result R Number indicator Two: 0 0 0 0 (1) (2) (4) (6) Yearly MIS, NPIU Number of innovations Reports proposals financed by innovations fund. AHI - number of new D Number curricula for emerging technologies developed Intermediate Result (Component Three): Revised Intermediate Result (Component Three): Intermediate Result C Text NSC indicator One: NPIU A National Steering establi Committee (NSC), shed supported by NPIU, established Intermediate Result C Text SSC indicator Two: SPIU State-level Steering establi Committees (SSC), shed supported by SPIU, established within 3 months of project effectiveness 13 ITI institutional survey C Text Yes Yes Yes Yes Yes Yes Yes Yes Yearly MIS NPIU Tracer study of ITI pass- R Text Yes Yes Yes (Ye Mid-term Tracer NPIU outs s) and end- Study term Web-based Management R Text 0 Yes Yes (Ye Yearly MIS NPIU Information System s) (MIS) implemented Project evaluation C Text Yes Yes Yes (Ye Periodic MIS, NPIU undertaken at mid-term s) tracer and end-term by study, independent reports local/international consultant firms. *Please indicate whether the indicator is a Core Sector Indicator (see further http://coreindicators) **Target values should be entered for the years data will be available, not necessarily annually. *** Revised values are in parenthesis 14 ANNEX 2 Reallocation of Proceeds INDIA – VOCATIONAL TRAINING IMPROVEMENT PROJECT P099047 Restructuring Paper 1. Proceeds for India-Vocational Training Improvement Project (P099047) will be reallocated as follows: Allocation % of Financing Current Revised Current Revised Current Revised Goods, services, 77,350,000 35,191,093 78% studies, study tours and Operating Costs under Parts 1(i), 1(ii), 2(i), 2(iii) and 3 of the Project until December 31, 2009 Goods, works, 85,950,000 139,108,907 78% services, studies, study tours and Operating Costs under Parts 1(i), 1(ii), 2(i), 2(iii) and 3 of the Project from January 1, 2010 Goods, works, 21,800,000 10,800,000 78% services, trainings, workshops and studies for Incentive Sub-project under Part 1(iii) and Innovations Sub- projects under Part 2(ii) of the Project 2. The proposed revision to insert “works” in Category 2 and reallocate SDR 11,000,000 from Category 3 to Category 2 to finance establishment of ITOT. This reallocation from Category 3 will not affect the planned activities under the Project. 15