The World Bank Second Dam Rehabilitation and Improvement Project (P170873) REPORT NO.: RES45965 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SECOND DAM REHABILITATION AND IMPROVEMENT PROJECT APPROVED ON DECEMBER 15, 2020 TO INDIA WATER SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Regional Director: John A. Roome Practice Manager/Manager: Michael Haney Task Team Leader(s): Chabungbam Rajagopal Singh, Joop Stoutjesdijk The World Bank Second Dam Rehabilitation and Improvement Project (P170873) ABBREVIATIONS AND ACRONYMS AIIB Asian Infrastructure Investment Bank CWC Central Water Commission DEA Department of Economic Affairs DFIL Disbursement and Financial Information Letter DRIP-2 Second Dam Rehabilitation and Improvement Project GOI Government of India IBRD International Bank for Reconstruction and Development PDO Project Development Objective The World Bank Second Dam Rehabilitation and Improvement Project (P170873) BASIC DATA Product Information Project ID Financing Instrument P170873 Investment Project Financing Environmental and Social Risk Classification (ESRC) High Approval Date Current Closing Date 15-Dec-2020 31-Dec-2027 Organizations Borrower Responsible Agency Central Water Commission (CWC), Ministry of Jal Shakti,Government of Gujarat, Water Resources Department,Government of Kerala, Water Resources Department,Kerala State Electricity Board (KSEB),Government of Madhya Pradesh, Water Resources Department,Government of Manipur, Water Resources Department,Government of Chhattisgarh, India Water Resources Department,Government of Tamil Nadu, Water Resources Department,Government of Rajasthan, Water Resources Department,Meghalaya Power Generation Corporation Ltd. (MePGCL),Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO),Government of Odisha, Water Resources Department,Government of Maharasthra, Water Resources Department Project Development Objective (PDO) Original PDO The project development objective (PDO) is to increase the safety of selected dams in participating States and to strengthen dam safety management in India. OPS_TABLE_PDO_CURRENTPDO The World Bank Second Dam Rehabilitation and Improvement Project (P170873) Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-91810 15-Dec-2020 31-Dec-2027 250.00 0 250.00 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The Second Dam Rehabilitation and Improvement Project (DRIP-2) has a total project cost of US$713.41 million, with a US$250 million IBRD loan that was approved by the Board of Directors on December 15, 2020. The project is expected to be co-financed by the Asian Infrastructure Investment Bank (AIIB), also with a US$250 million loan. Counterpart financing is estimated at US$213.41 million. 2. Various delays have impacted AIIB’s project processing and to date its loan negotiations have not yet taken place. In its letter dated March 26, 2021, the Department of Economic Affairs (DEA) of the Ministry of Finance requested the Bank to make the Bank loan effective as soon as possible. 3. This proposed restructuring will remove an effectiveness condition and adjust disbursement percentages to ensure that activiites implemented by the Central Water Commission (CWC) and the ten participating states are adequately funded by loan proceeds. II. DESCRIPTION OF PROPOSED CHANGES The World Bank Second Dam Rehabilitation and Improvement Project (P170873) 4. Clause 5.01 of Article V: Effectiveness – Termination of the loan agreement that was negotiated on November 10, 2020 has an additional condition of effectiveness that conditions that ‘the Co-financing Agreement has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Borrower to make withdrawals under it (other than the effectiveness of this Agreement) have been fulfilled.’ 5. To be able to declare the Bank loan effective independently from the AIIB loan will require removing this cross- effectiveness condition regarding the AIIB co-financing in Article V. It is proposed to add a remedy under Article IV: Remedies of the Bank that ‘the co-financing deadline for the effectiveness of the Co-financing Agreement is December 31, 2021.’ In the unlikely event that the AIIB loan is not effective on December 31, 2021, the Bank wil consider options how to proceed. 6. This restructuring proposes changes to Schedule 2, Section III – Withdrawal of Loan Proceeds. There will be no change to the categories and amounts of the loan allocated to each category, but changes are proposed to the Percentage of Expenditures to be financed (inclusive of Taxes). The percentages shown in the negotiated loan agreement for the first three categories are 25 percent, 40 percent, and 35 percent for category 1, 2, and 3, respectively. These percentages take into account that AIIB would disburse similar percentages. Government of India’s request is for the Bank to finance AIIB’s share as well until such time the AIIB loan becomes effective. Therefore, it is proposed that for the first three categories the disbursement percentage will increase up to 50 percent, 80 percent, and 70 percent for category 1, 2, and 3, respectively. 7. With the proposed changes to the disbursement percentages, there will be sufficient flexibility to fund the project. The Disbursement and Financial Information Letter (DFIL) will state that ‘the actual percentage applicable to each category will be notified by the Bank from time to time’. This notification will be in the form of an official communication from the Country Director. 8. The amended loan agreement and DFIL that reflect the proposed changes are attached to this restructuring paper. III. SUMMARY OF CHANGES Changed Not Changed Disbursements Arrangements ✔ Financial Management ✔ Other Change(s) ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ The World Bank Second Dam Rehabilitation and Improvement Project (P170873) Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Legal Covenants ✔ Institutional Arrangements ✔ Procurement ✔ Implementation Schedule ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) . Click here to enter text.