Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No. 16678

IMPLEMENTATION COMPLETION REPORT

INDIA

BOMBAY URBAN DEVELOPMENT PROJECT(CREDIT 1544-IN)

June 10, 1997

Energy and Infrastructure Operations DivisionCountry Department IISouth Asia Region

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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CURRENCY EOUJIVALENTS(Currency Unit - Rupee (Rs.)

Year _!S$1= Rs. SDR 1 = US $

1983 (Appraisal) ]I 00 1.0021985 (Credit Effectiveness) 12 05 1.171986 1248 1.201987 12 63 1.251988 (Mid Term) 1 324 1.291989 1( 34 1.321990 (Original Credit Closing) 172( 1.391991 2( 73 1.311992 3(06 1.451993 31 22 1.401994 (Revised Credit Closing) 31 36 1.40

All rates are as of April of each year except 1982 and 1985. The rate used lor 1985 was of August 1985. Average rate over theimplementation period was Rs. 20.33/US$.

FISCAL YEAR OF BORROWERApri I I to March 31

ABBREVIATIONS AND ACRONYMS

ALIS Affordable Low Income Shelter ProgramBMC Bombay Municipal CorporationBMR Bombay Metropolitan RegionBMRDA Bombay Metropolitan Region Development AuthorityBUDP Bombay Urban Development ProjectCIDCO City and Industrial Development CorporationERR Economic Rate ol ReturnFOP Finance and Operations Plan (model)FSI Floor Space IndexGIS Geographic Infornation SystemsGOI Government of IndiaGOM Government of MaharashtraKMC Kalyan Municipa) CorporationLISP Land Infrastructure Servicing ProgramLOGFAS Local Government Finance Administration and ServicesNMMC/NBMC Navi Mumbai Municipal Corporation/Navi Bombay

Municipal CorporationMEIP Metropolitan Environmental Improvement ProgramMHADA Maharashtra lIousing and Area Development AuthorityMIS Management Information SystemsRCA Rent Control ActSAR Staff Appraisal ReportSUP Slum Upgrading l'rogramTATE Technical Assistance Training and EquipmentTMC Thane Municipal CorporationULCA Urban Land Ceiling Act

Vice President Mieko NishimizuDirector Robert S. DrysdaleDivision Chief Jean-Francois BauerTask Manager Argun Ceyhan

FOR OFFICIAL USE ONLY

IMPLEMENTATION COMPLETION REPORT

INDIA

BOMBAY URBAN DEVELOPMENT PROJECT(Credit 1544-IN)

TABLE OF CONTEN] S

PREFACE

EVALUATION SUMMARY ........................................... j

PART I: PROJECT IMPLEMENTATION ASSESSMENT ............... ............................ I

A. Project Objectives ........................................ 1B. Achievement of Project Objectives ........................................ 3C. Major Factors Affecting the Project ......................................... 10D. Project Sustainability ........................................ 12E. Bank Performance ........................................ 12F. Borrower Performance ........................................ 13G. Assessment of Outcome ........................................ 15H. Future Operations ........................................ 161. Key Lessons Learned ........................................ 16

PART II: STATISTICAL ANNEXES

Table 1 Summary of AssessmentsTable 2 Related Bank Loans/CreditsTable 3 Project TimetableTable 4 Loan/Credit Disbursements: Cumulative Estimated ActualTable 5 Key Indicators for Project ImplementationTable 6 Key Indicators for Project OperationTable 7 Studies Included in ProjectTable 8a Project CostsTable 8b Project FinancingTable 9 Economic Costs and BenefitsTable 10 Status of Legal CovenantsTable 11 Compliance with Operational Manual StatementsTable 12 Bank Resources: Staff InputsTable 13 Bank Resources: Missions

Appendix A: Mission's Aide-MemoireAppendix B: Borrower's Letter dated May 23, 1997.Appendix B-Annex I: Borrower Contribution to ICR.

This document has a restricted distribution and may be used by recipients only in theperforrnance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

IMPLEMENTATION COMPLETION REPORT

INDIA

BOMBAY URBAN DEVELOPMENT PROJECT(Credit 1544-IN)

Preface

This is the Implementation Completion Report (ICR) for the Bombay UrbanDevelopment Project (BUDP)* for which a Credit of SDR 137.7 million (equivalent to US$138million at the time of appraisal) to India was approved on January 29, 1985. The Credit becameeffective on August 22, 1985. The Credit was closed on September 30, 1994 after beingextended five times from the original closing date of September 30, 1990. Final disbursementtook place on May 17, 1994. A total of SDR 93,495,400 (equivalent to US$124.89 million) weredisbursed. A total of SDR 44,204,600 had earlier been canceled in 1991 and 1993.

The ICR was initiated by a mission comprising of Mr. Evan Rotner (Mission Leader) andMs. Kim Cuenco (Urban Planner)". The ICR was reviewed by Mr. Jean-Francois Bauer, Chief,Energy and Infrastructure Operations Division and Mrs. Kazuko Uchimura, Project Adviser,Country Department II, South Asia Region.

Preparation of this ICR began after the Bank's final supervision mission (September1994). It is based on material in the project files. The Borrower assisted significantly in thepreparation of the ICR by preparing their own evaluation of the project's execution and initialpreparation, and commenting on the initial draft ICR as well as a subsequent revised draft. TheBorrower's comments on the latter are given in Appendix B. The Bank's and the Borrower'sconclusions on Bank Performance, Borrower Performance and Assessment of Outcome differsignificantly. Because of this reason, the Borrower's contribution has been included in the ICRin its entirety (Appendix B).

The name "Bombay" has been changed to "Mumbai". However, since the original name of the Project isBombay Urban Development Project, the name Bombay was used in this ICR to refer to the current name ofMumbai.

Mr. Sunil Mathrani, Consultant, contributed to the completion of the report, in early 1997.

IMPLEMENTATION COMPLETION REPORT

INDIA

BOMBAY URBAN DEVELOPMENT PROJECT(Credit 1544-IN)

EVALUATION SUMMARY

Introduction

1. The Bank's initial involvement in urban development in India began in the 1970s andfocused on three of India's largest cities -- Calcutta, Madras and Bombay. The objective of theseinterventions was to raise the level of services provided to the population, and to strengthenurban planning and service delivery institutions, particularly those of local government. Thescope of these urban activities were subsequently broadened to include medium-sized cities. TheBombay Urban Development Project (BUDP) identified land, infrastructure and shelterdevelopment as being the most critically neglected Bombay Metropolitan Region (BMR)problems which were not addressed by the Bank's earlier projects. The Project formed part of theGovernment of Maharashtra's (GOM) Affordable Low Income Shelter (ALIS) Program in BMRfor the period 1983/84-1989/90. The overall objective of ALIS was to reduce the absolutenumber of households living in slums by increasing the supply of affordable shelter particularlyto the poor. BUDP also supported GOM's efforts to improve policies and institutions affectingthe management of urban development.

Project Objectives

2. The project aimed to increase the public supply of affordable land, infrastructure andshelter, particularly for low income families. It sought to improve local governments' financialand administrative capacity to deliver and maintain services, and to plan and execute urbanprojects. In so doing, it aimed to significantly reduce the cost of shelter investments throughmore efficient and equitable land use planning and pricing policies, appropriate performance-oriented design standards and development control and building regulations. Finally, it aimed todirect a larger proportion of private investment in land servicing and shelter construction into lowcost units for low income families.

3. Although the objectives remained valid and unchanged throughout the life of the Project,the emphasis shifted away from slum upgrading to municipal services and infrastructure whenthe project was restructured in late 1990. Looking back, it is clear that these objectives althoughambitious, were correct, given the problems identified at the time of project preparation.

Implementation Experience and Results

4. The project had four major components:

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(a) Land Infrastructure Servicing Program (LISP);

(b) Slum Upgrading Program (SUP);

(c) Local Government Finance Administration and Services (LOGFAS); and

(d) Technical Assistance, Training and Equipment (TATE).

Under LISP, physical targets for sites and services schemes were almost fully met. Affordable,serviced plots were sold to nearly ninety thousand low-income households. However, the targetwas achieved over a period of nine instead of five years, as expected at appraisal. This timeoverrun has been taken into account in the overall project evaluation.

5. Only 22 percent of the SAR target for SUP was achieved. The component proved verydifficult to implement for a number of reasons, which shows the lack of a strong constituencyfor in-situ slum upgrading on a cost-recovery basis. The scheme was undermined by competitionfrom several parallel programs that financed essential infrastructure in slums, or provided new,free (or almost-free) housing to slum dwellers (Part i, para. 9).

6. Financial objectives (affordable pricing for low income beneficiaries, while ensuring fullcost recovery, charging real interest rates, and significant internal cash generation for projectfunding) were substantially achieved. A revolving fund created in the Bombay MetropolitanRegion Development Authority (BMRDA), from part of the repayments to GOM by theimplementing agencies is now operational. It is contributing to the development of capacity forfinancial intermediation in the area of municipal infrastructure.

7. Objectives regarding reforms in rent control, property tax and urban land ceiling were notfully achieved. They were considered essential for achieving the long-term objectives of ALIS,but no specific actions were explicitly included in the project conditionality. The Bank expectedGOM to pursue these reforms in parallel with the project. It would appear that while there wasagreement on the importance of reforms between the Bank and Government officials, thecomplexities and resistance to such reforms were not adequately taken into account. The Bankmade a concerted attempt to promote these reforms and the unusually long delay in negotiatingthe project shows the extent of the efforts made (Part 1, paras. 18-21).

8. The technical capacity of BMRDA, the Maharashtra Housing and Area DevelopmentAuthority (MHADA) and the City and Industrial Development Corporation (CIDCO) toformulate, plan and implement projects was strengthened during the Project. Nevertheless,experience with this project has shown that the ability of BMRDA and GOM to successfullycoordinate large, multi-agency programs remains weak. Hence, the overall achievement of thisobjective was only partial.

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Project Sustainability

9. The project is unlikely to be sustainable because of the lack of political and institutionalcommitment to its approach. BUDP, with its emphasis on cost recovery, and offering productswith limited visibility encountered difficulty in evoking political commitment, particularly asregards major legislative reforms. Frequent changes in leadership at the institutional level alsocontributed to this difficulty. The Project would be sustainable only if GOM demonstratescommitment to the project's approach and objectives, which has not been the case for slumupgrading. Sustainability and replicability of future sites and services schemes would beenhanced if they did not have to rely on governmental land, whose supply in the BMR is nowlimited.

Project Cost, Financing and Schedule

10. The Project closed with a rupee expenditure of Rs. 435.81 crores (US$214.33 million) asagainst Rs. 282.33 crores (US$256.70 million) estimated in the SAR, but with a correspondingCredit utilization of SDR 93 million (US$124.889 million) instead of the estimated SDR 137.7million (US$138 million). The SAR estimated a 6.5 year completion period, but this proved tobe over-optimistic as nine years were required instead. The Project was restructured with twosuccessive credit cancellations of SDR 37 million in December 1991 and SDR 7.20 million inJune 1993 (Part I, para. 5). By June 1994, the balance of SDR 93 million was fully disbursedbefore the final closing date of September 1994.

Major Factors Affecting Achievement

11. Communal disturbances in Bombay during the short period between December 1993 andFebruary 1994, and the continuous depreciation of the rupee, particularly after the Gulf War in1991, adversely affected credit utilization. These factors were not within GOI's control. WithinGovernment control were several factors that influenced project implementation. First, efforts toreform the Rent Control Act (RCA) and the Urban Land Ceiling Act (ULCA) were ineffective.Second, the lack of government commitment to the SUP approach led to the continuation ofgrant-based improvement schemes and subsidized tenement programs which made SUP lessattractive, and resulted in the limited achievement of these objectives. Third, althoughintroduced for well-intentioned environmental considerations, the general ban on quarrying anddevelopment of coastal wetlands adversely affected project implementation (Part I, para. 30).Fourth, the unrealistic policy of retaining development plan reservations on slums held up thetransfer of tenure to slum dwellers' cooperatives.

12. With the exception of MHADA, implementing agencies administered BUDP as a part oftheir other ongoing activities. This resulted in less attention being given to BUDP. There werealso delays in bid evaluation and decisions regarding award of contracts by the StandingCommittee which have been chronic problems in the Bombay Municipal Corporation (BMC).Many of the delays were mainly due to weak coordination at the governmental level which failedto resolve issues in a timely manner.

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Bank and Borrower Performance

13. Apart from a few shortcomings, Bank performance was generally satisfactory in theidentification and preparation, and marginally satisfactory in appraisal and supervision of theproject. The unbroken continuity of the Bank Task Manager (Part I, para. 42) and the BMRDAManager responsible for the project was a positive feature. However, the Bank should haveallocated more resources for supervision during the last three years of implementation.

14. The Project had six implementing agencies plus a coordinating body and four distinctcomponents'. Performance varied according to agency and component and over time. It isextremely difficult to integrate this degree of diversity into a single measure of Borrowerperformance spread over a twelve-year period. Nevertheless, on balance, Borrower performanceis rated as marginally satisfactory, although this assessment would not be justified for allimplementing agencies.

Assessment of Outcome

15. Despite the partial fulfillment of project goals, the overall outcome is assessed asmarginally satisfactory, principally because of the success of the project's largest component,LISP . By meeting the objective of improving the supply of serviced public land to low-incomehouseholds, the project has enabled over half a million persons to benefit directly from theinvestments undertaken by the project. The majority of the beneficiaries were close to, or belowthe poverty line (Part I, para. 26). These benefits imply the transfer of real assets to the poor andthe project has thereby contributed to alleviating poverty. F inally, the ERR surpassed SARestimates (Part I, para. 25) and the project's financial targets have also been met.

Findings and Key Lessons

16. The Project has demonstrated that:

(a) The design of urban development projects should explicitly take into accountsocio-political factors that have a key impact on sector policies and wherepossible, alternative less ambitious reform options should be considered (Part I,para. 22);

/ Implementing Agencies Project ComponentsMaharashtra Housing and Area Development Authority (MHADA) LISP, SUP, TATECity and Industrial Development Corporation (CIDCO) LISP, LOGFAS, TATEBombay Municipal Corporation (BMC) LISP, SUP, LOGFAS, TATEThane Municipal Corporation (TMC) LOGFAS, TATEKalyan Municipal Corporation (KMC) LOGFAS, TATENavi Bombay Municipal Corporation (NBMC) LOGFAS, TATE

Bombay Metropolitan Region Development Authority (BMRDA) was the coordinating body.

2 Estimates at appraisal were 85,000 plots; they were revised to 88,000 plots during restructuring. Actually,87,743 plots were developed under the program (Tables I and 2).

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(b) even holding up the processing of a substantial loan in support of investments isinsufficient to bring about required legal and institutional reforms (Part I, para.18). However important the reforms may be, they will only occur if there issufficient political will to confront the vested interests resisting them. Once aloan becomes effective, attention is focused more on project-specificimplementation objectives at the expense of broader and politically difficultsectoral reforms;

(c) the Bank should not undermine its credibility by making explicit policydeclarations to Borrowers and then ignore its own self-declared policy (Part I,para. 20);

(d) a project's physical and financial objectives can be largely achieved despitedistorted sector policies. As a result of BUDP, about half a million poor peoplehave benefited from serviced plots and housing loans financed by the project. Theimplementing agencies have acquired substantial financial resources from plotsales as a direct result of their participation in the project and are thus in a positionto replicate the physical achievements of the project (Part I, para. 51);

(e) in order for such urban development programs involving multiple agencies to beimplemented efficiently, it is necessary to strengthen the planning, coordinationand management of urban services by these agencies. Improvement ofprocurement practices is also essential (Part I, para. 35 (e)); and

(f) frequent changes of key personnel and staff, particularly from the IndianAdministrative Service cadre have been a common problem in implementinglong-term programs. This has also been true of important engineering positions inBMC and MHADA. The continuity of key personnel is critical to ensurecommitment to project objectives.

IMPLEMENTATION COMPLETION REPORT

INDIA

BOMBAY URBAN DEVELOPMENT PROJECT(Credit 1544-IN)

PART I. PROJECT IMPLEMENTATION ASSESSMENT

A. PROJECT OBJECTIVES

Background

1. The Bank's initial involvement in urban development in India began in the early 1970sand focused on three of India's largest cities -- Calcutta, Madras and Bombay. The objectives ofthese interventions were to raise the level of services provided to the population, and tostrengthen urban planning and service delivery institutions, particularly those of localgovernment. The scope of these urban activities was subsequently broadened to includemedium-sized cities.

2. The Bombay Urban Development Project (BUDP), prepared in 1982-83, identified land,infrastructure and shelter development as the most critically neglected problems in the BombayMetropolitan Region (BMR). These had not been addressed by the Bank's earlier single-sectorurban projects in Bombay, which had focused on the transport, water supply and seweragesectors. The Project formed part of the Government of Maharashtra's (GOM) Affordable Low-Income Shelter (ALIS) Program in the BMR for the period 1983/84-1989/90. This program'slong-term objective was to reduce the absolute number of households living in slums byincreasing the supply of affordable shelter particularly to the poor. BUDP also supportedGOM's efforts to improve policies and institutions affecting the management of urbandevelopment.

Statement of Objectives

3. The main objectives of the Project were as follows:

(a) to increase the public supply of affordable land, infrastructure and shelterparticularly for low income families and small businesses;

(b) to improve local government's financial and administrative capacity to deliver andmaintain services, particularly infrastructure created under BUDP;

(c) to strengthen the government's institutional capacity to plan, coordinate,implement, and evaluate BUDP projects. programs, and policies, andto replicate the achievements;

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(d) to improve public sector cost recovery and to reduce in a major way public andprivate costs of shelter investments through more efficient and equitable land useplanning and pricing policies and more appropriate performance-oriented designstandards, development control and building regulations; and

(e) to direct a larger proportion of private investment in land servicing and shelterconstruction into low cost units for low income families.

4. These objectives were translated into physical and investment targets as shown inTable 11. Objectives (a) and (d) were directly and substantially supported by the investmentprogram. Objective (b) was partly supported by the investment program and technical assistancecomponent. Objective (c) was supported through the broadly defined technical assistance andtraining component. However, objective (e) entailed legislative reforms, particularly in the RentControl Act and Urban Land (Ceiling and Regulation) Act.

Table 1. Bombay Urban Development ProjectProject Components

Original SAR (1985) Restructured (Dec. 1990)COMPONENTS Physical Financial % Total Physical Financial % Totial

__________________________ (Rs crores) (Rs crores)

1. Land Infrastructure 85,000 196.3 69 88,000 366.3 67Servicing Program (LISP) plots plots

of which: Not incl. (109.2) (20)I a. New Infrastructureworks2. Slum Upgrading Program 100,000 53.4 19 60,000 21.6 4(SUP) house- house-

holds holds

3. Local Government 30.8 11 146.5 27Finance Administration &Services (LOGFAS)

of which: Not incl.3a. Additional services for12 BMR towns.

4. Technical Assistance, 1.9 1 10.0 2Training & Equipment(TATE)

TOTAL 282.4 100 1 544.4 100

5. The Project was formally restructured in December 19902 because only 37 percent of theCredit had been disbursed at its original closing date (September 1990). A three-year extensionof the closing date was proposed and additional infrastructure investments costing about US$ 35

I/ Further details for physical targets (appraisal, revised and actual) are given in Part 11; Table 5.

2/ A memorandum (No. R90-156) dated 14 December 1990, seeking approval for the restructuring was submitted to theBoard.

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million, such as water supply and storm drainage were included in the project scope. The Creditwas also redistributed within categories, but no partial cancellation was envisaged at that point.The respective scopes of LISP linked to off-site infrastructure and that of LOGFAS wasconsiderably increased as part of the restructuring, while the SUP target was reduced and thefunds allocated to it cut by US$ 35 million (Part II, Table 5). Other BMR municipalities werealso brought within the scope of the project.

Evaluation of Objectives

6. Although the objectives remained valid and unchanged throughout the life of the Project,the emphasis shifted away from slum upgrading to municipal services and infrastructure whenthe project was restructured. Looking back, it is clear that these objectives although ambitious,were correct, given the problems identified at the time of project preparation. While theimportance of urban land and rent policy changes was widely recognized, given their highlypolitical nature, it was unrealistic to expect that these reforms could be achieved as a result ofpressure from the Bank through the limited leverage of the Project alone (para. I 1).

B. ACHIEVEMENT OF PROJECT OBJECTIVES

Physical Components

7. The LISP component (accounting for nearly 70 percent of disbursements), comprisedsites and services schemes that predominantly developed 25-40 square meter sized plots withaccess to public utilities and community facilities. The plots were sold at prices that variedaccording to size, location and access to amenities. A covenant in the Project Agreement obligedGOM to ensure that at least 55 percent of the plots were sold to households at or below theBombay poverty line. The LISP physical targets were fully met, but were achieved over nineinstead of the expected five years. However, the SUP target was achieved only to the extent of22 percent of the SAR target, despite the four-year extension of the project period. The physicaland financial progress of these components are given in Table 2.

Table 2. Project Implementation Performance

SAR Original Re3tructured (Dec. 1990) Attual Actutl a % of r*0autuadConpenent Physical Financial Physical financial Physicat Feancaal Physkial .01 .

(Rs creres) (Rs crares) (Ps traes) ___-_-X

1. + la LISP 85,000 196.3 88,000 366.3 87,743 297.7 99.7 8Iplots plots plots

2. SUP 100,000 53.4 60,000 21.6 22,204 7.5 37.0 35households households households

3. LOGFAS 30.8 146.5 7 118.1 - 814. TATE (including 1.9 10.0 . 12.5 125MEIP _ _ _BUDP Total 282.3 544.4 _ _435.8 80

* MEIP: Metropolitan Environmental Improvement Program

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Slum Upgrading Program

8. This component was intended to cover in-situ improvements for about 100,000households, living mainly within the BMC area and accounting for about 12 percent of totalnumber of households estimated to be living in hutments in 1981. The component consisted ofinfrastructure improvements, loans for home improvement and leasehold tenure.

9. The component proved very difficult to implement for a number of reasons, which boildown to the lack of a strong constituency for in-situ slum upgrading on a cost-recovery basis.First, the scheme was undermined by several parallel programs that financed essentialinfrastructure in slums, or provided new, free (or almost-free) housing to slum dwellers. Asubstantial proportion of the target slums for SUP were thus reassigned to the Prime Minister'sGrant Project, launched in 1987, which provided nearly Rs. 60 crores to GOM for slumrelocation as well as in-situ improvements. The GOM budget also allocated Rs. 3 million peryear to each Member of the Legislative Assembly (MLA) for slum improvement grants in theirconstituencies. Second, most of the slums were on land that had been classified for other publicuses. Reclassifying the land use encountered resistance from MHADA/BMC, which would havepreferred this land to have remained in the public, non-residential domain for future developmentby these public agencies. Third, in-situ improvements were also disliked by their staff becausethey did not lead to public works contracts for them to administer. Finally, granting legal tenureto slum dwellers was also disliked by some local politicians as it diminished their influencebecause slum dwellers relied on these politicians to protect them from eviction.

10. The project's approach to slum upgrading thus did not serve as a model for otherschemes. On the contrary, politicians encouraged slum dwellers to opt for 'free' schemes andtheir demonstration effect (even if demand far outstripped supply), reduced community demandfor the Bank-funded SUP. Programs requiring unsustainable levels of subsidies, quite contraryto BUDP principles and approaches, thus became more popular amongst the target beneficiaries.

11. With hindsight, it appears that the decision taken at the time of project restructuring(December 1990) to retain this component3 in the project was not justified. It should have beencanceled4 because the nature and extent of the obstacles to implementing SUP was apparent toBank and Project staff by that stage. In August 1991, a letter from the Bank to the MetropolitanCommissioner, BMRDA, stated that tenure for slum dwellers was as important as physicalimprovements and contained a warning that the Bank would "discontinue financing" the SUPcomponent in the absence of remedial action. However, this threat was not acted upon, eventhough it would appear5 that no further slum households benefited from the project over theremaining three years of implementation.

3/ Albeit with a 40 percent reduction in the target number of households to 60,000.

4/ However, it should be recognized that there would probably have been considerable reluctance on the part of the Bank aswell as GOI to explicitly recognize that the SUP was a failure due to the power of vested interests which could not beovercome.

5/ The Bank's letter of August 22, 1991 states that about 22,000 households had been covered by SUP at that point. Thetotal number of benefiting households at loan closure in September 1994 was unchanged.

Institutional Strengthening and Capacity Building

12. Objective (b) was addressed through the Local Government Finance and AdministrativeSystems (LOGFAS) component and partly supported by the Technical Assistance, Training andEquipment (TATE) component. The technical capacity of BMRDA, MHADA and CIDCO toformulate, plan and implement projects was strengthened during the Project. Nevertheless,experience with this project has shown that the ability of BMRDA and GOM to successfullycoordinate large, multi-agency programs remains weak. Hence, the overall achievement of thisobjective can only be considered as partial.

13. Objectives (b) and (c) were supported by a large number of studies and consultantservices (Part II, Table-7). In particular, technical assistance succeeded in significantlydeveloping institutional capacity in the following areas:

(a) formulation and evaluation of land development projects targeted mainly towardslow-income beneficiaries through the use of computer-based models in BMRDA,MHADA and CIDCO;

(b) use of a computerized lottery system for beneficiary selection and commercialaccounting for monitoring and collection of accounts receivable in MHADA;

(c) use of a network-based, computerized Project Management System andcomputerized tracking of procurement, expenditure and Credit utilization inBMRDA; and

(d) introduction of a Geographic Information System (GIS) for use in regional landuse planning, transportation, other infrastructure planning and environmentalmanagement activities in BMRDA.

14. As a municipal finance agency, BMRDA made effective use of computerized Financeand Operations Plan (FOP) models for loan appraisals. On the other hand, the organization andmanagement studies carried out under the TATE component for MHADA, the Thane MunicipalCorporation (TMC), the Kalyan Municipal Corporation (KMC) and the Navi Mumbai MunicipalCorporation (NMMC) have had very little institutional impact. While the studies were good,they were not utilized by the implementing agencies.

15. The project's cost reduction objective was directly related to LISP. This objective wasaddressed by obtaining GOM's approval to modify land use and design standards for LISP.Similar standards were later incorporated in the Development Control Regulations (1991) of therevised Development Plan of Bombay, thus substantially meeting this objective. The projectdemonstrated that in the metropolitan shelter sector, increasing the supply of affordable servicedland through modifications in land use regulations and provision of trunk infrastructure topromote private land development for all income groups is fundamental. The direct investmentby public agencies in land development was an important part of the overall strategy withimportant demonstration effects.

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Reform of Sector Policies

16. There was limited success in directing a larger proportion of private investment in landservicing and shelter construction into low cost units for the poor (Objective e). These actionsdepended on legal and sectoral reforms in rent control, property tax and urban land ceilings,which have not taken place. They were considered essential for achieving the long-termobjectives of ALIS, but no specific actions were explicitly included in the project conditionality.The Bank expected GOM to pursue these reforms in parallel with the project.

17. BMRDA and GOM, also attempted several times to implement a pilot scheme of 'GuidedLand Development' to attract private investment for low-income housing construction within theexisting legal framework with financial support from the Project. However, as a first step,BMRDA was to develop sites and services on land acquired though compensatory acquisition.This scheme could not be implemented successfully either because of the refusal of landownersto give up their properties. Then, BMRDA changed its approach to guided land development,and began promoting commercial development at a district center. Under this modifiedapproach, land was acquired notionally by GOM and returned to the owners provided theyagreed to develop it along the guidelines set by BMRDA. In the end, this approach stimulatedland assembly, public use and the commercial development of the district center as originallyenvisaged by BMRDA. Presently, BMRDA is using FSI as incentive and mechanism to bringabout guided development, e.g. landowners get bonus FSI if they agree to allocate a portion oftheir land to smaller plots for the poor. Hence, GOM has not given up on guided landdevelopment but rather has enlarged its scope as part of its land policy mechanisms. Since then,BMRDA has extended the concept of Guided Land Development which is based on incentives inthe form of development rights in its draft Regional Plan'.

18. The Project Appraisal team sought amendments to the Rent Control and BMC Acts in thesecond half of 1983, prior to negotiations. Even at that stage, DEA had advised GOM that rentcontrol reform was outside the scope of the issues which were relevant to the IDA interest inproject7 . Since rent control reform by any single state raised national issues, GOI felt that theyshould not be a condition of negotiations. Nevertheless, the Decision Memo issued after thereview of the Issues Paper records that 'GOM should be requested to furnish IDA with astatement of intention prior to negotiations which should include its detailed action plan for rentcontrol reform and a reasonable timeframe within which this objective would be achieved'. Thesubsequent letter from the Bank to GOI conveyed these conditions of negotiations8 .

19. GOM attempted to satisfy this condition by drafting legislative amendments by the timethe Bank was ready to negotiate the Credit following Loan Committee clearance in January1984. However, DEA formally responded to the Bank's insistence on a statement of intent bystating that 'it is not the policy of GOI or the state government to submit statement of intentions

6/ Draft regional plan for the Bombay Metropolitan Region, 1991-201 1, BMRDA, 1994.

7/ Para. 23 of the Issues Paper dated 13 September 1983.

8/ Letter from the Country Programs Division Chief to the Joint Secretary, Di A, dated 31 October, 1983.

since it is not possible for any government to commit the legislature in this manner'. There wasno progress on this issue during the first half of 1984.

20. Thereafter, Bank staff attempted for several months to find a compromise which wouldenable negotiations to take place. Finally, in October 1984, the Regional Management soughtand obtained the approval of the Senior Vice President. Operations (SVPO) to proceed withnegotiations, even without a statement of intentions, on the grounds that these reforms were notcritical in the short term to the financial viability of the project'. However, the SVPO suggestedthat the project size be reduced and GOI be advised that the Bank 'would not be prepared toundertake further lending for urban housing projects whose long-term viability is affected by rentcontrol, unless satisfactory progress is made by GOM in enacting the envisaged amendinglegislation"'.

21. The negotiations were completed in December 1984, eleven months after initial LoanCommittee approval. The GOI delegation succeeded in convincing the Bank to retain theoriginal size of the project without giving any specific assurance on rent control and property taxreform. The agreed minutes of negotiation record that 'rent control reform was an importantobjective of the Government, as reflected in the Approach Paper of the Seventh Five-year Plan,and there was every intention to achieve this objective during the Seventh Plan Period'.

22. In conclusion, it would appear that while there was agreement on the importance ofreforms between the Bank and Government officials at a technocratic level, the political risks toany government in Maharashtra of such reforms were not adequately taken into account. TheBank made a concerted attempt to promote these reforms and the unusually long delay innegotiating the project shows the extent of the efforts made. However, the political power of the'renters lobby' which has prevented any reform in the State till today, should have been apparentto both sides even at that time. The Project showed the futility of using a single investmentproject to leverage major reforms when the political commitment does not exist. Nevertheless,although ULCA and RCA were not repealed, partial reforms did take place at the State level.Some exemptions to the ULCA were given provided the landowner was prepared to develop landin a manner similar to sites-and-services. There were also some minor changes to the RCA.Additionally, BUDP tried to change existing standards that governed the land developmentprocess which limited public-private partnership and raised the cost of housing for the poor.Under the Project, the Bank succeeded in obtaining a GOM sanction to modify land use anddesign standards of the LISP component. The LISP provided serviced sites, includingcommunity facilities, core houses and housing expansion loans to over 110,000 households ofwhich the majority were in lower income groups. Similar standards were later incorporated intothe 1991 Development Control Regulations of the Revised Plan of Bombay. With regard to theacquisition of land for slums under the SUP component, although these were planned prior toproject approval, the Project encountered many unanticipated problems, such as the coastal zonemanagement plan (excluded coastal land), ban on quarrying for reclamation materials, changes of

9/ Memo from the RVP to the SVPO, dated 23 October, 1984.

10/ The Bank ignored its own self-declared ban on further lending by proceeding with other urban projects in India eventhough there was no progress in rent control reforrn.

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reservations in the master plan for the transfer of tenure (the master plan was concurrently underrevision at the time of project preparation), etc.

Financial Objectives

23. The Project's financial objectives included affordable pricing for low incomebeneficiaries, while ensuring full cost recovery, and the charging of real interest rates tobeneficiaries. These have been substantially achieved. Households were granted loan funds forpart of the cost of the plots at unsubsidized conditions (12 percent interest rate over 20 years).Some problems were inevitably encountered with loan repayments by beneficiaries, but thesehave not jeopardized inflows to the BMRDA Revolving Fund (para. 24). Internal cashgeneration by the project in the sites and services component exceeded the minimum 50 percentof project costs projected at appraisal. This is due to income derived from the much higher thanprojected sale prices and revenues generated by the sale of middle and upper income residentialand commercial plots.

24. In addition, the BMRDA-BUDP Revolving Fund was created in BMRDA in 1988, in partto assist the agency in developing the capacity for financial intermediation in the area ofmunicipal infrastructure. The Revolving Fund is fed by 45 percent of the principal to be repaidby the implementing agencies to GOM and is intended for use in financing future programssimilar to BUDP. Annual inflows are currently about Rs. 20 crores and approved loans (at 12percent for 15 years) to BMR municipalities to date amount to Rs. 32 crores.

Economic Rate of Return (ERR)

25. The project was designed as a program consisting of discrete components. The ERR wasnot therefore worked out for the overall project, but was estimated for representative sub-projects.The SAR estimated a weighted average rate of return based on prototype LISP and SUP sites tobe 20.4 percent (17.9 percent and 31.0 percent, respectively). The LISP ERR was estimated torange from 13 percent in Thane-Kalyan areas to 18 percent in Greater Bombay and 27 percent inNew Bombay. The methodology adopted included all costs net of taxes, and took as economicbenefits the rental values of residential, commercial and institutional plots. Following a similarmethodology, the ERRs for three representative sites in Thane, Greater Bombay and NewBombay have been re-estimated on the basis of actual costs incurred (net of taxes), market pricesand rental values at the time of first allotment of plots. The re-estimated ERRs work out to be42.7 percent, 33.5 percent and 40.9 percent respectively (Part II: Table-9). Despite the longerperiod of construction, the ERRs are higher on account of the substantial increase in real estateprices and rental values in the BMR. The SAR estimate of the ERR was based on land sale pricesof Rs 45-600 per sq. meter while the ex-post ERR has been calculated using Rs 750-4500 per sq.meter. Other non-quantified benefits from the project include:

(a) substantial private investment in building construction;

(b) considerable employment generation through small contractors who built single-storied simple structures for low-income cooperatives; and

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(c) poverty alleviation.

The ERRs of individual schemes in SUP were also above the SAR estimates, mainly because ofthe substantial increase in real estate rental values and the transfer of land tenure being anintegral part of SUP.

Social Objectives and Gender Concerns

26. The social objectives of the project focused on poverty alleviation and the lack of accessof the poor to urban services. In particular, the LISP component had an explicit target of 45 to55 percent of plots to be allocated to families below the poverty line, and 10 to 20 percent ofplots for income groups immediately above the poverty line. A comparative profile of LISPbeneficiaries and income distribution based on household survey carried out for BMR" in 1989showed that this objective was met in terms of number of sites developed and the beneficiaryproportions. Similarly, under SUP, a large proportion of beneficiaries were below the povertyline, as confirmed in the base line surveys carried out by the BMRDA. While no formal surveyhas been conducted on plot resales, the percentage is likely to be about 15-20 percent. Plotlayout and sizes have limited the transfers to the same low-income income group, with newermigrants buying plots from more established residents with already existing housingarrangements. The reason for this is that the eligibility criteria used for selection of householdrequired a minimum period of residency in the city. This left out a large category of poorhouseholds who are recent migrants to the city and in search of a more stable residence.Although the project did not have any explicit gender objectives, the Borrower adopted a policyof granting land tenure under SUP jointly to both the spouses of a household.

Environmental Objectives

27. The project was prepared in 1982-83, at which time environmental concerns were notexplicitly addressed. Nevertheless to the extent that the project provided basic infrastructureservices, it had beneficial environmental impacts. LOGFAS investments, particularly in stormwater drainage, assisted in flood prevention.

28. Moreover, a set of environmental studies for the Bombay Metropolitan Region wereincluded in the scope of the restructured project as part of the Bank-executed MetropolitanEnvironmental Improvement Program (MEIP). These studies were successfully implementedunder the TATE component. They were:

a) an environmental management strategy for the Bombay region;

b) integrated environmental management of the Chembur-Thane-Belapur industrialas; and

c) a solid waste management study.

H/ Multipurpose household survey conducted jointly by ORG and BMRDA, 1990.

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A considerable number of follow-up investments and policy initiatives emerged from this work.Some have been taken up by the private sector, but there are several which the Government ofMaharashtra and donors could support in the areas of solid waste management and water supplyimprovements, low cost sanitation and hazardous waste treatment.

C. MAJOR FACTORS AFFECTING THE PROJECT

29. There were two sets of factors outside government control which had a significant effecton project implementation. These were the communal disturbances and bomb blasts in Bombayduring the short period between December 1993 and February 1994, and the continuousdepreciation of the Rupee, particularly after the Gulf War in 1991. Between Effectiveness andCredit closing, the SDR strengthened by about 285 percent against the Rupee while the IndianConsumer Price Index rose much less (about 220 percent). Hence the amount of the Creditavailable in real terms rose sharply. Credit utilization in SDR terms (93.5 million) thereforeappears poor as compared to the initial SDR 137.7 million. On the other hand, spending inRupee terms (436 crores) was much higher than projected (Rs. 282 crores).

30. Within government control were several factors that influenced project implementation.First, efforts to reform the RCA and ULCA were ineffective. Second, the lack of governmentcommitment to the SUP approach led to the continuation of grant-based improvement schemesand subsidized tenement programs which made SUP less attractive, and resulted in the limitedachievement of these objectives (para. 9). Third, although introduced for well-intentionedenvironmental considerations, the general ban on quarrying and development of coastal wetlandsadversely affected project implementation because the LISP component depended on stone fromthe closed quarries and also some of the area to be developed lay within the coastal wetlands.Due to the absence of proper planning and administrative measures to resolve this problem,implementation of LISP was considerably delayed. Fourth, the unrealistic policy of retainingdevelopment plan reservations on slums held up the transfer of tenure to slum dwellers'cooperatives.

31. Of the factors within the control of implementing agencies, several had an importantimpact on implementation. First, with the exception of MHADA, implementing agenciesadministered BUDP as a part of their other ongoing activities. This resulted in insufficientattention being given to BUDP. Realizing the need for closer monitoring and review, BMCsubsequently assigned these responsibilities to the Chief Engineer of the Project Planning andMonitoring Cell, and Additional Municipal Commissioner after 1990. Second, delays in bidevaluation and decisions regarding award of contracts by the Standing Committee have beenchronic problems in BMC. Although BMRDA produced monthly reports which comparedprogress vis-a-vis annual targets, it lacked the authority to introduce the necessary measures tospeed up contract award. The Technical and High Power Committees constituted by GOM werelargely ineffective in enforcing recommended actions.

32. The Project was conceived more as a program based on prototype projects rather than as aconventional fully designed investment project where the entire investment is appraised upfront.Certain deviations in the costs were therefore inevitable. Estimation of physical quantities, baseunit costs and price contingencies were largely adequate. In fact, there were initial cost

underruns, particularly in land reclamation. However, as the initial IDA Credit was determinedusing a constant exchange rate, significant rupee depreciation meant that an increase ininvestments in rupee terms could be supported without difficulty by the Credit. The projectclosed with a rupee expenditure of Rs. 435.81 crores (US$214.3 million) as against Rs. 282.3crores (US$256.7 million) estimated in the SAR, but with a corresponding Credit utilization ofSDR 93 million (US$124.9 million) instead of SDR 137.7 million (US$138 million) estimated inthe SAR. The Project was implemented through 1,327 contracts, out of which 1,248 smallercontracts were awarded through Local Competitive Bidding (LCB) procedures. Theperformance of contractors was generally satisfactory, although in most cases there was sometime overrun.

33. The SAR estimated a 6.5 year implementation period. However, achieving the LISPtarget could only be accomplished with the extension of the credit closing date by four years toSeptember 1994, for reasons given in para. 35. Some project completion works continued up toMay 1995.

34. According to the initial SAR disbursement profile, SDR 137.7 million was to be fullyutilized by September 1990. However, actual disbursement at that time was only SDR 40million (42.8 percent - Part II, Table 4a). Subsequently, there have been two cancellations. SDR37 million in December 1991 and SDR 7.20 million in May 1993. By June 1994 the remainingSDR 93 million was fully disbursed before the final closing date of September 1994.

35. The reasons for the project delays were as follows:

(a) Although the original implementation schedule appeared appropriate at that timein order for the project to have a significant sectoral impact, the delays that haveoccurred during implementation have shown it to have been unrealistic;

(b) many of the delays were due to weak and uncommitted coordination at thegovernment level which failed to resolve issues in a timely manner. For example,substantial land for LISP was allotted to MHADA only after being made acondition for Credit extension;

(c) the ban on quarrying and the restrictions on reclaiming coastal wetlands added tothe other administrative problems faced by the Project;

(d) there was an inordinate delay in deciding the policy of granting tenure to slumslocated on land reserved for public purposes under the Development Plan;

(e) of the implementing agencies, BMC encountered major problems in the selectionof contractors and had generally slow and inefficient procurement practices. Forexample, it used 120 to 150 days as the bid validity period instead of the normal90 days; and

(f) Frequent changes of key personnel and staff, particularly from the IndianAdministrative Service cadre have been a common problem in implementinglong-term programs. This has also been true of important engineering positions

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in BMC and MHADA. The continuity of key personnel is critical to ensurecommitment to project objectives.

D. PROJECT SUSTAINABILITY

36. The project is unlikely to be sustainable because of the lack of political and institutionalcommitment to its approach. BUDP, with its emphasis on cost recovery, and offering productswith limited visibility encountered difficulty in evoking political commitment, particularly asregards major legislative reforms. Frequent changes in leadership at the institutional level alsocontributed to this difficulty.

37. The Project would be sustainable only if Government demonstrates commitment to theproject's approach and objectives, which has not been the case for slum upgrading.Sustainability and replicability of future sites and services schemes would be enhanced if theydid not have to rely on governmental land, whose supply in the BMR is now limited For thatpurpose, mechanisms such as Transfer of Development Rights (TDR) and other land policyinnovations promoting land assembly through private sector and servicing will be of crucialimportance.

38. The replicability of the project's off-site infrastructure investments will require greaterparticipation by private financial intermediaries. The BUDP Revolving Fund managed byBMRDA (para. 24), could serve as a catalyst for a larger financial intermediation function byBMRDA in support of urban infrastructure investments. The prospects for the sustainability ofthe Revolving Fund are good and the main implementing agencies have accumulated substantialfinancial resources as a result of their participation in the LISP component. They are therefore ina position to replicate this scheme, provided adequate public land is available.

E. BANK PERFORMANCE

39. Apart from a few shortcomings, Bank performance was generally satisfactory in theidentification and preparation of the project. Bank performance at appraisal and supervisionperformance are rated as "marginally satisfactory" (paras. 41 and 42). At the identification stage,the Bank correctly diagnosed the problems in the urban sector. It carried out two key studies in1980 which helped identify the priorities and policy issues which had not yet been addressed bythe Bank's involvement in other sectors. These studies helped develop consensus on the project'sapproach during the preparation phase.

40. Given the multi-sectoral issues faced in project design, project preparation wasstrengthened by the participation of an interdisciplinary team with expertise in physical andenvironmental planning, municipal engineering, solid waste management, financial analysis andurban economics. Bank staff worked with the local team to formulate the project design and didnot propose the use of consultants for formal preparation. This contributed to borrowerownership and commitment, particularly by BMRDA, which was the coordinating agency.However, the Bank appears to have overestimated implementation capacity at the time ofappraisal and did not anticipate that the project would be handled by the implementing agenciesas part of 'normal' business at a sluggish pace.

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41. The Bank also unsuccessfully attempted to use the Project as a vehicle to bring aboutlegislative changes, even though GOM had expressed its inability to give any assurances onlegislative matters. This delayed negotiations by nearly one year without producing a firm GOMcommitment in this area. Eventually, the Bank's pre-condition for negotiations was dropped inlieu of 'satisfactory progress' being made by the state in amending the relevant legislation"2 . Inretrospect, attempting to achieve such far-reaching and politically sensitive policy changes byholding up the Project was perhaps naive. More attention might have been given to alternativeways of achieving some of the same effects.

42. In all there were 19 supervision missions. These missions contributed significantly tomaintaining the momentum of the project, and supporting the project coordinating mechanism.BMRDA found that the analysis of the status of the Project reflected in the supervision aide-memoires strengthened their ability to follow up on some difficult issues with GOM and otherimplementing agencies. Of these missions, 13 took place to September 1990, the original creditclosing date. Thereafter, the supervision effort slackened off in intensity and frequency. Oddly,this happened soon after the formal restructuring, when there would have been grounds for anenhanced supervision effort. During the last three years of its life, the project was not supervisedadequately (six short missions at long intervals).

43. The change in supervision intensity may have been caused by the transfer of the TaskManager to another Department. South Asia Country Department II did not assign a new taskmanager and the original TM continued the supervision. Although continuity of the TM whohad established a strong rapport with the local counterpart team and promoted the project as acollaborative effort was a positive feature, in retrospect it is concluded that the Bank should haveallocated more resources for supervision during the last years of the project. From thedocuments included in the Project Files, it appears that the Project received insufficient attentionwithout much scrutiny, even when an exceptional fifth extension of closing date was agreed uponby the Bank. In total, the 133 staff weeks (sw) devoted to supervision over nine years wassignificantly less than the 175 sw estimated in the SAR for a shorter six and a half year period.

F. BORROWER PERFORMANCE

44. The Project had six implementing agencies (MHADA, CIDCO, BMC, TMC, KMC,NBMC) plus a coordinating body (BMRDA) and four distinct components (LISP, SUP,LOGFAS, TATE -- para 4). Performance varied according to agency and component and overtime. It is extremely difficult to integrate this degree of diversity into a single measure ofBorrower performance spread over a twelve-year period. Nevertheless, on balance, Borrowerperformance in implementation is rated as marginally satisfactory, although this assessmentwould not be justified for all implementing agencies. Whether the use of private agencies to

12/ There has been almost no progress in this area during the past decade. An Amendment to the Delhi Rent Control Act hasbeen prepared with the objective of introducing some flexibility in rent structures and encouraging house constructionactivities. The proposed legislation would serve as a model to other states seeking to pass similar legislation. In 1986,some reforms were introduced by GOM in the Rent Control Act, but they deal mainly with new properties. These changesallow for a five year moratorium on rent restriction and thereafter limit the rents to a return of 15 percent per annum on thecost of land and building at the time of first letting. In addition, the Model Rent Control Bill prepared by the GOl has notyet been passed by the Maharashtra State Legislature.

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implement the Project could have been more effective can be debated, but certainly the need forcoordination among multiple agencies is important. This was a critical function performed byBMRDA under the Project, and was particularly important since many of the problems were of aregulatory or legal nature, which would have been difficult for the private sector alone to sortout. Moreover, may subprojects involved more than two agencies; it seems unlikely that aprivate agency would have been the appropriate agency to conflict resolution.

45. The technical inputs of BMRDA's planning unit in identifying preparing and appraisingthe project were satisfactory. Government also demonstrated its initial commitment to theproject by appointing the interdepartmental coordinating committee. However, GOMcommitment to some Project goals later turned out to be lacking.

46. In contrast to project preparation, Borrower performance during the implementationphase suffered from several shortcomings. As a coordinating agency, BMRDA was strong inidentifying problems based on its Management Information System (MIS) but weak in enforcingsolutions. In 1985, BMRDA issued a reporting procedure manual which provides information onvarious issues. These include agency performance outside BUDP, procurement, marketing andallotment of plots, financial covenants and others. Unfortunately, the use of this manual waslimited to getting project specific expenditure data necessary for disbursement applications andrecovery of monthly dues. BMRDA maintained a highly satisfactory record of procurementactivity which formed the basis for the review of physical and financial progress by Banksupervision missions. In consultation with the implementing agencies, BMRDA prepared ayearly work program and translated it into monthly expenditure targets. Its monthly progressreports compared the progress with these targets and brought out important issues to the attentionof heads of implementing agencies and government. However it did not have the powers toenforce any of the decisions and the project coordinating mechanism got energized only duringthe IDA supervision missions. Although the Chief of the Planning Division of BMRDA, themain coordinating officer for the project, did not change for the entire duration of the project,there were frequent changes in the membership of the High Powered Coordinating Committee,BMRDA and other heads of implementing agencies. These changes adversely affected theprogress of the project and commitment to its objectives.

47. The roles of the public and private sectors are complementary rather than adversarial.The primary function of a metropolitan planning agency such as BMRDA is to provide aneffective framework for regional planning and development. It is clear from past experience thatat least two conditions are necessary to enable these agencies to perform this function effectively.First, the agency must have sufficient political influence to perform its function effectively, andsecond, it should have adequate financial resources to put in place a few strategic infrastructureinvestments to which the market can respond to. Purely advisory agencies, such as a Council ofGovernments, are too weak and not taken seriously. Metropolitan planning agencies play animportant role in laying the groundwork for private sector development by setting the rules ofdevelopment, financing a few strategic investments, and facilitating the process of land use andbuilding (zoning, subdivision regulations, etc.) The private sector would not invest unlessgovernments provide these benefits under consistent and reasonable rules of engagement. Infact, cities with strong urban growth management regulations have flourished economically andhave become very desirable places to live. It is precisely the cities with weak planning and

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growth management that have stagnated. The market on its own cannot be expected to seriouslyimprove the urban environment, nor will it address poverty concerns. BMRDA has been aneffective metropolitan planning and development agency because it controls some resources thatenable it to perform the functions above. It is unlikely that the Bombay Metropolitan RegionalPlan would be taken seriously if BMRDA had not evolved as a serious player in the real estatemarket. However, BMRDA's actions under the Project did not distort the land market and thuscrowd out private investment, because BMRDA's influence has been limited by the size of itsholdings1 3. The Agency has been able to generate resources from its activities with its landholdings not because BMRDA owned a significant large amount of land overall in the city's realestate market, but because of the fact that the real estate market was booming at the timeBMRDA owned the land (it has since effectively dropped to 50%). Moreover, BMRDA has nointention to pursue a similar model or to operate in the land market in a big way. BMRDA hassince entered into partnership with the private sector (ICICI, HDFC, and IL&FS14 ) to set up afinancial intermediary to finance state-wide urban infrastructure, and to solve major sectoralneeds to support more efficient urban management. The success of this public-privatearrangement in the future will be worth watching.

48. MHADA's performance on LISP was highly satisfactory, but barely satisfactory on SUP.CIDCO's performance in LISP varied from being rated as satisfactory to deficient, particularlyon marketing of plots. BMC's performance on SUP was deficient. Implementation was stoppedin 1991 after the announcement of a 2.5 floor space index (FSI) scheme for slum redevelopmentas an alternative approach involving private real estate developers, but this has not yet had anysignificant results either. Although BMC's performance on procurement was procedurallycorrect, it encountered considerable delays in the pre-award and post-award stages, whichresulted in overall unsatisfactory performance. TMC and KMCs performance in implementingLOGFAS was generally satisfactory. Overall it is rated as marginally satisfactory.

49. Compliance with loan covenants was rated satisfactory with respect to procurement,progress reports, accounts and audits, pricing and cost recovery. However, it was deficient in thecase of sector policies and institutional development. Overall, compliance with loan covenantstoo is rated as marginally satisfactory.

G. ASSESSMENT OF OUTCOME

50. Despite the partial fulfillment of project goals, the overall outcome is assessed asmarginally satisfactory, principally because of the success of the project's largest component,LISP. By meeting the objective of improving the supply of serviced public land to low-incomehouseholds, the project has enabled over half a million persons to benefit directly from theinvestments undertaken by the project"5 . The majority of the beneficiaries were close to, or

131 Bombay has 537 sq.km of land within the BMC of which BMRDA has only 150 acres (in Bandra-Kurla) at its disposal.

14/ ICICI: Industrial Credit and investment Corporation of India; HDFC: Housing Development Finance Corporation;IL&FS Infrastructure Leasing and Financial Services Limited.

15/ This is a very conservative estimate, based on 88,000 plots under LISP and 22,000 households under SUP (Table 2) andabout 5 persons per family.

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below the poverty line. These benefits imply the transfer of real assets to the poor and theproject has thereby contributed to alleviating poverty. Finally, the ERR surpassed SAR estimatesand the project's financial targets have also been met.

H. FUTURE OPERATIONS

51. The expenditure required to complete ongoing works after final Credit closing can be metby the various agencies from their own resources. MHADA and CIDCO have generated cashsurpluses of Rs 93.8 crores (US$ 30.3 million) and Rs. 28.3 crores ( US$ 9.1 million)respectively. These will be more than adequate to complete ongoing works. In additionsubstantial revenue is expected from the sale of the balance of plots. For BMC, the expenditureinvolved is rather small as compared to its annual budget. T MC has completed all works alreadywhile KMC has already applied for financial assistance from the revolving fund established inBMRDA. Given the resources available, it is possible to finance the completion of the project.

52. The assets created in the project are in the form of municipal infrastructure. Adequateinstitutional provisions have been ensured for their use and maintenance. No major problem isenvisaged in this regard.

53. The BUDP program is linked to overall sector performance. If shelter supply remainsinadequate even for middle income groups, it is likely that plots meant for low incomebeneficiaries in the project will get transferred to higher income groups. Hence, any futureevaluation will have to be of the sector as a whole and not of the Project alone. BMRDA isattempting to develop a regional information system to provide a basis for such a periodicevaluation.

I. KEY LESSONS LEARNED

54. This project has demonstrated that:

(a) The design of urban development projects should explicitly take into accountsocio-political factors that have a key impact on sector policies and wherepossible alternative less ambitious reform options should be considered;

(b) even holding up the processing of a substantial loan in support of investments isinsufficient to bring about required legal and institutional reforms (para. 18).However important the reforms may be, they will only occur if there is sufficientpolitical will to confront the vested interests resisting them. Once a loan becomeseffective, attention is focused more on project-specific implementation objectivesat the expense of broader and politically difficult sectoral reforms;

(c) the Bank should not undermine its credibility by making explicit policydeclarations to Borrowers and then ignore its own self-declared policy (para. 20);

(d) a project's physical and financial objectives can be largely achieved despitedistorted sector policies. As a result of BUDP, about half a million poor people

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have benefited from serviced plots and housing loans financed by the project. Theimplementing agencies have acquired substantial financial resources from plotsales as a direct result of their participation in the project and are thus in a positionto replicate the physical achievements of the project (para. 51);

(e) in order for such urban development programs involving multiple agencies to beimplemented efficiently , it is necessary to strengthen the planning, coordinationand management of urban services by these agencies. Improvement ofprocurement practices is also essential (para. 35 (e) ); and

(f) frequent changes of key personnel and staff, particularly from the IndianAdministrative Service cadre have been a common problem in implementinglong-term programs. This has also been true of important engineering positions inBMC and MHADA. The continuity of key personnel is critical to ensurecommitment to project objectives.

55. Most of these lessons are equally relevant for other urban and infrastructure projects inIndia.

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PART II: STATISTICAL ANNEXES

Table 1: Summary of Assessments

A.. Achievement of Objectives Substantial Partial Negligible Not applicable

Macro policies I i 1 1Sector policies * [1 1Financial objectives * I I

Institutional development I [ IIPhysical objectives * iPoverty reduction 1 * I

Gender issues II I UOther social objectives I I I IEnvironmental objectives I I * 1 1

Public sector management iPrivate sector development I I I I

Other (specify)

A A0 &PrjectSustaittability Likely Unlikely Uncertain

Highly MarginallyC. Bank Performance Satisfactory Satisfactory Satisfactory Deficient

Identification i] * I I I IPreparation assistance I I U I iIAppraisal 1: i IISupervision 11 1 *

Highly MarginallyDl Borrower Performance Satisfactory Satisfactory Satisfactory Deficient

Preparation I I I IImplementation 1I ICovenant compliance i i I H I IOperation (if applicable) iI I

Highly Marginally HighlyE. Assessment of Outcome Satisfactory Satisfactory Satisfactory Unsatisfactory Unsatisfactory

[1 II U II II11 1

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Table 2: Related Bank Loans/Credits

Loan/Credit Title Ln./Cr. Purpose Year of StatusNumber. Approval

A. Preceding Operations* Bombay Water Supply and Sewerage Cr. 390-IN Water supply and 1974 Completed

Project conveyance sewers inGreater Bombay

* Second Bombay Water supply and Cr. 842-IN Water supply and waste 1979 PartiallySewerage Project water treatment and completed.

disposal in Greater ResidualBombay works now

proposed atB.3

* Third Bombay Water Supply and Ln. 2769-IN Expand water supply by 1987 On-goingSewerage Project Cr. 1750-IN 455 mld in Greater

Bombay* Bombay Urban Transport Project Ln. 1335-IN Augmentation of bus 1977 Completed

fleet, depots &workshops, trafficmanagement & fly-overin Greater Bombay

* Maharashtra Water Supply Project Cr. 899-IN Water supply and 1979 CompletedSewerage in Thane-Kalyan-Bhiwandisubregion

B. Following Operations* Bombay Urban Transport 11 Improvement in railway Preparation

commuter networks, in progresstraffic andtransportationmanagement in BMR

* Bombay Urban Resettlement and PreparationRehabilitation under way

* Bombay Sewerage Disposal Project Sewerage disposal Underthrough deep marine preparationoutfalls and aeratedlagoons

* Fourth Bombay Water Supply and Develop middle UnderSewerage Project Vaitarna for additional preparation

water supply 450 mid.* Maharashtra Water Supply Project - To augment water Under

Stage II supply to Thane Kalyan preparationBhiwandi areas bydeveloping Peshir waterworks

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Table 3: Project Timetables

Date Planned ActualIdentification (Executive Project Summary) January 1981Preparation June 21 -July 3, 1982Appraisal June 27-July 17, 1983Negotiations November 1984Board Presentation January29, 1985Signing March 1, 1985Effectiveness August 22, 1985Project Completion March 1990 March 31, 1995Credit Closing date (original) September 30, 1990First Extension with telex of 9/28/90 to September 30, 1991Second Extension with telex of 10/25/91 to March 31, 1992Third Extension with telex of 03/31/92 to September 30, 1992Fourth Extension with telex of 10/14/92 to September 30, 1993Fifth Extension with telex of 09/28/93 to September 30, 1994Actual Credit closing date September 30, 1994

Table 4. Credit Disbursements: Cumulative Estimated and Actual(US$ thousands)

FY-85 EY-86 FY-87 FY-88 FY-89 FY-90 FY-91 FY-92 FY-931 FY94

Appraisal Estimate 5,500 31,700 74,100 110,700 129,900 136,900 138,000Actual 7,109 11,573 21,273 34,745 48,798 62,964 21,308 101,371 124,889Actual as % of SAREstimate 0% 22.4 15.6 19.2 26.7 35.6 45.6

Date of Final Disbursement: May 17, 1994

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Table 5: Key Indicators for Project Implementation

Physical TargetsActual

Components/Agencies SAR Revised September1994

I. Land Infrastructure Servicing Program (LISP) 85,000 88,000 87,743of which:

(a) MHADA Greater Bombay: Serviced sites 40,000 55,200 55,297(b) Thane/Kalyan: Serviced sites 25,000 3,800 4,709

BMC Greater Bombay: Offsite Infrastructure Completedand Community Facilities

Rehabilitation of Water Mainst *** Partly CompletedPriority Storm Water Drainage Works *** Transferred to other Bank projectWaste Water Treatment (Aerated Lagoons) **Water Supply to Eastern Suburbs *** Completed

(c) CIDCO New Bombay: Serviced sites and Infrastructure 20,000 29,000 27,737Master Balancing Reservoir at Shil and Transmission CompletedMains ***Drawl if 30 nld water from Patalganga *** Completed

2. Slum Upgrading Program (SUP) 100,00 60,000 22,204of which:

(a) MHADA Greater Bombay: On Public Land 70,000 40,000 21,604(b) On Private Land 10,000 0 0(c) BMC on MCGBI Land 20,000 20,000 6003. Local Government Finance Administration and Services in Rs. Crores

(LOGFAS)Equipment and Civil Works for improving the

maintenanceof municipal services in BMC, NMMC, TMC and KMCEquipment 197 350Road Maintenance 24 New 26Solid Waste Management 123 worksSewerage Maintenance 50 added as 23Water Maintenance 0 perthe 9Fire Fighting 0 study 68Others 0 under 25Civil Works TATEMahalaxmi Refuse Transfer Station CompletedAugmentation of Water Supply in Kalyan and Dombivali Ongoing **

Storm Water Drainage Works in Thane & Kalyan *** CompletedImproving & Developing Services in Municipal Councils Ongoing **

4. Technical Assistance Training and Equipment (TA TE)For improving the capacity of the project implementing Completedand coordinating agenciesTraining 9Studies 3 23Equipment-Computers 35

Note: ** Being funded by BMRDA from the BUDP Revolving Fund.*** New works included in the project at time of restructuring (December 1990).

**** Metropolitan Environment Improvement Program included

- 22 -

Table 6: Key Indicators for Project Operation

No key Indicators for Project Operation were given in the SAR.

Table 7: Studies Included in the Project

Name of Study Purpose as Agreed Status Impact of StudyOrganization Structure and Financial Top design organizational structure and Completed Accounting system has beenManagement Estate financial management systems for MlIADA implemented. Organizational study was

not acted upon.Benchmark Study of Slum Upgradation Program To establish pre-improvement conditions in the Completed Benchmark conditions were established.

slums be followed-up with a post But program not being implemented onimplementation study. a large scale, post implementation study

has not been carried out.Maharashitra Refuse Transfer Station feasibility To design refuse transfer station in Bombay Terminated MBC did not agree with consultants

City. design. Project was redesigned andexecuted without stationary compactors.

Study of plots advertisement awareness in Due to low response to first advertisement of Completed The study concluded that the lowChakop LISP in Greater Bombay, MHADA proposed to response was due to poor marketing

divert the smaller plots to the next higher strategy and advertisement. The studyincome group. suggested that a wider circulation and

communication should improve theresponse. MHADA adopted thesuggestion and received better responsefor its future advertisements for lowincome plots.

Urban Management for Municipal Corporation Two separate Corporations were constituted in Completed Civil works and equipment identified forof Thana and Kalyan 1982 and 1983 for the newly areas of Thane municipal maintenance services have

and Kalyan respectively. Two independent been procured under DIJBP. Otherstudies were carried out for each of the recommendations have remainedCorporations to propose a development unimplemented.management system, organization structure andmunicipal finance systems.

Design of Water Supply Project for New to prepare, design and cost estimates for Project executed under BUDP.Bombay using Patalganga as a source augmenting water supply to New Bombay by

using Patalaganga as a source.Mathematical Model for Siltation of Thane To study the hydrological impact of landfill in Completed Other environmental impact ofCreek the Thane Creek. reclamation on mangroves and marine

life do not allow reclamation.Municipal Services Requirement in 11 The Municipal Councils have been Completed BMRDA has commenced extendingMunicipal councils experiencing rapid growth in population, financial assistance through the BUDP.

industrial and other economic activities. T hc Revolving fund to the municipal councilpurpose of the study was to develop FOP for by using study recommendations foreach Municipal Council and identify capital appraisal of loan application.investment program based on servicerequirement.

Geological Survey in Bombay Metropolitan To estimate the building materials requiremcnt Completed The outcome of the study has beenRegion and identify geological appropriate location for included in the draft Revised Plan for

quarrying stone/stand, weathered rock and clay BMR - 2011, and environmentalfor bricks. protection guidelines issued.

Master Plan for Storm Water Drainage for To prepare a master plan for Storm Water Completed Priority storm water drains andBombay Drainage and of rehabilitation of old sewers maintenance equipment were identified

and procured under BUDP.Environmental Design and Site Planning at Most of LISP sites in GB was on coastal Completed Site is being developed as per theCharkop IV wetlands. As the understanding of consultants layout and designs.

environmental effects of landfill were learnt.layout planning was designed taking intoaccount various environmental and ecologicalparameters like tidal impact zone, flora.

Solid Water management in Bhiwandi To recommend improved solid waste collection Completed The council has not taken any follow-upand dispatch practices. action.

- 23 -

Table 7: Studies Included in the Project (cont'd)

Name of Study Purpose as Agreed Status Impact of StudyStudy of Storm Water Drainage in Mira To prepare a master plan of storm water Completed Priority investment on storm waterBhyander drainage and a pilot scheme of small bore drainage supported by BMRDA from

sewers for conveyance of septic tank effluents. BUDP: Revolving FundDesign of Water Distribution Network in To prepare water distribution network plan in Completed Part of works were financed fromKalyan conjunction with project of augmentation of BUDP. Balance works are being

water supply of Kalyan and Dombivli. financed by BMRDA from BUDP:Revolving Fund.

Audio-visual of Slums To prepare audio-visual presentation of slum Completed Audio-visual material used.upgrading programn.

Feasibility Study - Vasai Virar Water Supply To prepare preliminary designs and cost Completed BMRDA has decided to finance worksestimates of headworks, treatment plant, master up to MBR as BOLT (build, Own,balancing reservoir and distribution network, Lease and Transfer).and recommend financing, institutional andtariff policy.

Municipal Services Requirement for Navi To propose a development management Completed New Bombay municipal did not makeMumbai & Panvel Municipal Corporations system, organization structure and municipal use of systems recommended. Panvel

finance systems for two municipal corporation has not yet beencorporations, namely New Bombay for established.northem part and Panvel municipal corporationfor the southern part of New Bombay

Environment Management Strategy and Action To formulate environmental management Completed High priority in infrastructure projectPlan strategy for BMR. and integrated arrangement required

for environmental coordination havebeen recommended.

Integrated Urban and Environmental Study of To identify on site emission reduction Completed Recommendation is underChembur and Thank-Belapur measures, urban infrastructure improvenments consideration.

and formulate a disaster management plan .Solid Waste Management Disposal in Great To prepare a plan of action for collection. Completed An investment program of Rs 200 hasBombay's bay transportation and disposal of solid waste. emerged.Study of Storm Water Drainage in Pen To prepare a storm water drainage master plan. Completed Priority works financed by BMRDA

from BUDP: Revolving Fund.

- 24 -

Table 8A: Project Costs

_____________________ ppraisal: Estimate (US$ M) Actual/latest Estimat USMLocal Foreig Total Local Freign Toacosts costs costs costs

Land Infrastructure 113.20 7.70 120.90 143.21 3.19 146.50Servicing Program (LISP)Slum Upgradation Program 32.60 1.40 34.00 3.55 0.00 3.55(SUP)Assistance to Local 14.70 3.70 18.40 26.53 14.23 40.76Government (LOGFAS)Technical Assistance 1.30 0.20 1.50 5.67 0.00 5.67Training and Equipment(TATE)Design and supervision 17.00 1.50 18.50 16.47 1.48 17.95

Total Base Cost 178.80 14.50 193.30Physical contingencies 12.50 1.30 13.80Price contingencies 45.90 3.70 49.60

Total 237.2 19.5 256.7 195.43 18.90 214.33

Table 8B: Project Financing

Appraisil Estimate (US$ M) Actual/latest Estimate (IS$ M)Local Fioreign Total Local Forein Totalcosts costs costs costs

IBRD/IDA 138.00 124.89Government ofMaharashtra 118.70 89.44

Total 237.2 19.5 256.70 214.33

- 25 -

Table 9A: Economic Costs and Benefits

A methodology similar to the one used in the SAR was used to estimate the main benefits of the LISPcomponent for representative projects in Thane, Greater Bombay and New Bombay sub-regions. Inassessing the net economic benefits in terms of the economic rate of return (ERR), three representativesites - Panchpakhadi (27.23 ha), charkop 1 (95 ha) and Kopar Khairane (I 17 ha) - out of the 22 developedin the three sub-regions have been taken. all three representative sites are the largest in each of the sub-regions.

The methodology adopted for the ERR estimation is as follows:

Costs:(a) The costs are derived from the financial costs excluding taxes (7.3 percent as

assessed in the SAR).(b) All chargeable and non-chargeable costs have been included, as in the SAR.(c) No correction on the basis of shadow prices is done as all the construction materialsare procured at market prices and not at administered prices.

Benefits:(a) The market value of land is derived from the location-specific property prices at the

time of the first advertisement of each site, as quoted in the 'Accommodation times',a local newspaper specializing on land, housing and infrastructure.

(b) The market value of land, thus derived, is used to evaluate apartment plots in theLISP component. Low income plots have less attractive location, narrowerfrontages and limited potential for expanded construction. Hence, their market valueis one-third to two-thirds the market value of apartment plots, as reflected ininstances of informal resale by beneficiaries immediately after allotment. Thepresent analysis assumes that their value is approximately one-half of the price ofapartment plots.

(c) The annual benefits resulting from the development of these plots is evaluated at 15percent of the total market value of the developed land.

(d) 25 percent of the plots are allocated in the first year, 25 percent in the second year,and 50 percent in the third year.

The benefits are related to the market prices prevailing at the time of the first advertisements. If benefitsare corrected for subsequent increases, there would be a substantial increase in the benefit stream.

- 26 -

Table 9B: MHADA-PANCHPAKHADI - Economic Analysis (coont'd)

Y ea EconomiAcst Netaof Taxes Economic Benefits Net Beneflits(-l L a/d es ( A s L _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __k h

0.0731984 0.00 0.001985 50.05 50.05 -50.051986 13.03 13.03 -13.031987 3.33 3.09 -3.091988 155.06 148.12 57.36 -90.761989 59.98 55.66 114.72 59.051990 198.07 194.63 229.43 34.801991 150.55 144.06 229.43 85.371992 16.20 16.18 229.43 213.251993 4.50 4.29 229.43 225.141994 6.48 6.48 229.43 222.951995 2.22 2.22 229.43 227.211996 229.43 229.431997 229.43 229.431998 229.43 229.431999 229.43 229.432000 229.43 229.432001 229.43 229.432002 229.43 229.432003 229.43 229.432004 229.43 229.432005 229.43 229.432006 229.43 229.432007 229.43 229.432008 229.43 229.43

__________ ___________ _____ _____ ___________E R R : 42.67

Tpe0 tpt. fPlots0 Commercial Plots Low Income Plots Total Value

Area (Sq.Ms.) 58,081 2,947 70,096Price (Rs/sq.m) 1,500 4,500 750Total Value 871.22 132.62 525.72 1,529.56(Rs.Lakhs)

- 27 -

Table 9C: CIIDCO-KOPAR KHAIRANE - Economic Analysis (coont'd)

Year Economic Cost Net of Taxes Economic Benefits Net Benefits(Rs Lakhs) (Rs Lakhs)

1987 85.98 79.70 -79.701988 811.60 761.41 -751.411989 994.08 921.51 -921.511990 992.75 920.66 511.13 -409.531991 455.82 423.19 1,022.26 599.081992 687.63 642.57 2,044.53 1,401.961993 341.65 317.08 2,044.53 1,727.451994 379.25 351.56 2,044.53 1,692.961995 0.00 0.00 2,044.53 2,044.531996 2,044.53 2,044.531997 2,044.53 2,044.531998 2,044.53 2,044.531999 2,044.53 2,044.532000 2,044.53 2,044.532001 2,044.53 2,044.532002 2,044.53 2,044.532003 2,044.53 2,044.532004 2,044.53 2,044.532005 2,044.53 2,044.532006 2,044.53 2,044.532007 2,044.53 2,044.532008 2,044.53 2,044.53

ERR 40.86%

Type Apt. Plots Commercial Plots Low Income Plots Total Value

Area (Sq.Ms.) 35,7100 14,4307 23,7316Price (Rs/sq.m) 1,500 4500 750Total Value 5,356.50 6,493.82 1,779.87 13,630.19(Rs.Lakhs)

- 28 -

Table 10: Status of Legal Covenants

Agreement Section Type Status lOtiginal Description Comments_____ __ __ _____ D ate

PA Schd. 2 2.01 4 C Throughout GOM's commitment to projectobjectives set forth in Schedule 2Development Credit Agreement, andGOM to provide necessarycounterpart funds.

2 9 C Throughout Selection of sites for the land andinfrastructure servicing program andthe shlim upgrading program andtheir plans, layouts, designs andstandards shall be satisfactory toIDA.

3 12 NC 09/30/90 GOM will aim to implement about Impossible10 percent of the slum upgrading under existingwith households located on privately laws.owned land.

4 9 C Throughout The scope and timeframe in respect Someof a program of municipal services improvementsand improvements in the made withoutdevelopment control and building formalregulations shall be implemented agreement withonly after the recommendations of IDA.the consultants for the program havebeen jointly reviewed and agreedupon among GOI, GOM and IDA.

5 3 C 09/30/87 BMRDA will establish a revolving IDA relaxedrevised fund to be credited with 45 percent revolving fund,03/89 of the principal amounts to be repaid eligibility to

by the implementing agencies to includeGOM in repayment of amounts on- municipallent to them by GOM to implement infrastructure.the project. the funds shall be treatedas a non-refundable loan and shall beused for financing similar program infuture (para. 3.09)

6 5 NC 1986-87 MHADA shall (i) limit new IDA's influenceinvestments in housing schemes over MHADA's(excluding repairs, reconstruction non-IDA fundedand slum improvements) outside the operations wasproject to Rs 10 crore per year during weak.the peak period of theimplementation of the project anduse layouts, standards andsuperstructure in any new schemesoutside the project basedsubstantially on the building anddevelopment control regulationsprescribed for land infrastructureservicing schemes under the project.

- 29 -

Table 10: Status of Legal Covenants (cont'd)

Agreement Section Type Status Original Description Comments.Date

PA Sched. 2 6 5 NC 1986-87 (a) minimize the average cost per Ditto.household for land development andhousing construction, and (b)maximize the percentage ofhouseholds with incomes at orbelow the absolute Bombay povertylevel in the range of 55% to 75% ofall beneficiary households.

7 2 CP Throughout MHADA and CIDCO will aim to CIDCO'sachieve the following performance collections weretargets by fiscal year 1987/88: (a) not alwaysdesign, supervision of construction satisfactory.and management costs, includingsupport services, not to exceed 12%of annual construction costs, (b)accounts receivable hire purchaseand rental properties not to exceedan average of 3 months billing, and(c) estate management costs notexceed 4% of rental andinstallments receivable.

8 2 C Throughout GOM will aim, in respect to LISP Revenues were(i) to recover fully all chargeable much highercosts, and target beneficiary than anticipated.selection criteria and terms andconditions of sales and leases forresidential, commercial, smallindustry and other plots, and forhome improvement loans shall bean agreement among GOI, GOMand IDA, and (ii) on lending termsto beneficiaries for serviced plotsand housing loans shall include interalia that interest shall be charged atno less than 12% per annum GOMwill aim in respect of SUP.

11 9 CP Throughout BMRDA shall: (i) prepare and Materials reviewfurnish to IDA not later than requirement wasDecember 31 each year, an annual unrealistic.report of the progress of theAffordable Low Income SheiterProgram for that year, together withproposals for actions required to betaken to meet the targets for theprogram for the following year, and(ii) review every six months theavailability of materials andfinancial requirements for ALISprogram (para. 3.20) (para. 11 ofSchedule 2 to Project Agreement).

- 30 -

Table 10: Status of Legal Covenants (cont'd)

Agreement Section i Type. :Status Original Description Comments_ _ _ _ _ _ :__ __ __ __ _ 0000 0 t ; X t00 :D ate __ ::_ :____________PA Sched. 2 12 5 CP Throughout GOM shall cause the implementing Difficulties

agencies to provide each year experienced insufficient budgetary provisions for monitoring.adequate services maintenance inareas benefited by the Project

PA Sched. 1 2.06 5 C Throughout GOM not to change subsidiary loanagreements with CIDCO & BMC.

PA 2.08 5 C Throughout GOM to acquire and make available Delay in landland and rights for construction and acquisitionoperations of facilities under the major was aProject. major factor in

slow pace ofprojectimplementation.

PA 4.01 1 CD Throughout (i) project implementing agencies willhave their accounts and financialstatements for each fiscal year auditedin accordance with appropriateauditing principles consistentlyapplied, by independent auditorsacceptable to IDA; and (ii) theaccounts and audits will be furnishedto IDA not later than nine monthsafter the end of each agencies'financial year (para. 3.19), (section4.01 of Project Agreement).

Key: C = Full complianceNC= Not complied withCP= Partially complied withCD= Delayed compliance

Table 11: Compliance with Operational Manual Statements

There are no significant cases of lack of compliance with OMS.

- 31 -

Table 12: Bank Resources - Staff Inputs

Stage of Project Cycle ActualStaff Weeks US$ thousand

Preappraisal through Board 164.7 254.7Supervision 133.3 304.9Completion 10.0 11.8Total 308.0 571.4

Table 13: Bank Missions

Stage f Project :ale No. of ' Specialization Performance Problems:Cycle -,____ _ -Perso,.* - ,Ra tb .... _:. _

Preparation Jun 82 7 FA, UPMissionPre-appraisal Mar-83 5 FA, UP, FAD, ME,

PHEAppraisal July-83 7 FA, UP, FAD, ME,

PHE, SFA, ENGAppraisal through 2 PHE, SFABoardSupervision Feb-85 5 ME, PHE, SFA, ENG, I F, MMission ME

Aug-85 I ME I MApr-86 3 ENGs 1 MSep-86 1 EC 1 M

_____________ -Feb-87 3 ME, EC, ENG 1 M, PJul-87 1 ME

Oct-87 2Jul-88 3 ENG, SFA I M, E

Dec-88 I ENG 2 M, E, P._______________ Apr-89 2 ENV, SFA 2 E, F

Sep-89 1 SFA, R 2 M, PApr-90 2 UP, ENV 2 P, EJul-90 3 ENGs 3 P, M

Dec-90 I EC 2 P, MApr-91 2 EC, ME 2 P, MOct-91 I EC 2 F, P

Aug-92 1 EC 2 PDec-93 I EC 2 PSep-94 2 EC, UP 2 P, E

Completion Sep-94 2 EC, UPStaff Skills:ENG = Engineer ENV = Environmental Engineer SFA Senior Financial AnalystFAD = Financial Adviser EC = Economist UP = Urban PlannerME = Municipal Engineer PHE = Public Health EngineerKey:I =Minor problems F Financial E = Environmental2 = Moderate problems M = managerial P = Procurement

- 32 -

Appendix A

IMPLEMENTATION COMPLETION REPORT

INDIA

BOMBAY URBAN DEVELOPMENT PROJECT(Credit 1544-IN)

MISSION'S AIDE-MEMOIRE(MISSION OF SEPTEMBER 1994)

1. An IDA mission consisting of Mr. Evan Rotner and Ms. Kim Cuenco (SA21N) visitedBombay from September 21-15, 1994 to discuss with the Government of Maharashtra (GOM)the requirements for the completion of the Project's Implementation Completion Report (ICR)and other issues identified during the current and previous missions. The mission wishes toexpress its appreciation for the assistance and cooperation provided by the Government ofMaharashtra and the project management agencies.

2. The mission's primary objective was to ensure that actions necessary to complete the ICRby the required date are undertaken and to follow-up on the suggestions made by the 2-11December, 1993 mission to BMRDA on the ICR preparation. The report should be completedand distributed to the World Bank Board not later than six months after the closing date ofSeptember 30, 1994.

3. This aide-memoire summarizes the present status of ICR preparation and agreements onactions that need to be undertaken to complete the ICR before March 1995.

Status of ICR Preparation

4. BMRDA has prepared a detailed draft outline of the project ICR, taking intoconsideration the suggestions made by the mission during its visit in December 1993. Themission reviewed this outline with BMRDA and suggested for the following:

(a) Project Description

* Include information on extension dates

(b) Project Coordination

* explain how the project was designed and run as a program loan and the effectivetechnical role of BMRDA in managing the project as an appraisal intermediary;

* note the limited effectiveness of the technical committee;

* highlight the importance of successfully computerizing project management; and

- 33 -

* note changes and improvements in procurement procedures and bid documentsduring implementation and comment on impact - if any - on procurementefficiency.

(c) Related Project Issues

* discuss the negative impact of competing non-BUDP programs and sources offinds, particularly on the SUP component;

* discuss reasons for the failure to implement urban renewal schemes in slum areasas an alternate to in-situ upgrading; and

* on TA, note that the organizational and financial management studies had a goodpotential, which was a little utilized by the implementing agencies.

(d) Replicability

* note that sustainability and replicability of project results will require greaterparticipation by private financial interrnediaries; and

* recast the BUP as an infrastructure financing project, possibly through anevolution of the existing BMRDA urban infrastructure fund.

(e) Indicators for Project Implementation

¢ consider using two tier indicators that allow more specifying in evaluating projectperformance;

include both financial and qualitative indicators for all components and individualagencies;

* differentiate between the number of plots developed and households benefited(larger because of substantial number of apartment plots in BUDP);

* include performance indicators for assessing the LOGFAS componentperformance;

* include plot demand indicators (number of applications vis-a-vis quantity of sitesavailable) and tables of details by scheme, plot type to indicate marketability; and

* for Annexure, include a detailed PERT chart for a typical scheme and - say - oneor two of the larger schemes like Charkop I and/or Koprekhairane, showing fromthe feasibility study stage to occupation and settlement forecast and actual activitytimes.

- 34 -

(f) Other Suggestions

* list technological initiatives introduced by the project, e.g. use of precast wallplinths, cut doors, etc. Pre-cast drains at Koprekhairane and include underperformance indicators;

* include section on performance of contractors;

* highlight the main finding that the project was highly financially viable (appraisedfunding vs actual funding/cost; recovery/profitability) with substantial socialbenefits;

* record and explain that the implementing agencies (MHADA and CIDCO) havefailed to pick up on the model, contrary to SAR expectations and forecasts;

* include a section comparing the SAR forecast with actual project and othersupplier's (private and public) contribution to the affordable supply of servicedplots/housing (the supply and demand balance was modeled in the SAR);

- review and comment on maintenance of project assets by responsible agencies:MHADA, CIDCO and BMC; and

comment on the relationship between SAR expectations compared to theperformance of exceptional site planning and engineering features (semi-privateopen space for low income clusters of small plots, dispersion of low incomeclusters among middle and higher income clusters; construction, marketing,staffing and services provided (or not) in community facilities provided by theproject, performance-based roads, drains, water supply and sanitation engineeringstandards etc.).

5. It was agreed that BMRDA would submit a completed draft to the Bank by end-December 1994. In the interim, it would forward to the Bank draft sections as they emerge.

Implementation Action Program (IAP)

6. As part of the ICR, an IAP will be prepared by the Borrower describing theimplementation and financing of all remaining activities beyond the closing date of the Project inaccordance with the Project Agreement. It should contain appropriate technical, financial andinstitutional arrangements to ensure effective project implementation and O&M including: (a) aschedule of all actions required to complete the project beyond the Credit Closing Date, in thesense that benefits/beneficiaries are in place; (b) a financing plan identifying the funding sourcesfor unfinished investments to be funded using non-Bank funds; (c) an implementation plan forthe operation and maintenance of completed investments; and (d) requirements for periodicmonitoring and reporting (to GOM and IDA) by all implementing agencies on O&M activitiesand implementation of unfinished activities. In particular, remaining sites and services schemesshould be completed, allocated and occupied in accordance with the project agreement, withhome improvement loans extended to eligible beneficiaries.

-35 -

Use of Project-Generated Surplus Funds by CIDCO and MHADA

7. MHADA and CIDCO have generated substantial surpluses from project implementation.These funds should not flow into general agency revenues, but ploughed back into the project tofinance BUDP-type schemes within the credit period. The mission requests thatBMRDA/MHADA/CIDCO prepare and submit to IDA a plan for utilizing the surpluses forBUDP-type schemes.

Other Issues

8. Un-Occupied Apartments Plots - Charkop. The mission had noticed on an earlier sitevisit that a number of apartment plots in Charkop have been vacant for several years. Themission had said at that time that "these were allotted earlier with IDA's agreement on a one-time basis outside the normal auction process to public sector agencies at average cost price.One of the public sector agencies is Indian Air. The failure of Indian Air and other publicagencies, if any, to construct, abuses a special arrangement to the detriment of both thedevelopment and environmental value of the area near the plots and project financial returns".The mission was disappointed to find that its recommendation has been ignored and theMHADA appears not to have informed Indian Air and other public agencies, if any, that if theydo not commence construction within 3 months their leases would be terminated in accordancewith provisions in the lease agreements and the plots would be auctioned to the public at large.The mission requests and expects that BMRDA/MHADA submit to IDA within 2 weeks, copiesof lease termination notices for these and any such other plots in BUDP schemes - with lists ofthe same.

9. Maintenance-Sites and Services Schemes and Provision of Services. The missionunderstands that Charkop sites and services scheme infrastructure assets have been turned over tothe BMC for maintenance and operations. We observed many instances in which theinfrastructure is not being maintained or services provided - damaged roads and drains,uncollected garbage, etc. MHADA (and CIDCO) should survey all completed schemes,inventory the maintenance and service requirements; and establish schedules and action programfor setting them right as part of the ICR/IAP. The mission requests that the survey and actionprogram be sent to IDA by November 1994.

10. Community Development Services (CDS) Continuing Needfor. The mission visitedone Cooperative Society Cluster (Sunrise) in the Gorai scheme which it visited in December1993. At that time the Society was just inaugurating obtaining its lease agreement andoccupation certificate. Since then, the Society has completed house construction up to about theroof level. However, construction had obviously stopped for several months. Our inquiriesrevealed that some of the society members may not have been able to come up with their share ofthe house construction costs. This is not surprising. Since costs are now estimated at about Rs.32,000/unit and the BUDP house construction loan is about Rs. 15,000, some households withincomes of about Rs. 1,200-1,800/mo (for the A, B and C low income plots) must find it difficultto raise the cash to cover construction costs.

- 36 -

11. MHADA's community development wing should continue to be active on site to identifyways and means for assisting Societies to resolve difficulties like the financial one above andother ones connected with service and maintenance problems. Merely because MHADA (and/orCIDCO) has completed construction and handed over plots and infrastructure to beneficiariesdoes not mean that their responsibility for a site had ended. Achieving complete housingconstruction and full occupation of sites remains as a responsibility. The mission requests thatIDA be informed by November 1994 what arrangements MHADA/CIDCO are making tocontinue to provide CDS during the ongoing period of scheme house construction andoccupation and community service start up. Specific provisions for CDS should be included inthe ICR/IAP.

Use of Credit Balance Available in the Special Account

12. During the mission BMRDA asked whether or not there was about SDR 2,340,069.30remaining in the BUDP Special Account with DEA, which should be disbursed againstoutstanding eligible BUDP claims. The mission has requested IDA to clarify the situation andwill inform BMRDA of the outcome as soon as information is available.

- 37 -

( Mumbai MetropolitanI Region AX BDevelopment TXuthority Bandra (E), Mumbai -400 051

E-MAIL: mmnrda@gias`bm01.vsnLfnet-in Ted. No. 642 9751 (8 Lines)E-MAlL:EmmrdaOgiasbm01.7BOMnetN :: FAX NO.: 91-022-640 03 06TELEX: 0 11 -7 8069 BMDA, IIS

P/BUDP/ICR/ 3 ( 3 May 23,1997

To,

Mr. Jean-Francois BauerChief,Energy and Infrastructure Operations Division,Country Department II,South Asia Region, The World Bank,1818 H Street N.W.,Washington D.C. 20433, U.S.A.

Sub: BUDP - 1544 IN - Comments on ICR and Borrower's Contribution

Dear Mr. Bauer,

Thanks for your letter dated May 8, 1997 sending us a copy of the BUDP-ICR. As you are aware,we had a significant contribution to the drafting of earlier version of ICR, which was sent to Mr.Robert Panfil on March 9, 1995. Our formal 'Borrower's Contribution' to ICR was therefore ratherbrief. Now that the ICR has undergone considerable change, we take this opportunity to present ourcontribution highlighting the conclusions that significantly differ from those of the revised ICR nowsent.

The general performance of the project has been adjudged to be "marginally satisfactory". (Thiscategory of assessment is not observed in the World Bank Operations Manual on Good Practices GP13.55 of May 1994). Perhaps this conclusion has been arrived at by giving equal weightage to thesectoral policy objectives and achievements within the project framework. Assigning such equalweightage to both these aspects of the project is highly unrealistic as achievements of policy objectiveswas obviously beyond the control of the project implementing agencies or the Bank Supervision staff.Reforms in rent control legislations and urban land ceiling have not been achieved despite a numberof high level Government of India commissions and committees recognising the need for suchreforms. Thus the project needs to be assessed with reference to the physical and financial targets ofthe project and the policy changes that could be brought about having a direct bearing on the projectachievements. With this perspective, we believe that the project could be rated as "satisfactory', andsome of the components like LISP and LOGFAS could even be considered as "highly satisfactory".

Some of the factual inaccuracies noticed from the revised ICR are also given as separateannexure to this letter

With regards,

Yours sincerely,

(V.K, Phatak)Chief, Planning Division.

- 38 -APPENDIX B-ANNEX I

BORROvVWER'S CONTRIBUTION TO TT-Ui

IMP ,LEMIENTATO*NT COMI'LETfiON REPQRT ON-

'C; 5 C .N!o . A15t'4' 4 I)t

IN,DIA

lviumba'i Metroino1itan Region D)evelopment Authlority

- 39 -2

I NDIA

BOMIBAY URBAN DEVELiOPMENT PROJECT(Creelit 1544-IN)

BORROWER'S CONTRIBUTION TO THEIMPLEMENTATION COMILETION REP'OIT

1.0 ObJeclives

1.1. The objectives of Bombay Urban Development Project (BUDP) as stated in theSAR were;

(i) to make a large inicrease in the public supply of affordable land,infrastructure and shelter particularly for lowv income families andsmall business;

(ii) to substarntially improve local government financial and administrativecapacity to deliver and maintain services, particularly tlle infrastructurecreated under B3UDP

(iii) to strengthen Goverinment's instituitional capacity to plan, coordinate,iimplemenit, and ev aluate BUDI Projects, programs, and policies andreplicate thle achievement-;

(iv) tlhrough mnore efficient and equitable land use planning and pricingpolicies and mnore appropriate performance oriented design standards,development conitrol and builclinig regulations to aim at improvedpublic sector cost recovery and major reduction in the public andprivate costs of slhelter investments; and

(v) to direct a larger proportion of private investnment in land servicing andslhelter construction in low cost units for low income famnilies.1

1.2. Th-ese objectives wvere traiLslated into physical and investment targets to be

1 Staff Appraisal Report No. 4794 - IN, India, Bombay Urban Development Projcct Urban and WaterSupply Division, South Asia Projects Departmient, World Bank. Washington D.C., 1985 (para 2.08, pp 13).

- 40 - 3

supported by IDA Credit of SLDI 137.7 million as given in Table 1.

Table 1 Rs. in Crores

COMPONENTS/AGENCIES SAR TARGETST } ysical Financial

1 Land Infrastructure Serviciig Program (LISI')Provision of 85,000 serviced sites including cc)mtnunity 85,0()0 196.25facilities, corc houses and house expanisioni loans:MHADA Greater Bombay: Serviced Sites 40,000 81.22

Thane / Kalyan: Serviced Sites 25,000 59.58BMC Greater Bombay: Offsite Infrastructure and

Community Facilities 21 .54CIDCO New Bombay: Serviced Sites and - 20,000 33.91

' nfr.astrUcture

2 Slum Upgrading Program (SUP)Upgrading 100,000 slum households in Greater Bombay 100,000 53.37including provision of tenure, improved infrastructureservices, home improvemnict loans, commnunity facilitiesMIHADA: Greater Bonmibav - Oni PIiublic Land 79,000 35.07

-On Private Land 10,000 5.01BMC: - O MCGU Land 20,000 13.29

3 Local Government Finance Administration andServtices (LOGFAS) 30.78Equipment and Civil Works for Inmproving the m aintenance ofroads, drains anid collection and disposal of rcfusc inmunicipal corporations

BMC 17.70TMC 6.25KMC & CIDCO (NBMC) 6.83

4 Teclhnical Assistance Training and Equipmenit (TATE) 1 .93For improving the capacity of the project implementing andcoordinating agencies

BUJDP TOTAL 282.33

1.3. The objectives of the project remained valid and unchanged, duringimplementation, except that the relative emphasis changed in favor of municipalservices and in-frastructure as showvn in Table 2 below;

Table 2 Rs. in Crores

CONMPONENTS SAR TARGETS IREVISED TARGETS

Physical Financia % of Tot. Physical Financial % of Tot.

1 LISP 85,000 196.25 69.51%c 88,000 257.10 47.23%1 a New InfrastructurT works 109.20 20.06%,2 SUP 100,000 53.37 18.90 %/c, 60,00(0 21.60 3.97%Z3 LOGFAS 30.78 10.90%hC 146.43 2 6.90/c4 TATE 1.93 0. 689 10.03 1.84%

BUDP TOTAL 282.33 100.00% 344.36 100.00%

For details please refer Annexuire 1.

1.4. The policy related project objectives had two cistinct aspects ; one related to

- 41 - 4

Sectoral Policies and the otlher related to 1Project implementation. The SectoralPolicy objectives, using project as velhicle, attempted to bring about legislativereforms particularly in Rent Control Act, Property Tax and Urban Land (Ceiling andRegulation) Act. Some of these had national ramifications. The policy objectivesrelated to Project impleimieintationi had a more direct bearing on the project such asreforms in the lDeveloppment Control and Building Regulations, Private SecorP articipation in Land Development, Institutionial Reforms and Capacity Buildingand Grant of Tenurial Rights to Slum Households' cooperatives. The PlanningCommission Task Force (1983), National Commission on Urbanization (1988) andNational Housing Policies (1988 - 1992) have all recognized the importance oflegislative reforms in Rent Control and Urban Land Ceiling. However given thepolitical implicationis of suclh reforml- process, not milucli progress has been achievedin this regard. Expectinig a single project to bring about significant legislative reformswas tlherefore ratlher unrealistic. At tile timiie of IProject Appraisal and Negotiations,concern for environmental impact i\as not very pronouncqd. The project thereforedid not have explicit objectives related to environmenit. However the project latersupported such objectives through technical assistance to the World lBank supportedMetropolitan Environment Improvement Plrogramme.

2. Programme Approaclh Of The Project:2.1 The project was conceived more as a programi based on prototype projects andnot as a conventional fully designed project. Certain deviations in the costs weretlherefore inevitable. Estimation of plhysical quantities, base unit cosLs and pricecontin-encies were largely adequate. in fact, initially thlere were cost underrunisparticularly in land reclamation. However, credit allocation was based on constantexchange rate. Significant rupee depreciation therefore mean-t constant increase ininvestm1lent in rupee termas that could be supported by availabld credit. The projectclosed with a rupee expenditure of Rs. 435.81 crores (US $ million 214.33)as againstRs. 282.33 crores (US S 256.70 millioni) estinmated in SAR, but with correspondingcredit utilization of SDR 93 million (US $ 124.889 million) instead of SDR 137.7million (US $ 138 million) estimated in SAR. The scope of L]SI linked off siteinfrastructure and LOGFAS wvas considerably increased particularly by restructuringthe project in 1991 (Annexure 1). The project was implemented tllrouglh 1327contracts out of wvhich 1248 smaller contracts awarded through Local CompetitiveBidding (LCB) procedure. Performance of contractors wvas generally satisfactorythough in most cases there was some time overrun.

- 4 2 - 5

POSSIB3LE INVESTMENT UNDER CREDIT

6(X 6(N)~~~~~~~~~~~~~ ----- Expcniditurc

5(X)

400

Lh

200

( ---I I 9

0 -

8 ~~~~~3 3N ON\ EN 3N O

Date

Note: Investment 1 indicates tlie expendituirc that cotild be supported by the residual credit.Expenditure indicates the actual cumulative expenditurc. &Investment 2 indicates total expcniditiire that could have been supported b)' the total credit.

2.2 SAR estimated a six and half year completion period commencing from thereLroactively financed vworlks starting in January 1 981 to Septemlber 199(9. 1 loweveusubstantial progress in LISP w,as aclhieved only by extended credit closing date OrSeptember, 1994 thouglh some works vcre completed by May, 1995. Thc SAgdisbursement profile cxpected full utilization of SDR 137.7 million by September1990. However, actual disbursement by that time was only SDR 40.00 million. Afterrestructuring and enhanced disbursement rates, credit disbursements improvedand by June 1994 entire credit of SDR 93 million (after two successive creditcancellation of SDR 37.00 million in December 1993 and SDR 7.20 million in June1993) was fully disbursed before the extenided closing date of September, 1994.

3. - Achievements of Objectives

3.1. Ob1jcctivc (i) was translated into twvo componienits viz. LISP - LandInfrastructure Servicing Program and SUP - Slum Upgradinig Program. The plhysicaland financial progress of these components is given in Table 3. LISP target has been'substantially' achieved in 9 years instead of 5 as expected in SAR. SUP targetlhowever has been aclhieved only to the extent of 22%/., of SAR target despite four yearextension of project period.

- 43 - ()

Table 3 Rs. in crores

COM']ONEN'I'S SAR TARGETS REV!SED ACI'UAL ACTUAL AS % OFTARCETS REV.TARGETS

1 'hy. ) - I-in,. I' y. I:in.) I 'h y . ':in l I'h y. Finl.|1+F1a US!' SE;85,()(( I96.25 88,00() 36 6.3() 87,743 297.72 99.71%7. 81.28%7,.2 S U i' I )U( 10(,00( 53.3:7 60,00(0 21.6(0 22,20(4 7.46 37.01% 34.54%BUDP TOTAL 249.62 - 387.90 ; 305.18 78.67h o

3.2. Olbjcctive (ii) was partly translated into LOGFAS - Local Government Financeand Administrative Systelmis and partly supported by TATE - Tecl3nical Assistance,Training and Equipment. Table 4 provides financial progress of LOGFAS and TATEas comnpared to SAR targets. As seen from tlis table the objective has beensubstantially achieved by supporting the investment necessary ifor efficient deliveryof municipal services.

Table 4 Rs. inl Crores

COMPONENTS FINANCIAL TARGETS ACTUAL S % OFSAP. REVISED AC:4UAL REV.TARGETIS

3 LOGFAS 30.78 146.43 118.14 80.68%4 TATE 1.93 10.03 12.49 124.53%cBUDP TOTAL 32.71 156.46 130.63 83.49%

3.3. 017jcctivzc (ivz) beincl directly related to LISP was first achieved by obtainingGOM sanction for modified landuse and design standards for LISP. Similarstandards were later incorporated in the Development Control Regulations 2 (1991)of the revised Development Plan of Bombia}ay, thus 'substantially' achieving theobjective.

3.4. Objective (ii) an1d (iiil Nere supported by a large number of studies andconsultant services. Througlh this technical assistance and direct involvement in theproject, institutional reforms and capacity building hlas been 'substantially'developed, notably in the folloNwing:

(a) Formulating and evaluating land development projects mainly for lowincome beneficiaries with affordability and cost recovery considerationsby using computer based models in MMRDA, NMHADA and CIDCO.

(b) Using compulerized lottery for drawing lots for beneficiary selection,commercial accounting for monitoring collection of receivable etc. inMHADA.

(c) Using network based comnputerized Project Managemncrt SystCemIs andcoml-Lputerized tracking of procuremient, expenditure and creditutilization in MAMRDA.

2 Development Control Regulations for Grealcr Bombay 1991, Urban Developillont Department, Govcrn)mMaharashtra.

- 44 - 7

(d) DeveloPing Geographic informlation1 SYSLem1 (GIS) for use in regionalland use planning, transportation, other infrastructure plannin-g andenvironmlrental nmanagenncnt in MMIRDA,

(e) Using computer basedi layout design preparation in MHADA andCIDCO, and

(f) MMRDA thrcugh its BUDP-Revolving Fund acting as a municipalfinance agency and making effective use of computerized Finance andOperating Plan (FOP) mo,dels for loan appraisals. BMRDA thusacquired a potential to become financial intermediary to financemunicipal infrastructure.

On the other hand,

(g) Organization and Management Studies carried out under TATEcomponent for M1IADA, TMC, KMC and NMMC have had very liltleimpact. f

3.5. Nine training programs including participation in international seminarsand stud), tours were supported covering areas of Metropolitan Planning andAdministration, Solid Waste Management, Community Development, UrbanManagement, Municipal Finance Managem-ient and Land Policy. This helpedimprove capacity for metropolitan planning and management.

3.6. Objective (v) was basically linked to legal and sectoral reforms at Nationaland State level. Refornms in urban land ceiling, rent coiltrol and property taxtherefore could not be substantially achieved. Howvever, some reforms were carriedout in Rent Control Act and Urban Land Ceiling Act as given in Annexure II.MMRDA attempted to implement a pilot scheme of "Guided Land Development"to achieve objective related to promoting private participation in land developmenton LISP pattern, within the existing legal framework and with financial supportfrom the project. This sclheme relied upon the exemption from compulsoryacquisition as the incentive. However as tlhe compulsory acquisition itself could notbe pursued , the scheme of promotinig private land development could not alsosucceed. Changes in land use planning, building codes etc. to reduce tLhe costs ofshelter investment and help cost recovery have been 'substantially' achieved.Financial objectives referred to affordable pricing for low income beneficiaries, fullcost recovery , interest rates to be charged and internial cash generation for projectfunding. These have been 'substantiallv' achieved. Substantial technical capacity hasbeen developed in BMRDA, MHADA and CIDCO to formulate, plan andimplement projects. Similar capacities could not be developed among otlherimplementing agencies. However capacity to coordinate large multi-agencyprogram is still weak in BMRDA and GOM. The aclhievement could be treated as'partial'. Physical objectives relate to LISP, SUP and LOGFAS compolnelnts. Theachievement in eaclh of these can be rated as substantial, partial andc substantialrespectively witlh overall rating being 'substantial' thiough delayed.

3.7. Lack of access to serviced land and municipal services causes deprivation ofurban poor. The project objective wvas tlherefore to n-ainly reaclh the poor througlh ils

- 45 - 8LISP component. The SAR had a site planning objective of ensuring 45 to 55% ofplots for lowr incom1le families belowv the poverty line and 10 to 20% plots for incoimiegroups immediately above the poverty line. A comparative profile of LISPbeneficiary and income distribution based on a 'Househlold Survey carried out forBMR'3 in 1989 shows that this objective has been largely achieved both in terms ofnumber of sites developed and the beneficiary proportion (See graph below). In caseof SUP too, the large proportion of beneficiaries were below the poverty line asconfirmed in tlhe base line surveys carried out by BMRDA. However in this case thetotal scale of project implemenitation was only 25% of the SAR estimates.

BMIR and LISP Income Profiles - 1981

100

80---vrt . --

C 7 Pov( --rt) Iine ,- <

60! - 450 / / B I ncormc Profile

jc 30) 7 40

10

0 500 1000 15() 9)20(X) 2500 3000 3500 4000 45(X)

|Monthly Household Income (Rs.)

3.8. The reasons for delays are analyzed as followTs:

a) Though the implementation sclhedule was right' in terms of desiredsectoral impacts witlh the delays that have occurred it appears to beuiunrealistic.

b) Many delays are mainly on account of weak and uncommitted cc-ordination at governmental level wvhich failed to resolve issues in atimely manner. Substantial land was allotted to MHADA only onaccount of conditions of extension. Coordination mechanism gotenergized only during the IDA supervision missions and forresponding- to the conditions of extension.

3 Multipurpose Household Survey of BMR, BMARDA and ORG, 1990.

- 46 - 9c) Ban on quarrying and restrictionis on reclaiming coastal wetland were

the oinly technical problems faced by tlhe project.

d) Inordinate delay in deciding the policy of granting tenure to slumslocated on land reserved for public purposes in the 'DevelopcnielitPlan' .

e) Enlarging the scope of project included twTo aerated lagoons at Versovaand Malad which wvere unfinislhed wvorks of an earlier Bank assistedBombay II Water Supply and Sewerage Project (Credit No. 842 IN). Nosignificant progress could be achieved on these projects in BUDP. ThesewTorks wvere under consideration for inclusion in the Bank financedproposed 'Bombay Sewerage Disposal Project'.

f) Amongst the implementing agencies, BMC had major problems ofselection of contractors and generally inefficient procurement practices.

g) Even where civil works on LISP sites were complete, delays werecaused in estate management stages of advertisement, scrutinv,selection and final allotment to the beneficiaries.

4. Project Sustainability:

4.1. The project is likely to be sustainable, only if Governrment develops andcsustains comnmitment to project objectives and approaches. Furtlhermore the projectwvould not be sustainable if it has to rely onl government land. For that purpose landpolicy innovations promoting land assembly through private sector and servicingwzill be of crucial importance. Providing basic trunk infrastructure like water,sanitation, roads and power should receive higher priority. The follow-up project ifany, has to support infrastructure and land policy initiatives. However, as of nowvthere appears to be no inclination on the part of the Banik to support such project.How^ever, MMRDA initiated Bombay Urban Infrastructure Project (BUIP). Tlhe Bankin response to the BUIP has indicated its to support to a financial intermediary.

4.2. To help project sustainiability, the BUDP had conceived of a BUDP RevolvingFund to be constituted in MMRDA. This Funid has been constituted as agreed and isin operation- since 1989. Till Marclh 1997, tlhe Fund has approved loan of Rs. 32.41crores and disbursed Rs. 25.87 crores for improvemrient of municipal infrastructurein BMR. This should help project sustainability by way of financial support.

5. Bank Performance t

5.1. The project wvas identified during informl-al discussions between GOM and tlleBank missions in 1979 - 1980. Bank carried out the Bombay City Study (1980) andBombay Shelter Stud)y - Urban HIousing and Land (1980) througlh highly acclaimedacademicianis, Prof. Harry W. Richardsoni and Prof. William C. Wheatonrespectively. These sludies lhelped identify the priorities and policy issues in urbanland and shelter sector. The studies generated considerable initerest and debateamongst the Borrowver agencies and lhelpedL develop consensus on approach loproject preparation.

- 47 -7C)

5.2. The Project Preparation took place in Junie - July 1982. The project preparationvas helped by competent mission comlnprising expert consultants in related fields.

(ArchilecLure-Physical Planning, Environmental Planning, Municipal Engineering,Solid Waste Management, Financial Analvsis and Urban Economics). The missionswvorked with the local team to evolve the project design and did not engage anyconsultant for formial preparation. This helped in increased involvement andcommitment to project particularly in BMNIRDA which was the co-ordinating agency.

5.3. The project preparation paid actequate attention to technical, financial,economic and institutional aspects. However it could nowv be said with hiindsiglhtthat it did not provide adequate attention to environmental considerations. Itsemphasis on improved services to slums, solid waste nianagement and otherm-unicipal services is however indicative of its commitment to 'brown agenda'.

I

5.4. Tlhe Appraisal took place in Junie - July 1983 and was preccded by Pre -appraisal in March 1983. The appraisal riglhLly brought out the major issues vh1ichmay affect tlhe achievement of project objectives. These wvere;

a) Sectoral policy issues like rent control and property tax reforms,'urbanland ceiling act,

b) Policies related to development of slums on private land,b) Adequacy of lanid available wvith implem-ienting agencies,c) Strengthening of BIMRDA as the coordinating agency,d) Strengthening muniicipal government in Thane, Kalyan- and Navi

Mumbai,e) Professional community development staff in 'BMC and MIlIADA to

ensure community participation in SUP,f) Restricting MHADA's noin-DUDP annual program to less Rs. 10 crores

to ensure priorit) and comml?1itmlenit to I3UDP, andg) Specifying cost recovery objectives in terms of interesl rate to be

charged and recovery performance for collecting monthly dues.

5.5. Consensus could be cleveloped amongst the implemiienlting agencies and thieBank on all the issues except (a) and (b) above. Bank attempted to use project as avehicle to bring about legislative charges wvhereas the administrators expressed theirinability to give any assurances on legislative matters. This delayed the negotiationsby nearly two years. Though GOI gave some indication of action on these issues,nothing substantial happened on that front. Attempting to use project for bringingout policy changes was perhaps naive.

5.6. Bank performance from Identification througlh Appraisal and Negotiations,was generally higlhly satisfactory mainly for continuity of Task Manager and the mixof competent consul[ants, and thleir rapport with local team wh1ich1 helped projectevolution as a joint Leamn effort.

5.7. The Project was declared effective in March 1985, thouglh the RZetroactivelyworks commenced in January 1984. The Credit became effective in August 22, 1985.Bank performance in supervision of project implemenitation wvas also higlhlysatisfactory mainly because of continuation of the same Task Manager wlho was on

- 48 - I 1

nilny occasions lone m1elember of the such missions. Nineteen supervision missionstlhrouglh their extensive fieldi visits, discussions with operational staff ofimplementing agencies and project beneficiaries, discussions with heads ofimplementing agencies and secretaries of government departments, energized thecoordination meclhanismii. Out of these thirteen were prior to September 1990 tlleoriginal credit closing date and only six tlhereafter till September 1994. Penetratinganalysis of status of project reflected in the Aide Memoir strengtlhenced thlecoordination agency to follow-up on some tricky issues. Follow-up on advice was*also persistent. In particular, the supervision mission ensured;

a) adequate enforcement of project covenants,b) judicious review of feasibility studies of LISP projects covering layout,

engineering , beneficiary income profile, affordable pricing and costrecovery aspects,

c) coordinated construction of LISP projects bv improved contractpackaging, (Tlhe initial practice was to award separate contracts forworks like water supply, sewerage, roads, etc. The missions advisedpackaging of these contracts into a single contract for a particular area.This improved coordination of construction activities at site.); andimproved bid documents that included 'price variation clause' andgradual conformity to the 'sample bidding document' recommended bythe Bank,

d) dynamic development of TATE component by incorporatingadditional consulting assistance as the need arose particularly inenvironment related activities such as planniing of coastal wetlands,quarrying operations, Metropolitan Environment ImprovementProgram (MEIP) - studies related to Environmehtal ManagementStrategy, Solid Waste Management in Bombay, EnvironmentalManagement of industrially sensitive areas, engineering master planand feasibility studies of storm water drainage -, water supply to NewB3ombay and Vasai-Virar, water disLribution systemii in Kalyan andcomputerization and developm-nent of GIS capabilities in BMRDA,

e) flexibility in modifying project contenits keeping in view the projectobjectives, which led lo inclusion of major off-site works not envisagedin SAR, expansion of LOGFAS component to cover schemes likeelectric crematoria;

f) expedient use of conditions of extension of credit closing date to keepborrower's interest alive and stimulate early decisions on difficultissues like allotment of additional land to MHADA, allocation ofPatalganga water to Navi Mumbai and establishing Navi MunmbaiMunicipal Corporation which also helped physical and financial -progress in a large way. From Annexure III, tlhree distinct plhases ofland availability can be observed from the clhronology chart of theavailability of land and submissioni of feasibility studies to IDA. Thecorrelation between the Missions and procurement of land for theproject can be clearly seen from the chart.

5.8. Despite suclh persistent (sometimes naggino) efforts, tlie SupervisionMlissions maintained cordial relations with borrowing agencies and staff andworked together to achieve project objectives in best possible manner. The project

- 49 - 1 2implementation did not involve any significant deviation from the Bank policiesand procedures.

6. Borrower Performance

6.1. Tlhe technical input of MMRDTA's plarnning uniit in identifying, preparing andappraising the projects were 'hiiglhly satisfactory'. Government too by app(oinltingTinterdepartmental coordination committee demonstrated its will to pursue projectobjectives. IBMRDA and otlher implementing agencics worked witlh Bank missionswithout any) exterial conlsultallt assistance on proj(cct preparation. Affordable LowIncome Slhelter Prog,ram (ALlS)P adequtalely coveeld secLoral, economic, technical,financial issued. Explicit consideration of environmental factors wvas, however, nota part of the state of art theni.

6.2. UInlike during preparation, borrower performance during implementationcan be rated only as 'satisfactory'. BMRDA as a coordination agency was stronig inidentifying problems based on its MIS but wvas weak in ensuring tlhcir solutions.I3MNRDA issued a 'Reporting Procedure Mlanual in 1985, covering informationrequired on sectoral dimension-s, agencies performance outside BUIRP, procurement,marketing and allotment of plots, financial covenants etc. How'ever it could notenforce this manual except for getting project specific expenditure data necessary fordisbursement applications, and recovery of moi thly dues. BMRDA maintainedhiglhly satisfactory record of procuremilenit which formed basis for review of physicaland financial progress bv Bank supervision mnissions. BMrDA in consultation withimplementing agencies prepared yearly work program and translated it intom-nonthly expenditure targets. Its monthly progress reports compared the progressws\ith these targets an-id broughlt out important issues to the attention of heads ofimplementing agencies and government. But it dlid not have powers to enforce anydecisions. Like the Task NManager of Banik-, Chief, Planning Division of BM\IRDAwiho wvas the maini coordinating officer continued from iLdentificationi to compnletionof the project. However frequent changes of Metropolitan Commission, BMRDAand otlher heads of implementing agencies adversely affected the progress of thieproject and commitment to objectives. BMRDiA also made concerted cfforts todevelop 'Guided Land Development' as an alteLrnativ'e to com pulso)ry landacquisition. MHADA's performalnce on LISP was 'highly satisfactory' but on SUPonly moderately 'satisfactory'. CIDCO's performance in LISP varied from satisfactoryto deficient particularly cn marketing of plots. BMC's performance on SUP wasdeficient, it virtually stopped implementation in 1991 after the announcement of 2.5FSI scheme of slum redevelopment. Its performance on procurement was thoughprocedurally satisfactory involved considerable delays in pre-awvard and post awardslages. DIMC used 120 to 150 days as the bid validity period instead of normal 90 days.TMC and KMC's performance in inplementing LOGFAS was generally satisfactory.

6.3. Tlhe project did not have any specific maacro economiiic policies, bus in terms ofsectoral policies it intencded to bring about reform-is in rent control, property tax,urban land ceiling, development control and building regulations and noni-BUDPprograms of M1-IADA and CIDCO. Except for .1evelopment control and building

4 Thc State Go\ernimiet constitiuted a Wiorkinig Group ini 1981, to follov up the discussions with the ldentific.Mission, wlhich prepared the report on Affordabl1 Lown Income Sheltcr Programme.

- 50 - 1 3

control regulations no significant impact was achieved in other areas. In fact, in caseof SUI' programlls LuLite Contrary to 13UDI' prinlciples and approaches became molepopular. Regarding financial objectives internal cash generation, pricing ataffordable levels for low income beneficiaries, full cost recovery, interest rate to becharged and recovery of nmonthly dues were highly satisfactorily achieved.Achievement of institutionzal development objectives remained deficient.Recommendations of Organization and Management studies carried out forMHADA, TMC, KMC and NBMC remained largely unimplemented. BMRDA'srole and function still continues to be a matter of debate. Physical objectives weresubstantially achieved in LISP and LOGFAS but not in SUP. Social objectivesparticularly benefiting the poor wvere also substantially achieved. Overallimplementation in physical and financial terms though delayed wvas highlysatisfactory, but in respect of policy and institutional developmi-ent deficient.

6.4. There were fourteen important covenants in the P,roject Agreement. Out ofwhich seven have been fully complied, three have been partially complied, onecovenan-t has been complied with delay. Tlhrce covenants related to implementationof slum upgradation on private lands and limiting MHADA's ne,w investment onnon BUDP schemes have not been comiplied with. Therefore the compliance witlhcovenants was highly satisfactory ws'itlh respect to procurement, progress reports,accounts and audits and pricing and cost recovery. It was 'satisfactory' in respect ofuse of technical assistance and 'deficient' in case of sector policies and institutionaldevelopment. Overall, it could be rated as 'satisfactorv'.

7. Assessmenit of Outcomne

7.1 The overall outcomiie of the BUDP is satisfactory, in the context of prioritybeing given to the physical objective of improving supply of public land to lowincome beneficiaries which has been substantially achieved. The Economic Rate ofReturn has surpassed SAR estimates and FRR shows achievement of financialobjectives. Altlhough1- sustainability is likely onl) if major reforms in lanid policiesand provision of adequate muniicipal infrastructure in periplheral areas is achieved.It is indicative of changed priority over the years and not irrelevance of projectobjectives. Summary of assessments in giveni in Annexure IV.

8. Future Operations

8.1. The project wvas being implemented through 1327 contracts (includingtraining), out of these 1007 contracts have been completed. MHADA and CIDCOhave generated cash surpluses of Rs. 93.79 crorcs and Rs. 28.33 crores respectively.This will be adequate to complete their onl going works. in addition substantialrevenue is expected by sale of balance plots. For BMC the expenditure involved israther small as comipared to its annual budget. TMC has completed all its works.KMC has already applied for finanicial assistance from B3UDI': Revolving Fundestablished in BM\RDA. Given the fund available, it wvould be possible to financecompletion of the project. Assets created in [lie project are in the nature ofmunicipal infrasLrucLure. Adequate instilulionial provjisiois have beeni ensured fortheir use and maintenance. No major problem is envisaged in this regard.

8.2. The programmatic objectives of the project are linked witlh overall sector

- 51 - 1 4

performance. If slhelter supply remains inadequate even for middle income group, itis quite likely that plots m-eanit for lowv income beneficiaries in the project will gettransferred to higher income groups. The evaluation in future w ill lhave to be of thlesector as a whole and not of project alone. 13MIRDA is attempting to develop aregional information system to provide basis for suclh periodic evaluation. Theemphasis in follow up action by the Bank will have to be on supportinginfrastructure investment, land policy instrument that ensure access to servicedland for the poor and institutional developm-ieint to finance, plan and co-ordiniatedevelopment. BMRDA could be considered as an intermediary in this regard.

9. Ker Lessons Learnt

9.1. A project based investment program cannot be used as an effective vellicle lobring about legal and institutional reforms, lhowever important tlley may be for thedesirable sectoral impacts. Once tlhe loan becomes effective, tine borrower's attention(and to some extent of the l3anlk) gets confilled to using thle available fuInds and noton the secLtral rfcormn s.

9.2. In case of urban sector, to implement programs of improvement in quality oflife tlhrough multi-sectoral projects involving mrltiple agencies,, an integratedurban development approach is necessary. However, for suclh programs to beimplemented efficiently, planning and coordination is of crucial significance. In thisregard an external coordinating agency, vhich is not directly implementing theproject, is importalnt for impartial monitorin-g and evaluation. But mostimplementing agencies are au toniomiious and have their own procedure to makedecisions. If an external agency does not have an effective say. in evaluating tlledecisions of the implementing agenlcies, coordinationi may turn out to be ineffective.Certain 'empowering' of coordinatinig agency is, tlherefore, essential.

9.3. Frequent clhang-es of personalities in key positions, particularly belonging tothe Indian Administrative Service, is of conmmon problem in implemiienting longterm programs. This is also true of key engineering positions in BMC and MHADA.Certainl amount of continluity of key personnel is, therefore, important indeVelopinIg Comm1111itmcent to projcct objectives anid approaches.

9.4. The work culture prevailing in most public sector institutions is alien tomodern methods of project management. Efforts are necessary to change this workculture. Imposing project management consultants could only be a short termexpedient solutions.

9.5. In the Metropolitan Slhelter Sector, increasing the supply of service landthrough provision of trunk infrastructure and supporting land policy instrumentswlhiclh promote private land developmncit for all income groups is of fundamcntalimportance. Direct investment by public agencies in land development could onlybe a part of the overall strategy lhaving demonstration impacts.

9.6. Most of these lessons are relevant for urban and infrastructure projects inIndia.

\ rw,- 5 2 - Anncxure I

Rs. in Crores

COMPONENTS/AGENCIES SAR TARGETS REV. TARGETS ACT./Scp.94Phy). Filn J'hy. Fin. Phy. Fin.

| Land Infrastructure Scrvicing Program (LISr)Provision of 85,000 scrviced sites including cominuniity S5,0O() 196.25 88,000 366.30 87,743 297.72facilitics, core houses and house expansion loans:MHADA Greatcr Bombay: Scrviced Sites 40,00( 8122 55,200 136.82 55,297 114.86

Thane / Kalyan: Serviced Sites 25,000 59.58 3,800 9.78 4,709 9.57BMC Greatcr Bombay: Offsitc Infrastructure and

Communiity Facilities 21. 54 28.9() 2565Rehabilitation of WVater Mains 29.2(0 11.03Priority Storm Water Drainage lWorks 20.00 17.59

* Waste Watcr TreaLmi)nt (Aerated Lagoons) 2(0.( 8.60* Water Sup)ply tc) EasLern SuXburbs 20.00 6.92

CIDCO New Bombay: Serviced Sites and 20,000 33.91 2 ,000 81.60 27,737 79.31I nfrastructu re

* Master Balancing Rcscrvoir at Shil and 12.00 12.49Trasmission M1ains

* Drawl of 30 mid water from Patalganga 8.00 11.642 Slum Upgrading Program (SUP)

Upgrading 100,000 slum households in Creater Bomba) 100,000 53.37 35,000 21.60 22,204 7.46including provision of tenure, improved infrastructureservices, home improvement loans, communitv facilitiesMHADA Greatcr Bombay - On Public Land 70,000 35.07 27,500 19.82 21,604 6.13

- On Private Land 10,((0 5.01 0 0.00 0 0.00BMC: - On MCGB Land 20,000 13.29 7,500 1.78 600 1.33

3 Local Government Finance Administration andServices (LOGFAS) 30.78 146.43 118.14Equipmcnt and Civil Works for Improving themaintenence of roads, drains and collection and disposalof refuse in municipal corporations

BMC 17.70 34.48 25.07TMC 6.25 13.79 21.68KMC & ClDCO (NBMC) 6.83 13.16 18.88KMC ++ Augmentation of Water Supply 35.00 33.05CIDCO-(NBMC) ++ Equipments 20.00 1 5.36Municipal Councils in BMR

Improving and Dcvelopiig Municipal 30.00 4.10Services

4 Technical Assistance Training and Equipment (TATE) 1.93 2(13 9.39For improving the capacity of the project implenicntingand coordinating agencies

+++ MctTopolitan Envirolnmcnt Improvement 80() 3.1(Programme|

BUDP TOTALI 282.33 544.36 435.81

Note: * Items included in December 1988.

I* Items included after thc Restructuring bccame effective from January 1991.++ As part of originial p roject.+++ Included as part of TATE.

I {s

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Annexure 11

After the Negotiations of the Project some acnendments and reforms have beenintroduced in the Urban Land Ceiling Act and the Rent Control Act and are given below;

1. Pyovisionis of Section 20 & 21 of Urban (Land Ceiling and Regulation) Act, 1976:

Section 21 of the Act entitles land hlolders to prepare schemes and develop theirsurplus land for weaker section housing and thereby obtain exemption from theprovisions of tlhe Act. Such exemption can nQt be refused on the ground that the land isrequired for public purpose since such exemption is also in the public interest. Thepattern of development prescribed under Section 21 allowved development of residentialtenementcis wZith a plintlh arca upto 40 sqr.m and upto 80 sq.m to'be constructed in equalnumbers. I-Towever such development could not reach the most disadvantaged andhence the State Governnmient prescribed guidelines for devqlopment of weaker sectionhousing under Section 20 of the ULC Act.

A scheme was prepared under Sectioni 20 in 1983, which envisaged construction oftenements of 25, 40 and 80 sq.m. plinth area on the surplus land and requiredlandholders to surrender proportion of tenements (and aiso land for bigger lands) basedon size of land holding. This wvas struck down by tlie High Court which did not view itto be in the public interest since;

1. nmore than 50% land was released for the land holders; and2. there wTere no price restrictions on sale of tenements.

In 1986, the State Government formiiulated revised guideAnes for weaker sectionhousing wlhichA wvere subsequently amended in 19808. These are as followvs:

1. For Surplus Land below 4,000 sq.m.The land holder slhould build tenements of upto 40 sq.m. area on the entire net

buildable land and sell 30% of suclh tenemenits to the State Government or Governmentnominees at predetermined rates. 70% of the tenements can be sold by the landholder/developer in the open market at a predtcermined rate and according lo tlleallotmenAt procedures to be laid down by, the State Government (tlhese will be similar toMHADA's policy of allotmaent). In both the cases the predetermined rates would beroughly equal to five times the land cost (as per the ULC Act rates) plus actual cost ofconstruction and 15% profit on total expenditure.

2. For Surplus Land above 4,000 sq.m.:The surplus area excluding Developmenti Plan reservations slhall be divided into

two equal cormpone-'r as given below;

- 54 -

The other alternative offered to the land lholders is to surrender 65% of the land atULC prices to MHADA and using thle remaining 35% land for construction ofapartments having an area of 40 to 80 sq.m.,

2. Rent Conltrol Reforml-s:

In 1986, The Governm-nent of Maharashtra in-troduced some reforms in the RentAct but they mainly deal wvitlh the new properties. These changes allow for a five-yearmoratorium on rent restriction and thereafter limit the rents to net return of 15% perannum on cost of land and buildinig at the time,of first letting. The system of short term

Table-Schieme for Surplus land above 4000 Sq.rT. under ULC

Component A: All plots admeasuring 25 Sq.M. eachl

Type of Plot % Tenements Approximate Cost. _ _ _ _ _ _ _ _ _ _ _ (R s.)

Sites & Services 5 (minimum) 6000-8000plots+Core 10 (Minimum) 12000-14000HouseI Room 85 (Maximum) Below 25000Tenements

Govt. shall have the pre-emption in case of all plots in thiscomponent

Component B: The land owner shall construct thetenements asper the following guidelines

Tenemnenit Size % of Teniemiients Right of pre-emption

Upto 25 Sq.M. 30 60% at cost price25-50 SqL.M. 20 10%' at prcscribed50-80 Sq.M. 30 rate by Govt.

The total area of pre-empted plots shall not exceed 12.5% ofthe FSIon thiscomponent

leasing was also revived, wvhich Nas banned in 1973.

Ownership Transfers of Rtent Controlled Buildings

- 55

Willt a view to expand the scope of tili renex-val programme of thle Rlenl ControlAct affected buildings w-vithl active participation of tenants the Government ofMallarashtra amended the Act to cnable the tenants co-operativcs to purchase thebuildinigs by paying 100 timiies thle imoth])' rent as compensation to thle ownicrs. Tllisprovision is inadequate as far as return to original owners is concernied; but some of thetenanLts cannot afford to pay even this meager compensation to the owvners. This schcmehas remained locked up in prolonged litigation till 1992 when High Court finally uplheldthe amendments to MHADA Act but the matter is now in the Supreme Court.

National Housing Policy

The National Housing Policy formulated in 1988 also proposed to amend theprovisions of ULC and Renit Control Act. Besides these changes, the Policy's, majorobjective was to motivate and help all people - particularly houseless and inadequatelyhoused, to secure for themselves affordable shelter througb access to land, materials,teclnology and finance by creating an enabling environment. The thrust of the FinalPolicy adopted by the Government in 1992 recommended the 'facilitator' role of publicagencies.

The Model Rent Act

An amendlment to the Dellhi Rent ConLrol Act was prepared for the UniollTerritory of Delhi witlh the objectives of introducing reasonable flexibility in rentstructures and enicouraging house construction activity. Based on this Act, theGovernment of India prepared 'The Model Rent Control Bill' which aims at reducingcontrols on the rental housing market and promoting investments in new houseconstruction for rental lhousing. Following the Model Act, the Government ofMaharashtra has prepared a bill which also aims at unifying, consolidating andamending laws prevailing in different parts of the State of Maharashtra. The salientfeatures of the bill are as followXzs:

1. 40 years exemption from provisions relating to standard rent and permittedincreases provided for buildings newly constructed or reconstructed on or after 1stOcLober 1987 and for premises not let or given on license for a continuous periodof one year.

2. After the expiry of 40 years, the standard rent to be fixed for premises first let after1st October, 1987 on the basis of 15% net return to the landlord on his investmentin land and building plus all the out going in respect of the premises. Provisionsfor fixation of standard rent for otlLer premises remain unchanged. HIoweverapplicationi for fixation of standard renlt has to be made withlini a period of one yearfrom the date of demand of excessive rent or permitted increases by the landlordor within a period of one year from commencement of this Act.

3. Exemptionis provided for premises let to foreign missions, internationial agencies,multinational companies and public limited companies having a paid up sharecapital of more tlhan Rs. I crore.

4. Existing protection afforded to tenants to continue.

-56-

5. Rent increase by the landlord allowyed at a flat rate of 5% per annum for varioususes after commi-ecem-ent of this Act.

The bill was proposed to be converted into an enforceable Act after it ispassed by the State Legislature and approved by the Governor. However, due to changein the Government, the bill wa.s not processed.

- 57 -

Annexure [

Phases of Land Availability and Chronologyof Submission of Feasibility Studies

690-00 ~Charkop IV /Malani

59))()() K-OanblNlXI * K\hDrghlardi t11'(l [I:j vd (WV)

4949((X) Charkop IIIz ~~~~~~~~~~~Kanld vaii -' Nc

390.00 G- AG ;rai 1 Mul, " rak.an

Charkopll 1 M5jiwadc l290.00 i khairnnc

Auoli 190.00

Choarkop I *<rai I

9(X) .(( I

May-83 Oct-84 Fcb-86 Jul-57 Nov-88 Mar-90 Aug-91 Dec-92

Month I Ycar

- 55 -

Summary of Assessmients Annexure IV

A. Achievemncnt of Objectives Substantial Partial Negligible Not applicable

Macro Policics W q

Sector Policics

Financial objectives 7 z F7

Instihtuional development tii Physical objectives W El JLIPoverty reduction El [ E .

GClnder issiues O O 4

Othcr social objectives El E ElPublic sector management El ElPrivate sector developmeint El E ElOther (specify) E E

B. Project sustainability Likely Unlikely UI-nccrtain

El [ El

- 59 -Sumnimary of Assessmnents (Cownd).

Highlv

C. Bank pcrformance satisfactory Satisfactorv DeficicTt

IdenLificalion I F IPreparation assi5tancc C L

Appraisal L X L

Supervision) L L L

1-li yh D. Borrower performance satisfactorv SatisfackIY Deficient

Preiparalion LIL LGIImplemcntation LIOL L3ICovenant compliance LI L LIOperation (if applicable) LI LI LI

HighIv HighlyF. Assessincni of 1tlc(mc s.iti.fa r l ()ry Un-.ma¶iLf;( lry 1v.%ati.factory

LI LI LI CI]

IMAGING