|Project Rationale and Linkage to Country/Regional Strategy
Project 1 and 2 under the investment program will support the Bhagalpur water supply improvement subproject. The outputs from Project 1 and 2 will bring a complete water supply system from the water source to the distribution network. There are two areas of key development issues:
(i) Capacity to manage design-build-operate contracts. The Bhagalpur water supply improvement subproject will engage a contractor using two design-build-operate (DBO) contracts. One contract will renew Bhagalpur's entire water distribution networks, and rehabilitate the existing water production system under Project 1. The other will cover a new water production system under Project 2. Both will be procured through the international competitive bidding. The contract size is about $60 million and $20 million respectively. The Bihar Urban Infrastructure Development Corporation, a state government undertaking registered under the Company's Act 1956, will be the implementing agency of Projects 1 and 2. It has reasonable capacity to handle the state projects. However, it does not have experience in an externally funded project. While there will be design and supervision consultants to support Bihar Urban Infrastructure Development Corporation from mid 2012, there will be no support between the closing of the ongoing project preparatory technical assistance in August 2011 and consultants under the loan in mid 2012. Lack of experience in designing and handing a complex large international competitive bidding contract under ADB's procedure may delay the advance contracting activities. As DBO will be the main contractual arrangements envisaged under the investment program, therefore, lack of capacity in preparing and issuing DBO contracts may cause delays in implementation of most projects under the investment program, and hence in benefit accrual.
(ii) Capacity to deal with endangered species in protected area. Project 2, part of the Bhagalpur water supply improvement subproject will develop new water intakes and a new water treatment plant in Bhagalpur from 2012. The new intake wells will be located approximately in the center of the Vikramshila Gangetic Dolphin Sanctuary (VGDS) where endangered Gangetic Dolphins are protected under the Wild Life (Protection) Act 1972. Alternative location options for the intake wells were assessed and found that other locations outside VGDS will incur higher energy costs due to long-distance pumping of the water for 30 kilometers. The state government has already applied for a Wildlife Clearance on construction of the intake wells in the sanctuary from the government. Project 2 is likely to have environment category A, and there will be an environmental impact assessment (EIA) for the first time under ADB financed urban sector projects in India. There has been sanctuary management and dolphin conservation plans, but was not fully implemented due to lack of dedicated manpower and financial support. The Vikramshila Gangetic dolphin expert in the PPTA team reported that in the absence of vigorous education, monitoring and enforcement, the dolphins had been and will continue to be at risk in the sanctuary. The investment program will be an opportunity to attract financial and human resources to such endeavor. Unfortunately, the executing and implementing agencies lack capacity to finalize an EIA and revise the sanctuary management and dolphin conservation plans, to make Project 2 eligible for financing under the investment program.