India : Second West Bengal Development Finance Program

Sovereign Project | 49209-001

The proposed program seeks to facilitate the continuation of a comprehensive fiscal consolidation program in West Bengal initiated in 2012. This will generate fiscal savings and, thereby, assist West Bengal to augment growth-enhancing development financing and improve delivery of public services.

Project Details

  • Project Officer
    Janardanam, Srinivasan
    South Asia Department
    Request for information
  • Country/Economy
    India
  • Modality
  • Sector
    • Public sector management
Project Name
Second West Bengal Development Finance Program
Project Number
49209-001
Country / Economy
  • India
Project Status
Closed
Project Type / Modality of Assistance
  • Loan
  • Technical Assistance
Source of Funding / Amount
Loan 3563-IND: Second West Bengal Development Finance Program
Source Amount
Ordinary capital resources US$ 300.00 million
TA 9378-IND: Supporting the Second West Bengal Development Finance Program
Source Amount
Technical Assistance Special Fund US$ 500,000.00
Strategic Agendas
  • Inclusive economic growth
Drivers of Change
  • Gender Equity and Mainstreaming
  • Governance and capacity development
  • Knowledge solutions
  • Partnerships
  • Private sector development
Sector / Subsector
  • Public sector management / Public expenditure and fiscal management

Gender
Some gender elements
Description
The proposed program seeks to facilitate the continuation of a comprehensive fiscal consolidation program in West Bengal initiated in 2012. This will generate fiscal savings and, thereby, assist West Bengal to augment growth-enhancing development financing and improve delivery of public services.
Project Rationale and Linkage to Country/Regional Strategy

The need to develop a comprehensive program that addresses fiscal consolidation and development for the Government of West Bengal (GOWB) has been on the agenda of the Asian Development Bank (ADB) since 2005 when the preparatory stage of a policy-based loan was first initiated. This acquired renewed focus in 2011 when the state introduced a series of reforms with the change in state administration. Since then, ADB and the GOWB have been in constant policy dialogue to develop a durable reform and developmental agenda starting with the preparatory stage of the first policy-based loan in 2012.

In view of the GOWB's fiscally-stressed situation, ADB approved a policy-based loan of $400.0 million and a TA grant of $0.7 million to India in 2012 for the first West Bengal Development Finance Program. The key contributory factors to the fiscal stress were the state's low own-tax revenue effort and a high level of non-discretionary expenditure (salaries, interest payments, and pensions), which adversely affected GOWB's ability to pursue its development financing objective. This provided the rationale to the first program, which aimed to create the fiscal space to augment and sustain higher development spending (public investment) in the state.

Given the difficulties of rationalizing public expenditure over 2 to 3 years, ADB and the GOWB agreed that the first program would facilitate the necessary steps to augment revenue and lay the foundations for improved targeting of scarce public resources to improve the overall efficiency of spending. The GOWB achieved full compliance on all policy actions under the first program, and has moved beyond the goals of the first program. Independent assessments recognized the GOWB's commitment to fiscal consolidation, and the GOWB received several awards for e-governance in tax administration in 2014.

Policy actions in the first program clearly enhanced the revenue performance of GOWB in a broad-based manner, and improved the state's finances. Public investment (as a percentage of gross state domestic product [GSDP]), reached almost 1.3% in FY2016 from 0.5% in FY2012, while the fiscal deficit reduced to 2.2% in FY2016 from 3.4% in FY2012. This was one of the major contributions of the first program.

The first program was an example of successful partnership between the GOWB (and the Government of India) and ADB. It critically hinged on the political commitment of GOWB to bring about necessary fiscal reforms, so that it can set the fiscal objectives on a balanced and sustainable path geared toward meeting the long-term development financing needs of the state.

It was recognized in the original design of the first program that the full effect of the reforms on improvements of public service delivery would need a period of 5 years to materialize, and that the GOWB will require additional support under a follow-on program. Additional external assistance is required to sustain the reform momentum because of the following reasons:

Some of the reforms already initiated, by their very nature, have a long-term implementation cycle. The foundations of these reforms were laid under the first program but they now need to be carried forward. These reforms include linking the medium-term expenditure frameworks (MTEFs), initiated under the first program, with actual budget allocations; payments for the voluntary retirement scheme (VRS) and/or early retirement scheme (ERS) in selected state-owned enterprises (SOEs) to ensure effective implementation of the subsidy rationalization strategy; and digitizing legacy data on registered property deeds in all registration offices in the state. A continued assistance for such reforms through the proposed second program would consolidate and sustain gains made towards better own-revenue management and expenditure rationalization.

The first program focused on augmenting public investment. However, creating an enabling environment for facilitating private investment, especially in the areas of social and economic infrastructures, is equally important in the context of growth and public service delivery. Thus, the second program envisages supporting private investments more directly. This is intended to be achieved by creating an infrastructure facility for supporting project preparation, development, and appraisal activities as well as for viability gap funding (VGF).

Some of the follow-on reforms will have major cost implications. If GOWB has to incur the entire cost of reforms, then this could undermine GOWB's regular budgetary allocations for public investment (enhanced under the first program).

An integrated solution comprising a policy-based loan with clear program costs supported by attached technical assistance is the appropriate lending approach and modality. This will help ADB and GOWB to design and implement additional policy actions to carry forward GOWB's own reform agenda without putting unsustainable strain on the public exchequer to finance reforms costs. The second program will support key elements of the state's agenda including making the tax administration more efficient and transparent through simplification of rules and e-governance, enhancing outlays for capital creation, and improving the business environment for micro, small and medium enterprises

ADB's India country partnership strategy (CPS) for 2013-2017 aims to support the government's vision of faster, more inclusive and sustainable growth by emphasizing investments in infrastructure, logistics, urban services, and skills, which will create jobs and improve access to jobs. To achieve these objectives the strategy declares that ADB will work selectively with states such as West Bengal that propose fiscal consolidation programs to move from current expenditure to capital investment, increase revenue collection, and improve service delivery.

A key lesson learned from the first program, which also provides the rationale for the proposed second program, is that sustained political commitment and strong ownership of reforms in the state is the most important prerequisite for a successful policy-based loan. Another important lesson is that ownership is guaranteed through long-term association with the development partner(s) and continuation of the key implementation staff.

Impact

Accessibility, quality, and affordability of public services improved

Project Outcome

Description of Outcome

Investment in the state particularly in social and economic sectors, improved and sustained

Progress Toward Outcome
In advance stage of progress.

Implementation Progress

Description of Project Outputs

Expenditure rationalization efforts accelerated

Facilitation of private investment improved

Revenue administration strengthened

Status of Implementation Progress (Outputs, Activities, and Issues)
Output 1: Expenditure rationalization efforts acceleratedAll 4 policy conditions for the first tranche have been completed. For the second tranche, out of 6 policy actions (T2-12 to T2-17), 5 have been complied with. In advanced state of progress is: T2-12- Voluntary Retirement Scheme (VRS) disbursement for selected state-owned corporations - As a cumulative effect of VRS, regular retirements, and non-recruitment of new permanent staff, total number of employees in the specified transport SOES has reduced from 13,385 in FY2016 to 9672 in FY2019, while total fleet size increased from 2372 to 3069 in the same period. Operational efficiency had significantly improved with ratio of permanent employees per running fleet has reduced from5.6 in FY2016 to 3.2 in FY2019, while number of fleet routes increased by 40% during the same period. The assessment of policy action compliance is in progress.Output 2: Facilitation of private investment improved. The first tranche policy condition has been completed. For the second tranche, out of 2 policy conditions (T2-18 to T2-19), one is in progress. T2-18 regarding disbursement of at least INR1.8 billion from West Bengal Investment and Infrastructure Development Fund (WBIIDF) for identified public-private partnership (PPP) projects has been completed with the INR1.84 billion released as operational viability grant for health diagnostic laboratories. However, a service-wise breakdown of payments made to the hospitals is awaited from government before end of September 2019.Output 3: Revenue administration strengthenedAll 6 first tranche policy conditions have been completed for the 1st tranche. For the second tranche, 5 out of 6 policy conditions (T2-20 to T2-25) have been met; completion of the remaining T2-21 is in progress regarding digitalization of old property record data in all registration offices in the state. While 100% of property deeds have been scanned, meta data for 65% of deeds have been done. Completion of metadata for the remaining 35% of deeds is expected before end of September 2019.
Geographical Location
West Bengal

Safeguard Categories

Environment
C
Involuntary Resettlement
C
Indigenous Peoples
C

Summary of Environmental and Social Aspects

Environmental Aspects
not applicable
Involuntary Resettlement
not applicable
Indigenous Peoples
not applicable

Stakeholder Communication, Participation, and Consultation

During Project Design
The potential stakeholder groups include central policymakers at the Department of Economic Affairs, Department of Expenditure, Government of India; Government of West Bengal (GoWB) officials based in various departments; nongovernmental organizations; and academicians in West Bengal. The main beneficiaries are the people of West Bengal.
During Project Implementation
The Finance Department (FD) of GoWB is the executing agency of the program, with the principal secretary of Finance Department as the focal point for matters pertaining to the program. A program steering committee, to be chaired by the chief secretary, has been established and has representatives from other departments including the FD. Consultants have been engaged and completion of the second tranche policy actions are ongoing.

Business Opportunities

Consulting Services

The attached TA is estimated to cost $600,000, of which $500,000 will be financed on a grant basis by ADB's Technical Assistance Special Fund (TASF-Others). The GOWB will provide counterpart support in the form of counterpart staff remuneration, office accommodation and supplies, local transport, other logistical support, and other in-kind contributions.

The implementation arrangements for the TA are aligned with those of the policy-based loan. The FPMU will implement the TA components, and the Finance Department will carry out overall supervision and coordination. A total of 28 person-months of consultancy services (national) will be required intermittently. The consulting firm has been engaged for recruiting the national consultants using the quality and cost-based selection method with a standard quality cost ratio of 90:10. All consultants have been recruited in line with ADB's Guidelines on the Use of Consultants (2013, as amended from time to time). All disbursements under the TA will be made in accordance with ADB's Technical Assistance Disbursement Handbook (2010, as amended from time to time).

Procurement
Procurement, advance contracting, and retroactive financing are not expected.

Contact

Responsible ADB Officer
Janardanam, Srinivasan
Responsible ADB Department
South Asia Department
Responsible ADB Division
Public Management, Financial Sector and Trade Division, SARD
Executing Agencies
Finance Department - Government of West Bengal

Timetable

Concept Clearance
29 Jun 2015
Fact Finding
13 Jul 2015 to 20 Jul 2015
MRM
14 Jan 2016
Approval
20 Sep 2017
Last Review Mission
-
Last PDS Update
26 Sep 2019

Funding

Loan 3563-IND

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
20 Sep 2017 24 Oct 2017 22 Nov 2017 30 Sep 2019 30 Nov 2019 29 Nov 2019
Financing Plan
  Total (Amount in US$ million)
Project Cost 431.25
ADB 300.00
Counterpart 131.25
Cofinancing 0.00
Loan Utilization
  Date ADB Others Net Percentage
Cumulative Contract Awards 17 Jun 2022 300.00 0.00 100%
Cumulative Disbursements 17 Jun 2022 300.00 0.00 100%

TA 9378-IND

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
20 Sep 2017 13 Feb 2018 13 Feb 2018 31 Oct 2019 31 Oct 2020 16 Nov 2020
Financing Plan/TA Utilization
ADB Cofinancing Counterpart Total
Gov Beneficiaries Project Sponsor Others
500,000.00 0.00 0.00 0.00 0.00 0.00 500,000.00
Cumulative Disbursements
Date Amount
17 Jun 2022 367,256.96

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

The Access to Information Policy (AIP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

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Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.


Evaluation Documents See also: Independent Evaluation

Title Document Type Document Date
India: Second West Bengal Development Finance Program Validations of Project Completion Reports Feb 2021

Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

Tender Title Type Status Posting Date Deadline
Second West Bengal Development Finance Program Firm - Consulting Closed

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan

None currently available.