Ex-Ante Evaluation (for Japanese ODA Loan)

1. Name of the ProjectCountry: India
Project: Hogenakkal Water Supply and Fluorosis Mitigation Project (Phase 2)
Loan Agreement: March 31, 2009
Loan Amount: 17,095 million Yen
Borrower: The President of India
2. Background and Necessity of the Project(1)

Current State and Issues of the Water Supply and Sanitation Sectors in India

In India, demand for water usage is increasing with its population and economic
growth, but, from a lack of infrastructure, the water supply shortage is becoming acute.
Further, reliance on groundwater is lowering the groundwater level and leading to higher
content of fluorine, arsenic, and other toxic substances. Also, with a sudden populationinflux in the urban areas along with industrialization, sewage emission is exceeding
treatment which threatens the public health and living environment of local residents. In
terms of operation and maintenance of water supply services, there are technical andfinancial issues such as water quality, non-revenue water and level of water tariff, etc.
(2) Development Policies for the Water Supply / Sewage and Sanitation Sectors inIndia / Tamil Nadu State and the Priority of the Project
In its Eleventh Five Year Plan (April 2007 – March 2012) the Indian Government
has outlined a goal of providing water supply, sewage and sanitation facilities to all theurban population by 2011/2012. Further, in the current administration’s Common
Minimum Programme (May 2004), there is a commitment to expand public investment inwater supply facilities, and the supply of drinking water to all levels of society in bothurban and rural areas, and increasing drinking water supplies is one of the top-priority
issues. In regards to the problem of fluoride in underground water, the Eleventh Five
Year Plan incorporates a “National Fluorosis Mitigation Programme”, and a framework todeal with the fluoride issue on a national scale for the first time is expected to be
developed.
Tamil Nadu in the southern India has an annual rainfall of 958mm, less than thenational average in India of 1,250mm. Such condition together with rapid urbanization isleading to use of groundwater contaminated by fluoride as drinking water, and excess
use of groundwater is resulting in depletion of groundwater and chronic water shortages.

To address this, the State of Tamil Nadu is attempting to provide safe water supply
through construction of water supply facilities, etc.
(3) Japan and JICA’s Policy and Operations in the Water Supply / Sewage andSanitation Sectors in India
Taking into account the rapidly growing urban population, Japan and JICA havesupported the supply of adequate and safe drinking water and the remediation of poor
public sanitation conditions in order to improve living standards and to prevent watercontamination in major rivers. Further, in rural areas, water infrastructure projects aresupported as part of the development of basic infrastructure for improving the living
environment of the poor. In Japanese Yen ODA Loans, in the water supply / sewage andsanitation sector, 20 projects with loans totaling over 343.2 billion Yen have been
approved. Further, as technical assistance and grants, policy advisors and other experts
have been dispatched three times since 2004.
(4)

Other Donors’ Activity
The World Bank and ADB have provided assistance to the water supply / sewage
sectors as part of their measures to reduce poverty in India. Focus areas are (a)assistance to states / cities that are proactive in making reforms, (b) promotion ofcompetition in service improvements in water supply / sewage service among localgovernments, (c) rationalization of water tariff levels, (d) utilization of private sector
resources and (e) consideration of poverty impacts. Note as of 2007, approved
assistance of the World Bank totaled $4,031 million and of the ADB $543 million.
(5) Necessity of the Project
The Krishnagiri and Dharmapuri Districts, located in the North West of Tamil Nadu,
which are the two areas targeted by this project, are less-developed than other areas in
Tamil Nadu. Despite the increasing demand for water due to population growth, becauseof the less annual rainfall in the two districts at 815 mm than the national average (1,250mm) and the average for Tamil Nadu (977 mm) and no surface water usable all year
round, people are forced to use more groundwater than they should, resulting in
depletion of groundwater and chronic water shortages. Also, a large amount of fluoride,
which is harmful to the human body, is contained in the rock ground that forms theDeccan Plateau and is transferred to the groundwater. This ground water contaminatedby fluoride results in diseases such as dental fluorosis and skeletal fluorosis among thelocal residents. Supplying safe surface water to the two project areas by drawing waterfrom Hogenakkal in Cauvery River, 45 km from Dharmapuri, is urgently needed to solve
the problem of water shortage and contamination of drinking water by fluoride. Thus thisproject is highly necessary and relevant. The second phase of the project targets theproject area including the Hosur area within the Krishnagiri district that was not part of
the target of the first phase of this project (Loan Agreement: March 2008).
3. Project Description(1)

Project Objective(s)The objective of this project is to provide safe and stable water supply service thatwill meet the surging demands for water by constructing water supply facilities that use
water transfered from Cauvery River and by fluorosis mitigation in Dharmapuri andKrishnagiri, the two areas in Tamil Nadu, South India, which are the areas with the mostserious cases of water shortage and contamination of groundwater by fluoride within
Tamil Nadu; thereby contributing to improvement of the living conditions of localresidents.
(2)
Project Site / Target Area
Krishnagiri and Dharmapuri Districts, State of Tamil Nadu
(3)
Project Component(s)1) Water supply facilities: Provision of transmission pipelines, construction ofdistribution network, reservoirs and pumping stations, etc.
2) Fluorosis mitigation: Baseline Survey; training for doctors, teachers, etc.; dietconsultation; awareness campaign, etc.
3) Capacity building of local bodies: Capacity Building for the member of Village
Water and Sanitation Committee (VWSC), Operation and Maintenance (O&M),
tariff collection and financial management; functional extension of training facilities,etc.
4) Consulting services: Construction monitoring and supervision, capacity buildingof leak measures for the executing agency, etc.
(4)
Estimated Project Cost (loan Amount)
48,026 million yen (ODA loan amount: 39,482 million yen)
(5)
Schedule
March 2008–July 2013 (65 months). The project completion is defined as completion ofthe consulting service.
(6)
Project Implementation Structure1) Borrower: The President of India
2) Executing Agency: Tamil Nadu Water Supply and Drainage Board (TWAD)
3) Operation and Maintenance System: TWAD, local bodies(7)
Environmental and Social Consideration/Poverty Reduction/Social Development
1) Environmental and Social Consideration

a) Category: Bb) Reasons for categorization: This project is classified as Category B because it
was determined that the project will not have any significant undesirable impact on
the environment given that the characteristics of the sector is not likely to exert
impact, and the project is not located in a sensitive area, based on the “Japan Bankfor International Cooperation Guidelines for Confirmation of Environmental andSocial Considerations” (established April 2002).
c) Environmental Permit: The EIA report has been accepted in September 2001 bythe Tamil Nadu State Pollution Control Board, though it is not required for theproject in the country’s legal system.
d) Anti-Pollution Measures: Regarding water supply facilities, since water is takenfrom surface water, no ground subsidence is foreseen. Water treatment plants,pumping stations and other facilities will be designed and constructed by taking
noise into consideration. Additionally, sludge generated at the water treatment plant
will be dried under the sun, after which, based on the direction of the State Pollution
Control Board, it will either be provided to local farmers as compost or be buried in aprescribed repository site.
e) Natural Environment: The project site is not located in and around any
sensitive areas such as national parks, and it is likely to have a minimal adverse
impact on the natural environment.
f) Social Environment: The project requires 20.83ha of land acquisition of public
and private land and deforestation, which will be implemented in accordance withthe country’s domestic procedures (18.03 ha has already been acquired). The
project will not involve any involuntary resettlement. In addition, the clearance fordeforestation has been approved, and the necessary procedures are expected tocomplete in FY2008.
g) Other/Monitoring: In this project, TWAD will monitor the quality of water inflow
to and outflow from the water supply facilities, while each local body will monitor thewater quality etc. in reservoirs.
2) Promotion of Poverty Reduction: The incidence of poverty in the project areas is
about 36.7%, which is higher than the national average, and this project will contribute to
the alleviation of poverty by improving health condition of the poor residents andupgrading their living environment.
3) Promotion of Social Development (e.g. Gender Perspective、Measure for Infectious
Diseases Including HIV/AIDS、 Participatory Development、Consideration for Persons
with Disabilities, etc.): From the planning stage, participation of local residents including

women will be promoted by preparing a distribution plan for each village, building thecapacity of VWSC, and by carrying out O&M of water supply facilities and awarenesscampaign etc.
(8)
Collaboration with Other Donors:
Experts or NGOs with knowledge and experience are scheduled to be involved inawareness campaigns concerning fluorosis mitigation, preparation of a distribution planfor each village, capacity building of tariff collection etc.
(9)
Other Important Issues:This project, in conjunction with the Phase 1 project (Loan Agreement: March 2008) is
expected to be a model project, the first to comprehensively combat the fluorosis
problem with India’s groundwater.
4. Outcome Targets(Quantitative effect of the whole project including Phase 1 and this phase loans)(1) Evaluation Indicators (Operation and Effect Indicator)
Baseline(Actual value in 2007)

Target (2015)[Expected value 2 years
after completion]

Population served(1000 persons)

910

3,238

Amount of water supply(m3/day)

40,875

152,799

Available water per capita
per day (L)Urban area: 29-37
Rural area: 10

Urban area: 70 -90
Rural area: 40

Water supply hours (hr/day)

1 hour on average

4 hours on average-More than 30% ofparticipants

Indicator

Numberofwomen

whoparticipatedincapacity
building training (%)

Impact indicators:a) Difference in the ratio of patients afflicted with non-skeletal fluorosis (effects asstomach discomfort, extreme weakness, effects on fetuses, etc.) (Difference in the ratio
of non-skeletal fluorosis patients to general population in the project areas before andafter the project)b) Difference in the ratio of dental fluorosis among students (the ratio of students
suffering from dental fluorosis to the total number of students in the project areas before
and after the project)

(2) Internal Rate of Return
Based on the conditions indicated below, the project’s Economic Internal Rate of Return(EIRR) is 9.05%[EIRR]
Cost: Project cost (excluding tax), operation and maintenance expenses
Benefit: Reduction in the number of hours for drawing water, increase in the number ofworkable hours, decrease in healthcare related expenditure
Project Life: 30 years
5. External Factors and Risk Control
Water rights for the Cauvery River.
6. Lessons Learned from Past Projects
From ex-post evaluations of similar projects in the past, it has been learned that for
project facilities to be utilized adequately, financial sustainability must also be ensured.
While project costs are covered by the government, operation and maintenance costs
and upgrade investment costs in the local bodies must be covered by operating income,and it is important that as a part of this project that the necessary subsidies from thestate government are gradually removed so that the recovered water payments cover
the maintenance costs. Accordingly, in order to ensure the sustainability and stand-alone
expansion of this project, JICA will monitor the executing agency in its price setting,payment recovery and subsidy reduction.
7. Plan for Future Evaluation(1)
Indicators to be Used
1) Population served (1000 persons)2) Amount of water supply (m3/day)
3) Available water per capita per day (L)4) Water supply hours (hr/day)
5) Number of women who participated in capacity building training (%)6) Difference in the ratio of patients afflicted with non-skeletal fluorosis
7) Difference in the ratio of dental fluorosis among students
8) Internal rate of return: EIRR (%)(2)

Timing

Two years after project completion.
End