Ex-ante Evaluation Paper (for Japanese ODA Loan)
South Asia Division 1, South Asia Department, JICA
1. Name of the ProjectCountry: India
Project: Project for Construction of Chennai Seawater Desalination Plant (I)Loan Agreement: March 29, 2018
2. Background and Necessity of the Project(1) Current State and Issues of the Water Supply Sector in India
India's National Water Policy (2012) has set a policy objective of establishing access todrinking water for the entire population of India. However, less than 90% of households haveaccess to adequate drinking water even in urban areas (Source: 69th round of National
Sample Survey by the Ministry of Statistics and Programme Implementation, 2012),
demonstrating that water source development and supply improvement have been unable tokeep up with the increased water demand from population growth and economic
development. Even where the distribution network has been established, water supply
interruptions and restrictions have limited the daily supply time in major cities to just between
1–6 hours on average. In addition to a chronic shortage of human resources, the entities
responsible for water supply services also face difficulties in operation and maintenancefrom both a technical and financial standpoint due to a high rate of non-revenue water andlow water fee.
The target area of the 'Project for Construction of Chennai Seawater Desalination Plant'(hereinafter, "the Project") is Chennai Metropolitan Area (hereinafter, "CMA"), the state
capital of Tamil Nadu in southern India, which has a population of approximately 8.9 million
people (as of 2011). Although the population is expected to exceed 15 million by 2035, watersupply upgrades are not able to keep up with population increase and economicdevelopment. Despite a water demand of 910 MLD (million liters per day) in 2016, supply
remains at just 810 MLD. As several foreign companies are located in and around CMA,
including the Japanese companies (378 offices as of November 2017 according to theEmbassy of Japan in India website), these serious water shortages are also having a major
impact on the investment environment. On the other hand, developing large scale surface
water sources would require long periods of time and drawing up subsurface water would be
difficult to satisfy the massive demand of water, and the surface water would be highly
susceptible to conditions during dry season. For these reasons, expansion of seawater
desalination was planned to increase supply capacity past the capacity of existing seawater
desalination plants (totaling 200 MLD). The Project is positioned as one of the efforts tosecure a safe and stable water resource in accordance with the Master Plan for Water
Supply and Sewerage Sectors in Chennai Corporation and rest of CMA formulated by thecity to solve these problems in CMA.
(2) Japan and JICA's Water Supply Sector Cooperation Policy and the Positioning of thisProjectThe Country Assistance Policy for India (March 2016) set "support for sustainable andinclusive growth" as a priority area with particular priority given to infrastructure development,including water supply and sewerage in the Chennai-Bengaluru Industrial Corridor (CBIC) as
well as major cities. Furthermore, JICA's Country Analysis Paper for India (March 2018) also
recognized "addressing rapid urbanization" as a key development issue, and has analyzed
the need to improve infrastructure including water supply and sewerage in urban areas thatare experiencing ever-growing populations, as well as the need to provide public services.
Therefore, the Project is consistent with the policy and analysis results. As of February 2018,
there are 32 ODA loans to India totaling 637.6 billion yen that have been approved for India
water supply and sewerage sector.
(3) Other Donors' Activity
World Bank has set one of its priority areas as combating changes in mid-sized cities from
population growth and industrialization, and has been providing support for waterworks
upgrades as a means to contribute to improving the situation.
Meanwhile, Asian Development Bank is supporting the water supply sector in urban areas
in Karnataka state etc. not only for upgrading facilities, but also strengthening the operationand maintenance system and organizational structure. It is also focusing on promoting
Public Private Partnerships. German government-owned development bank Kreditanstalt fürWiederaufbau (KfW) is also providing support through an extension of the existing seawater
desalination plant at a project site adjoining the Project, which was planned in tandem with
the Project to implement seawater desalination in Master Plan for Water Supply andSewerage Sectors in Chennai Corporation and rest of CMA.
3. Project Description(1) Project Objective
The Project aims to achieve a safe and stable water supply service in CMA, located in thesouth Indian state of Tamil Nadu, by constructing a seawater desalination plant andconstructing and improving water transportation and distribution facilities, thereby
contributing to improvement in local resident living conditions and the investment
environment.
(2) Project Site/Target Area
Chennai Metropolitan Area, Tamil Nadu State(3) Project Components
1) Construction of a seawater desalination plant (400 MLD)
2) Construction of water pumping stations and a distribution reservoir
3) Laying of transmission mains
4) Improvement of the existing water distribution facilities and network in Chennai
Corporation; installation and upgrading of equipment (including meters) etc.
(implemented by the Executing Agency)
5) Installation of external power transmission lines6) Consulting Services: conceptual design, detailed design, bidding assistance,construction supervision, facilitation of implementation of Environmental Management
Plan and Environmental Monitoring Plan, formulating and implementing plans forcapacity development and organizational improvement of executing agency, andpromoting public awareness activities(4) Estimated Project Cost
104.548 billion yen (of which, the total ODA Loan amount is 73.404 billion yen with 30.000
billion yen as the tranche 1 loan amount)(5) Schedule
Scheduled from March 2018 to June 2026 (100 months in total). The Project completion isdefined as the in-service date of distribution facilities (March 2025).
(6) Project Implementation Structure1) Borrower: President of India
2) Guarantor: None
3) Executing Agency: Chennai Metropolitan Water Supply and Sewerage Board(CMWSSB)
4) Operation and Maintenance Agency: CMWSSB (approx. 3,100 staff members) isresponsible for the operation and maintenance of the Project. For the seawater
desalination plant, the plan is for the plant contractor to carry out operation andmaintenance for 20 years after completion under a Design-Build-Operate (DBO)
contract.
(7) Collaboration with Other Schemes and Donors
1) Related aid activities by Japan: None in particular2) Aid activities of other aid organizations: None in particular(8) Environmental and Social Considerations/Poverty Reduction and Social Development
1) Environmental and Social Considerations① Category: B② Categorization Rationale: The Project is not applicable to sectors/characteristics
susceptible to the impacts listed in 'JICA Guidelines for Environmental and Social
Considerations' (promulgated in April 2010), thus the negative impact on theenvironment from the Project is judged negligible.
③ Environmental Permit: An Environmental Impact Assessment (EIA) report on theProject is to be approved by the Ministry of Environment, Forest and Climate Change.
④ Anti-Pollution Measures: Measures against dust, noise, and water turbidity during
construction shall include water sprinkling to control dust, soundproofing equipment,
and the introduction of silt screens to filter suspended matter. After going into service,
wastewater from the seawater desalination plant is expected to be treated at the facility
before being discharged to comply with India law.
⑤ Natural Environment: The negative impact on the environment from the Project is
expected to be negligible as the target area is not situated in or around any vulnerable
areas such as national parks. Further, no nesting or egg-laying habitats of sea turtles
that inhabit Tamil Nadu have been found, and migratory areas are in more coastal or
deeper waters than the location of the intake and discharge outlets. As far as impact
from wastewater containing concentrated salt water, no rare species etc. habitats havebeen found near the discharge outlet, and also, the higher salt concentration will be
mitigated through diffusion when released. Therefore, negative impact on ecosystems
is assumed to be limited in nature.
⑥ Social Environment: Due to a 30-year (renewable) lease agreement from a state
subordinate body, the Project will not involve land acquisition or resident resettlement.
With regard to impact on area fishermen, measures against water turbidity will be
implemented during construction, and once in service, wastewater will be treated in thefacility before being discharged. Since the higher salt concentration will be mitigatedthrough diffusion when released, the negative impact is expected to be limited innature.
⑦ Other/Monitoring: During construction, the contractor and CMWSSB will be chiefly
responsible for monitoring air quality, water quality, noise, waste treatment,
ecosystems, etc. Once in service, CMWSSB will be responsible for monitoring water
quality of the surrounding waters and ecosystem (including impact on fisheries) as
associated with seawater concentrated wastewater.
2) Cross-cutting Items: Climate Change Related Matters: The Project aims to ensure astable supply of water, by securing water sources that are not affected by fluctuations inrainfall amount/patterns expected from climate change, as well as by saving water
through improvements of the water distribution network. For that reason, the Project willcontribute to climate change (adaptation) measures. Poverty Measures andConsiderations: Given that the planned implementation will improve the water
distribution network in a project area that includes slum areas, the Project falls under thecategory of 'poverty consideration project' for the support it provides to the impoverishedsegment of the population.

3) Gender Classification: GI (S) Gender Informed (Significant) Project<Activities/Classification Rationale> Through promotional and awareness activities suchas house connection, activities have been planned based from a gender-centric viewpoint,by for instance arranging places and times in a manner that encourages participation byfemale residents.
(9) Other Important Issues: None in particular
4. Target Outcomes(1) Quantitative Effects
Outcomes (Operational and Effect Indicators)
Baseline
Indicator(Actual value in2016)
Indicators for Chennai Metropolitan Area (reference values)1
Population served (in 1000 persons)
7,800

Target (2027)[2 Years afterCompletion]
12,800

Average amount of water supply (in MLD)
900
1,750
Indicators concerning seawater desalination plant
Plant utilization rate (%)2－68
Indicators for Chennai Corporation concerning the distribution network to be developed inthe Project
Population served (in 1000 persons)
7,100
8,200
Pipe-served water supply rate (%)36188

Meter installation rate (%)44100

Average amount of water supply (MLD) (reference810
1,300value)51) Since construction of a water distribution network outside of Chennai Corporation is notpart of the Project, the indicators for CMA are for reference only.
2) Plant utilization rate is calculated based on 'seawater desalination plant average daily
supplied volume ÷ supply capacity'
3) Pipe-delivered water supply rate is calculated based on 'population served with pipe ÷population served'
4) Meter installation rate is calculated based on 'number of meters installed ÷ number ofhouseholds connected'5) Is only a reference value as it includes water supply from other plants.
(2) Qualitative Effects
The qualitative effects of the Project include an improvement in living conditions (i.e.
improved health of residents, etc.) as well as social and economic development (i.e.
economic growth of the region, investment promotion, etc.) by improving satisfaction inwater quality and pressure (customer survey/sample survey) and by achieving safe andstable water services in the CMA.

(3) Internal Rate of Return
Based on the following assumptions, the Economic Internal Rate of Return (EIRR) of the
Project is 19.5%. The Financial Internal Rate of Return (FIRR) is negative due to the current
low water fees. A fee hike is planned for future consideration and will be monitored during
the Project's implementation.
[EIRR]
Cost: Project cost (excluding tax), operation and maintenance cost
Benefits: Willingness to pay water fees; reduction of well drilling and operating costs;
reduction of medical expenses; reduction of domestic water transporting costs
Project life: 30 years[FIRR]
Cost: Project cost (including tax), operation and maintenance cost
Benefits: Additional fee income (assuming a 100% meter installation rate and gradual feeincrease)
Project life: 30 years
5. External Factors and Risk Control(1) Preconditions: Upgrading of the water distribution network by the executing agency iscarried out without delay.
(2) External Factors: None in particular
6. Lessons Learned from Past Projects and Application to the Project
The lesson learned from ex-post evaluation of the 'Urban Water Supply and Sanitation
Improvement Program' in India, was that it is vital to consider a realistic plan for promoting
the widespread use of water meters and prepare a fee structure that maximizes the amountbeneficiaries pay by accurately projecting the demand for services and the amount residents
are willing to pay for these services in a water supply project.
In the Project, it is confirmed that water fees will be progressively revised and that thewater meter installation rate in Chennai Corporation will be set to 100% by the year 2026.
Through consulting services, support is also planned for ascertaining the willingness andability of residents to pay fees, carrying out PR activities to promote the widespread use ofwater meters, and preparing a financing plan for the executing agency.
7. Evaluation Results
The Project aims to achieve a safe and stable water supply service in CMA, located in thesouth Indian state of Tamil Nadu, by constructing a seawater desalination plant andconstructing and improving water transportation and distribution facilities, thereby
contributing to improvement in local resident living conditions and the investment

environment. As such, it is consistent with the Government of India's policies ondevelopment and solving issues as well as Japan and JICA's policy on assistance.
Moreover, given that the Project is judged to contribute to SGD Goal 6: to "ensure
availability and sustainable management of water and sanitation for all," the need for JICA tosupport the implementation of the Project is high.
8. Plan for Future Evaluation(1) Indicators to be Used
As indicated in sections (1)-(3) under Target Outcomes(2) Timing of the Next Evaluation
Ex-post evaluation: Two years after project completion