1. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 1 World Bank assisted Karnataka Urban Water Sector Improvement Project (KUWASIP) by S.Poornachandra AEE (UWS), KUIDFC, BANGALORE.

2. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 2 W.B. Loan No.4730-0-IN Project Cities in Karnataka

3. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 3   Objectives of the Project:   Reforms & service improvements through Private Sector Participation (PSP) in the water sector in Karnataka.   Implement the strategy enunciated in the Urban Drinking Water & Sanitation Policy of GoK.   Phased approach.   Towns selected:   Belgaum, Gulbarga & Hubli-Dharwad (Phase I).   Continuous water supply in selected Demonstration Zones of Phase I cities.   Scaling up to the rest of the areas in the three cities and also to more cities.Introduction

4. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 4 Project Details   Project Cost:   World Bank loan-Rs. 182.00 crores   GoK contribution-Rs. 55.00 crores   Total project cost-Rs. 237.00 crores   Component wise cost: Technical Assistance studies -Rs. 11.75 crores Investments [P.I + D.Z + Others] -Rs. 217.40 crores Incremental operating costs -Rs. 8.15 crores   All amount passed on to the beneficiary cities as grant by GoK, due to pilot nature of the project.   Project period:   Four years: 2004-2008 (proposed to be extended up to March 2010).

5. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 5 Project Details   Project Components:   Technical Assistance (TA) studies   Investments: (a) demonstrating continuous (24x7) water supply through initial PSP in selected demonstration zones [D.Z] of the three ULBs ; (b) Bulk water improvement related investments (Priority Investments [P.I]) including critical/urgent works to improve supply frequency.   Executing Agencies:   Technical Assistance studies-consultancy firms selected by competitive bidding.   Priority Investments-KUWS & DB.   Demonstration project-private entity called ‘Operator’.   Quality Certification: All Works & Operator’s performance: Technical Auditor; Priority Investments: Third Party Inspection Agency.

6. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 6 1. 1.Establishment of Karnataka State Urban Water Supply & Sanitation Council (KSUWSC) 2. 2.Review and Establishment of Regulatory and Legal Framework 3. 3.Water and Sanitation Sector Investment & Tariff Frameworks 4. 4.Strengthening of Urban Water Supply and Sanitation (UWSS) Service Delivery in ULBs 5. 5.Creation of Water and Sanitation Information System (WASIS) and Benchmarking of Service Provision 6. 6.Tariff Design for Continuous Water Supply Technical Assistance Studies

7. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 7 Key aspects of Project   Core of the project is a performance based contract with private sector firm for rehabilitation, operation and management of water service in small areas in Belgaum, Gulbarga and Hubli-Dharwad (called Demonstration Zones).   The role of private sector is limited to demonstration of improved service. Assets remain with ULBs, staff continue on ULB rolls though working under PSP, no investment risk to PSP, no role in tariff fixation & bill collection (though the PSP would develop a computerized billing & collection software system)   Fee based contract.

8. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 8 Key aspects of Project   This is the first such structured initiative in India, coming to fruition after several years of work.   Extensive consultations with all stake holders during project preparation; ULB support by resolutions already passed.   Extensive consultations and reviews for drafting the contract/bid document; no previous model document, even with Bank, to follow.   First service improvement, then tariff hike.

9. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 9   Operator Contract period: 3 ½ years   Single contract for all three ULBs   Single contract between five parties Vs Operator   Distinct obligations for all parties Vs the Operator   KUIDFC authorized to act on their behalf vis-à- vis the Operator   Prime contractual responsibility – Operator Contract Details

10. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 10   Performance based contract.   Total contract price Rs. 28 crore (Rs. 22.40 crore Remuneration; Rs. 5.60 crore Max. Bonus).   60% of Rs. 22.40 crore i.e., Rs. 13.50 crore Fixed Remuneration:   40% of Rs.22.40 crore i.e., Rs.8.90 crore Performance Remuneration.   Fixed Remuneration: 15 equal quarters   12% of Performance Remuneration, if all targets achieved, 18 months after effective date; 28% of Performance Remuneration spread over two year Operation & Management Period, if targets achieved.   Penalties (max. 10%) for failure; termination. Contract Price Details

11. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 11   Preparatory Period A - Survey, Design, Estimation; Preparation of Draft/Final Investment Programme.   Preparatory Period B - Selection of sub-contractors (contract document preparation, tender process management); meeting performance targets for Preparatory Period B.   Demonstration of performance targets in preparatory period B and O & M period.   Customer grievance redressal. What the Operator will do?

12. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 12 Operator Performance Targets  At the end of Implementation Period:  To demonstrate Continuous Pressured Water Supply to every Customer in each Demonstration Zone.  Metering of minimum of 90% property connections.  Maintenance of computerized records of readings.  Reduction of the losses to 30 litre / connection / day / metre pressure in each Demonstration Zone.  Operation on a 24 hour basis of the Customer service centers established at Demonstration Zone.

13. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 13 Operator Performance Targets  During O&M Period:  Continuous Pressured Water Supply must be provided to every connected property and stand-post.  Emergency stoppages shall not exceed twelve hours and no more than an average of four emergency stoppages in a period of 12 months.  100% of all property connections and public stand-posts must be metered.  100% of Customer meters must be read and billed every month.  Losses must be reduced to 20 litres per connection / day / metre pressure by the end of 24 months.  System connection requests must be fulfilled within 7 days.  All Customer complaints to be responded to within 24 hours and redressed within 7 days of such complaint.  Leaks appearing at the surface must be repaired within 24 hours of notification/observance.

14. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 14 Services to the Urban Poor   Defined as those living in houses < 600 Sq. ft. built up area.   No deposit for water connection.   Minimum lifeline supply of 8000 litres per household.   Provide water free of charge through public kiosks to vulnerable sections with involvement of NGOs and / CBOs.

15. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 15   8 Priority Investment works for augmenting bulk water supply completed and commissioned.   Laying of distribution network in 5 Demo Zones – completed.   House service connections - completed.   All the five DZs operationalised and O&M phase commenced on 3 rd April 2008.   Technical Assistance Studies - two completed, four in progress.   Social Intermediation & Communication activities are being conducted.   Expenditure as on 31 st January 2009 – Rs 172 Crores. Status of the Project

16. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 16 Demonstration Project Sl. No. Demo ZoneNo. of Wards. HSCs Target (Nos.) HSCs Achievement (Nos.) 1.Belgaum (South)536104216 2.Belgaum (North)535103909 3.Hubli464107258 4.Dharwad449005581 5.Gulbarga1140203201 6.Total292245024165

17. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 17   First instance of a new model of PSP in water service -challenge & opportunity.   Pressures of differing expectations - even of partner agencies.   Impatience / unrest of non demo zone residents in chosen cities.   Contract model & document format chosen - grey areas.   Conservative mindset of client staff to many issues, differing from conventional contracts.   Curbing un-authorized / illegal connections and transition from flat to volumetric tariff.Challenges

18. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 18

19. KUWASIP Karnataka Urban Infrastructure Development & Finance Corporation Working towards better urban living 19 Thank you