Statement by Michael Carter, Country Director, India, on the World Bank’s Role in the Delhi Water Supply and Sewage Project

Contact in New Delhi :   Sumir Lal  -  Tel : 51479115
                  Email :  slal@worldbank.org
       Sudip Mozumder -  Tel : 51479210
      Email : smozumder@worldbank.org

STATEMENT BY MICHAEL CARTER, COUNTRY DIRECTOR, INDIA, ON THE WORLD BANK’S ROLE IN THE DELHI WATER SUPPLY AND SEWERAGE PROJECT

July 29, 2005 :  At the request of the Government of India, the World Bank is assisting the Delhi Jal Board (DJB) in its development of a reliable, sustainable and affordable water supply system in Delhi. Both the Government of India and the Government of the National Capital Territory of Delhi are keen to improve the urban water sector, which in most cities of India is characterized by poor service and financially strained utilities.

The proposed Delhi Water Supply and Sewerage Project will have five components:

1) The first phase of a water distribution and waste water collection improvement plan, to be implemented in two zones of south Delhi through the award of management contracts to professional operators;
2) Trunk water and sewerage infrastructure improvement to address bottlenecks, improve energy efficiency, and promote environmental sustainability;
3) Organization strengthening measures including staff training, customer service centers, a management information system, etc;
4) Services to the poor, including sub-projects in the two zones under management contract; and,
5) Preparation of a roll-out plan for improving services and infrastructure city-wide.

The project is currently in the preparation stage. The proposed loan will go for approval by the Bank’s Board of Executive Directors, which includes a representative of the Government of India, after the preparation is complete. Meanwhile, the Bank has sanctioned a sum of US $ 2.5 million as a project preparation facility. This money is being used by DJB to fund certain studies and reports whose findings and recommendations will help in the design of the project.

No privatization

Neither under the proposed project nor in any advisory work is the Bank proposing privatization of any part of DJB nor is there is a timetable for any privatization. As a matter of fact, at this time, the World Bank would definitely not recommend privatization. 

Procurement guidelines

As a development bank owned by 184 member-countries, the World Bank has been mandated with a mission to address poverty by supporting development efforts of its borrowing members.

In order to ensure that the development outcomes for which its money is borrowed are achieved, the Bank has developed, with the concurrence of its members, a high set of standards in areas such as procurement, financial management, and environmental and social safeguards to which its borrowers commit. These are accepted as global benchmarks by its supporters and critics alike. These guidelines and policies are all in the public domain and can be easily accessed on the World Bank website.

The World Bank’s procurement guidelines are based on four considerations: the need for economy and efficiency, the Bank's interest in giving all eligible bidders from developed and developing countries the same information and equal opportunity, the Bank’s interest in the development of domestic contracting and manufacturing industries in the borrowing country, and the importance of transparency in the procurement process.

Accordingly, the guidelines lay down bidding procedures, eligibility criteria, safeguards against conflicts of interest, fraud and corruption, respective responsibilities of the borrower and Bank, and so on.

While it is the borrower’s duty to administer the procurement process, the Bank has a clear responsibility to review and decide on its no-objection to the key documents and reports emanating from this process.

Consultancy award by DJB to PriceWaterhouse Coopers

Some NGOs have raised questions about the Bank’s role in the award by DJB of a project preparation study to PWC over 1999-2001. The insinuation that the Bank attempted to favor PWC is completely unfounded -- on the contrary, this is an excellent example of the Bank’s close monitoring of the procurement process to ensure transparency and fair competition.

In all Bank procurements, the short-listed firms should comprise three to six firms with a wide geographic spread, with no more than two from any one country, and at least one from a developing country unless qualified firms from a developing country are not identifiable. The original shortlist included only developed country firms; this is why the Bank asked that a firm from a developing country be included. In response, DJB included PWC India which was the highest ranked such firm.

DJB evaluated the firms’ technical proposals and submitted its evaluation report to the Bank. Based on the information contained in this report, the Bank raised questions on the subcriteria that were used to evaluate the proposals on the grounds that these did not adequately reflect the requirements of the terms of reference. The Bank arrived at this opinion after a thorough internal review and after seeking the opinion of an external consultant. Accordingly, it was decided between DJB and the Bank to invite fresh proposals from the same firms.

(In a consultancy contract, the terms of reference are the key as they define the objectives, scope of work, activities, tasks to be performed, respective responsibilities of the borrower and the consultant, the expected results, and deliverables from the assignment.)

When the Bank received DJB’s evaluation report on the revised technical proposals, it asked that one particular evaluator’s scores be removed from the evaluation as they were dramatically different from the others for a particular criterion. The Bank’s action, though uncommon, is not unique. Due to this distortion of the average score, only one firm had a score above the qualifying threshold laid out in the bid documents. On correcting the average by removal of this evaluator’s scores, three firms, including PWC and the original qualifier, passed. When the financial bids of these three firms were publicly opened, PWC won on the combined score because its financial offer was substantially cheaper than the other two.     

We do not see this as “calling the shots” or “running” the borrower’s affairs, but ensuring in partnership with the borrower a transparent and fair procurement process for a contract that is being funded with public money.

Some Important Dimensions of the Bank’s Role

Strengthening of the management of water distribution and waste water collection.  This will be tested by delegating the operation and maintenance of two operational zones to experienced, private operators under two separate management contracts with DJB. The operators will be selected through a competitive process according to the Bank’s procurement guidelines. DJB will retain control over assets, staffing, tariff and investment decisions, and will supervise the operator. The operator will receive a fixed fee with bonuses and penalties depending on performance.

If successful, such delegation of operations and maintenance could improve managerial and technical practices in DJB, and be expanded at a later stage to other areas of the city on a competitive basis. This arrangement could help inject private sector skills in the public utility and does not amount to privatization.

Recovery of Cost of Delivery of Water Supply.  The project is designed to achieve a set of standards for better water service delivery. In our view, this requires setting tariffs at a level that covers at least the cost of operations and maintenance. This is a matter we will need to reach agreement with DJB on when we reach the stage of negotiating the loan. But we have seen no projection to suggest that this would require increases even remotely approaching the 800-900 percent being quoted in the press. Moreover, the Bank is clear that the project must be explicitly targeted at improving access of the poor to water and sanitation services, with measures in place to ensure affordability such as transparent, targeted subsidies.

Efficiency and Economy in Financial Management and Procurement.  As an integral part of its support to DJB, the Bank will continue to ensure that all procurement that it finances is done efficiently and in a transparent manner. 

Disclosure of Information. The Bank will strictly adhere to its disclosure policy, which specifies the nature and timing of documents that it must disclose.  It will concur with any initiative by DJB to disclose information beyond what is required by the Bank’s policy.  Any such decision on disclosure rests with DJB.

For more information on the Delhi Water Supply and Sewerage Project, please read the following :

Project Information
Contract Information
Main World Bank Procurement Page


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