Document of

The World Bank

Report No: 24771-IN

PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 114 MILLION (US$150 MILLION EQUIVALENT) TO INDIA FOR THE ANDHRA PRADESH RURAL POVERTY REDUCTION PROJECT January 3, 2003

Rural Development Sector Unit India Country Unit South Asia Regional Office

CURRENCY EQUIVALENTS (Exchange Rate Effective October 2002) Currency Unit = Indian Rupees Rs. 1 = US$0.020 US$1 = Rs. 48.75 FISCAL YEAR April 1 -- March 31 ABBREVIATIONS AND ACRONYMS
AP APDPIP APERL APFD APP APRLP APRPRP APSWREIS BPL CAS CBOs CC CEO CIF CIG DAC DEA DFID DPAP DPEP DPMU DRDA DWCRA DWCUA EMF GoAP GoI GP ICDS IPM ITDA LEAP MP MS MTR PDS PIP PRI PSAL RNF SC/ST : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : Andhra Pradesh Andhra Pradesh District Poverty Initiatives Project Andhra Pradesh Economic Restructuring Loan Andhra Pradesh Forest Department Anti-poverty program AP Rural Livelihoods Project Andhra Pradesh Rural Poverty Reduction Project Andhra Pradesh Social Welfare and Residential Educational Institutions Society Below Poverty Line Country Assistance Strategy Community-based organization Community Coordinator Chief Executive Officer Community Investment Fund Common Interest Group District Advisory Committees Department of Economic Affairs Department for International Development Drought-Prone Area Program District Primary Education Project District Project Management Unit District Rural Development Agency Development of Women and Children in Rural Areas Development of Women and Children in Urban Areas Environmental Management Framework Government of Andhra Pradesh Government of India Gram Panchayat Integrated Child Development Services Integrated pest management Integrated Tribal Development Agency Livelihood Enhancement Action Plan Mandal Parishad Mandal Samakhya Mid-term review Public Distribution System Project Implementation Plan Panchayat Raj Institution Programmatic Structural Adjustment Loan Rural Non-Farm Scheduled Caste/Scheduled Tribe

SERP SHG SLMF SAPAP SPIA SPMU SRM TDP TPMU TWD UNDP VO VSS VTDA

: : : : : : : : : : : : : :

Society for Elimination of Rural Poverty Self-help Group Sustainable Livelihoods Management Framework South Asia Poverty Alleviation Project Sub-Project Implementation Agency State Project Management Unit Social Risk Management Tribal Development Plan Tribal Project Management Unit Tribal Welfare Department United Nations Development Programme Village Organization Vana Samrakshana Samithi Village Tribal Development Agency

Definitions Habitation Village Gram Sabha Gram Panchayat Block (mandal) : : : : Cluster of approximately 200 households in a distinct geographic area Administrative unit consisting of a collection of habitations All adult residents of a village (equivalent to the general assembly of the village). Elected body representing one or several villages--part of Panchayati Raj Institutions (PRIs) (local government) : Administrative unit below the district consisting of a group of villages/Panchayats (in Andhra Pradesh, blocks are subdivided into mandals but retain the administrative and local government functions of blocks)

Vice President: Country Director: Sector Director: Task Team Leader:

Mieko Nishimizu Michael F. Carter Constance Bernard Jeeva Perumalpillai-Essex

INDIA ANDHRA PRADESH RURAL POVERTY REDUCTION PROJECT

CONTENTS

A. Project Development Objective 1. Project development objective 2. Key performance indicators B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2. Main sector issues and Government strategy 3. Sector issues to be addressed by the project and strategic choices C. Project Description Summary 1. 2. 3. 4. Project components Key policy and institutional reforms supported by the project Benefits and target population Institutional and implementation arrangements

Page 2 2

2 3 6

7 9 9 10

D. Project Rationale 1. 2. 3. 4. 5. Project alternatives considered and reasons for rejection Major related projects financed by the Bank and other development agencies Lessons learned and reflected in the project design Indications of borrower commitment and ownership Value added of Bank support in this project 16 17 18 19 19

E. Summary Project Analysis 1. 2. 3. 4. 5. 6. 7. Economic Financial Technical Institutional Environmental Social Safeguard Policies 19 20 20 21 22 24 27

F. Sustainability and Risks 1. Sustainability 2. Critical risks 28 28

3. Possible controversial aspects G. Main Loan Conditions 1. Effectiveness Condition 2. Other H. Readiness for Implementation I. Compliance with Bank Policies

30

30 30 32 32

Annexes Annex 1: Project Design Summary Attachment 1: APRPRP Attachment 2: Poverty and Social Development in Andhra Pradesh Attachment 3: Summary of the Livelihoods Assessment Report Annex 2: Detailed Project Description Attachment 1: Subproject Eligibility and Appraisal Attachment 2: Land - Risk Mitigation Measures for Land Purchase Component Attachment 3: NGO Collaboration and Selection Attachment 4: Environmental Management Framework Attachment 5: Tribal Strategy Attachment 6: Gender Strategy Attachment 7: Lessons and Outcomes Emerging from APDPIP Estimated Project Costs Economic Assessment Financial Summary for Revenue-Earning Project Entities, or Financial Summary (A) Procurement Arrangements (B) Financial Management and Disbursement Arrangements Annex 7: Project Processing Schedule Annex 8: Documents in the Project File Annex 9: Statement of Loans and Credits Annex 10: Country at a Glance Annex 3: Annex 4: Annex 5: Annex 6: 34 38 39 42 45 52 56 57 61 65 69 73 78 79 86 87 94 103 104 105 109

MAP(S) IBRD No. 32105

INDIA

Andhra Pradesh Rural Poverty Reduction Project

Project Appraisal Document

South Asia Regional Office SASRD Date: January 3, 2003 Sector Director: Constance A. Bernard Country Director: Michael F. Carter Project ID: P071272 Lending Instrument: Specific Investment Loan (SIL)
Project Financing Data [ ] Loan [X] Credit

Team Leader: Jeeva A. Perumalpillai-Essex Sector(s): General agriculture, fishing and forestry sector (50%), Other social services (20%), Secondary education (16%), Sub-national government administration (14%) Theme(s): Poverty strategy, analysis and monitoring (P), Other rural development (S)
[ ] Other:

[ ] Grant

[ ] Guarantee

For Loans/Credits/Others: Amount (US$m): SDR 114 million (US$150 million equivalent) Proposed Terms (IDA): Standard Credit Grace period (years): 10 Commitment fee: O.50% Financing Plan (US$m): Source

Years to maturity: 35 Service charge: 0.75% Local

Foreign

Total

BORROWER IDA LOCAL COMMUNITIES BORROWING COUNTRY'S FIN. INTERMEDIARY/IES

Total:

59.97 119.78 13.96 52.13 245.84

0.00 30.25 0.00 0.00 30.25

59.97 150.03 13.96 52.13 276.09

Borrower: GOVERNMENT OF INDIA(GOI) Responsible agency: GOVERNMENT OF ANDHRA PRADESH (GOAP)

Address: Secretariat Building, Hyderabad - 500 022 Contact Person: Mr. S. Ray, Special Chief Secretary, Panchayati Raj and Rural Development Tel: 91 40 2345 4670 Fax: 91 40 2345 6946 Email: Sray@ap.gov.in Other Agency(ies): SOCIETY FOR THE ELIMINATION OF RURAL POVERTY (SERP) Address: Hill Fort Road, 5-10-188/2 III Floor Summit Apts., Hyderabad 500 004, Andhra Pradesh, India Contact Person: Mr. Vijay Kumar Tel: 91 40 5566 0315-8 Fax: 91 40 23211848 Email: vijay@velugu.org ANDHRA PRADESH SOCIAL WELFARE RESIDENTIAL EDUCATIONAL INSTITUTIONS SOCIETY (APSWREIS) Address: Social Welfare Office Complex, Masab Tank, Hyderabad -500 028 Contact Person: Ms. Santhi Kumari, Secretary Tel: 91 40 2339 9706 Fax: 91 40 2331 3136 Email: apswreis@yahoo.com
Estimated Disbursements ( Bank FY/US$m):

2004 27.95 Cumulative 31.23 Project implementation period: 5 years

Annual

FY

2003 3.28 3.28

2005 54.84 86.07

2006 43.15 129.22

2007 16.90 146.12

2008 3.91 150.03

Expected effectiveness date: 04/01/2003

OCS PAD Form: Rev. March, 2000

Expected closing date: 09/30/2008

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A. Project Development Objective

1. Project development objective: (see Annex 1) The project development objective is to enable the rural poor, particularly the poorest of the poor,* in Andhra Pradesh (AP) to improve their livelihoods and quality of life. The project supports Government of Andhra Pradesh's (GoAP) ongoing long-term Rural Poverty Reduction Program which aims "to eradicate poverty; promote human capital development; focus on the welfare of children--particularly girls, women, the old, and the infirm; and build an equitable society in which people participate in making decisions which affect their lives and livelihoods." The project builds upon the ongoing AP District Poverty Initiatives Project (Cr.3332-IN) which has helped to frame GoAP's rural poverty reduction program. The project supports the program by (a) empowering the rural poor through developing and strengthening self-managed grassroots organizations; (b) providing access to technical and financial resources in order to expand their asset base and livelihood opportunities; and (c) mitigating risks faced by the rural poor. Salient features of this project include: (i) a process oriented approach to participatory rural development; (ii) broad geographical coverage of 560 mandals**; (iii) a sharp focus on the poorest and most vulnerable (e.g. disabled people) of rural communities; (iv) improved responsiveness of GoAP sectoral and antipoverty programs to the poor; and (v) inclusion of a wide range of stakeholders, especially local governments (including through pilot innovative approaches), private sector, and civil society, in project implementation. * The definition of the '"poorest of the poor" is provided in section C3. The GoAP's medium-term rural poverty program focuses on all poor. ** AP has approximately 1,100 mandals (sub-district level administrative units) in 23 districts. 2. Key performance indicators: (see Annex 1) The main project impact/outcome indicators include: Empowerment (voice) of rural poor enhanced largely through number and percentage of community-based organizations (CBOs) functioning well in relation to their social, economic, and political objectives Household income of the poor increased and/or sources of income diversified Household perception of the quality of and access to basic services--education, health, integrated child development services (ICDS) -- improved Percentage increase in access to and/or ownership of land Increased access to credit and insurance services and reduced indebtedness Improved access to disability certification and increased use of community-based rehabilitation Increase in percentage of children (by gender) enrolled to schools Local governments more inclusive and responsive to the needs of the poor in pilot mandals (sub-district level of government)

B. Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 22541-IN Date of latest CAS discussion: April 5, 2001 The proposed project fits well with the Banks Country Assistance Strategy (CAS) objectives and is

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consistent with the CAS program priorities and principles of selectivity, partnership, and a programmatic approach. The project strongly contributes to the CAS goal of pro-poor rural development. GoAP prepared the Andhra Pradesh: Vision 2020 (in 1999) which is the long-term development strategy for the state. This document has served as a guiding framework for World Bank assistance to AP. AP has developed a strong partnership with the Bank anchored on establishing a sustainable fiscal framework and undertaking key administrative reforms. This partnership was initiated through the Andhra Pradesh Economic Restructuring Project (APERP) (Ln.4360/Cr.3103-IN), approved by the Bank in 1998, and subsequently supported under the Andhra Pradesh Economic Restructuring Loan/Credit (APERL) (Ln.4651/Cr.3616-IN) approved by the Bank in March 2002. The APERL structural adjustment program is premised on continued progress in fiscal management, public expenditure management and governance/public management reforms. In addition to fiscal and governance reforms, the Banks AP assistance strategy focuses on enhancing human capital, accelerating rural growth, and supporting key pro-poor interventions. This assistance has taken the form of the AP District Poverty Initiatives Project (Cr.3222-IN); AP Community Forestry Management Project (Cr.3692-IN) emphasizing forest management through community participation; and AP Irrigation III Project (Ln.4166/Cr.2952-IN) emphasizing participatory irrigation management. Moreover, under APERP, several subprojects are under implementation supporting the health, nutrition, and education sectors. Additionally under implementation are multi-state projects, including in AP, supported by the Bank that focus on AIDS/HIV, Tubercolosis, Cataract Blindness, and Leprosy. The Bank is also assisting GoAP conduct a strategic environmental analysis in connection with the Vision 2020 goals and parallel capacity building efforts for local institutions. The project proposes to integrate participatory, demand-driven development of low-income households with well-coordinated, transparent delivery of public services at the local level. The strengthening/formation of self-managed CBOs based on affinity (primarily relationships of trust and mutual support) and of CBO federations and networks are important expected outcomes of the project and will help develop social and human capital and empower the poor. The improvements in the (i) integration of different public sector interventions at the mandal level and (ii) good governance and organizational capacity of local governments (both elected officials and line department staff) at the subdistrict level are also expected outcomes of the project. Deficiencies in these areas have seriously hindered public services from responding to the needs of the poor and the poor from accessing these services. Redefining and restructuring more healthy and sustained interfaces (or links) among grassroots groups, local institutions, and GoAP are central challenges for the project. 2. Main sector issues and Government strategy: Rural poverty in AP -- as everywhere -- is a multidimensional and complex issue involving the inability to satisfy basic needs, lack of control over resources; lack of education and skills; poor health and malnutrition; lack of shelter; poor access to water and sanitation; vulnerability to shocks, violence and crime; and lack of political freedom and voice. Based on recent World Bank poverty analysis for AP (see Annex 1, Attachment 2), performance in reducing rural poverty and improving human development has been mixed. With respect to income/consumption, poverty has been reduced in AP in the second half of the 1990s but at a slower rate compared to the All India level. Estimates of rural income poverty in AP vary between 11% (official figures from Planning Commission) to 28% (revised figures from A. Deaton (2001). The slow growth rate in the agriculture sector and limited diversification of the rural economy raise real concerns in the rural areas. Poverty amongst scheduled tribes (STs) and scheduled castes (SCs) is significantly higher than in the population as a whole which is attributable to social

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discrimination, ill health, and other factors. The main challenges include: (a) Limited success of antipoverty programs (APP): Since the early 1950s, the Government of India (GoI) has implemented APPs by providing wage employment, productive assets (tools, implements, animals), skills, credit, and food security. GoAP has complemented these GOI programs with additional funding for self-help groups (SHGs); Scheduled Caste and Scheduled Tribe (SC/ST) programs, many implemented by the SC and ST Departments and Corporations; and Janmabhoomi, a state-wide social program. However, these programs have been partially successful. Key reasons cited include, lack of peoples' participation, poor governance, and inadequate incentives to government staff in implementing the programs. (b) Lack of empowerment: Perhaps the most important cross-cutting challenge facing the poor (and the poorest of the poor) is their lack of power (or voice) in accessing basic services, taking advantage of economically attractive opportunities, and exercising legal rights. Information is seldom available. Household, village, and local government decision making processes are often exclusionary. Mechanisms to ensure accountable delivery of state and local government services are either non-existent or non-functioning. Moreover, social discrimination of caste and ethnicity still prevail and result in further disempowerment of the poor. (c) Limited livelihood opportunities: The main occupations of household heads for the rural poor in AP is agriculture laborer and self-employed agriculture -- over 75% of the lowest income quintile fall in these two categories. The rural poor therefore depend primarily on agriculture and allied activities (e.g. non-timber forest products, livestock, etc.) for their livelihood. The poor have limited access to economic activities, in part because of limited ownership of land and lack of to formal credit. The majority of households below the poverty line are landless. Marginal farmers often own land only in degraded areas. Uncertain tenancy relations and rigid leasing regulations have also affected the livelihood options accessible to the poorest. The landless are dependent on low agricultural wage rates, often arbitrarily fixed in a purely buyers market. Credit often is obtained from informal suppliers who charge excessive interest rates--preventing the poor from earning reasonable returns from most economic investments. Slow growth in the agricultural sector has shrunk whatever employment opportunities were offered in the sector. Rural nonfarm (RNF) employment opportunities are also limited, because, since the early 1980s, RNF employment has remained constant at about 23 percent. (d) Limited human capital development: The interdependence, complementarity, and synergy of health, nutrition, and education in the context of human development are now universally recognized. Human capital is critical for the rural poor, because deprivation of health, nutrition, or education limits the capacity to fully (i) utilize ones own assets (e.g., labor) and (ii) access and utilize available services. The inability to tap either or both prevents people from escaping vicious poverty traps. Health, nutrition, and education indicators for AP's rural areas show severe deprivation among the poor. If rural poverty is to be reduced, these low indicators emphasize the urgent need to address these concerns, largely through coordinated community mobilization and improved service delivery. (e) Risks faced by the poor: Experiences from GoAP poverty programs, particularly APDPIP, highlight the precarious living conditions of the rural poor. The consequences of unanticipated losses from death, hospitalization, disability, droughts and floods often are devastating and can prevent households from escaping poverty and related debt traps. Risk mitigation and risk-coping strategies and instruments often are limited and difficult to follow or access. Public and private insurance instruments are rarely accessed by the poor.

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(f) Government's piece-meal approach to poverty reduction: Despite the massive doses of funds that GoAP has spent to overcome poverty, the lack of inclusive planning, appropriate targeting, and synergy in development programs have resulted in the sub-optimal effectiveness of public sector interventions. Government Strategy: Andhra Pradesh became the first Indian state to articulate a comprehensive vision for human and economic development when it released its Vision 2020. Commencing in early 2000, GoAP took a number of significant steps to develop a strategy to operationalize Vision 2020, and to build widespread ownership of the process. A number of Cabinet sub-committees were formed to produce approach papers to deal with a wide range of issues, including an overarching strategy for poverty reduction. The Report of the Rural Poverty Task Force was released in May 2000 and provided the basic framework for the preparation of the strategy paper on poverty reduction and formulation of GoAPs rural poverty reduction program. At the same time, the Government also set up a Poverty Eradication Mission composed of eminent person possessing a wide range of expertise in the rural sector from around the country. The objective of the mission is to be an advisory body to GoAP and to comment on GoAPs initiatives for poverty reduction by offering independent advice. The GoAP Rural Poverty Reduction program has the dual objectives of (i) promoting economic mobility and (ii) enhancing social protection by reducing vulnerability for the poor. In terms of economic mobility, the focus is on measures to improve rural livelihoods for marginal and small farmers, widen access to non-farm employment opportunities, and improve the access of communities to financial resources. Vulnerability will be addressed in two ways: first, by improving poor people's access to existing anti-poverty programs and key services such as food security and basic education, health, and nutrition, and second by developing new insurance mechanisms and safety nets to protect against downside risks. More specifically, GoAP's strategy includes the following: Empowerment and grass-roots institutions: AP has been a leading state in forming and developing self-help groups (SHGs) of the poor (i.e. Development of Women and Children in the Rural Areas (DWCRA women SHGs), mothers' committees, school education committees, watershed committees, and forest groups). AP now has nearly 400,000 SHGs with savings of approximately Rs 5 billion (US$100 million equivalent). Viable economic activities: GoAP is also pursuing a rural livelihood approach to poverty reduction taking into account the need for a more holistic approach to rural growth and development. This emphasizes non-farm employment opportunities, especially the development of microenterprises and their linkages with markets and rural banks. Human development: GoAPs rural human development strategy focuses on improving the efficiency of Mother and Child Health (MCH), Reproductive Child Health (RCH), Integrated Child Development Services (ICDS), and elementary education services; while reducing the incidence of communicable diseases. The strategy to improve key indicators includes increasing the number of grassroots Auxiliary Nurse Midwifes (ANMs); strengthening the ICDS program; forming "Mother and Child" Core teams at the Gram Panchayat (GP) level; and encouraging private sector participation to deliver key services. In the education sector, GoAP aims to increase literacy levels to

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over 95% by 2005 and universalize elementary education. The latter implies ensuring that every school-aged child is in school, there are no drop-outs, and a minimum level of learning and competency is imparted to every child. Local Governance: Following the July 2001 local government elections, GoAP is committed to (a) decentralization including fiscal decentralization to PRIs and municipal government and (b) devolution of administration to lower-level governments. GoAP is promoting "participative democracy" -- ensuring peoples participation in and downward accountability of local governments. Public management reform: GoAP is promoting a transparent and accountable government, which includes freedom of information, citizen charters, procurement procedures, and reporting. The APERL supports these initiatives. To assist in implementation of the above, GoAP established the Society for the Elimination of Rural Poverty (SERP) in January 2000. (refer to section C4). SERP is responsible for coordinating the Rural Poverty Reduction Program of the state, popularly known as Velugu (Eternal Light). SERP is also the Secretariat for the AP Poverty Eradication Mission. SERP's first significant step in advancing this program is through implementation of the APDPIP and other related projects. Lessons from the past three years of implementation include: (i) the importance of focusing on livelihoods (expanding the asset base, including land, and creating economic opportunities) in addition to group mobilization; (ii) the nature of risks faced by the poorest and possible approaches to help them reduce, mitigate, and manage these risks; (iii) institutional arrangements related to facilitating the process of group formation and strengthening and managing the CIF; and (iv) sustainability concerns and the need to converge project-specific processes and investments with existing state and local government programs. This project builds upon APDPIP in several important areas (refer to Section A1). 3. Sector issues to be addressed by the project and strategic choices: SERP organized consultations at different levels and commissioned several important studies to identify key sector issues to be addressed by the project (Annex 1, Attachment 3). The outcome of the consultative process and studies has helped in the development of the following project design features: Developing and strengthening self-managed grassroots organizations: Building on the strengths of AP's group-based organization movement, the project will assist forming new, and strengthening existing, self-managed peoples organizations. A differentiated approach will be adopted in forming and nurturing affinity-based groups such that the unique needs of different types of marginalized people (e.g., women, disabled, elderly, tribals) are appropriately met. CBOs will be the key instrument for identifying priority needs of the target groups at the habitation/village level. The project also will facilitate the federation and networks of CBOs into Village Organizations (VO) and Mandal Samakhyas (MS) which represent a group of VOs at the subdistrict level. Improving livelihood opportunities: Experience from APDPIP emphasizes the importance of promoting sustainable livelihood opportunities to complement the group formation and empowerment exercises described above. The project will focus on facilitating livelihood options in both the farm and nonfarm sectors. The Community Investment Fund (CIF) which will provide supplementary financing of activities that focus on sustainable rainfed farming systems, land purchase for productive purposes, etc. With respect to nonfarm opportunities, the project will provide assistance to CBOs to develop microenterprises such as livestock development, adding value to farm produce, and trading. This assistance could take the form of providing training and information on markets, and facilitating links to the private sector, rural banks, and other financial intermediaries.

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Both farm and nonfarm employment opportunities will be built upon existing local knowledge. Access to funds through formal channels remains a major constraint in reducing income poverty. The project will support access to funds through the CIF, as a catalyst, for activities that cannot be funded through existing sources in the short run. The project will facilitate links between CBOs and financial intermediaries including banks and nongovernmental organizations (NGOs) providing micro-finance services for longer-term sources of financing. Strengthening asset base: The Bank has identified this project as a "pilot" for the exception to disburse against land purchases. This exception will be an important intervention to reduce poverty and improve the livelihoods of the poor. Models of group and individual purchase have been identified. Details are provided in Annex 2 and the Operational Manual for Land Purchase. Supporting the convergence of public sector programs: The project will support the convergence of programs delivered by line departments, particularly at the mandal level. The guiding principles for convergence are (i) creating awareness amongst CBOs (of the poorest of the poor) of line department services, especially in health, nutrition, and education; (ii) improving the understanding of poverty and making it a core concern of mandal-level representatives and functionaries; (iii) establishing organizational systems at the community level to support convergence and help ensure that line department services are responsive and accountable to CBOs; and (iv) developing performance indicators for mandal-level officials to measure reductions in poverty. GoAP has issued government orders to facilitate the convergence of antipoverty programs of all line departments. Strengthening local governments: On a pilot basis (40 of the 560 project mandals), the project will involve PRIs more centrally in implementation by making GPs (village-level local government) and Mandal Parishads (MPs, sub-district level local government) responsible for prioritizing and approving CIF allocations across sectors under their jurisdiction. These allocations will focus on infrastructure, social development, and microwatershed activities. The capacity of local governments will be developed in several areas -- identification of rural poor, local-level planning, delivery of basic services--all based on principles of downward accountability and transparent decision-making processes. Results from this pilot will feed into an action plan for scaling up policy dialogue, in future and ongoing Bank operations. Piloting a comprehensive system of social risk management: The project recognizes that the poor suffer disproportionately from risks. Thus, a social risk management (SRM) framework has been developed to provide a comprehensive approach to mitigating and coping with risks. As a part of this overall approach to SRM, the project will pilot a comprehensive insurance package, where the CBOs would be insurance intermediaries with technical assistance from public and private insurance companies. Additionally a community- based health package to complement the insurance package focussing on ambulatory care will also be developed. Technical assistance is also provided for carrying out the feasibility of a drought-related risk mechanism.

C. Project Description Summary

1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The project has six components: Component I: Institution and Human Capital Development: Technical assistance will be provided for the following activities: (i) strengthening and building self-managed institutions of the poorself-help

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groups and federated groups at the village and mandal (block) levels; (ii) building the capacity of line departments and local governments to focus on the needs of the poor and help empower the poorest of the poor through joint planning, monitoring, training, and implementation; and (iii) supporting reorientation of existing Education, Health and Nutrition Department programs to the needs of the poor in 80 selected mandals; and (iv) building private sector partnerships for livelihood opportunities. Component II: Community Investment Fund. The CIF is designed to transfer financial and technical resources to CBOs and local governments to support subprojects on a demand-driven basis in the following areas: (i) social development, (ii) community-level infrastructure, (iii) income-generation and livelihood improvements; and (iv) land purchases. The process to identify, prepare, appraise, and implement the CIF proposals are detailed in the operational manuals and Project Implementation Plan (PIP). Component III: Support to Pilot Programs. The main pilots are: (i) Strengthening the Role of local governments - designed to strengthen the capacity of local governments to respond to the needs of the rural poor; and (ii) Social Risk Management and Health - to test different models of community based comprehensive insurance package since the poor are most vulnerable to downslide risks; and (iii) Community Managed Comprehensive Basic Health Package to complement the comprehensive insurance package. Component IV: Support to Out of School Children. This will support GoAP's policy to enroll all children in school by 2005, through motivating parents and children to go to regular schools and bridge camps to prepare them. To retain scheduled caste girls in formal schools until the completion of their secondary education, 64 residential schools will be constructed. Component V: Support to Disabled Persons will provide for a targeted approach in 80 mandals to meet the special needs of people with disabilities. This component will require social mobilization and building of peoples institutions focused on the needs of disabled persons and their families, and will focus on improving livelihood opportunities of the disabled and caregivers. The project will promote convergence of interventions in the health and educations sectors to support disabled persons and disability prevention, while encouraging commumity-based interventions. Component VI: Project Management. This component will support activities of the main implementing agency, SERP. Activities will include: providing key functional staff at the State Project Management Unit (SPMU) and District Project Management Unit (DPMU); contracting an independent monitoring and evaluation agency; conducting environmental management training; and undertaking special studies.
Component Indicative Costs (US$M) % of Total Bankfinancing (US$M) % of Bankfinancing

Part I: Institution and Human Capital Development Part II: Community Investment Fund Part III: Pilot Programs Part IV: Support to Out of School Children Part V: Support for Persons with Disabilities Part VI : Project Management
Total Project Costs

Total Financing Required

25.20 157.02 7.45 57.38 11.32 17.72 276.09 276.09

9.1 56.9 2.7 20.8 4.1 6.4 100.0 100.0

23.30 68.00 5.78 30.71 9.77 12.47 150.03 150.03

15.5 45.3 3.9 20.5 6.5 8.3 100.0 100.0

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2. Key policy and institutional reforms supported by the project: Improved targeting of sectoral programs: The project will support GoAPs policy to converge APPs and to ensure that the program reaches those who most deserve it. Policy and Steering Committees (refer to Section C4) will be set up at the state, district, and mandal (sub-district) levels to facilitate information-sharing and targeting. A database of all poor households at the mandal level will be developed, based on the multi-purpose household survey and participatory poverty assessments, to help ensure that targeted programs reach the poor. Line department staff will be provided training and field exposure to help them understand clearly the characteristics and needs of the poor. A number of government orders have been issued that provide guidance to line departments on these matters. Strengthening local governments: With the implementation of Constitutional reforms and recent local government elections, GoAP is keen to build the capacity of local governments and to ensure their accountability to the poorest. A pilot in 40 mandals is being established that will test the ability of the local governments to plan and finance pro-poor programs. The role of the local governments in project implementation also will be strengthened, with CIF proposals being endorsed by the Gram Sabhas (village-level constituencies) and the local government officials. Based on the success of the pilot, an Action Plan will be developed by GoAP to scale up to the rest of the state and also feed into policy dialogue and future and on-going Bank operations. Improving access to land: Based on the APDPIP experience, the project highlights the issue of providing land to the landless poor. The project will pilot the purchase of land by communities and individuals. Improving enrollment in schools: The project will support GoAPs policy to ensure that all children are enrolled in school by 2005. Support will be provided through mobilizing communities, bridge camps, and residential schools for girls. The 80 mandals with high incidence of out of school children will be targeted. 3. Benefits and target population: The project will focus on targeting assistance in the state to 560 disadvantaged mandals in sixteen districts. The mandals have been identified using criteria such as human, economic and infrastructural development. Within these mandals, the poor and the poorest will be involved--e.g. scheduled caste; scheduled tribes; backward class; people with no control over or access to productive resources (landless, asset-less, and without access to credit); daily wage laborers; bonded laborers; unskilled marginal farmers; disabled people; socially disadvantaged people like the jogins (girls dedicated to the deity to prevent calmity befalling the village and subsequently coerced into prostitution); out of school children, especially girls; widows and female-headed households; and involuntary migrants. Among the poor, project interventions will begin with the poorest of the poor." Self-selection by the poor and of the poor will be facilitated based on economic and social criteria evolved/identified by the poor themselves, using techniques, such as, Participatory Rural Appraisal (PRA), Participatory Poverty Assessment (PPA), (social mapping, wealth ranking, well-being grouping, gendered resource mapping) and endorsement of the process by the village community--through the Gram Sabha. It is estimated that two million households will benefit from the project. The main benefits include (a) social empowerment and mobilization through better organization; (b) improved skills to enable target groups to undertake productive investments and to increase earning opportunities; (c) greater access to productive assets, infrastructure, and improved social services; (d) social risk management and protection

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for those who are vulnerable to natural and health related risks; (e) empowerment of one of the most vulnerable sections among the poor, i.e., people with disabilities; and (f) improved access to elementary and secondary education for girls from poor families, especially SCs and STs, focusing on areas with a high incidence of out of school children and school drop-outs. In addition, the poor will benefit because (i) both local governments and the line departments, particularly at the mandal level, should become more inclusive of the poor in their planning, operations, and monitoring; and (ii) local governments and line departments will be more transparent and accountable to the community. These institutions also will improve their ability to respond to the demands of the poor by better targeting public programs. 4. Institutional and implementation arrangements: Society for the Elimination of Rural Poverty (SERP) - (refer to Section B2) SERP is the organization entrusted by GoAP to spearhead the fight against rural poverty in the state. SERP, as the lead agency for implementation of APDPIP and other similar projects supported by UN agencies and Government departments, will be the executing agency for this project. Experience has shown that it is able to assume responsibilities for implementing complex rural development programs satisfactorily. In addition, it also has the following advantages: (i) The project focuses on social mobilization and community empowerment as a strategy for poverty reduction. An independent support organization can effectively promote a process-oriented approach -- more effectively than single-sector line departments; (ii) SERP's autonomous status enables it to select highly committed professionals on fixed-term appointments to implement the project; (iii) It can be more proactive in promoting partnership with NGOs, corporate sector, and government organizations; (iv) As the Secretariat to the Poverty Eradication Mission, SERP enjoys an unique advantage in influencing government policies; (v) It will be able to facilitate line departments' partnering with poor communities and to monitor outputs committed by the line agencies. SERP is an independent society headed by the Chief Minister as the ex-officio Chairman of the General Body. The General Body comprises broad representation from all key stakeholders including a large presence from CBOs. Management of SERP is entrusted to an Executive Committee, of which an eminent non-governmental person is President and the State Project Director (SPD) is Chief Executive Officer (CEO). The Executive Committee consists of seven members, with two serving as ex-officio members and five representing leading agencies and individuals contributing to rural development. Project implementation arrangements include: SERP - State and District Levels State Project Management Unit (SPMU). The SPMU is headed by the SPD, who reports to the Executive Committee. The SPD is supported by Regional Project Directors (RPD) and a team with core skills in finance, procurement, human resources including training, disability, monitoring & evaluation (M&E), gender, livelihoods, communications, social risk management, institution building, and local government. Other expertise will be obtained as needed through contractual arrangements and/or partnerships with other agencies. District Project Management Unit (DPMU). In each of the 16 districts, a DPMU will be headed by a Project Director supported by a group of District Project Managers. They are vested with responsibility for all project activities within the district, including final approval of proposals under the CIF. The core

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skills of the DPMU are, among others, finance, training, community development, gender, communications, health and disability, rural engineer/subproject appraisal, livelihoods, land and rice credit, and social risk management. In addition, a team of field supervisorsAssistant Project Managers (APMs) for mobilization; APM for health, nutrition, disability, and out of school children; and one coordinator for land in selected districts. Their core responsibilities will be to provide guidance and support to community coordinators (CCs) and ensure links with local governments and line departments. Intermediaries Role of Local Governments: Local government (across all project mandals) will be responsible for (i) confirming self-selection households of the poorest of the poor; (ii) endorsing subproject proposals submitted by CBOs that fall within local government jurisdiction; and (iii) supporting placement of out of school children (especially bonded labor) in bridge camps and residential schools. To further strengthen the local governments, a pilot has been developed to build their capacities in 40 mandals to assume greater responsibility for project planning and implementation (refer to Section B3). Role of NGOs. A number of NGOs with expertise in working with socially disadvantaged groups and those that are involved in promoting sustainable livelihoods were involved at different stages of project preparation. SERP will identify suitable NGOs and civil society organizations with experience in community facilitation to help (i) organize the poorest of the poor, (ii) undertake awareness generation, sensitization, and training for various stakeholders, (iii) evolve specific strategies for vulnerable groups, and (iv) execute monitoring and evaluation activities. Mandal Community Support Cell. Since the presence of NGOs with experience and expertise in community mobilization is limited to only a few mandals, SERP will set up Mandal Community Cells where NGO partnerships are not feasible. The Mandal Community Cells will be staffed by a highly trained and dedicated team of individual community coordinators. The core staff will be two to three Community Coordinators (CCs) per mandal, one per 1,500-2,000 households. Mandal cells in the project will be constituted differently depending on available local resources and the scope of work. The team of community coordinators will be financed initially by the project but through the Mandal Samakhyas to help ensure demand-driven, downward accountable services. CBOs and Individuals--Village Level Community Activists, Facilitators, and Para-professionals. An early activity in the formation of groups will be the identification of community activists, facilitators, and para-technicians in each habitation. Following appropriate training, these grassroots workers will mobilize communities and provide technical assistance for carrying out microplans and developing subprojects. Additional resources will be used to form a cadre of volunteer paraprofessionals (primary health care, veterinary services, paramedics) accountable to CBOs and VOs. Common Interest Groups (CIGs). The CIGs will be the project's key instrument for identifying priority needs at the habitation/village level. CIGs will be groups of poor people brought together by common interests. The project will assist the formation of new groups as well as strengthen existing groups (e.g., thrift and credit self-help groups (SHGs)). The majority of new groups will be organized on SHG principles. The groups will develop financial stability and money management capacity through internal lending of their own savings before becoming eligible for assistance under the project's CIF. Village Organizations (VOs) and Mandal Samakhyas (MSs). As the SHGs increase in number and gain experience, they will be federated to form self-managed VOs. The VOs can be either registered formal
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associations or informal organizations of 10 to 30 SHGs and will symbolize the collective strength of the poor. Mandals with 20 to 30 VOs will be encouraged to federate to form an MS. The MS will (i) deal with mandal-level staff of local government and line departments; (ii) eventually enter into an agreement with SERP to take over many of the CCs' functions; and (iii) work as financial intermediaries. Policy and Steering Committees State Steering Committee (SSC). This committee will be chaired by the Special Chief Secretary, Panchayati Raj and Rural Development, GoAP. Other members will be senior staff from all relevant departments of the government. The main functions of the SSC will be to (a) facilitate any activity related to the project that requires interdepartmental collaboration/cooperation and (b) promote convergence between ongoing programs. District Level Coordination Committees (DLCCs). These committees will be crucial to interprogram coordination, which takes place at the district level. DLCC will be chaired by District Collectors or Chairpersons of the Zilla Parishad (district level local government). The committee will be composed of functionaries of the key line departments, local government, NGOs, and community organizations. Wherever appropriate, the DLCC will ensure effective linkages of the project and all other line department programs. Such sector linkages also will facilitate the rural poor's access to technical support from the line departments. Mandal Committees. These committees will provide fora for close interaction among Mandal Samakhya, "organizations" of the poor, public officials, and the PRIs at the mandal level. The committees' main function will be to monitor implementation of convergence policies and programs. Based on field observations, they will provide feedback to the DACs and DPMU. They also will play an important role in ensuring that mandal-level line department staff are responsive to the needs of the poor. Implementation. Detailed implementation arrangements are included in the Project Implementation Plan, the Operational Manuals and Financial Management Manual. Key elements are: (i) CIF Component: Preparation, Appraisal, and Approval of Subprojects The project will allow CIGs to submit proposals to DPMUs for financing from funds allocated to the district from the community investment fund (CIF), either on their own or together with other local organizations, including GPs. Funds will be allocated in response to the demand generated and the effectiveness of use by the participating groups. Details of the criteria for evaluating subprojects and the eligibility criteria for organizations submitting proposals are provided in the Operational Manual. This information is widely publicized by DPMUs. Based on the experience of APDPIP, it is expected that the demand for subprojects will cluster in the following areas: (i) social development (including early childhood development centers and disability interventions); (ii) physical infrastructure; (iii) income-generation and livelihood improvements; and (iv) land purchase. DPMUs will have access to a multidisciplinary panel of experts (public or private individuals or firms, or staff of the line departments) to undertake technical, social, economic, and environmental appraisal of subprojects. Subprojects costing up to US$30,000 equivalent will be approved by the DPMU. Proposals costing more than this amount will be appraised by the DPMU but must be approved by the SPMU. The CIGs will choose whether to implement subprojects themselves or to engage contractors. When the work will be undertaken by the communities themselves, quality control advice will be given by technical staff of the line departments or by an individual nominated by the DPMU from the panel of technical experts.

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Potential participants will have a range of investment options from which to choose and will be expected to show their commitment through up-front cash or in-kind contributions. The level of contribution is sector specific and has been included in the eligibility criteria. The full cost of operation and maintenance will be the responsibility of the group members or Panchayats initiating the investment proposals, who will keep these contributions in a separate account. (ii) Educational Component: Support to Out of School Children This component will be coordinated by both SERP and the Andhra Pradesh Social Welfare Residential Educational Institutions Society (APSWREIS). However, DPMUs, MSs, Gram Sabhas/Panchayats, VOs, and CBOs will play an important role in identifying girls to be assisted under the project. Implementation will take place in 80 (out of the 560 project mandals) with high concentration of out of school children and school drop-outs. To ensure effective coordination in these 80 mandals with the ongoing District Primary Education Project of the Department of Education, an MOU and government orders have been issued. The mobilization activities will be carried out by NGOs and CBOs experienced in this area. State, district, and mandal level committees will work closely to ensure that (a) needs of all of the poor children are considered; (b) best use is made of field-level organizations/workers; (c) capacity building activities for teachers and administrators are well coordinated and, wherever possible, shared; and (d) quality of nonformal (bridge/camp) educational courses is maintained and improved based on implementation experience. At the district level, APSWREIS will work closely with the District Coordination Committee on Mainstreaming Child Labor, which will form a subgroup of representatives from government and nongovernmental agencies involved in educational and out of school children issues to guide the implementation of the component in their respective districts. The focus of the educational support through the residential schools will be on girls from the pool of out of school children/school drop-outs in the project districts who at present are largely neglected. To ensure continuity of secondary education for these girls, the project will establish 64 residential schools for ages 9-14. Additional activities to be financed under the project will include improvements in educational facilities, recruitment and training of teachers, and strengthening management functions of APSWREIS. (iii) Monitoring and Learning (M&L) Based on the experience of APDPIP a monitoring and learning system has been developed for the project. The system consists of self-monitoring at the community level, input-output monitoring/Management Information Systems (MIS), process monitoring system, and impact evaluation. The SPMU/DPMUs will be responsible for input/output monitoring at all levels through a computerized MIS. Monitored activities will include allocation and use of project funds for various inputs; delivery of other targeted inputs (training of staff and potential clients, construction of residential schools, other organizational inputs); use of the CIF costs of different types of subprojects; progress of community institution building; number and type of workshops and training modules implemented; number of girls enrolled in schools; and reduction in out of school children. Process monitoring. Based on experience from APDPIP, two or three NGOs supervised by a mother NGO will carry out process monitoring. Based on the MIS and using PRA techniques, assessments will judge the quality of project implementation, particularly in institutional development at the village level, community satisfaction with project inputs, and mechanisms to ensure inclusiveness.

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Monitoring will assess the extent to which the poor have been included in the process of project selection, design, and implementation at the individual and community levels, focusing on the dynamics of CIGs, VOs, and MSs. The approach to process monitoring will encourage self-assessment by CIGs. Reports once in four months will be submitted for review and appropriate action. The findings will be reflected in the biannual progress reports. Impact evaluation will be carried out in three stages by the Center for Economic and Social Studies (CESS), an independent agency. A baseline survey, to be carried out beginning in January 2003, will assess preproject conditions in the project areas. Preproject conditions will include the asset and vulnerability status of the project households; the conditioning factors, i.e., state policies, programs, and organizations that deliver the programs to the poor; and status of livelihood strategies of the poor and status of livelihood outcomes: income and nonincome poverty. The interrelationships will be examined. Sample districts will be selected on the basis of agroclimatic zones. Program and nonprogram mandals will be taken for comparison. The second stage will coincide with the mid-term review (MTR) of the project. By this time, it will be possible to evaluate the project's success in building appropriate and sustainable local institutions, including the strength and quality of linkages with local governments and banks. The third stage, coinciding with the end of the project, will evaluate the impact and outcome indicators described in Annex 1. Key impact indicators include reduction of rural poverty, sustainability of institutions and subprojects, reduction of social inequalities, and degree of participation by the poor and vulnerable in decisionmaking bodies. (iv) Reporting and Mid-Term Review The SPMU will submit to the World Bank a bi-annual progress report and a comprehensive annual report. The biannual reports will consist of (a) physical and financial expenditure data; (b) performance indicators; (c) successes and problems encountered with possible remedial actions; (d) socioeconomic and environmental impacts; and (e) progress toward benchmarks in implementing policy reforms. The annual report will cover all quantitative and qualitative aspects of implementation progress, including implementation plans for the following year. A mid-term review will be held in 2005 which will be an in-depth assessment of progress and an opportunity to change course when appropriate. (v) Funds Flow (a) SPMUs and DPMUs : Each year, the project will be budgeted in GoAP budget as two identifiable line items, one under the Department of Rural Development (SERP component); and the other under the Department of Social Welfare (APSWREIS component). GoAP will pass on the funds to SERP (SPMU) and APSWREIS. SERP, SPMU will retain a part of the funds to finance its own activities (costs associated with M&L, special studies) and pass on the balance to the 16 DPMUs for project implementation. The DPMUs will use the funds for activities at the district level, including subprojects being implemented by CIGs. Similarly, APSWREIS will utilize the funds for its activities and pass on the funds to its constituent school-level units. The funds for the implementation of the tribal development under the project will be passed on by the DPMUs to Tribal Project Management Units (TPMU) in applicable districts under advice to the Commissioner, Tribal Welfare. At each of the locations, the project funds will be maintained in a separate bank account earmarked for the project. Subproject Implementing Agency (SPIA) will not necessarily be registered bodies. The Financial Management Manual and Operational Manual, with the Subproject Agreements between SPIA and DPMU, will include information on the agreed financial management arrangements.

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The project proposes to pilot flow of funds through the local governments in selected districts. This procedure will involve providing an indicative investment budget to each Gram Panchayat, transferring funds to the GPs for onward transfers to the SPIAs upon approval of the subprojects, and adequate monitoring and reporting arrangements. The financial management and accounting arrangements will need to be documented in the MoU. (b) Subproject Agreements and Beneficiary Contributions: The financial management arrangements for the implementation of the subprojects will comprise the following: SPIA will open a separate Project Bank Account for project funds. The cash contributions for project activities from the beneficiaries will be deposited in the Project Bank account. The funds in this account will be used only for project-related payments. Operations and maintenance contributions and savings from subproject and related payments will not be made to this Account. The subproject agreements will be based on lump-sum contracts with payments linked to achievement of physical milestones. The milestones and the payment installments will be defined in the agreements. The agreements also will indicate the beneficiary contributions in cash, material, or labor required for each of the milestones. The calculation of the installments will be made to provide the SPIAs with funds required to meet the specific milestone and provide a buffer before the next release to allow for continuity of works. However, for subprojects of lesser amounts (less than US$5,000) for which the activities require one-time expenditures (e.g., purchase of livestock), the entire amount may be released upon signing the agreements and confirmation that the beneficiarys own contribution has been deposited in the bank account. Five percent of the subproject cost will be retained until completion to ensure that the financial reports (utilization certificates) are obtained from the SPIAs. The lumpsum agreements based on achievement of physical milestones will allow the SPIAs to retain savings, if any, that arise from efficiency and economy in project implementation. However, this will be limited to 10% of the subproject budget. On the other hand, if the subproject actual costs exceed the budget, up to 10%, can be cleared by DPMU, subject to $30,000 ceiling, based on the request of SPIA and approval of such requests. The release of the payments will be subject to (i) signing the agreement; (ii) opening the project bank account; (iii) depositing cash contributions for each milestone in the account; (iv) retaining services of trained bookkeeper; (v) certifying achievement of physical milestones; and (vi) submitting regular financial reports. Although contributions in kind form part of the project costs, the former do not qualify as eligible expenditures for reimbursement from the Bank Credit. However, in-kind contributions will be factored into the disbursement percentages. A certification for in-kind contribution needs to be submitted by the SPIA. (c) Local Government Pilot: A formula-based block grant to each GP will be provided to implement CIF relating to infrastructure, social development, and microwatershed activities. A second block grant will be provided to a multistakeholder committee (MSC) or Gram Sabha, which will approve subproject proposals for CIF investments which do not fall directly under the jurisdiction of the Mandal Parishads and GPs. Financial management and accounting controls will be put in place to reduce fiduciary risks. Each GP, MP, and MSC will hold a dedicated project account that will be subject to annual audits. There will be an

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MoU between the DPMU and participating local governments and MSCs. It is proposed that an imprest (based on percentage of the annual fund requirements) will be placed with the GP/MP/MSC, to be replenished on submission of financial reports on the subprojects approved and funds released. A similar procedure will be in place for the MSCs. SERP will retain the important role of facilitating the process, mobilizing the community, and building the capacity of CIF stakeholders in both pilot and nonpilot mandals.

D. Project Rationale
1. Project alternatives considered and reasons for rejection: An assessment of three project options considered is summarized below:
Project alternative A. Work exclusively with locally elected PRIs Disadvantages (i) Difficult to establish a stable governance/working environment due to evolving relationship between PRIs and state politicians and administration. (ii) Political and social structures at the local levels may prevent adequate attention to needs of the poor. (iii) Transfer of financial resources to PRIs subject to political power structure as stable fiscal decentralization is still evolving. (iv) Weak capacity for implementation, especially financial management, and lack of transparency in operations. However, the involvement of PRIs in any project (and, more importantly, in the longer-term sustainability of services delivery) is critical. PRI pilots and strategy to scale up are core project design features. B. The independently managed (i) Doubtful long-term social fund approach, which sustainability, because this transfers resources to NGOs approach bypasses existing directly working with/for the poor. institutions (e.g., PRIs) and is less likely to transfer learning effects to existing institutions or the poor communities. (ii) Implementing NGOs may create dependency among the poor without creating longer term capacity for self-help. (iii) Local governments as well as poor communities and NGOs compete for resources, crowding out community organizations. Advantages (i) Potential for sustainable long-term institutions, because, under the 73rd/74th amendments of the Indian constitution, PRIs will have fiscal and administrative responsibility for rural development. (ii) Democratic institutions with elected officials who can be replaced by voters. (iii) Potential ability to respond to needs of the entire community based on good understanding of local situation.

(i) Quick transfer of resources with few management layers. (ii) Allows greater operational freedom. (iii) Potential for better targeting of the poor.

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C. Ensure convergence of the relevant line department and antipoverty programs through improved public expenditure management and restructuring of line departments.

(iv) Works best in response to economic or other shock." (i) These broader reforms cannot be pushed without strengthening the social capital of the poorest and developing a deeper understanding of how public services can be made more inclusive and responsive to them. (ii) The limited mandate and leverage of the proposed project suggest that a structural adjustment operation may be more appropriate for this broader "programmatic" approach. (iii) Given the demand on resources, there is possibility of mistiming the use of funds.

(i) Obviates the need for an alternate administrative structure. (ii) Project's scope will be larger, because, in principle, convergence of different programs is easily achieved.

The design adopted for the proposed project is similar to that of APDPIP which is over two years in operation (option C above, reference Section B 2, Annex 2 Attachment 7). In AP, the PRI model was not deemed fit in view of the present capacity of PRIs. PRIs are still evolving to adequately represent the interest of the poor and are in the early stages of developing their administrative and financial capabilities to carry out their responsibilities, as defined in the Constitution, in particular to handle poverty reduction programs. However, the major focus on pilots through PRIs and developing an action plan to scale up successful elements underscores the importance of engaging PRIs in key areas of project implementation. While the project model focuses on self-managed organizations of target groups, it emphasizes developing working partnerships with existing institutions, civil society actors, public sector organizations, line departments of the state government, and PRIs. Project financed interventions will complement other poverty reduction schemes. In addition, based on the experience of APDPIP, a large proportion of the demand for resources under the CIF is for income generating activities. CIFs are provided as grants to CBOs who in turn on-lend to their members at a mutually agreed rates of interest. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned).
Sector Issue Project Latest Supervision (PSR) Ratings
(Bank-financed projects only)
Implementation Progress (IP) Development Objective (DO)

Bank-financed

Poverty-reduction projects

Watershed projects

Gender-specific initiative for microenterprise development Rural water supply and sanitation

Andhra Pradesh DPIP Madhya Pradesh DPIP Rajasthan DPIP Integrated Watershed Development Project (Hills II) Karnataka Watershed Development Project Rural Women's Development and Empowerment Project Karnataka Water Supply and

S S S S S S S

S S S S S S S

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projects Agriculture projects Irrigation management projects Education Health Nutrition

Other development agencies

Environmental Sanitation Project(C) Uttar Pradesh Sodic Lands Reclamation Project II APERP Irrigation APERP Primary Education APERP Primary Health APERP Nutrition (ICDS) Various antipoverty rural development, watershed, and water supply projects

S S S S S

S S S S S

UK DFID, Dutch, DANIDA, KSW, French Technical Cooperation

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

3. Lessons learned and reflected in the project design: The APDPIP project (and the earlier UNDP South Asia Poverty Alleviation Project (SAPAP) and DFID Rural Livelihood Programs in AP) have generated several important lessons on community-driven development in the State. In addition to the broader lessons described in Section B2, specific insights from community-driven development and related projects briefly include: Community participation and ownership in achieving efficiency. Communities can contribute toward investment and operational costs if they are assured of a good return. Sustainability. Provision should be made for adequate time and support at start-up to fully involve the community in defining their own needs and aspirations and the initiatives they wish to support. Emphasis should also be placed on building and strengthening community-level institutions not only during planning but throughout the proposed scheme cycle. Empowered PRIs/line departments. Project implementation arrangements at the mandal level should empower officials and not undermine their authority. To ensure sustainability of project benefits, suitable arrangements linking project interventions with line departments and PRIs should be developed. Public sector reorientation: The challenge of substantively sensitizing mind-sets and practices to those that place the community in a position of power and responsibility should not be underestimated. One means to facilitate these changes is a comprehensive training program for all levels of civil servants and elected officials. Other incentive mechanisms will be investigated during implementation. Investment opportunities concurrent with social mobilization. It is not enough to facilitate community-level social action; people's organizations also require concurrent investment opportunities including linkages with teh private sector and financial institutions. Operational lessons. (a) Decentralized structures with full control over subproject approvals expedite decisions and minimize political interference; (b) Efficient procurement and disbursement systems help ensure speedy implementation; (c) Competitive employment conditions for SERP staff help attract and retain competent and motivated individuals; (d) High-quality operational manuals, computerized MIS, standardized financial management procedures, regular and rigorous auditing, and quantitative and qualitative monitoring and evaluation are important; (e) Physical and financial

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sustainability conditions should be incorporated in subproject eligibility criteria to ensure a continued flow of benefits; and (f) Technical expertise at the local level is critical to sustainable livelihood improvement objectives. A more detailed summary on lessons learnt is provided in Annex 2, Attachment 7. 4. Indications of borrower commitment and ownership: GoAP has been persistent in its request for Bank assistance for a state-wide project to address poverty reduction and has provided necessary budgetary resources for start-up activities. The project has broad stakeholder ownership. Civil society organizations (networks, NGOs, and academic institutions) have repeatedly endorsed and supported the strong self-help group movement, common-interest group culture in the state, and shift to decentralized decisionmaking. The July 2001 PRI elections have also galvanized public support around decentralized decisionmaking. GoAP's commitment and approach to rural poverty reduction have been demonstrated in the (a) Andhra Pradesh: Vision 2020 report; (b) draft concept outline for the proposed project prepared by GoAP in November 2000; and (c) draft White Paper on eradicating poverty and formation of a Poverty Eradication Mission consisting of eminent experts throughout the country. The government has supported its commitment by ensuring that a dedicated team prepared the project including undertaking several important studies and manuals, safeguard action plans, and consultations, culminating in the Project Implementation Plan. GoAP launched the project in June 2002. The project design has gone through an extensive consultation process with legislators, line departments, local government, and communities. 5. Value added of Bank support in this project: The value added by the Bank includes (a) significant Bank involvement in the state through the ongoing projects and program loan (e.g., fiscal, governance, power reforms) and in several important sectors in the state (e.g., health, education, water, forestry); hence, an opportunity for synergies among the various programs; (b) experience from similar projects in other countries and in India, which offers a rich knowledge base that can be brought into the design of the AP program; and (c) provision of funding at a low interest rate, which permits a large, state-wide program to be adopted. (Asian Development Bank, the alternative financing agency, does not provide soft loans to India.)

E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)
1. Economic (see Annex 4): NPV=US$ million; ERR = % (see Annex 4) Cost benefit Cost effectiveness Other (specify) The project consists of several interdependent components, all premised on developing and strengthening village-level institutions and on facilitating economic and non-economic opportunities for the rural poor. The cost-benefit analysis does not attempt to evaluate the entire project in terms of quantifiable economic or financial returns but analyzes the two largest components of the project: CIF and Support to Out of School Children. The estimated project costs for the CIF is US$157 million (57% of the project) and the residential schools for girl children is US$50 million (18% of the project). Approximately 75% of the CIF has been estimated for productive (livelihood) activities, and 25% has been estimated for social and physical infrastructure activities.

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In the APDPIP (CR 3332-IN), the cost-benefit analysis focused on the viability of productive and infrastructure subprojects proposed by CBOs. The APDPIP appraisal and supervision documents included detailed models evaluating (a) the financial viability of a representative set of subprojects and (b) the economic viability of investments in girls' education. Given that the proposed components on the CIF and girls' residential schools are similar, the project team used a similar methodology and early findings emerging from APDPIP (e.g., actual costs and benefits of subprojects). However, several new livelihood-oriented subprojects to be financed by the CIF have been identified and are modeled in Annex 4. The evaluation for livelihood subprojects is based on a minimum financial cost-benefit return. Each of the subprojects analyzed possessed a financial return in excess of 12%. The methodology used to analyze these subprojects will be used as part of the appraisal process to make sure that the CIF is approved for financially viable subprojects. The economic analysis of the residential schools for girls resulted in an ERR of 12.1% with conservative assumptions on the productivity benefits of attending school. Nonquantifiable benefits were excluded from the cost-benefit analysis but are also extremely important and should be factored into the overall evaluation of the Support to Out of School Children component. 2. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4) refer to Section E1 Fiscal Impact: The total cost of APRPRP is estimated at approximately US$276 million over 5 years, of which approximately US$52 million will come from the financial intermediaries. Under the fiscal framework supported by the AP Economic Restructuring Project, welfare spending, including rural development, is targeted to stay constant as a share 1.5% of GSDP. The total planned budget for the next five years for rural development, SC, ST and Backward Class welfare is Rs. 115 billion and project budget requirement is about 10% of the planned amount. APRPRP will result in some increase in recurrent expenditures during the post-project period. The increase will relate mainly to the girl child residential schools to cover costs of teachers, boarding and other incremental operational costs. GoAP has provided assurances that this will be provided and a government order has been issued. The incremental requirement will be approximately Rs.450 million equivalent per year which is about 1% of the current recurrent budget for APSWREIS to operate the schools. Incremental operation and maintenance of small-scale infrastructure investment from the CIF will be covered by the communities and will not be an additional burden on public expenditure. 3. Technical: The project will finance a variety of interventions ranging from land development to water resource management, to microenterprise development and social services. The subproject appraisal process will assess proposals for the appropriateness of their underlying technologies. The appraisal process will have eligibility criteria (including scale criteria) and guidelines for the major likely interventions (menu of options). The project will draw on technology, design and other guidelines already available for many subsectors, e.g., agriculture, animal husbandry, watershed development, and rural infrastructure. The project will aim to be flexible in terms of the activities financed but will be strict in terms of ensuring adherence to certain principles, such as: the demand-driven nature of investments; community management of activities; targeting the poorest in the district, blocks/mandals and villages; and financial efficiency and accountability.

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4. Institutional: 4.1 Executing agencies: The institutional arrangements for implementing the project are set out in section C2 above. Developing and strengthening local grassroots organizations is the key element. However, the project design also recognizes the important role to be played by NGOs and elected governmental bodies (PRIs) in mobilizing and supporting poor communities to access resources. SERP will draw on expertise and experience of NGOs, as appropriate, and establish linkages with the existing local institutions, including the line departments and the PRIs, especially the GPs/Panchayats. APSWREIS, the agency responsible for implementing the educational support component of the project, has been managing residential schools for schedule castes and other underprivileged classes since 1983. It is responsible for 230 schools across the state. Given its experience of managing a large educational program through residential institutions, APSWREIS has both the expertise and capacity to execute this component. 4.2 Project management: The semi-autonomous status and decentralized institutional arrangement of SERP enables operational autonomy at the district level. Thus, the society will bring decisionmakers closer to the participating communities and allow rapid decisions on proposals submitted by the participating communities. The additional benefits of this approach will be: More effective response to location-specific needs of communities based on a better understanding of socioeconomic conditions Greater sense of ownership and commitment to project activities through participation by the representatives of CIGs and their organizations in District Advisory Committees and in the management of Mandal Cells Convergence among various development programs managed by PRIs, line departments, and other local institutions operating from the districts Simplified fund flow enabling direct transfer of funds to the SPIAs or PRIs Competition among districts based on responsiveness and effective use of funds. To ensure that environmental management is mainstreamed in the project, an environmental team, supported by an Environmental Agency (EA) and a State Environmental Resource Advisory Group, will be formed within the Livelihoods Unit of the SPMU. Within each DPMU, a manager, supported by an Environmental Resource Group, will be designated to ensure that the provisions of the Environmental Management Framework (EMF) are met. At the subproject level, a Livelihood Associate (LA) will ensure that environmental considerations are incorporated in Livelihood Enhancement Action Plans (LEAPs) and subproject designs. Community coordinators trained in the EMF take the first steps to ensure environmental considerations are met at the sub-project level. For effective implementation of the Tribal Development Plan, setting up a State Tribal Monitoring Unit (STMU) in the SPMU headed by a senior professional assisted by 3-4 functional experts on tribal issues, such as nontimber forest products, has been established. The STMU will liaise between SERP and the Commissioner, Tribal Welfare. The STMU will provide guidance and advice to the Tribal Project Monitroing Units (TPMU) to be established at the ITDA headquarters in the districts of Visakhapatnam, East Godavari, Khammam, and Warangal, which have high tribal concentrations. Each TPMU will be supported by a team of functional specialists at the ITDA and also will draw support from a larger pool of functional specialists at the DPMU level. 4.3 Procurement issues:

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Procurement arrangements will closely follow APDPIP. Procurement plans for first year activities have been provided. Most of the project procurement will be carried out with community participation. There will be small procurement for works and goods following either NCB procedures or Shopping/Direct Contracting. Most of the consultancy contracts, including NGO contracts, are also expected to be below US$200,000 equivalent, and the majority of shortlisted consultants will be national consultants. 4.4 Financial management issues: Overall, the project has financial management systems in place that are adequate to ensure that the project can provide to the Bank accurate and timely information regarding project resources and expenditures. The financial management manual for APDPIP has been enhanced to cover the accounting policies and procedures applicable to the proposed project. An integrated, computerized financial management system being developed will be used for the proposed project. In the interim, the manual accounting system will be used. Given that the scope of work will increase from managing the financial affairs of 6- 16 districts (180 mandals) (APDPIP) to an additional 560 Mandals, the capacity and number of staff required to handle the additional responsibilities will be substantially enhanced. A detailed staffing plan is part of the project implementation plan (PIP). Subprojects will be implemented by the SPIA. The SPIA can be a village organization (VO), a federation of self-help groups at the village level; Mandal Mutually Aided Cooperative Society (MMACS); community-based organization (CBO); producer organizations; common interest group (CIG); or the GP. The SPIAs will not necessarily be registered bodies. The Financial Management Manual along with the subproject Agreements between SPIA and DPMU on approval of the proposal include detailed guidelines on the agreed financial management arrangements. Important lessons learned from the implementation experiences in APDPIP and other DPIPs/CDD projects are being incorporated in the design of the financial management system. The financial management arrangements set up will emphasize providing local-level transparency, social audit, and self-accountability. Disbursements. Disbursements from the International Development Association (IDA) credit will initially be made in the traditional system (reimbursement with full documentation and against statement of expenditure) and can be converted to the report-based disbursements at the option of the GoAP and GoI after the successful demonstration of regular, timely, and adequate Financial Monitoring Reports. Retroactive financing. Retroactive funding up to an amount of SDR 5.1 million would cover eligible expenditures for implementing activities after June 01, 2002 until the signing of the legal agreements. The activities to be covered under the retroactive financing are consistent with the agreed financing categories. Audit. Notwithstanding the statutory audit of APSERP, APSWREIS, and other agencies by the Comptroller and Auditor General of India, the independent auditors for the financial audit of the project will be a firm of chartered accountants, appointed by APSERP, SPMU. The qualifications of the firm of chartered accountants will be subject to review by IDA. The terms of reference (TOR) of the auditors have been agreed with IDA and form part of the Financial Management Manual. The audit will be carried out in accordance with the International Standards of Auditing. 5. Environmental: Environmental Category: B (Partial Assessment) 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. From an environmental perspective, the two components of concern are the Community Investment Fund (CIF) and the construction of residential schools.

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The CIF is to fund subprojects such as income-generating activities, physical infrastructure, social development, and watershed interventions. In order to determine the impacts and the mitigation measures that will be required, an environmental assessment was undertaken. In most cases, these subprojects will not lead to environmental impacts of any significance. Since the activities to be supported by the CIF cannot be precisely defined ahead of time, an Environmental Management Framework (EMF) has been developed as an output of the environmental assessment (EA). The implementation experience under APDPIP has been reviewed, and the findings have been used to refine the EMF for APRPRP. Based on this experience, particular consideration has been given to the issue of access to grazing and fodder for livestock subprojects. The EA report provides a timetable for the development of a Government Order (GO) permitting the allotment of government-owned wasteland to organized groups of the poor for pasture development, fodder cultivation, and regulated grazing. Given APRPRP's emphasis on better natural resource and microwatershed management, pest management is relevant for some subprojects. A separate Pest Management Plan (PMP) has been prepared and integrated in the EMF, which stipulates that support will not be provided to subprojects entailing the use of WHO Class I or II pesticides. Although unlikely, a few subprojects may have to be considered in the context of their implications on natural habitats, cultural property, forests, and dam safety. Provisions have been made in the EMF to ensure that these implications are addressed. Regarding the construction of residential schools, a preliminary environmental screening of 64 proposed sites has been carried out, and the final decision of the locations will be made using the outputs of the screening. Subsequently, prior to awarding the contract for construction, an EA for each site will be conducted, based on guidelines included in the EA Report. All the environmental impacts are expected to be minor, and standard mitigation measures are available. A site-specific EMP containing these mitigation measures will be prepared. This EMP will form a part of the contractors bid documents. As a part of the EA process, public consultations were held on the draft EA (including the EMF) report and PMP relevant to the CIF subcomponent. The findings of the public consultations were subsequently incorporated. Both the draft EA (including the EMF) report and the PMP are available in the projects public website. In the school construction component, the public consultations will be carried out as a part of the site-specific EAs. 5.2 What are the main features of the EMP and are they adequate? The EMF used in the CIF component has the following features: procedures for screening, tools for assessment at a subproject level, training requirements, development of communication materials, monitoring requirements, and reporting procedures to be followed. All CIF subprojects will necessarily be screened based on the requirements of the EMF prior to sanctioning. In addition, the EMF promotes environmental pilot subprojects, whichafter successful demonstrationmay be replicated through funding available under the CIF. The EMF also includes guidelines for the environmental screening and assessment of support for residential schools. The entire EMF will be fully integrated in the Operational Manual that is referenced in the Development Credit Agreement. More information on the EMF is included in Annex 2, Attachment 4. 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: November 2002 5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? In relation to the CIF component, a draft EA report (including the EMF) and PMP were prepared. Public

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consultations on these draft documents were held in 24 mandals in 3 project districts during the project preparation phase. Villagers--both men and women--participated in these consultations, and the salient points of the EMF and PMP were explained to them. In addition, district-level consultations at the district headquarters Warangal, Ongole (Prakasham) and Kurnool were conducted, and 1 state-level consultation was also carried out. During project implementation, consultations with the villagers will necessarily be conducted, because the subprojects will be developed using a community demand-driven approach. The community coordinators will be using the EMF tools to interact with the community on environmental issues during subproject development. 5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? For the CIF component, the EMF covers mechanisms for monitoring, supervising, and evaluating the impacts of the subprojects and the mitigation of these effects. More information on the mechanisms is included as a part of the description of the EMF in Annex 2, Attachment 4. In the school construction component, an external agency for M&E will be appointed. It will be the role of the external agency to review and report whether the site-EMP provisions are being properly implemented. 6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. The major social development issues are : A. Supporting disadvantaged groups

Women and female-headed households. The gender division of labor, gender-based occupations, and gender biases in access to resources and services that emerged during project preparation have defined the interventions targeted at women. The social practice of Jogins (girls dedicated to the deity to prevent calamity befalling the village and subsequently coerced into prostitution), insecurities of the informal sector, intrahousehold food insecurity due to unequal intrafamilial distribution of power, violence against women, and the plight of older destitute women and widows have emerged as critical concerns for women. A Gender Strategy has been developed (details in Annex 2, Attachment 6) that will address these issues through 5 main interventions: 1. 2. 3. 4. 5. Mainstreaming gender in CIF activities Promoting gender awareness among project stakeholders Introducing engendered project management Implementing gender disaggregated M&E Creating dedicated residential schools to provide nonformal and formal education to female out of school and school drop-outs from poor households.

Dalits/Scheduled Castes. Dalits and Scheduled Castes are among the most socially disadvantaged groups facing social exclusion and discrimination. Affirmative action in favor of the Dalits will be integral to the project components of social mobilization, livelihood interventions (both off-farm and on-farm), subprojects under the CIF, and institution building. The project interventions will supplement state action covered by the Special Component Plan. Scheduled Tribes. The STs constitute the poorest and the most vulnerable for exploitation of all the social groups and, in the project districts, constitute 6.4% (3.05 million) of the total population. Five of the 16 project districts--Vishakapatnam, East Godavari, West Godavari, Khammam, and Warangal-- have a significant proportion of the tribal population. Various constitutional safeguards, policy regulations,

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and a number of development programs have improved the socioeconomic status of tribals; however, as compared to others, they remain disadvantaged and poor. A Tribal Development Plan (TDP) (Annex 2, Attachment 5) as envisaged under OD 4.20 has been prepared to build strong, self-reliant and self-managing institutions of tribals. These institutions are intended to enable tribals to access economic and social opportunities to overcome poverty and raise their living standards. The TDP incorporates strategies identified by tribals during the consultations for dealing with issues including food insecurity during lean seasons, low productivity of lands, high incidence of landlessness especially in plains areas, depletion of nontimber forest products (NTFP), and lack of awareness on processing and marketing of NTFP. In the tribal mandals, ITDA offers single-line administration with all departments converging at the district level. Thus, the TDP envisages dovetailing all developmental programs. It also establishes linkages and implementation arrangements to avoid duplication of efforts in similar AP community-based poverty eradication projects/programs, namely the Participatory Tribal Development Project, Sustainable Tribal Empowerment Project, and the Community Forestry Management Project (APCFMP), with the ITDA playing the coordinating role. For coordination between APRPRP and APCFMP, a government order has been issued and salient features are: (i) Inclusion of the SERP officers in the various committees under APCFMP; (ii) Microplans of VSS in tribal areas to be discussed in the meetings of the ITDA-level committee, and microplans in other areas to be discussed in the meetings of District Forestry Committee; (iii) All training programs for VSS to be coordinated by the above-mentioned committees at district level. In general, the operational procedures to be followed will be similar to those in nontribal areas emphasizing demand-driven participatory approaches to identification and implementation of activities. The M&E agency to be engaged for the project also will monitor the project in the tribal areas to enable introduction of corrective measures based on lessons from implementation experience. (Annex 2, Attachment 5) Specially vulnerable groups. Important vulnerable groups who will be supported under the project are people with disabilities, out of school girl children, school drop-outs, widows and destitute women, coastal fisher-folk, and landless artisans. The project will provide for intervention on behalf of groups of disabled who are economically, socially, physically, and/or mentally challenged. The emphasis will be on empowerment and improved livelihoods, and links with institutions that provide essential services to the disabled. In addition, the existing models of community-based rehabilitation of people with disabilities as developed by NGOs and other civil society organizations will be adopted for the project interventions. The community-based rehabilitation will be suitably linked with institution-based rehabilitation already in existence. The project will support institutions within AP that build and train community-based rehabilitation workers. The project will provide for interventions for groups whose livelihoods are threatened. While social disadvantage may be a criterion for the formation of certain groups and assistance, others less disadvantaged will also be assisted. Other vulnerable groups identified by communities during the process of participatory planning will be included in the project. B. Dealing with community divisiveness

Ensuring adequate support from the community--Gram Sabhas (GS) /Panchayats (GP)--is important to reaching the poor and assisting them in addressing the causes of poverty. Community members, other than the poorest are not direct beneficiaries of the project. Sensitization of PRIs especially at the Gram (village) and Mandal (intermediate level-local elected government levels) to function in a pro-poor and inclusive manner will be ensured. SHGs, VOs and MSs will be facilitated to develop close working relationships with GS/GP and in dealing with the "non-poor." Furthermore, the project will endeavor to
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meet the needs of the nontargeted poor from the womens groups through a strategy wherein these groups will benefit from the capacity building, skills development, access to marketing information and infrastructure, linkages with banks, and health and education interventions under the project. C. Land requirements under the project

Two major project areas for which land acquisition will be required are: Residential schools. Sixty-four residential schools are to be constructed by APSWREIS. The project has identified land that is either government land or has been donated by philanthropists. Relevant documentation is available reflecting voluntariness of the donation. Community infrastructure. Based on experience from APDPIP, land has been voluntarily donated for infrastructure either by the GP or individuals, as evidenced in the agreements signed with the common interest group. The voluntariness of land contributions is being documented based on criteria of (a) open and transparent consultations and decisionmaking; (b) the possibility for people to say no; and (c) no coercion of poor or vulnerable groups. The project will adopt similar procedures, and will disallow any subprojects wherein Involuntary Resettlement (OD 4.30) is likely to be triggered. A standard compensation as purchase between willing buyer/willing seller, in which the GP or similar decentralized body agrees on standard purchase prices, will be provided as an option in the subproject guidelines. 6.2 Participatory Approach: How are key stakeholders participating in the project? A combined Social and Environmental Assessment was carried out under the Sustainable Livelihoods Management Framework (SLMF) and included individual and group interviews; key informant discussions; and stakeholder workshops at state, district and village levels. Consultations were held during project preparation with a broad cross-section of poor communities, elected representatives, and a number of apex NGOs and intermediary NGOs operating in the state. The Tribal Development Strategy, the Gender Strategy, and the Disabled Peoples Strategy emerged out of consultations. A guiding principle of project design is to promote a more demand-driven and socially inclusive approach toward identification, design, execution, and quality assurance of productive assets at the local level. This approach necessarily involves participation by the primary participants from the target groups and a broad-based collaboration with various types of civil society institutions. The primary stakeholders of the project will be the rural poor, especially the poorest of them, who will organize into CBOs/SHGs. The project will put strong emphasis on building grassroots institutions and improving self-management capacities during and after project implementation. The project will engage with, sensitize, and build the capacity of social intermediaries--mandal-level functionaries, line departments, PRI representatives, and NGOs--to respond to the needs of the poor. The project also will work closely with other projects and/or programs that are being implemented in the project districts to maximize benefits to the poorest of the poor. 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? During preparation, consultations were held with community groups, both state level and, more importantly, the district/mandal-level functionaries and a number of NGOs. NGOs with expertise in working with socially disadvantaged groups--such as the disabled, dalits, women, out of school children and ST-and those involved in promoting sustainable livelihoods through interventions such as food security, watershed management, NTFP, and dryland agriculture were involved at different stages of project preparation.

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During project implementation, SERP will identify suitable NGOs and civil society organizations with experience in community mobilizationespecially expertise in working with socially disadvantaged groups, poverty alleviation, and promotion of sustainable livelihoods. They will (i) organize the poorest of the poor, (ii) collaborate to generate awareness, sensitize, and build capacity of various stakeholders, (iii) evolve specific strategies for vulnerable groups and the safeguard policies, and (iv) process monitoring (Annex 2, Attachment 3). 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? See Section 4. 6.5 How will the project monitor performance in terms of social development outcomes? See Section C, M&L paragraph. 7. Safeguard Policies: 7.1 Are any of the following safeguard policies triggered by the project?
Policy Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) Natural Habitats (OP 4.04, BP 4.04, GP 4.04) Forestry (OP 4.36, GP 4.36) Pest Management (OP 4.09) Cultural Property (OPN 11.03) Indigenous Peoples (OD 4.20) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP 4.37, BP 4.37) Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* Triggered Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No No No No No No No

7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.
Policy Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) Compliance Measures and Comments Based on the EMF, CIF subprojects will be screened to determine an appropriate level of EA. Screening includes verification against a negative list designed to ensure compliance with all safeguard policies. Following EA, measures to control environmental risks and enhance benefits will be built into subproject design. Separate EAs will be conducted for each residential school to be constructed,, leading to EMPs that will form part of construction contracts. A PMP has been developed and incorporated in the EMF. No subprojects using banned pesticides or agrochemicals in WHO classes IA, IB, and II will be supported. Crop-related subprojects will incorporate Integrated Pest Management (IPM) approaches, for which technical capacity will be established in project districts through training trainers. The negative list for sub-project screening requires that no sub-projects that will damage non-replicable cultural property be supported. If sub-projects involve the preservation of cultural property, then a Level II assessment will be required. If the preliminary investigations reveal a need for further investigation, a Level III assessment will be carried out, and the report will be submitted for review by the World Bank. As the tribal population constitutes the poorest and the most vulnerable social groups in Andhra Pradesh, and the scheduled areas and tribal subplan areas a fall under the project

Pest Management (OP 4.09)

Cultural Property (OPN 11.03)

Indigenous Peoples (OD 4.20)

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Involuntary Resettlement (OD 4.30) Safety of Dams (OP 4.37, BP 4.37)

districts, a Tribal Development Plan has been prepared as an integral part of the project in accordance with OD 4.20. The TDP was based on secondary data, field work, and consultations. See Section 6.1 above. The project does not envisage any physical displacement. Land requirements under the project will be voluntary donations. See Section 6.1 (C) (2) above. No sub-project involving a dam (existing or new) of 10m high or more will be permitted. For check dam sub-projects below 10m, the Operational Manual for the Dam Safety Plan will be followed.

F. Sustainability and Risks

1. Sustainability: The main design elements of the project that help ensure long-term sustainability of anticipated benefits are: Building capacity in existing CBOs (and forming new CBOs only when necessary). Experience in AP has strongly demonstrated the sustainability and effectiveness of village-level groups. The project will avoid unnecessarily forming new groups. Emphasizing demand-based proposals to be financed through the CIF as opposed to imposing externally identified priorities helps ensure and sustain commitment of CBOs Developing and strengthening linkages between CBOs and the private sector, banks, and other financial intermediaries will help ensure that access to markets, technical expertise, and finance is sustained after the project is completed Strengthening the linkages between CBOs and local governments (mandal-level functionaries and elected officials) helps strengthen downward (and upward) accountabilities. 2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1):
Risk
From Outputs to Objective

Risk Rating

Risk Mitigation Measure

Political commitment to address the needs of the poorest is not sustained.

Intravillage dynamics (e.g., related to caste) do not provide opportunities for marginalized groups to be empowered

SERP's Governing Body and Executive Council will be composed primarily of non-officials and representatives of CBOs who will ensure that the voices of the poor will be taken into account. Stringent financial accounting systems have been put in place at the SPMU and DPMU levels. Empowering the poorest will ensure participatory democracy. Strengthening the capacity of village and mandal-level institutions will help ensure that GoAP remains responsive and accountable to the needs of the poor. Moreover, continuous dialogue between GoAP (focus state) and the Bank will ensure sustained high-level commitment to addressing the needs of the poor. A gradual, bottom-up approach that engages both vulnerable and dominant sections of a village will be adopted. Information exchanges and consensus building (in part through PRIs)

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Entrenched incentives prevent mandal-level decisions by functionaries or elected officials from (i) being reoriented to support the interests of the poorest and (ii) facilitating convergence and coordination of public services. Strong, sustained linkages between the "poorest" groups to the private sector, banks, and other financial intermediaries and markets cannot be established
From Components to Outputs

will reduce this risk. GoAP is developing a framework to help ensure accountability and efficiency at local government levels. Lessons learned from DPIP pilot programs will be incorporated into the project design. Process indicators will be used to assess and modify approaches in forming strong and sustainable linkages between village-level groups and service-based stakeholders.

Neither adequate time nor support is given for the "poorest" to organize into self-reliant, self-managed groups.

Adequate funds are not made available in time by GoAP. Insurance and other safety net schemes are too complex and expensive to work properly on behalf of the poorest.

M M

Intensive support will be provided to villages to develop and strengthen SHGs by both external community coordinators and self-identified village-level activists. Social assessment will focus on the process of strong group formation recognizing the important differences among community groups. High-level GoAP commitment to the project should facilitate funds. The project has decided to promote pilots in these areas to test innovative approaches in reducing health and agriculture-related risks. Successful pilots will be scaled up as part of the overall program. The financial management arrangements have been designed to recognize the risks and provide for separate bank accounts and adequate bookkeeping arrangements as conditions for the approval of the subprojects. Submission of expenditure statements is also necessary for the release of subsequent tranches of the subproject. In addition, the project will prepare training plans to ensure that a cadre of bookkeepers and accountants are provided with ongoing training. Suitable formats of accounting and reporting have been designed and included in the FMM.

Project funds will be spread widely across community groups and PRI institutions, which have limited capacity to handle funds. There are identified risks of diversion of funds and inadequate accounting records.

Overall Risk Rating

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)

3. Possible Controversial Aspects:

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G. Main Loan Conditions

1. Effectiveness Condition Standard conditions of effectiveness 2. Other [classify according to covenant types used in the Legal Agreements.]

Covenants related to Implementation. Organization and structure of SERP : Throughout the duration of the Project, SERP shall be responsible for management and co-ordination of Project activities excepting those relating to the construction of residential schools for girls and for these purposes shall maintain: (a) a General Body consisting of broad representation from all key stakeholders including CBOs and civil society members; (b) an Executive Council which shall include non-government members;(c) a State Project Director responsible for the day to day running of the Project; and (d) the SPMU and DPMUs with the staffing and responsibilities agreed with the Association.

Sub Projects: SERP shall : (i) cause the SPMU and DPMUs to appraise and approve the Sub-projects in accordance with the criteria and procedure specified in the Operational Manual; (ii) ensure that a Sub-project Agreement to be entered into between the respective DPMU and the Beneficiary Institution, under terms and conditions acceptable to the Association for the purposes of carrying out each Sub-project; such agreements shall, inter alia, specify the type of Sub-project, describe the land, works and goods to be financed, and the cash or kind contribution of the Sub-project beneficiaries; and (iii) cause the SPMU or DPMUs to appraise and approve Land Purchase Sub-projects involving land purchase for productive purposes in accordance with the provisions of the Operational Manual for Land agreed with the Association. Social and Environmental Safeguards: (a) Andhra Pradesh , SERP, and APSWREIS, shall carry out the Project in accordance with the agreed Environmental Management Framework (including the cultural property action plan, pest management plan, and the dam safety plan continued therein) and ensure that the environmental and social screening criteria are updated regularly throughout implementation of the Project and are at all times consistently and satisfactorily applied. (b) Andhra Pradesh and SERP shall, in collaboration with ITDA implement, in a manner satisfactory to the Association, the Tribal Development Plan agreed with the Association, to ensure that the tribal population in Andhra Pradesh benefit fully from the activities under the Project. NGO Selection: SERP shall select the NGOs assisting in the implementation of the Project in accordance with criteria and procedures agreed with the Association.

Pilot Programs : Andhra Pradesh and SERP shall carry out the pilot program for PRI strengthening and the pilot program for social risk management and health with due diligence and in accordance with a time-bound action plan agreed with the Association and, as part of such implementation, shall: provide six-monthly progress reports on the pilots, commencing December 2003; provide a detailed report on lessons emerging from the PRI pilots, and an action plan for scaling up successful elements of these pilots in Andhra Pradesh; and complete the pilots by no later than July 2006.

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Residential schools for girl children: APSWREIS shall carry out in accordance with a time-bound action plan agreed with the Association and under the guidance of a State technical committee complete the civil works for schools no later than March 31, 2004. Persons with Disabilities: Andhra Pradesh and SERP shall implement the Component regarding Persons with Disablitieis , including the development of community based rehabilitation activities through CBOs/NGOs in about 80 mandals and in accordance with the arrangements set forth in the PIP; and Andhra Pradesh shall promptly commence a program to issue disability certification cards to all qualifying disabled persons in about 80 mandals and shall monitor and report on implementation of such program to the Association, such registration to be completed by June 30, 2005. Project Implementation and Project Monitoring: SERP and APSWREIS shall not later than December 1 of each year, starting 2003, prepare annual action and procurement plans for implementation of the Project activities, and taking into account the Associations recommendations thereon, finalize, not later than February 28 of each year, such plans. Andhra Pradesh, SERP and APSWREIS shall: (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory to the Association the carrying out of the Project and the achievement of the objective thereof; (b) prepare, under terms of reference satisfactory to the Association, and furnish to the Association not later than March 30, 2005 a report integrating the results of the monitoring and evaluation activities, on the progress achieved in carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objective thereof during the period following such date; (c) review with the Association by June 30, 2005, or such later date as the Association shall request, the report referred to in paragraph (b) of this Section, and thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objective thereof, based on the conclusions and recommendations of the said reports and the Associations views on the matter.

Andhra Pradesh and SERP shall prepare : (a) in each year of the Project, (i) reports on a four month basis on process monitoring and (ii) an annual consolidated report on process monitoring and provide copies of such reports to the Association, and, based on the findings of the above-mentioned reports and annual consolidated report for each year, shall take such remedial actions as Andhra Pradesh and SERP deem necessary or appropriate during the period following such date, and promptly inform the Association of such actions; (b) impact evaluation reports by no later than March 31,2005 and December 31, 2007, and promptly provide a copy of such reports to the Association; and (c) in respect of the Land purchase component of the Project , no later than August 31, 2003 an appropriate baseline survey of a sufficiently large sample to indicate potential beneficiaries. Land Title : Andhra Pradesh and SERP shall: (i) ensure that any private land needed for road improvement or other works for the CIF component ( other than the land purchase sub-component) shall be provided by the owner of such land in a voluntary manner, and in accordance with a memorandum of understanding, agreed with the Association, between the Beneficiary Institution, a representative of Andhra Pradesh, and the owner of such land; and (ii) not commence upgradation of roads or other works in locations where such land is needed until such memorandum of understanding has been concluded.

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Financial Management Requirements: (a) Andhra Pradesh, SERP and APSWREIS shall maintain a financial management system, including records and accounts, and prepare financial statements, in a format acceptable to the Association, adequate to reflect in accordance with sound financial management and accounting practices the operations, resources and expenditures in respect of the Project. (b) Andhra Pradesh, SERP and APSWREIS shall: (i) have the records, accounts and financial statements referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association and as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of the financial statements referred to in paragraph (a) of this Section for such fiscal year as so audited, and (B) an opinion on such financial statements, records and accounts of such audit by said auditors, of such scope and in such detail as the Association and shall have reasonably requested; and (iii) fur nish to the Association and such other information concerning said records, accounts and financial statements as well as the audit thereof, and concerning such auditors, as the Association and shall from time to time reasonably request. (c) Andhra Pradesh, SERP and APSWREIS shall prepare and furnish to the Association separate financial monitoring reports, (each such a Financial Monitoring Report) in form and substance satisfactory to the Association, which: (i) sets forth sources and uses of funds for the Project, both cumulatively and for the period covered by said report, showing separately funds provided under the Credit, and explains variances between the actual and planned uses of such funds; and (ii) describes physical progress in Project implementation, both cumulatively and for the period covered by said report and explains variances between the actual and planned Project implementation; and (iii) sets forth the status of procurement under the Project, as at the end of the period covered by said report.

(d) The first Financial Monitoring Report shall be furnished to the Association no later than 45 days after the end of the first calendar quarter after the Effective Date, and shall cover the period from the incurrence of the first expenditure under the Project through the end of such first calendar quarter; thereafter, each Financial Monitoring Report shall be furnished to the Association not later than 45 days after each subsequent calendar quarter, and shall cover such calendar quarter. (e) Andhra Pradesh, SERP and APSWREIS shall establish by no later than 30 September 2003, and thereafter maintain throughout the Project implementation period a satisfactory computerized Financial Management System for the Project, in accordance with the Financial Management Manual agreed with the Association. (f) SERP and APSWREIS shall employ not later than April 1, 2003, and thereafter maintain throughout the Project implementation period a firm of chartered accountants with terms of reference and qualifications acceptable to the Association, for auditing the records, accounts and financial statements

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of the Project.

H. Readiness for Implementation

1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. 1. b) Not applicable. 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. 4. The following items are lacking and are discussed under loan conditions (Section G):

I. Compliance with Bank Policies

1. This project complies with all applicable Bank policies. 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies.

Jeeva A. Perumalpillai-Essex
Team Leader

Constance A. Bernard
Sector Director

Michael F. Carter
Country Director

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Annex 1: Project Design Summary INDIA: Andhra Pradesh Rural Poverty Reduction Project
\

Hierarchy of Objectives
Sector-related CAS Goal:

Key Performance Indicators

Sector Indicators:

Data Collection Strategy Critical Assumptions

Sector/ country reports: (from Goal to Bank Mission)

Accelerating pro-poor rural Rural income levels and development in AP other poverty indicators at state level Program Goal Reduction in rural poverty, particularly for the poorest of the poor, by the year 2020 in Andhra Pradesh

Multi-purpose household surveys National Statistical Surveys Other State level statistics

Project Development Objective:

Outcome / Impact Indicators:

Project reports:

(from Objective to Goal)

To enable the rural poor in AP, and particularly the poorest of the poor, improve their livelihoods and quality of life

Empowerment (voice) of rural poor enhanced largely through number and percentage of community-based organizations (CBOs) functioning well in relation to their social, economic, and political objectives Household income of the poor increased and/or sources of income diversified Household perception of the quality of and access to basic services--education, health, integrated child development services (ICDS) -- improved Percentage increase in access to and/or ownership of land Increased access to credit and insurance services and reduced indebtedness Improved access to disability certification and increased use of community-based

Impact Evaluation Study and Secondary Data Formal and Informal reports including project monitoring reports

Political and financial commitment to APRPRP and a focus on addressing the needs of the poorest is sustained over the long term

Sound macroeconomic and Feedback from stakeholders working in the fiscal management and good governance in AP selected mandals Project Completion Report Effective devolution of functions, officials and funds to PRIs

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rehabilitation Increase in percentage of children (by gender) enrolled to schools Local governments more inclusive and responsive to the needs of the poor in pilot mandals (sub-district level of government)

Output from each Component:

Output Indicators:

Project reports:

(from Outputs to Objective)

1. Self-reliant and self-managed CBOs of the rural poor established and relationships with social and economic service providers (e.g. hospitals, banks, KVKs) operational.

1.1 No. of CBOs formed and strengthened. 1.2 Self-managed groups, cooperatives and peoples organizations formed around livelihood interventions. 1.3 Generated and inter-loaning (over time) by CBOs 1.4 Local Government capacity building programs implemented. 1.5 No. & value of bank loans issued to SHGs/VOs

In addition to the project reports described above:

Semi-annual and annual progress reports provided by SERP, including activity Adequate time and support reports of project staff is given for the poorest to organize into self-reliant and self-managed groups MIS of SERP, including data on CBO performance Line agencies and PRIs are able to change the existing Process monitoring incentive structures to allow more responsive and CIF proposals efficient service to the poor Bank reviews Financial Monitoring Reports

Intra-village dynamics (e.g., related to caste) allow space for marginalized sections to be empowered

2. Assets of the rural poor created, strengthened, and sustained through CBOs

2.1 No. sub-projects meeting criteria (productivity, equity, sustainability) funded. 2.2 No. of persons trained in sustainable livelihood activities 2.3 No. and type of CIF proposals from persons with disabilities and their providers funded 2.4 Amount of land purchased under number of HH/CBOs benefitted

Rural poor CBOs are able to form linkages with Banks, private firms, and other service providers as and when needed GoAP commitment to land lease and purchase continues after project Relevant livelihoods skillbuilding is provided to CBOs, including the most vulnerable groups (e.g.,

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disabled persons) 3a. PRI is become more accountable inclusive, and poverty focussed 3a.1 Increased pre-poor expenditures in MPs and GPs 3a.2 Greater voice in decision-making for traditionally weaker socioeconomic groups (by gender and caste). Insurance mechanisms to address risks faced by the poorest are efficient, affordable, and able to be provided to the rural poor in an administratively simple manner

3b. Social risk management 3b.1 Number of households and basic health package purchasing insurance for developed and piloted mitigating against life, disability, health, and drought risks in the 15 selected mandals. 3b.2 Improved access to health providers in the selected 2 pilot mandals (basic health package). 4. Reduced reliance on out of school children and improved access of high quality residential schools for girl child labours. 4.1 Anti-child labour community mobilization campaigns reach parents, mothers, local leaders, community groups in 80 mandals 4.2 No. of out of school children particularly PoP girls, enrolled in bridge schools, residential schools, or mainstreamed into regular schools 5.1 No. of Information and Education Campaigns and training programs for health workers and communities implemented 5.2 No. of CBOs of disabled persons and their providers formed 5.3 No. of disabled persons and their caregivers trained 5.4 No. of community based rehabilitation activities underway Educational Management Information System (EMIS) data, educational surveys, etc.

Bridge schools do not attract already enrolled pupils due to free food element Poorest HH find alternative income to offset loss of income from out of school children

5. Disabled persons and their caregivers (generally parents) are empowered to access basic services and special entitlements

Intra-village dynamics regarding disability allow disabled persons and their providers to come forward and participate Sufficient funds are allocated by the state to meet increased demand for disability entitlements

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6. Greater capacity for service delivery and project management at SERP and in poverty focused NGOs

6.1 Project staffing in place (in particular CCs) 6.2 Partnerships established with NGOs and other service providers to support project implementation 6.3 M&E system in place and indicators feed back into management decisions

Continued GoAP commitment to SERP as the main implementing agency Sufficient facilitation teams exist with the requisite skills and commitment to build and strengthen the CBOs (e.g. women, disabled, etc)

Project Components / Sub-components:

Inputs: (budget for each component)

Project reports:

(from Components to Outputs)

1. Institution and Human Capital Building 2. Community Investment Fund 3. Support to Pilot Programs

US$25.20 million US$157.02 million US$7.45 million

Progress Reports and Disbursement Reports

Adequate and timely counterpart funding

4. Support to Out of School US$57.38 million Children 5. Support for Persons with Disabilities 6. Project Management US$11.32 million US$17.72 million

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Annex 1: Attachment 1 Andhra Pradesh Rural Poverty Reduction Project

SOCIAL MOBILISATION & INSTITUTION BUILDING

Promoting Gender

Em Peo powe Enhancing access to Mandal ple r Po information Or oSamakhya gan s r i sa Ensuring tio ns Village transparency & accountability Org.

Equity

Facilitation
SERP and APSWREIS
Ensuring Strategic

HHs, HHs, HHs

n tio ta en

S En upp Li vir ort ve on fo lih m r S oo en oc ds tal ia ly lly Su & sta in ed

Empower ment

Opportunity
COMMUNITY INVESTMENT FUND for Social Development Physical Infrastructure Income Generation Links to Commercial Banks and Micro Finance Institutions Enhancing the skills of Poor House Holds Building a cadre of Community Activists and para-professionals Creating Wage and self employment Opportunities Enhancing access to government programs and other services increased Improving Market Opportunities Facilitating private sector partnerships Strengthening the responsiveness of PRIs to rural poor

SHGs / CIGs

Security
A V u ddr e ln e s s e rab s i li ty
Attention to specially vulnerable groups Out of School Children Disabled Women Headed Households & single women Improving Food Security Enhancing access to Health Enhancing access to Education Facilitating access to insurance services Enhancing access to Land

Communication
Convergence of Anti

Im

em pl

Poverty Programs, Banks, MFIs etc

Sensitizing Line

Departments, PRIs
Building Partnerships with

Civil Society, Private Sector

Monitoring & Evaluation

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Annex 1: Attachment 2 Poverty and Social Development in Andhra Pradesh*

1. Poverty Levels and Trends: Andhra Pradesh is Indias 5th largest state (population: 76 million). Nearly three-quarters of the total population of the state lives across 26,500 villages in rural areas. While the rural economy provides over 70% of employment, it is estimated to contribute less than one-third the Gross State Domestic Product (GSDP). Despite the widespread attention the state has deservedly received for its achievements in the information technology sector, poverty remains a major issue and concern, with pockets of chronic poverty within the state affecting specific localities and population groups.
Table 1: Mean Consumption and Poverty in Andhra Pradesh and India: 1999/00
NSS 55th Round (1999/00) Urban Rural Overall 1. Mean per-capita monthly consumption (Rs.) All India: Andhra Pradesh: 2. GoI Planning Commission Poverty Estimate (%): All India: Andhra Pradesh: 3. Alternative Poverty Estimates (%): All India: Andhra Pradesh: 855 774 23.6 26.6 12.5 11.3 486 454 27.1 11.1 25.3 27.9 591 551 26.1 15.8 -

Source: 1 and 2: NSSO 55th Round Consumer Expenditure Survey, Planning Commission, Government of India. 3: Deaton (2001) based on NSS data, which tries to correct for cost-of-living differences between AP and the All-India level. 2. Estimates of poverty incidence in Andhra Pradesh vary quite considerably: while 1999/00 GoI Planning Commission estimates (Table 1) show poverty in the state to be considerably lower than the All-India average (16% vs. 26%), other studies suggest that poverty differentials between Andhra Pradesh and the rest of India are considerably lower than that indicated here. For example, World Bank (1997) India, Achievements and Challenges: Reducing Poverty, Deaton & Tarozzi (1999) Prices and Poverty in India, Deaton (2001: draft) Computing prices and poverty rates in India 1999/00. Alternate estimates (Deaton 2001) suggest that about one-quarter of APs population still live in poverty. There are also strong grounds for believing that in Andhra Pradesh, the incidence of poverty in rural areas is higher than in urban: mean per capita consumption in rural areas is considerably lower than in urban (Table 1). Other nonincome indicators of living standards from other sources (e.g., the 1998/99 National Family Health Survey: NFHS-II), also show rates of infant and child mortality, morbidity, illiteracy, school nonattendance rates, etc. are also much worse in rural areas compared to urban areas. For a more detailed discussion of some of these issues, please see Andhra Pradesh Poverty Note: A Preliminary Profile and Emerging Issues mimeo, World Bank, 2001.

Table 2: Recent Trends in Monthly Per-Capita Consumption

NSS 43 Round 1987/88 Urban Rural
rd

NSS 50th Round 1993/94 Urban Rural

NSS 55th Round 1999/00 Urban Rural

87-88 to 1993/94 U R

93-94 to 1999/00 U R

Mean per-capita monthly consumption (Rs.): Andhra radesh 228 159 409 Karnataka 223 151 423 Tamil Nadu 245 156 438 Kerala 262 209 494 All-India 246 158 458

289 269 294 390 281

774 911 972 933 855

454 500 514 766 486

79% 90% 79% 89% 86%

82% 78% 88% 87% 78%

89% 115% 122% 89% 87%

57% 86% 75% 96% 73%

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Source: NSS data, various years.

3. Progress at poverty reduction in Andhra Pradesh in recent years may have been slower than in other states. There has been much debate and controversy in India recently around the poverty estimates released by the Government of India based on the 1999/00 NSSO survey. While it is difficult to ascertain the extent to which poverty in the country has declined in recent years, NSS data show that growth in mean per capita consumption in rural Andhra Pradesh was slower than in other states (Table 2). In addition, National Accounts data show that the trend growth rate for agriculture in the state declined from over 5% during the 1980s to less than 2% during the 1990s, a particularly worrying sign given that a large fraction of the rural poor are depended on wage labor for their livelihoods (para. 5). Andhra Pradesh: Draft Report of the Rural Poverty Task Force, 17th May, 2000.
Poverty Profile: A profile of consumption-poverty in the state using the 1993/94 NSS shows that a very 4. large percentage of the rural population in Andhra Pradesh has virtually no education (Table 3). Some 79% of poor rural household heads (i.e., those in the bottom quintile) are not literate. Another 11% are educated only up to some level below primary. Even for the population as a whole, the comparable figures are as high as 66% and 13%, respectively. Overall, literacy rates in AP are amongst the lowest in the country. These in turn reflect low primary school enrollment, the poor quality of education, as well as gender and social inequalities in access to education at all levels. Andhra Pradesh State Strategy Paper DFID, India, 2001. Table 3: Distribution of Population by Income and Education Level of Household Head
Income Group RURAL AREAS: Bottom Quintile 1 Quintile 2 Quintile 3 Quintile 4 Top Quintile 5 Overall Population Mean monthly p.c. Consumption URBAN AREAS: Bottom Quintile 1 Quintile 2 Quintile 3 Quintile 4 Top Quintile 5 Overall Population Mean monthly p.c. Consumption
Source: Note:

Not literate 79% 75% 68% 62% 47% 66% Rs. 255 58% 38% 29% 19% 11% 31% Rs. 292

Education level of Household Head (1993/94 NSS) Less than Completed Completed Completed Primary Primary Middle Secondary 11% 13% 14% 13% 15% 13% Rs. 300 16% 19% 17% 12% 5% 14% Rs. 329 6% 6% 9% 11% 12% 9% Rs. 317 12% 16% 17% 10% 4% 12% Rs. 336 3% 4% 5% 7% 9% 5% Rs. 377 7% 12% 13% 14% 9% 11% Rs. 398 1% 2% 3% 4% 9% 4% Rs. 459 5% 8% 12% 18% 21% 13% Rs. 512

Completed Higher 1% 1% 3% 9% 3% Rs. 579 2% 6% 12% 27% 49% 19% Rs. 666

1993/94 NSS Consumer Expenditure Survey Consumption quintiles have been constructed separately for urban and rural households using the NSS MPCE.

5. In Andhra Pradesh, a much higher share of the population report agriculture labor as their main occupation (43%) compared to the All-India average (32%). This finding is consistent with the fact that average landholdings in the state are considerably lower than in the rest of the country (about 0.6 hectares per household in AP compared to 0.8 ha. in India overall). NSS data also reveal that households in AP that relied primarily upon labor income from agriculture for their main source of livelihood had mean consumption levels that were about 20% lower than other households, and tended to be disproportionately represented amongst the bottom income quintiles (Table 4). nonfarm income shares in Andhra Pradesh are relatively low, compared to neighboring states such as Tamil Nadu, as well as compared to the All-India average.

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Table 4: Distribution of Population by Income and Occupation of Household Head Income Group RURAL AREAS: Bottom Quintile 1 Quintile 2 Quintile 3 Quintile 4 Top Quintile 5 Overall Population Mean monthly p.c. Consumption Main Occupation of Household Head (1993/94 NSS) Self-empl. Agriculture Other Self-empl. non-agri. laborer laborer Agriculture Other 9% 15% 14% 17% 18% 15% Rs. 303 Self Employed 36% 37% 32% 34% 23% 32% Rs. 381 59% 52% 46% 33% 26% 43% Rs. 243 Regular Salaried 22% 34% 44% 48% 59% 42% Rs. 486 8% 8% 7% 7% 4% 7% Rs. 261 18% 23% 27% 34% 36% 28% Rs. 325 Casual Labor 37% 24% 17% 9% 2% 18% Rs. 259 5% 3% 6% 9% 16% 8% Rs. 441

URBAN AREAS: Bottom Quintile 1 Quintile 2 Quintile 3 Quintile 4 Top Quintile 5 Overall Population Mean monthly p.c. Consumption
Source: Note:

Other 5% 5% 6% 9% 16% 8% Rs. 504

1993/94 NSS Consumer Expenditure Survey. Cases where no occupation was reported were excluded

6. Three population groups who appear to be at some disadvantage in particular are women, tribals, and scheduled caste households. To some extent Muslim households also appear to find less employment, and earn lower incomes, in the nonfarm sector. Not only do these three groups typically possess much lower levels of human capital, but controlling for these assets, they face additional constraints on employment and earnings. Significant regional disparities in living conditions persist across different parts of the state. 7. Initial findings from DFID-financed Participatory Poverty Assessments carried out in five towns in AP by Action Aid and PRAXIS highlight vulnerability of the urban poor to insecure livelihoods. Particularly vulnerable to the demands of livelihood were children from poor families. Cycles of impoverishment were found to be perpetuated by severe indebtedness for a large number of poor, and illnesses in the family. The lack of access to basic services and social security is often compounded by poor service delivery and corruption. Women have also reported violence and drudgery in their daily lives to meet their basic needs such as for drinking water. 8. To sum, amongst the main challenges facing policy makers in Andhra Pradesh are to: (i) invigorate agriculture and rural nonfarm economy to stimulate the emergence of vibrant and productive small-scale enterprises and raise rural incomes across the board, (ii) improve access of the poor to opportunities in the economy and remove impediments that those of lower social status and wealth appear to face in participating in the growth process, (iii) improve delivery of service to the poor and reduce levels of corruption, and (iv) better target development efforts and resources towards regions and social groups with greater need of assistance. *P. Lanjouw and S. Zaidi, 2001(unpublished)

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Annex 1: Attachment 3 Summary of the Livelihoods Assessment Report Objective. The objectives of the livelihoods assessment (LA) are (i) to identify, using multidimensional indicators of poverty, the target group for the project: the rural poor and poorest of the poor; (ii) to establish a baseline of the current status of their livelihoods; (iii) to identify activities and arrangements that perpetuate poverty, making a particular assessment of the vulnerability of these groups to various risk events that can prevent, and have prevented, them from achieving sustainable livelihoods; and (iv) to assess the institutions, including social processes and relationships, service providers, or failures of service provision that impact on poverty or restrict access by the poor to livelihood opportunities. The LA uses survey data from the ongoing AP District Poverty Initiatives Project (APDPIP) together within its own PRA findings and key informant interviews, plus a range of secondary sources. Methodology. The assessment has used a conceptual model of "livelihoods" to help understand why poverty is perpetuated. The key elements of this model are (a) people have a bundle of assets and capabilities that can be combined to produce "a living"; (b) this "living" is vulnerable to external risk factors; and (c) the ability of people to convert their bundle of assets into a living is mediated by a number of conditioning variables. The study has thus examined the assets possessed by the poor. It has studied the types of risk they are most prone to and how these risks impact on their assets. It has investigated how formal and informal institutions influence the ways in which the poor can make a living and the sorts of activities that they pursue to make that living. Finally, it has questioned people about whether they consider their lives have improved over the past 15 years. Summary of findings. The report contains a large quantity of detailed analysis on the livelihood status of the poor in a number of sample districts in Andhra Pradesh. This summary draws out the key livelihood issues that emerge repeatedly from different components of the analysis, highlighting their importance in poverty and poor peoples livelihoods. Manual labor: the main source of livelihood for the poor: What emerges from the integrated analysis of poverty, the asset base of the poor, and the risks the poor face is the primacy of human capital in the livelihoods of the poorest. Human capital, in the form of their ability to undertake manual labor, is very frequently their only asset. Therefore, as its highest priority, the project should aim to maintain, increase the terms of exchange for, and build human capital for the poorest of the poor. Health as a primary concern for the poor. The ability to perform manual work is critical to the livelihoods of the poor. For them, dependence on wage labor, livelihood stability, and security are closely linked. However, the analysis of different dimensions of human capital shows that illness characterizes the lives of the poor. Health risks, particularly fevers and stomach complaints, represent over 50% of all risks experienced. A number of actions are needed to address poor health and the impacts of poor health. There is a need for health awareness programs and for investment in providing better and more accessible health care. Some of this can be achieved through convergence with line departments. There is also a need to reduce health-related expenditure, and, in terms of risk management: reduction and mitigation measures, reducing health costs is best achieved through prevention and education. Land and the landless. The project constituency are largely landless. In addition to the health-related constraints detailed above, lack of natural capital is a barrier to the rural poor moving out of poverty.

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Landlessness and poverty are two closely related conditions. Alongside land reform processes, the project must search for alternative means by which to connect the poor to a base of productive natural capital. A number of options have been highlighted for connecting the landless to land, including the project's brokering access to various forms of unused or under-used land.` Strong demand for education. The poor and poorest of the poor place a very high value on the education of their children (SHGs are also educating adults). However, this preference for educationwhich results in long-term increases in human capital and income-earning potential--is offset by poor provision of schools and poor attendance by some teachers at their assigned schools, and by household risks, such as health shocks. The project will, as has APDPIP, support education as an investment in human capital with a focus on out-of-school children. Need for better access to financial resources. Predictably, the assessment found that the poor have few financial resources, but while they may be able to get some formal credit, the poorest of the poor find obtaining credit very difficult. The poor have very few formal loans, but their most frequent response to risk events is to borrow to cover increased expenditure. There is a need to make the poor bankable and improve their access to affordable formal credit so that they can expand their horizon of livelihood options. Food security. The poor rate institutions and programs that provide food security very highly; these include Public Distribution System (PDS), Annapurna, Antyodaya, and Food for Work (FFW). These, and schemes such as the Rice Credit Line (RCL) are important safety nets for the poor, and the project should ensure, through its social risk management framework, that the necessary safety nets are in place. Governance and empowerment. Of the livelihood indicators, empowerment showed the most improvement in the past 15 years. This empowerment demonstrates that social mobilization through the formation of SHGs is effective. Forming SHGs is essentially the formation of bonding social capital among peers, and the membership of SHGs is the structural manifestation of greater levels of trust and reciprocity among its members. Bonding social capital should be seen as a precursor to forming social capital groups that will bridge to groups beyond peers and to institutions. The cohesion and confidence generated by SHGs provide the springboard for developing links to other groups and institutions, as in federations of SHGs and linking to banks and institutions of governance. For example, GPs received, somewhat surprisingly, quite high ratings for their importance to the livelihoods of the poor. There is a need to legitimize SHGs in representative democracy, and the route to this is empowering SHG members to participate in Grama Sabhas and building their capacity to hold office once elected. Strategy to address livelihood problems. The key issues emerging from LAs cluster around 3 themes: (i) protecting, maintaining, and building the critical assets of the poor; (ii) empowering the poor so they can use these assets productively with less restriction; and (iii) providing the poor with more and better opportunities to use their assets. The project is a 5-year time slice of the longer term GoAP rural poverty reduction program. To maximize impact, poverty reduction programs should give consideration to the order in which the building blocks of reducing poverty should be put in place over the longer term. In operational terms, social mobilization and the formation and strengthening SHGs is justified as a first step. The project works more efficiently with groups than individuals, and the bonding social capital in SHGs is the foundation for the remainder of the livelihoods improvement process. The next step must be to secure the ability of the poor to do manual labor, which is a health strategy. The first 2 steps in the health strategy are social empowerment and social risk management. Social empowerment is a gradual
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process that needs continuous effort. Logically, it is followed by building the assets of the poor. Three types of asset are important: human (heath, skills, education), financial (particularly access to credit) and natural (land, land quality, water, forests). These assets are needed in this general sequence: The landless need better terms of exchange for their labor. This change can occur if they increase the value of their labor by becoming semiskilled and skilled workers. All the poor need access to credit. For example, for the poorest, cheap credit is needed as part of risk mitigation to prevent falling into a debt-trap when a risk event strikes. Those who have some natural resources need access to nonusurious credit to use these resources effectively. Three types of natural resource interventions are required: (i) the landless need land, through leasing or some other mechanism; (ii) those who have land, or access to it, need to improve its productivity; and (iii) there is also a need to develop livestock and forest products. Having security and an asset base, the poor need to be empowered to overcome the constraints on conversion of assets into a living, and they need for choice of opportunities to do this. Thus, in addition to social empowerment, there is a need for empowerment that allows the poor to operate more efficiently in the market economy and to have a voice in the political economy of their villages. The choice of opportunities relates to both improving current opportunities, for example, by increasing labor opportunities and wage rates; and creating new opportunities, for example, through building skills and investing in physical infrastructure to facilitate microenterprise.

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Annex 2: Detailed Project Description INDIA: Andhra Pradesh Rural Poverty Reduction Project The key approaches and strategies of the project are: (i) Grassroots institutional development: The project is designed to strengthen and form self-managed grassroots organization, including SHGs, VOs, and MS. The CBOs will be the projects key instrument for identifying priority needs of the target groups at the habitation/village level. These target groups will be helped to develop financial stability and money management capacity through internal loaning of their own savings before becoming eligible for assistance under the CIF of the project. (ii) Emphasis on livelihoods: The project focuses on expanding the existing livelihoods of the poor by looking at their skills, resources, local opportunities, and gaps in the value chain at all stages--inputs, outputs, value additions, marketing--to ensure that the poor are better positioned to take advantage of farm and nonfarm employment opportunities. It will especially focus on creation of sustainable nonfarm employment opportunities such as microenterprises, livestock development, and value addition to farm produce and trading. Special emphasis on development of land assigned to the poor, enabling the poor to access common property resources as well as private lands that are unproductive and fallow, on lease or otherwise; and providing title to those who are cultivating land by custom but have no title form parts of this project. In addition, the project will facilitate access to financial resources for the poor.The project is designed to facilitate greater linkages between the poor groups/households and financial intermediaries, i.e. regional rural banks and NGOs providing micro-finance services.In the short run it will provide access to funds for the target groups through the CIF for those activities that cannot be funded from existing sources. (iii) Support to out of school children: Out of school children perpetuates households in poverty; hence, the project provides for strategic interventions to support GoAP's policy to ensure Universal Elementary Education for all children by 2005. Interventions include (a) community mobilization through sensitizing parents, communities, and employers of children and setting up bridge course camps so that the children may be mainstreamed into regular schools and (b) support to parents of out of school children as they will benefit from project activities. (iv) Reorientation of ongoing line departments programs: The project is designed to explore possibilities of ensuring greater efficiency through coordinating with the existing delivery mechanisms of line departments and exploring possibilities of routing some of the functions through PRIs and civil society actors. The guiding principles for convergence will be: In-depth understanding of poverty must be ensured and must be made a core concern of the mandal-level functionaries through building their capacity and exposing them to best practices. Program and processes of line departments must support empowerment of the poor in a complementary manner through joint planning, monitoring, training, and implementation.

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(v) Strengthening of local governments: The PRIs have an important role in the poverty alleviation programs and implementation of project activities in Andhra Pradesh. To increase their effectiveness, the project will build the capacities of the PRIs in local-level planning, identifying the poor, and managing delivery of development interventions.
By Component:
Project Component 1 - US$25.19 million

Strengthening Institutional, Social, and Human Capital (US$25.19 million/Rs.1,351.09 million) The focus of Component 1 will be to (a) develop self-reliant and self-managed peoples organizations (CBOs) of the target communities; (b) build and strengthen federations and networks of these groups; (c) strengthen the capacity of the PRIs especially, at GP and mandal-levels and in line departments and NGOs; (d) strengthen the convergence among Education, Health and Nutrition Departments; (e) promote information dissemination, awareness building, and knowledge sharing of the project; and (f) build strategic partnerships with the private sector and civil society. Technical assistance through Mandal Samakhyas, NGOs, and individual consultants will assist in the following activities: (a) Formation and development of CBOs, including SHGs: This will include forming new groups and strengthening existing groups. Capacity building of existing CBOs including SHGs will be undertaken in 560 project mandals. Successful approach of group formation/community empowerment tested under APDPIP and South Asia Poverty Alleviation Program (SAPAP) will be adopted. (b) Formation and strengthening federations of self-managed groups, cooperatives, and other peoples organizations: This will involve supporting emergence of VOs, MSs, and cooperatives, and strengthening their organizational capabilities by providing professional inputs for development of group and financial management systems, promotion of livelihoods, forging linkages with finance and service providers, and by building the knowledge base and skills at the grassroots by developing a cadre of activists and paraprofessionals. (c) Capacity of PRIs, line departments, and NGOs: Building the capacity of PRIs, especially in the GPs (village) and Mandal Parishads, line departments (primarily for primary health care, supplementary nutrition, elementary education, agricultural development, and rural development), and NGOs to function in a pro-poor and inclusive manner. Micro-level planning through Participatory Learning and Action (PLA) methods, financial management, and sensitization to needs of the poorest of the poor in the village community. (d) Convergence: Ensuring convergence between SERP and the programs of the Education, Health, and Nutrition Departments in 80 mandals. Coordination committees at the state/district and mandal levels will be constituted to ensure the convergence between SERP and the line departments. The project will support : (i) improved health & nutrition seeking behaviour by communities by creating awareness of the existing programs; (ii) selection of women from the remotest areas and providing training in ANM to be able to provide first contact care to the communities; (iii) development of a cadre of health , nutrition and disability activists selected from within the communities; (iv) development of mini Anganwadi centers wherever there are gaps in child and nutrition services; and (v) focused health initiatives to be funded under CIF. (e) Strategic communication: Support for information, education, and communications, including

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awareness building campaigns and demonstrations in village communities on issues affecting social and/or economic activities of interest to the rural poor. These issues will include education/out of school children, preventive health care, and sustainable development and management of natural resources. Communication will be used to ensure that beneficiaries are empowered and motivated to participate in their own development, promote an interactive, and ensure information flows within the project and between the project and the outside world. (f) Building partnerships: This will involve provision of information and an enabling environment for the participation of the private sector and the civil society in enhancing livelihood opportunities for the rural poor through linkages for skill development, value addition, finance, and marketing.
Project Component 2 - US$157.02 million

Community Investment Fund (CIF) (US$147.13 million/Rs.7,928.33 million) The CIF general component is designed to transfer financial and technical resources to CBOs in (i) social development (including early childhood development centers and disability interventions), (ii) physical infrastructure, (iii) income-generation and livelihood improvements, and (iv) land lease and purchase. The process to prepare, appraise, and implement the CIF proposals will be similar to the experiences under APDPIP. Subprojects will be assessed on the basis of: (a) social and environmental sustainability; (b) financial viability of income-generation and livelihood to ensure that the projects can generate returns to meet the potential loan obligations assumed by the respective CBOs to the VOs; and (c) technical support provided by district and subdistrict-level specialists, including Livelihood Associates, NGOs, research institutes, and line department staff. Beneficiary contributions will average around 10% ( except for persons with disabilities, aids and appliances will be free of cost). The key element of the CIF proposals will be to leverage and access financing for subprojects from banks and microfinance institutions (MFIs). This will also ensure sustainability of the subprojects. Project financing by the commercial banks and MFIs is expected at the ratio starting from 1:1 to ultimately 1:5. Land Purchase Subcomponent (US$9.89 million/Rs.525.69 million) The Bank normally does not support disbursement of Bank financing for land purchase. This project has been cleared to be a pilot for Bank financing of land purchase for productive purposes. The support is specifically for the landless poor to acquire and secure land-based livelihood options based on a community-based land purchase and management system. Total land purchases from private sources are estimated to be around 0.01% of land available for sale in selected districts. Land will be purchased only if it is productive, unencumbered, and with free title; and is provided voluntarily. A comprehensive Operational Manual has been finalized, to ensure that (i) the land purchase is only for productive purposes; (ii) the seller has voluntarily provided land for purchase; (iii) community purchase agreements verify that there is free title; (iv) risks against price inflation, elite capture, and political interferences have been mitigated; and (v) all land transactions have been closely monitored.
Project Component 3 - US$ 7.45 million

Support to Pilot Programs Decentralization and the role of PRIs (US$6.56 million/Rs.352.12 million) This subcomponent will pilot innovative approaches to strengthen the ability of PRIs to respond to the needs of the rural poor. The project will implement two pilots in 40 mandals (about 1,000 GPs) across the project area that will test two approaches to building PRIs capacity (one more prescriptive than the other). The pilots will include measures to support downward accountability of GPs and MPs to CBOs and villagers, including measures to significantly improve the participation and transparency in GP and MP decisionmaking. A formula-based block grant to each GP will be provided to implement CIF

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allocations across the sectors concerned (especially productive infrastructure, social development, and some microwatershed activities). However, instead of using the regular CIF approval process, the pilots will entrust priority setting and subproject approvals for CBO/SHG subproject proposals to the GP (the DPMU will facilitate the technical appraisal of proposals). The GPs will also be able to implement works directly. A second block grant will be provided to multistakeholder committees (MSCs) or Gram Sabhas, which will approve subproject proposals for CIF investments that do not fall directly under the jurisdiction of the MPs and GPs. SERP will retain the important role of providing process facilitation, community mobilization, and capacity building of CIF stakeholders in both pilot and nonpilot mandals. Financial management and accounting controls will be put in place to reduce fiduciary risks. Each GP, MP, and MSC will keep a dedicated project account that will be subject to annual audits. There will be an MOU between the DPMU and participating PRIs and MSCs. As there are 1,000 MOUs to be signed , these MOUs will be finalized prior to transfer of funds. All MOUs will be signed by project start, i.e., April 1, 2003. It is proposed that an imprest (based on a percentage of the annual fund requirements) will be placed with the GP/MP, to be replenished on submission of financial reports on the subprojects approved and funds released. A similar procedure will be in place for the MSCs. Intensive training support will be provided to all key stakeholders on rights, opportunities, roles and responsibilities, and participatory processes. Technical support for subproject proposal preparation will be provided by SERP, and the pilots will use the basic support structure and human resources of the project for implementationespecially the community coordinators and community/social activists who will work to strengthen the Panchayats as well as CBOs. Progress and results will be carefully monitored, and outcomes reviewed by mid-term. An action plan will be prepared on scaling up positive outcomes. Social Risk Management and Health (US$0.90 million/Rs.48.29 million) This component will address the downside risks faced by the poor by developing and strengthening community-driven processes for risk reduction, risk mitigation, and risk coping. Technical assistance will be provided to community-based organizations and insurance companies, such as Life Insurance Corporation (LIC) and some private insurance companies, to develop a pilot on a Comprehensive Insurance Package (CIP) to explore the viability of insurance as a risk mitigation measure for the rural poor. The insurance premium will be provided by the communities. CBOs, VOs, and MSs will play the role of insurance intermediation. The CIP includes life and health insurance cover for the whole household. The pilot will be restricted to 15 mandals, and 50% of the poor households per mandal, or a total of 30,000 households, will be enrolled. A community-based health package to complement the CIP will be developed in two of the 15 mandals. Technical assistance will be provided to the poor to access ambulatory care; provide information on health care institutions; information on prevention and health education; development of a appropriate health communication strategy; and monitoring system to assess the responsiveness of health service providers. Technical assistance will also be provided to develop an income protection program. Vulnerability to shocks such as those in the form of natural disasters has a disastrous impact on the poor. This study will investigate innovative approaches to provide guaranteed income protection to the poor rural households who are disproportionately impacted by natural disasters, primarily excessive or low rainfall. The project will finance a study to (a) quantify the risk--determine the insurable risks (or potential income loss due to natural disasters); (b) identify risk mitigation alternatives--alternative employment source during disaster years; (c) develop an insurance product; and d) design implementation mechanisms (include cost) of the product-risk transfer mechanisms, from micro (individuals) to meso (GP, MP, ZP) to macro (state-level).

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Based on the outputs from the study, a pilot income protection program will be implemented in a few districts.
Project Component 4 - US$57.38 million

Support to Out of School Children (US$57.38 million/Rs.3,094.69 million) A key strategy to reduce rural poverty, based on the experience of APDPIP, is to address the twin problems of out of school children and high school drop-out rates in the project districts. This intervention will not duplicate any existing intervention. It will support GoAPs education and rural poverty strategy, which advocates the need to bring every child out of school, considered "child labor," back into the mainstream educational system. Parents will have access to CIF resource which may help soften the economic impact of foregone income brought in by children working. Moreover, the CIF can be used to promote early childhood development as a measure to prevent child labor and drop outs from school. Since girl children are at a greater disadvantage compared to boys in families of the poorest of the poor, the projects support will be focused on their needs. The project will finance: (a) Social mobilization and bridge schools (US$7.19 million/Rs.390.17 million): Implement regular campaigns by NGOs and PRIs to sensitize parents, especially mothers, and community members about the importance of education; build on mobilizing communities for giving confidence to poor parents to send their children to school and strengthen the school system; and establish a maximum number of residential bridge and regular secondary residential schools for girls. Bridge schools will run short- and long-term remedial courses to prepare out of school children and school drop-outs between 7 to 14 years to enter the formal education system, including those institutions and programs supported by the Banks District Primary Education Program. Government orders reflecting the convergence of this program with the Education Department have been issued. (b) Residential schools for girl children (US$50.20 million/Rs.2,704.52 million): Sixty-four residential schools for 560 girl children per school primarily of scheduled castes, for admission between ages 9-14 will be constructed and completed by March 2004. APSWREIS currently operates 230 such residential schools. Project will finance the civil works costs, supervision costs for construction, and part of recurrent costs for the first two years. The residential schools will ensure not only that girls who graduate from the bridge camps at grade 5 continue their schooling to the secondary level but also ensure quality education for their all-round development and thus improve their opportunities. In the absence of such residential facilities, these girls are at risk of dropping out of the education system and reverting to work due to absence of upper primary schools close to their homes, lack of security, and cultural factors. The recurrent costs of running these residential schools are high, but the impact of school completion and learning achievements are significantly better than the regular schools as evident by the results obtained by these students in 2001-02, where the overall pass percentage was 95% of which 70% passed with first class. (c) Early childhood development: To ensure an enriched environment for the very young children aged 1-6 years and to facilitate girls' participation in schools and women's participation in project activities, community groups will be encouraged to set up early childhood development facilities financed through the CIF component. In ICDS blocks, early childhood development centers will provide for day-care and education facilities for 3-6 year olds. This will also be a forum for converging health services for mother and child.
Project Component 5 - US$11.32 million

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Support for Persons with Disabilities (US$11.32 million/Rs.606.46 million) The project proposes to help disabled persons and their caregivers to improve their livelihood opportunities and quality of life. This component will be operational in 80 mandals covering an estimated 48,000 people. The proposed interventions are intended to: (a) empower people with disabilities within their communities and with service providers and build people's institutions to respond to the needs of the disabled and their families; (b) improve livelihood opportunities and other activities for disabled persons and their caregivers through the subproject proposals to the CIF; and (c) promote convergence of interventions in health and education sectors to support disability prevention and inclusive education for the rural poor. A Government Order has been issued to ensure that all qualified persons have disability certification cards so that they may access the goods and services mandated under the existing government schemes.
Project Component 6 - US$17.72 million

Project Management (US$17.72 million/Rs.953.84 million) Support to SERP (US$13.01/Rs.701.1 million): Project management will be the responsibility of SERP, except for the sub-component associated with the residential school for girls which will be the responsibility of APSWREIS. The project will finance the costs of the contractual staff, office equipment, vehicles and incremental operating costs. SERP consists of a State Project Management Unit (SPMU) and District Project Management Units (DPMUs) in all 16 districts. At the SPMU, CEO/State Projects Director (APRPRP) and another State Project Director (DPIP) report to the SERP Executive Committee. In addition, 3 Regional Project Directors are in charge of the project. Each DPMU is headed by a Project Director assisted by District Project Managers (functional specialists) and field personnel (Assistant Project Managers). Activities at the community level will be carried out by Mandal Samakhyas/Mandal Community Support Cells, NGOs, and village-level activists identified by the communities. A state-level coordination committee will be set up for planning, implementing, and monitoring the health, nutrition, and education convergent action. Similar task forces will also be constituted at the district and mandal levels. APSWREIS will be responsible for the construction of the 64 residential schools for girls. APSWREIS will be assisted in project management including procurement, administration, supervision, and performance of contracts. A district coordinating committee will be in place to ensure that the children from the bridge camps are mainstreamed in these residential schools. The committee will include members of all agencies dealing with education, i.e., DPEP, ITDA, and BC Welfare Officer. NGO partnership: As under the APDPIP project, partnerships with NGOs will be key in assisting the SPMU and the DPMUs to implement the project. SERP has Andhra Pradesh Mahila Abyudaya Samastha (APMAS), an NGO coordinating body, to facilitate collaboration with NGOs in the state in implementing the project. The strategy envisages (a) intensive collaboration with NGOs that have significant presence, in specific mandals and those that also have necessary human resources and competence (in approximately 10% of the project II mandals); (b) issue-based collaboration with NGOs that work on specific issues such as dalits, gender, out of school children, and the physically challenged to access their technical expertise and to evolve specific collaboration modalities on a case-by-case basis; and (c) collaboration with small NGOs. (see Attachment 3). Monitoring & Evaluation (US$3.32 million/Rs.178.31): To ensure consistency of data collection and analyses with APDPIP, it was decided to continue with the existing organizations for baseline survey, impact evaluation, and process monitoring.

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Environmental Management (US$0.29 million/Rs.15.57 million): A team of one Project Manager and two Project Executives will form the team at the SPMU to facilitate the implementation of the EMF and to ensure its mainstreaming in the APRPRP. This team will form a part of the Livelihoods Unit at the SPMU. To support the environment team, the SPMU will appoint an Environmental Agency (EA), and will also constitute a State Environmental Resource Advisory Group to provide advice on environmental issues pertaining to poverty alleviation projects. At the district level, one Project Manager will be charged with the responsibility to ensure that the provisions of the EMF are adequately met in the subproject cycle. To support activities at the district level, an Environmental Resource Group will be formed, including individuals from NGOs, universities, and other experts, who will be contracted to provide support to implement the EMF. The Assistant Project Management and the CCs at the mandal level form the team through which the EMF is implemented. At the subproject level, Livelihood Associates (LAs) will be selected to ensure that environmental considerations have been incorporated into Livelihood Enhancement Action Plans (LEAPs) and subprojects (see Attachment 4). Tribal Development Plan monitoring: A Senior Professional with a team of 3-4 functional experts will comprise the State Tribal Management Unit at the SPMU. In the districts with ITDAs, Tribal Project Management Units (TPMU) will be set up who will liaise with the ITDA and the DPMUs in the respective districts and draw upon the various specialists in these two, to implement the TDP. The TPMU will liaise with SERP and Commissioner, Tribal Welfare, for the effective implementation of TDP. All the project components will be implemented in the tribal areas, and about 20% of the total project costs have been allocated for this purpose.The implementation arrangements to prevent overlap or duplication with other projects, especially the Andhra Pradesh Community Forest Management Project have been agreed upon by SERP, Andhra Pradesh Forest Department (APFD), and Tribal Welfare Department (TWD) (see Attachment 5). Gender Strategy (US$0.23 million/Rs.12.3million): A gender strategy is central to achieving the objective of APRPRP as women and girls constitute a majority of the Andhra Pradesh (AP) poor, face deprivation more intensely, in comparison to men and boys. Apart from general ways in which households slip into poverty, women slip into poverty in gender-specific ways such as breakdown of marriages or deaths of husbands. Women and girls in poor households find it more difficult to overcome poverty than men and boys. However, all poor women do not face poverty in a similar manner. Caste, class, ethnicity, marital status, and physical ability all have a bearing on the incidence and intensity of poverty faced by different groups of poor women. Specifically, the strategy takes into account how gender interlocks with other identities of women within families, communities, markets, and state institutions. Technical assistance (US$0.87 million/Rs.46.61 million): The project will fund special studies and technical assistance related activities required to be taken up as per the emerging demands from the communities. The potential areas identified relate to Livelihoods, Organization Development, Human Resource Development, Evaluation of the Health Pilot, Evaluation of Insurance PilotActuarial Studies, Impact Analyses, annual health surveys to assess the status of health and nutrition linking it with improvements to Livelihoods vs. Livelihoods with Quality of Life, and Community Perception Studies about project implementation.

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Annex 2: Attachment 1 Subproject Eligibility and Appraisal Conceptual Approach to Subproject Appraisal Under the project, CBOs and GPs will be able to apply for funding from the CIF. Each DPMU will have a set of panels or resource groups (a resource group for livelihoods, a resource group for environment, and a panel of appraisers). They will support the facilitation, implementation, monitoring and/or appraisal of the subprojects. The open and demand-oriented nature of this process, the expected diversity of subproject proposals, and the involvement of different district units in the approval process require clear and objective criteria for the eligibility and the appraisal of subprojects. The following items (limited to 5% of the CIF amount) are proposals to be financed by the CIF but will not follow detailed subproject appraisal guidelines (these processes are described in subsequent paragraphs): Barefoot professionals Skill-Building (particularly short-term) Pre-project expenses; project preparation costs Technical Support Support of Livelihood Associates Support of Commodity Specialists Assessment of backward/forward linkages Appraisal costs Entry-point activities The steps involved in defining subproject appraisal are: Exploration of the community needs and project ideas and identification of subproject ideas and initial subproject proposal Formation of CIG, comprised of the members who will directly benefit from the subproject, for implementation and maintenance of the subproject Check of eligibility of subproject by the MCSC or equivalent institution Preparation of full subproject proposal, with advice/assistance from locally/DPMU-hired support Forwarding the proposal, along with the checked subproject summary sheet from the Mandal Cell Analysis and appraisal of full subproject proposal (by an independent appraisal team from the panel of appraisers, including the Technical and Environment Resource Groups) Sanction of the subproject Preparations for implementing the subproject (mechanisms for implementation, monitoring, funds, community contribution, bank account, building required skills) Signing of subproject agreement detailing the milestones for implementation between DPMU and CBO; release of first installment Execution of subproject (implementation, monitoring and supervision, technical support, milestone completion, and releases) Joint Evaluation, final installment, and conclusion of subproject Post-subproject monitoring. As the focus of the CC is to facilitate comprehensive subprojects, various livelihood and other needs will evolve into various components of the subproject.

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Eligibility check. The MCSC staff, NGOs directly working with the CBOs will collect the initial subproject proposals from the CBOs. They will use a simple and rapid checking procedure taking into account the eligibility criteria (see section below) and appraisal criteria to decide on the further preparation of the subproject. Wherever required, the subproject preparation costs will be sought. Full preparation of subproject proposals. Preparation of subprojects will be done directly by the CBOs with direct and total involvement of the CIG members and/or with the help of MCSC. MCSC will secure support from the required professionals from either government or private sector. Appraisal. Subprojects will be appraised by the DPMU with the help of a team of technical experts. The subproject appraisal guidelines will include multiple criteria reflecting the objectives and nature of the project. The major appraisal parameters will include: Institutional appraisal: Age, experience, managerial capabilities, thrift and credit record, and cohesiveness of the groups proposing the investments are important aspects regarding the implementation capacity and the sustainability of the investment. The complexity of the subproject will match the technical and managerial capability of the group proposing and managing it. Participation and commitment: Subproject proposals will need to show how the process of participation has been applied by the groups in the planning and identification stage and the proposed arrangements of sharing ownership and implementation responsibilities. The beneficiaries' commitment expressed through contribution in the form of labor, cash, or kind to the subproject investment (cost-sharing) will be an important criterion for appraisal. Social appraisal: Each proposal will be assessed against its social impact. Parameters such as the percentage of beneficiaries expected to cross the poverty line, proportion of beneficiaries belonging to social groups such as SCs, STs, other backward classes, women, women-headed households, additional employment and income generated, and quality of life of beneficiaries will be relevant. Possible negative implication on nonbeneficiaries will be assessed in each case, and mitigation measures will be specified if necessary. Gender impacts of subprojects, especially on the position and condition of women, will be determined, and mitigation measures, as necessary, will be presented. Technical appraisal: Each proposal will be in line with proven engineering and technical standards appropriate to the local conditions and will be checked for consistency with national standards and cost-effective construction methods. Environmental appraisal: An environmental checklist will be part of the appraisal process including impacts on natural resources, safety for people, health risks. Safeguards appraisal: For subprojects that are likely to trigger the safeguards relating to indigenous people, and pest management, this appraisal will ensure that the relevant management plans are meticulously followed. Financial viability. Financial viability will be checked for each investment proposal related to economic activities and small-scale infrastructure. To simplify financial viability assessment, benchmarks for investment costs per unit (e.g., costs per benefiting household for roads, drinking water, and sanitation, or costs per hectare for irrigation infrastructure, horticulture) could be used and will need to be developed. For microenterprises, a full cash flow analysis will need to be done.

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Economic viability. In addition to financial viability, a separate economic assessment will be undertaken only when major inputs and/or outputs with distorted financial prices are crucial in the subproject proposals. An example will be water pumping using subsidized electricity. Sustainability and O&M arrangements. Part of each subproject should be a detailed plan for firm commitments for the Operation & Maintenance (O&M) responsibilities and arrangements. Only if the proposing group convincingly demonstrates that O&M obligations can be handled by the beneficiaries will approval be granted. Input formats. To facilitate a quick and standardized appraisal process, tables will be prepared in which all critical parameters can be filled in and compared with the minimum requirements and norms set forth under the project. The input formats will be designed in such a way that the DPMUs can computerize subproject information to be fed into the overall project MIS. Subproject agreement. A subproject agreement (Memorandum of Understanding) will be signed between the DPMU and the CBO. This agreement will contain: (a) a section on the rights and obligations of the DPMU and the CBO regarding the execution of the subproject, (b) a financing plan showing the fund requirements and sources (including the beneficiaries contribution) at various stages of project execution, (c) the monitoring, supervision, and reporting procedures, and (d) the O&M responsibilities after implementation. A draft subproject agreement is given as Enclosure 2 and is described in the Operational Manual and the Operational Guidelines for Subproject Eligibility, Appraisal, and Execution. This agreement will be refined as necessary based on implementation experience. Subproject Eligibility Criteria The general principle for CIF-supported activities is: Investment under the CIF will follow the basic rationale for public sector investment and will not constitute "hand-outs" to individuals. Proposed eligibility criteria include: The subproject benefits the poor. The subproject originates from the beneficiary community, which is provided a range of options from which to choose as well as sufficient information to make an informed choice, and the design of the subproject encourages community participation in all subproject phases. The subproject is technically sound and technologically simple so that the community can operate and maintain it. The subproject is labor intensive and uses local labor or otherwise generates a significant social impact. There is adequate evidence that the subproject will be effectively managed and implemented by the community making the request, with the community acting independently or contracting other agencies. The financial, technical, and institutional arrangements for operations and maintenance of the subproject are in place, including assignment of responsibilities for maintenance works, provision of maintenance-related training, and ensuring the necessary funding. The subproject is consistent with good practice sectoral policies and guidelines. The total subproject cost does not exceed $30,000, except for 16 new 'watershed plus' subprojects. The beneficiaries have agreed to contribute 10-15% of total subproject cost in cash or kind, except for subprojects benefitting the disabled. The subproject is additional to existing or planned public investments. The subproject meets the cost per unit and cost per beneficiary ceilings established by the

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project. The subproject does not duplicate other sources of funds The subproject is located in a public or communal land or land belonging to local bodies; or, where the location proposed is private land, an appropriate written contract between owners of the land and beneficiaries ensuring unlimited and unimpeded access to beneficiaries exists. and The subproject does not have negative environmental effects; or if it does, adequate mitigation measures exist. Activities not eligible for Project financing (Negative list): Cash grants or loans to individuals Facilities that do not directly improve the productivity of the poor (e.g., public administration buildings, political or trade union facilities, religious buildings) Sophisticated equipment that cannot be operated and maintained at the village level Cost of running/operating constructed facilities Relief activities and activities that directly support consumption. Activities not eligible for IDA Credit financing (Negative list): Rehabilitation or construction on private land or improvement of private property unless contributing to and in agreement with groups or overall community Purchase or leasing of land except for creating livelihoods of the target group Taxes and duties. Broad contents of a subproject proposal: The following is an indicative list of contents of a subproject proposal in a flexible format, either in Telugu or in English: Subproject rationale Discussion on how the subproject addresses a set of prioritized needs/problems/issues, facilitating the poorest to better their situation significantly Process of the subproject proposal Benefit to the poorest (number and list of vulnerable groups) Discussion on Sustainability, Operational Feasibility, and Maintenance Discussion on how the subproject betters the position of the women among the poorest Cost estimate for activities Community contribution (down payment in cash, contributions in a phased manner--in cash, kind, and labor--and contribution toward maintenance fund/maintenance) Contributions from other sources Discussion on loan repayment (if required) Clear milestones and fund release schedule linked to milestones.

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Annex 2: Attachment 2 Risk Mitigation Measures for the Land Purchase As the financing of land purchases, in the context of productive investments, is an innovative component that poses a number of specific risks, the following note highlights some of the measures undertaken to minimize these risks, which are more fully elaborated in the draft operational guidelines (OGs): Targeting of beneficiaries: General criteria for poverty targeting in the APRPRP, based on a wealth ranking and poverty mapping exercise aiming to identify the poorest 30% of households in project areas, will be applied in the land purchase component as well. The Operational Guidelines complement this with eligibility requirements in terms of land ownership to ensure support is targeted to the poor. Productivity impact: Elaboration of a "district plan", to be approved by local authorities and NGOs, will be a pre-condition for land acquisition in any district. This plan contains, among others, model farm business plans for the productive ventures to be implemented by beneficiaries. These plans, together with technical assistance will help potential beneficiaries to elaborate a farm business plan as the centerpiece of their application. All project proposals will be subject to economic analysis and only those meeting minimum criteria will be eligible for funding. Land markets: There are three risks, namely that (i) titles of land offered for purchase are not valid; (ii) beneficiaries will pay beyond market prices; and (iii) the sudden infusion of capital to purchase land will result in a general increase in land prices. Regarding (i) an independent review of the legal framework has been conducted and translated into a number of precautionary measures (search for 25 years, plot survey, public notice, etc.) which are detailed in the OG that go over and above the practices currently employed by SCC, to minimize the risks involved. Beneficiaries, who receive a maximum grant that is fungible between land purchase and complementary investment, will have a strong incentive to minimize what they are paying for the land. The district plan will contain reference prices and they will have a number of other avenues to receive assistance (detailed in the OG) in the negotiation process and wide publicity of prices will further help to ensure maximum transparency. The risk of the project pushing up land prices in general is minimized by the fact that a minimum supply (exceeding demonstrated demand) needs to be established in the district plan in order for a district to be eligible and the fact that paying too much for the land will reduce the economic viability of the farm plans, thereby making them no longer eligible. Flow of funds and grant structure: There is an upper amount on the grant to be received per beneficiary, generating incentives for negotiating down the land price. The VO is free to undertake whatever arrangements they see fit internally, i.e. whether to require beneficiaries to pay back part of the grant received into a revolving fund or whether to access group credit to supplement the grant received. Funds for purchase of the land will flow directly from the District Project Management Unit to the seller. Monitoring and evaluation: Given the importance of the land component, a separate baseline and follow up survey (after 3 years) will be undertaken and a minimum number of land purchase groups will be included in the qualitative monitoring. Questionnaires, sample sizes, and control groups (including a group of SCC purchasers) will be chosen so as to allow inferences on the impact of this component. Forms to be used in the process will be adapted so as to capture information to be used for purposes of the evaluation as much as possible. A workshop to disseminate findings from process monitoring will be held annually. Mechanisms are in place to ensure that the results of the evaluation will be taken into account during project implementation.

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Annex 2: Attachment 3 NGO Collaboration and Selection NGO Collaboration Recognizing the need for greater collaboration with NGOs to ensure synergy and to maximize the program impact, a series of consultations were held with credible NGOs to evolve a partnership strategy. This process was anchored by the Mahila Abhivruddhi Society, Andhra Pradesh (APMAS). APMAS is a state-level technical and management support institution for strengthening the womens Self-Help Movement in Andhra Pradesh. In the past year, APMAS has strengthened the NGOs and DRDAs to enhance the quality of SHGs. APMAS has professional teams working in Adilabad, Cuddapah, and Prakasam districts. APMAS has collaborative relationships with RPRP to develop a Quality Assessment System for SHG federations and to undertake the quality assessment of 18 SHG federations promoted under the UNDPs SAPAP. APMAS has the required experience and expertise of evolving the NGO partnership strategy for RPRP. The main objectives of the consultation were: Assessing APDPIPs relationships with NGOs in the six districts, to build upon lessons learned Supporting SERP team at the State and District levels in holding consultations with NGOs on collaborative possibilities In consultation with SERP and NGO representatives, evolving, a strategy for collaboration that will include a step-by-step process for forging the partnership Providing technical support to the Project Directors at the District level, in mapping, studying, short-listing, and entering into a collaborative relationship. State-level Consultations During the initial consultation organized, NGOs and SERP articulated a tremendous potential for working together for poverty reduction. There was consensus that APMAS should facilitate regular interaction between the project and NGOs and that there was need to build on lessons learned from APDPIP. The setting up of district-level think tanks and building the capacities of the CCs and District teams for establishing and monitoring collaborations and relationships were agreed. Norms for project implementation in NGO-operated mandals with respect to development and implementation of joint implementation plans, CIF planning and appraisal, promotion of federations, and staffing also were agreed. Collaborative relationships with DRDA, AP Rural Livelihoods Project (APRLP), Drought-Prone Area Program (DPAP), and rural banks at the district level to avoid duplication and maximize impact were also emphasized. District-level Consultations A number of district-level workshops of the project with NGOs has very positive outcomes in terms of better understanding of the project among the NGOs, understanding the scope of collaboration, comparative advantage of the NGOs in community mobilization skills and local knowledge to lay a strong foundation for the project, capacity building needs of NGOs in promoting sustainable institutions of the poor in the form of SHGs, Village Organizations and Mandal Federations, the need for supporting and strengthening NGO promoted existing SHGs, MACS and SHG Federations, etc. A mutually supportive and beneficial arrangement was perceived by both the project and the NGOs by the end of the initial round of discussions.

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RPRP-NGO Collaboration Strategy The process of evolving RPRP NGO collaboration strategy is ongoing. APMAS has completed State and District level workshops, study of NGO SERP relationships in five APDPIP districts and in some districts, intensive working is underway to map NGOs geographically and based on their technical expertise. The following guiding principles need to be taken into consideration while developing NGO partnerships: Poverty is complex; thus, collaboration among all the key stakeholders is critical to reduce poverty. Each collaboration is unique, and it needs to be evolved over time though mutual dialogue, joint planning, and respecting one anothers positions. Collaboration is possible because there is complementarity and value addition. Collaboration involves compromise on both sides to achieve a common goal of poverty reduction. A positive attitude and appropriate skills need to be developed to evolve and manage collaborative relationships. Just as the project expects SHGs to have certain qualities, partners need to have similar qualities. Based on the work done so far, the following broad strategy is emerging: Intensive collaboration with those NGOs that have significant presence in specific mandals and those that also have the necessary human resources and competence (approximately 10% of the RPRP mandals). Issue-based collaboration with those NGOs that work on specific issues such as dalits, gender, out of school children, physically challenged, to access their technical expertise and to evolve specific collaboration modalities on a case-by-case basis. Collaboration with small NGOs that do not have access to financial and technical resource. These individuals or organizations have commitment, interest, patience, and ability, but no support. The project could develop appropriate training programs for such organizations. Role of NGOs In each of the above strategies, the role of NGOs will vary slightly or significantly. However, the following is emerging based on the inputs received: NGOs will be a part of the RPRP District and mandal-level committees. In the operational areas of NGOs, the organization will be engaged in all the activities of the project at all stages and work in tandem with RPRP staff. The staff of NGOs will be engaged in processes, such as participatory appraisal for the development of microplans, and livelihood enhancement action plans (LEAPs). Some NGO staff also may be treated as the community activists. NGOs will play a critical role in promoting SHGs, VOs, and MSs in specific mandals. RPRP will support existing SHGs and federations of NGOs if the members of these peoples institutions are from the poorest of the poor families. NGO representatives will also be part of the mandal RPRP training center and engaged in all the capacity building events. NGOs working on specific components of the project such as out of school children, disability, dalits, gender, will play a key role in providing technical, managerial, and implementation support to

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RPRP. NGOs need to be involved in building the capacities of RPRP staff such as Community Coordinators and Assistant Project Managers. Some of the new recruits of RPRP may be field-placed with NGOs for immersion and learning. NGOs will participate in developing district RPRP strategy, material development, and other key activities of the project. NGOs will be involved in the process monitoring of the project. NGOs support will be compensated by the project through the CBOs in their operational area. NGOs will be involved in specific research studies. Training for RPRP staff and NGO staff will be conducted jointly to develop collaborative relationships among them. NGOs specific roles need to be evolved at the organization level and at the district level. There is considerable scope to develop long-term relationships between RPRP--NGOs to minimize duplication, maximize impact, build on the good work that has already been done, and avoid confusion at the community level. APMAS, with cooperation from SERP and Project Directors, has completed 1 state-level workshop, 12 district level workshops, a RPRP NGO relationship study in DPIP districts, and NGO mapping in 2 districts. By December 2002, NGO mapping will be completed in all the districts. During JanuaryJune 2003, APMAS will escort the RPRP District Team in evolving collaborative relationships with a variety of NGOs based on mutual interest, trust, and participation. NGOs will have a role in the RPRP at all stages and levels. Community mobilization, capacity building, rights-based approach, and building sustainable institutions of the poor will be the areas that NGOs will be able to effectively contribute to the success of RPRP. Building the capacities of NGOs, supporting NGOs on those issues that they are working, compensating their efforts appropriately, and embracing them as equal partners will be the role that the RPRP will need to play. Such a positive and purposeful relationship will benefit the poor and will also be a win-win situation for both NGOs and RPRP. Selection of NGOs Under the project, NGOs will be expected to play an important role in following activities: Mobilization of the rural poor Formation, development, and strengthening CBOs in the project mandals Capacity building of CBOs Facilitation of the vulnerable and socially disadvantaged in the CBOs, identifying/assessing strategies/plans for subprojects Assistance in the preparation of community investment plans for social development and income-generating activities to be undertaken by the CBOs Convergence in accessing services and programs of Government and NGOs. MOUs between the SERP and the NGOs will be entered into, for which SERP will hold negotiations

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with selected NGOs and enter into contractual agreements for implementation of agreed activities, incorporating agreed action plans as part of this agreement. Where necessary, the project will finance training of NGO field staff to ensure effective implementation of the agreed tasks using the APRPRP approach. NGOs will be selected according to the following criteria: Evidence of legal registration Provision to engage in social and economic activities in their Articles of Association or Memorandum of Association or Rules and Bylaws A proven track record of at least 3 years' experience in group formation and group-related social and economic activities Transparent financial management, as evidenced by accounts audited and certified by a chartered accountant Demonstrated capacity of staff to carry out the proposed services or ability to procure such staffing capacity.

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Annex 2: Attachment 4 Environmental Management Framework Background An Environmental Assessment (EA) was undertaken as a part of the APRPRP project preparation activities, and an EA report was prepared. The EA focused on the subprojects that are to be implemented in the CIF component, as well as the construction of residential schools. As the activities to be supported by the CIF cannot be precisely defined ahead of time, an Environmental Management Framework (EMF) has been developed as an output of the EA. This EMF comprises tools for subproject screening, assessment, mitigation, institutional arrangements, training requirements, supervision, monitoring, and auditing. In preparing this EMF, the experience gained so far in implementing APDPIPs EMF was analyzed, and the findings have been suitably incorporated in this EMF. Purpose The purpose of the EMF is to ensure that neither the livelihoods of the poor nor the environment is compromised. Specifically, the EMF will contribute to the goal of poverty reduction by: Preventing and/or mitigating any negative environmental impact that may emerge from the subprojects Ensuring the long-term sustainability of benefits from subprojects by securing the natural resource base on which they are dependent Facilitating proactive subprojects that can be expected to lead to increased efficiency and improved management in the use of natural resources, resulting in improvements in local environmental quality and human well-being. Screening and assessment The EMF classifies subprojects into Levels 0, I, II, and III. This classification is based on the nature and scale of the environmental impacts. The project staff will classify each proposed subproject into 1 of these levels, and will also confirm that it does not fall under the EMFs Negative List. After this is done, the appropriate procedures and tools in the EMF will be to conduct the assessment. Different procedures and tools have been prepared for different levels of assessment. There are both generic tools and subproject specific tools for assessment and to determine the measures required to mitigate the impacts. A separate guideline has been developed and included in the EA Report for the environmental screening and assessment of the construction of residential schools. Subproject appraisal cycle and EMF The EMF is fully integrated with the subproject appraisal cycle. Subproject Summary Sheets are prepared by the CC when the subproject is proposed, and they include recommendations based on an analysis under the EMF. Subproject Appraisal Recommendation Sheets are prepared by the Appraisal team at the time of sanctioning or rejecting a subproject, further incorporating recommendations based on the analysis under the EMF. It is the project teams responsibility to ensure that the recommendations are implemented. For the construction of residential schools, a preliminary environmental screening of the 64 proposed sites is being carried out, and the final decision on the locations will be made using the outputs of the screening. Subsequently, prior to awarding the contract for construction, an EA for each site will be
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conducted, based on guidelines included in the EA Report. All the environmental impacts are expected to be minor, and standard mitigation measures are available. A site-specific EMP containing these mitigation measures will be prepared. This EMP will form a part of the contractors bid documents. Safeguard compliance The screening and assessment procedures and tools will ensure that all the subprojects comply with the Banks safeguard requirements. During project preparation, separate studies were completed to guide compliance with OP 4.01 Environmental Assessment, OP 4.09 Pest Management, and OP 4.37 Safety of Dams. The requirements of the Banks policies regarding Natural Habitats, Forestry, and Cultural Property will be met through the application of the procedures and tools incorporated into the EMF. Institutional arrangements At the state level, the SPMU will establish the State Environmental Resource Advisory Group to provide advice on various facets of environmental issues pertaining to poverty alleviation projects. At an operational level, a 3-member team will be based at the SPMU to ensure that environmental management is mainstreamed in the project. The 3-member team will comprise a project manager and 2 project executives. This team will form a part of the Livelihoods Unit at the SPMU. To support the environmental team, the SPMU will appoint an Environmental Agency (EA). At the district level, 1 DPM will have the responsibility for ensuring that the provisions of the EMF are adequately met in the subproject cycle. To support the activities at the district level, Environmental Resource Groups (ERGs) will be formed. They will include individuals from NGOs, departments in universities, and experts/consultants. These individuals will be contracted to provide support to implement the EMF at the district level. In addition, 1 or 2 ERG members in each district will be selected to develop a team to provide additional support. The selection will be based on the environmental issues prevalent in the district where further expertise needs to be developed and support is required. At the subproject level, there will be selected Livelihood Associates (LAs) who will have the responsibility to ensure that environmental considerations have been incorporated in the Livelihood Enhancement Action Plans (LEAPs) and in the subprojects. Training Training programs to equip the CCs, LAs, DPMU staff members (responsible for facilitating implementation of the EMF), and the ERG members in using the EMF will be organized by the EA. At the District Level, the DPMU staff, ERG members, and selected LAs will form the core group of trainers who will train the CCs and the Appraisal Team members in environmental screening, assessment, and monitoring. Specific training modules have been identified, which will be conducted during the project implementation period.

In addition, the Project will provide support for the Training of Trainers (ToT) to lead Farmer Field Schools (FFS) which will help equip farmers to practice Integrated Pest Management (IPM). This support will be provided in coordination with the Department of Agriculture. FFS participants are selected through farmer group meetings, and after formation they meet once a week for 4-5 hours in the field for the whole cropping season. The FFS provides an intensive opportunity for the farmers to master the basic skills that will enable them to make informed, confident field management decisions regarding IPM.

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Environmental supervision Supervision of EMF implementation will be conducted at 2 levels. At the district level, as part of their overall supervisory responsibilities, the APRPRP staff will be required to verify that CCs are correctly using the EMF and that the environmental mitigation measures prescribed in the approved subproject proposal are implemented. The DPMUs will verify these issues from the same sample of subprojects as they use for other supervisory requirements, and the results will be included in their overall supervision reports provided to the SPMU. These supervision reports will be submitted to the EA for review of EMF implementation. At the state level, the EA will conduct biannual supervision of EMF implementation, selecting a representative sample of Level I, Level II, and Level III (if any) category subprojects. The EA will verify whether the screening process was correctly applied, suitable mitigation measures specified, and these measures correctly implemented. The supervision reports will include recommendations for improving the EMF and its effectiveness in implementation. Environmental Supervision by the DPMUs and EA will ensure that agro-chemical dealers supported by the Project do not sell pesticides classified by the World Health Organization as Class Ia, Ib or II. Environmental monitoring It is the EAs responsibility to remain abreast of changing environmental conditions and emerging environmental concerns in the APRPRP areas. The EA will constantly be involved in collecting monitoring information provided by the government and civil society sources. On the basis of this information, the EA will recommend revisions to the EMF and highlight local concerns to the DPMUs. Details of changing conditions, emerging concerns, recommended revisions, and local issues will be included in the biannual supervision reports provided to the Director of SPMU. Environmental auditing To provide an independent assessment of the effectiveness of the EMF, the SPMU will contract an external agency to undertake an audit of the EMF. This external agency will be an independent civil society organization. The principal focus of the audit will be to assess the extent to which the EMF has lead to the implementation of appropriate environmental mitigation measures in APRPRP subprojects and has promoted the implementation of environmentally beneficial subprojects. Proactive environmental pilot subprojects The EMF will encourage pilot subprojects that contribute to improved livelihoods through the conservation of the environment. These subprojects could include (1) the use of alternate resources, e.g., biomass gasifiers for rural electrification; (2) efficient use of existing resources, e.g., fuel-efficient cook stoves; (3) creation or enhancement of natural resources to support livelihoods, e.g., energy plantations and water conservation works; and (4) creation or enhancement of systems for sustainable management of natural resources, e.g., community fodder plantations and IPM practices. Particular consideration has been given to the issue of access to grazing and fodder for livestock subprojects. The EA report provides a timetable for the development of a Government Order permitting the allotment of Government-owned wasteland to organized groups of the poor for the purpose of pasture development, fodder cultivation, and regulated grazing.

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Budget for EMF implementation Budgetary provisions are required to support the institutional arrangements, the external agencies (EA at the state and ERGs in the districts), audits, and implementation of environmental pilot projects. The estimated budget for implementing the EMF is approximately Rs 20 million.

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Annex 2: Attachment 5 Tribal Strategy As the Tribal population constitutes the poorest and the most vulnerable social groups in Andhra Pradesh, a Tribal Development Plan (TDP) has been prepared as an integral part of the project in accordance with the OD 4.20 on Indigenous People. The population of Scheduled Tribes (ST) is 4.2 million, and they constitute 6.3% of the States general population (1991 Census). The TDP was based on secondary data, field work, and consultations in 19 selected villages in districts of Visakhapatnam, Khammam, and Kurnool. In addition, workshops were organized with Tribal leaders, NGOs working in the tribal areas, Government officials, and elected representatives at the respective ITDA offices to invite their views and suggestions. A State-level meeting was also conducted with NGOs at the office of the SERP. Outputs of the consultation process helped in evolving formats for conducting PRAs in the villages for TDP preparation and also for detailing the TDP. Tribal Development Plan The objectives of the TDP are to (i) evolve a development process that fosters full respect for dignity, human rights, and cultural uniqueness of indigenous people, (ii) ensure that they do not suffer adverse effects during the development process, and (iii) take up economic benefit programs which are culturally and socially compatible. Various constitutional safeguards, policy regulations, and a number of development programs have improved the socioeconomic status of tribals but, compared to others, they remain disadvantaged and poor. The TDP aims to build strong self-reliant and self-managing institutions of tribals in both exclusive and mixed villages and, through these institutions, to enable the tribals to access economic and social opportunities to overcome poverty and raise their living standards. With the tribal community taking decisions on the activities to be implemented, no adverse project impacts are envisaged. In the Tribal Mandals, the Integrated Tribal Development Agency (ITDA) offers single-line administration with all departments converging at the district level and thus, the TDP envisages dovetailing all developmental programs and establishing linkages and implementation arrangements to avoid duplication of efforts in similar community-based poverty eradication projects/programs, namely, Participatory Tribal Development Project, Sustainable Tribal Empowerment Project and the Community Forestry Management Project (CFMP), with ITDA playing the coordinating role. To ensure that there are no overlaps and there is no duplication between the CFMP and the RPRP, a GO is to be issued by the GoAP. The salient features of the GO (currently in draft form) are: (i) Inclusion of the Officers of SERP in the various committees under CFMP and the consequential reconstitution of the following committees constituted under G.O.Ms.No.13,, Dated: 12-2-2002, namely, District Forestry Committee, ITDA-level Committee, Forest Division-level Coordination Committee, and State Level Forest Committee. These committees will ensure integration and convergence of activities under the CFMP and the VELUGU Project ( AP Rural Poverty Reduction Project and APDPIP) and other developmental activities taken by GoAP. These Committees will also ensure that there is no overlap and duplication of development initiatives under CFMP and the VELUGU Project. (ii) All the microplans of VSS, prepared as per the guidelines issued, in Tribal areas, will be discussed in the meetings of the ITDA level Committee, and microplans in other areas will be discussed in the meetings of District Forestry Committee to ensure integration and convergence of strategies and activities under the CFMP and the VELUGU Project.

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(iii) All training programs for VSS will be coordinated by the above-mentioned committees at District level. The key issues raised during the consultation process and the likely strategies and activities to address the issues are presented in the following matrix. Strategy Activities in the Plan Establishing new Separate SHG/CIG for each tribal group SHGs/CIGs and (homogenous groups) in villages/habitations exclusively inhabited by tribal groups VOs/VTDAs in the tribal habitations where Separate SHGs /CIG for STs/and non-STs in mixed villages. there are no SHGs and VO to consolidate all SHGs into a strong strengthening existing institution SHGs Building the capacities Dovetailing of govt. interventions for the development of STs, coordination with the of CCs and CAs as functionaries of depts. concerned. trainers Facilitation in participatory preparation of development plan, implementation, M&E Lack of awareness of Promotion of awareness Training VTDA members on the powers and constitutional on safeguards provided to responsibilities of Gram Sabhas in scheduled areas safeguards meant for tribals under the of the State as envisaged in A.P. Panchayat Raj Tribals under Constitution. (Amendment) Act 1998 constitution. Training to the tribal leaders, PRI functionaries, SHGs/VOs/VTDAs Lack of awareness Provision of necessary Selection of beneficiaries by VOs from among the among women of skills to take up SHGs in consultation with Gram Sabha. income- generating income-generating Training in various income-generating activities as activities. activities. per preference groups Provision of necessary assistance. Exposure visits to the places of successful SHGs. Low productivity Enhancing productivity Training in soil conservation and land from lands by bridging knowledge development activities, dryland farming gap and financial techniques, watershed management. resources support Organizing demonstration plots and seed production sites. Training in balanced use of fertilizers and pesticides, use of bio fertilizers and biopesticides, and use of improved seeds Fund support for land development, purchase of appropriate agri-inputs, irrigation. High incidence of - Land lease Identification of landless tribals; Government landlessness, - Assignment of waste lands, temple lands, and ceiling lands for especially among government lands and distribution; and willing land sellers. Scheduled Tribes in purchase of lands Purchase of lands and assignment of land to plains areas - Diversification of eligible landless tribals (per guidelines prescribed employment under land purchase scheme). Ensure pattas to tribal farmers who are cultivating and provide necessary assistance. Issue Mobilization of Scheduled Tribe women to form into SHGs/strengtheni ng already existing SHGs

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Financial assistance to take up off farm activities. Depletion of NTFP; Protection and Community management of forests, no illegal lack of awareness of regeneration of NTFP cutting, growing NTFP species. processing and species; strengthening Training in scientific tapping of NTFP, value marketing of NTFP, backward and forward addition of NTFP, such as gum karaya, deseeding agriculture, and linkages of of tamarind, manufacturing of addaleaf plates.; horticulture items. microenterprises.. post-harvest practices, processing, and preservation of NTFP/Agrl./Horticulture produce; commodity marketing, Awareness raising program on weights and measures, marketing interventions Technical and Facilitating preparation of Livelihoods analysis, formation of CIGs financial support to proposals after Discussions relating to subprojects with CIGs demand-driven sub comprehensive Approval of proposal by VO and VTDA projects livelihoods analysis. Provision of Financial and Technical assistance and Marketing Linkages Lack of assistance to Provision of necessary Forming groups with differently abled people and assistance. orientation on avenues of employment . differently abled Setting up special training centers. people Admitting in educational institutions meant for them. Linkages with institutions providing institutional support. Food insecurity - Establishment of grain Establishing and management of grain bank, rice during lean seasons. banks credit. - Rice credit scheme Liaison with Civil Supplies/Food Corporation of India for replenishing the rice, implement FFW Vulnerable to risk Social Risk Management Conduct awareness on insurance coverage for and Social Protection crops, livestock, and health of individual. initiatives Development of appropriate insurance packages. To provide animal health care at village level by appointing local tribal youth as veterinary Assts. High incidence of Motivation of parents, youth, teachers dropouts, especially Opening of bridge schools. among girls. Provision of minimum infrastructure to schools. Alienation of tribal Effective Speedy disposal of cases pending with various land in Scheduled implementation of AP courts such as SDC (TW), Agent to Govt. areas Scheduled Areas Land Handing over of lands restored to tribals under Transfer Regulation, LTR and physical verification of lands. 1959. Institutional Arrangements for TDP Implementation arrangements: APRPRP will have convergence with the ITDAs in the Tribal Sub-Plan (TSP) areas in 5 districts and the ITDA for Primitive Tribal Group (Chenchu) in 7 other districts with the following arrangements. For effective implementation of its activities in Tribal Sub-Plan areas, GoAP has issued orders for the convergence of DPIP and ITDAs, vide G.O.No.78. The salient features of the above order are: There will be an independent and autonomous Unit under the Project Officer, ITDA, called the

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Tribal Project Management Unit (TPMU) to implement APDPIP in TSP areas. The TPMU is an independent support organization for the TSP area. Its exclusive mandate is social mobilization and empowerment of tribal communities. An Annual Works and Finance Plan (AWFP) will be developed by the PO, ITDA for the TSP areas as per guidelines of the SPMU and in consultation with Project Director, DPIP. After the District Collectors approval, the Project Director, DPIP, will send the AWFP for the entire district showing the TSP component separately. Capacity building: Orientation to the distinct sociocultural, economic, political, and religious settings of the Tribals, will be provided to all project functionaries, NGOs, and ITDA functionaries by the Capacity Building Unit; to enable effective and culturally sensitive project implementation. Separate training modules will be designed by the Capacity Building Unit, with inputs from resource persons of repute to address these and other critical issues such as protective measures envisaged for tribals, tribal development policies, tribal development approaches, conventional and participatory, preparation of village development plans through PRA, convergence of various services for tribal development. Planning, monitoring, and evaluation: The project's monitoring will capture input and output, process, and impact. The M&E system for the project will monitor the following with respect to the TDP: Economic conditions to include food security, income-generating activities, mechanisms adopted to manage food insecurity, income increases, changes in livelihoods, improvement in skills, economic activities established Social conditions: Representation in SHGs, MS, and PRIs; participation in project activities and SHG meetings; Enrollment and dropout rates; accessibility to social infrastructure: schools, hospitals Processes in TDPs preparation and approval Dovetailing with other departments reflected in number of schemes dovetailed, tribal habitations benefited, and Tribal families benefited. M&E will include the participation of the tribals, to ensure feedback on project implementation. Impact evaluation of project for the tribals should look at issues related to food security, skill enhancement, employment including income through off-farm and nonfarm activities, improvement in living standards, status of women, improvement in the access to marketing and formal institutions, and sustainable village institutions.

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Annex 2: Attachment 6 Gender Strategy Goals, objectives, and activities of Gender Strategy The goal of the gender strategy is to reduce absolute and relative poverty of women and girls from marginalized sections in the project area and thereby contribute to the achievement of gender-specific international development targets in the project area. Lessons from APDPIP have fed into this strategy, which essentially identifies a 10-fold objective along with the activities for achieving the goals which are to: Strengthen poor womens asset base, livelihood security, and economic opportunities, Reduce gender gaps in human development: education, survival, and nutrition, Strengthen maternal health and reproductive health of women and men and adolescent boys and girls, Expand access of women to gender-specific basic needs such as childcare, toilets, and gas, Strengthen participation of poor women in local self-governance institutions, Reduce gender-specific risks and vulnerabilities of poor women and poor households, Reduce gender stereotyping in project area, Promote gender-aware management of environment and natural resources, Engender policies, schemes, and implementation of line departments and banks concerned with social development, Reduce discrimination of poor women on the basis of caste, ethnicity, religion, disability, age, and other characteristics. Gender Action Plan The plan is not only a means to engender the project implementation by strategically and systematically involving women and incorporating their needs and demands in every component of the project is essential. The project is also an important forum to enhance the empowerment of women. Addressing gender equity Elements Institutional and environment building Objectives 1. Increase awareness and sensitivity to gender inequities 2. Enhance motivation to address womens needs and empowerment Actions 1. Village-level events with suitable gender-sensitizing activities 2. Information dissemination and knowledge sharing among stakeholders at different levels Responsibility District Gender Coordinators, CCs, Community Activists, and Social Organisors along with the Capacity Building unit SGC, DGCs, and Gender Resource Groups

Capacity Building 1. Equip staff with knowledge and tools to promote womens development and empowerment 2. Equip women in the project villages to act for

1. Gender sensitization and knowledge enhancement of staff government, NGOs, other departments, and communities 2. Special awareness and development programs for

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themselves Gender Resource Group - GReG 1. Increase gender equity in the project areas. 2. Provide training, information dissemination, research, and documentation 3. Provide human and material support to women and implementers

women to be able to take advantage of opportunities 1. Workshops and other events with implementing agencies for gender sensitization, increasing knowledge, skills, and tools for improved gender equity in all activities. 2. Village-level activities to increase awareness, improve womens participation and empowerment. 3. Human and material support to women and implementers through training, research, documentation, and information dissemination 4. Strengthen the delivery mechanisms for women

GReG at the State and district levels, and capacity building unit

In order that project implementation is inclusive and gender-sensitive, it is important that gender concerns are integrated across all project components. These include the Community Investment Funds, subproject appraisal, Capacity Building, and Project Management. Some of the major actions envisaged are represented below. Gender integration in Project Implementation Project Gender considerations Actions Responsibility component Community 1. Subprojects to reflect 1. Enhance the capacity of CCs Gender and CIF Investment womens needs for to reach out to women, Coordinators, Funds drinking water, mobilize them along with men DPMU, SPMU income-generation, health, where possible, identify their literacy, day care, food, priorities, and help formulate Subproject land. subprojects. preparation 2. Subprojects to impact 2 Identify proposals with women positively positive impacts on women and 3. Womens access to and mechanisms to ensure womens control over the resources control of resources and being provided/created benefits under the subproject 3 Evolve mitigation strategies 4. Clarity on benefits likely for perceived negative impacts to flow to women 5. Mitigation measures for likely burden on women of the activity. Subproject 1. Gender appraisal included 1. Social appraisal formats to Subproject appraisal and in social appraisal of separately articulate the criteria Appraisal

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monitoring

subprojects 2. Gender impacts of subprojects monitored using identified indicators

for gender appraisal 2. Indicators for monitoring gender impacts of subprojects to be developed and incorporated into the M&L system 3. Capacity building of the State and District Managers Appraisal, Managers M&L

Consultant with DPMU SPMU with GReG

Capacity Building

1. Allocate 40% of capacity building funds for gender-related programs 2. Enhance capacity of all project stakeholders to deal with gender-related issues 3. Incorporate gender perspective in capacity building programs for various processes such as M&L, participatory monitoring, communications, subproject appraisal Project 1. Ensure attention to Gender 1. Gender Resource Groups SPMU, DPMUs, Management at all levels of the project (GReGs) to meet at least on a GReG 2 Expert advice to guide, quarterly basis to plan and review monitor, and evaluate the gender dimension of the project implementation of gender 2. Ensure adequate women staff aspects of DPIP in SPMU, DPMUs, Mandal Units (at least 30%) Networking 1. Useful linkages and 1. Ensure representation of SPMU, DPMUs, coordination with other experts involved in these projects GReG successful womens programs on the GReG such as AP Mahila Samatha 2. Capacity Building programs 2. Gender-sensitive should benefit from these involvement of line programs department staff and other 3. Greater interaction between service providers the staff of DPIP and these projects, especially at the field level and joint activity where possible 4. Gender sensitization of line departments, NGOs, and other service providers M&L system 1. Capture the impact of the 1. Women to be consulted SPMU and M&L project on women and while developing indicators for Consultants benefits to them: the extent impact, performance, and of womens participation, process monitoring Gender, CIF enhanced capacity, and 2. Capacity building of M&L coordinators, empowerment; womens staff SPMU increased access to 3. Specific inputs for CIFs,

1. Focus on gender while implementing all project activities 2. Project systems and activities capture interventions on gender related issues and their impacts

Gender, M&L Coordinators, SPMU DPMUs, SPMU

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government departments and programs, markets, skills, and knowledge

e.g.,, related to group self-assessment

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Annex 2: Attachment 7 Lessons and Outcomes Emerging from APDPIP A. Lessons on approach a. It is critical to build confidence in the poorest of the poor. To reach the poorest of the poor, the project will rely on a broad range of entry-point activities and close rapport with the community. b. Working through a highly trained and dedicated team of community coordinators (CCs) in each mandal, to be employed by the organization of the poor in the long run, has led to the CCs being accountable to the SHGs rather than to SERP. c. The induction process for the CCs, with a long village immersion program and experiential learning mode, has been critical in broadening the CCs horizon on poverty and gaining the confidence of the poorest. d. Trained professionals living in close proximity to the target community has a strong positive impact in empowering the poorest. e. Self-selection has been a fairly successful, inclusive, acceptable and empowering experience for the poor. f. SHGs of poor men, youth, adolescent girls, artisans, and professional groups require as much attention as conventional women SHGs. g. Specific strategies developed for the poor in mixed groupsdestitute women, women-headed households, landless laborers, artisans, and people with disabilities---has helped in effectively addressing their needs and priorities. h. GoAP has often underestimated depth of capacity building needed for SHGs. i. The identification of activists and building their capacity to facilitate group formation and functioning, and to address major social issues, has helped to create human resources that are accessible to the organizations of the poor and accountable to them. j. Building a gender perspective in DPIP and other departments and agencies, and capacity building especially for addressing gender issues has been critical. k. Empowerment of women requires dialogue with other sections of the community as well. Furthermore, the successful addressing of major social issues at both the community and household levels requires women and men to work in tandem. l. Situation-specific social security systems are necessary to address the range of risks confronting the poorest. m. The microenterprise development strategy for the poorest should be based on what the poor are currently doing and emphasize building their capacity to work effectively with markets. n. Government functionaries admittedly are unable to reach the poorest of the poor owing to lack of skills, information, and access; a target-based approach to development with inadequate staffing and time; and a communication gap and poor information outreach. o. Food security programs such as Food for Work (FFW) and Anthodaya can be effectively implemented to reach the poorest, using the SHGs to plan and manage the program. p. The mandal-level functionaries are convinced about the possibility of reaching the poorest of the poor through the SHGs and Mandal Samakhyas (MSs). q. Groups of the poor have been able to represent their needs and priorities better at the Gram Panchayat (GP) and Janmabhoomi meetings and thereby gain access to education and health facilities and services. r. Not only economic factors inhibit children from attending school, but also social and cultural factors, such as the ignorance of parents due to illiteracy, tradition, lack of access to alternatives, and insensitive administrations (including teachers at large). Evidence from APDPIP suggests that, through the social mobilization approach, parents and children can be motivated to withdraw children from work, and parents, regardless of their economic condition, are willing to send their children to
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school. s. The students from AP Social Welfare Residential Schools Society (APSWREIS) have shown outstanding performance in academic as well as extracurricular activities. The excellent performance of these students from the APSWR schools shows that, when the right opportunity is given to these socioeconomically disadvantaged students, they can excel. t. APRLPwith its sustainable livelihoods approach, focus on participatory watershed development, and components aimed at addressing issues of equity, group formation, and capacity buildinghas many lessons for AP RPRP. There is scope for sharing of knowledge and experience in the initiatives relating to capacity building of primary and secondary stakeholders, watershed-plus-sustainable-rural-livelihoods initiatives, and financing of soil and water conservation works prioritized in the community microplans of 500 watersheds. In all of these and in seeking to integrate the GoAP antipoverty programs (APPs) and advocate pro-poor policies, APRLP shares a common vision with APRPRP. B . APDPIP: Outcomes (based on process monitoring studies in the 6 DPIP districts) 1. a Natural capital Asset base of the poor households increased and livelihoods stabilized: More than 60% of the CIF disbursed has been used for the purchase of livestock assets (milk cows, buffaloes, plough bullocks, sheep, rams). On an average, a member with a 2-animal household dairy unit is able to make a net incremental monthly income of Rs. 600/=. The additional income generated by sheep/lamb-ram units are more or less equal to this. The compulsory insurance system built into these investments by the project has more or less eliminated the risk of asset loss due to idiosyncratic and covariant risks. The CIF proposals also include marketing support, which also ensures a higher rate of return. Externalities include access to income by women, since most of them receive regular income from milk sales. Childrens nutritional status has improved with the consumption of small quantities of milk. Asset quality improved: The CIF activities have also promoted productivity of agricultural land horticulture development activities in tribal areas. Land leasing and irrigation development are few examples of perceptible changes taking place in the quality of the asset base of the poor. Livelihoods diversified: CIF has also diversified poor womens economic activities. Women are taking up brick-making; retail trade in edible oils, cloth, and other essential consumable goods; furniture-making, garment-making, detergent-making, other nontraditional activities, with high rates of return. Human capital Food security improved and distress migration reduced: The introduction of the Rice Credit Line (RCL) coupled with the implementation of the FFW program through the SHGs has significantly improved food security for the poor. These two initiatives have reduced the large-scale distress migration that was a common feature in Mahabubnagar, Anantapur, and parts of Vizianagaram and Chittoor districts. Both the RCL and FFW have reduced the total expenditure incurred by the poor on the purchase of food. The 30-40% fall in distress migration reported in Anantapur and Mahabubnagar districts (project mandals) during the current agricultural season, despite the prevailing drought conditions, could be considered as an indication of the improved food security.

2. a

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Skills of poor households improved: The sustained capacity building efforts of SHG, VO, and MS members as well as exposure visits organized for them have contributed to the abilities and skills of the poor women. Early manifestations of the impact of these efforts can be seen in: Improved group functioning (adherence to norms, rotation of leadership, and greater transparency in the financial transactions of the groups). Improved knowledge and awareness about better livelihood strategies and practices made possible through sustained capacity building, training, and exposure visits. Examples include training women in dryland agricultural practices in Chittoor; the exposure visit of the tribal women of Adilabad engaged in dairy to the far-off Haryana; and skill upgrading of tribal men and women engaged in NTFP collection in Srikakulam, Adilabad, and Vizianagaram. A good number of paraprofessionals trained by the project in veterinary care, health, and NTFP add to the skill base of the community. These barefoot workers not only meet critical gaps in services but also help the community in the implementation of suitable CIF subprojects. Access to government programs and services increased: DPIPs focus on convergence with line departments (LDs) has promoted the access of the community groups to the benefits/services provided by the line departments. The SHGs have effectively participated and benefited from FFW, watershed development projects, and Neeru-Meeru (water conservation mission works). With GoAPs launch of the Employment Guarantee Mission (EGM), funds from agencies such as DRDA and SC/ST/BC corporations are dovetailed with the CIF for the poor identified by the community. In Srikakulam, even the bank loans are dovetailed with CIF funds for supporting subprojects. Thus, the DPIP not only has facilitated the access of the poor to government program, funds, and technical resources but also is slowly emerging as a node around which APPs are planned and implemented. Rural communities effectively mobilized against out of school children: The projects focus on mobilizing the community against out of school children appears to be yielding good results. Early community-based campaigns against out of school children, adoption of child at school policy as a non-negotiable by SHGs, active involvement of SHGs and VOs in the mobilization of out of school children, setting up a chain of bridge and residential schools, coupled with the mission approach adopted by the GoAP to promote school enrollment, have contributed to a decline in the incidence of out of school children. The sharp increase in the enrollment of children, particularly girls, in the primary schools during the last two years is an indication of this. However, closer follow-up of the mainstreamed children needs attention. Social Capital Functioning SHGs: The project has significantly augmented the communitys stock of social capital (largely bonding type), as indicated by the large number of functioning SHGs, VOs, and MSs adhering to basic minimum democratic transparency and accountability norms. The projects exclusive focus on the poor, intensive facilitation and capacity building efforts, and extensive use of community activists for social mobilization have contributed to the growth of bonding social capital. Community activists: The creation of a cadre of trained community activists who are able to do an excellent job of community mobilization, organization, and capacity building as well as articulation of community needs and demands, is the most visible outcome of the project. The vast reservoir of leadership that has been carefully nurtured has a vast potential for the future sustainability of the

3. a

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institutions of the poor. c Sustainability factors: The VOs and MSs have emerged as implementing agencies for CIF subprojects, RCL, and other projects (e.g., collective purchase and supply of farm inputs). There has been a sustained increase in the corpus of the VOs, made possible by the good repayment behavior of the CIG members of loans advanced for income-generating projects. Some of the SHGs and VOs have been working very zealously against certain social practices such as child marriages in Srikakulam, caste-based discrimination and the Jogini system in Mahabubnagar, and the sale and consumption of alcohol; and they have reversed cigar smoking in Vizianagaram, Anantapur, and Chittoor. A good number of VOs and MSs are able to manage their activities and finances very diligently. These are clear pointers to the potential sustainability of these collectives. Even more important is the increasing recognition accorded by the LDs, PRIs, and NGOs to the SHGs, VOs, and MSs as organizations of the poor. Financial Capital Dependence on high-cost sources of borrowing reduced : Small but compulsory savings and interlending by SHG members, promoted as non-negotiable, have reduced the dependence of the members on traditional high-cost sources of borrowing, often interlinked with commodity/labor sales. On the other hand, promotion of transparent financial system (e.g., introduction of MBKs, BKs, free supply of books of accounts, capacity building for financial management, auditing,) has contributed to the growth of SHGs as credible micro-finance institutions. The efforts of the project to link SHGs with commercial banks are picking up, while the CIF has contributed to the corpus of the VOs. Funds dovetailed: Convergence efforts made by the project have resulted in mobilization of funds by SHGs/CIGs from the LDs supplement CIF funds. (e.g.,, land lease in Anantapur, bulk milk cooling projects in Adilabad and Anantapur, horticulture development in Srikakulam with ITDA). The LDs, DRDA, SC/ST/BC corporations, and bankers are now willing to support the beneficiaries and groups identified by DPIP. In Srikakulam district, funds of DRDA, SC/ST/BC corporations, and CIF of DPIP are dovetailed with bank loans to finance subprojects. Thus, DPIP has promoted not only the financial assets of the poor but their access to credit as well. Importantly, the project has promoted the microfinance institutions accessibility to a bankable clientele. Physical Capital

4. a

5.

a Subprojects implemented meet some critical gaps in socioeconomic infrastructure: The CIF subprojects have met some of the critical infrastructure gaps of the poor such as crche centers (e.g., Ammavodi in Chittoor), drying platforms, small irrigation infrastructure (e.g., tank renovation in Vizianagaram), community halls, and drinking water hand pumps. However, the proportion of CIF funds allocated for infrastructure is very small.

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b Market opportunities improved : DPIP is slowly but steadily improving the access of the poor to the market by; (i) Meeting critical infrastructure gaps (e.g., setting up bulk milk cooling centers) cofinancing infrastructure development activities; (ii) Promoting wholesale trade by community groups in commodities produced by the poor (e.g., red graham in Mahabubnagar, gooseberry in Chittoor, seed and fertilizer in Adilabad, essential consumer goods in Chittoor and Vizianagaram); (iii) Promoting partnership between the community groups and the private sector (e.g., market tie-up of dairy farmers with Heritage Foods in Chittoor; fruit and vegetable processing in Adilabad; and NTFP tie-up with Girijan Cooperative Corporation (GCC) in Adilabad, Vizianagaram, and Srikakulam; (iv) Training youth in self-employment skills in collaboration with Reddy Labs in Mahabubnagar and Chittoor. However, to have larger impact on the livelihoods of the poor, these interventions need to be scaled up.

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Annex 3: Estimated Project Costs INDIA: Andhra Pradesh Rural Poverty Reduction Project
Totals Including Contingencies (US$ Million) 02/03 Project Components by Year A. Institutions & Human Capital Building Building Self Managed Institutions of the Poor Capacity Building of PRIs and staff of Project Management Units and Line Departments Convergence with Health and Nutrition Sector Strategic Communication Building Private Sector Partnerships Subtotal Institutions & Human Capital Building B. Community Investment Fund Social Dev, Physical Infrastructure & Income Generation Land Purchase Subtotal Community Investment Fund C. SUPPORTING PILOT PROGRAM Strengthening the Roles of PRI Social Risk Management Subtotal SUPPORTING PILOT PROGRAM D. Support to Out of School Children Community Mobilization for child labour elimination Residential Schools for Gild Child Sub total Support to Out of School Children E. Support for Persons with Disabilities F. Project Management State Project Management Unit District Project Management Unit Gender Strategy & Action Plan Technical Assistance Safeguard Action Plans - EMF, PMP, Dam Safety Monitoring and Evaluation Subtotal Project Management 0.38 1.70 0.16 2.24 8.00 0.67 2.09 0.23 0.35 0.10 1.46 4.90 80.61 0.68 2.00 0.53 0.07 0.68 3.95 113.80 0.73 2.03 0.04 0.41 3.22 56.08 0.76 1.96 0.08 0.61 3.41 17.61 3.23 9.78 0.23 0.87 0.29 3.32 17.72 276.09 0.40 1.13 1.54 1.62 18.60 20.22 4.53 1.67 14.46 16.13 4.96 1.71 7.93 9.65 1.59 1.78 8.07 9.85 0.24 7.19 50.20 57.38 11.32 0.10 0.10 2.38 0.23 2.62 2.67 0.21 2.88 1.49 0.21 1.70 0.01 0.14 0.15 6.56 0.90 7.45 3.42 0.05 0.01 0.61 0.02 4.12 5.87 0.21 0.78 0.08 0.03 6.98 4.57 0.20 0.28 0.42 0.02 5.49 4.16 0.15 0.22 0.09 0.02 4.64 3.95 0.01 3.96 21.98 0.62 1.28 1.20 0.10 25.19 03/04 04/05 05/06 06/07 07/08 Total

36.49 4.87 41.36

75.35 5.02 80.37

35.29 35.29

147.13 9.89 157.02

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Annex 4 INDIA: Andhra Pradesh Rural Poverty Reduction Project Economic Assessment Introduction. The project consists of several inter-dependent components but they are all premised on developing and strengthening village-level institutions and on facilitating economic and non-economic opportunities for the rural poor. The cost-benefit analysis does not attempt to evaluate the entire project in terms of quantifiable economic or financial returns but analyzes the two largest components of the project -- Community Investment Fund and the Support to Out of School Children. The estimated project costs for the CIF is US$157 million (57% of the project) and the residential schools for girl children is US$50 million (18% of the project). Approximately 75% of the CIF has been estimated for productive (livelihood) activities and 12.5% has been estimated for infrastructure activities. The cost-benefit analysis focuses on assessing the financial viability of a representative set of productive and infrastructure CIF subprojects and the economic viability of residential schools for girl-out of school and school drop-outs. 1. Community Investment Fund (CIF) The evaluation of the CIF is based on an analysis of the financial viability of individual productive and infrastructure subprojects. The appraisal document for APDPIP analyzed several subprojects and the infrastructure investments have been retained as part of the cost-benefit analysis for this project. The infrastructure investments include (a) small drinking water supply scheme and (b) small rural roads. In addition, the proposed project has identified and collected data for four livelihood-related subprojects. These subprojects are representative of how the CIF may be used to support enterprises based on actual preferences of CBOs. The four models are based on cultivation/production of (a) dairy; (b) cashew; (c) land development and cultivation of sorghum and red gram; and (d) non-timber forest product of gum karaya. The cost-benefit model provides a framework through which most productive and infrastructure subprojects will be analyzed as part of the appraisal process. SERP and the PRIs will coordinate this process in which a threshold (most often 12%) will be used as the minimum financial return expected if CIF funds are to be approved. The cost-benefit models and assumptions for these illustrative subprojects are provided below: 2. Educational support for girl out of school and school drop-outs This component would provide greater access to education for out of school girls in the project areas. International experience has proven that education for girls is a prerequisite to sustained development and a basic element to support women in their important role in development. Education helps women to contribute to economic growth through both: (a) home productivity, such as better family care, improved health, greater attention to child education, nutrition and child survival rates, reduced fertility rates, home production; and (b) market productivity through self and/or wage employment in economic, social and political jobs. The particular situation of girls and the deficiencies of the existing schooling system to provide basic education for these groups in the project areas require special investments. On-going experience with

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residential, bridge and camp schools has demonstrated that these type of schools are successful to bring back working girls to school and to greatly reduce future drop-out rates. Results of the economic analysis: Since the proposed investment in residential schools is relatively more costly than regular day schools, a simple cost benefit analysis has been conducted for a single representative residential school. The assumptions of the analysis are shown in Table 2 with detailed notes attached to the table. The direct costs of the component include investment in the buildings, annual operational costs (teachers, meals, books, etc.), and the maintenance and repair cost for all facilities. Indirect costs are considered as foregone earnings of the working girls estimated at Rs 3,000 per year. This wage loss is partly off-set by savings in child support costs estimated at Rs 1,000 per year for such items as food and housing, when girls attend boarding schools instead of staying at home or at a work place. Assuming a modest incremental economic productivity of an educated girl (aggregated over a lifetime) with grade 10 of Rs 120,000 and with grade 12 of Rs 150,000 versus a girl with no basic school education, the cash flow analysis would result in an ERR of 12 percent. It should be noted that such incremental economic productivity should not be compared with actually achieved salaries (market place productivity). Even without finding a job, education would generate home productivity in the form of personal welfare in the life of those women and therefore economic value, and the grown-up girls as educated women and mothers would contribute to the welfare of their families and their own children as well. In this context the incremental productivity estimate is a very conservative assumption. Model for Educational Support to Girls component Other Issues related to Cost-Benefit Analysis A major lesson from APDPIP is the need for adequate capacity to undertake cost-benefit analyses and provide support to CBOs engaged in livelihood activities. SERP will need to strengthen its expertise in these areas in order to provide in-depth technical assistance on the financial viability of sub-projects. This is especially important given the shift towards supporting economic activities. Proposed measures to strengthen capacity and establish linkages to outside experts (e.g. trained Livelihood Associates) are described in the institutional arrangements for the project. In addition to these cost-benefit models, SERP has attempted to analyze several interventions (affecting an individual household or group) simultaneously to determine their aggregate impact on household/group cash flow and income. This more comprehensive approach to project impacts at the household/group level may provide a more different and insightful perspective than conventional analyses which are focused on single investments in isolation. SERP will use this approach to estimate the impact of multiple project interventions on a household or group.

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Table A4.1: Dairy Activities-Milk Production from Buffaloes (financial cost-benefits analysis)
Unit I Costs Investment Costs Buffaloes-2 ( @7500 each) Insurance @ 8.4% Total Operating Costs Feeding - lactation period Feeding - dry period Veterinary aid Labour Water & Power Total Total Costs II Benefits Sale of milk (1400 ltrs/buffalo@Rs 9 per ltr) Closing stock value Total III Net Benefits IRR Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Rs. Rs. Rs.

15,000 1,260 16,260

600 600

600 600

600 600

600 600

600 600

600 600

600 600

600 600

600 600

Rs. Rs. Rs. Rs. Rs. Rs. Rs.

7,425 2,393 225 1,825 600 28,728 44,988

12,375 3,988 375 1,825 600 19,163 19,763

12,375 3,988 375 1,825 600 19,163 19,763

12,375 12,375 3,988 3,988 375 375 1,825 1,825 600 600 19,163 19,163 19,763 19,763

12,375 12,375 12,375 12,375 3,988 3,988 3,988 3,988 375 375 375 375 1,825 1,825 1,825 1,825 600 600 600 600 19,163 19,163 19,163 19,163 19,763 19,763 19,763 19,763

12,375 3,988 375 1,825 600 19,163 19,763

Rs. Rs. Rs. Rs.

18,900

25,200

25,200

25,200 25,200

25,200 25,200 25,200 25,200

25,200 18,000 43,200 23,438

18,900 -26,088 19%

25,200 5,438

25,200 5,438

25,200 25,200 5,438 5,438

25,200 25,200 25,200 25,200 5,438 5,438 5,438 5,438

1 2 3 4 5 6

Assumptions: From the fourth year onwards one buffalo is replaced by its own progeny, every year The value of male calves is not taken into the analysis and could be assumed to be equal to their feeding cost Labor is at Rs 5 per day for 365 days per year The buffaloes are stall-fed; growing calves would require some feed, vet-aid (25% of the buffalo) The value of the buffaloes and the grown-up calves with the family is estimated to be Rs.18000, at the end of 10 years Insurance for milch animal costs Rs.300/year (with appropriate inflation in the cost)

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Table A4.2: Cashew Plantations (financial cost-benefits analysis) Unit Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

I Costs Investment Costs Preparation of land Digging of pits and filling back Cost of planting material * i) Planting & Staking ii) Workable Fence Total Operating Costs Manure, fertilizer (incl application) Plant protection Intercultural operations Pot watering Harvesting (24.5 person days @ Rs. Maintenance cost Total Total Costs II Benefits III Net Benefits IRR

Rs. Rs. Rs. Rs. Rs. Rs.

1,000 1,000 3,000 300 1,200 6,500

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

500 200 500 200 1,400 7,900 2,500 -5,400 25%

800 250 600 200 1,850 1,850 2,500 650

1,200 1,200 1,200 300 300 300 600 600 600 100 858 858 2,200 2,958 2,958 2,200 2,958 2,958 2,500 0 4,000

1,200 300 600 858 1,900 4,858 4,858 6,000 1,143

1,200 1,200 300 300 600 600 858 858 1,900 1,900 4,858 4,858 4,858 4,858

1,200 300 600 858 1,900 4,858 4,858

1,200 300 600 858 1,900 4,858 4,858 12,000 7,143

8,000 12,000 18,000 3,143 7,143 13,143

300 -2,958 1,043

Assumptions: 1 The discount rate is taken to be 12% as that is the rate at which CIGs are borrowing for land development activities (and other longer gestation projects). It is also the maximum lending rate at which commercial Banks lend for horticultural activities. 2 Cashew plantation has a much longer life (longer than 10 years) 3 No. of plants per hectare is 200 4 * @ Rs. 15/- each including 10% extra for gap filling 5 There is a 50% loss of crop output every 5 years 6 In the first three years income is generated from intercropping of red gram

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Table A4.3
I Costs Investment Costs

Land Development (financial cost-benefits analysis)

Unit Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Land Development (Contour Bunding, Silt Application, Gully Plugging, etc.) Rs. 4350 1595 Production Costs

1754.5

1929.95

Sorghum (ploughing, seeds, other inputs, weeding, harvesting,1050 1050 etc.) Rs. 1050 1050 transportation, 1050

1050

1050

1050

1050

1050

Red Gram (ploughing, seeds, other inputs, weeding, harvesting, transportation, 2100 Rs. 2100 2100 2100 2100 etc.) Total Costs II Benefits Sorghum (3.5 quintals @ Rs 450 per quintal)1575 Rs. Red Gram (2.5 quintals @ Rs 1200 per quintal) Rs. 3000 Total III Net Benefits Rs. Rs. 4575 -2925 1575 3000 4575 1425 1575 3000 4575 1425 1575 3000 4575 -170 1575 3000 4575 1425 Rs. 7500 3150 3150 4745 3150

2100

2100

2100 3150

2100 3150

2100 5079.95

3150 4904.5

1575 3000 4575

1575 3000 4575

1575 3000 4575 1425

1575 3000 4575 1425

1575 3000 4575 -504.95

1425 -329.5

Internal Rate of Return

0.3456

Assumptions 1 It is assumed that the inflation rate is 5% 2 Land Development investment is every three years.

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Table A4.4. NTFP Gum-Karaya (financial cost-benefits analysis)

Unit I Incremental Costs Training on good gum tapping practices, Rs. scientific intervention, tools & marketing Drying Platform Rs. Processing (Drying, grading, marketing, Rs. etc.) Rs. Total II Incremental Benefits Sale of Gum Karaya (w/good) Sale of Gum Karaya (base case) Incremental Net Returns Incremental Net Benefits Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

1,200

250

250

250

250

250

250

250

250

250

500 220 1,920

240 490

240 490

240 490

240 490

240 490

240 490

240 490

240 490

240 490

Rs. Rs.

4,638 4,100 538 -1,383

5,325 4,101 1,224 734

5,563 4,102 1,461 971

5,800 4,103 1,697 1,207

5,800 4,104 1,696 1,206

5,800 4,105 1,695 1,205

5,800 4,106 1,694 1,204

5,800 4,107 1,693 1,203

5,800 4,108 1,692 1,202

5,800 4,109 1,691 1,201

III

Rs.

IRR Production in Kilograms Grade A Grade B Grade C Total Prices (In Rs.) Grade A Grade B Grade C Returns Grade A Grade B Grade C Total Year 0 10 15 25 50

68% Year 1 Year 2 12.5 15 17.5 25 25 20 55 60 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 17.5 20 20 20 20 20 27.5 30 30 30 30 30 15 10 10 10 10 10 60 60 60 60 60 60 Year 9 Year 10 20 20 30 30 10 10 60 60

125 90 60

125 90 60

125 90 60

125 90 60

125 90 60

125 90 60

125 90 60

125 90 60

125 90 60

125 90 60

125 90 60

1,250 1,350 1,500 4,100

1,563 1,575 1,500 4,638

1,875 2,250 1,200 5,325

2,188 2,475 900 5,563

2,500 2,700 600 5,800

2,500 2,700 600 5,800

2,500 2,700 600 5,800

2,500 2,700 600 5,800

2,500 2,700 600 5,800

2,500 2,700 600 5,800

2,500 2,700 600 5,800

Assumptions: 1 Model estimates incremental net benefits from improved gum extraction and processing practices 2 It is assumed each person taps gum from 20 trees 3 Model assumes a ten year time horizon

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Cost-Benefit Calculation of Educational Support to Girls and Reduction of School Drop-outs cost-benefit analysis conducted for a single residential girl school
(values in INR million) Investment Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Costs (a) 0.34 1.01 0.34 Consultancy Supervision (b) 0.03 0.10 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 Maintenance Operational Support costs Costs (c) Costs (d) 0.4 1.6 4.0 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 Saved (e) -0.04 -0.16 -0.40 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 -0.56 Foregone Earnings (f) 0.12 0.48 1.20 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 0.85 3.03 5.17 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 40 160 400 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 560 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 18.7 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 65.3 Total Costs # of girls # of girls (g) # of girls (h) Incremental productivity grade 10 (I) 0 0 0 0 0 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 grade 12 (j) 0 0 0 0 0 0 0 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 9.8 0 0 0 0 0 2.24 2.24 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 12.04 Total Benefits

Net
Benefits

enrolled finishing 10 finishing 12

-0.85
-3.03 -5.17 -6.75 -6.75 -4.51 -4.51 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29 5.29

ERR a/cost of residential school complex estimated at 1.68 million b/consultancy and supervision costs estimated at 10% of investment costs c/maintenance costs of buildings (e.g. furniture, equipment, repairs, etc.) estimated at 2% of investment costs d/operational costs estimated at 10,000 per student per annum e/support costs saved estimated at 1,000 per year based on expenditures saved by parents when girls are in school f/ foregone earnings estimated at 3,000 per year per student g/20% of girls leave the school after grade 10 (10% drop-out and 70% leave after grade 12) -- avg duration is 6 years h/70% of girls leave the school after grade 12 (10% drop-out and 20% leave after grade 10) -- avg duration is 6 years I/The average incremental productivity (lifetime) for a grade 10 education is estimated at 120,000 I/The average incremental productivity (lifetime) for a grade 12 education is estimated at 150,000

12.1%

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Annex 5: Financial Summary INDIA: Andhra Pradesh Rural Poverty Reduction Project
Years Ending IMPLEMENTATION PERIOD Year 1 Total Financing Required Project Costs
Investment Costs Recurrent Costs

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Total Project Costs Total Financing Financing

IBRD/IDA Government Central Provincial Co-financiers User Fees/Beneficiaries Commercial Banks/MFI

5.9 2.1 8.0 8.0 4.3 1.8 0.0 0.0 0.0 0.4 1.5 8.0

76.0 4.6 80.6 80.6 43.8 17.5 0.0 0.0 0.0 4.1 15.2 80.6

105.7 8.0 113.7 113.7 61.8 24.7 0.0 0.0 0.0 5.7 21.5 113.7

45.6 10.5 56.1 56.1 30.5 12.2 0.0 0.0 0.0 2.8 10.6 56.1

6.9 10.7 17.6 17.6 9.6 3.8 0.0 0.0 0.0 0.9 3.3 17.6

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0

0.0 0.0 0.0

Total Project Financing

0.0

Main assumptions:

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Annex 6(A): Procurement Arrangements INDIA: Andhra Pradesh Rural Poverty Reduction Project
Procurement

A. Procurement Implementation Capacity The State of Andhra Pradesh (AP) has a rich experience in implementing procurement under the Bank financed projects. The Government Officials at various levels are by and large familiar with the procurement procedures in Bank financed projects. The proposed Andhra Pradesh Rural Poverty Reduction Project (APRPRP) is essentially a community driven project. Another important component of the Project is procurement of civil works for 64 numbers of school buildings. Procurement of goods and equipment comprises a small portion of the Project. However, it has a substantial component for consultancy most of which are small contracts below US$100,000. The project (except the school component) will be managed by the same agency which is implementing the ongoing APDPIP i.e. Society for Elimination of Rural Poverty (SERP). The school component will be implemented by AP Social Welfare Residential Educational Institution Society (APSWREIS). Both these organizations are familiar with Banks procurement procedures. SERP which will be implementing the APRPRP, has acquired rich experience of implementing community driven project with similar objectives during the last two years. Further, during these two years, SERP has focused on process, which has resulted in a committed cadre of young women and men who have been sensitized and oriented in the project objectives and goals which includes implementation of community driven subprojects. The SERP has also, through a series of workshops and training programs, build up capacity of the staff positioned for the proposed APRPRP. However, they need the help of outside consultants for preparation of bidding documents. These consultants are already in place. The construction supervision for the schools will be carried out by the Andhra Pradesh Health and Medical Housing and Infrastructural Development Corporation (APHMHIDC), a government of Andhra Pradesh undertaking. This agency has sufficient experience in implementing Bank financed projects, and has also sufficient skilled personnel. In order to ensure that the procurement procedures are followed and guidance is available to the field staff, SERP will appoint a full time procurement manager at the State level. Further, the district CIF coordinators will act as Nodal Officers for the procurement purpose. The capacity building of community coordinators, community organizations and the implementation staff will be a continuous process. The process of capacity building being followed in DPIP, will be replicated in APRPRP as well. In APSWREIS, there will be a full time engineer to coordinate the procurement of school buildings and related items. Procurement Risk There is a potential risk in having a large number of contracting done at community level. Experience in other community based projects emphasize the need for a strong monitoring mechanism including social audit which considerably reduce the inherent risk. The proposed Project has detailed a monitoring mechanism for monitoring and evaluation to ensure efficient completion of the Project and achievement of the objective there-of. The Terms of Reference (TOR) for the monitoring agency should specifically include physical verification of the assets created under the CIFs. The project design is based on the concept of bottom-up planning, and most of the activities under the project would be decided by village communities. Distribution Profile

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The Project is designed on the concept of bottom-up planning and demand-driven activities. In terms of priority the first task would be to support groups of most disadvantaged people and empower them to participate in village development processes. Experience has shown that this takes around six months. Therefore, the disbursement profile would be flat during initial period and pick-up gradually. Procurement Arrangements All project activities to be financed under the Credit would be procured in accordance with the Bank Guidelines for procurement of Goods, Works and Consultancy Guidelines for hiring Consultancy Services (including NGO Services) to be financed under the Credit. All civil works, goods and services would be procured using India specific Banks model documents as well as the formats of the community contracts specifically approved for the Project. Domestic preference will apply in case of ICB contracts. Specific procurement arrangements summarized in Table A are as follows: Community Investment Fund (US$169.70 million): The project would finance small sub-projects proposed by Common Interest Groups on a demand driven basis, such as village approach or link roads, community halls, watershed development, strengthening of health care centers, improving animal health care and breed upgradation facilities, drains, minor irrigation works, wells, drinking water arrangements, etc. The sub-projects would also finance procurement of productive assets such as creation of micro enterprises, livestock development, value addition to farm produce, trading, etc. The sub-projects would also finance the hiring of services or training of community members, wherever these would be managed by the communities themselves. NGOs'/CBOs (Community Based Organizations) assistance would be taken for preparation of sub-projects. The Project would be located in 500 mandals in spread over 16 non-DPIP districts. The value of each sub-project would vary between US$1,500 and US$30,000 equivalent. There will be approximately 10,500 sub-projects financed under this Project. Procurement would be in accordance with para 3.15 of the Guidelines. The format for community contract will be the same as that adopted under the DPIP. The agreed procedures for community procurement are as follows: Works: (a) direct contracting with registered NGOs or local community organizations such as Common Interest Groups; (b) lump-sum fixed-price/unit rate contracts with qualified contractors awarded on the basis of quotations obtained from at least 3 qualified domestic contractors in response to a written invitation; or (c) community carrying out the works themselves and taking up technical/managerial assistance from government agencies or NGOs or hiring services of individual experts. Goods: (a) The goods estimated to cost less than US$500 per contract may be procured through Direct Contracting procedures, (b) Goods estimated to cost more than US$500 per contract will be procured under Shopping procedures on the basis of at least 3 quotations, and (c) In accordance with established commercial practices after obtaining prior clearance from SERP. Purchase of Lands: The procedures for purchase of lands shall be in accordance with the measures indicated in Attachment 2 of Annex 2 of this document and detailed procedures shall be described in the 'Operational Manual'. The procedures under the Operational Manual shall be acceptable to IDA. Civil Works (US$22.24 million): The civil works under the project include construction of about 64 schools spread over 16 districts of the Project. The approximate cost for construction of each school will be approximately US$340,000. The works are scattered over 16 districts and small in value. As such, foreign contractors are not likely to participate in the bids for these works. The works will therefore be carried out following National Competitive Bidding procedures in accordance with para 3.3 and 3.4 of the Guidelines. Foreign bidders, however, would not be precluded from participating under NCB

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procedures. The procedures acceptable under NCB are given as attachment 1 to this annex. Goods, Equipment, Furniture and Supplies (US$5.97 million): NCB: Goods estimated to cost less than the equivalent of US$200,000 per contract (e.g., furniture, text books, computers and peripherals, office equipment, training equipment etc.) up to an aggregate value of US$3.30 million would be procured following NCB procedures in accordance with the provisions with the para 3.3 and 3.4 of the guidelines. National Shopping: Goods estimated to cost less than US$30,000 per contract (e.g., small items of equipment, urgent requirements of computers, audio-visual equipment, furniture, vehicles, etc.) would be procured by the various implementing agencies in small lots using National Shopping procedures in accordance with paragraphs 3.5 and 3.6 of the Guidelines, up to an aggregate amount of US$2.56 million. Rate contracts of the Directorate General of Supplies and Disposals (DGS&D) would be acceptable as a substitute for National Shopping. Direct Contracting: Goods and equipment of proprietary nature estimated to cost less than US$10,000 equivalent per contract upto an aggregate of US$0.10 million (e.g., books, periodicals, extension and publicity materials, software, proprietary equipment and spares, etc.) would be procured using direct contracting procedures in accordance with paragraph 3.7 of the Guidelines. Petty items costing US$500 equivalent or less subject to an aggregate amount of US$10,000 would be procured following paragraph 3.7 of Guidelines. Training and Consultancies (US$11.91+30.14 million): The project involves massive efforts in capacity building for the implementation staff, NGOs, community groups and officials of the line departments. The project will need to train the implementation staff consisting of project directors, additional project directors, project managers, project executives, district project managers, assistant project managers. There will also be a large number of community coordinators who will also need to be trained to perform their tasks. At the community level, the project which covers around 500 mandals will need to buildup capacity of village level Self Help groups which through appropriate training. In addition, NGOs at which all the line department staff will also need the training. The training modules and the training requirement have been finalized during the two years of operation of DPIP and this will be replicated in APRPRP. The important consultancies have been identified as i) Monitoring and evaluation, including baseline survey, process monitoring and impact evaluation. ii) Consultancy for eradication of out of school children by bringing them back to education. iii) Environment impact and monitoring. iv) The project management consultancies for school component. v) Consultancies for preparation of plans, estimates, designs, drawings, specifications and the bidding documents for school buildings. Consultancies and studies would be contracted on terms and conditions that are in accordance with IDA guidelines for the use of consultants (January 1997 and revised in September 1997 and January 1999). Technical Assistance and consultancy services would be procured using QCBS procedures. For contracts with consulting firms/institutions valued below US$100,000 equivalent per contract, procurement would follow QCBS or methods based on consultants qualifications or single source selection depending upon the appropriateness of the procedures relevant to the requirements. For individual consultants, this

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threshold would be US$50,000 equivalent per contract. The standard request for proposals and conditions of contract would be used for all contracts. The consultancy for Monitoring & Evaluation will be contracted on Single Source basis. The aggregate threshold for Single Source Consultancy shall be US$3.97 million. Since most of the cost, other than the five consultancies mentioned above, would be through community-based organizations, their selection would be based on Consultants Qualification. The threshold for selection based on Consultants Qualification will be US$22.63 million. The remaining consultancy will follow the QCBS method of selection. Preparedness of the project for implementation: Following steps have been taken by the Government of Andhra Pradesh:

Procurement Plan and Procurement Schedule has been prepared. Key project staff has been put in position, training and awareness programs have been carried out. Sites for all the 64 schools have been identified. The land is also transferred to APSWREIS for 62 schools. Preparation of bidding documents for the school buildings is in progress. The consultants for M&E have been identified. The following steps are required prior to negotiations for implementation of the project.

The bidding documents for construction of schools (at least 25 numbers should be forwarded to the Bank. Review by the Bank of Procurement Decisions: (Table B) Procurement Planning Prior to the issuance of any invitations to pre-qualify for bidding or to bid for contracts, the proposed procurement plan for the project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods and works shall be undertaken in accordance with the procurement plan which shall have been approved by the Bank and with the provisions of said paragraph 1. Annual Procurement Plans would be reviewed by IDA/Bank. Prior Review of Contracts Civil Works and Goods Contracts. All packages for works contracts above US$300,000 and contracts for goods exceeding the equivalent of US$100,000, and the first two contracts for goods above US$50,000 would be fully documented and subject to Prior Review by the Bank. Similarly, first two contracts by Common Interest Groups would also be fully documented and subject to prior review by the Bank as per the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Bank Guidelines. Further, first two contracts for purchase of lands by the Community would also be fully documented and subject to prior review by the Bank. Consultancy Contracts. Prior review procedures would be as follows:

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(a) With respect to each contract for employment of consulting firms/institutions estimated to cost the equivalent of US$100,000 or more, the procedures set forth in paragraphs 1, 2 (other than the third sub-paragraph of paragraph 2(a)) and 5 of Appendix 1 to the Consultant Guidelines shall apply; (b) With respect to each contract for employment of consulting firms/institutions estimated to cost the equivalent of US$50,000 or more but less than the equivalent of US$100,000, the procedures set forth in paragraphs 1, 2 (other than the second subparagraph of paragraph 2(a)) and 5 of Appendix 1 to the Consultant Guidelines shall apply; and (c) With respect to each contract for the employment of individual consultants estimated to cost the equivalent of US$50,000 or more, the qualifications, experience, terms of reference, and terms of employment of the consultants shall be furnished to the Association for its prior review and approval. Post Review Works and Goods: The contracts below the prior review threshold for Works and Goods shall be subject to post- review as per the procedure set forth in paragraph 4 of Appendix 1 of the Bank Guidelines; and Technical Assistance, Studies and Training: Contracts for the employment of consulting firms estimated to cost less than US$100,000 and contracts for the employment of individuals estimated to cost less than US$50,000 shall be subject to post-review provided that the generic TORs and shortlists for critical assignments have been cleared with the Bank. Procurement Information: Procurement information would be collected and recorded as follows: (a) (b) Prompt reporting of contract award information by SERP/ APSWREIS Comprehensive semi-annual reports by SERP/ APSWREIS indicating: (i) revised cost estimates for individual contracts and the total cost; (ii) revised timings of procurement actions, including advertising, bidding, contract award, and completion time for individual contracts; and (iii) compliance with aggregate limits on the specified methods of procurement; and Completion report by the Borrower within three months of the Credit Closing Date.

(c)

Procurement Schedule and Proposed Procurement Arrangements: The proposed packages and the Procurement Schedules for goods/equipment required for capacity-building and project management have been provided by the SPU. The project elements, their estimated costs, and proposed methods of procurement are summarized in Table A. Figures in parentheses are the respective amounts to be financed through the IDA credit.
Procurement methods (Table A)

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Table A: Project Costs by Procurement Arrangements (US$ million equivalent)

Procurement NCB 0.00 Method 2 Other 169.70
1

Expenditure Category 1. Community Investment Fund (CIF) 2. Works 3. Goods 4. Services 5. Training 6. Operating Costs Total

ICB 0.00

N.B.F. 0.00

Total Cost 169.70

(0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00)

(0.00) 22.24 (16.68) 3.30 (2.64) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 25.54 (19.32)

(77.83) 0.00 (0.00) 2.67 (2.14) 30.14 (27.81) 11.91 (11.32) 0.00 (0.00) 214.42 (119.10)

(0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 0.00 (0.00) 36.12 (11.62) 36.12 (11.62)

(77.83) 22.24 (16.68) 5.97 (4.78) 30.14 (27.81) 11.91 (11.32) 36.12 (11.62) 276.08 (150.04)

1/ 2/

Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies. Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

Expenditure Category 1. Works 2. Goods

Contract Value Threshold (US$ thousands)

Procurement Method

Contracts Subject to Prior Review (US$ millions)

300 >30 to <200 < 30 >10 to <30

NCB NCB Shopping Direct contracting First two contracts above US$ 50,000 and all contracts above US$ 100,000

3. Services 4. Vehicles 5. Community Investment Funds

< 100,000 <30

Shopping/DGS&D Rate contract Quotation/Direct Contracting/Community Participation Direct Contracting QCBS CQ, sole source or any other method as per

First two contracts for Works/Goods and first two contracts for purchase of lands Prior review Post award review except TOR of

6. Consulting services by NGO services, Training by firms

<0.5 >100 <100

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guidelines QCBS

Generic nature and the short-list for critical assignments Prior award review

7. Consulting Services by Individuals.

>50 <50

CQ, sole source CQ, sole source Post award review

Total value of contracts subject to prior review: Overall Procurement Risk Assessment Average

US$ 25 million

Frequency of procurement supervision missions proposed: One every 6 months (includes special procurement supervision for post-review/audits). Since the number of community contracts would be more than 10,000 in numbers the Post Award review will be less than 5% of the contract and would be less than the requirement under average risk project. Attachment 1

Only the model bidding documents for NCB agreed with the Government of India Task Force as amended from time to time, shall be used for bidding. Invitations to bid shall be advertised in at least one widely circulated national daily newspaper, at least 30 days prior to the deadline for the submission of bids. No special preference will be accorded to any bidder when competing with foreign bidders, state-owned enterprises, small-scale enterprises or enterprises from any given State. Except with the prior concurrence of IDA, there shall be no negotiation of price with the bidders, even with the lowest evaluated bidder. Except in cases of force majeure and/or situations beyond the control of the state, extension of bid validity shall not be allowed without the prior concurrence of IDA: (i) for the first request for extension if it is longer than eight weeks; and (ii) for all subsequent requests for extension irrespective of the period. Re-bidding shall not be carried out without the prior concurrence of IDA. The system of rejecting bids outside a pre-determined margin or bracket of prices shall not be used.

Rate contracts entered into by by DGS&D will not be acceptable as a substitute for NCB procedures. Such contracts will be acceptable for any procurement under National Shopping procedures. _____________________________________________________________________________ 1 Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation" and contact the Regional Procurement Adviser for guidance.

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- 95 -

Annex 6(B) Financial Management and Disbursement Arrangements INDIA: Andhra Pradesh Rural Poverty Reduction Project Financial Management 1. Summary of the Financial Management Assessment Country Issues (a) The issue of availability of funds on a timely basis to APSERP & APSWREIS applies to the project to the extent that this is a state sector project and that state sector projects are generally more vulnerable to this problem. As part of the reform processes, GoAP have introduced a mechanism of releasing funds required for project implementation for two quarters at the start of the year. The GoAP have also introduced a system of regular reviews of project outputs and financial performance. In addition, GoAP has demonstrated a high level of commitment to the project and have assured the Bank that counterpart funding for the project will be accorded the highest priority. (b) Quality and timeliness of audit reports and response/follow-up of audit findings has been noted in many states/administrations. However, APDPIP has demonstrated through their pro-active approach in responding to and resolving audit observations that this will not be an issue in this project. APDPIP has also had a good record of timely submission of audit report in the ongoing project. Issues relating to the quality of CAG audit reports will not apply here as the project audit will be undertaken by a firm of chartered accountants. (c) Though at the country level, delays in submitting withdrawal applications has been an area of concern, GoAP has had an excellent record of timely submissions of withdrawal claims in APDPIP. APDPIP has had a slow start and overall disbursements as on October 2002 stands at 11% with a disbursement lag of 6 months. However, it is recognized that the community driven projects have a longer start up period required for mobilization and formation of groups. In addition, the APDPIP experiences will help the project to accelerate the preparation process. The tools, facilities, systems and processes developed and tested for the APDPIP will be replicated across to the new districts and this will give the headstart required to ensure that disbursements are apace with the plans. The project has also made a good start in setting up district level offices, appointing staff, identification and acquisition of land for construction of new schools, preparation of bidding documents etc. Strengths and Weaknesses Strengths The project has the following strengths in the area of financial management: (i) This is the second project being implemented by APSERP and APSWREIS and hence the project personnel are trained in Banks disbursement procedures. The project activities in the new project are quite similar to APDPIP, with the exception of some new components and thus the implementation arrangements remain similar. APSERP and APSWREIS are registered societies and follow a standard double entry accounting system; A project financial management manual for APDPIP is in place and is being followed this has been enhanced to cover the new areas of work. The project is preparing regular financial management reports. The current manual accounting systems have been tested and will be replicated in the new project. A system of timely submission of accounts from districts to the state level already exists.
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(ii) (iii)

(iv)

(v) (vi)

A computerized financial accounting and management system is currently being developed. GoAP has demonstrated a high level of commitment to the project and during discussions on the fund flow processes assured the Bank that the releases of funds during the life of the project will be accorded the highest priority.

Significant weaknesses Significant weaknesses Though the manual accounting system in place has been well tested in SERP and FMRs have been produced in time, these reports are currently limited to financial information only and have no details of procurement and linkages of financial information with physical performance. Resolution The FMM has been revised to cover compilation of the information required at each accounting center. This information will be included in the internal reports and will allow the SPMU to provide compiled reports on procurement financial reports linked with physical achievement for key project activities. The revised FMM has clear guidelines on the accounting processes to be followed for sub-project payments and accounting for beneficiary contributions in kind/material.

Accounting for sub-project payments (on receipt of certification of physical achievements), beneficiary contributions in kind etc. are not clearly understood and uniformly implemented these remain areas of weakness in the accounting system. The inability to implement the computerized SERP is in the final stages of development of financial management system prepared for APDPIP a new financial management and accounting has set back the process of computerization. software and this is being tested at selected locations. The system should be ready for implementation at all accounting centers by 30 September 2003. The capacity of CBOs for book-keeping and One of the critical functions of the project accounting and financial management is very will be to enhance capacity of the limited. They will need support in maintaining the community in bookkeeping and accounting. books of account. Training on the projects expectations of the accounting arrangements will be provided to the MSCC team members by SERP or SERP appointed consultants. Staffing & Training:

Given that the scope of work will increase from managing the financial affairs of 180 Mandals (APDPIP) to an additional 500 Mandals in 16 districts, the capacity and number of staff required to handle the additional responsibilities will need to be substantially enhanced. A detailed staffing plan has been drawn up which is a part of the project implementation plan (PIP). APSERP SPMU: The finance function at SERP will be headed by a senior officer from the Central/State finance cadre, who will be responsible for the two projects. This is considered important to bring synergies between the management of the two projects and ensure that lessons learnt are shared. In addition, APSERP will appoint two Finance Managers, who would be qualified chartered accountants to individually manage the two projects. This team will be supported by accountants and accounts assistants to form Regional Teams responsible for the day to day management of the operations.

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APSERP DPMU/TPMUs: Since the finance functions is substantially decentralized, it will be important to ensure that the DPMU/TPMUs are staffed with competent District Finance Managers (DFMs) with suitable experience in modern accounting and financial practices. The DFMs will have the overall responsibility for all accounting and financial aspects including accounting and reporting arrangements for the Mandal Parishads, TPMUs, if applicable, Mandal Community Support Cells and the SPIAs at the District level. The DFMs will assisted by Accounts Officers and Assistants, as per the requirement. APSWREIS - Given that the scope of work will increase from managing the financial affairs of 24 residential schools (APDPIP) to an additional 64 schools in 16 districts in the proposed project, the capacity and number of staff required to handle the responsibilities will need to be substantially enhanced. While the present Finance Officer will continue to be responsible for the oversight functions and will head the Unit, s/he will need to be supported by a fully dedicated Assistant Finance Officer, who would be semi-qualified professional with experience in modern accounting and financial practices. In addition, there will be two separate Teams, for APDPIP and APRPRP, each headed by Accounts Officers, from the State Accounts Services suitably experienced in managing projects of similar size and scope, to be responsible individually for the day-to-day management of the two projects. At the District level, the constituent management Units will need to have experienced Accounts Superintendents to handle the day-to-day accounting and reporting functions. It has also been agreed that one Officer from the State Accounts & Finance cadre will be appointed to be responsible for regular visits to the schools and arranging regular training programs for the Accountants at all the schools. Sub projects implemented by SPAs: The SPA will have a trained accounts book-keeper. This will be a condition for signing of the sub-project agreement. Training: Since the project financial and accounting staff would be newly recruited, and have not been involved in the design of the project and the design of the financial management system, they need to be trained in the requirements of accounting and reporting under the project. The accounting staff will also need to be trained to operate the computerized financial management system, once it is ready. Though the State of Andhra Pradesh has a long history of well managed Self-Helf groups and have demonstrated abilities of book-keeping and accounting arrangements, the management of CIF funds will need additional capacities to be built at community organization levels. Reviews of APDPIP experiences indicate that this remains an area of weakness. APSERP will be required to pay special attention to the capacity building interventions and prepare a comprehensive training strategy and plan to provide training and build a cadre of well trained community level cadre of book-keepers and accountants. Model books of accounts and reports prepared and tested for APDPIP need to be widely circulated and used during the training programs as resource material. Some of the important lessons learnt from the APDPIP and other DPIPs/CDD projects are: Community Facilitators (CF) at the Mandal Community Support Cells need to be trained in book-keeping and accounting requirements for the SPIAs. They work in close touch with the SPIAs and can be an important resource to train and build capacity at the community level; Special initiatives taken to provide training in book keeping to identified semi-literate persons from the communities can build a cadre of bare-foot book keepers. These trained resource persons can be promoted to provide services to multiple SPIAs on payment of fees.

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The formation of VOs and Mandal Federations/Samakhyas promoted under the project with an objective to ensuring sustainability of the community based organizations, though not funded under the project need substantial training inputs for management of self-generated funds. At the VOs and Mandal Federations/Samakhya level, accounting hubs could be set up by hiring the services of an accountant/book keeper and all the SPIAs could be encouraged to bring their vouchers and bank books on a regular basis to the hubs for the accounting books to be updated and reports prepared. APDPIP could use the cadre of `master book keepers available to run the `accounting hubs.

Accounting Policies and Procedures The Financial Management Manual prepared and used for APDPIP has been further developed to cover the accounting and reporting arrangements for the new project. The Manual lays down in detail the applicable accounting policies and procedures. The Manual also has separate sections for the bookkeeping and accounting arrangements for APSWREIS, ITDA and the SPAs. Books of accounts for the project would be maintained using double-entry bookkeeping principles. Standard books of accounts (cash and bank books, journals, ledgers, etc.) would be maintained at the SPMU, DPMU/TPMU and APSWREIS. The books of accounts will be maintained on a manual basis until the integrated computerized accounting system being developed and tested is operational. A Chart of Accounts has been developed to enable data to be captured and classified by expenditure center, budget heads, procurement methods, project components/activities, and disbursement categories. This matches closely with the classification of expenditures and sources of funds indicated in the project documents (Project Implementation Plan and Project Cost Tables). The key issues that have been addressed in the design of the accounting policies & procedures are: Accounting entries for recording the beneficiary contributions in kind will be made on the basis of certification of achievement of the specific milestones as laid down in the Sub-project agreements (specifying the contributions in kind linked to each milestone). Releases of installments against the sub-project agreements will be recorded as expenditures in the books of accounts of APSERP. All other releases of funds to accounting centers (DPMUs, Mandal Support Cells, Mandal Parishads, ITDAs, APSWREIS management Units) will be accounted for as advances in the books of accounts of and adjusted to expenditures only on submission of expenditures. All reported expenditures by ITDA, Mandal Support Cells and Mandal Parishad and any other agencies to whom funds are released under the project (with the exception of SPIA and other lump sum contract based payments to contractors, suppliers, consultants etc.) will be accounted for in the books of accounts of APSERP and APSWREIS. At all accounting centers, separate books of accounts will be maintained for the project funds as per the requirements specified in the Financial Management Manual.

SPIAs will maintain accounts records/registers as follows: (i) Cash/bank Book; (ii) contributions received in cash/labor/materials; (iii) materials purchased and utilized. In addition, the SPIAs will retain all vouchers, bills, supporting documents and ensure that the Bank pass books are regularly updated. Similar accounts will be maintained for the Operation & Maintenance Bank account and reports submitted to its members and Gram Sabha.

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As part of the pilots under the project, it is proposed that some of the CIF activities will be implemented through the PRI. At the GP level, the existing accounting system will be used. The formats of the financial reports to be submitted on a regular basis have been agreed and are documented in the Manual. GP will maintain a separate Bank account to account for the project. Financial Management Arrangements at the Community Level: The Operations Manual for CIF documents in detail the financial management arrangements being put in place at different stages of the sub-project cycle. The selection and appraisal criteria of the sub-projects require that detailed assessment of the group's track record of managing their savings schemes are carried out and documented. At each of the subsequent stages of the sub project preparation, supporting documentation provides details of the accounting and fund management arrangements agreed for the implementation of the sub-project. Release of funds on the approval of the sub project, are based on the sub project meeting the conditions required for ensuring that satisfactory financial management arrangements (as documented in Addendum 2 of the model Agreement) are in place. These conditions include (a) the CIG has a trained book keeper; (b) the CIH has demonstrated financial management capacity on its initial savings activities; and (c) up to date submission of monthly financial statements. The monitoring responsibilities rest largely with the Community Facilitators, whose specific tasks in the areas of accounting and financial management include (a) working out fund management arrangements; (b) opening of separate bank accounts and collection of upfront contributions; (c) facilitate signing of MoU and release of funds; and (d) follow-up on monthly financial reports. 2. Audit Arrangements Notwithstanding the statutory audit of SERP, APSWREIS and other agencies by the Comptroller and Auditor General of India, the independent auditors for the financial audit of the project would be a firm of Chartered Accountants, appointed by SERP, SPMU. The qualifications of the firm of chartered accountants would be subject to review by IDA. The Terms of Reference of the auditors have been agreed with the Association and will form part of the Financial Management Manual. The audit will be carried out in accordance with the International Standards of Auditing. The audit would cover all the accounting centers and include an audit of financial transactions and an assessment of the operation of the financial management system (including internal control mechanisms). The Project Auditor would carry out sample audit of the records and accounts of the SPAs to ensure conformity to the projects financial policies and the sub-project agreement. The audit would be carried out on a quarterly basis. The cost of this audit would be eligible for financing from the IDA Credit. The auditors would be selected in accordance with the World Banks Guidelines for Selection of Consultants. The annual project financial statements audited by the firm of Chartered Accountants would be submitted within 6 months of the close of GoAPs fiscal year. The following audit reports will be monitored in the Audit Reports Compliance System (ARCS): Implementing Agency APSERP & APSWREIS Department of Economic Affairs/GOI Audit SOE/Project Audit Special Account Auditors A firm of Chartered Accountants Comptroller and Auditor General

The nature of the project is such that project funds would be made available to a large number of community groups who are not registered legal entities. These groups would be new and established for

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the project. The financial management arrangements set up would emphasize on providing local level transparency, social audit and self-accountability. These measures would include a simple summary of the accounts (amounts received from the members and the project, amount spent and balances in hand) will be publicly posted in the notice board in the Gram Sabha. In addition, the books/registers, vouchers and bank pass books would be open for perusal by members. This would be in addition to sample audit by the project auditors. APDPIP (CR- 3332 IN) audit reports for the year 2000-01 have been submitted on time and there is no history of audit compliance that are applicable. The entity audited financial statements for the two primary implementing agencies, APSERP and APSWREIS for the last two financial years were reviewed.

The review of the audit reports made available during the review, indicated that though the reform
measures taken by APSWREIS have resulted in improved quality of financial management and acceptable financial and accounting arrangements, the earlier balances of advances (as on 31 March 2001) amounting to Rs. 1,200 million remains unadjusted in the books of accounts of APSWREIS. These largely relate to earlier years (prior to 1999) and are on account of payments made by APSWREIS to AP Scheduled Caste Corporation (a public sector enterprise of GoAP) for construction of school buildings. APSWREIS has prepared detailed action plans for the resolution and adjustment of the pending advances. Substantial progress has already been made to initiate the process and it is expected that the proposal for the final adjustment of the advances, clearing all pending balances, will be submitted to the Executive Board of the Society by 31 December 2002. The Bank will continue to review the entity audit reports of APSWREIS and APSERP to monitor the overall institutional financial management issues. Reporting and Monitoring

The monthly reporting formats from each of the accounting centers (APSERP and APSWREIS) have been designed to provide summarized monthly financial information on the fund flows, balances in
cash/bank, status of advances and expenditures classified by project components/activities, disbursement categories, procurement methods etc. The monthly and quarterly reports will be compiled by

APSERP to provide integrated project financial management reports.

The annual audited project financial statements, to be provided by GoAP to IDA would comprise: (a) a consolidated Project Sources and Application of Funds for the whole project; (b) classification of expenditures by project activities/components and disbursement categories; (c) consolidated statement of withdrawals (for the whole project) from the IDA Credit made on the basis of Statements of Expenditures (SOEs) and documented claims; and (d) reconciliation of reported expenditures with the total withdrawal claims submitted during the year. SPIAs will prepare a simple report summarizing (i) the sources and uses of funds, indicating the balances in cash/bank; (ii) activities completed, cost and activities to be completed in the next month); (iii) contributions in labor and materials. The report will be presented to its members and in the Gram Sabha and provide all records for scrutiny by members. The submission of the financial report will be required as a pre-condition for release of subsequent tranches against the sub-project agreements. Computerized Financial Management System The software developed during the preparation of the APDPIP could not be implemented due to technical

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and implementation issues and has since been abandoned. APSERP has initiated a new process of development of the software required for the accounting and reporting functions under the project. The software is being developed in-house by programmers and has been substantially completed. The key issues considered while developing the design of the software were: Integration with the MIS system qualitative information on the sub project proposals/contracts tracked in the MIS system are linked by common code numbers in the FMS system. Financial information relating to the sub-project contracts are tracked by the same code numbers.

The system would allow accounting of multiple projects and overall consolidation at the entity level.
The system would be used by APSERP and APSWREIS for project accounting for APDPIP and APRPRP as well as other activities.

Since the system is at preliminary stages of testing, the design of the financial management system for the proposed project is based currently on manual books of accounts. After successful testing and parallel runs for at least one year, the manual systems may be discontinued. Impact of Procurement Arrangements The nature and type of the contractual arrangements with the SPIAs lay the basis of accounting at the APSERP. As has been envisaged, the APSERP will enter into contractual arrangements with SPIAs. These agreements will be based on lump sum contracts with payments based on performance milestones agreed and documented in the contracts. The achievement of the performance milestones will be certified. Thus, APSERP will only need to account for the release of performance-based installments. 3. Disbursement Arrangements Disbursements from IDA/ABRD credit/loan would initially be made in the traditional system (replenishment and reimbursement with full documentation and against statement of expenditure) and could be converted to the Report based disbursements at the option of the GoAP and GoI after the successful demonstration of regular, timely and adequate Financial Monitoring Reports. A Special Account would be maintained in the Reserve Bank of India; and would be operated by the Department of Economic Affairs (DEA) of Government of India (GOI). The Special Account would be operated in accordance with the Bank's operational policies When existing disbursement procedures are used, the authorized allocation of the Special Account would be US$10 million which represents about four months of estimated disbursements from the IDA Credit. The authorized allocation would be US$5 million until the aggregate disbursements from the IDA Credit reach the equivalent of SDR 30 million. The Special Account would be replenished monthly or when 20 percent of the advance to the Special Account has been utilized, whichever occurs first. APSWREIS & APSERP will compile the financial information from all its management constituent agencies and prepare reimbursement claims on a monthly basis. APSWREIS will forward the monthly claims to APSERP, who will be responsible for submission of the withdrawal applications to CAA&A in DEA for onward submission to the Bank for replenishment of the special account or reimbursement. Disbursements will be made on the basis of statement of expenditure for (a) Community Investment Funds; (b) civil works for contracts not exceeding US$300,000; (c) goods, equipment and vehicles for contracts not exceeding US$100,000 equivalent; (d) services under contracts not exceeding US$100,000 for employment of consulting firms and US$50,000 for employment of individual consultants,

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respectively; and (e) incremental operating and maintenance costs. Retroactive Financing: Retroactive financing up to an amount of SDR 5.1 million, would cover eligible expenditure for implementing activities after 01 June 2002. Retroactive financing would support civil works, purchase of goods, equipment & vehicles, consultancies, training, incremental operating costs, and school operating costs in temporary facilities. Supervision Plan From a financial management perspective, the project will need intensive supervision. The focus during the supervision will be on building capacity of SPAs, PRIs and internal controls, fund flows, assessment of delays and lags in reimbursements and evaluation of entities and process.
Allocation of credit proceeds (Table C)

Table C: Allocation of Credit Proceeds Expenditure Category Amount in US$million Financing Percentage

(1)(a) Sub-projects other than land acquisition sub-projects; (1)(b) Land Acquisition sub-projects (2) Civil Works for Part D of the project (3) Goods, equipment (including materials and vehicles) other than under Part B of the project (4) NGO services, Educational & Research institution consultancies (6) Trainings, workshops, study tours (5) Consultancies, technical assistance (7) Incremental Operating Costs

71.30 4.40 16.30 4.70

66% 70% 75% 100% of foreign expenditures, 100% of local expenditures (ex-factory costs) and 80% of local expenditures for other items purchased locally 95% 95% 80% 80% until March 31, 2005; 60% until March 31, 2006; and 40% thereafter 50% until March 31, 2005

22.60 11.00 4.30 7.40

(8) School Operating Costs (9) Unallocated

Total Project Costs Total

3.80 4.20 150.00 150.00

The term incremental operating costs means the costs of operation and maintenance of additional buildings, equipment and vehicles, office rental and expenses, hiring of vehicles, salaries of additional staff and travel allowances of all staff, incurred for the purposes of carrying out the Project. The term school operating costs means the maintenance costs of the residential schools incurred for the purposes of carrying out the Project. As per Bank Disbursement Policy (BP 12) contributions in kind/labor and Commercial Banks/MFI which form part of the total Sub Project costs, do not qualify as eligible expenditures for disbursement. While,

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the contributions from Commercial Banks/MFIs have not been considered as part of the sub project costs for the purpose of calculation of the disbursement percentages, beneficiary contributions in kind/labor have been factored into the percentages for the Sub Projects category (including land acquisition sub projects). Therefore, the disbursement percentages will be applied on the total sub project expenditures (including user contribution in kind or labor, but net of contributions from Commercial Banks/MFI).

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Annex 7: Project Processing Schedule INDIA: Andhra Pradesh Rural Poverty Reduction Project
Project Schedule
Time taken to prepare the project (months) First Bank mission (identification) Appraisal mission departure Negotiations Planned Date of Effectiveness

Planned

Actual

02/28/2002 09/30/2002 12/17/2002 04/01/2003

02/28/2002 10/03/2002

Prepared by:

Society for the Elimination of Rural Poverty (GoAP) and Andhra Pradesh Social Welfare Residential Educational Institutions Society (APSWREIS)
Preparation assistance:

PHRD Grant - TF026723 - US$500,000.00

Bank staff who worked on the project included: Name

Speciality

Jeeva Perumalpillai-Essex Manish Bapna Venita Kaul G.N.V.Ramana Meera Priyadarshi Varalakshmi Vemuru Sankaran Vaideeswaran Paul Martin Keith McLean Manvinder Mamak Dhimant Jayendraray Baxi Sara Gonzalez-Flavell Eliza Winters Klaus W. Deininger Ashok Seth David Werner Jacqualine Julian Deborah Lee Ricks Lata Ganesh Grace Domingo

Task Team Leader Co-Task Team Leader and Economist Education Specialist Public Health Specialist Nutrition Specialist Social Development Specialist Environmental Specialist Environmental Specialist Decentralization Specialist Financial Management Specialist Procurement Specialist Legal Counsel Disability Specialist Land Specialist Consultant/Agriculturalist Consultant/Disability Project Costs Program Assistant (Washington) Program Assistant (Washington) Program Assistant (New Delhi)

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Annex 8: Documents in the Project File* INDIA: Andhra Pradesh Rural Poverty Reduction Project

A. Project Implementation Plan

Prepared by Society for the Elimination of Rural Poverty (SERP) in September 2002 Documents also available on webiste : www.Velugu.org
B. Bank Staff Assessments

APRPRP Project Concept Document APRPRP Preparation Mission Aide-Memoire dated March, 2002 APRPRP Pre-appraisal Mission Aide-Memoire dated July 2002 APRPRP Appraisal Mission Aide-Memoire dated October 21, 2002
C. Other

Studies undertaken preparatory to the APRPRP

S.No. 1 2 Name of the study Livelihood Assessment Social Risk Management Consultant undertaking the study ITAD Ltd. Dr. Paul Siegal, Dr. Jeff Alwang & Ms. Sandhya Rani.K. Program Director (Social Risk Management) SERP, Hyderabad Dr. Ranga Rao. APRR&ASSOCIATES,

3. 4..

5. 6. 7.

8,

9. 10. 11. 12. 13. 14. 15.

Strategies & Interventions in Health, Nutrition & Sanitation. Strategies & Interventions Action Aid, No.10-2-276/4/2 Empowering the Differently abled Reviewed by David Werner persons Strategies for Dry Land Areas National Institute of Agricultural Extension Management, (Manage) Rajendarnagar, Hyderabad-500030 Strategies for Land and Water Watershed Support Services And Activities Network Management (WASSAN) Study the existing Bharatiya Samriddhi Investments & Consulting Services rural infrastructure for enhancing Ltd.(BASIX) the livelihoods of rural community Panchayat Raj Institutions and MYRADA Community Based Organisations in the APRPRP Strategies for Out of School Center For Economic And Social Studies (CESS) Children Gender Strategies Ms. Ranjani Murthy, Gender Consultant Chennai, Tribal Development Plan Tribal Cultural Research & Training Institute Environment Management Plan & Center for Environment Concern Pest Management Plan Strategies for Dalits Mr.Kurian Katticaren, Ankuram-Sangamam-Poram Baseline/Impact Evaluation & CESS and SOCHURSOD Process Monitoring Report on APSWREIS Schools Mr. S. Reddy and Mr. A. Reddy, Osmania University

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*Including electronic files

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Annex 9: Statement of Loans and Credits

INDIA: Andhra Pradesh Rural Poverty Reduction Project

02-Dec-2002
Original Amount in US$ Millions Project ID
P072123 P073094 P050653 P069889 P040610 P050647 P071033 P074018 P050668 P072539 P010566 P038334 P035173 P059242 P055455 P055454 P050658 P067543 P070421 P067216 P071244 P055456 P010505 P009972 P045049 P049770 P050657 P035172 P059501 P050667 P067330 P049537 P050637 P050646 P050651 P045050 P041264 P045051 P038021 P035169 P010561 P035824 P035827 P010496 P049385 P049477 P035158 P010531 P009584 P010511 P009995 P010473 P049301

FY

Purpose

IBRD
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 463.00 255.00 381.00 180.00 450.00 0.00 0.00 0.00 0.00 0.00 360.00 0.00 589.00 62.00 0.00 516.00 0.00 80.00 0.00 150.00 0.00 0.00 0.00 210.00 105.00 0.00 0.00 0.00 85.00 0.00 0.00 0.00 96.80 79.90 0.00 0.00 301.30 0.00 175.00 0.00 0.00 0.00 350.00 0.00 50.00

IDA
250.00 108.00 151.60 60.00 140.00 149.20 98.90 442.80 79.00 0.00 0.00 0.00 0.00 110.10 74.40 65.50 64.90 30.00 0.00 100.40 0.00 0.00 100.48 0.00 111.00 50.00 110.00 0.00 45.00 182.40 142.60 0.00 0.00 194.10 134.00 85.70 50.00 191.00 152.00 52.94 100.00 50.00 300.00 76.40 241.90 39.00 150.00 248.30 0.00 164.80 0.00 142.40 100.00

GEF
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Cancel.
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.34 0.00 0.00 0.00 19.00

Difference between expected and actual a disbursements Undisb. Orig Frm Rev'd
253.27 113.73 153.29 59.24 140.32 148.77 104.83 404.22 524.43 244.46 322.70 144.26 335.14 104.70 68.40 60.49 58.19 16.67 333.85 101.48 542.83 57.85 95.21 434.64 94.49 118.82 102.45 56.25 39.88 88.24 56.34 59.45 29.61 119.22 107.91 56.37 74.72 98.96 109.08 12.14 90.80 70.21 180.98 59.79 220.79 16.46 136.50 80.86 3.10 107.74 98.23 89.96 11.15 0.00 0.00 1.18 -0.21 -0.23 15.21 0.85 106.64 -1.30 -4.54 108.04 46.43 54.47 21.07 2.91 7.50 13.34 -1.14 32.85 11.02 102.49 42.95 30.07 130.24 14.99 28.26 23.16 14.59 10.85 42.49 8.13 59.45 5.43 70.59 72.07 65.89 40.12 36.57 104.69 13.53 72.62 60.84 76.80 39.26 173.48 14.22 128.98 80.05 6.97 114.09 93.23 103.37 34.80 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 28.57 0.00 0.00 0.00 0.00 0.00 76.48 0.00 0.00 0.00 0.00 14.44

2003 Tech/Engg Quality Improvement Project 2003 AP COMM FOREST MANG 2002 KARNATAKA RWSS II 2002 MIZORAM ROADS 2002 RAJ WSRP 2002 UTTAR PRADESH WATER SECTOR RESTRUCTU 2002 KARN TANK MGMT 2002 Gujarat Emergency Earthquake Reconstruct 2002 MUMBAI URBAN TRANSPORT PROJECT 2002 KERALA STATE TRANSPORT 2001 GUJARAT HWYS 2001 RAJ POWER I 2001 POWERGRID II 2001 MP DPIP 2001 RAJ DPEP II 2001 KERALA RWSS 2001 TECHN EDUC III 2001 LEPROSY II 2001 KARN HWYS 2001 KAR WSHD DEVELOPMENT 2001 Grand Trunk Road Improvement Project 2000 IN-Telecommunications Sector Reform TA 2000 RAJASTHAN DPIP 2000 NATIONAL HIGHWAYS III PROJECT 2000 AP DPIP 2000 REN EGY II 2000 UP Health Systems Development Project 2000 UP POWER SECTOR RESTRUCTURING PROJEC 2000 IN-TA for Econ Reform Project 2000 UP DPEP III 2000 IMMUNIZATION STRENGTHENING PROJECT 1999 AP POWER APL I 1999 TN URBAN DEV II 1999 UP SODIC LANDS II 1999 MAHARASH HEALTH SYS 1999 RAJASTHAN DPEP 1999 WTRSHD MGMT HILLS II 1999 2ND NATL HIV/AIDS CO 1998 DPEP III (BIHAR) 1998 UP FORESTRY 1998 NATL AGR TECHNOLOGY 1998 DIV AGRC SUPPORT 1998 WOMEN & CHILD DEVLPM 1998 ORISSA HEALTH SYS 1998 AP ECON RESTRUCTURIN 1998 KERALA FORESTRY 1997 AP IRRIGATION III 1997 REPRODUCTIVE HEALTH1 1997 ECODEVELOPMENT 1997 MALARIA CONTROL 1997 STATE HIGHWAYS I(AP) 1997 TUBERCULOSIS CONTROL 1997 A.P. EMERG. CYCLONE

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Original Amount in US$ Millions Project ID

P044449 P043728 P036062 P035170 P035821 P010480 P010484 P010485 P035825 P010529 P010461 P010464 P010476 P010522 P009946

Difference between expected and actual a disbursements GEF

0.00 0.00 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FY

Purpose

IBRD
0.00 0.00 0.00 350.00 0.00 167.00 59.60 0.00 0.00 0.00 275.80 0.00 0.00 0.00 153.00

IDA
19.50 50.00 28.00 0.00 425.20 25.00 0.00 142.00 350.00 290.90 0.00 260.30 282.90 126.00 153.00 7291.62

Cancel.
0.00 0.94 5.86 60.00 0.00 22.00 7.20 19.64 0.00 0.00 189.30 0.00 25.01 0.00 23.45 374.74

Undisb.
13.81 11.14 5.97 116.60 61.76 30.03 21.93 19.02 59.48 66.36 11.84 46.37 44.33 27.37 0.55 7750.07

Orig
15.54 16.57 13.94 176.60 8.94 53.95 29.13 61.17 100.75 91.80 201.14 62.98 111.70 35.62 13.29 3322.44

Frm Rev'd
-2.69 0.00 3.67 0.00 0.00 1.79 21.93 37.52 0.00 21.68 -0.09 25.34 60.51 14.54 13.29 316.98

1997 RURAL WOMEN'S DEVELOPMENT 1997 ENV CAPACITY BLDG TA 1997 ECODEVELOPMENT 1996 ORISSA POWER SECTOR 1996 DPEP II 1996 BOMBAY SEW DISPOSAL 1996 UP & Uttaranchal RURAL WATER 1996 HYDROLOGY PROJECT 1996 STATE HEALTH SYS II 1996 ORISSA WRCP 1995 MADRAS WAT SUP II 1995 DISTRICT PRIMARY ED 1995 TAMIL NADU WRCP 1995 ASSAM RURAL INFRA 1992 NAT. HIGHWAYS II

Total:

5944.40

20.00

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INDIA STATEMENT OF IFC's Held and Disbursed Portfolio Jun 30 - 2002

In Millions US Dollars
Committed IFC
FY Approval 1992 1992 1992/94/97 1989/95 2001 2001 1981/90/93 2002 2001 1996/99/00 1992/96/97 2001 2001 1997 1981 1995 2001 2001 1995 1997 1997/00 1995 2001 1986/93/94/95 2000/02 0 1998 1990 1981/86/89/92/94 2000 1989/90/94 1987/88/90/93 1989 1996 1991/96/01 2001 1997 1997 2002 1989 1994 1992/93 1997 2001 Company Indus VCF Info Tech Fund Ispat Industries JSB India Jetair LearningUniverse M&M MMFSL MahInfra Moser Baer NICCO-UCO NIIT Orchid Owens Corning Pennar Steel Prism Cement RCIHL RTL Rain Calcining SAPL SREI Sara Fund Spryance Sundaram Finance Sundaram Home TCFC Finance Ltd TCW/ICICI TDICI-VECAUS II TISCO Tanflora Park Tata Electric Titan Industries UCAL United Riceland VARUN Vysya Bank WIV Walden-Mgt India Webdunia AEC Ambuja Cement Arvind Mills Asian Electronic BTVL Loan 0.00 0.00 0.00 0.00 0.00 0.00 0.00 17.19 0.00 24.81 2.43 0.00 0.00 25.00 0.00 12.19 0.00 0.00 13.33 0.00 10.00 0.00 0.00 0.00 10.23 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00 0.00 0.00 3.12 0.00 0.00 0.00 0.00 Equity 0.61 0.62 3.00 0.28 0.00 0.25 0.55 0.00 10.00 14.80 0.00 0.00 0.00 0.00 0.07 5.02 1.97 0.45 5.46 0.07 0.00 5.94 2.00 0.00 0.00 0.00 6.46 0.15 0.00 0.51 0.00 0.52 0.53 0.00 0.36 7.30 2.11 0.03 2.00 0.00 4.94 4.91 5.50 20.00 Quasi 0.00 0.00 0.00 0.00 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Partic 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Loan 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 9.18 2.43 0.00 0.00 25.00 0.00 12.19 0.00 0.00 13.33 0.00 10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00 0.00 0.00 3.12 0.00 0.00 0.00 0.00

Disbursed IFC
Equity 0.61 0.62 3.00 0.28 0.00 0.25 0.55 0.00 0.00 14.80 0.00 0.00 0.00 0.00 0.07 5.02 1.97 0.45 5.46 0.07 0.00 5.94 2.00 0.00 0.00 0.00 6.46 0.15 0.00 0.00 0.00 0.52 0.53 0.00 0.36 7.30 2.11 0.03 0.67 0.00 4.94 4.91 5.50 20.00 Quasi 0.00 0.00 0.00 0.00 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Partic 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Portfolio:

214.98

185.51

50.00

66.75

156.13

156.65

40.00

62.25

Approvals Pending Commitment

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FY Approval 2002 2002 2002 1994 1997 2000 2000 2000 2001 2002 2002

Company Cosmo Films Apollo Tyres Ltd Escorts Telecom INDORAMA DM SWAP GVK-Swap APCL Orissa WESCO Orissa NESCO GI Wind Farms TELCO1 Usha Beltron Total Pending Commitment:

Loan 10.00 20.00 32.00 0.70 2.50 7.10 11.00 28.00 9.79 67.00 21.00 209.09

Equity 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.98 0.00 0.00 0.98

Quasi 0.00 0.00 15.00 0.00 0.00 1.90 0.00 0.00 0.00 0.00 3.60 20.50

Partic 0.00 15.00 30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 45.00

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Annex 10: Country at a Glance INDIA: Andhra Pradesh Rural Poverty Reduction Project
POVERTY and SOCIAL India 2001 Population, mid-year (millions) GNI per capita (Atlas method, US$) GNI (Atlas method, US$ billions) Average annual growth, 1994-00 Population (%) Labor force (%) Most recent estimate (latest year available, 1994-00) Poverty (% of population below national poverty line) Urban population (% of total population) Life expectancy at birth (years) Infant mortality (per 1,000 live births) Child malnutrition (% of children under 5) Access to an improved water source (% of population) Illiteracy (% of population age 15+) Gross primary enrollment (% of school-age population) Male Female KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1981 GDP (US$ billions) Gross domestic investment/GDP Exports of goods and services/GDP Gross domestic savings/GDP Gross national savings/GDP Current account balance/GDP Interest payments/GDP Total debt/GDP Total debt service/exports Present value of debt/GDP Present value of debt/exports 1981-91 (average annual growth) GDP GDP per capita Exports of goods and services STRUCTURE of the ECONOMY 1981 (% of GDP) Agriculture Industry Manufacturing Services Private consumption General government consumption Imports of goods and services 38.9 24.5 16.3 36.6 74.8 10.1 9.8 1981-91 (average annual growth) Agriculture Industry Manufacturing Services Private consumption General government consumption Gross domestic investment Imports of goods and services 3.1 6.9 7.4 6.9 5.8 4.2 6.2 5.9 1991 31.3 27.6 17.1 41.1 67.0 11.6 9.9 1991-01 3.1 6.3 7.0 7.9 4.6 6.9 7.8 10.3 2000 26.2 26.0 15.2 47.8 66.6 12.9 15.1 2000 1.3 4.9 4.2 9.5 0.4 12.0 15.7 12.7 2001 24.9 26.9 15.8 48.2 66.5 13.2 16.6 2001 -0.2 6.3 6.7 4.8 1.7 6.5 2.0 10.6
Growth of investment and GDP (%)
30 15 0 96 -15 97 98 99 00 01

South Asia 1,380 450 616

Lowincome 2,511 430 1,069

Development diamond*

1,015.9 450 453.4

Life expectancy

1.8 2.2

1.9 2.4

1.9 2.3

GNI per capita

Gross primary enrollment

29 28 63 68 47 88 43 101 109 92

.. 28 62 73 49 87 44 101 109 93

.. 31 59 76 .. 76 37 96 103 88

Access to improved water source

India

Low-income group

1991 316.8 24.1 7.3 21.4 20.9 -3.2 1.2 26.4 19.1 .. .. 2000 6.1 4.2 16.7

2000 445.2 23.6 12.0 20.5 22.5 -1.1 0.8 22.1 15.3 15.9 107.0 2001 4.0 2.1 20.9

2001
Economic ratios*

182.1 18.7 6.2 15.1 16.7 -2.0 0.3 11.4 4.4 .. .. 1991-01 5.9 4.1 13.3

457.0 22.9 14.0 20.3 22.3 -0.6 0.9 22.7 13.8 .. .. 2001-05 5.4 3.9 6.3 India Domestic savings

Trade

Investment

Indebtedness

5.7 3.5 5.9

Low-income group

GDI

GDP

Growth of exports and imports (%)

45 30 15 0 96 -15 97 98 99 00 01

Exports

Imports

Note: Data are for fiscal year ending March 31 of the year shown, except for population (mid-year 2000); 2001 data are preliminary estimates. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.

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India
PRICES and GOVERNMENT FINANCE 1981 Domestic prices (% change) Consumer prices Implicit GDP deflator Government finance (% of GDP, includes current grants) Current revenue Current budget balance Overall surplus/deficit TRADE 1981 (US$ millions) Total exports (fob) Tea Iron Manufactures Total imports (cif) Food Fuel and energy Capital goods Export price index (1995=100) Import price index (1995=100) Terms of trade (1995=100) BALANCE of PAYMENTS 1981 (US$ millions) Exports of goods and services Imports of goods and services Resource balance Net income Net current transfers Current account balance Financing items (net) Changes in net reserves Memo: Reserves including gold (US$ millions) Conversion rate (DEC, local/US$) EXTERNAL DEBT and RESOURCE FLOWS 1981 (US$ millions) Total debt outstanding and disbursed IBRD IDA Total debt service IBRD IDA Composition of net resource flows Official grants Official creditors Private creditors Foreign direct investment Portfolio equity World Bank program Commitments Disbursements Principal repayments Net flows Interest payments Net transfers Development Economics 20,695 827 5,142 645 137 50 750 908 789 .. .. 2,503 826 86 739 101 639 1991 83,717 7,685 13,312 4,815 1,087 211 461 2,334 1,606 97 6 2,186 1,981 586 1,395 712 683 2000 98,312 7,816 18,930 10,110 1,390 469 382 1,068 -1,658 2,155 3,036 817 1,460 1,229 231 630 -399 2001
Composition of 2001 debt (US$ mill.)

1991

2000

2001

Inflation (%)
15

.. 11.5

12.8 10.5

3.4 4.5

3.8 4.1

10 5 0

.. .. ..

.. .. ..

18.9 -8.3 -11.2

19.9 -8.6 -11.3

96

97

98

99

00

01

GDP deflator

CPI

1991 18,477 535 970 12,996 27,914 557 6,028 5,836 51 46 109

2000 37,542 1,183 916 29,714 55,383 2,417 12,611 8,965 116 150 77

2001 44,894 1,394 1,158 34,511 59,264 1,432 15,650 8,785 122 162 75

Export and import levels (US$ mill.)

80,000 60,000 40,000 20,000 0 95 96 97 98 99 00 01

8,501 .. .. 5,105 15,862 1,348 6,669 2,416 28 27 105

Exports

Imports

1991 23,028 31,485 -8,457 -3,753 2,068 -10,142 7,650 2,492 5,834 17.9

2000 53,251 67,028 -13,777 -3,559 12,256 -5,080 11,482 -6,402 38,036 43.3

2001 63,764 75,656 -11,892 -3,821 12,798 -2,915 8,771 -5,856 42,281 45.7

Current account balance to GDP (%)

0 95 96 97 98 99 00 01

11,249 17,821 -6,572 325 2,693 -3,554 2,564 990 6,823 7.9

-1

-2

103,677 7,080 18,888 10,727 1,423 506 336 589 4,340 2,346 2,756 2,064 1,760 1,361 399 568 -169
A - IBRD B - IDA C - IMF

G: 3,462

A: 7,080

B: 18,888 F: 39,539

D: 14,648

E: 20,060

D - Other multilateral

E - Bilateral F - Private G - Short-term

11/12/02

Note: Data are for fiscal year ending March 31 of the year shown, except for population (mid-year 2000); 2001 data are preliminary estimates.

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