Maharashtra Rural High Voltage Distribution System Program ... · The Maharashtra State Electricity Distribution Company Limited (MSEDCL), a state-owned enterprise with a distribution

Maharashtra Rural High Voltage Distribution System Expansion Program (RRP IND 50193-003)

Project Number: 50193-003 Loan Number: February 2020

India: Maharashtra Rural High Voltage Distribution System (HVDS) Expansion Program

Program Implementation Document

http://www.adb.org/Documents/RRPs/?id=50193-003-3

http://www.adb.org/Documents/RRPs/?id=50193-003-3

CONTENTS Page

I. Program Description 1

A. Strategic Context 1 II. Results and Disbursement 4

A. The RBL Program’s Overall Results 4 B. Disbursement-Linked Indicators 10 C. Disbursement Linked Indicator Verification Protocols 11 D. Disbursement Allocation and Status 17

III. Expenditure Framework and Financing 21 A. Expenditure Framework 21 B. Program Financing 22

IV. Program Systems and Implementation Arrangements 23 A. Monitoring and Evaluation System 24 B. Fiduciary Systems 26 C. Satisfying Procurement Member Country Eligibility Restrictions 33 D. Safeguard Systems 33 E. Gender and Social Dimensions 34 F. Communication and Information Disclosure Arrangements 34 G. Development Coordination 35

V. Integrated Risks and Mitigating Measures 35 A. Key Risks and Mitigating Measures 35 B. Issues and Changes 38

VI. Program Action Plan 38 A. Status of Program Action Plan 38 B. Issues and Changes 41

VII. Technical Assistance 41 A. Summary 41

VIII. Monitoring of Key Program Covenants 42 IX. Summary of Key Outstanding Issues 42 X. Accountability Mechanism 42 XI. Changes in Program Sope and Implementation Arrangements 43 XII. Program Organizational Structure and Focal Staff 43

A. Organizational Structure 43 B. Program Officers and Focal Persons 44

PURPOSE OF THE PROGRAM IMPLEMENTATION DOCUMENT

The developing member country (DMC) is wholly responsible for implementing the program supported by results-based lending (RBL). The Asian Development Bank (ADB) staff support the results-based lending program design and implementation. The program administration document (PID) consolidates the essential program implementation information. The PID is a management tool which supports effective program implementation, monitoring, and reporting. It is developed throughout the program processing, and should be discussed with the DMC at Loan Negotiations. It is a living document that should be refined and kept up to date during program implementation.

Abbreviations

ADB = Asian Development Bank DMC = developing member country DLIs = disbursement-linked indicators M&E = monitoring and evaluation PID = program implementation document PAP = program action plan RBL = results-based lending RRP = report and recommendation of the President

I. PROGRAM DESCRIPTION 1. The results-based loan (RBL) will support a component of the state of Maharashtra’s program to provide access to efficient, reliable and good quality power supply to new agriculture customers through metered high voltage distribution system (HVDS), related institutional strengthening and enhanced awareness on HVDS and the efficient usage of electricity and water for agriculture in rural areas. A. Strategic Context 2. Maharashtra, the second most populous state in India, has a high annual per capita income compared with the national average.1 However, there is significant inequality within Maharashtra; the rural eastern parts of the state in particular have a high proportion of the population living below the poverty line.2 About half of the state’s labor force remains engaged in agriculture and related activities, but agriculture’s share of the state’s gross domestic product declined from 15.3% in fiscal year (FY) 2002 to 12.2% in FY2017 as a result of small farm sizes, lack of irrigation and dependence on rainfall, low agriculture productivity and less-than-efficient use of electricity and water, poor storage facilities and connectivity to markets. Maharashtra’s Vision 2030 focuses on the agriculture sector with the goals of increasing growth to 5% per year, and increasing agricultural productivity and farmers’ incomes.3 These would be achieved by reducing the cost of cultivation; increasing the area under irrigation; providing access to a reliable power supply; promoting distributed solar power, electricity, water conservation and agriculture value chains; and improving access to markets. 3. The Maharashtra Energy Department (MED)4 is responsible for the state’s power sector. The Maharashtra State Electricity Board was unbundled into generation, transmission, and distribution utilities in 2005; at that time aggregate technical and commercial distribution losses averaged about 35%, the power sector had a demand–supply gap of over 20%, and customers, particularly in rural areas, faced unreliable and poor-quality supply. Steady progress has been made to improve electricity access and electricity distribution efficiencies along with generation and transmission capacity. The Maharashtra State Electricity Distribution Company Limited (MSEDCL), a state-owned enterprise with a distribution license formed after the unbundling, is currently India’s largest electricity distribution company, supplying over 25.4 million customers in 457 towns and nearly 42,000 villages across Maharashtra, except in the city of Mumbai. MSEDCL supplies electricity to over 4.2 million agricultural customers in rural Maharashtra, who account for an estimated 30% of its electricity sales volume. However, despite overall efficiency improvements, a healthy sales mix (industrial and commercial sales account for about 44% of total sales), and high tariffs,5 MSEDCL’s financial status is impacted by its performance in rural Maharashtra, and a large base of rural customers that are not efficiently or reliably supplied with electricity. 4. Deficiencies in the traditional electricity distribution network design and historically inadequate capital expenditures have resulted in long, inefficient low-voltage distribution lines, with nearly 15–20 customers sharing a single large distribution transformer. Most rural feeders

1 The per capita income of Maharashtra was ₹165,491 compared with ₹103,870 nationally in fiscal year (FY)

2017.State Government of Maharashtra. 2018. Economic Survey of Maharashtra. Mumbai. 2 World Bank. 2017. Maharashtra – Poverty, Growth and Inequality. New Delhi. Poverty maps indicate 24%–51% of

the population in several districts in rural Maharashtra is living below the poverty line, while urban poverty is 9%. 3 Government of Maharashtra, Planning Department. 2017. Vision 2030. Mumbai. 4 The Energy Department is under the Industries, Energy and Labor Department, Government of Maharashtra. 5 Tariffs are set by the Maharashtra Electricity Regulatory Commission (MERC). Industrial tariffs in Maharashtra are

among the highest in India (about ₹8/kWh in FY2018).

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were mixed, with rural domestic and agriculture customers on the same feeder. MSEDCL’s Gaothan and Infrastructure Plan program (implemented over 2006–2015) strengthened the rural distribution network and physically segregated 5,000 rural feeders. This allowed agriculture customers to receive 8–10 hours supply per day (though efficiency, quality and reliability are still a concern), while other customers receive a continuous supply. This has contributed to reducing average utility wide aggregate technical and commercial losses to about 17% in 2015. Per capita usage of electricity in Maharashtra reached about 1,300 kilowatt-hours (kWh)/year in 2014, but was under 800 kWh/year in rural areas, low compared to the world average of 3,000 kWh/year. 5. Power supply to agriculture customers remains affected by low metering levels, while inadequate payment enforcement results in losses exceeding 20% for rural feeders with predominantly agricultural customers. Most agricultural customers are charged a fixed tariff based on the declared capacity of the agriculture pump rather than on actual electricity usage, resulting in inefficient electricity and water consumption. Retail agricultural tariffs are linked to prior assessments of customer payment capacity and require government subsidies and cross-subsidies from other customer categories to cover the cost of supply. The recurring electricity subsidy in Maharashtra for agriculture customers was $0.8 billion in FY2018.6 This impacts the state’s ability to fund social programs while cross-subsidies reduce the competitiveness of industries. Power is also often supplied to agricultural customers at night impacting pump usage and the quality of rural life. 6. Government strategy and program for the sector. The electricity sector in India is focused on accelerated electrification, adoption of clean energy source and increased energy efficiency, improvement in the quality of power supply to customers, and improved performance of utilities, which have traditionally been loss making. In 2016, the state government of Maharashtra formulated its program of Power for All with the objective to provide continuous (24-hour) reliable power to all non-agriculture customers and an assured 8–10 hours daily supply for agricultural customers across the state. The program has components covering renewable energy generation predominantly through the private sector, transmission and distribution system strengthening, 100% household electrification, adoption of efficient street lighting and agriculture pumps, metering and information and communication technology. While progress has been significant on renewable energy capacity addition, transmission and distribution investments and rural electrification for households, the agriculture pump program has not materially progressed. In 2018, the state government of Maharashtra reviewed the requirements for reliable rural power supply for the agriculture sector and decided to provide applicants for agriculture electricity connections either a connection through HVDS or off-grid solar water pumps to ensure the agriculture sector can access modern, reliable energy. The program components are periodically reviewed by the utilities, government and the regulator, and updated to 2021 to meet increasing demand. It is expected that the electrification program for farmers (including HVDS) would continue beyond 2021 after government and regulatory approvals. 7. Proposed Program. The Asian Development Bank (ADB) RBL will support Maharashtra’s HVDS program for new grid-connected rural agricultural customers across the state. The HVDS program is demand-driven and based on applications received for new agricultural connections. The RBL program is expected to be implemented from April 2020 to December 2021, by which time about 156,000 metered HVDS connections are expected to be in place with distribution transformers, 11 kilovolt (kV) grid extensions, and upstream strengthening for adequate network capacity.

6 Organisation for Economic Co-operation and Development. 2018. Agriculture Policies in India. Paris. Nationally,

electricity subsidy for farmers was nearly $9 billion in 2016, second to fertilizer subsidies. Electricity subsidies grew nearly fourfold over 2000–2016.

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8. The RBL modality is suitable for the following reasons: (i) it uses MSEDCL’s strong implementation capacity and functional enterprise resource planning (ERP) systems to undertake the HVDS program; (ii) government ownership of the program is strong, as demonstrated by implementation of past rural electrification initiatives, and the initial implementation of the HVDS program in 2019; (iii) it will lower the transaction costs of implementing activities over the state of Maharashtra by using existing fiduciary and safeguard systems, which will be further enhanced under the program action plan (PAP); and (iv) the state government of Maharashtra and MSEDCL are committed to strengthening sector governance including metering of agricultural customers, improving operational performance, and facilitating information disclosure. 9. HVDS as an enabler. Increasing the efficiency and reliability of electricity supply to agricultural customers poses significant challenges (para. 4). Maharashtra has undertaken pilots to increase the energy efficiency of pumps using the existing grid, and promoted the adoption of drip irrigation. The pace of adoption is slow because of limited awareness on energy efficiency, high upfront costs, frequent pump burnout due to low voltage supply, and unmetered electricity supply. There is a need to review business models and technology, and to undertake work across the electricity, water, and agriculture sectors. The adoption of HVDS for rural feeders can support models for private sector development including franchising and energy service companies, for which agricultural consumption metering would be a prerequisite. Given the national importance of rural development and the need to address distress on the part of farmers, the government of India is working to increase electricity and water use efficiency, improve subsidy targeting and farmers’ incomes by 2022. HVDS and customer metering support improved sector governance and would be a platform to meet these goals. 10. ADB’s value addition. The proposed intervention is aligned with ADB’s Strategy 2030 operational priorities to promote rural development and food security; tackle climate change, build climate and disaster resilience, enhance environmental sustainability; accelerate progress in gender equality; and strengthen governance and institutional capacity. It aligns with India’s Nationally Determined Contribution to reduce emission intensity by up to 35% by 2030 from 2005 levels, and ADB’s India country partnership strategy, 2018–2022 for inclusive infrastructure and addressing climate change. It supports Sustainable Development Goal (SDG) 7 on access to affordable, reliable, sustainable, and modern electricity to all; and SDG 13 on action to combat climate change. ADB has financed successful HVDS projects in India for reliable and efficient supply to rural customers through project and program loans. ADB’s support for this first phase of HVDS for new agricultural customers in Maharashtra will strengthen the achievement of outcomes, improve awareness of the benefits of HVDS, and strengthen the development of the subsequent phases for HVDS expansion to cover agricultural customers beyond 2021 and mobilize commercial financing. The RBL will complement an ongoing ADB project supporting connectivity and to improve value chains in agriculture to support the state government’s objective to promote economic growth and private sector development in rural areas. The RBL will strengthen linkages between electricity and water use under the state’s Water 2030 program, disseminate knowledge, and enhance institutional development.

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Table 1: Program Scope7

Item Broader Government Program Results-Based Lending

Program Outcome Adequate generation, transmission and distribution network

capacity to meet increasing demand and provide 8–10 hours a day of power supply to agriculture customers and continuous power supply (24-hours a day) to other customer categories.

Efficient, reliable, and good quality power for agriculture customers in rural Maharashtra for 8-10 hours a day

Key outputs Addition of 5,300 MW of generation capacity (4,000 MW of renewables including distributed generation); increased transmission and distribution capacity; electrification of 1.8 million households; connections for 0.23 million farmers to HVDS or off-grid solar water pumps; installation of 35.6 million efficient bulbs, 0.9 million efficient streetlights, and 0.5 million pumps.

0.156 million agriculture customers connected to HVDS, MSEDCL institutional capacity improved, and efficient use of electricity and water demonstrated

Activity types Construction and installation of generation, transmission, distribution and energy efficiency improvements along with associated institutional strengthening of utilities and customer awareness

Construction and installation of metered HVDS connections, high- tension lines, and substations; institutional strengthening, customer awareness.

Expenditure

About $10.4 billon (government program), of which about $703.1 million is for rural HVDS component

$703.1 million

Main financiers Utility financing, state government, debt from various sources including ADB, private sector (renewable generation, distribution in Mumbai)

Counterpart funding including debt, ADB

Geographic coverage

Maharashtra (entire state) Rural Maharashtra

Implementation period

2016–2021 2020–2021 a

ADB = Asian Development Bank, HVDS = High Voltage Distribution System, MSEDCL = Maharashtra State Electricity Distribution Company Limited, MW = megawatt. a The program covers eligible prior results in 2019 and activities associated to the RBL under the attached TA to be completed by 31 March 2022. Source: Maharashtra Energy Department and Maharashtra State Electricity Distribution Company Limited.

II. RESULTS AND DISBURSEMENT

A. The RBL Program’s Overall Results

1. Program Results Framework

11. Impact, outcome and outputs - The RBL program’s impacts will be emission intensity of the economy reduced, agricultural productivity in rural Maharashtra improved, and efficiency in the electricity value chain achieved. The outcome will be access to efficient, reliable, and good quality power supply for new agricultural customers in rural Maharashtra improved. 12. Output 1: HVDS electricity distribution network in rural Maharashtra for new agricultural customers installed. The RBL program focuses on enabling farmers in rural Maharashtra to use electricity to irrigate land and earn their livelihood. An estimated 156,000 farmers will be connected to distribution network and metered with HVDS. This involves (i) installation of 132,600 customized low capacity distribution transformers based on the expected power consumption; (ii) installation of 46,800 km. of 11 kV high voltage line extensions to connect new customers to the existing distribution grid; and (iii) construction or upgrading of 121 33/11 kV distribution substations to improve the upstream distribution network capacity for HVDS to supply new customers.

7 The government program is based until 2021. MSEDCL is preparing a longer term program for conversion of

agriculture connections to HVDS that needs management and regulatory approvals.

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13. Output 2: Institutional capacity of MSEDCL improved. The RBL program will support improvement in the institutional capacity of MSEDCL. It would include (i) at-least 1,000 MSEDCL staff (including all eligible and interested women) demonstrate knowledge and skills on capital investments, operation, maintenance, monitoring and safeguards for HVDS; (ii) systems for metering for agricultural customers on HVDS functional, enabling improved planning, metering, billing, collection and enforcement; and (iii) systems for physical verification of HVDS assets would be functional, with information recorded in the ERP. 14. Output 3: Awareness on HVDS, efficient use of electricity and water in rural Maharashtra enhanced. The program will collect data, demonstrate and promote awareness of HVDS, efficient use of electricity and water in rural Maharashtra through (i) an operational HVDS monitoring dashboard recording information on the program related to agriculture customer connections, sales, meter data, voltage variations, transformer failure rates that could be accessed by stakeholders including other government departments; and (ii) provide periodic updates on processing of HVDS connections to 156,000 customers (including women). In addition, the government and MSEDCL have agreed to at least one agriculture feeder with 100% HVDS, energy efficient pumps and associated efficient irrigation equipment to be pilot-tested in rural Maharashtra agriculture and increased awareness for at least 500 users (including all eligible women) on HVDS, efficient use of electricity and water that would be supported under the ADB TA for Implementation Support for Maharashtra Rural High Voltage Distribution System Expansion Program. In addition, measures by the state government to enable adoption of energy and water conservation through appropriate interventions including update to government program, tariff structures, improved subsidy administration, enhanced awareness and other appropriate mechanisms would be identified and promoted. 15. All outputs and outcome indicators have been chosen based on MSEDCL’s ability to measure and achieve them, using IT monitoring tools and systems to provide transparent evidence of target achievements and their relevance of contributing in a bottom-up approach and time bound manner to the program progress and planned final outcomes. The disbursement-linked indicator (DLI) targets have been chosen in consultation with MSEDCL’s plans for HVDS roll out and careful consideration of performance on earlier projects. Institutional capacity as well as awareness on HVDS, efficient use of electricity and water in rural Maharashtra under the RBL program are expected to help with periodic updates to the government program including wider adoption of HVDS for agriculture customers as well as approaches towards installation of efficient electric pumps and drip irrigation units and unlock commercial financing to scale up the HVDS program beyond 2021.

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Table 2: RBL Program Results Framework

Results Indicators DLI (yes/no)

Baseline Value &

Unit Baseline

Year

Target Values of Results Indicators

Prior Results

Apr 20 -Jun 20

Jul 20 -Sep 20

Oct 20 -Dec 20

Jan 21 -Mar 21

Apr 21 -Jun 21

Jul 21

-Sep 21

Oct 21 -Dec 21

Jan 22 -Mar 22

Outcome

1. Agricultural customers are effectively metered and billed a usage-based energy charge for utilization of the HVDS network1 (%)

DLI1 NA% 2018 >60% >60% >70% >70%

2. Improved power reliability for agricultural customers with less interruptions. Distribution failure rate for HVDS lower than 8%

DLI2 12% 2018 <8% <8% <8% <8%

3. Improved power quality for agricultural customers. Voltage drop for HVDS-connected agricultural customers not more than 6% (MERC voltage regulation)2

DLI3 15% 2018 <+/-6% <+/-6% <+/-6% <+/-6%

4. Reduction in greenhouse gas emissions by 130,000 tCO2 equiv./year compared to conventional low voltage distribution grid.

No 0 tCO2 equ/year 2018

130,000

(FY 21-22)

Output

5. Increase in number of new agricultural electricity connections in rural Maharashtra through metered HVDS by 156,000 by 2021

DLI4 0 / nos 2018 65,000 30,000 10,000 20,000 20,000 11,000

6. Increase in number of commissioned HVDS distribution transformers by 132,600 for new agricultural electricity connections in rural Maharashtra by 2021.

no 0 / nos 2018 54,600 25,000 9,000 16,500 16,500 11,000

7. Increase in length of 11kV distribution lines for new agriculture electricity connections in rural Maharashtra through metered HVDS by 46,800 km. by 2021

DLI5 0 / km 2018 19,000 9,000 3,000 6,000 4,000 5,800

1 No. of connections metered and billed a usage-based energy charge at least once during the 3-month period out of the total no. of pump set connections issued under the HVDS program. 2 Maharashtra Electricity Regulatory Commission (Standards of performance of distribution licensee, period for giving supply and determination of compensation), Regulation 2014. Measured

at customer end at the day after commissioning of distribution transformer (DTR). The measured voltage would be then compared against system voltage of 440 voltage as stipulated in the Regulation. It would be done on a sample no. of HVDS customers in each circle. (10 customers/circle every quarter)

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8. Addition of new 33/11kV substations, augmentation/upgradation of existing 33/11 kV substations by 121 in rural Maharashtra to improve upstream network capacity for agriculture HVDS by 2021

DLI6 0 / nos 2018 10 10 20 20 20 15

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9. Increase in institutional capacity with number of MSEDCL staff (including all interested and eligible women) that demonstrate knowledge and skills on operations, maintenance and monitoring of HVDS for agriculture customers by 1,000 by 2021

DLI7 0 / nos. 2018 250 250 250 250

10. E-procurement audits conducted annually no no 2018 yes yes yes

11. 100% physical fixed asset verification for HVDS program no no 2018 yes yes yes yes yes yes yes yes

12. 100% metering of agricultural customers on HVDS no 0 2018 yes yes yes yes yes

yes yes yes yes

13. HVDS monitoring dashboard to monitor agricultural customer supply parameters created and operational Monitoring of performance indications (No. of connections, Sales in MU, voltage variations, transformer failure, staff trained, safeguard reports prepared etc.)

DLI8 no 2018

yes

14. At least 1 agricultural feeder with 100% HVDS and energy efficient irrigation equipment pilot tested in rural Maharashtra.

no 0 2018 yes

15. At least 500 agriculture customers (including all interested and eligible women) on the feeder reported increased awareness on HVDS with efficient use of electricity and water in rural Maharashtra.

no 0 2018 125 125 125 125

16. Customers who have applied for HVDS receive periodic updates on their connection status, billing.

no yes yes yes yes yes yes yes yes yes

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2. Implementation Status

Table 3: Status of the Results Framework (as of February 2020)

Results Indicators Baseline Value Baseline Year Target Value {Year}

Actual Achievement {Year}

1. Agricultural customers are effectively metered and billed a usage-based energy charge for utilization of the HVDS network1 (%)

NA 2018

NOT APPLICABLE AT THIS STAGE


12% 2018

3. Improved power quality for agricultural customers. Voltage drop for HVDS-connected agricultural customers not more than 6% (MERC voltage regulation)2

15% 2018

4. Reduction in greenhouse gas emissions by 130,000 tCO2 equiv./year compared to conventional low voltage distribution grid.

0 2018

5. Increase in number of new agricultural electricity connections in rural Maharashtra through metered HVDS by 156,000 by 2021

0 / nos 2018


6. Increase in number of commissioned HVDS distribution transformers by 132,600 for new agricultural electricity connections in rural Maharashtra by 2021.

0 / nos 2018


0 / km 2018

8. Addition of new 33/11kV substations, augmentation/upgradation

0 / nos 2018

1 No. of connections metered and billed a usage-based energy charge at least once during the 3-month period out of the total no. of

pump set connections issued under the HVDS program. 2 Maharashtra Electricity Regulatory Commission (Standards of performance of distribution licensee, period for giving supply and

determination of compensation), Regulation 2014. Measured at customer end at the day after commissioning of distribution transformer (DTR). The measured voltage would be then compared against system voltage of 440 voltage as stipulated in the Regulation. It would be done on a sample no. of HVDS customers in each circle. (10 customers/circle every quarter)

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Results Indicators Baseline Value Baseline Year Target Value {Year}

Actual Achievement {Year}

of existing 33/11 kV substations by 121 in rural Maharashtra to improve upstream network capacity for agriculture HVDS by 2021 9. Increase in institutional capacity with number of MSEDCL staff (including all interested and eligible women) that demonstrate knowledge and skills on operations, maintenance and monitoring of HVDS for agriculture customers by 1,000 by 2021

0 / nos. 2018

10. E-procurement audits conducted annually no 2018

11. 100% physical fixed asset verification for HVDS program

no 2018

12. 100% metering of agricultural customers on HVDS

0 2018

13. HVDS monitoring dashboard to monitor agricultural customer supply parameters created and operational Monitoring of performance indications (No. of connections, Sales in MU, voltage variations, transformer failure, staff trained, safeguard reports prepared etc.)

no 2018

14. At least 1 agricultural feeder with 100% HVDS and energy efficient irrigation equipment pilot tested in rural Maharashtra.

0 2018

15. At least 500 agriculture customers (including all interested and eligible women) on the feeder reported increased awareness on HVDS with efficient use of electricity and water in rural Maharashtra.

0 2018

16. Customers who have applied for HVDS receive periodic updates on their connection status, billing.

0 / nos 2018

AG = agriculture, ckm= circuit KM, DTR = distribution transformer, HVDS = high voltage distribution system, LVDS = low voltage distribution system, MU = million units (kilowatthours).

3. Issues and Changes 16. Not Applicable at this stage.

10 B. Disbursement-Linked Indicators

1. Description of Disbursement-Linked Indicators

17. All outputs and outcomes have been linked with time bound, and specific disbursements. As discussed in Section A, the outputs are linked to key elements of the distribution infrastructure and will ensure completion of the distribution assets which will lead to expected outcomes. Each individual DLI is explained in the next paragraphs. 18. Increased agriculture connections through metered HVDS. Through the program, MSEDCL will connect about 156,000 paid and pending agricultural customers. This indicator has been selected as DLI as the connection is the last piece of the network installation and the linkage to the program beneficiary i.e. the rural agricultural customers. All connections would be metered and location coordinates of all installations would be known. The DLI will be quantified and measured though a new database in the MSEDCL system. Each customer would have a unique customer number and would be connected to a small capacity (typically 10/16/25 kVA) distribution transformer and all distribution transformers (DTRs) would be uniquely coded for tracking purposes.

19. New 11 kV high voltage distribution lines commissioned through HVDS program. The HVDS program includes erection of high voltage lines (11 KV) for power distribution. The lines connect the outgoing 11 KV feeder with the distribution transformer and are an essential physical element of the distribution network. After commissioning, the installed and commissioned line length is recorded in MSEDCL’s IT system.

20. Upstream network capacity for HVDS improved. The HVDS program includes the augmentation, upgradation, erection, and commissioning of 33/11 KV sub-stations to manage the increased demand from added connections. The progress is verified physically at site and tracked in MSEDCL’s IT system.

21. Institutional capacity of MSEDCL improved. The HVDS program includes the capacity building of at-least 1,000 MSEDCL staff in rural Maharashtra who would be trained and demonstrate knowledge and skills on capital investments, operations, maintenance, monitoring and safeguards for HVDS.

22. HVDS monitoring dashboard. This DLI measures the development of a dashboard that would be used by MSEDCL management to monitor the performance of the Program. It will help track the above DLIs as well as other key performance indicators in the Program Action Plan for review and reporting and will support information sharing with key stakeholders in government.

23. Achievement of above outputs (i) expanded access to electricity services; (ii) high voltage lines commissioned; (iii) 33/11 kV distribution sub-stations commissioned, (iv) institutional capacity of MSEDCL improved; and (v) development of the HVDS monitoring dashboard through the RBL program create the basis to reach the planned outcome targets which are described below.

24. Effective access and efficient usage of HVDS network. This DLI indicates the extent to which the HVDS infrastructure is utilized, metered power supply is provided and a usage-based energy charge is determined and billed. It is measured by measuring the proportion of HVDS connections billed an energy charge at least once during each quarter out of the total number of HVDS connections issued under the scheme. With the robust IT system in place, it is possible to extract the HVDS customers from the billing database and verify the quantum billed.

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25. Improved power reliability for agriculture customers. Overloading of distribution transformers on low voltage lines, mainly caused by the quantity of customers (including illegal connections) and the consequential damage of the transformer causes power supply interruptions. In the agricultural sector where farmers depend on grid power supply to run their pumps, such interruptions lead to decrease of productivity. With HVDS, no more than 2 customers are connected to one transformer and overload as well as transformers failures are minimized.

26. Improved quality of supply for agriculture customers. The covers the maintenance of voltage profile within Maharashtra Electricity Regulatory Commission (MERC) voltage regulations. In lengthy low voltage distribution systems, voltage fluctuations were a common problem and leads to frequent damage of agricultural pumps. HVDS networks using high voltage lines with distribution transformers connected to a maximum of two customers with short low voltage lines will minimize this phenomenon. The voltage quality will be measured manually on a specific and representative sample basis and recorded in MSEDCL’s HVDS dashboard.

Table 4: Disbursement-Linked Indicators

Indicator Disbursement Allocated

($ million) Share of Total ADB

Financing (%) Outcomes DLI 1 Effective metering and billing of HVDS agricultural customers 69.2 20.0 DLI 2 Improved power reliability for HVDS agricultural customers. 51.9 15.0 DLI 3 Improved power quality for HVDS agricultural customers 51.9 15.0 Output 1: High voltage electricity distribution network in rural Maharashtra for new agriculture customers installed DLI 4 156,000 new metered HVDS agricultural electricity connections in rural Maharashtra

69.2 20.0

DLI 5 46,800 km. of 11 kV distribution lines for HVDS agricultural electricity connections

34.6 10.0

DLI 6 Upstream capacity for 121 33/11 kV substations for agricultural HVDS 17.3 5.0

Output 2: Institutional capacity of MSEDCL improved DLI 7 Institutional capacity of 1,000 MSEDCL staff on HVDS increased

17.3 5.0

Output 3: Awareness on HVDS, and the efficient use of electricity and water in rural Maharashtra enhanced DLI 8 HVDS monitoring dashboard

operational 34.6 10.0

Total 346.0 100.0 ADB = Asian Development Bank, HT= high tension, HVDS = high voltage distribution system. Source: Asian Development Bank.

2. Issues and Changes 27. Not Applicable at this stage C. Disbursement Linked Indicator Verification Protocols

Description of the Verification Protocols – Rigorous verification protocols with independent third-party verification of DLIs would be established. ADB will undertake half yearly review missions to monitor program progress, review DLI achievements and the status of the program action plan.

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Table 4: Disbursement-Linked Indicator Verification Protocols (as of February 2020)

Disbursement-Linked indicator (DLI)

Definition and description of achievement and verification

Information source and frequency

Verification Agency and procedure

Outcome DLI 1 – Agricultural customers are effectively metered and billed a usage-based energy charge for utilization of the HVDS network Apr 20 – Jun 20: At least 60% of total new HVDS connections are being used. Jul 20 – Sep 20: At least 60% of total new HVDS connections are being used. Oct 20 – Dec 20: At least 70% of total new HVDS connections are being used. Jan 21 – Mar 21: At least 70% of total new HVDS connections are being used.

DLI 1 measures the ratio of HVDS connections that are billed a metered, usage-based energy charge at least once during the verification period. It reflects the extent to which the HVDS infrastructure constructed under the program is effectively put to use and if farmers are metered and billed a usage-based tariff that supports efficient consumption of power. Conditions for disbursement are met if the number of connections billed during the verification period out of the total number of HVDS connections issued under the scheme met the specified targets. If the target is not met for a certain verification period, no disbursement will be made. Should the target for the following verification period be met, the amount for the previous undisbursed amount will be disbursed together with the amount for the current period. Disbursements can be deferred until the target ratio has been achieved.

MSEDCL New connections system (NCS) and Billing Database Required frequency for reporting will be quarterly, and MSEDCL and ADB may agree each year on interim reporting arrangements as appropriate. Monitoring may be as frequent as MSEDCL wishes.

Every quarter, the M&E team in MSEDCL prepares an attestation that the DLI is met and attaches the relevant reports. The IVA will verify the results every quarter from MSEDCL’s Billing Database and NCS. The IVA will also verify the results by spot checks of the HVDS system at circle/ division level. The IVA will refer to the verification protocols and other relevant guidelines prepared for the program. The IVA report is to be attached to the MSEDCL’s report. Within one month of receiving the validated report, ADB will confirm that the target has been met.

DLI 2 – Improved power reliability for agricultural customers with less interruptions Apr 20 – Jun 20: Distribution transformer failure rate to be less than 8% Jul 20 – Sep 20: Distribution transformer failure rate to be less than 8% Oct 20 – Dec 20: Distribution transformer failure rate to be less than 8% Jan 21 – Mar 21: Distribution transformer failure rate to be less than 8%

DLI 2 is the rate of failure of distribution transformer failures for HVDS related agricultural customers. It is computed as a ratio of “number of transformers failure during a period” to “average number of transformers present during the verification period” Conditions for disbursement are met if the rate of failure of distribution transformer is less than the target for a given quarter. If the target is not met for a certain verification period, no disbursement will be made. Should the target be met combined for the following and previous verification periods, the amount for the previous undisbursed amount will be disbursed together with the amount for the current period. Disbursements can be deferred until the target ratio has been achieved for combined, consecutive verification periods.

Manual or automated reporting (in MS Excel format) of Distribution Transformer failure rate by MSEDCL. Required frequency for reporting will be quarterly. MSEDCL and ADB may agree each year on interim reporting arrangements as appropriate. Monitoring may be as frequent as MSEDCL wishes.

Every quarter, the M&E in MSEDCL prepares an attestation that the DLI is met and attaches the relevant reports. The IVA will verify the results every quarter from MSEDCL’s manual reporting in MS Excel format. The IVA will also verify the results by spot checks of the HVDS system at circle/ division level. The IVA will refer to the verification protocols and other relevant guidelines prepared for the program. The IVA report to be attached to the MSEDCL’s report. Within one month of receiving the validated report, ADB will confirm that the target has been met.

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DLI 3 – Improved power quality for agricultural customers Apr 20 – Jun 20: Voltage variation should be within the limit of +/- 6% Jul 20 – Sep 20: Voltage variation should be within the limit of +/- 6% Oct 20 – Dec 20: Voltage variation should be within the limit of +/- 6% Jan 21 – Mar 21: Voltage variation should be within the limit of +/- 6%

Definition of DLI 3 is the maintenance of voltage profile within the voltage deviation band specified by MERC.1 The permissible deviation band specified by MERC in 6% (+/-) Conditions for disbursement are met if the deviation of voltage is maintained within +/- 6% of system voltage of 440V for 90% of the time within a given quarter. If the target is not met for a certain verification period, no disbursement will be made. Should the target be met combined for the following and previous verification periods, the amount for the previous undisbursed amount will be disbursed together with the amount for the current period. Disbursements can be deferred until the target ratio has been achieved for combined, consecutive verification periods.

From the customer database, 10 new customer distribution transformers (with 10 unique codes) shall be chosen for each circle. Considering 35 circles, total 350 transformer codes will be used for verification. Each distribution transformer connects up to 2 metered customer connections. Only one connection per transformer shall serve for voltage verification. Voltage is measured and stored on each meter for HVDS connected customers for a time period of 45 days. This data must be manually extracted from the meter. Any meter recording shall show maintenance of a voltage fluctuation within +/-6% of the system voltage of 440V during 90% of the time recorded (outages are excluded). Required frequency for reporting will be quarterly and MSEDCL and ADB may agree each year on interim reporting arrangements as appropriate. Monitoring may be as frequent as MSEDCL wishes.

Every quarter, the M&E team in MSEDCL prepares an attestation that the DLI is met and attaches the relevant reports. The IVA will verify the results every quarter from MSEDCL’s Billing Database and NCS. The IVA will also verify the results by spot checks of the HVDS system at circle level. The IVA will refer to the verification protocols and other relevant guidelines prepared for the program. The IVA report is then attached to the MSEDCL’s report. Within one month of receiving the validated report, ADB will confirm that the target has been met.

1 MERC (Standards of performance of distribution licensee, period for giving supply and determination of compensation), Regulation 2014.

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Output DLI 4 – Increase in number of new agricultural electricity connections in rural Maharashtra through metered HVDS Prior Results: Release of 65,000 metered agriculture connections through HVDS program Apr 20 – Jun 20: Release of 30,000 metered agriculture connections through HVDS program Jul 20 – Sep 20: Release of 10,000 metered agriculture connections through HVDS program Oct 20 – Dec 20: Release of 20,000 metered agriculture connections through HVDS program Jan 21 – Mar 21: Release of 20,000 metered agriculture connections through HVDS program Apr 21– Jun 21: Release of 11,000 metered agriculture connections through HVDS program

Conditions for full disbursement are met if the number of new agriculture connections released by MSEDCL through HVDS for a quarter reaches the target number specified for that quarter (first column). Partial disbursement. The DLI is scalable and partial disbursement is allowed for over and under achievement. If the target is not fully achieved, then disbursement can be proportional to the increase made from the previous period’s achievement. The following formula will be applied: Partial DLI disbursement = planned DLI disbursement per metered agriculture connection* actual number of metered agriculture connections achieved for the quarter. Disbursements are allowed for early or late achievement of the DLI and capped at the total ADB financing allocation. This means that the planned disbursement amount can be released when the set target is fully achieved even if the achievement is late, as long as the achievement is during the program’s duration.

MSEDCL New Connection System Required frequency quarterly and MSEDCL and ADB may agree each year on interim reporting arrangements as appropriate. Monitoring may be as frequent as MSEDCL wishes.

Every quarter, the M&E in MSEDCL prepares an attestation that the DLI is met and attaches the relevant reports. The IVA will verify the results every quarter from the MSEDCL New Connection System. The IVA will also verify the results by spot checks of the HVDS system at circle/ division level. The IVA will refer to the verification protocols and other relevant guidelines prepared for the program. The IVA report is to be attached to the MSEDCL’s report. Within one month of receiving the validated report, ADB will confirm that the target has been met.

DLI 5 – Increase in length of 11 kV distribution lines for new agricultural electricity connections in rural Maharashtra through metered HVDS Prior Results: Commissioning of 19,000 circuit-km of HT Lines through HVDS program Apr 20 – Jun 20: Commissioning of 9,000 circuit-km of HT Lines through HVDS program Jul 20 – Sep 20: Commissioning of 3,000 circuit-km of HT Lines through HVDS program Oct 20 – Dec 20: Commissioning of 6,000 circuit-km of HT Lines through HVDS program

Conditions for full disbursement are met if the length of HT Lines (circuit-km) commissioned under HVDS Scheme for a quarter reaches the target number specified for that quarter (first column). Partial disbursement. The DLI is scalable and partial disbursement is allowed for over and under achievement. If the target is not fully achieved, then disbursement can be proportional to the increase made from the previous period’s achievement. The following formula will be applied: Partial DLI disbursement = planned DLI disbursement per circuit-km of HT lines through the HVDS program * actual achievement of circuit-km of HT lines through the HVDS program achieved for the quarter. Disbursements are allowed for early or late achievement of the DLI and capped at the total ADB financing allocation. This means that the planned disbursement amount can be released when the set target is fully achieved even if the achievement is late, as long as the achievement is during the program’s duration.

Project Module of MSEDCL ERP System Required frequency for reporting will be quarterly and MSEDCL and ADB may agree each year on interim reporting arrangements as appropriate. Monitoring may be as frequent as MSEDCL wishes.

Every quarter, the M&E in MSEDCL prepares an attestation that the DLI is met and attaches the relevant reports. The IVA will verify the results every quarter from the project module of MSEDCL ERP system. The IVA will also verify the results by spot checks of the HVDS system at circle/ division level. The IVA will refer to the verification protocols and other relevant guidelines prepared for the program. The IVA report to be attached to the MSEDCL’s report. Within one month of receiving the validated report, ADB will confirm that the target has been met.

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Jan 21 – Mar 21: Commissioning of 4,000 circuit-km of HT Lines through HVDS program Apr 21 – Jun 21: Commissioning of 5,800 circuit-km of HT Lines through HVDS program

DLI 6 – Addition of new 33/11 kV substations, augmentation/upgradation of existing 33/11 kV substations in rural Maharashtra to improve upstream network capacity for agricultural HVDS Apr 20 – Jun 20: Commissioning of 10 substations under HVDS program Jul 20 – Sep 20: Commissioning of 10 substations under HVDS program Oct 20 – Dec 20: Commissioning of 20 substations under HVDS program Jan 21 – Mar 21: Commissioning of 20 substations under HVDS program Apr 21 – June 21: Commissioning of 20 substations under HVDS program Jul 21 – Sep 21: Commissioning of 15 substations under HVDS program Oct 21 – Dec 21: Commissioning of 26 substations under HVDS program

Conditions for full disbursement are met if the number of substations commissioned under HVDS Program for a quarter reaches the target number specified for that quarter. Partial disbursement. The DLI is scalable and partial disbursement is allowed for over and under achievement. If the target is not fully achieved, then disbursement can be proportional to the increase made from the previous year’s achievement. The following formula will be applied: Partial DLI disbursement = planned DLI disbursement per substation * actual achievement of commissioned substations achieved for the quarter. Disbursements are allowed for early or late achievement of the DLI and capped at the total ADB financing allocation. This means that the planned disbursement amount can be released when the set target is fully achieved even if the achievement is late, as long as the achievement is during the program’s duration.

Project Module of MSEDCL ERP System Required frequency for reporting will be quarterly and MSEDCL and ADB may agree each year on interim reporting arrangements as appropriate. Monitoring may be as frequent as MSEDCL wishes.

Every quarter, the M&E in MSEDCL prepares an attestation that the DLI is met and attaches the relevant reports. The IVA will verify the results every quarter from the project module of MSEDCL ERP system. The IVA will also verify the results by spot checks of the HVDS system at circle/ division level. The IVA will refer to the verification protocols and other relevant guidelines prepared for the program. The IVA report to be attached to the MSEDCL’s report. Within one month of receiving the validated report, ADB will confirm that the target has been met.

DLI 7 –Increase in institutional capacity with number of MSEDCL staff (including all interested and eligible women) that demonstrate knowledge and skills on operations, maintenance and monitoring of HVDS for agricultural customers. Apr 20 – Jun 20: HVDS related training completed for 250 MSEDCL staff working in rural Maharashtra Jul 20 – Sep 20: HVDS related training completed for 250 MSEDCL staff working in rural Maharashtra

Conditions for full disbursement are met if the number of MSEDCL staff trained on HVDS for a quarter reaches the target number specified for that quarter (first column). Partial disbursement. The DLI is scalable and partial disbursement is allowed for over and under achievement. If the target is not fully achieved, then disbursement can be proportional to the increase made from the previous period’s achievement. The following formula will be applied:

Number of MSEDCL employees from Technical Department, Nashik attending 3-day training course on HVDS including on investment, billing & Collection, transformer failure and maintenance.

Every quarter, the M&E in MSEDCL prepares an attestation that the DLI is met and attaches the relevant reports. The IVA will verify the results every quarter from the project module of MSEDCL ERP system. The IVA will also verify the results by spot checks of the HVDS system at circle/ division level.

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Oct 20 – Dec 20: HVDS related training completed for 250 MSEDCL staff working in rural Maharashtra Jan 21 – Mar 21: HVDS related training completed for 250 MSEDCL staff working in rural Maharashtra

Partial DLI disbursement = planned DLI disbursement per trained MSEDCL staff * (actual achievement of trained MSEDCL staff achieved for the quarter Disbursements are allowed for early or late achievement of the DLI and capped at the total ADB financing allocation. This means that the planned disbursement amount can be released when the set target is fully achieved even if the achievement is late, as long as the achievement is during the program’s duration.

Required frequency for reporting will be quarterly and MSEDCL and ADB may agree each year on interim reporting arrangements as appropriate. Monitoring may be as frequent as MSEDCL wishes.

The IVA will refer to the verification protocols and other relevant guidelines prepared for the program. The IVA report to be attached to the MSEDCL’s report. Within one month of receiving the validated report, ADB will confirm that the target has been met.

DLI 8 –HVDS monitoring Dashboard to monitor agricultural customers created and operational Apr – Jun 20: HVDS monitoring dashboard to monitor agricultural customers supply parameters created and operational

Definition of DLI 8 is the creation of online HVDS dashboard for monitoring of indicators for supply to farmers connected on HVDS network (No. of connections, Sales in MU, Voltage variations, transformer failure rates). The dashboard would also support program monitoring (km. of lines, number of 33/11 kV sub-stations, number of MSEDCL staff trained, safeguard report status etc.) Conditions for disbursement are met if complete online HVDS dashboard is created by MSEDCL Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount can be released when the set target is fully achieved even if the achievement is late, as long as the achievement is during the program’s duration.

Project Module of MSEDCL ERP System

The M&E in MSEDCL prepares an attestation that the DLI is met and attaches the relevant reports. The IVA will verify the results and confirm the HVDS dashboard is operational. The IVA will also verify the results by spot checks of the HVDS system at circle/ division level. The IVA will refer to the verification protocols and other relevant guidelines prepared for the program. The IVA report to be attached to the MSEDCL’s report. Within one month of receiving the validated report, ADB will confirm that the target has been met.

ADB = Asian Development Bank, DLI = disbursement-linked indicator, ERP = enterprise resource planning, HT = high tension, HVDS = high voltage distribution system, IVA = independent verification agent, M&E = monitoring and evaluation, MERC = Maharashtra Electricity Regulatory Commission, MS = Microsoft, MSEDCL = Maharashtra State Electricity Distribution Company Limited, MU = million units (kilowatthours), NCS = new connection system. Sources: Asian Development Bank. .

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1. Verification Status 28. Not applicable at this stage

Table 5: Progress in Disbursement-Linked Indicator Verification (as of February 2020)

Disbursement-Linked Indicators Progress in Verification Issues and Changesa Outcome: Not applicable at this stage Outputs: Not applicable at this stage Other Results: Not applicable at this stage

D. Disbursement Allocation and Status 29. Disbursements will be made in accordance with ADB’s Loan Disbursement Handbook (2017, as amended from time to time) and detailed arrangements agreed between the government and ADB. The loan proceeds will be disbursed to the national government’s Controller of Aid, Accounts and Audit Account (CAAA). The loan will be disbursed subject to the achievement and verification of the DLIs. An advance disbursement has been requested by Government of Maharashtra after loan approval to finance advance payments to contractors for turnkey contracts which is subject to approval of Government of India. Financing of prior results not more than 12 months before loan signing is requested to support achieving the results as scheduled, given such activities comply with the program action plan and the results verified in accordance with verification protocols. Prior results for achievements for DLIs 4, 5 and 6 are not expected to exceed 13% and the combined total of advance financing and financing for prior results would not exceed 30%. Subsequent disbursements will be made based on quarterly achievement of DLIs and may be early or late depending on the performance against targets. Partial disbursements for DLIs 4, 5, 6 and 7 are allowed in proportion to the DLI target achievement. The verification mechanism and protocols have been established depending on the nature of the DLIs. Government of Maharashtra and MSEDCL would provide information to the independent verification agent (IVA) for preparation of reports and also submit evidence of authority of person authorized to sign withdrawal applications and authenticated specific signatures for each authorized person.

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1. Expected Disbursement Allocation and Schedule

Table 6: Expected Disbursement Schedule ($ million) (As of February 2020)

Disbursement Linked Indicators

DLI Total ADB Financing Allocation ($ Million)

Share of ADB Financing (%)


Prior Results

Apr 20 Jun 20

Jul 20 Sep 20

Oct 20 Dec 20

Jan 21 Mar 21

Apr 21 Jun 21

Jul 21 Sep 21

Oct 21 Dec 21

Jan 22 Mar 22

Outcome 1. Agricultural customers are effectively metered and billed a usage-based energy charge for utilization of the HVDS network1 (%)

DLI 1 69.2 20% 0 17.300 17.300 17.300 17.300 0


DLI 2 51.9 15% 0 12.975 12.975 12.975 12.975 0

3. Improved power quality for agricultural customers. Voltage drop for HVDS-connected agricultural customers not more than 6 % (MERC voltage regulation)2

DLI 3 51.9 15% 0 12.975 12.975 12.975 12.975 0

Output 4. Increase in number of new agriculture electricity connections in rural Maharashtra through metered HVDS by 156,000 by 2021

DLI 4 69.2 20% 28.833 13.308 4.436 8.872 8.872 4.879


DLI 5 34.6 10% 14.047 6.654 2.218 4.436 2.957 4.288

6. Addition of new 33/11 kV substations, augmentation/upgradation of existing 33/11 kV substations by 121 in rural Maharashtra to improve upstream network capacity for agriculture HVDS by 2021

DLI 6 17.3 5% 0 1.430 1.430 2.860 2.860 2.860 2.145 3.717

1 No. of connections metered and billed a usage-based energy charge at least once during the 3-month period out of the total no. of pump set connections issued under the HVDS program. 2 MERC (Standards of performance of distribution licensee, period for giving supply and determination of compensation), Regulation 2014. Measured at customer end at the day after

commissioning of distribution transformer (DTR). The measured voltage would be then compared against system voltage of 440 voltage as stipulated in the Regulation. It would be done on a sample no. of HVDS customers in each circle. (10 customers/circle every quarter)

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DLI Total ADB Financing Allocation ($ Million)

Share of ADB Financing (%)


Prior Results

Apr 20 Jun 20

Jul 20 Sep 20

Oct 20 Dec 20

Jan 21 Mar 21

Apr 21 Jun 21

Jul 21 Sep 21

Oct 21 Dec 21

Jan 22 Mar 22


DLI 7 17.3 5% 0 4.325 4.325 4.325 4.325

8. HVDS monitoring dashboard to monitor agricultural customers supply parameters created and operational Monitoring of performance indications (No. of connections, Sales in MU, voltage variations, transformer failure, staff trained, safeguard reports prepared etc.)

DLI 8 34.6 10% 0 34.6 0 0 0 0

Total 346 100% 42.880 103.566 55.659 63.742 62.264 12.027 2.145 3.717

Expected Disbursement Profile for ADB loan

2020 2021 2022 Expected Disbursement Profile

(including taxes and duties)

147.9 194.4 3.7

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2. Disbursement Status

Table 7: Disbursement Status (As of February 2020)


ADB Financing Allocation ($ million)

Share of Total ADB Financing

(%)

Expected Disbursement by {month and

year} ($ million)

Actual Disbursement by {month and year}

($ million)

Share of Total ADB Financing Disbursed

(%) 1. Agricultural customers are effectively metered and billed a usage-based energy charge for utilization of the HVDS network1 (%)

69.2 20%



51.9 15%

3. Improved power quality for agricultural customers. Voltage drop for HVDS-connected agricultural customers not more than 6 % (MERC voltage regulation)2

51.9 15%

4. Increase in number of new agriculture electricity connections in rural Maharashtra through metered HVDS by 156,000 by 2021

69.2 20%


34.6 10%

6. Addition of new 33/11 kV substations, augmentation/upgradation of existing 33/11 kV substations by 121 in rural Maharashtra to improve upstream network capacity for agriculture HVDS by 2021

17.3 5%


17.3 5%

1 No. of connections metered and billed a usage-based energy charge at least once during the 3-month period out of the total no. of

pump set connections issued under the HVDS program. 2 MERC (Standards of performance of distribution licensee, period for giving supply and determination of compensation), Regulation

2014. Measured at customer end at the day after commissioning of distribution transformer (DTR). The measured voltage would be then compared against system voltage of 440 voltage as stipulated in the Regulation. It would be done on a sample no. of HVDS customers in each circle. (10 customers/circle every quarter)

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ADB Financing Allocation ($ million)

Share of Total ADB Financing

(%)

Expected Disbursement by {month and

year} ($ million)

Actual Disbursement by {month and year}

($ million)

Share of Total ADB Financing Disbursed

(%) 8. HVDS monitoring dashboard to monitor agricultural customers supply parameters created and operational Monitoring of performance indications (No. of connections, Sales in MU, voltage variations, transformer failure, staff trained, safeguard reports prepared etc.)

34.6 10%

Total 346.0 100% 100.0 Source: Discussions with MSEDCL.

3. Issues and Changes

30. Not applicable at this stage.

III. EXPENDITURE FRAMEWORK AND FINANCING A. Expenditure Framework

1. Expected Expenditure Framework 31. MSEDCL operates as a distribution utility in the state of Maharashtra, India and is regulated by the state’s electricity regulator –MERC. The MERC approves a capital expenditure plan for MSEDCL which guides the development of distribution infrastructure in order to meet the electricity demand of its customers. In order to project the development of distribution infrastructure, the capital expenditure plan takes into account, amongst other factors, expected growth in demand and the need to achieve targeted performance parameters in terms of reduction in distribution losses (technical and commercial) and achievement of quality of supply and service levels at the customer end. The aspects of cost efficiency and benefits maximization are duly considered while approving the capital expenditure plan. 32. The capital expenditure plan approved at the start of control period is reviewed on a medium-term basis and spending for the remaining half of control period is accordingly approved. MERC’s mid-term review tariff order for MSEDCL, issued in September 2018, has projected a total capital expenditure outlay of $1.7 billion for the period 2019 to 2021. This includes investments in upstream and downstream network augmentation and strengthening, and last mile connections, covering all customer categories of MSEDCL. The proposed RBL will cover similar aspects, but for a subset of customers under the agricultural category of MSEDCL. The total cost of RBL program is estimated at $703.1 million. This includes capital expenditure on upstream network augmentation and strengthening including 33/11 kV substations, downstream network strengthening and augmentation including 11 kV distribution lines, poles, distribution transformers and last mile connections including metering. It also includes costs related to institutional capacity development and improving customer awareness. The expenditure framework of an RBL program makes the program operational by ensuring that the priorities and costs are realistic, and may be supported by a medium-term expenditure framework, which in turn is part of a sector expenditure framework.

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Table 8: Breakdown of Expenditure Framework, 2020-2021 (in 2019 prices)

Itema Amount

($ million) Share of Total

(%) HVDS electricity distribution network in rural Maharashtra for new agriculture customers installed 548.1

77.9

Institutional capacity of MSEDCL improved 2.0 0.3 Awareness on HVDS and the efficient use of electricity and water in rural Maharashtra enhanced

0.5

0.1

Taxes 88.0 12.5 Administration cost 23.1 3.3 Financing costs 20.9 3.0 Contingencies 20.4 2.9 Total 703.1 100.0

HVDS = high voltage distribution system, MSEDCL = Maharashtra State Electricity Distribution Company Limited. a This includes financing of eligible prior results in 2019. Sources: Maharashtra State Electricity Distribution Company Limited and Government of Maharashtra estimates.

2. Expenditure Status

Table 10: Estimated Program Expenditure (As of XXXX)

Items

Estimated Expenditures Over the Past Year (xxxx–

xxxx) ($ million)

Share of Total

Expenditures of the Past

year (%)

Cumulative Expenditures

to Date (xxxx–xxxx) ($ million)

Share of Total

Cumulative Expenditures

to Date (%)

HVDS electricity distribution network in rural Maharashtra for new agriculture customers installed

Institutional capacity of MSEDCL improved


Awareness on HVDS and the efficient use of electricity and water in rural Maharashtra enhanced Taxes Administration cost Financing costs Contingencies Total

Source{s}: {List table source(s).}.

3. Issues and Changes 33. Not applicable at this stage. B. Program Financing

1. Expected Financing Plan 34. The total financing needed is estimated at $703.1 million, of which the government has requested a regular loan of $346.0 million from ADB’s ordinary capital resources to help finance

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the program. The loan will have a 20-year term, including a grace period of 5 years; an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility; a commitment charge of 0.15% per year; and such other terms and conditions set forth in the draft loan and program agreements. Based on the straight-line method, the average maturity is 12.75 years, and there is no maturity premium payable to ADB. Counterpart funding has been arranged by MSEDCL and Government of Maharashtra. The financing plan is summarized in Table 11.

Table 11: Program Financing Plan (As of February 2020)

Source Amount ($ million) Share of Total (%) Counterpart Fundinga 357.1 50.8 Asian Development Bankb

Ordinary capital resources (loan) 346.0 49.2 Total 703.1 100.0

a Includes loans mobilized by MSEDCL and guaranteed by the state government of Maharashtra. b ADB loan will be passed to MSEDCL as a grant by the state government of Maharashtra. Sources: MSEDCL and Government of Maharashtra estimates.

2. Financing Status

Table 12: Status of Program Financing Plan (As of February 2020)

Source

Financing over the

Past Year ($ million)

Share of Total

Financing of the Past

year (%)

Cumulative Amount of

Financing to Date

($ million)

Share of Total

Cumulative Financing

to Date (%)

Equity

NOT APPLICABLE AT THIS STAGE Loan Grant Asian Development Bank Contribution Total

Source{s}: {List table source(s).}

3. Issues and Changes 35. Not applicable at this stage.

IV. PROGRAM SYSTEMS AND IMPLEMENTATION ARRANGEMENTS

36. The Energy Department, Maharashtra and MSEDCL are the executing agencies for the program. MSEDCL will be responsible for physical investments in the network under the program. MSEDCL’s regional offices in Nagpur, Pune, Kalyan and Aurangabad will implement the program with overall oversight by MSEDCL’s headquarters. A steering group headed by the Secretary Energy and Chairman and Managing Director of MSEDCL would periodically review the program implementation and provide overall direction. The HVDS project management unit (PMU) in MSEDCL will submit periodic progress reports on achievement of DLIs and the PAP as well as other key performance indicators.

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A. Monitoring and Evaluation System

1. Description of the monitoring and evaluation (M&E) system

37. Description of the M&E institutional and operational dimensions. MSEDCL’s organization structure is organized functionally (operations, commercial, projects, finance, and support functions like HR, IT, etc.) as well as geographically (four regions). While functions are further divided into divisions for carrying out specific activities, regions are further divided into field offices at zones, circles, divisions, sub-divisions and sections. 38. Most of MSEDCL’s core functions have some form of representation within a circle office, hence, circle is the basic unit of performance management. Performance is managed on a monthly basis, with circles reporting their performance to zones, zones reporting to regions and regions reporting to head office. Once performance parameters are finalized at circle level, data is simply aggregated across zones and regions, thus finally aggregating into company level performance.

39. There is significant IT intervention in MSEDCL’s performance monitoring framework. A number of software applications (systems) are used by MSEDCL for its key business processes (new connections, network operations and maintenance, meter reading and billing, capital projects, financial transactions, etc.). These systems are also used by MSEDCL to report data on key performance indicators (KPIs). The systems use a common database in real time; further, mobile versions of the systems are available to the field staff for instantaneous data entry. Thus, the design and processes of the performance monitoring framework ensure that data is up-to-date and minimizes manual intervention.

40. KPIs across various aspects of the business such as efficiency, network reliability, commercial finance, customer, new projects are tracked. Some prominent KPIs include distribution loss, network reliability (SAIFI, SAIDI), tariffs, cost of supply, load shedding, projects commissioned, capital works under progress and financial indicators.

41. MSEDCL adopts the operating norms and performance targets set by the regulator – MERC – for its internal performance management. Target setting is an annual exercise within MSEDCL. While MERC sets norms/targets for the organization as a whole and on an annual basis, MSEDCL further disaggregates those down to the circle level and to a monthly frequency.

42. RBL program specific institutional and operational dimensions. The organizational framework for the RBL program depends on status of implementation of the HVDS project. During project implementation phase, the RBL program is being monitored by the HVDS unit established within the Project function and housed in MSEDCL’s headquarters. This unit is responsible for planning, implementing and commissioning of the project. As and when individual packages within the project get commissioned, the assets so commissioned get subsumed within MSEDCL’s overall asset base and are operated and maintained by the Operations function.

43. The HVDS unit is adequately staffed – it is headed by a chief engineer (CE) HVDS who is supported by a team of mid-level and junior executives. MSEDCL has appointed a third-party independent verification agency. Ground-level implementation of the project is being carried out by a large number of contractors, who report performance on project implementation directly to the HVDS unit. MSEDCL also has recruited consultants in each circle to review activities on the ground and provide weekly feedback on the implementation

44. For the purpose of reporting of various performance indicators, the HVDS unit interacts

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with the IT division to extract reported values from various software applications. The staff at HVDS unit rely on the same processes and systems that are used by MSEDCL’s IT division to generate monthly performance reports, thus ensuring high levels of integration between the two.

45. Arrangement for evaluation of the program. Directorate of Economics and Statistics (DES) is an independent entity within the state government for conducting performance/impact evaluations of state sponsored development programs. Since the HVDS scheme is supported by the state government, it should qualify for ex-post evaluation (after implementation of the scheme). DES is not attached to any line ministry of the state government plus it carries out its evaluations through external agencies - thus evaluations carried out by the DES are expected to be independent.

46. Effective metering and billing of usage-based energy charge. This DLI measures the number of connections billed at least once during a 3-month period out of the total number of HVDS connections issued under the scheme. The DLI requires two sets of data: (i) billing status; and (ii) connections issued under the scheme.

47. Information on new connections can be extracted from the New Connection System (NCS) used to process applications for new connections, disconnections, reconnections and change in connection of customers – thus the system maintains a record of the connection status of each customer. The system has a filter for the scheme under which the customer was provided a new connection – this will enable extraction of connection statuses of HVDS customers. The NCS is seamlessly integrated with the billing system and the scheme code for each customer is passed on to this system as well – thus extraction and comparison of data on connection status and billing status of each HVDS customer is possible.

48. Number of connections issued under the scheme. This data is also available from the NCS and can be reported separately for HVDS connections. The NCS is an online system and most of the steps in a connection process are carried out online, thus limiting manual intervention and maintaining data quality.

49. Reduction in distribution transformer failure rate. The DTR failure rate is computed as a ratio of “number of transformers failure during a period” to “total number of transformers present during the period.” The data process begins at the circle office where the stock of transformers is maintained. Data on all transformer capacities is maintained. The records are recorded firstly entered in a hard copy format and then transcribed to Microsoft Excel (MS Excel). The staff records the opening stock, incoming failed transformers, transfer to the repair unit or replacement with new transformer (as the case may be) and closing stock. The hard copy logs are transcribed to MS Excel on a 2-weekly basis for the purpose of monthly reporting.

50. Every second week, each circle office sends data to the Material Management Department at head office which includes details on opening and closing values of the stock of transformers and transformer failures. Individual MS Excel files are involved, and email is used as the mode of transfer between circle office and head office. Based on the report received from all circle offices, the head office generates an AFSZ report: “Age (of transformer) – Failure – Scrap – Zone-wise total” on a fortnightly basis. Disaggregation for failure rate is available as per the DTR capacity, zone, circle, etc. Data quality issue is potentially an issue given manual interventions at the circle office and head office. Also, since multiple MS Excel files are involved and that the entire data comes from almost 50 circles, the scale of manual intervention can be significant. This process is being automated by MSEDCL.

51. During program design, it was discussed that since HVDS transformers are identified by

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a unique asset code, it should be possible to identify and report these and MSEDCL is putting this system in place.

52. Maintenance of voltage profile within MERC’s voltage norms. This DLI assesses whether the voltage deviation for HVDS customers lies within the voltage deviation band specified by MERC. The voltage would be measured at the customer end and a sample of customers would be selected for data capture. Data would be reported on a quarterly basis. The data capture process involves manual interventions in terms of physically measuring the voltage at customer end, recording it in data templates and further aggregating and processing the data for indicator computations. Considering constraints of distance and costs involved in the data capture process as well as the need for data to be fairly representative, it has been agreed with MSEDCL to plan for a sample from 35 circles to be representative for HVDS customers.

53. Expanded access to electricity services. This DLI measures the number of new agricultural customers connected through HVDS. The data shall be extracted from the NCS system. Segregating and reporting on customers connected under HVDS scheme is possible, as explained earlier. The system being fully online thus limiting manual intervention, data quality is expected to be good. Sex-aggregated data, location and circle-aggregated data on new connections would be collected.

54. HT line commissioned (circuit-km) and total number of sub-stations commissioned through HVDS program. These DLIs pertain to assets created and commissioned under the HVDS scheme. The process of asset creation starts with creating a new project within the project builder interface of the project system module of the ERP software. The interface provides a comprehensive list of components along with unique identification for each component in order to “build” the particular asset. After the project is created and approved in system, purchase order is created which enables the contractor to work. Once work is completed, a joint measurement process is undertaken by both MSEDCL and the contractor in order to validate and certify the work. On approval, the contractor begins process of invoicing and a work completion report is prepared. After this event, asset is created in the system.

55. The workflow is fully online and there are in built validations (joint measurement process, invoicing and work completion report) available. Thus, data quality is expected to be good.

56. HVDS monitoring dashboard. This DLI measures the development of a dashboard that would be used by MSEDCL management and state government to monitor the performance of the Program. It will help track the above DLIs and inform MSEDCL management as well as other agencies of the state government on key performance indicators, the PAP for review and reporting. Data quality is expected to be good.

2. Monitoring and Evaluation System Related Program Actions Status 57. Not applicable at this stage.

3. Issues and Changes 58. Not applicable at this stage. B. Fiduciary Systems

1. Financial Management System

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a. Summary of the Financial Management System 59. State level financial management system. The state government of Maharashtra has a well-developed budgetary framework that ensures allocations of adequate resources to all departments and programs. As per the Maharashtra budget manual, the Finance Department (FD) is responsible for preparation of the annual budget by obtaining estimates from various departments. The departmental estimates of receipts and expenditure are prepared by the controlling officers on the advice of heads of departments and submitted to the FD by prescribed dates. The FD scrutinizes the estimates and prepares the detailed estimates. The preparation of the budget aims be to achieve as close an approximation to the actuals as possible. 60. The Maharashtra budget manual provides that the authority administering a grant is responsible for tracking progress of expenditure under its control and for keeping it within the sanctioned grant or appropriation. The duties and responsibilities of the authorities include preparing the estimates timely and accurately and to ensure that the grant is spent only on the objects for which it has been provided and to surrender savings if no longer required. 61. Entity overview. MSEDCL is a distribution utility operating in the state of Maharashtra. It is a limited company established under the Companies Act, 1956. MSEDCL came into existence in 2005 after the unbundling of the erstwhile Maharashtra State Electricity Board (MSEB) into four companies. The company is a wholly owned subsidiary of MSEB Holding Company Ltd. – the holding company is owned by state government of Maharashtra. MSEDCL is one of the largest public sector company in the business of electricity distribution and has the largest customer base in India. MSEDCL has a total of 65,146 employees in 4 regional offices, 16 zones, 46 circles, 147 divisions, 652 subdivisions, 3,228 section offices and 34 IT centers. 62. Fund Flow. Funding for the Program will be provided in the state government budget under HVDS Scheme in an exclusive budget line, separate from the other budget line items through which the state government finances the power sector. This is as per the general practice of the state government, wherein it creates separate budget lines for external funding. ADB funds will flow to the Government of India and then flow through the state government Treasury and will be disbursed to MSEDCL to implement the Program. Maharashtra Treasury, under the Finance Department, will monitor performance against this budget line and this will be reported through the existing budget estimation, allocation & monitoring system. Normally the state budget is approved by the state legislature before commencement of the financial year on 1 April each year. 63. Personnel. MSEDCL’s organizational structure is based on functional responsibilities of the personnel. MSEDCL is headed by a chairman and managing director (CMD). MSEDCL has adequate technical and financial and planning capabilities to prepare plans and budgets for its projects and a well-established project management set-up. It was assessed that the main positions in finance and account division are filled with qualified staff with appropriate background and experience and the level of staffing in the finance unit is adequate without significant vacancy. MSEDCL’s finance division is headed by director (finance) supported by three chief general managers (CGM) for corporate finance, corporate accounts, and internal audit. There is a designated division for ERP implementation under corporate account department.

64. Accounting Policies and Procedures. MSEDCL prepares its financial statements under the historical cost convention on an accrual basis and in accordance with generally accepted accounting principles and applicable accounting standards in India. MSEDCL prepares standard alone and consolidated financial statements in accordance with the provisions of the Companies Act, 2013, the Ind AS notified under the Companies Rules 2015 issued by the Ministry of Corporate Affairs. It also considers the principles determined by the MERC while determining

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tariff, to the extent applicable for accounting. MSEDCL has adopted all the Ind AS and the adoption was carried out in accordance with Ind AS 101 First-time Adoption of Indian Accounting Standards.

65. Budgeting. Budget comprises capital and revenue budget. Capital budgets are based on physical works to be done while revenue budgets are based on norms and/or estimates. The program will be included under the capital budget and the funds will be allocated, disbursed and monitored through MSEDCL’s budget system. MSEDCL prepares the annual capital budget for next financial year and discloses it on the MSEDCL’s web site.3 Along with budget for the next year, a revised estimate for the current year is also prepared based on utilization till date. These estimates are then compiled by the finance department (corporate finance) and after internal discussions, presented to the board of directors for its approval. The budget is also submitted to the state government for inclusion in the state budget as appropriate. The capital budget needs to be approved by the MERC. The capital expenditure budget is prepared by the projects department of MSEDCL while the budget for revenue expenditure is prepared by the commercial, operations and other concerned departments. The managing director monitors the budget on a monthly basis. 66. Information System. MSEDCL has been a pioneer in IT implementation in the power distribution sector. It has developed various IT applications through in-house IT department (comprising 465 staffs including regional office) headed by the executing director. MSEDCL has provided various online consumer services and empowered its employees with digital tools to deliver services promptly. MSEDCL is deploying IT services on mobile platform to improve transparency, efficiency and ease of business to employees and customers. The major IT initiatives of MSEDCL are listed as below.

(i) ERP is fully functional. In the FY2015-2016, MSEDCL completed implementation of enterprise resource planning (ERP) solution to all regional offices by integrating all the various operating systems. This brings significant improvements in operational efficiency by storing the information at a central location on real time basis with accuracy and eliminating manual process. Most of transaction and operation in MSEDCL such as projects, maintenance, materials management, finance and control, energy audit, customer relationship management, e-tendering, billing, payroll/human resource management system, website, online payment has been conducted through ERP.

(ii) Mobile APPs. Mobility platform is introduced to improve employee efficiency and better

delivery of services to customers. MSEDCL has in-house developed and successfully deployed a consumer application and 3 mobile applications for employees in FY2016-2017. Employee apps are developed mainly to cover day to day business activities of field employee and to capture field data on near real time basis.

(iii) MSEDCL Dashboard. Dashboards provide at-a-glance views of KPIs relevant to a

business process such as energy sales, payment collection, material stock, or balance sheet. KPI’s available on dashboard are energy accounting, position of daily non-agricultural sale against target can be monitored, meter reading analysis, category wise analysis of demand and collection, new connection release and pendency, sale, demand, collection trend analysis, analysis of power related and billing complaints, and feeder wise time of day wise load profile etc.

3 Maharashtra State Electricity Distribution Co. Ltd. https://www.mahadiscom.in/annual-budget/

https://www.mahadiscom.in/annual-budget/

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67. Asset management. Asset register is properly maintained in the ERP software with identification of specific item, depreciation, written down value and location center. For physical verification, MSEDCL has formulated policy for physical verification of fixed assets to ensure proper accounting and control over fixed assets in January 2018. MSEDCL will conduct physical verification in a phased manner at the same time all across its license area in Maharashtra from August to December once in every three years. 68. Cash and Management. MSECL maintains record of receipts, payments, and cashbooks online. The receipts of funds from collection, timely deposit to coding are properly controlled. The cash balance and cash book are periodically verified to ensure control and accuracy. The execution of a transaction and its subsequent recordings are carried out as per delegation of powers defined and approved by the management of MSEDCL. All accounting documents are duly signed and authorized by delegated personnel. The bank statements are reconciled on monthly basis. In FY2017-2018, all payments to employees such as salary, bill, allowances are being done digitally.

69. Centralized billing system. 100% of billing of all customers across all circles was started through centralized billing from August 2018 onwards. Before implementation, decentralized customer database was being maintained at circle IT centers for reporting purpose, which was post billing activity. Most of the billing activities was done offline and there was delay in bill generation due to manual activities which were under control of sub-division office. After implementing centralized billing system, MSEDCL was able to (i) regulate cash flow through scheduled billing activity; (ii) improve quality of billing; (iii) reduce billing complaints and commercial loss; (iv) complete the process from meter reading to billing generation is automated, without any manual intervention; and (v) cause minimum delays in submitting the MIS information due to manual activity.

70. Internal control. MSEDCL has a dedicated internal audit department with qualified staff headed by a CGM. The internal audit unit separately operates from finance and account department. The function of internal audit department is to prepare annual audit plan and review the reports submitted by the internal auditors. MSEDCL has appointed approximately 70 independent chartered accountancy firms for conducting internal audit of the various regional offices and headquarters. These internal audit reports are reviewed by the internal audit staffs in headquarters and any significant internal audit findings are reported directly to the audit committee of the board by the CGM (internal audit) with director (finance) on regular basis.

71. The scope of internal audit covers all major activities of the entity. MSEDCL specifies detailed scope of audit for head office and regional office. In head office, after completion of internal audit, the internal auditor submits the draft report and receives replies to draft report from concerned sections. After submitting the final internal audit report, action taken on the report is submitted from concerned sections. The internal audit unit issues consolidated audit reports on semi-annual basis. 72. Improvement in internal financial controls over financial reporting. In response to audit observation on internal financial controls, MSEDCL appointed a chartered accountancy firm, to conduct an evaluation of internal financial controls over financial reporting and submit a report. The framework includes risk control matrix which covers power purchase, revenue billing, material management, human resource, operation and maintenance, capital expenditure, corporate finance, corporate accounts and information technology general controls. The firm submitted the report documenting risk and control matrix system to MSEDCL. MSEDCL is in the process of reviewing this report to address the audit observation.

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73. External audit. MSEDCL has comprehensive an audit system with five types of audit (statutory audit, government audit, cost audit, secretarial audit and internal audit). Statutory audit was done by three chartered firms appointed by the Comptroller & Auditor General of India (CAG). Immediately after statutory audit, supplementary audit is conducted by CAG. According to the Companies Act, cost audit and secretarial audit is also conducted. Practicing company secretary has been appointed as secretarial auditor and reviewed the statutory compliance of MSEDCL. The external auditor gave a qualified opinion pointing out some audit observations. MSEDCL’s management, in its reply to the audit observations, has indicated that action is being taken to resolve the issues raised by the auditors including regarding asset verification.

74. Public disclosure of the audited program financial statements, including the auditor’s opinion on the program financial statements, will be guided by ADB’s Access to Information Policy. After the review, ADB will disclose the audited program financial statements and the opinion of the auditors on the project financial statements no later than 14 days of ADB’s confirmation of their acceptability by posting them on ADB’s website. The management letter, additional auditor’s opinions, and audited entity financial statements will not be disclosed. The audited accounts will be submitted in the English language to ADB within 6 months after the close of the fiscal year. ADB reserves the right to require a change in the auditor (in a manner consistent with the laws and regulation of the India), or require additional support to be provided to the auditor, if the audits required are not conducted in a manner satisfactory to ADB, or if the audits are substantially delayed.

b. Financial Management System Related Program Actions Status 75. The key actions to improve the existing financial management system included in the PAP are (i) timely progress on physical verification of fixed assets (including those under the Program) and inventory and maintenance of asset register in ERP/SAP by 2021; (ii) discussion and agreement with statutory auditors on the issue of internal controls over financial reporting to be in compliance with Guidelines framed by Institute of Chartered Accountants of India by June 2020; (iii) action plan regarding resolution of issues raised by auditors by June 2020. In addition, a training program on ADB disbursement procedures and auditing requirements would be completed with MSEDCL and GOM before March 2020.

2. Procurement System

a. Summary of the Procurement System 76. The procurement for the program will be undertaken by MSEDCL and would be consistent with procurement principles of ADB's Procurement Policy, 2017 as amended from time to time. MSEDCL has a materials management (MM) department headed by a chief engineer who reports to the executive director. The MM Department is responsible for procuring meters & transformers and routine requirements of MSEDCL. In addition, MSEDCL also has a superintending engineer who is responsible for all the HVDS project related procurement. The HVDS project team is responsible for developing the bid documents for the HVDS project. The bidding is proposed to be done by the regional directors / Chief Engineers of each zone. 77. Procurement under the Program will essentially involve system improvement work, such as (i) supply, testing and commissioning of new 33 /11KV sub stations; (ii) augmentation/upgradation of existing 33/11 kV substations; and (iii) construction and commissioning of 11KV lines and distribution transformers and last mile connections including metering. All procurement is conducted according to the state’s procurement guidelines, manuals, and standard bidding documents (SBDs). For the purposes of the program, MSEDCL has divided

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the total procurement into the following categories. The details of the procurement done under each category and the status thereof is as follows:

(a) Full Turnkey HVDS Tenders: MSEDCL issued 13 tenders inviting bids for different works in

its circles for an aggregate value of $199 million. Full Turnkey (FTK) tenders range in estimates from $[0.4] million to $[27.6] million. The largest tender for FTK was an estimated $[27.6] million - well below the ADB threshold of $50 million for financing under the RBL modality. The bidding follows NCB procedures. It is noted that there are numerous, relatively standard, low value and low risk contracts and procurement is carried out in dispersed locations by different zones of MSEDCL.

(b) Partial Turnkey HVDS Tenders: MSEDCL issued 633 tenders inviting bids for different circles for an aggregate value of $[305] million. Partial turnkey basis tenders (PTK) envisage supply of key items (for e.g. distribution transformers and meters) by MSEDCL while the rest of the works and remaining items are done by the contractor. These are low value contracts with an average estimated cost of less than $1.0 million.

(c) Procurement of Partial Turnkey - Goods: MSEDCL has separately issued tenders for

procurement of goods such as distribution transformers and meters. The total value of contracts under such procurement is $[82] million and the average value of contracts is $[1] million. These goods are centrally procured by MSEDCL and provided to PTK contractors. The process is based on a review of technical bid followed by price bid.

78. One finding is that for Partial Turnkey – Goods (distribution transformers, meters) – if the lowest acceptable rate received is from a bidder outside Maharashtra, then such bidder is considered for order up to 50% of the tendered quantity and if units in Maharashtra that have bid are agreeable to accept a part of the order at the lowest acceptable rate, such units in Maharashtra can cumulatively provide the balance 50% of the tendered quantity by matching their rates with lowest acceptable unit rates. The purchaser generally distributes the quantity among bidders who have matched their rates with the rate of lowest acceptable bidder based on their manufacturing capacity. A similar mechanism exists even in case the least cost bidder is from the state of Maharashtra. Also, micro small and medium enterprises registered in Maharashtra, if they have participated in the tender, are eligible to receive a share of the order if able to reduce bid prices to match the L1 bidder.

79. The General Financial Rules (GFR) states that every authority delegated with financial powers to procure goods in public interest shall have the responsibility and accountability to bring efficiency, economy, and transparency in matters relating to public procurement for fair and equitable treatment of suppliers and promotion of competition in public procurement. The practice is clearly stated upfront in the tender document. While this appears to promote local supplies, it is found to be a commonly followed practice in most Indian states to support local industry. MSEDCL has indicated that the practice helps diversify supply sources given the large volumes to be delivered within the program period to avoid delivery risks.

80. Country level procurement systems: There is no central law governing procurement in India. However, comprehensive rules and directives in this regard are available in the GFR 2005; subsequently replaced by GFR 2017 and Delegation of Financial Powers Rules (DFPR) 1978, as subsequently amended from time to time. The GFR framed by the Ministry of Finance; lay down the principles for general financial management and procedures for government procurement. These rules have the status of subordinate legislation. All government purchases must be in accordance with the principles outlined in the GFR. The Department of Expenditure, Ministry of Finance has also issued three separate manuals on procurement of goods, services and works

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as guidelines to all central government departments. Further, the Directorate General of Supplies & Disposals (DGS&D) and the Central Vigilance Commission (CVC) have also issued guidelines prescribing the procurement procedures to be followed by all central ministries and executing agencies. The state government also has a good public procurement system which complies with the GFR as well as the procurement guidelines issued by the state government. There are comprehensive state procurement guidelines for civil works and guidelines on the selection and employment of consultants. 81. The extant procurement regulations of MSEDCL are in accordance with the internal procurement rules and processes which comply with the state government’s procurement guidelines circumscribed by Government of India’s GFR 2017. The publication of notice is done in one national and one local daily and is also hosted on the company’s website. MSEDCL has developed its own portal which it has been using since 2010. MSEDCL has developed its own SBDs used for procurement of goods, services and consultants. The timelines followed for sale of bid documents, bid preparation, bid evaluation and subsequently award of contract are generally in line with the market practice and the overall project implementation timelines allowed by the ministry/state governments. The bids are normally opened the day after the last date of submission of the bids. The bid evaluation is carried out by the bid evaluation committees which are constituted for every tender. The constitution of the evaluation committee is approved by the MD and invariably include a representative each from the indenting, finance and contracts departments. The level of participation in the committee depends upon the size of the tender and is as laid down in the Procurement Policy. The bid evaluation is normally done within the stipulated time. The procedures for the receipt of goods, record keeping of assets/inventory, and defect liability/warranty period are well established.

b. Procurement System Related Program Actions Status 82. The key risks and actions identified for MSEDCL are:

(a) The e-Procurement system was developed in-house by MSEDCLs IT team. However, it has been audited by an independent third-party CERT-IN empaneled vendor in 2019 and certified. MSEDCL will get the certification renewed annually.

(b) Periodic submission of procurement monitoring report on a quarterly basis (c) Periodic publishing of contract award information on MSEDCL website. (d) From a longer-term perspective, need-based training on procurement would be

provided to MSEDCL through the Capacity Development Center. This would be useful for future interventions if these require high value packages, international competitive tenders or advanced technology packages.

3. Anticorruption System

a. Summary of Anticorruption System 83. State level. The state government has set up an entity called Anti-Corruption Bureau (ACB) for investigation of complaints against public servants involving abuse of position and corruption. ACB was constituted under Government of Maharashtra on November 1957 with a view to eradicate/prevent bribery and corruption in state government and semi-government departments and public sector undertakings including MSEDCL. ACB is headed by a Director General of the rank of Director General of Police. The Director General of ACB is independent of the Director General of Police and functions directly under the administrative control of the government in Home Department.

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84. The main functions of ACB include (i) to detect cases of bribery and corruption and to investigate offices under the purview of section 7 to 15 of Prevention of Corruption Act 1988 (Act 49 of 1988); and (ii) to institute enquiries in to complaints made by the members of public or received from the government officials and from the state Ombudsman (Lok-Aayukta and Up Lok-Aayukta) relating to bribery, corruption, criminal misconduct, embezzlement of government money by public servants. Duties of officers are (i) endeavor to collect information regarding bribery and illegitimate assets amassed by public servants; (ii) lay traps to catch public servants accepting illegal gratifications; and (iii) conduct enquiries and investigations into complaints as may be ordered by the director general and other supervisory officers. 85. Entity level. MSEDCL has employees service regulations 2005 which includes the code of conduct to be followed by its employees. These rules provide for detailed guidelines for employees to follow and consequences of any violation. MSEDCL has a well-structured anti-corruption system. MSEDCL has five different units regarding anti-corruption and an accountability mechanism, which are chief investigation officer (CIO), security and enforcement department, energy vigilance community, disciplinary action cells, and local competent authority. Security and enforcement department is in-charge of physical security of all assets and enforcing detection of electricity theft. CIO’s mandate is to investigate any complaints including corruption, embezzlement, fraud charges against its officers (below superintending engineer) while the energy vigilance community handles all vigilance matters related to high level officers (above superintendent engineer) and reports to CMD. Local Competent authority handles all internal administrative complaints in regional offices, reports to director (HR). Disciplinary action cells handle substantial and serious reports engaging police actions against employees. 86. MSEDCL also has a three-tier mechanism for redressal of consumer grievances including that is in compliance with the MERC (Consumer Grievance Redressal Forum and Electricity Ombudsman) regulations. This includes (i) internal grievance redressal cell; (ii) consumer grievance redressal forum; and (iii) electricity ombudsman. 87. ADB has a fiduciary responsibility to ensure that its loans and other forms of financing are used only for the purposes for which they were granted, in accordance with the Agreement Establishing the Asian Development Bank. To uphold that obligation, ADB developed guidelines to prevent or mitigate fraud, corruption, and other prohibited activities in RBL operations financed in whole or in part by ADB (Appendix 2).

b. Anticorruption System Related Program Actions Status 88. MSEDCL will adopt and follow ADB’s Guidelines to prevent fraud, corruption and other prohibited activities in RBL. C. Satisfying Procurement Member Country Eligibility Restrictions 89. Given the program’s expenditure and procurement profiles, it is unlikely that ADB member country eligibility restrictions will be breached. MSEDCL will provide regular procurement monitoring reports with information on contracts awarded, nationality of the bidder and size of contract to assure this. D. Safeguard Systems

1. Summary of Safeguard System 90. The program is expected to be category B for environment and involuntary resettlement

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and Category C for indigenous people. MSEDCL confirmed land acquisition is not proposed for distribution transformer and last mile installations. Each 33/11 kV distribution substation would require land that is either government land or in some cases obtained through a willing buyer and willing seller model from private parties. The environmental impacts of agriculture connections are not expected to be significant and will be focused during the construction phases.

2. Safeguard System Related Program Actions Status 91. MSDECL should ensure that the sub projects under the program are screened and assessed using the safeguard checklists and templates in Appendix-3 of the Program Safeguard Systems Assessment (PSSA) and the results submitted to ADB through semi-annual monitoring reports in Appendix 5 of the PSSA.4 In case there are any impacts, environmental management plan and social measures are to be implemented as identified in the PSSA. Adequate budget and recourses would need to be allocated, as required, for proper and timely implementation of the Safeguards Program Action Plan (SPAP). If noncompliance with proposed mitigation measures are identified, corrective actions shall be proposed to ADB for review and implemented. MSEDCL will also continue to undertake and strengthen consultations with affected persons and strengthen the capacity of MSEDCL staff on safeguards through training. Support will also be provided through qualified and experienced safeguard focal persons to support the program management unit and assigned staff to implement the SPAP.

E. Gender and Social Dimensions 92. Women farmers would benefit from the program as owners of new HVDS connections. There would also be an improvement in household incomes through reduced electricity consumption, pump set damage due to voltage fluctuations from the MSEDCL power supply and reduced diesel usage. Rational usage of electricity for agriculture allows electricity to be available for rural households (for lighting, income generation activities) and public lighting in rural areas (improved security). MSEDCL has provided information on recruitment and training practices for staff and women staff interested and associated with the program would be trained on various aspects of HVDS. The potential for women to benefit from reduced electricity and water usage will be further examined under the proposed feeder pilot including reduced electricity bills, potential models for direct benefit transfer and alternative usage of electricity and water savings. F. Communication and Information Disclosure Arrangements 93. ADB’s Access to Information Policy has been shared and ADB disclosure requirements discussed. MSEDCL has consulted with stakeholders, including the regulator, during program design and preparation stage. The HVDS unit provides weekly updates to MSEDCL management. MSEDCL provides periodic updates to customers regarding the status of their application for connections. MSEDCL also periodically updates the government on the status of connections provided. The PAP also includes consultation with affected peoples. Open communication at all levels will continue during program implementation. The communication and disclosure actions will include consultation meetings with stakeholder communities and through websites. Monthly, quarterly and annual performance reports would be shared with MSEDCL management and government. Progress and achievements of DLIs under the RBL would be disclosed through MSEDCL website.

4 Available at https://www.adb.org/sites/default/files/project-documents/50193/50193-003-pssa-en.pdf

https://www.adb.org/sites/default/files/project-documents/50193/50193-003-pssa-en.pdf

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G. Development Coordination 94. The program will result in information obtained through metering on usage patterns of individual farmers connected to HVDS. The results from the HVDS program and information from the pilot implementation on baselines, water and electricity usage etc. supported under the TA for Implementation Support for Maharashtra Rural High Voltage Distribution System Expansion Program would be shared with multi-sector stakeholders including those associated with the state’s Water 2030 program. At the national level, ADB is in touch with the World Bank as well as bilateral agencies that have indicated interest to support electricity distribution sector improvements in India.

V. INTEGRATED RISKS AND MITIGATING MEASURES A. Key Risks and Mitigating Measures 95. The following risk matrix summarizes the findings of the integrated risk assessment and the mitigating measures for the ADB’s Maharashtra High Voltage Distribution System and Distribution Strengthening Program. ADB’s guidelines informed the risk assessment, with six linked categories of risk as follows: 96. Results. Risks can impede the achievement of the program’s intended results and development outcomes. They relate to the program’s rationale and design, the government’s commitment, the definition and selection of results and DLIs, results measurement and verification mechanisms, monitoring and evaluation implementation capacity, and sustainability.

97. Expenditures and financing. Risks are associated with the efficiency and effectiveness of the expenditure framework, and the adequacy and sustainability of the program financing.

98. Fiduciary. Risks relate to financial management, procurement, and anticorruption systems as they pertain to the risk that program finances will not be used for the intended purposes.

99. Safeguards. Risks are associated with the safeguard system’s ability to manage the program’s potential adverse environmental and social impacts.

100. Operating environment. Risks relate to factors such as macroeconomic conditions, political issues, and fiscal conditions that might affect program implementation.

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Table 13: Status of Integrated Risk Assessments and Mitigating Measures

Risks

Rating Without the Mitigating

Measures Key Mitigating Measures Results. Limited demand for HVDS for new agriculture connections as well as low awareness for HVDS (and the adoption of equipment for efficient electricity and water usage) in Maharashtra.

  Substantial

Government policy requires all new grid connections on HVDS. Demand estimated by aggregation of confirmed requests. Support to design, implement and monitor a pilot for a rural agriculture feeder with 100% HVDS, efficient pumps and drip irrigation to improve awareness of benefits including reduced energy, water usage to customers.

Slowdown in generation and transmission investments may reduce intended benefits.

Moderate Ongoing coordination between MSEDCL and other utilities on investment plans. MSEDCL supporting grid connected distributed solar power for agriculture sector and energy efficiency initiatives.

Inaccurate data entered or data quality issues

Moderate Data collection for DLI attributable to individual MSEDCL staff based on inputs into the ERP. IVA to validate on sampling basis. Functional internal audit mechanisms in MSEDCL, disclosure on MSEDCL website

Adequacy of staffing given implementation timelines and coverage across the state of Maharashtra

Moderate MSEDCL has the experience of taking up large rural electrification programs with decentralized implementation. Dedicated PMU headed by a Chief Engineer reporting to Director Projects, MSEDCL. The unit has dedicated staff. Weekly tracking of contractual and physical progress by MSEDCL management through ERP and coordination meetings to anticipate bottlenecks and resolve issues.

The commissioned HVDS assets may suffer from poor maintenance due to MSEDCL's lack of experience in operating and managing HVDS systems.

Moderate Training programs for MSEDCL staff including on operations and management of HVDS assets. Focus on outcome DLIs including failure rates and voltage. MSEDCL utilizing IT tools to effectively track performance. Established complaint and grievance redress mechanisms to address customer problems.

Expenditure and financing. The program’s expenditure framework may be unrealistic and could lead to program cost underruns/overruns

Moderate

Expenditure framework benchmarked against other similar programs and found comparable. It is also in line with observed 2019 procurement outcomes. Program was approved by the Maharashtra Electricity Regulatory Commission for inclusion in MSEDCL’s capital investment plan and would be recovered through tariffs.

Counterpart financing may not materialize as planned for the

Moderate Counterpart financing firmed up by MSEDCL in 2019 with support from Government of

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Program or there may be a failure of additional financing needed.

Maharashtra. MSEDCL has access to bridge finance to ensure the program is not delayed.

MSEDCL's financial performance may deteriorate and impact program financing and sustainability.

Moderate MSEDCL’s tariffs cover costs and are set based on an established multi-year tariff setting framework. Government subsidy support provided for sale to agriculture. Customer meter data stored and linked to payment profile. Willingness to pay assessments through the HVDS pilot for reliable, good quality power. UDAY program and financial status of MSEDCL to be monitored under the PAP. Key indicators including debt service coverage ratio, current ratio, tariff resetting based on costs and subsidy payments to be monitored during implementation under PAP.

Fiduciary. Qualified opinion in audited statements, including those related to historical asset verification, internal controls on financial reporting.

  Moderate

Physical verification of program assets based on MSEDCL inspections. Physical verification for MSEDCL’s existing assets to be undertaken based on asset verification policy. Action plan for audit observations by June 2020. Report for compliance on internal controls in accordance with Institute of Chartered Accountants of India approved and implementation to be reviewed under the PAP.

Lack of timely audits of procurement systems

Moderate Yearly audits of the electronic procurement system, disclosure of contract information data through website identified in the PAP.

Lack of guidelines to prevent or mitigate fraud and other abuse

Moderate The program is covered by the Government’s applicable anti-corruption mechanism. ADB’s Guidelines to prevent or mitigate fraud, corruption and other prohibited activities in results-based lending for programs.

Safeguards. Environment and social safeguards screening, planning and monitoring are inadequate to comply with ADB’s safeguards policies.

Moderate

The program is demand driven and land for sub-stations expected on government land. Grievance redress mechanisms established. Training of MSEDCL staff for screening, impact assessment and reporting. Deployment of safeguard experts under TA to build capacity, monitor impacts at PMU.

Operating environment. Slower roll out of HVDS due to changes in government priorities, customer choice or weather events.

Moderate

Positive feedback received from HVDS customers post-installation in awareness programs. Information on HVDS implementation and outcomes to be shared with government through the HVDS monitoring dashboard.

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.

Demonstration through the pilot and dialogue with the government and MSEDCL through the PAP for future phases of the HVDS program. Delays due to weather events factored into construction schedules.

Overall RBL program risk  Moderate ADB = Asian Development Bank; DLI= disbursement link indicators, DTR = distribution Transformer, ERP = enterprise resource planning, HVDS = high voltage distribution system, IVA = independent verification agent, MSEDCL = Maharashtra State Electricity Distribution Company Limited, PAP = program action plan, PMU = program management unit, RBL = results-based lending, TA = technical assistance. Note: Risk factors are assessed against two dimensions: (i) the likelihood that the risk will occur, and (ii) the impact of the risk on the outcome. Rating scale: low = low likelihood and low impact; moderate = substantial to high likelihood but low to moderate impact; substantial = low to moderate likelihood but substantial to high impact; high = high likelihood and high impact. Source: ADB. B. Issues and Changes 101. Not applicable at this stage

VI. PROGRAM ACTION PLAN A. Status of Program Action Plan 102. The Program Action Plan is set out in the table given below. The actions included in the PAP will be reflected in MSEDCL’s progress report

Table 14: Status of Program Action Plan PROGRAM ACTION PLAN

Actions Responsible

Agency Time Frame for Implementation

TECHNICAL 1. Formulate a training plan for MSEDCL

personnel (including women employees) on HVDS program, including for O&M and DLI reporting and ensure delivery in all circles.

MSEDCL Corporate Planning

2019-2021

2. Support pilot selection, design, implementation including arrangements with agencies for 100% HVDS, efficient pump and water conservation and provide monthly updates to Energy Department and ADB.

MSEDCL DSM Cell, HVDS

Program Unit

2019-2021

3. Prepare distribution planning and feasibility studies and prepare a prioritized list of agriculture feeders to convert to HVDS in subsequent phases (post 2021) and obtain utility management and regulatory approvals.

MSEDCL DSM Cell

2019-2021

4. Raise awareness to enhance understanding and acceptance of new

MSEDCL DSM Cell

2019-2021

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Actions Responsible Agency

Time Frame for Implementation

technologies and innovations for energy and water usage, monitoring and conservation among rural customers in Maharashtra.

(coordinate with EESL,

MEDA, GSDA, consultants)

MONITORING AND VERIFICATION 5. Review achievements versus targets for

the Program and submit monthly reports to MSEDCL management & Energy Department, Government of Maharashtra and quarterly reports to ADB.

MSEDCL Projects

2019-2021

6. Assess the achievement of DLIs by MSEDCL and verification by the independent verification agent and authorize the DLI achievement report to be shared with state government, central government and ADB. Submit the withdrawal application accompanied by the independent verification agency’s verification of DLI achievement and other supporting documents.

MSEDCL HVDS

Program unit, Finance and Corporate Planning

2019-2021

7. Disclose progress and achievements of disbursement linked indicators, program action plan, audited program financial statements, safeguard monitoring reports and procurement pan on a semi-annual basis through the MSEDCL website.

MSEDCL HVDS

program unit and corporate

planning

2019-2021

FINANCING 8. Monitor allocations from GOM and other

sources of financing (banks) against what has been agreed in funding and investment plan.

MSEDCL Corporate Finance

2019-2021

FINANCIAL MANAGEMENT 9. Fixed asset and inventory physical

verification plan for MSEDCL to be implemented.

MSEDCL Operations

2019-2021

10. Action Plan to address qualified opinion issued by external auditors to be completed.

MSEDCL Corporate Accounts

June 2020

11. Ensure implementation of updates to internal control over financial reporting system in accordance with relevant ICAI Guidelines.

MSEDCL Corporate Accounts

2019-2021

12. Monitor MSEDCL performance on Government of India’s UDAY program and improvement for debt service coverage ratio and current ratio by 2021.

MSEDCL Corporate Finance

2019-2021

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PROCUREMENT AND ANTI-CORRUPTION 13. Periodic and timely third-party

procurement audits to be conducted on the procurement system.

MSEDCL IT Team

2019-2021

14. Submit procurement monitoring report on a quarterly basis.

MSEDCL Projects

2019-2021

15. Publish contract awards details on the website of MSEDCL.

MSEDCL Projects

2019-2021

16. Adopt and follow ADB’s Guidelines to prevent fraud, corruption and other prohibited activities in RBL.

MSEDCL Projects

2019-2021

SAFEGUARDS 17. Safeguard focal points recruited to work

with assigned division engineers to implement environment and social management system and the safeguard program action plan.

MSEDCL Projects and

HVDS Program Unit

2019-2021

18. Ensure safeguard screenings are completed and selected sub-projects assessed prior to finalization of sites.

MSEDCL HVDS

Program Unit

2019-2021

19. Ensure due diligence for sub-projects with impacts and risks and ensure environment management plans are part of the bidding documents, contracts.

MSEDCL HVDS

Program Unit

2019-2021

20. Prepare and implement adequate pollution control measures and waste management plan for 33/11 kV substations.

MSEDCL HVDS

Program Unit

2019-2021

21. Enhance plans for management of occupational health and safety risks during construction and community health and safety risks during operation.

MSEDCL HVDS

Program Unit

2019-2021

22. Follow the guidelines for voluntary donation and direct purchase in the even private land acquisition is required and ensure conduct of meaningful consultations with the affected people and stakeholders ensuring participation of women and vulnerable groups.

MSEDCL HVDS

Program Unit

2019-2021

23. Apply the existing MSEDCL Grievance Redress Mechanism for the program in consideration of environment and resettlement aspects.

MSEDCL HVDS

Program Unit

2019-2021

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24. Periodically evaluate and ensure adequacy of budgets for program safeguard implementation.

MSEDCL HVDS

Program Unit

2019-2021

25. Prepare and submit semi-annual safeguards monitoring reports to ADB.

MSEDCL HVDS

Program Unit

2019-2021

26. If noncompliance with the proposed mitigation measures is identified, propose corrective actions and submit them to ADB for review and implementation.

MSEDCL HVDS

Program Unit

2019-2021

27. Hold periodic trainings to build awareness and capacity of MSDECL staff to assess and respond to potential safeguards impacts.

MSEDCL HVDS

Program Unit

2019-2021

GENDER 28. One member of HVDS unit to be

responsible for coordination and collection of gender related data from Program implementation (number of women farmers with HVDS connections, number of MSEDCL staff trained) and under the proposed pilot (number of women developing awareness on energy and water conservation measures and benefits to rural communities) and included in the HVDS Dashboard as well as periodic reporting to ADB.

MSEDCL HVDS

Program Unit

2019-2021

29. Identify and support avenues for women including collation and analysis of smart meter related data for program reporting.

MSEDCL HVDS

Program Unit

2019-2021

ADB = Asian Development Bank, DLI = disbursement linked indicator, DSM = demand side management, EESL = Energy Efficiency Services Limited, GOI = Government of India, GOM = Government of Maharashtra, GSDA = Groundwater Surveys and Development Agency, HR = human resources, HVDS = high voltage distribution system, ICAI = Institute of Chartered Accountants of India, IT = information technology, MEDA = Maharashtra Energy Development Agency, MSEDCL = Maharashtra State Electricity Distribution Company Limited, RBL = results-based lending. UDAY = Ujwal Discom Assurance Yojana. Sources: ADB and MSEDCL. B. Issues and Changes 103. Not applicable at this stage.

VII. TECHNICAL ASSISTANCE A. Summary 104. The attached transaction technical assistance (TRTA) will help strengthen the RBL program implementation through (i) monitoring for the program; (ii) support for design, roll out, coordination and monitoring of the Minimum Energy Support to Maximize Incomes Sustainably

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(MES2MIS) pilot on 1 agriculture feeder through 100% HVDS (old and new customers), efficient pumps and drip irrigation to support energy and water conservation that would support demonstration, advocacy and refine design for effective tariff setting, payment and subsidy administration linked to efficient electricity and water use as well as the post 2021 government program for HVDS; and (iii) provide support for to strengthen safeguards documentation. The TRTA is estimated to cost $1.1 million financed on a grant basis by the Technical Assistance Special Fund (TASF-Others). The government will support the TRTA in the form of counterpart staff and other in-kind contributions.5 The TA pilot will support efficient electricity and water consumption through the HVDS platform, structure irrigation advisory services and improving awareness for farmers. The Energy Department and MSEDCL would be responsible for the TRTA. For the pilot project funded under the TRTA, the Energy Department Maharashtra will coordinate through MSEDCL and relevant agencies including Maharashtra Energy Development Agency (MEDA), Groundwater Surveys and Development Agency (GSDA) and the Water Resources Department (WRD).

VIII. MONITORING OF KEY PROGRAM COVENANTS

105. {Summarize the status of key program covenants. Summarize major issues encountered during implementation, if any. Summarize measures adopted or planned to address the issues. Summarize changes made to the covenants and reasons for doing so, if any.}

IX. SUMMARY OF KEY OUTSTANDING ISSUES

106. Summarize key outstanding issues and status in addressing these. Summarize next steps in addressing these and the expected timeframe

Table 15: Key Outstanding Issues and Actions (As of XX 2020)

Number Key

Issues

Status in Addressing the

Issues Next Steps

Responsible Agencies and

People Timeframe for

Implementation

{Add or delete rows as needed.} {Either define abbreviations within the table or list them alphabetically and define them below the table. Use a consistent approach and do not define some in the table and others below the table. {To ensure that the program is results-focused and actions can be achieved, the number of actions should be limited and the actions should be carefully selected} Source{s}: {List table source(s).}

X. ACCOUNTABILITY MECHANISM 107. The Accountability Mechanism provides an independent forum and process whereby people adversely affected by ADB-assisted operations can voice, and seek a resolution of their problems, as well as report alleged violations of ADB’s operational policies and procedures.6

5 Attached Technical Assistance Report (accessible from the list of linked documents in Appendix 2). 6 ADB. 2012. Review of the Accountability Mechanism Policy. Manila.

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People who are, or may in the future be, adversely affected by a program supported by RBL may submit complaints to ADB’s Accountability Mechanism (2012). 108. Before submitting a complaint to the Accountability Mechanism, affected people should make a good faith effort to resolve their problems and/or issues by working with the concerned ADB operations department. Only after doing that, and if they are still dissatisfied, they approach the Accountability Mechanism.

XI. CHANGES IN PROGRAM SCOPE AND IMPLEMENTATION ARRANGEMENTS 109. Changes in scope and implementation arrangement during the course of implementation (including both major and minor changes) should be recorded to provide a chronological history of these changes.

Table 16: Changes in Scope and Implementation Arrangements (As of xxxx)

Number Changes and Key

reasons Date Names of Documents

1 2 3 4 5 6

Source: TBD

XII. PROGRAM ORGANIZATIONAL STRUCTURE AND FOCAL STAFF A. Organizational Structure 110. During project implementation phase, the RBL program will be monitored by a HVDS unit established within the project function and housed in MSEDCL’s headquarters. This unit will be responsible for planning, implementing and commissioning of the project. As and when individual packages within the project get commissioned, the assets commissioned will get subsumed within MSEDCL’s overall asset base and will be operated and maintained by the operations function. 111. The HVDS unit will be headed by a Chief Engineer HVDS who will directly report to the director heading the project’s functions. S/he will be supported by a team of executive engineers. The unit will also be advised by consultants recruited by MSEDCL and additional consultants who provide circle level support. Ground-level implementation of the project will be carried out by a number of external vendors, who will report performance on project implementation directly to the HVDS unit.

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B. Program Officers and Focal Persons

1. Initial Arrangements

Table 17: Program Officers and Focal Persons (As of February 2020)

Number Key Government Staff and Positions Key ADB Staff and Positions

1 2 3 4 5 6

R. Devara Principal Secretary (Financial Reforms) A. Gupta Principal Secretary Energy and CMD, MSEDCL P. Badgeri Deputy Secretary Energy B. Khandait Director Projects, MSEDCL P. Reshme Executive Director, MSEDCL A. Raidurg Chief Engineer HVDS

P. Wijayatunga Director Energy, South Asia Department L. George Senior Energy Specialist, South Asia Department C. Meindl Energy Specialist, South Asia Department J. Banerjee Senior Project Officer, South Asia Department

2. Changes during Implementation

112. {Monitor and record changes during implementation of ADB mission leader and key executing agency staff. Indicate the new names, titles, and dates for changes, and reasons for the changes.}

Table 18: Changes in Key Executing Agency Staff and ADB Mission Leader (As of xxxx)

Number Changes Date Reasons for the Change 1 2 3 4 5 6

{Add or delete rows as needed.} {Either define abbreviations within the table or list them alphabetically and define them below the table. Use a consistent approach and do not define some in the table and others below the table. Source{s}: {List table source(s).}

45 Appendix

GUIDELINES TO PREVENT OR MITIGATE FRAUD, CORRUPTION, AND OTHER

PROHIBITED ACTIVITIES IN RESULTS-BASED LENDING FOR PROGRAMS

A. Purpose and General Principles 1. The developing member country (DMC) is responsible for the implementation of programs supported by results-based lending (RBL). The Asian Development Bank (ADB) has a fiduciary responsibility to ensure that its loans and other forms of financing are used only for the purposes for which they were granted, in accordance with the Agreement Establishing the Asian Development Bank (the Charter).1 To uphold that obligation, ADB presents these guidelines to prevent or mitigate fraud, corruption, and other prohibited activities in RBL operations financed in whole or in part by ADB. These guidelines build upon the legal obligations presented in the loan agreement and apply to operations funded by the RBL (the programs).2 2. These guidelines do not limit any other rights, remedies, or obligations of ADB or the DMC under the loan agreement or any other agreement to which the ADB and the DMC are both parties. 3. All persons and entities participating in the programs must observe the highest ethical standards; take all appropriate measures to prevent or mitigate fraud, corruption, and other prohibited activities; and refrain from engaging in actions described in these guidelines in connection with such programs. B. Definitions 4. These guidelines address the following practices as defined by ADB:

(i) A “corrupt practice” is the offering, giving, receiving, or soliciting, directly or indirectly, anything of value to influence improperly the actions of another party.

(ii) A “fraudulent practice” is any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit, or to avoid an obligation.

(iii) A “collusive practice” is an arrangement between two or more parties designed to achieve an improper purpose, including to improperly influence the actions of another party. (iv) A “coercive practice” is impairing or harming, or threatening to impair or harm, directly or indirectly, any party or the property of the party to influence improperly the actions of a party.

5. In addition, ADB may investigate conflicts of interest, obstruction, and retaliation:

(i) A “conflict of interest” is a situation in which a party has interests that could improperly influence a party’s performance of official duties or responsibilities, contractual obligations, or compliance with applicable laws and regulations. To the extent that conflicts of interest may provide an unfair competitive advantage or

1 ADB. 1966. Agreement Establishing the Asian Development Bank. Manila 2 ADB may support a part (or a slice) of a government program or the entire government program through results-

based lending (RBL). The program or the part that is supported by the RBL is the RBL operation. The term “program” in these guidelines refers to the RBL operation as defined unless otherwise specified.

46

compromise the integrity of financial and governance systems, conflicted persons and entities must be excluded from participating in relevant program activities.

(ii) Obstructive practice, which includes (a) deliberately destroying, falsifying, altering, or concealing evidence material to an ADB investigation; (b) making false statements to investigators in order to materially impede an investigation; (c) failing to comply with requests to provide information, documents, or records in connection with an Office of Anticorruption and Integrity (OAI) investigation; (d) threatening, harassing, or intimidating any party to prevent it from disclosing its knowledge of matters relevant to the investigation or from pursuing the investigation; or (e) materially impeding ADB’s contractual rights of audit or access to information.

(iii) Retaliation against whistleblowers or witnesses is any detrimental act, direct or indirect, recommended, threatened or taken against a whistleblower or witness or person associated with a whistleblower or witness in a manner material to a complaint because of the report or cooperation with an investigation by the whistleblower or witness.

C. Developing Member Country’s Actions to Prevent Fraud, Corruption, and Other

Prohibited Activities in Results-Based Lending for Programs 6. Unless otherwise agreed in writing by the DMC and ADB, the DMC will take timely and appropriate measures to

(i) ensure that the program is carried out in accordance with these guidelines; (ii) avoid conflicts of interest in the program; (iii) prevent fraud, corruption, and other prohibited activities from occurring in the

program, including adopting, implementing, and enforcing appropriate fiduciary and administrative practices and institutional arrangements to ensure that the proceeds of the loan are used only for the purposes for which the loan was granted;

(iv) promptly inform ADB of allegations of fraud, corruption, and other prohibited activities found or alleged related to a program;

(v) investigate allegations of fraud, corruption, and other prohibited activities and report preliminary and final findings of investigations to ADB;

(vi) respond to, mitigate, and remedy fraud, corruption, or other prohibited activities that are found to have occurred in a program and prevent its occurrence;

(vii) cooperate fully with ADB in any ADB investigation into allegations of fraud, corruption, and other prohibited activities related to the program, and take all appropriate measures to ensure the full cooperation of relevant persons and entities subject to the DMC’s jurisdiction in such investigation, including, in each case, allowing ADB to meet with relevant persons and to inspect all of their relevant accounts, records and other documents and have them audited by or on behalf of ADB; and

(viii) ensure that persons or entities sanctioned by ADB do not participate in RBL supported activities in violation of their sanction.

D. ADB’s Actions to Prevent Fraud, Corruption, and Other Prohibited Activities in Results-Based Lending for Programs 7. Unless otherwise agreed in writing by the DMC and ADB, ADB will

(i) inform the DMC of credible and material allegations or other indications of fraud, corruption, and other prohibited activities related to a program, consistent with ADB’s policies and procedures;

47

(ii) have the right to investigate allegations independently or in collaboration with the DMC;

(iii) inform the DMC of the outcome of any investigation, consistent with ADB policies and procedures;

(iv) have the right to sanction any individual or entity for engaging in practices defined above in accordance with ADB’s prevailing sanctions policies and procedures; sanctions may result in that party’s exclusion from participating in an RBL-financed activity or any other ADB-related activity indefinitely or for a stated period of time;3 and

(v) recognize sanctions determined by other multilateral development banks in accordance with the agreement for the mutual enforcement of debarment.

3 Participation does not include the performance under contracts entered into or other engagements begun before the

date of the loan agreement.