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From 2012 to 2014 water and sanitation service delivery assessments (SDA) have been carried out in seven selected countries in the East Asia and Pacific region under the guidance of the World Bank’s water and sanitation program and with valuable contributions of other development partners, such as United Nations Childrens Fund (UNICEF), WaterAid, and Asian Development Bank (ADB). Countries where SDA were carried out are Cambodia, Indonesia, Lao Peoples Democratic Republic (PDR), Papua New Guinea, Philippines, Timor-Leste, and Vietnam, while in Myanmar, a broad joint sector assessment took place by World Bank, UNICEF, ADB, and Japan International Cooperation Agency (JICA). SDA were implemented as a country-owned process led by key government agencies, and drew on the experience and methodology of similar assessments conducted in more than 40 countries (and states) in Africa, Latin America, and South Asia. It has three main components: a review of past water and sanitation access trends, a costing model to assess the adequacy of anticipated future investments, and a scorecard that allows diagnosis of bottlenecks along the service delivery pathways.

Successful mid-sized cities will be vital to India’s growth and prosperity in the coming decades. Indian cities are home to over 375 million people now, and their population is likely to double by 2035. Yet water supply in most mid-sized cities falls short of Government of India benchmarks for service, efficiency and cost recovery. In many of them water flows in the pipes for 2 hours a day or less, its quality is poor, and it is provided by utilities that cannot even cover their operating costs. Following a brief introduction to the three city case studies (section two), the report lays out the Indian water sector’s unique challenges, and using case examples to substantiate findings (section three). The challenges include day-to-day operational issues associated with running a utility, as well as policy and planning issues that affect the utility’s governance and investment planning to meet current and future demand. The results of a financial viability gap analysis, applied to Bhubaneswar and Coimbatore reveal the magnitude of improvements required, and the key drivers that affect the utilities’ financial performance (section four). These complex challenges make traditional PPP models, Management Contracts, Concessions and Leases, less amenable for use in mid-size Indian cities. As section five describes, this is because the traditional models are too risky for the operator or government or too limited in scope to create lasting improvements. The remaining sections focus on explaining the design and procurement strategy for the two innovative PPP models, the phased performance based contract and the Joint Venture (JV) Partnership (section six and seven). These models have the potential to deliver better results than the traditional PPPs and business as usual scenarios. This is because in addition to reforming dysfunctional utilities into focused and accountable organizations, they are able to respond to information uncertainty, include strong incentives, have clear sources of funding, and promote capital efficiency.