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KfW - GRANT FUND I

The Government of T amil Nadu (GoTN) has accorded its Administrative Sanction vide G .O. Ms. No.218, Municipal Administration & Water Supply (MA-II) Department, dated 03.11.2008 for implementation of Sustainable Municipal Infrastructure Financing – T amil Nadu- Phase-I (SMIF-TN-I) Program assisted by KfW. The total outlay of SMIF-TN-I is Euro 77 Million (about Rs.500 crores) and the grant allocation to KfW GF I under SMIF-TN-I as per G .O.(Ms) No.45 Municipal Administration & Water Supply Department, dated 27.03.2014 is Euro 16.18 Million (about Rs.105 crores). The GoTN vide G .O. Ms. No.40, Municipal Administration & Water Supply (MA-II) Department, dated 19.03.2009 has prescribed guidelines for operation and management of KfW Grant Fund-I. The completion period of SMIF-TN-I Program is 31.12.2014.

Further, the GoTN has accorded its Administrative Sanction vide G ..O. Ms. No.83, Municipal Administration & Water Supply (MA-II) Department, dated 10.06.2013 for implementation of Sustainable Municipal Infrastructure Financing in Tamil Nadu-Phase-II-Part-1 (SMIF-TN-II-1) Program assisted by KfW. The total outlay of SMIF-TN-II-1 is Euro 80 Million (about Rs.578 crores) and the grant allocation to KfW GF I under SMIF-TN-II-1 is Euro 40 Million (about Rs.289 crores). The completion period of SMIF-TN-II-1 Program is 30 th June 2018. The GoTN vide G .O.(2D) No.122 Municipal Administration & Water Supply Department, dated 26.11.2013 prescribed guidelines for operation and management of KfW GF-I under SMIF-TN-II-1 Program.

OBJECTIVES:

The KFW Grant Fund - I will be used to assist Urban Local Bodies (ULBs) / Statutory Boards towards providing capital grant to the urban infrastructure projects under SMIF-TN-II-1 with a positive impact on the environment and climate change to improve the capacities of ULBs in order to enable them to plan, manage and operate sustainable infrastructure projects and access financial resources beyond Government grant funds.

FUND MANAGEMENT OPERATIONS AND PROCEDURES

The KfW GF-I is managed and operated by T amil Nadu Urban Infrastructure Financial Services Limited (TNUIFSL) based on the guidelines prescribed and procedures laid down by the Government, from time to time. TNUIFSL acts as fund manager of KfW GF-I.

FUND SIZE, SOURCES AND ALLOCATION

The KfW GF-I is a Government Fund and is a part of SMIF-TN-I Program and SMIF-TN-II-1 Program assisted by KfW. Asum of Rs.105 crores under SMIF-TN-I Program and Rs.289 crores under SMIF-TN-II-1 has been allocated to KfW GF - I. The amount will be provided by the Government by way of budgetary allocation, every year. The interest from investments and any other income earned or accruing to Fund will also form part of its corpus and will be applied for the purposes for which the Fund is created.

ELIGIBILTY CRITERIA

All ULBs in the State of Tamil Nadu are eligible for financial assistance under the KfW GF -I subject to the following conditions:

  • more than 20% of project beneficiaries shall be the people living below the poverty line.
  • 80% of property tax should have been collected in the past three years prior to the project investment year.
  • the urban local body should have repaid all loan dues for two years prior to the project investment year.

The water supply, sanitation & sewerage, municipal solid waste disposal, storm water drainage, urban transport infrastructure like rail over bridge, rail under bridge implemented by ULBs, with the objective of up-gradation of the living standards of urban population and improvements in the service delivery to such population in the State of Tamil Nadu or such other urban infrastructure projects as may be approved by the Government from time to time are eligible for financial assistance.

The Empowered Committee, constituted by the Government will have the flexibility to decide upon the exact capital grant portion to be extended to sub- projects based on assessment of financial viability of the sub-project and the financial strength of the respective ULB.

PROCEDURE FOR APPLICATION AND APPROVAL OF GRANT

Application from the ULB for capital grant shall be submitted through Commissionerate of Municipal Administration / Commissionerate of Town Panchayats to the fund manager, with the following:

Council Resolution
The ULBs shall submit the Council Resolution for execution of the project and availing the capital grant under KfW GF-I.

Detailed Project Report
The application for grant should contain a detailed report of the project covering the subjects including: suitability of site; availability of inputs; appropriateness of a proven experience with the technology offered; project design; arrangements for detailed engineering; cost estimates; construction and procurement arrangements; arrangements for operation and maintenance; arrangements for compliance with environmental, resettlement and social standard as stipulated by the Government from time to time, in consistence with the Environmental and Social Framework as applicable, adequacy of the proposed financing and the eligibility criteria.

Details of below poverty line population
In case of the projects which directly benefit the urban low-income population, the justification for the use of the Grant Fund should be substantiated in the grant proposal by indicating the numbers of targeted urban low-income population and specific project areas and expected impact on the improvement of the living standard of the targeted population.

APPRAISAL

While appraising the grant fund application, it shall be ensured that

  • The purpose of grant meets the objectives as prescribed in the KfW GF-I guidelines;
  • The project uses the most appropriate process and cost effective technology and technical specifications;
  • The project is adequately funded;
  • The ULBs demonstrates financial and institutional capacity to operate and maintain the facilities constructed;
  • The project meets the requirements stipulated in the Environment and Social Framework, as applicable.

Based on the appraisal, a detailed appraisal report shall be placed before the Empowered Committee, constituted by the Government for necessary approval. The Empowered Committee will sanction and finalize the means of finance including the quantum of capital grants and accord administrative sanction for the sub-projects to be funded under SMIF – TN Program and SMIF - TN - II - 1 Program

Based on the approval of the Empowered Committee, the fund manager shall intimate the amount of capital grant sanctioned and prescribe conditions as may be required for proper utilization of grant for the implementation of the sub-projects funded under SMIF-TN Program. Based on the progress of work, the grant shall be disbursed to ULBs, in one or mote installments.

PROCUREMENT PROCEDURES

Procurement for the projects shall be subject to the procurement guidelines prescribed by International Bank for Reconstruction and Development or KfW. These guidelines may be complemented by the Tamil Nadu Transparency in Tenders Act.

PERFORMANCE DURING 2011-12

The funds have been committed for 14 sub-projects under KfW assisted SMIF-TN, of which capital grant under KfW GF I has been sanctioned for 13 sub-projects amounting to Rs.150.80 crores, of which Rs.77.18 crs. has already been disbursed to ULBs up to 31.03.2012. A sum of Rs.25 crores only has been released by Government to KfW GF I during the financial year 2011-12. A sum of Rs.23.67 crores only has been disbursed to the ULBs during the financial year 2011-12 based on the progress of the project.

PERFORMANCE DURING 2012-13

A sum of Rs.150.80 crs has been alloted to KfW GF I. The funds have been committed for 14 sub-projects under KfW assisted SMIF-TN, of which capital grant has been sanctioned to 13 sub-projects amounting to Rs.150.80 crores under KfW GF I, and a sum of Rs.97.53 crores has been disbursed to ULBs up to 31.03.2013. A sum of Rs.40 crores only has been released by Government to KfW GF I during the financial year 2012-13. A sum of Rs.20.35 crores only has been disbursed to the ULBs during the financial year 2012-13 based on the progress of the project.

PERFORMANCE DURING 2013-14

A sum of Rs.394 crores (Rs.105 crores under SMIF-TN-I Program and Rs.289 crores under SMIF-TN-II-1 Program) has been allotted as grant, of which a sum of Rs.135 crores (Rs.105 crores under SMIF-TN-I Program and Rs.30 crores under SMIF-TN-II-1 Program) has been released by Government to KfW Grant Fund-I.

The funds have been committed for 17 sub-projects under SMIF-TN-I Program and SMIFTN-II-1 Program, of which capital grant has been sanctioned for 15 sub-projects amounting to Rs.204.53 crores under KfW Grant Fund-I, of which a sum of Rs.109.89 crores has been disbursed up to 31.03.2014

A sum of Rs.6 crores (previous year Rs.40 crores) has been released by Government to KfW Grant Fund-I during the financial year 2013-14. Asum of Rs.12.36 crores (previous year Rs.20.35 crores) has been disbursed during the financial year 2013-14 based on the progress of the project.