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This project consisted of two components. Component 1 entailed a comprehensive policy and institutional analysis of the urban sector (including the water supply, sanitation, environment, and transport sectors) and supported the Government of Nepal’s efforts to (i) review and update draft urban water supply and sanitation policies and the medium-term development plan, and (ii) redefine and institutionalize the role, responsibilities, and structure of Department of Water Supply and Sewerage within a devolved scheme. Component 2 focused on the preparation of a comprehensive feasibility study comprising (i) a detailed needs and demand evaluation for water supply and sanitation services in emerging towns in Nepal; (ii) formulation of 3-4 sample subprojects and clear subproject selection criteria; (iii) preparation of associated supporting documents; and (iv) an assessment of the Town Development Fund, which was established to provide financial, institutional, and technical support to institutions involved in town construction, development, and expansion activities. In addition to infrastructure development, subcomponents such as hygiene education were addressed.