India: National Highway Corridor (Sector) I Project

Completion Report

Project Number: 34420-013 and 34420-023 Loan Numbers: 2029 and 2527 September 2015

This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency Unit – Indian rupee/s (Re/Rs)

At Appraisal At Project Completion (20 October 2003) (31 December 2011) Re1.00 = $0.022 $0.0188 $1.00 = Rs45.34 Rs53.11

ABBREVIATIONS

ADB – Asian Development Bank BOT – build–operate–transfer CSC – construction supervision consultant EIRR – economic internal rate of return EWC – east–west corridor FIRR – financial internal rate of return IEE – initial environmental examination km – kilometer NGO – nongovernment organization NHAI – National Highways Authority of India NHDP – National Highways Development Project O&M – operation and maintenance PCR – project completion review PIU – project implementation unit PSP – private sector participation VOC – vehicle operating cost

NOTES

(i) The fiscal year (FY) of the Government of India ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY 2015 begins on 1 April 2014 and ends on 31 March 2015.

(ii) In this report, "$" refers to US dollars.

Vice -President W. Zhang, Operations 1 Director General H. Kim, South Asia Department (SARD) Director M. Teresa Kho, India Resident Mission (INRM), SARD

Team leader A. K. Motwani, Senior Project Officer (Transport), INRM, SARD Team member s M. Sharma, Associate Project Analyst, INRM, SARD D.S. Raju, Associate Project Analyst, INRM, SARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i

I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Outputs 3 C. Project Costs 4 D. Disbursements 5 E. Project Schedule 6 F. Implementation Arrangements 6 G. Conditions and Covenants 7 H. Consultant Recruitment and Procurement 7 I. Performance of Consultants and Contractors 8 J. Performance of the Borrower and the Executing Agency 9 K. Performance of the Asian Development Bank 9 III. EVALUATION OF PERFORMANCE 9 A. Relevance 9 B. Effectiveness in Achieving Outcome 10 C. Efficiency in Achieving Outcome and Output 11 D. Preliminary Assessment of Sustainability 11 E. Impact 12 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14 A. Overall Assessment 14 B. Lessons 14 C. Recommendations 15

APPENDIXES

1. Revised Design and Monitoring Framework 16 2. Summary of Salient Features of the Project 18 3. Project Cost and Financing Plan 19 4. Disbursement of ADB Loan Proceeds 21 5. Appraisal and Actual Implementation Schedules Compared 22 6. Chronology of Major Events 23 7. Organization Structure for Project Implementation 25 8. Status of Compliance with Major Loan Covenants 26 9. Summary of Contract Packages Financed by ADB 35 10. Initial Operation of the Project Highway 36 11. Economic Reevaluation 40 12. Financial Reevaluation 43 13. Contribution to ADB Results Framework 45

BASIC DATA

A. Loan Identification

1. Country India 2. Loan Numbers 2029 and 2527 3. Project Title National Highway Corridor (Sector) I Project 4. Borrower Government of India 5. Executing Agency National Highways Authority of India 6. Amount of Loans Loan 2029: $400 million Loan 2527: $100 million 7. Project Completion Report Number PCR: IND 1537

B. Loan Data

1. Appraisal – Date Started Loan 2029: 25 August 2003 Loan 2527: 10 December 2008

– Date Completed Loan 2029: 3 September 2003 Loan 2527: 12 December 2008 2. Loan Negotiations – Date Started Loan 2029: 3 November 2003 Loan 2527: 25 May 2009

– Date Completed Loan 2029: 4 November 2003 Loan 2527: 25 May 2009

3. Date of Board Approval Loan 2029: 4 December 2003 Loan 2527: 30 June 2009

4. Date of Loan Agreement Loan 2029: 27 October 2004 Loan 2527: 4 August 2009

5. Date of Loan Effectiveness – In Loan Agreement Loan 2029: 90 days after loan agreement signed Loan 2527: 1 November 2009

– Actual Loan 2029: 24 January 2005 Loan 2527: 15 September 2009

6. Closing Date – In Loan Agreement Loan 2029: 31 December 2007 Loan 2527: 31 December 2011

– Actual Loan 2029: 9 May 2012 Loan 2527: 9 May 2012

– Number of Extensions Loan 2029: 3 Loan 2527: 0 7. Terms of Loan Loan 2029 – Interest Rate London interbank offered rate (LIBOR)-based

lending facility – Commitment Charges 0.75% – Maturity (number of years) 25 – Grace Period (years) 5 – Front-end Fee 0.50%

Loan 2527 – Interest Rate London interbank offered rate (LIBOR)-based lending facility – Commitment Charges 0.15% – Maturity (number of years) 17 – Grace Period (years) 2 – Front-end Fee None

8. Terms of Relending (if any) None

9. Disbursements a. Dates Loan 2029 Initial Disbursement Final Disbursement Time Interval 16 December 2005 11 December 2009 48 months

Effective Date Original Closing Date Time Interval 24 January 2005 30 December 2007 35 months

Loan 2527 Initial Disbursement Final Disbursement Time Interval 30 November 2009 7 December 2011 22 months

Effective Date Original Closing Date Time Interval 15 September 2009 31 December 2011 27 months

b. Amount ($) Loan 2029 Last Original Revised Reallocated Amount Undisbursed Category Allocation Allocation Amount Disbursed Balance a 01 Civil Works 359,400,0000 389,600,000 30,200,000 389,600,000 0 02 Equipment 11,800,000 0 (11,800,000) 0 0 03A Consulting Service: 27,800,000 10,400,000 (17,400,000) 10,001,908 398,092 Construction Supervision 03B Consulting Service: Road 500,000 0 (500,000) 0 0 Safety Consultant 03C Consulting Services: 400,000 0 (400,000) 0 0 HIV/AIDS Consultant 03D Consulting Services: PSP 100,000 0 (100,000) 0 0 Financial Adviser Total 400,000,000 400,000,000 0 399,601,908 398,092 PSP = private sector participation. a The undisbursed amount was canceled at financial account closure on 9 May 2012.

iii

Loan 2527 Last Original Revised Reallocated Amount Undisbursed Category Allocation Allocation Amount Disbursed Balance Civil Works 97,200,000 0 0 98,601,203 (1,401,203) Consulting Services － 2,000,000 0 0 1,398,797 601,203 Highway Investment Consulting Services － 800,000 0 0 0 800,000 Road Safety Total 100,000,000 0 0 100,000,000 0 ( ) = negative.

10. Local Costs (Financed) Loan 2029 - Amount ($) 0 - Percent of Local Costs 0 - Percent of Total Cost 0 Loan 2527 0 - Amount ($) 0 - Percent of Local Costs 0 - Percent of Total Cost 0

C. Project Data 1. Project Cost ($ million) Revised Appraisal Estimate Actual Cost Estimate Foreign Exchange Cost 454.4 706.1 715.5 Local Currency Cost 305.8 392.9 421.8 Total 760.2 1,099.0 1,137.3

2. Financing Plan ($ million) Appraisal Revised Actual Cost Estimate Estimate Implementation Costs Borrower Financed 257.7 449.7 490.5 ADB Financed 400.0 500.0 499.6 Private Sector 68.6 103.3 106.1 Total 726.3 1,053.0 1,096.2 IDC Costs and other Financial Charges Borrower Financed 33.9 46.0 41.1 ADB Financed Private Sector Total 33.9 46.0 41.1 ADB = Asian Development Bank, IDC = interest during construction. Note: Appraisal estimate was finalized during processing of Loan 2029. Revised estimate was finalized during processing of Loan 2527.

3. Cost Breakdown by Project Component ($ million) Appraisal Revised Actual Component Estimate Estimate A. Public Sector Portion 1. Base Cost a. Highway Investment i. Civil Works 537.1 870.5 912.0 ii. Land Acquisition and Resettlement 38.0 25.3 29.2 iii. Relocation of Utilities 17.7 13.6 8.8 iv. Environment 10.3 13.9 v. Consulting Services 27.8 16.2 16.3 vi. Project Management 5.4 5.4 8.8 Subtotal (a) 636.3 931.0 989.0 b. HIV/AIDS and Anti -Trafficking i. Consulting Services 0.4 0.4 0.4 Subtotal (b) 0.4 0.4 0.4 c. Road Safety i. Advanced Traffic Management System 10.0 10.0 0.0 ii. Equipment 1.8 1.8 0.0 iii. Consulting Services 0.5 0.9 0.6 Subtotal (c) 12.3 12.7 0.6 Subtotal (1) 649.0 944. 2 990. 1 2. Front -End Fee 2.0 2.0 2.0 3. Interest During Construction 30.4 40.3 35.5 4. Commitment Charges 1.5 3.7 3.6 Total (A) 682.9 990. 2 1.031. 2 B. Private Sector Portion 1. Base Cost i. Civil Works and O&M 68.6 103.3 100.7 ii. Land Acquisition and Resettlement 5.0 3.0 2.9 iii. Relocation of Utilities 2.3 2.4 2.3 iv. Environment 1.3 v. Consulting Services 0.1 0.1 0.1 Total (B) 77.3 108.8 10 6. 1 Total 760.2 1,09 9.0 1,13 7. 3 O&M = operation and maintenance. Note: Appraisal estimate was finalized during processing of Loan 2029. Revised estimate was finalized during processing of Loan 2527. In the revised estimate, the cost of environment is included in the cost for civil works. The cost for environment at completion for private sector portion is included in the cost of civil works.

4. Project Schedule Item Appraisal Estimate Actual A. Project Preparation Q3 2003–Q2 2004 Q3 2003–Q2 2004 B. Civil Works – Public Sector Procurement Q3 2003–Q3 2004 Q4 2004–Q3 2005 Construction Q3 2004–Q2 2007 Q3 2005–Q4 2011 C. Civil Works – Private Sector Contract Awarding Q3 2005–Q2 2006 Construction Q1 2005–Q2 2007 Q3 2006–Q2 2009 D. Construction Supervision Consultants Selection Q4 2003–Q2 2004 Q4 2004–Q1 2006 Supervision Q3 2004–Q2 2007 Q4 2005–Q4 2011 E. Road Safety Consulting Services Q4 2009–Q2 2011 Q1 2011–Q4 2011

5. Project Performance Report Ratings Ratings a Implementation Period Development Objectives Implementation Progress 4 December 2003–31 May 2004 Satisfactory Satisfactory 1 June 2004–30 September 2004 Satisfactory Unsatisfactory 1 October 2004–30 November 2004 Satisfactory Satisfactory 1 December 2004–31 December 2004 Satisfactory Unsatisfactory 1 January 2005–30 September 2008 Satisfactory Satisfactory 1 October 2008–30 April 2009 Satisfactory Partially Satisfactory 1 May 2009–31 December 2010 Satisfactory Satisfactory 1 January 2011–31 December 2011 On Track b 1 January 2012–30 June 2012 On Track b a Project performance report ratings are based on a different method than that used for overall assessment of the project at completion. b Based on new rating system for evaluation of project performance using e-Operations.

D. Data on Asian Development Bank Missions No. of No. of Person- Specialization of Name of Mission Date Persons Days Members Fact-finding for Loan 2029 26 May–10 Jun 2003 9 135 b, b, c, d, f, j, p, r, y Appraisal 26 Aug– 5 Sep 2003 7 70 b, f, f, i, j, r, v Inception (Loan 2029) 19–30 Sep 2005 4 36 a, c, d,p Special loan administration 18–26 Jan 2006 5 45 a, b, c, c, p Review 1 5–15 Sep 2006 3 30 a, d, p Midterm review 10–18 Dec 2007 2 18 a, b Review 2 2–10 Jun 2008 3 27 a, b, b 20–24 Oct 2008 & Review 3 3 21 a, b, d 5–6 Nov 2008 Special loan administration 10–12 Dec 2008 2 6 b, b Fact-finding for Loan 2527 12–26 Feb 2009 6 30 b, b, b, c, d, n Inception (Loan 2527) 22–24 Sep 2009 3 9 a, b, b Review 4 25–31 Mar 2010 3 21 a, c, j Review 5 30 Aug 2010 4 4 a, c, d, j Review 6 16 May 2011 2 2 a c Project completion review 8–19 Mar 2015 1 12 O a = analyst, b = transport specialist, c = project implementation specialist, d = resettlement and social development specialist, f = financial specialist, i = counsel, j = environmental specialist, n = control official, o = consultant, p = portfolio management specialist, r = private sector development specialist, v = advisor, y = economist.

I. PROJECT DESCRIPTION

1. In 1998, the Government of India launched the National Highways Development Project (NHDP) to upgrade key arteries of the national highways network in an effort to relieve the system’s chronic capacity constraints (para. 4). In support of the NHDP, which was entrusted for implementation to National Highways Authority of India (NHAI), the Asian Development Bank (ADB) had provided a series of loans; the National Highway Corridor (Sector) I Project, in the amount of $400 million, was approved on 4 December 2003 and was the fourth loan in this series. The primary objective of the project was to help the government strengthen the policy and institutional framework for efficient delivery of highway development and operation and maintenance (O&M) services. Using the sector loan modality, the focus of the project was to (i) upgrade the key national arterial corridors connecting the eastern and western ends of the country to help reduce regional disparities, (ii) facilitate private sector participation (PSP) in highway development by providing advisory services to process the PSP component, (iii) help the government prevent further spread of HIV/AIDS and raise public awareness of the risks of trafficking in women and children, and (iv) enhance road safety by introducing a “safety zone” concept for a pilot section in the east–west corridor (EWC).1

2. At appraisal, the project comprised the following: (i) widening 592 kilometers (km) of the national highway between Chittorgarh and Orai to four lanes; (ii) developing at least 10% of project highways under a PSP scheme and providing financial advisory services to assist PSP; (iii) reducing risks of spreading HIV/AIDS and trafficking women and children; and (iv) enhancing road safety by introducing a safety zone to a selected pilot section of the EWC. The total project cost was estimated at $760.2 million equivalent, which would be financed by the ADB loan of $400.0 million, government funds of $291.6 million, and private sector funds of $68.6 million. It was envisaged that the project would be implemented over 48 months and would be completed by 30 June 2007. The major benefit of the project would be sustainable economic growth attained through enhanced efficiency of economic activities.

3. During implementation, the project experienced a substantial cost overrun in civil works, mainly caused by (i) price underestimation of noncore subprojects at processing of the original loan, and (ii) price escalation of labor and materials during implementation. Local currency appreciation during construction further increased the financing gap. It was estimated that the total additional cost required under the public sector portion of the project was at $307 million. Therefore, ADB approved a supplementary loan of $100 million on 30 June 2009 to ensure completion of the project by addressing remedial measures to the implementation delay as well as the cost overrun in civil works.2 The government would finance the remaining $207 million. The provision of the supplementary loan would also ensure timely economic and financial benefits brought by the project, as well as continuous monitoring and support from ADB.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

4. India’s economy had long suffered from the national highway system’s chronic capacity shortage. To address this issue and upgrade key arterial corridors, in 1998 the government

1 ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loan to India for the National Highway Corridor (Sector) I Project . Manila. 2 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Supplementary Loan to India for the National Highway Corridor (Sector) I Project . Manila.

2 launched the NHDP. Its key components were (i) rehabilitation and widening of the Golden Quadrilateral, a 6,000 km highway network, to be completed by the end of 2004 (first phase); and (ii) rehabilitation and widening of the 4,000 km north–south corridor and the 3,300 km EWC, to be completed by the end of 2007 (second phase). In support of the NHDP, ADB had provided a series of loans. The project was the fourth in this series and the first using the sector loan modality. The project’s main element was to rehabilitate and widen priority sections of the EWC, with emphasis on 662 km (including 70 km to be undertaken through PSP) of existing highway in the states of Rajasthan, Madhya Pradesh, and Uttar Pradesh. A project of this magnitude also required broad-based policy reforms, including institutional capacity building for financial management and creation of an enabling environment for PSP. ADB had adopted a programmatic approach to advance these reforms in a progressive and evolutionary manner through a multiyear lending program, assisting the government in its efforts to (i) strengthen project development and implementation capability of NHAI, (ii) enhance PSP in highway development, (iii) strengthen NHAI’s fund mobilization capability, (iv) strengthen O&M functions of NHAI, and (v) enhance NHAI’s professional management capability and financial viability.

5. At appraisal, it was proposed to use the sector loan modality to increase flexibility in the selection of road sections to be financed by ADB. The ADB fact-finding mission in June 2003 found that all requirements for using the sector loan modality were satisfactorily met, including (i) existence of a sector development plan, (ii) institutional capability to implement the sector development plan, and (iii) development of policies to enable the sector to improve its performance. The project preparatory technical assistance consultants facilitated the transition from the conventional project loan scheme to the sector loan approach, with increased responsibility shifted to NHAI. 3 Major project preparation activities were carried out by NHAI using its own resources. The technical assistance supplemented NHAI’s efforts in due diligence and preparation of specific documents to ensure that all ADB requirements are satisfactorily met. The sector loan approach adopted for the project also included the following features: (i) priority highways would be identified to ensure minimum contiguity of project roads; (ii) from the among priority highways, a core subproject would be selected as an exemplary subproject for the appraisal of other subprojects; and (iii) NHAI would select eligible noncore subprojects and appraise them according to criteria agreed on between ADB and NHAI. Lessons from previous ADB-financed projects in India were incorporated in the project design and formulation. Meanwhile, potential risks were identified, mainly possible delays (i) in implementation due to prolonged land acquisition, and (ii) in processing noncore subprojects due to NHAI’s unfamiliarity with procedural requirements of ADB’s sector loan modality. Mitigation measures formulated at appraisal were either already in place or were put in place during implementation to address the potential risks. Detailed templates of summary subproject appraisal reports, checklists, and other reporting formats were provided by ADB to NHAI to facilitate processing of its subprojects. To strengthen its technical capability, NHAI established a technical group of experts within the project team. Additionally, the project preparatory technical assistance consultants provided trainings to the team staff.

6. During and after implementation, the project was found to be relevant to the government’s objectives and policies, as well as to ADB’s country strategy, in its design and formulation (paras. 29 and 30). Widening a section of the EWC to four lanes under the project has significantly improved the connectivity in the project area and also between eastern and western parts of the country. Development of one section of the project highway through PSP has enhanced PSP in road development. Remarkable socioeconomic impact was generated during and after project implementation (para. 42). However, the project experienced a serious

3 ADB. 2002. Technical Assistance to India for Preparing the National Highway Corridor (Sector) Project . Manila

cost overrun and substantial delays (paras. 12 and 17). The design and monitoring framework was revised during the appraisal for the supplementary loan. Overall, the outputs and outcomes of the project have met the government’s development objectives and ADB’s country partnership strategy. The revised project framework showing the results is in Appendix 1.

B. Project Outputs

1. Highway Investment – Public Sector Portion

7. It was anticipated that 592 km of national highways would be widened to four lanes under public sector financing. At appraisal, a core subproject of 131 km between the Rajasthan– Madhya Pradesh border and Jhansi was selected. During implementation, three noncore subprojects were selected according to the criteria agreed at appraisal. Upon completion, 594.3 km of national highways along the EWC were widened to four lanes and upgraded with substantial road furniture and safety facilities. The salient features of the completed project highway are in Appendix 2. During implementation, some enhancements were undertaken, such as the construction of additional service roads, overpasses and underpasses, grade separators, and culverts based on field requirements. These enhancements did not cause significant cost changes, but strengthened the road safety features and brought more benefits to road users and residents.

8. During implementation, quality control was carried out by contractors in accordance with contractual requirements. The construction supervision consultants (CSCs) assessed and supervised the works to monitor the adherence with the specifications. No significant defects or quality problems were reported during the defect liability period.4 ADB’s project completion review (PCR) mission observed that the project highways were of good quality, enabled a comfortable ride, and had a maintenance system in place to maintain good condition.5

2. Private Sector Participation

9. At appraisal, it was agreed that at least 10% of the project highway would be developed under a PSP scheme. During implementation, one section of the project highway (Orai–Barah) was selected to be developed under PSP. In April 2006, a build–operate–transfer (BOT) concession was awarded to a private firm for constructing and operating this section (para. 18). Upon completion, the 62.8 km Orai–Barah section was widened to four lanes, which included substantial road furniture and safety facilities. NHAI engaged a financial adviser, using its own funds, to support implementation of the PSP component.

3. HIV/AIDS and Anti-Trafficking

10. It was anticipated that this component would include a series of activities to reduce risks of spreading HIV/AIDS and trafficking women and children. During implementation, the nongovernment organizations (NGOs) engaged by NHAI conducted HIV/AIDS and human trafficking awareness program. The activities conducted by the NGOs at worksites and in the project influenced areas, included (i) raising awareness among construction workers, (ii) conducting a campaign to raise awareness and change behavior among high-risk groups, (iii) strengthening the referral systems for sexually transmitted infection and HIV/AIDS to boost early diagnosis along priority highways, (iv) promoting and distributing condoms, and (v) building

4 The defect liability period is 1 year after the completion of civil works per the project’s civil works contracts. 5 The international roughness index of project roads measured by the CSCs was in the range of 2–4.

4 capacity of service providers and decision makers. In addition, project contractors conducted HIV/AIDS awareness campaigns for their workers at project sites, as required in the contracts. No child labor was employed, and women were engaged on the principle of equal pay for equal work at the worksites. Monitoring was conducted periodically by the NGOs and CSCs.

4. Road Safety

11. This component was designed to enhance road safety by introducing a road safety zone to a selected pilot section of the EWC. During implementation, NHAI selected a section of about 150 km in Rajasthan and Madhya Pradesh as the pilot section. 6 To facilitate the implementation of the road safety zone concept, NHAI engaged a consulting firm in March 2011 to carry out a road safety audit, design the road safety zone, and prepare specifications of road safety equipment. Due to project cost overruns and full disbursement of the ADB loan, this component was financed by the government. The study is still ongoing, and some of the safety equipment has been incorporated in the completed highway facility as a part of the O&M concession.

C. Project Costs

12. At appraisal, the project cost was estimated at $760.2 million equivalent, including both the public and private sector portions. During implementation, the project experienced a substantial cost overrun in civil works, mainly caused by contract prices for the noncore subprojects that were about 51% higher than that estimated at appraisal, and price escalation of labor and construction materials during 2005–2008 (about 14% above the total awarded price).7 During processing of the original loan, a cost estimate of $0.90 million per km was used for noncore subprojects. Since detailed estimates were not available due to the use of the sector loan modality, this estimate was based on the cost of upgrading artery corridors to four lanes during previous similar projects. The actual cost was $1.35 million per km during the noncore subproject approval and contract award period. During the construction period the price for input items of labor, cement, steel, plant, machinery and spares, fuel and lubricants, bitumen, and other local materials rose significantly. Comparing the 2008 average with the 2005 average, the consumer price index for industrial workers increased by 22%, and the cost of some construction material increased by even more, such as iron and steel (34%), cement (37%), and bitumen (150%). In addition, the cost estimates at the time of processing the original loan did not include contingencies because of the sector loan modality. When ADB approved subprojects and contract awards in 2005, NHAI opted to retain ADB financing for all the subprojects by lowering the ADB financing percentage, so that all subprojects could be implemented to the required standards set out in the loan agreement. At that time, it was agreed that counterpart funds would be used to finance the balance cost. However, as construction costs further escalated during implementation, and as the NHDP was substantially expanded since the commencement of the project, the government requested a supplementary loan from ADB to secure long-term loan funds for the project. Since detailed studies and firm estimates for the noncore subprojects were not available during appraisal of the original loan, there were some savings in the costs of land acquisition and resettlement, relocation of utilities, and consulting services. The total project cost was reviewed in 2009 and revised to $1,099 million. A financing gap of $21 million was created because of currency fluctuation at the time of processing of the supplementary loan. The additional cost of $307 million required under the

6 Originally, NHAI selected the 120 km Jhansi–Orai section in Uttar Pradesh as the pilot section for the road safety zone. However, this was changed during implementation, since this section was unlikely to be ready in a timely manner because of the delay in the completion of civil works. 7 The Report and Recommendation of the President for the supplementary loan undertook detailed analysis on the project cost overrun.

public sector portion of the project was partially financed by ADB’s supplementary loan of $100 million (para. 3). Upon project completion, the total project cost was $1,137.3 million equivalent, which was about 49.6% higher than the original cost estimate, but 3.5% higher than the revised cost estimate under the supplementary loan. As compared with the original cost estimate at appraisal, the cost for civil works at completion increased by 69.8% for the public sector portion and 46.8% for the PSP portion. As compared with the revised cost estimate, the cost for civil works at completion increased by 4.8% for the public sector portion, which was mainly due to further price escalation during implementation (about 79% of the total increase). The allocation of $11.8 million for an advanced traffic management system and equipment under the road safety component could not be utilized due to delays in the engagement of consultants and incorporation of some of the road safety and traffic management activities in the scope of the concessionaire for O&M. The finance charges for the ADB loans increased by 21% due to the increased loan amount through the supplementary loan.

13. At appraisal, it was envisaged that the project would be financed by the ADB loan of $400.0 million (52.6% of the project cost), government funds of $291.6 million (38.4%), and private sector funds of $68.6 million (9.0%). Under the revised project cost and with ADB’s supplementary loan, the amended financing plan was 45.5% of the cost from the ADB loans, 45.1% from government and 9.4% from private sector. During implementation, the costs for some consulting services (financial adviser, HIV/AIDS prevention consultants, and road safety consultants) were financed by the government. The related loan allocations were transferred to civil works. Upon completion, the final project financing was 43.9% from ADB, 46.7% from the government, and 9.3% from the private sector. The detailed comparison of the project cost and financing plan at appraisal and at completion is in Appendix 3.

D. Disbursements

14. The original ADB loan (Loan 2029) was approved on 4 December 2003, signed on 27 October 2004, and became effective on 24 January 2005. The loan proceeds were disbursed in accordance with ADB’s Loan Disbursement Handbook (January 2001 as amended from time to time). The imprest account and statement of expenditure methods were not used during implementation as NHAI had sufficient funds for making payments and the individual payments made were generally larger than the threshold for the statement of expenditure method. Due to overall implementation delays (paras. 16 and 17), the closing date of 31 December 2007 for the original loan was extended three times to 31 December 2011. The last extension was made effective on 30 June 2009 and was consistent with the closing date for the supplementary loan. The loan disbursements for the original loan were primarily made in 2006 (25.4% of the total loan amount), 2007(38.1%), and 2008 (32.8%).

15. Due to a cost overrun, the cumulative disbursements under the original loan was 97.1% in 2008, with financing of 67% for the civil works contracts. A loan amount of $30.2 million was reallocated for civil works from other categories under the original loan. To support project completion, ADB approved the supplementary loan of $100 million on 30 June 2009; the loan was signed on 4 August 2009 and became effective on 15 September 2009. Under the supplementary loan, the disbursement percentage allocated to civil works was revised to 90%.8 With completion of the civil works, the original and supplementary loans closed on 31 December 2011. However, loan financial accounts were kept open to complete disbursement of

8 By the time the supplementary loan was approved and became effective, the government had financed most of the additional cost. Therefore, for ADB to fully finance $100 million under the constraint of the retroactive financing ceiling of 20%, the ADB financing percentage for civil works under the supplementary loan needed to be increased.

6 expenditures incurred prior to loan closing. At loan financial closure on 9 May 2012, $499.6 million was disbursed, which included $399.6 million for the original loan and $100 million for the supplementary loan. The remaining undisbursed loan amount of $398,092 under the original loan was canceled. The actual disbursements of the ADB loans are in Appendix 4.

E. Project Schedule

16. At appraisal, the project was envisaged to be implemented over 48 months, inclusive of procurement and pre-construction activities, and was expected to be completed by 30 June 2007. To expedite procurement, ADB approved advance action for prequalification of civil works contractors on 29 July 2003. However, the prequalification of the contractors was delayed; the invitation for bidding among the prequalified contractors started in December 2004, and the bids were opened in February 2005. The contracts for most civil works packages were signed during June–September 2005, and the civil works commenced during August–November 2005. The initial delay of about 1 year in project implementation was mainly due to a longer procurement period caused by a delay in prequalification for civil works contractors, and a prolonged process for subproject approval. The physical progress for the nine civil works contracts in Madhya Pradesh and Rajasthan was satisfactory, with six contract packages substantially completed in 2008 and three before June 2009.

17. The progress on three civil works contract packages in Uttar Pradesh was slow because of (i) initial delays in site clearance, (ii) contractors’ slow mobilization, and (iii) insufficient construction supervision staffing. NHAI undertook measures to resolve these issues, including organizing high-level coordination meetings with the state government to resolve the site clearance delays, and conducting regular meetings with the management of the contractors to discuss and resolve related issues. To support completion of the project, ADB approved the extension of the loan closing date three times for the original loan, and approved the supplementary loan. The civil works in Uttar Pradesh were substantially completed by December 2011, which was about 54 months later than anticipated at appraisal.

18. With respect to the PSP component, NHAI initially identified the 62.8 km Orai–Barah section for a BOT (toll) concession project. However, because of the unsuccessful bidding process, NHAI converted the project into a BOT (annuity) concession project. After competitive bidding, the concession was awarded to a joint venture company in April 2006. The civil works commenced in October 2006 and were completed by December 2011. For the HIV/AIDS and anti-trafficking component, the NGOs engaged by NHAI conducted HIV/AlDS and human trafficking awareness programs. Variety activities were undertaken at the worksites and in the project-influenced areas during 2007–2009. The implementation of the road safety component was substantially delayed (para. 22). The consultant was engaged in 11 March 2011 for the implementation of the road safety component by NHAI using their own funds, and the related study is still ongoing (para. 11).

19. A comparison of the actual implementation schedule and the schedule at appraisal is in Appendix 5, and a chronology of the main events is in Appendix 6.

F. Implementation Arrangements

20. As envisaged at appraisal, NHAI was the executing agency for the project. Four project implementation units (PIUs) were established in Chittorgarh, Baran, Shivpuri, and Jhansi 9 NHAI

9 The Baran PIU was merged with the Kota PIU in 2010.

was restructured in 2009, and chief general managers were deployed by NHAI in the states with major operations as regional officers for better coordination with the state governments to expedite land acquisition, shifting of public utilities, forest clearances, and monitoring of construction works. A general manager at NHAI headquarters in Delhi was made responsible for two to three states. An HIV/AIDS prevention and anti-trafficking cell within NHAI’s environment and a social development unit was established to implement the related component. At project sites, the PIUs were established before the awarding of contracts to expeditiously implement the pre-construction activities such as the shifting of utilities, cutting of trees, land acquisition, and resettlement of affected persons. Each of the PIUs was headed by a deputy general manager and/or manager and adequately staffed with experienced personnel. Sufficient administrative authority was delegated to the PIUs for effective and timely decision making on many aspects of project implementation. The PIUs were assisted by the CSCs, who were assigned the power of the engineer in accordance with the Fédération Internationale Des Ingénieurs-Conseils conditions of the contract, barring a few exceptions for which prior approval had to be obtained from NHAI. NHAI also engaged some NGOs to assist in land acquisition and resettlement, social safeguard issues, and implementation of the HIV/AIDS and anti-trafficking component. The institutional framework for the project implementation is in Appendix 7.

G. Conditions and Covenants

21. The project complied with all the covenants specified in the loan and project agreements except for the covenant related to the road safety component, which was partially complied with. The government and the executing agency established an adequate organizational framework with adequate staff. The required monthly and quarterly progress reports were submitted to ADB regularly. During implementation, the government provided the required counterpart funds in a timely manner and ensured that the project was implemented successfully. Separate financial accounts for the project were maintained, as required, which were audited on an annual basis by statutory auditors. The loan and project covenants related to project implementation, O&M, selection of subprojects, and social and environmental safeguards were complied with. The status of compliance with major loan covenants is in Appendix 8.

H. Consultant Recruitment and Procurement

22. As envisaged at appraisal, three CSCs were recruited in accordance with ADB’s Guidelines on the Use of Consultants (2002, as amended from time to time). The contracts were signed with the CSCs during November 2005–February 2006. The first CSC was responsible for the construction supervision for the civil works under three packages in Rajasthan; the second CSC was responsible for the construction supervision for the civil works under three additional packages in Rajasthan; and the third CSC was responsible for the construction supervision for the civil works under six packages in Madhya Pradesh and Uttar Pradesh. The CSCs were recruited following the quality- and cost-based selection procedure. Due to delays in the completion of civil works, particularly for the contracts in Uttar Pradesh, the contracts with the CSCs were extended until they fulfilled their contractual liabilities. For the PSP component, a financial adviser was engaged by NHAI using its own funds. 10 The recruitment of the road safety consultant was substantially delayed, as (i) the original budget for the consulting services underestimated the input costs; and (ii) NHAI had tried to recruit consultants using its own funds and procedures, which lessened the opportunity to widely advertise the business opportunity to

10 At appraisal, $100,000 of the original ADB loan was allocated for a financial adviser to provide consulting services for the PSP component. During implementation, the financial adviser was engaged by NHAI using its own funds, and the ADB allocation was transferred to civil works under the loan.

8 international firms, so no bids were received. To overcome the underlying problem, a sufficient amount for the assignment was allocated in the supplementary loan, and NHAI initiated a fresh recruitment process using ADB’s procedures and loan proceeds. An international consulting firm was engaged and the contract was signed in March 2011. For the HIV/AIDS and anti-trafficking component, several NGOs engaged by NHAI and the civil works contractors conducted a HIV/AIDS and anti-trafficking awareness program.

23. The civil works procurement conformed to ADB’s Procurement Guidelines (1999, as amended from time to time) and used international competitive bidding procedures. To expedite procurement, ADB approved advance action for prequalification of civil works contractors in July 2003. However, the procurement for the 12 civil works contracts was delayed, and the invitation for bidding among the prequalified contractors started in December 2004. The bids were opened in February 2005 and upon ADB approval, the contracts were signed during June– September 2005. All the civil works contract packages (with contract prices and actual costs at completion) are summarized in Appendix 9.

I. Performance of Consultants and Contractors

24. The overall performance of the consultants is rated satisfactory . At appraisal, it was envisaged that consulting services required would be (i) three CSCs providing a total of 417 person-months of international and 4,719 person-months of domestic consulting inputs; (ii) a domestic firm to provide financial advisory services for the PSP component providing 15 person- months of consulting inputs; (iii) an international consulting firm for the road safety component providing 15 person-months of international and 15 person-months of domestic consulting inputs; and (iv) domestic NGOs for the HIV/AIDS and anti-trafficking component providing a total of 98 person-months of inputs, and a domestic individual consultant providing 36 person- months of inputs to supervise the NGOs’ activities.

25. During implementation, three CSCs were engaged who were assigned the power of the engineer in accordance with the Fédération Internationale Des Ingénieurs-Conseils conditions of contract. The CSCs undertook the tasks specified in the terms of reference, including design reviews, project management, construction supervision, measurement and payment assistance, environmental monitoring, and progress report preparation. Due to delays in the completion of civil works, the contract periods of the CSCs were extended with suitable variations. Upon completion, 9,255.6 person-months of consulting services were provided by the CSCs, including 474.7 person-months of international consulting inputs and 8,750.8 person-months of domestic consulting inputs. The recruitment for the road safety consultants was substantially delayed (para. 22). The consultants carried out road safety audits, safety zone design, and the preparation of equipment requirements. The study by the road safety consultants is still ongoing. Some of the safety equipment has been incorporated in the completed highway facility as a part of the O&M concession. After some initial delays for a few packages due to staffing issues, the NGOs recruited by NHAI using its funds carried out the activities for the HIV/AIDS and anti- trafficking component under the project.

26. The performance of the civil works contractors for the packages in Rajasthan and Madhya Pradesh was satisfactory ; the contractors completed the civil works generally within the project schedule and delivered the work as specified in the contracts. However, the performance of the contractors for the three packages in Uttar Pradesh was less than satisfactory ; the contractors had poor site management and were slow in mobilizing equipment and plants. NHAI undertook substantial measures, including conducting regular meetings with the contractors’ management, to discuss and resolve contract issues smoothly and

substantively. To ensure completion of the project, ADB addressed remedial measures to the implementation delay by approving the loan closing date extension three times. The civil works in Uttar Pradesh were substantially completed by December 2011, which was about 54 months later than anticipated at appraisal.

J. Performance of the Borrower and the Executing Agency

27. The overall performance of the borrower (India) and the executing agency (NHAI) is rated satisfactory . The related government agencies, including the Department of Economic Affairs, Ministry of Finance actively participated in the coordination and monitoring of project implementation. NHAI established well-staffed PIUs, which coordinated various activities, including feasibility studies, project preparation, shifting of utilities, land acquisition, tree cutting, environmental clearance, procurement of civil works contracts, and engagement of supervision consultants. NHAI complied with the conditions of the loan covenants. As a part of ADB’s programmatic approach to establish a policy and institutional framework for efficient and sustainable development of the national highway system, NHAI continued strengthening the framework for PSP in O&M and road safety. However, the project experienced a substantial cost overrun and delays in civil works, which postponed the project benefits anticipated at appraisal. The road safety components were not fully implemented as anticipated.

K. Performance of the Asian Development Bank

28. The performance of ADB is rated satisfactory . The project was administered by ADB headquarters in the Philippines until January 2010, and was subsequently delegated to ADB’s India Resident Mission. ADB was closely involved in identifying and resolving issues during implementation through tripartite project review meetings between borrower, executing agency and ADB and regular review missions. During implementation, ADB conducted 12 review missions, including the inception mission in 2006, the midterm review mission in 2007, and two special loan administration missions. ADB analyzed implementation issues affecting the project and provided substantial inputs in preparing action plans to expedite project implementation. Documents were approved in a timely manner at the processing and implementation stages (for engagement of consultants and procurement of civil works packages). All claims for payment were processed promptly. Based on requests by the government, ADB extended the loan closing date three times and approved the supplementary loan to facilitate implementation and completion of the project.

III. EVALUATION OF PERFORMANCE

A. Relevance

29. The project was considered relevant at appraisal and at completion, as it was an integral part of the government’s strategy to develop a national highway network under NHDP (paras. 1 and 4). The government’s 11th Five-Year Plan, 2007–2012 articulated the need for adequate, cost-effective, and high-quality infrastructure as a prerequisite to sustaining growth. The plan set the ambitious target of increasing the total investment in infrastructure from about 5% of gross domestic product in the 10th Five-Year Plan to 9% in the 11th Five-Year Plan.11

30. As a part of its programmatic approach to support the implementation of the NHDP, ADB

11 Government of India, Secretariat for Infrastructure, Planning Commission. 2011. Compendium of National Highway Projects . Delhi.

10 continued its multiyear lending program by providing loans for the development of the NHDP. ADB's country partnership strategy, 2009–2012 for India was designed to support government efforts to address some of the constraints identified in the 11th Five-Year Plan. These included strengthening infrastructure development in poor states, promoting PSP in infrastructure development, supporting climate change adaptation and mitigation, and encouraging innovative financing modalities to increase the leverage of ADB operations. In the updated country partnership strategy, 2013–2017 for India, ADB continues to support the strategic goals of the government through faster, more inclusive, and sustainable growth. 12 By the end of 2014, ADB had provided total 50 loans totaling $10,522.1 million to the transport sector in India, accounting for about 33.6% of total ADB lending to India. ADB’s multiyear lending assistance for the NHDP, which includes assistance to the project, has helped NHAI enhance PSP in road development and O&M. Overall, the project is considered relevant to the government’s development objectives and plan as well as to ADB’s strategy and lending policy.

31. A sector loan modality for the project increased the flexibility in selection of road sections and facilitated appraisal and approval during implementation. However, the sector loan modality generally results in lower project readiness and increases the risk of time and cost overrun. The project suffered cost overrun at the time of award of noncore subprojects, and a supplementary loan was approved to partly finance the cost overrun. Adequate contingencies under the project to cover physical and price contingencies could have helped mitigate the risk of cost overrun (para. 48).

B. Effectiveness in Achieving Outcome

32. The project is rated effective in achieving its outcomes. Despite implementation delays and a cost overrun resulting in a supplementary loan, all project components were completed as envisaged at appraisal. The objectives and outcomes of the project were achieved. Upon completion, 657.1 km (including 62.8 km through PSP) of national highways along the EWC had been upgraded and widened to four lanes, and substantial road safety features had been incorporated. Upon completion, the travel times have been reduced on the project highway, as average vehicular speeds have increased from 51.5 km per hour in 2002 to 80 km per hour for cars, and from 40 km per hour in 2002 to 60 km per hour for trucks. Vehicle operating costs (VOCs) have been reduced by an average of 43%, which has reduced passenger and freight transport costs. Road safety has improved due to the separation of the carriageway by a median and the incorporation of road safety features under the project. The traffic fatalities on the project corridor decreased from 308 during 2001 to 221 during 2012. The project highway, service roads, and roadside amenities have improved connectivity to rural areas and have brought substantial socioeconomic benefits to the project area. The implementation of the HIV/AIDS and anti-trafficking program has significantly increased public awareness of communicable diseases. At full operation of the project highway in 2013, average daily vehicle- kilometers were 4,763,975.

33. As envisaged at appraisal, the O&M of the project highway has been awarded to private sector entities. The highway sections funded under the project are being operated by concessionaires under operation–maintenance–transfer contracts. The concessionaires are equipped with vehicles and facilities for emergency rescue, first aid provision, regular patrolling, and routine maintenance. The BOT section under the PSP component of the project is being operated and maintained by the concessionaire as per the concession agreement. For controlling overloaded trucks, most toll plazas have installed weighing equipment. During ADB’s

12 ADB. 2013. Country Partnership Strategy: India, 2013–2017 . Manila

PCR mission, traffic data was collected for the project highway, which indicated that the annual average daily traffic was about 7,644 vehicles in 2014.13 For undertaking the assessment of the project at completion including the economic and financial reevaluations, the traffic forecast was revised based on current traffic data and the traffic growth rates at appraisal. A summary of the initial operation of the project highway is in Appendix 10.

C. Efficiency in Achieving Outcome and Output

34. The ADB PCR mission carried out economic reevaluation using a methodology similar to that adopted at appraisal using the updated input data. In the economic reevaluation, the economic benefits were calculated by comparing the “with” and “without” project scenarios. The economic benefits included VOC savings and passenger travel time cost savings. The economic internal rate of return (EIRR) was recalculated at 14.4%, with an economic net present value of Rs51,323 million for the project. The recalculated EIRR is lower than both the 22.9% estimated at appraisal for the core subproject and the 15.2% estimated for the whole project under the supplementary loan. The lower EIRR was mainly due to higher project cost at completion and the longer implementation period. However, the EIRR is still higher than the ADB recommended discount rate of 12%. The project is therefore continually considered economically viable. Details of the economic reevaluation are in Appendix 11.

35. The project is rated less than efficient in achieving outcome and output. The project experienced a 54-month delay, which postponed the anticipated benefits. The project had a cost overrun, which led to supplementary financing and reallocation of loan proceeds. Some costs for consulting services were financed by the government, which were anticipated to be financed by the loan. These factors affected the efficiency of the project.

D. Preliminary Assessment of Sustainability

36. The project is considered likely sustainable in consideration of the following factors.

37. The financial internal rate of return (FIRR) of the project was reevaluated based on actual capital cost, prevailing O&M cost, a revised traffic forecast, and existing toll rates and revenue. The recalculated FIRR of 2.9% is lower compared to the appraisal estimate of 6.8% for the core subproject and the revised estimate of 5.8% for the whole project under the supplementary loan. The lower FIRR was caused by higher costs and lower traffic. The recalculated FIRR is higher than the recalculated weighted average cost of capital of 2.08%. Therefore, this project is still considered financially viable. Details of the financial reevaluation are in Appendix 12.

38. Institutional and organizational capacity. NHAI has been restructuring and strengthening itself based on the reviews and the recommendations of the high-level committees formulated by the Government of India. Since its inception, NHAI has evolved to take up the implementation of the enhanced NHDP primarily through public–private partnership contracts, and through engineering, procurement, and construction contracts. NHAI has been taking steps to modernize and streamline its business processes and resolve implementation issues through suitable modifications to its regulations and policies.

39. Development of whole corridor . The project highway is part of the EWC, which has

13 Traffic data was provided by the concessionaires; some adjustments were made to account for round-trip traffic and non-toll vehicles.

12 been upgraded to four lanes for about 80% of its overall length. The Kota bypass is in the middle of the project corridor and is one of the EWC road sections being upgraded. The construction of the Kota bypass is being financed by the government and has been delayed due to engineering problems; it is expected to be completed by January 2016. Currently, all the through traffic has to use the original highway, which is in very bad condition. According to the traffic survey, most of the traffic on the project highway is local traffic and only a small portion is through traffic due to the poor condition of the road through the town of Kota. Completion of the Kota bypass in January 2016 will resolve these issues and will result in smooth passage of traffic through the entire project corridor. Completion of remaining sections of the EWC will boost overall connectivity and will lead to increased traffic and economic development.

40. Operation and maintenance of the project highways . The project highway has 11 toll plazas that are being operated by six private concessionaires under operation–maintenance– transfer contracts ranging in duration from 1 to 9 years (Appendix 10). The concessionaires with a concession period of 6-9 years have installed better equipment and toll plaza and office facilities. The concessionaires are responsible for highway maintenance of the respective section except along the Jhansi–Orai highway section, which it is being maintained through separate contracts. The performance of the concessionaires in highway maintenance varies. The PIUs have engaged consultants to monitor the O&M of the project highways. The short- term concessions are an interim arrangement, as NHAI has adopted a policy to switch to 5–9 year operation–maintenance–transfer concessions and road sections of 100 km–250 km. Switching to relatively long-term concessions will help support (i) better facilities and equipment; and (ii) better performance by the concessionaires in maintaining requisite levels of service.

41. Road safety and public transport services. Although the project incorporated substantial road safety features and consequently the fatalities have been reduced, road safety still remains an important issue to be addressed. The accident data for the project highway still indicate a significant number of fatalities. The project highway is not fully access controlled and serves mixed and local traffic and pedestrians. Many slow-moving vehicles use the inner lane of the highway, and some vehicles drive in the wrong direction. There are many overloaded trucks, especially on the Jhansi–Orai–Barah section, which have damaged the road surface and also caused road accidents. Therefore, road safety needs to be enhanced through strict enforcement of traffic rules, road safety awareness campaigns, and the provision of additional safety features such as median barriers, pedestrian overpasses or underpasses, additional service roads, and traffic lights and signs in populated areas. Although public transport services operate and serve the local population along the project highway, these services are not adequate and are poorly regulated. The government needs to develop and implement policies to promote public transport and provide low-cost and reliable transport services to the local population, particularly the poor. A well-developed, low-cost, and safe public transport system is important to increase accessibility and enable the poor to participate in economic activities and access social services.

E. Impact

1. Socioeconomic Impacts

42. The overall impact of the project is significant . At completion, the project had reduced VOCs, levels of congestion, travel times, and transport costs. The implementation of the project has significantly improved national highway connectivity along the EWC as well as in the project area, which has facilitated rapid socioeconomic development in the project area and throughout the country. During the ADB PCR mission, consultation meetings were held with the local PIUs, and the latest information on the project’s social impacts was collected. The analyzed

13 information indicate that upon project completion (i) total VOCs were reduced by about 43%, with VOC savings per vehicle-kilometer of Rs0.8 for two-wheelers, Rs3.1 for cars and jeeps, Rs12.6 for buses, Rs11.7 for trucks, and Rs14.1 for heavy trucks; (ii) the savings in average travel time for a whole journey was about 4.5 hours for car and jeep passengers and 5.5 hours for bus passengers; (iii) 28,518 person-months of inputs from local workers were utilized for construction; (iv) the actual average income of local residents increased by at least two times; (v) the price of the land along the project highway has increased by about five times; (vi) about 685 full-time staff currently work at the 11 toll plazas on the project highway; and (vii) a large number of roadside businesses have been established or expanded, providing significant working opportunities to the local population, especially the poor. The project has improved connectivity for rural areas and poor residents, although public transport services could be improved further. The upgraded highway corridor provides opportunities for further economic, industrial, and commercial development, potentially leading to increased employment.

2. Environmental Safeguards

43. The project was classified under environmental category B sensitive. Initial environmental examinations (IEEs) were carried out for each subproject by NHAI, which complied with ADB’s Environment Policy (2002) and ADB’s Environmental Assessment Guidelines (2003). One IEE for the core subproject was prepared before Board approval. The eligibility criteria and procedure for the noncore subprojects clearly stipulated the environmental due diligence criteria. Four IEEs were prepared for the noncore subprojects. The IEE report indicated that the project would not have significant adverse environmental impacts, as it would upgrade existing highways primarily within existing rights of way. However, an environmental management plan was prepared to ensure that all activities would be performed in compliance with principles and objectives of ecologically sustainable development.

44. During implementation, an environmental monitoring cell was established under each PIU for monitoring and implementing environmental mitigation measures. The statutory clearances required for the project were obtained. The contractors implemented mitigation measures related to disposal of debris during construction, noise and air pollution, borrow areas and quarries, labor and staff camps, environmental quality at the construction and plant sites, traffic safety for road users, personal safety for workers, and flora and fauna. Environmental experts from the CSCs visited the project sites regularly to monitor the air quality, noise level, soil pollution, forestation, and other environmental parameters. Any noncompliance was recorded and reported for the contractors to take immediate corrective action. The environmental monitoring results were incorporated in the progress reports. ADB monitored the compliance with environmental safeguard requirements by fielding environment experts and reviewing the monitoring reports. The ADB PCR mission observed that adequate drainage measures (bridges, culverts, and drains) had been constructed to avoid waterlogging and reduce soil erosion problems. The completed project has improved the environmental quality along the project highways by (i) reducing air and dust pollution, particularly emissions, due to afforestation as well as the construction of flyovers, underpasses and overpasses, and service roads; (ii) reducing noise levels by planting trees and shrubs in the right-of-way and median; and (iii) reducing erosion of the embankments by using vegetation and other protective works. The planting of trees and shrubs was well implemented, with sufficient and timely maintenance. However, (i) the implementation of environmental safeguards was not initially considered as a priority area by the contractors, supervision consultants, and executing agency (although it was strengthened during implementation); and (ii) the approval for cutting trees was delayed in some cases, which delayed the overall construction progress.

3. Land Acquisition and Resettlement

45. At appraisal, it was anticipated that the highway improvement would be carried out within the existing right-of-way (except for minor realignment and two bypasses). One resettlement plan for the core subproject and five resettlement plans for the noncore subprojects were prepared based on detailed engineering design, which met the requirements of the national acts on land acquisition and resettlement, as well as ADB’s Involuntary Resettlement Policy (1995). During implementation, efforts were made to minimize land acquisition and reduce resettlement impacts as much as possible by (i) keeping rights-of-way to 45 meters wide in built-up areas and reserve forest areas, (ii) adopting concentric symmetrical widening, (iii) raising carriageways over congested segments, and (iv) using bypasses to avoid congested urban settlements. Micro-plans were prepared in accordance with the entitlement matrix, and entitlement-cum-identity cards were provided to each affected person indicating the type of loss and entitlement. Payments were made to the affected persons as per the respective resettlement plans prior to the commencement of civil works on that section. In accordance with the entitlement matrix, none of the affected persons were made more disadvantaged due to involuntary resettlement. Measures to mitigate resettlement impacts included compensation at full replacement cost for all lost assets to the affected persons. In addition, the affected persons received resettlement and rehabilitation assistance such as allowance for shifting of affected assets, transitional allowance for loss of workdays and/or income because of dislocation, and economic rehabilitation grants for livelihood restoration. A consultative and participatory approach was adopted in the development of resettlement sites, allotment of residential plots, and design of a training and skill development program. Monitoring mechanisms were put in place to monitor utilization of the assistance provided to affected persons. Grievance redress committees were established in all related districts to deal with disputes. However, very few cases were referred to these committees and were resolved. Upon completion, the total cost of land acquisition and resettlement was Rs1,338.95 million. The common property resources, such as schools, religious structures, bus stops, wells, statues, cattle troughs, and hand pumps, were relocated and compensated for a total cost of Rs 399.78 million.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

46. Overall, this project is rated successful . The project is relevant to the government’s overall development objectives and ADB’s country partnership strategy. The completed national highway corridor has improved connectivity in the project area, facilitated traffic along the EWC, and significantly supported the socioeconomic development of the project influenced area. The involvement of the private sector in highway development and O&M has substantially improved service quality and reduced costs. The project is rated effective in achieving its outcomes. The results of the economic and financial reevaluation indicate the continuous viability of the project. However, the project experienced implementation delays, which postponed the benefits and efficacy anticipated at appraisal. The project also had a cost overrun, which reduced the project efficiency. The project is rated less than efficient in achieving its outcome and output. Some sustainability issues relating to road safety and public transport need to be addressed. The project is rated likely sustainable .

B. Lessons

47. The project was the fourth in the series of loans in support of the NHDP in India, and it was the first to use the sector loan modality. Some lessons were learned during project

15 implementation that can be applied to ongoing and future ADB projects in the country.

48. Underestimation of costs. The project encountered a significant cost overrun due to underestimation of costs at the time of processing of the original loan (para. 12). To enable quality completion of the project, ADB approved a supplementary loan and the government provided additional counterpart funds. For future projects using the sector loan modality, consideration may be given to setting appropriate level of cost contingencies, taking into account the uncertainties caused by (i) the unavailability of designs and detailed estimates, and (ii) higher price escalation due to a longer gap between the processing of the loan and the actual time of subproject appraisal, approval, and contract award.

49. Performance of the contractors . During implementation, significant delays in mobilization and completion of contracts were caused by weak capacity and poor performance of some contractors. For future projects, the criteria for qualification of contractors and for the award of multiple contracts should be strengthened. The contractual provisions related to contractor performance, such as mobilization, staffing, and deployment of equipment and funds, need to be strengthened so that poor performance by contractors is discouraged.

C. Recommendations

1. Project Related

50. Project benefit monitoring and evaluation. The project has resulted in initial socioeconomic impacts in the project influenced area and is likely to have larger impacts in the next few years over a wider region. Full completion of the EWC is likely to change the development scenario along this transport artery. A benefit monitoring and evaluation study should be undertaken to assess and document the socioeconomic benefits and the lessons learned for incorporation in future projects.

51. Timing of the project performance evaluation report. The project performance evaluation report should be prepared in 2017 or later. By then, most of the project highway sections will have been fully operational for 4–5 years and the widening of the entire EWC to four lanes should be complete. At that time, the traffic growth, performance of private sector concessionaires, public transport services, and impacts on poverty can be better assessed.

2. General

52. Capacity development for project implementation and operation. During the initial stage of project implementation, many PIUs were not very familiar with ADB’s procedures and policies on procurement, financial management, and environmental and social safeguards. Training should be adequately provided for PIU staff before these activities are undertaken.

53. Project sustainability. Future projects could benefit from the design and incorporation of components on sustainability, especially with regard to road maintenance and financing, toll policy, road safety enhancement, axle load control, and development of transport services. In addition, fully integrated and computerized toll collection and management systems should be introduced.

16 REVISED DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Targets/Indicators Project Achievements Appendix 1 Impact Improved mobility of people and goods Average annual growth rates of passenger vehicles in Average annual growth rates of the traffic on the project to contribute to the economic growth of the project corridor achieve 7% and goods vehicles highway was 7.7% for passenger vehicles and 1.3% for the states connected by the project achieve 5% from 2003 to 2015 goods vehicles during 2003–2014. Completion of the east– corridor west corridor beyond the project corridor will lead to a further increase in traffic growth.

Direct contribution by road transport sector to gross The direct contribution by the road transport sector to state domestic product increases by 1% by 2015 gross domestic product by 2015 is 3.45% in Rajasthan, (baseline in FY2006 at current prices: 3% in Rajasthan, 3.10% in Madhya Pradesh, and 7.00% in Uttar Pradesh. 3% in Madhya Pradesh, 4% in Uttar Pradesh) Outcome Travel time decreases {average vehicle speed Upon completion, the average vehicle speeds are 80 kph Improved road transport services and increases upon completion of project roads: cars 80.0 for cars and 60 kph for trucks. safety along the project corridor kph (51.5 kph in 2002) and trucks 60.0 kph (40.0 kph in 2002)}.

Number of traffic fatalities of project corridor in 2012 According to the data provided by the operation and does not exceed pre-project level (308 fatalities in maintenance concessionaires, there were 221 fatalities on 2001) the project corridor in 2014 due to road accidents. Outputs Stretches between Chittorgarh and Orai 595 km completed by 2010 Upon completion, 594.3 km of national highways along the are widened into four-lane roads east–west corridor were widened to four lanes.

10% of the project corridor is developed through a build–operate–transfer Barah–Orai section (62 km) under operation phase by The Barah–Orai section (62.8 km) was constructed by the concession 2010 private sector through a build–operate–transfer concession.

A road safety zone concept is A road safety zone implemented in a selected pilot One section (150 km) of the project highway was selected implemented section (120 km) by 2011 as a road safety zone pilot section. Road safety consultants were engaged to carry out a road safety audit and design of the road safety zone. The study is still ongoing. Some of the safety equipment has been incorporated in the completed highway facility as a part of the operation and maintenance concession.

Campaigns to help prevent the spread of Risk awareness workshops conducted during Several campaigns to help prevent the spread of HIV/AIDS HIV/AIDS and increase awareness of the construction period and increase awareness of the risk of trafficking in women risk of trafficking in women and children and children were conducted by nongovernment are conducted organizations and contractors during the construction period.

Design Summary Performance Targets/Indicators Project Achievements Activities with Milestones Inputs Actual 1. Highway Investment Component Total Project Cost ($ million) 1,099.0 Total Project Cost ($ million) 1,137.1 1.1 Construction substantially completed Asian Development Bank Asian Development Bank 499.6 by June 2010 Original 400.0 Government 531.6 Supplementary 100.0 Private Sector 106.1 2. Private Sector Participation Government Component Original 291.6 By Components ($ million) 2.1 Operation phase started by June Supplementary 204.1 Public Sector Portion 1,031.2 2010 Private Sector Highway Investment 989.0 Original 68.6 HIV/AIDS and Anti-Trafficking 0.4 3. Road Safety Component Supplementary 34.7 Road Safety 0.6 3.1 Consultants engaged by September Financial Charges 41.1 2009 Private Sector Portion 106.1 3.2 Concept of road safety zone and technical specifications of road safety equipment finalized by June 2010 3.3 Road safety zone implemented by June 2011

4. HIV/AIDS and Anti-Trafficking Component 4.1 All activities completed by June 2010 Note: Design and monitoring framework was revised at the time of the Supplementary loan. HIV/AIDS = Human immunodeficiency virus/acquired immunodeficiency syndrome; km = kilometer, kph = kilometers per hour. Source: Asian Development Bank project completion review mission.

Appendix 1 171Appendix

18 SUMMARY OF SALIENT FEATURES OF THE PROJECT

Feature Unit Chittorgarh PIU Baran/Kota PIU Shivpuri PIU Jhansi PIU Total

RJ -6 RJ -7 RJ -8 RJ -9 RJ -10 RJ -11 MP -1 MP -2 MP/ UP -3 UP -4 UP -5 BOT Appendix (Chittorgarh (Chittor (Chitt or (Kota– (Kota– (Kota– (MP/RJ (Shiv UP-1 (Jhansi (Jhansi (Jhan si (Orai– Bypass) garh– garh– RJ/ RJ/MP RJ/MP Border – puri– (Shiv Bypass) –Orai) –Orai) Bhogni Kota) Kota) MP border) border) Shiv Jhansi) puri– pur- border) puri Jhansi) Barah) 2

Bypass) Length (four- km 41.00 60.00 61.00 43.00 60.00 70.00 53.00 35.00 40.30 15.00 66.00 50.0 62.80 657.10 lane section) 0 Service road km 7.95 10.80 24.37 9.35 5.27 12.27 5.00 1.00 9.00 9.00 19.00 4.00 27.83 144.8 4 Interchange no. 2 9 11 .00 ROB no. 1 1 1 2 1 1 7.00 Flyover no. 1 1 2.00 Grade no. 6 4 6 16 .00 separator Vehicle no. 9 5 7 27 23 22 2 1 5 6 3 3 11 3.00 overpass/ underpass LCV no. 12 6 4 3 4 2 3 34.00 underpass Major bridge no. 2 6 6 4 1 2 1 2 24 .00 Minor bridge no. 14 14 12 6 22 10 21 5 10 2 9 3 2 130 .00 Box & slab no. 59 102 48 74 62 64 57 13 44 33 102 65 26 749 .00 culvert Toll plaza no. 1 1 1 1 1 1 1 1 1 1 1 11 .00 Rest area no. 1 1 1 3.00 Truck bay no. 2 2 2 2 4 4 2 13 5 36 .00 Bus bay and no. 22 26 27 7 11 8 11 18 18 1 1 30 180 .00 shelter BOT = build–operate–transfer, km = kilometer, LCV = light commercial vehicle MP = Madhya Pradesh, PIU = project implementation unit, ROB = rail- over-bridge, RJ = Rajasthan, UP = Uttar Pradesh. Source: Asian Development Bank project completion review mission.

PROJECT COST AND FINANCING PLAN Table A3.1: Project Costs ($ million) Original Estimate a Revised Cost b Actual Foreign Local Total Foreign Local Total Foreign Local Total Item Exchange Currency Cost Exchange Currency Cost Exchange Currency Cost A. Public Sector Portion

1. Base Cost

a. Highway Investment

i. Civil Works 359.3 177.7 537.1 582.5 288.0 870.5 610.2 301.8 912.0

ii. Land Acquisition and Resettlement 38.0 38.0 25.3 25. 4 29.2 29.2

iii. Relocation of Utilities 17.7 17.7 13.6 13.6 8.8 8.8

iv. Environment 10.3 10.3 13.9 13.9

v. Consulting Services 9.2 18.6 27.8 5.4 10.8 16. 1 5.4 10.9 16.3

vi. Project Management 5.4 5.4 5.4 5.4 8.8 8.8

Subtotal (a) 368.5 267. 8 636.3 587. 8 343. 2 931.0 615.6 373.4 989.0

b. HIV/AIDS and Anti -Trafficking

i. Consulting Services 0.4 0.4 0.4 0.4 0.4 0.4

Subtotal (b) 0.4 0.4 0.4 0.4 0.4 0.4

c. Road Safety

i. Advanced Traffic Management System 10.0 10.0 10.0 10.0 0.0 0.0

ii. Equipment 1.8 1.8 1.8 1.8 0.0 0.0

iii. Consulting Services 0.3 0.2 0.5 0.6 0.3 0.9 0.4 0.2 0.6

Subtotal (c) 12.1 0.2 12.3 12.4 0.3 12.7 0.4 0.2 0.6

Subtotal (1) 380. 7 268. 4 649.0 600.2 34 4.0 944. 2 616.0 374. 1 990. 1

2. Front -End Fee 2.0 2.0 2.0 2.0 2.0 2.0

3. Interest During Construction 30.4 30.4 40.3 40.3 35.5 35.5

4. Commitment Charges 1.5 1.5 3.7 3.7 3.6 3.6

Total (A) 414. 6 268. 4 682.9 646. 3 34 4.0 990. 1 657. 2 374. 1 1,031. 2

B. Private Sector Portion

1. Base Cost

i. Civil Works and Operation and Maintenance 39.7 28.9 68.6 59.8 43.5 103.3 58.3 42.4 100.7 3Appendix ii. Land Acquisition and Resettlement 5.0 5.0 3.0 3.0 2.9 2.9

iii. Relocation of Utilities 2.3 2.3 2.4 2.4 2.3 2.3

iv. Environment 1.3 1.3 iv. Consulting Services 0.1 0.1 0.1 0.1 0.1 0.1

Total (B) 39.8 37. 5 77.3 59.9 48.9 108.8 58.4 47. 7 106. 1

Total 454. 3 305. 9 760. 2 706. 1 392.9 1,099.0 715. 5 421. 8 1,137. 3 aUnder Loan 2029-IND. 19 bRevised cost estimated at the time of processing of supplementary loan (Loan 2527-IND). In the revised estimate, the cost of environment is included in the cost of civil works. The cost for environment at completion for private sector portion is included in the cost of civil works. Sources: ADB loan financial system and the project implementation units.

20 Appendix 3

Table A3.2: Project Financing ($ million)

Original Appraisala Revised b Actual % of % of % of Cost Cost Cost Source Total Total Total Asian Development Bank 400.0 52.6 500.0 45.5 499.6 43.9%

Government 291.6 38.4 495.7 45.1 531.6 46.7%

Private Sector 68.6 9.0 103.3 9.4 106.1 9.3%

Total 760.2 100.0 1,099.0 100.0 1,137.3 100.0% aUnder Loan 2029-IND. bRevised cost estimate at the time of processing of the supplementary loan (Loan 2527-IND.)

Sources: ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loan to India for the National Highway Corridor (Sector) I Project . Manila; ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Supplementary Loan to India for the National Highway Corridor (Sector) I Project. Manila; and ADB Loan Financial Information System.

Appendix 4 21

DISBURSEMENT OF ADB LOAN PROCEEDS

Table A4: Annual and Cumulative Disbursement of ADB Loan Proceeds a ($ million) Cumulative Annual Disbursement Disbursement Amount Amount Amount % of % of % of (L oan (L oan Total Total ($ million) Total Year 2029) 2527) 2005 3.59 0.90 3.59 0.7

2006 101.39 25.4 104.98 21.0

2007 152.09 38.1 257.06 51.5

2008 131.11 32.8 388.17 77.7

2009 11.43 2.9 25.6 425.24 85.1 25.64 2010 55.5 480.78 96.2 55.53 2011 18.8 499.60 100.0 18.83 Total 399.60 100.0 100.00 100.0

ADB = Asian Development Bank. a ADB. 2003. Report and Recommendation of the President to the Board of Directors: Proposed Loan to India for the National Highway Corridor (Sector) I Project . Manila (Loan 2029-IND) and ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Supplementary Loan to India for the National Highway Corridor (Sector) I Project (Loan 2527-IND). Source: Asian Development Bank.

Figure A4: Annual and Cumulative Disbursement of ADB Loan Proceeds a ($ million)

22 APPRAISAL AND ACTUAL IMPLEMENTATION SCHEDULES COMPARED

2003 2004 2005 2006 2007 2008 2009 2010 2011 5 Appendix Item Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 A Project Preparation

Core Subproject

Noncore Subprojects

B Civil Works - Public Sector

Procurement

Construction

C Civil Works - Private Sector

Contract awarding

Construction

D Construction Supervision Consultants

Selection

Supervision

E HIV/AIDS and Anti-Trafficking

Implementation

F Road Safety

Consulting Services

At appraisal Actual

Sources: Project implementation unit and and Asian Development Bank project completion review mission.

Appendix 6 23

CHRONOLOGY OF MAJOR EVENTS

Date Event 2003 26 May–10 June ADB fact-finding mission for Loan 2029 ADB approval of advance action for prequalification of civil works 29 July contracts 25 August–3 September ADB appraisal mission for Loan 2029 3–4 November Loan negotiation for Loan 2029 4 December ADB board approval for Loan 2029 2004 16 March ADB approval of prequalification documents 27 October Signing of loan agreement for Loan 2029 18 November ADB approval of prequalification evaluation report 9 December ADB approval of bidding documents for civil works packages 2005 24 January Loan effectiveness for Loan 2029 April–May ADB approval of bid evaluation report for civil works packages 24 May ADB approval of the award of all 12 civil works contracts 16 June–29 September Contract signing for all civil works packages 19–30 September ADB inception mission for Loan 2029 Contract signing with the supervision consultants for civil works packages 24 November in Madhya Pradesh and Uttar Pradesh Contract signing with the supervision consultants for civil works packages 2 December RJ-6, RJ-7, and RJ-8 2006 18–26 January ADB special loan administration mission. Contract signing with the supervision consultants for civil works packages 2 February RJ-9, RJ-10, and RJ-11 27 April Awarding of BOT contract to private sector 5–15 September ADB project review mission 2007 10–18 December ADB project midterm review mission 31 December Original loan closing date for Loan 2029 2008 2–10 June ADB project review mission 30 June Original project completion date 12 September–11 Completion of civil works contract packages RJ-11, MP-1, MP-2 and November MP/UP-1

24 Appendix 6

Date Event 20–24 October & ADB project review missions 5–6 November 5–8 December Completion of civil works contract packages RJ-6, RJ-7, and RJ-8

10–12 December ADB special loan administration mission 2009 12–26 February ADB fact-finding mission for Loan 2527 15–18 May Completion of civil works contract packages RJ-9 and RJ-10 25 May Loan negotiation for Loan 2527 30 June ADB board approval for Loan 2527 30 June Last extension of loan closing date for Loan 2029 4 August Signing of loan agreement for Loan 2527 15 September Loan effectiveness for Loan 2527 22–24 September ADB inception mission for Loan 2527 2010 25–31 March ADB project review mission 30 August ADB project review mission 31 August Completion of civil works contract package UP-3 Contract completion of supervision consultants for civil works contract 31 August packages RJ-5, RJ-6, and RJ-7 Contract completion of supervision consultants for civil works contract 31 October packages RJ-9, RJ-10, and RJ-11 2011 31 January Completion of civil works contract package UP-4 11 March Contract signing for road safety consultants 16 May ADB project review mission 31 December Actual loan closing date for Loan 2029 and Loan 2527 2012 9 May Financial closures of Loan 2029 and Loan 2527

2013

30 April Completion of civil works contract package UP-5 Contract completion of supervision consultants for the civil works contract 30 April packages in Uttar Pradesh and Madhya Pradesh 2015

8–16 March ADB project completion review mission ADB = Asian Development Bank; BOT = build–operate–transfer. RJ=Rajasthan; UP=Uttar Pradesh Source: ADB project completion mission.

ORGANIZATION STRUCTURE FOR PROJECT IMPLEMENTATION

National Highways Authority of India (Headquarters)

PIU – Chittorgarh PIU – Baran /Kota PIU – Shivpuri PIU – Jhansi PIU – Kanpur

(i) Project Director (i)Project Project Director Director (i) Project Director (i) Project Director Project Director

(ii) Managers (ii) ManagersManager (ii) Managers (ii) Managers Manager for for for for 3 civil works 3 civil works 3 civil works contract 3 civil works Accountant contract packages contract packages packages in contract packages in Rajasthan in Rajasthan Madhya Pradesh and in Supporting Staff Uttar Pradesh Uttar Pradesh

Financial Advisor Road Safety for the PSP Consultants

BOT Concessionaire Construction Supervision Consultants Nongovernment Organizations

7Appendix

Civil Works Contractors

BOT = build–operate–transfer; PIU = project implementation unit, PSP = private sector participation.

Sources: ADB project completion review mission and project implementation units. 25

26 Appendix 8

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS LOAN 2029: NATIONAL HIGHWAY CORRIDOR (SECTOR) I PROJECT Reference in Loan Covenant Agreement Status of Compliance General 1. NHAI shall be responsible for execution of the Schedule 6, Complied with. Project. The Borrower shall continue to delegate para. 1 During implementation, NHAI was NHAI with sufficient administrative and financial responsible for execution of the project authority for expeditious implementation of the and was given sufficient administrative Project. and financial authority for expeditious implementation of the project. Schedule 6, Complied with. 2. The Borrower shall ensure that sufficient para. 2 The Borrower provided sufficient budgetary allocations, counterpart funds budgetary allocations and staff for (including additional funds as required in case of efficient and timely implementation of the any revisions to RPs under the Subprojects) and project. Upon completion, total staff are made available to NHAI in a timely counterpart fund of $531.6 million was manner for efficient and timely implementation provided to the project, including of the Project. additional fund of $240 million required. 3. The Borrower shall ensure that administrative Schedule 6, Complied with. clearances are issued in a timely manner, as para. 2 The Borrower ensured that administrative required by NHAI for speed implementation of clearances were issued generally in a the Subprojects. timely manner. In case of delays, the governments took immediate action. Project Implementation Schedule 6, Complied with. 4. (a) Within two months of the Effective Date and para. 5 (a) Two PIUs for the core subprojects in any case prior to the award of civil works were established in Kota and Jhansi, contracts under the Subproject concerned, which were headed by project whichever is earlier, NHAI shall ensure that the directors and staffed with adequate PIUs (to be located in Kota and Jhansi) and the and experienced personnel. Project Team are adequately staffed with experienced personnel at both managerial and professional levels including staff with accounting and financial management expertise, and resettlement experiences, during the entire duration of Project implementation. (b) NHAI shall similarly establish additional (b) Another two PIUs were established PIUs for Non-core Subprojects, as required by in Chittorgarh and Shivpuri for the ADB, with adequate staffing, within at least four implementation of the non-core months from the date of approval of the subprojects. Subproject by ADB. 5. Each PIU shall be headed by a Project director Schedule 6, Complied with. (a general or deputy general manager level staff para. 6 Each PIU was headed by a deputy of HNAI). The Project director shall be assisted general manager and adequately staffed by deputy general managers/managers, each with experienced personnel. Sufficient responsible for one contract package or PSP administrative authority was delegated to component. An additional deputy general the PIUs for effective and timely decision manager/manager shall be assigned to each making on many aspects of the project PIU and shall be responsible for overseeing implementation. Separate financial resettlement activities and handling grievances accounts were established in each PIU. if any filed by the public, including any Project The financial accounts of the project affected persons and NGOs. Additionally each were audited by government auditors. PIU shall be assigned with an The audited reports were submitted to

Appendix 8 27

Reference in Loan Covenant Agreement Status of Compliance accountant/financial management specialist who ADB accordingly. The PIUs were shall be responsible for maintenance of assisted by the construction supervision Subproject accounts and records. consultants, who were assigned the powers of the engineer. NHAI also appointed some NGOs to assist in land acquisition and resettlement, social safeguard issues, and implementation of the HIV/AIDS and anti-trafficking component. 6. Project activities of the PIUs shall be overseen Schedule 6, Complied with. by Chairman, NHAI through the Project Team para. 7 The project activities of the PIUs were headed by a Chief General Manger in-charge of overseen by Chairman, NHAI through the the E-W Corridor. project team headed by a Chief General Manager in-charge of E-W corridor. During implementation, NHAI restructured its organizational structure in 2009 and deployed the Chief General Managers in the States as the Regional Officers for better coordination with the state governments to expedite land acquisition, shifting of utilities, forest clearances and close monitoring of construction works. A General Manager at NHAI’s headquarter was made responsible for 2-3 states. An HIV/AIDS prevention and anti-trafficking cell within NHAI’s environment and a social development unit was established to implement related component. 7. NHAI shall delegate sufficient administrative Schedule 6, Complied with. autonomy to the Project Team and the PIUs for para. 8 The project team and the PIUs were effective and timely decision making on delegated with sufficient administrative Subproject and Project implementation matters autonomy for effective and timely decision making on Subproject and Project implementation matters. Execution of Civil Works 8. The Borrower shall ensure that NHAI shall (i) Schedule 6, Complied with. acquire or make available on a timely basis, the para. 10 During implementation, efforts were land and rights in land, free from any made to minimize land acquisition and encumbrances; and (2) clear the utilities, trees reduce resettlement impacts as much as and any other obstruction from such land, on a possible. The land and rights in land was timely basis, as required for construction made available to the contractors activities relating to each Section of the related generally on a timely basis. Clearing civil works contract under a Subproject. utilities, trees and any other obstruction from such land, was generally on a timely basis, as required for construction activities.

28 Appendix 8

Reference in Loan Covenant Agreement Status of Compliance 9. NHAI shall ensure that subsequent to award of Schedule 6, Complied with . civil works contract under any Subproject, no para. 11 Section and part thereof under the civil Section or part thereof under the civil works works contracts were handed over to the contract shall be handed over to the contractor contractor after compliance with para 10, unless the provisions of paragraphs 10, 27, and 27, and 38 of schedule 6 of loan 38 of schedule 6 of loan agreement have been agreement. complied with: Road Safety 10. NHAI shall monitor the incidence of traffic Schedule 6, Complied with. accidents on the Subproject highways, and para. 12 report on these to ADB, on an annual basis, in a format agreeable to ADB, during the Project implementation period, and two years after Project completion. 11. NHAI shall carry out road safety audit for the Schedule 6, Complied with. Subproject highways during the construction para. 13 The road safety consultants carried out and operations stages of Subproject road safety audit after considerable implementation, and develop by 31 May 2006, delay. Recommendations for national recommendations to be used on other parts of highway system were developed as a the national highway system of the Borrower. part of road safety audits for 2800km of select national highways and expressways by NHAI under other ADB funded projects for NHDP. Operations and Maintenance 12. NHAI shall ensure that upon completion of each Schedule 6, Complied with. of the Subproject highways, their operations and para. 14 The operation and maintenance of the maintenance contracts are awarded to third project highway has been awarded to parties under arrangements satisfactory to private sector entities. ensure sustainability of the subproject highways. NHAI shall keep ADB informed of the terms and conditions of the proposed arrangements for operation and maintenance. 13. The Borrower shall ensure that NHAI starts Schedule 6, Complied with. tolling the Subproject highways as soon as para. 15 After completion, the project highway is possible and in any event within six months of being tolled in accordance with National construction completion. In order to achieve this, Highway Fee (Determination of Rates the Borrower shall assist NHAI in obtaining and Collection) Rules 2008 and related necessary statutory approvals and public amendments. notification of the tolling. Toll 14. Not later than December 2003 NHAI shall Schedule 16, Complied with. initiate the Study on Toll System (as financed para. 16 The toll system is being implemented under the Loan 1747:Surat-Manor Tollway based on the toll system study and the Project), so that the toll system is implemented reviews of the toll policy conducted by by not later than December 2004. the government from time to time. 15. The Borrower and NHAI shall finalize Schedule 6, Complied with. arrangement so that by not later than 31 para. 17 The tolls for the project highways are December 2004, NHAI shall be able to retain collected and retained by the private tolls collected, as its own revenue. concessionaires to cover the operation and maintenance costs in accordance with the provisions of the concession agreement.

Appendix 8 29

Reference in Loan Covenant Agreement Status of Compliance Private Sector Participation (PSP) 16. NHAI shall ensure that at least ten percent Schedule 6, Complied with. (10%) of the length of E-W Corridor to be para. 18 Under the project, one section of the developed under the Project shall be under national highways along the E-W corridor Component B. (Orai–Baran, 62.8 kilometers) was developed by private sector, which is about 9.5% of whole project length. 17. Within not later than six months from Schedule 6, Complied with. identification of the part of national highway for para. 22 Financial adviser was engaged by NHAI Component B, NHAI shall engage the financial to support development of part of E-W advisor for assisting in its packaging. corridor through private sector participation, and its packaging. 18. The Borrower and NHAI shall ensure that in the Schedule 6, Compl ied with. selection, construction and operation and para. 23 maintenance of the national highway to be included under Component B, all criteria and requirements as applicable· to eligibility and requirements for Subprojects are followed as included under this Loan Agreement. Environment 19. NHAI shall implement the Project in accordance Schedule 6, Compl ied with. with ADB's Environmental Assessment para. 24 Guidelines, 2003, as amended from time to time 20. NHAI shall ensure that all environmental Schedule 6, Complied with. mitigation measures identified in the IEE, and para. 25 Subprojects were designed and the Summary IEE as applicable to the constructed in accordance with Subprojects are incorporated into the detailed environmental mitigation measures Subproject designs and are followed during identified in the IEE and Summary IEE, construction, operation, and maintenance of the as applicable and the Environment Subproject highways. NHAI shall also ensure Management and Monitoring Plan that the Subprojects are designed and agreed upon with ADB in accordance constructed according to the Environmental with ADB’s Environmental Assessment Management and Monitoring Plan agreed upon Guidelines, 2003 as amended from time with ADB in accordance with ADB’s to time. Environmental Assessment Guidelines, 2003 as amended from time to time. 21. Any subproject classified as 'category A', in Schedule 6, Complied with. accordance with ADB's Environmental para. 26 Assessment Guidelines, 2003, as amended from time to time, shall not be eligible for financing under the Project. 22. NHAI shall ensure that for any Subproject that Schedule 6, Complied with. involves acquisition of a Section or part thereof para. 27 For Subprojects that involved acquisition under a civil works contract that is passing of a Section or part thereof under a civil through forest land and/or needs diversification works contract passing through forest from use of forest land, relevant statutory land and/or diversification from use of clearances under the Borrower’s Forest forest land, relevant statutory forest and Conservation Act. 1980 and related environmental clearances were obtained environmental clearances under Indian from related government agencies prior Environment Impact Assessment Notification, to commencement of civil works 1994, shall be obtained, prior to commencement according to the government policies and of civil works for that Section of the civil works regulation.

30 Appendix 8

Reference in Loan Covenant Agreement Status of Compliance contract under the Subproject. 23. NHAI shall continue with the training program Schedule 6, Compl ied with. The supervision for environmental management for its staff as para. 28 consultants organized regular also the staff of the civil works contractors workshops for the contractor and PIU engaged under the Subprojects. staff on environmental management. Land Acquisition, Resettlement and Indigenous People 24. For the Core Subproject, the Borrower and Schedule 6, Complied with. NHAI shall implement the RP in consultation para. 29 Resettlement plans (RP) for the core with the State and district authorities concerned subproject prepared based on detailed and with persons affected by the Subproject, in engineering design, which met the accordance with the Borrower’s applicable laws, requirements of the national acts on land ADB’s Policy on Involuntary Resettlement, 1995 acquisition and resettlement, as well as and ADB’s Handbook on Resettlement, 1998, ADB’s Involuntary Resettlement Policy and ADB’s Policy on Indigenous Peoples, 1998, and ADB’s Handbook on Resettlement all as amended from time to time. were implemented in consultation with the State and district authorities concerned and with persons affected by the Subproject 25. Similarly for the Non-core Subprojects, NHAI Schedule 6, Complied with. shall prepare and implement the RPs and IPDP para. 30 The RPs for the non-core subprojects as required, in accordance with the principles were prepared and implemented in and procedures laid out in the RF and IPDF accordance with the principles and respectively, to be submitted to ADB for procedures laid out in RF and were approval prior to award of the related civil works submitted to ADB prior to the award of contracts. related contracts. 26. Upon completion of detailed Subproject designs Schedule 6, Complied with. for both Core. Subprojects and Non-core para. 31 Subprojects; in case any changes are required to an agreed RP or IPDP, (including with regard to land to be acquired for relocation of both Core and Non-core Subproject affected persons), NHAI shall ensure that ADB's approval is obtained to the same, prior to the award of any civil works contracts under such Subprojects. 27. NHAI shall ensure that any person who may be Schedule 6, Complied with . affected in accordance with the RP as a para. 32 consequence of the Project, is consulted and fairly compensated on replacement values such that his or her living standards are not adversely affected by the Project, in accordance with the RP. 28. As part of the Project and Subproject Schedule 6, Complied with. implementation reports, NHAI shall submit the para. 33 NHAI submitted progress reports on land progress and completion reports on land acquisition and resettlement on a regular acquisition and resettlement that shall be basis. included under the financial audit reports for each Subproject. 29. NHAI shall disclose the RPs for the Subprojects Schedule 6, Complied with. and make all relevant information available to all para. 34 The RP for both core and non-core affected persons prior to land acquisition and subprojects were disclosed to all relevant resettlement and confirm that these are posted persons prior to land acquisition and

Appendix 8 31

Reference in Loan Covenant Agreement Status of Compliance on ADB’s web site in a timely manner. resettlement and were posted on ADBs website. 30. NHAI shall also ensure that essential public Schedule 6, Complied with. infrastructure that may be affected under land para. 35 The common property resources, such acquisition and resettlement is replaced as as schools, religious structures, bus appropriate in an expeditious manner in stops, wells, statues, cattle troughs, and accordance with the RP. hand pumps were relocated and compensated at a total cost of Rs399.78 million. 31. To ensure timely monitoring of the RP Schedule 6 Complied with. implementation, NHAI shall appoint an para. 36 Monitoring mechanisms were put in independent monitoring expert within three place to monitor the implementation of months of the Effective Date. The expert shall RP. Grievance redress committees were be responsible for providing to ADB through established in all related districts to deal NHAI once in every six months, monitoring with disputes. reports on the implementation of RPs under the Subprojects. 32. NHAI shall ensure that a local resettlement Schedule 6 Complied with. specialist and the ESDU officials undertake para. 37 training programs for the NGOs and resettlement officers of NHAI, on matters relating to resettlement. 33. Under each Subproject, as applicable, NHAI Schedule 6, Complied with. shall carry out settlement of issues relating to para. 38 Micro-plans were prepared as per the land acquisition and resettlement compensation entitlement matrix, and entitlement-cum- payments including; (i) payment of full identity cards were provided to each compensation/replacement value for affected persons indicating the type of land/structure (residential/commercial) to legal loss and entitlement. Payments were titleholders; (ii) payment of full replacement made to the affected persons as per the value of structure (residential/commercial) to resettlement plan, prior to the affected informal settler/roadside squatters; (iii) commencement of civil works on that payment of full compensation for acquired land section. In accordance with the to titled owners; and (iv) payments of all other entitlement matrix, none of the affected additional benefits and provision of assistance in persons were made more disadvantaged accordance with RP provisions, including due to involuntary resettlement. Upon income restoration grants and skill training completion, the total cost of land during the implementation of the Subproject. acquisition and resettlement was Rs1,338.95 million. The common property resources, such as schools, religious structures, bus stops, wells, statues, cattle troughs, and hand pumps were relocated and compensated at a total cost of Rs399.78 million. Social Measures 34. NHAI shall ensure public awareness and Schedule 6, Complied with. acceptance of the Project and Subprojects para. 39 The RPs was disclosed to all relevant through participation of NGOs and local persons. Identity cards were provided to community. To avoid influx of informal dwellers each affected persons indicating the type and fraudulent claims during implementation, of loss and entitlement. A consultative NHAI shall (i) within two months of Effective and participatory approach was adopted Date in the case of Core Subproject, and (ii) in the development of resettlement sites, within 2 months of approval of each Non-core allotment of residential plots, and design

32 Appendix 8

Reference in Loan Covenant Agreement Status of Compliance subproject, commence issuing photo identity of a training and skill development cards to all eligible (including non-titled) affected program. NHAI engaged several NGOs persons under the Subproject. To facilitate in the project areas to assist in land timely and effective implementation and acquisition and resettlement, social monitoring of RP under each Subproject, NHAI safeguard issues, and implementation of shall hire NGOs and depute resettlement- the HIV/AIDS and anti-trafficking monitoring officers in the PIUs. component. 35. (a) Within 6 months of Effective Date, NHAI Schedule 6, Complied with. shall engage a manager for resettlement within para. 40 ESDU and shall set up the grievance-handling units in the ESDU and in each PIU, to address environmental, resettlement, and other social issues in a timely manner. Grievance Redress Committees shall be formed in accordance with the RP and RF in each district for resolution of disputes concerning land acquisition and resettlement. (b) Within 6 months of Effective Date, NHAI shall set up a HIV/AIDs and Anti-trafficking cell within the ESDU, that shall be headed by a General Manager in charge of social development issues and shall be assisted by consultants to be engaged by NHAI. The cell shall engage three qualified locally-based NGOs to implement Component C as agreed with ADS. ESDU shall additionally through a domestic consultant supervise the NGOs and shall work closely with the relevant State agencies such as related State AIDs · Control Societies and Department of Women and Child Development and Social Welfare and other existing networks dedicated to the prevention of HIV/AIDs, human trafficking, and empowerment of women and children. 36. NHAI shall ensure that civil works contracts Schedule 6, Complied with. under the Subprojects incorporate provisions to para. 41 During implementation, the NGOs the effect that contractors (i) shall carry out conducted HIV/AIDS and anti-trafficking HIV/AIDS awareness and prevention programs awareness and prevention activities in for labor, (ii) shall not employ or use children as the project impact areas, including (i) labor, (iii) disseminate information at worksites awareness-raising among construction on risks of sexually transmitted diseases and workers, (ii) public awareness raising and HIV/AIDS as part of health and safety measures a change behavior campaign among for those employed during construction, (iv) high-risk groups, (iii) strengthening the follow and implement all statutory provisions on referral systems for sexually transmitted labor (including equal pay for equal work), infection and HIV/AIDS for early health, safety, sanitation, and working diagnosis along priority highways, (iv) conditions. The civil works contracts shall also condom promotion and distribution, and provide for termination of the contract by NHAI (v) capacity building of service providers in case of breach of any of the sated provisions and decision makers. In addition, the by the contractors. contractors conducted HIV/AIDS awareness campaigns to their labors as required in the contracts. No child labor employed, and women were engaged on

Appendix 8 33

Reference in Loan Covenant Agreement Status of Compliance the principle of equal pay for equal work at the worksites. Subproject Selection Criteria and Procedures 37. NHAI shall ensure that the Subprojects are Schedule 6, Complied with. selected under the Project in a timely manner para. 43 The subprojects were selected following and follow the eligibility criteria and procedures the eligibility criteria and procedures set set out in the Loan Agreement. out in the loan agreement. Project Performance Monitoring and Evaluation 38. Within three months of the Effective Date, NHAI Schedule 6, Complied with. shall establish a Project Performance para. 48 The baseline data and intermediate Management System and with assistance of the baseline data were collected during Project construction supervision consultants, implementation. At completion the project monitor and evaluate the Project’s benefits, benefits and performance have been progress and performance in such forms and evaluated in accordance with the project detail as required by ADB, in accordance with framework. ADB’s Project Performance Management Handbook, 2011, as amended from time to time. Progress Reports and Review 39. (a) Without limiting the generality of Section Schedule 6, Complied with. 2.08 of the Project Agreement, NHAI shall para. 49 NHAI submitted the progress reports to submit to ADB, semi-annual progress reports of ADB timely. the Subprojects and the Project, in such forms and details as required by ADB. (b) The Borrower and NHAI shall undertake Complied with. periodic review of the Project to assess and The baseline data and intermediate evaluate the scope, implementation baseline data were collected during arrangements (with due participation of NGOs implementation. At completion the project and community), benefit monitoring, progress benefits and performance have been and achievement of the Project in according evaluated in accordance with the project with ADB’s Project Performance Management framework. Systems Handbook, 2001, as amended from time to time. 40. In addition to regular reviews, there shall be a Schedule 6, Complied with. mid-term review of the Project by ADB, the para. 50 The project midterm reviews was carried Borrower and NHAI around May 2005, that shall out in December 2007 jointly by ADB and (i) review the scope, design and implementation NHAI. Subsequently, all the arrangements, (ii) identify any changes needed implementation arrangements were from the time of Project appraisal, (iii) assess reviewed during the due diligence implementation performance against Project conducted during processing of the performance indicators, (iv) review resettlement supplementary loan. operations, (v) review and establish compliance with legal covenants, (vi) identify problems and constraints, and (vii) if necessary, agree on any changes needed to achieve the Project objectives. 41. NHAI shall (i) maintain separate accounts for the PA Complied with. Project and for its overall operations; (ii) have Section 2.09 The project accounts and related such accounts and related financial statements (a) financial statements were audited by (balance sheet, statement of income and government auditors. The audited reports expenses, and related statements) audited were submitted to ADB on a regular annually, in accordance with appropriate basis. auditing standards consistently applied, by

34 Appendix 8

Reference in Loan Covenant Agreement Status of Compliance independent auditors whose qualifications experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than 9 months after the close of the fiscal year to which they relate, certified copies of such audited and financial statements and the report of the audits.

STATUS OF COMPLIANCE WITH ADDITIONAL LOAN COVENANTS LOAN 2029: NATIONAL HIGHWAY CORRIDOR (SECTOR) I PROJECT − SUPPLEMENTARY Project Implementation 42. The Borrower shall ensure that NHAI convenes Schedule 5, Complied with. a quarterly management level contract para. 3 NHAI conducted quarterly management performance review meeting, with contractors level contract performance review that have not substantially completed Works meetings with contractors that had not under the Project. NHAI shall inform ADB in substantially completed the works. advance of such meetings and upon ADB’s request, ADB may be present at the meeting as observer. 43. Within 3 months after the Effective Date, NHAI Schedule 5, Partially Complied with . shall have recruited consultants for the Road para. 4 Consultants for road safety component Safety Component. Furthermore, the Borrower were engaged in March 2011 after a shall ensure that NHAI implements pilot testing considerable delay. The study has not of the Safety Zone concept within 21 months been completed yet and the pilot testing of after the recruitment of the consultants. safety zone concept has not been fully implemented. Some of the safety equipment has been incorporated in the completed highway facility as a part of the operation and maintenance concession. Counterpart Funds 44. The Borrower shall ensure that NHAI provides Schedule 5, Complied with. the required counterpart funds for Project para. 5 NHAI provided the remaining funds implementation on time, to cover the required needed to cover the costs overrun for the remaining funds needed to cover the costs completion of project. overrun in respect of the Initial Project and the Project, if any. The Borrower shall ensure prompt disbursement of appropriated funds to ensure the successful and timely completion of the Initial Project and the Project. ADB = Asian Development Bank, BOT = build-operate-transfer, IEE = initial environment examination, NGO = nongovernment organization, NHAI = National Highway Authority of India, PA = Project Agreement, PIU = project implementation unit, PPMS = project performance management system, RP = resettlement plan. Source: The Asian Development Bank project completion review mission.

SUMMARY OF CONTRACT PACKAGES FINANCED BY ADB

Contract Amount

Procurement Contract ADB Contract No. Contractor/Consultant Section/Length Actual Cost Method Date Currency Amount Financing (Rs/$) ($) Civil Works - Public Sector RJ-6 China Gezhouba Chittorgarh Bypass on NH76 - ICB 24-8-05 Rs 3,144,000,000 3,623,500,000 56,448,964 41 km RJ-7 CEC-HCC Joint Venture Chittorgarh-Kota section on ICB 19-9-05 Rs 3,759,800,000 4,317,200,000 65,382,511 NH76 - 60 km RJ-8 Punj Lloyd Chittorgarh-Kota section on ICB 30-9-05 Rs 3,974,400,000 4,362,300,000 52,445,322 NH76 - 61 km RJ-9 Sunway Construction Kota-RJ/MP border section on ICB 11-8-05 Rs 2,866,500,000 3,454,000,000 30,213,641 NH76 - 43 km RJ-10 KMC Construction (India) Kota-RJ/MP border section on ICB 12-8-05 Rs 3,473,600,000 4,129,700,000 40,160,994 NH76 - 60 km RJ-11 L&T – ECC Division (India) Kota-RJ/MP border section on ICB 20-7-05 Rs 2,780,900,000 3,344,100,000 41,458,393 NH76 - 70 km MP-1 CSCHK – Soma Joint MP/RJ border-Shivpuri Bypass ICB 17-6-05 Rs 2,949,860,890 3,190,229,380 46,658,447 Venture section on NH25/NH76 - 53 km MP-2 ITD – Cemindia Joint Shivpuri-Jhansi section on ICB 16-6-05 Rs 1,574,455,500 1,612,587,801 22,445,911 Venture NH25 - 35 km MP/UP-1 Oriental Structural Shivpuri-Jhansi section on ICB 29-9-05 Rs 1,500,308,429 1,415,646,621 8,595,503 NH25 - 40 km UP-3 Oriental Structural Jhansi Bypass section on NH25 ICB 29-9-05 Rs 1,152,402,683 1,504,728,054 22,755,703 - 15 km UP-4 Sunway Construction Jhansi-Orai section on NH25 - ICB 11-8-05 Rs 4,148,800,000 5,329,694,082 62,758,223

66 km UP-5 IRCON (India) Jhansi-Orai section on NH25 - ICB 23-8-05 Rs 3,029,706,554 3,700,042,783 38,877,581

50 km Appendix Construction Supervision Consultants For Civil Works Contract Packages

1 Stanley Consultants, United RJ-6, RJ-7, and RJ-8 QCBS 2-12-05 Rs. 136,789,504 164,100,000 1,158,980 States $ 2,524,070 9

2 Wilbur Smith Associates, RJ-9, RJ-10, and RJ-11 QCBS 2-2-06 Rs. 110,963,711 94,600,000 1,272,034

United States $ 2,862,600 1,154,231 860,811 35

3 Renardet, Switzerland MP-1, MP-2, MP/UP-1, UP-3, QCBS 24-11-05 Rs. 215,931,000 248,145,817 4,183,436 UP-4 and UP5 $ 3,963,800 3,752,312 2,526,645 ADB = Asian Development Bank, ICB = international competitive bidding, km = kilometer, MP = Madhya Pradesh, NH = national highway, QCBS = quality- and cost-based selection, RJ = Rajasthan, UP = Uttar Pradesh. Source: ADB loan financial information system

36 Appendix 10

INITIAL OPERATION OF THE PROJECT HIGHWAY

A. Operation and Maintenance

1. As envisaged at appraisal, the operation and maintenance of the project highway was awarded to the private sector. The project highway sections are currently operated by six private concessionaries. The Orai–Barah section is operated by the build–operate–transfer concessionaire, and the remaining sections are operated by five private concessionaires based on operation–maintenance–transfer contracts with concession periods of 1–9 years. The performance of the concessionaires varies; the concessionaires with 6–9 year terms have invested in better facilities for toll plazas, offices, rest areas, and equipment due to the longer time commitment.

2. Along the project highway, 11 toll plazas have been installed and are being operated. Each toll plaza has six to ten toll collection booths, with a special lane for oversized vehicles and toll-exempted vehicles. The toll plazas operate 24 hours a day, with a total of about 40–100 staff at each toll plaza. Most of the concessionaries are equipped with vehicles and facilities for emergency rescue, first aid, regular patrolling, and routine maintenance. Computerized semiautomatic toll collection systems are being used that enable vehicle and toll information to be entered at each toll booth and summarized and recorded by the main computer station at the toll plaza office. Highway maintenance is the responsibility of the concessionaires, except the Jhansi–Orai section for which there are separate contracts. The performance of the concessionaires in highway maintenance varies.

Table A10.1: Toll Plazas and Operators

a Concession Highway Length No. Staff Concessionaire Plaza Name Period Chittorgarh-Kota section, managed by the Chittorgarh PIU Bassi 53.00 km 43 Aroli 54.00 km 42 Chittorgarh-Kota Tollway 6 years Dhaneshwar 53.50 km 44 Kota-Baran-Shivpuri section, managed by PIU-Kota Simaliya 42.68 km 60 Kota-Baran Tollway 9 years Fatehpur 61.37 km 40 Baran-Shivpuri-Jhansi section, managed by the Shivpuri PIU Mundiyar 67.49 km 44 Ramnagar 53.27 km 61 Jhansi-Baran Pathways 6 years Raksha 75.30 km 76 Jhansi-Orai section, managed by the Jhansi PIU

Semri 65.00 km 90 Ay Usha Jay Construction 1 year

Ait 65.00 km 85 Balagi 1 year Orai-Barah section, managed by the Kanpur PIU Usaka 62.80 km 100 O.B Infrastructure 15 years aLength of highway that toll plaza is responsible for km = kilometer, PIU = project implementation unit. Source: Private concessionaires operating the project highway.

Appendix 10 37

3. The project implementation units (PIUs) of National Highways Authority of India (NHAI) are in charge of contracting and supervising the highway operation and maintenance (O&M). The PIUs have engaged consultants to monitor the O&M of the project highway. To improve the highway O&M, NHAI has adopted a policy to switch from 1-2 year to 5–9-year operation– maintenance–transfer concessions and road sections of 100 kilometers (km) to 250 km. Switching to longer term concessions will help support (i) better facilities and equipment, and (ii) better performances by the concessionaires in maintaining requisite levels of service for road condition, surface roughness, lane availability, road furniture, and safety facilities. To maintain the quality of service levels and facilities and equipment, regular inspection and monitoring will be necessary, with prompt actions to handle nonperforming concessionaires.

B. Toll Scheme and Revenue

4. The toll rates and scheme are decided by NHAI according to national rules. 1 The toll scheme includes the following: (i) an average rate of Rs1.16 per km for cars, jeeps or vans (2014 toll rates); (ii) different toll rates for different vehicle types; (iii) a different toll tariff at each toll plaza according to the highway length under its jurisdiction; (iv) annual adjustment of the toll rates according to inflation; (v) discount rates for round trips, local vehicles, and monthly users; (vi) exemption for local motorcycles and three-wheelers; and (vii) exemption for government vehicles, ambulances, and military vehicles. For the return leg of a round-trip journey, the toll rate is about 50% of that for the single journey. Monthly tickets are provided only to local vehicles within the district. 2

Table A10.2: Toll Rates at All Toll Plazas, 2014

Plaza 1 2 3 4 5 6 7 8 9 10 11 Kota–Baran– Orai– Section Chittorgarh–Kota Baran–Shivpuri–Jhansi Jhansi–Orai Shivpuri Barah Dhanes Simali Fateh Mundi Ramna Plaza Name Bassi Aroli Raksha Semri Ait Usaka hwar ya pur yar gar Length (km) 53.00 54.00 53.50 42.68 61.37 67.49 53.27 75.30 65.00 65.00 62.80 Toll Rates (Rs per vehicle per single trip) Car, Jeep or Van 90 55 50 40 75 65 75 75 80 75 75 Light commercial vehicle, light goods 140 85 85 65 120 105 115 120 130 125 125 vehicle or minibus Bus or Truck 280 180 175 140 250 225 235 250 270 260 260 Multi axle vehicle (3-6 axles) 430 280 280 220 385 350 360 390 295 285 280 HCM or EME Oversized Vehicle 555 340 340 270 485 425 465 475 515 500 495 HCM=heavy construction machinery, km = kilometer, LCV = light commercial vehicle, LGV = light goods vehicle. Sources: Project implementation units; private concessionaires operating the project highway.

C. Traffic Development

5. During the Asian Development Bank (ADB) project completion review (PCR) mission, actual traffic data were collected from the O&M concessionaires. The number of vehicles tolled is recorded by each toll plaza, although this number does not include non-toll vehicles, round-

1 Government of India. 1997. National Highways (Rate of Fee) Rules . GSR 570(E). Delhi. 2 Each toll plaza issues about 100–200 monthly passes.

38 Appendix 10

trip vehicles, toll-exempted vehicles, and vehicles with monthly passes. These traffic data were consolidated and processed 3 by the ADB PCR mission and are listed in the following table.

Table A10.3: Actual Traffic on the Project Highway (Average number of vehicles per day in 2014) Car/Jeep Three- Two- Articulate Bus LCV Truck Tractor Total Section /Van Wheeler Wheeler Truck Chittorgarh– 1,634 94 2,353 2,224 485 1,643 571 203 9,206 Kota Kota–RJ/MP 2,898 489 5,727 70 777 437 1,301 79 11,776 border RJ/MP 717 121 1,416 24 257 147 646 26 3,353 border–Jhansi Jhansi–Orai 685 115 1,353 255 138 599 301 109 3,554 Orai–Barah 1,217 205 2,405 102 1,007 635 3,975 114 9,660 Weighted a 1,556 218 2,860 629 497 727 1,048 108 7,644 Average LCV = light commercial vehicle, MP = Madhya Pradesh, RJ = Rajasthan. aWeighted by distances of the highway sections. Source: Private concessionaires operating the project highway.

6. The traffic data in Table A10.3 show that the traffic levels on different sections varied during 2014. Based on the consultation meetings with the PIUs and concessionaires, most of the traffic was local and up to 30% of the trucks constituted through traffic. Compared with the traffic forecast at appraisal, the overall traffic level in 2014 was 16% lower than expected. The traffic level was low as the Kota bypass in the middle of the project highway is still under construction and is expected to be completed by January 2016. The traffic is expected to increase upon completion of Kota bypass. In accordance with the existing traffic data and corridor development status, the projected traffic growth rates at appraisal were slightly adjusted. It was assumed that the traffic would increase by an annual average of 6.6% during 2015–2020, 5.3% during 2021–2025, and 3.6% in 2026 and onward. Existing traffic data and the adjusted forecast were used in the economic and financial reevaluation by the ADB PCR mission.

D. Highway Safety and Accidents

7. The project has incorporated significant road safety features, including 144.84 km of service roads, 16 flyovers and grade separators, 113 vehicle overpasses and underpasses, 3 rest areas, 36 truck bays, 180 bus bays and shelters, and traffic signs (Appendix 2). The road safety consultants carried out safety audits. The O&M concessionaires are equipped with vehicles and facilities for emergency rescue, regular patrolling, and first aid. For control of overloaded trucks, most toll plazas have installed weighing equipment at toll booths and roadside weighing stations.

8. However, the road safety of the project highway still needs to be addressed. The project highway sections are not fully access-controlled and serve mixed traffic, local traffic, and pedestrians. Some vehicles exceed speed limits, many slow-moving vehicles use the inner lane of the highway, and some vehicles drive in the wrong direction. There are still overloaded trucks on the project highway, especially trucks carrying construction equipment on the Jhansi–Orai– Barah section, which has badly damaged the road surface and caused road accidents. The data

3 Adjusted traffic by adding round trip traffic, monthly pass traffic and toll exempted vehicles.

Appendix 10 39

provided by the concessionaires show a high road accident rate on the project highway, including significant fatalities. Table A10.4 contains 2014 accident data on the project highway.

Table A10.4: Accidents on the Project Highway, 2014 No. of Accidents

Total Fatal Nonfatal Section Chittorgarh–Kota 370 55 315 Kota–Rajasthan/Madhya 985 87 898 Pradesh border Rajasthan/Madhya 197 17 180 Pradesh border–Jhansi Jhansi–Orai 126 2 124 Orai–Barah 130 60 70 Total 1,808 221 1,587 Source: Private concessionaires operating the project highway.

9. Although the traffic fatalities on the project highway have been reduced from the pre- project level of 308 in 2001, road safety still needs to be enhanced through strict enforcement of traffic rules, road safety awareness campaigns, and provision of additional safety features such as median barriers, pedestrian overpasses or underpasses, additional service roads, and traffic lights and signs in populated areas.

40 Appendix 11

ECONOMIC REEVALUATION

A. General

1. The Asian Development Bank (ADB) project completion review (PCR) mission conducted an economic reevaluation of the project using similar methodology as that at appraisal. The “without” project scenario assumed that the original state of the highway sections would be retained. The “with” project” scenario assumed that the highway sections were upgraded so that vehicles could drive at higher speeds with lower operating costs and reduced travel time. Economic benefits were calculated by comparing the “with” and “without” project scenarios. Consequently, the economic internal rate of return (EIRR) was calculated for the project, and a sensitivity test was carried out.

B. Economic Costs

2. The project cost comprises capital and operation and maintenance (O&M) costs. The actual annual expenditures of the project for both public and private portions were used as the capital cost, including expenditures for civil works, land acquisition and resettlement, relocation of utilities, environment, consulting services, project management, and the financial charges of the loans. In US dollar terms, the total project cost was about 49.6% higher than that estimated at appraisal, mainly due to higher contract prices for noncore subprojects, prolonged project implementation, and price escalation for labor and construction materials. The project highway is now operated by six private concessionaires. Average O&M costs of the operators in 2014 were used in the economic evaluation, with slight adjustments. It was assumed that these O&M costs would increase by 3% each year, considering the traffic increase and highway’s deterioration. The periodic maintenance cost for pavement overlay is assumed to be every 5 years at 20% of the capital cost. The financial costs of investment and O&M were converted into economic costs using the average conversion factor of 0.90 at appraisal. All economic costs were estimated in, or converted to, 2015 prices.

C. Economic Benefits

3. As estimated at appraisal, the main sources of economic benefits were savings in vehicle operating cost (VOC), and savings in passenger travel time costs. The unit VOC, which vary according to the levels of road roughness, were adopted from a similar highway project in India.1 The VOC savings in 2015 prices for the project highway were estimated at Rs3.1 for car, jeep or van, Rs0.8 for two-wheelers, Rs12.6 for buses, Rs11.7 for light trucks, and Rs14.1 for heavy trucks. Average passenger vehicle speeds were assumed to be 60 kilometers (km)–80 km per hour for the “with” project scenario and 20 km–25 km per hour for the “without” project scenario. Passengers’ travel time cost savings were recalculated by different types of passenger vehicle. The passenger time cost was derived from the gross domestic product per capita of Rajasthan, Madhya Pradesh, and Uttar Pradesh during 2013–2014. Other factors taken into account in the calculation of passenger travel time cost savings included average vehicle loads, percentage of work-related trips, time costs by different road users, travel speeds for different types of passenger vehicles, and potential increases in income. The revised traffic forecast at PCR was used (Appendix 10, Section C), but 10% of induced traffic was excluded from the calculation of economic benefits. The evaluation of the benefits indicates that the VOC savings initially accounted for an average of 67% of the total benefits in 2010, but the share of passenger time

1 The road roughness of the project highway sections is about 2–4 for the “with” project scenario and 10–12 for the “without” project scenario.

Appendix 11 41

cost benefits increased sharply in the wake of increasing socioeconomic development and income.

D. Economic Reevaluation and Sensitivity Test

4. Based on above estimates of economic costs and benefits, the project’s economic internal rate of return (EIRR) was recalculated at 14.4%, with an economic net present value of Rs51,323 million. The recalculated EIRR is much lower than the 22.9% estimated at appraisal for the core subproject. The EIRR is also lower than the estimate of 15.2% for the whole project at the time of processing of the supplementary loan. The lower EIRR was mainly due to the project’s higher capital cost, longer implementation period, and lower actual traffic, as well as the inclusion of operation costs. The economic evaluation at appraisal did not consider the operation costs. However, the EIRR is higher than the ADB recommended discount rate of 12%. The project is therefore still considered economically viable. The detailed EIRR calculations for the project are in Table A11.1. Table A11.1: Economic Evaluation (Rs million) Costs Benefits Net Year Capital Operation Maintenance Total VOC Time Cost Total Benefit 2005 4,574 4,574 (4,574)

2006 14,592 14,592 (14,592)

2007 24,191 24,191 (24,191)

2008 19,254 19,254 (19,254)

2009 8,036 8,036 965 75 1,040 (6,996)

2010 2,045 12 30 2,087 3,860 752 4,613 2,526 2011 1,871 36 165 2,073 5,790 1,881 7,671 5,599 2012 97 240 337 7,720 3,135 10,856 10,518 2013 121 300 422 8,492 3,919 12,411 11,990 2014 121 300 422 9,071 4,453 13,525 13,103 2015 121 300 422 9,650 4,738 14,388 13,967 2016 9,179 125 300 9,604 10,195 5,297 15,491 5,887 2017 129 309 438 10,771 5,922 16,692 16,254 2018 133 318 451 11,380 6,621 18,000 17,549 2019 137 328 465 12,023 7,403 19,426 18,962 2020 141 338 479 12,705 8,278 20,982 20,504 2021 9,179 145 300 9,624 13,287 9,142 22,428 12,804 2022 149 309 458 13,896 10,096 23,992 23,533 2023 154 318 472 14,533 11,150 25,684 25,211 2024 158 328 486 15,201 12,315 27,516 27,029 2025 163 338 501 15,899 13,601 29,501 29,000 2026 9,179 168 300 9,647 16,381 14,803 31,185 21,538 2027 173 309 482 16,878 16,112 32,990 32,508 2028 178 318 497 17,391 17,536 34,927 34,431 2029 184 328 512 17,920 19,087 37,007 36,495 2030 189 338 527 18,465 20,776 39,241 38,714 2031 (37,281) 195 348 (36,739) 19,027 22,614 41,641 78,380 NPV: 51,323

EIRR: 14.4%

Discount Rate: 12%

EIRR = economic internal rate of return, NPV = net present value, VOC = vehicle operating cost. ( ) = negative. Source: Asian Development Bank project completion review mission.

42 Appendix 11

5. The EIRR was subjected to sensitivity analysis to test different scenarios of costs and benefits. The sensitivity analysis results show that the project continues to be economically viable for all tested scenarios. If a 20% O&M cost increase were to be combined with a 20% reduction in benefits, the EIRR would be 12.1% for the whole project. The sensitivity analysis also shows that the EIRR is more sensitive to changes in benefits. Therefore, National Highways Authority of India and the private operators should pay adequate attention to the road condition to facilitate traffic development. The results of the sensitivity tests are in Table A11.2.

Table A11.2: Results of Sensitivity Tests Tests NPV@12% EIRR (%) Case O&M Cost Benefits (Rs million) Base Case 14.4% 51,323 Changes (+/-) 10% 14.4% 50,771

20% 14.3% 50,218

50% 14.3% 48,592

10% 15.4% 75,903

20% 16.4% 100,482

(10%) 13.3% 26,744

(20%) 12.1% 2,165

10% (10%) 13.3% 26,191

20% (20%) 12.1% 1,060 Switching Point 920% 12.0%

(21%) 12.0% EIRR = economic internal rate of return, NPV = net present value, O&M = operation and maintenance. Source: Asian Development Bank project completion review mission.

Appendix 12 43

FINANCIAL REEVALUATION

1. The financial internal rate of return (FIRR) of the project was recalculated based on actual capital costs, actual operation and maintenance (O&M) costs, the revised traffic forecast, and existing toll rates. The major assumptions used in the FIRR recalculation are as follows:

(i) The capital costs included all capital expenditures related to the civil works, land acquisition and resettlement activities, and consulting services, but excluded the financial charges. In addition, the large-scale highway maintenance (periodical maintenance) expenditures were treated as capital costs. (ii) Average O&M costs of the operators were used as the basic costs. The O&M costs were kept at constant prices, and a 3% increase per year was added to account for traffic increases and deterioration of road conditions. (iii) The existing toll revenue in 2014 was used as the basis. It was assumed that the toll revenue level would increase along with the increase in traffic each year during the evaluation period; the toll rates would be adjusted by adding 5% each year. The revenue calculation also considered round-trip and monthly-ticket vehicles.

2. Based on the above assumptions and estimations, the FIRR was recalculated at 2.9%, which is lower than both the estimate at appraisal of 6.8% for the core subproject and the revised estimate of 5.8% for the whole project at the time of the supplementary loan. The lower FIRR was mainly due to higher capital costs, lower traffic, and the inclusion of operation costs.1 However, the FIRR is higher than the recalculated weighted average cost of capital of 2.08. 2 Therefore, the project is still considered financially viable. Table A12.2 presents the cash flows of the FIRR recalculation. Additionally, the FIRR was subject to sensitivity tests. Combining a 20% increase in O&M costs and a 20% decrease in revenue, the FIRR was at 1.2%. The test results also indicate that the FIRR was very sensitive to revenue changes (Table A12.1). Therefore, National Highways Authority of India and the highway operators should improve their management of toll collection to ensure sufficient revenue.

Table A12.1: Sensitivity Tests Scenarios FIRR (%) Base Case 2.9 Sensitivity Tests

1. O&M cost 10% higher 2.7 2. O&M cost 20% higher 2.5 3. Revenue 10% lower 2.3 4. Revenue 20% lower 1.6 5. Revenue 10% higher 3.5 6. Revenue 20% higher 4.0 7. O&M cost 10% higher & revenue 10% lower 2.1 8. O&M cost 20% higher & revenue 20% lower 1.2 FIRR = financial internal rate of return, O&M = operation and maintenance. Source: Asian Development Bank project completion review mission.

1 The financial evaluation at appraisal did not consider operation costs. 2 The weighted average cost of capital was recalculated during the PCR Mission by using actual capital cost and financing sources.

44 Appendix 12

Table A12.2: Financial Reevaluation of the Project (Rs million) Cost - Costs Toll Revenue Revenue Year Capital Operation Maintenance Total Stream 2005 4,876.0 4,875.8 (4,875.8)

2006 16,003.0 16,003.3 (16,003.3)

2007 26,197.0 26,197.1 (26,197.1)

2008 20,407.0 20,407.3 (20,407.3)

2009 8,421.0 8,421.3 (8,421.3)

2010 2,070.0 13.5 33.3 2,116.8 251.6 (1,865.1) 2011 1,918.0 40.5 183.4 2,141.7 754.9 (1,386.8) 2012 107.9 266.8 374.7 2,013.1 1,638.4

2013 134.9 333.5 468.4 2,516.4 2,048.0

2014 134.9 333.5 468.4 2,793.2 2,324.8

2015 134.9 333.5 468.4 3,116.5 2,648.1

2016 10,199.0 138.9 333.5 10,671.1 3,477.2 (7,194.0) 2017 143.1 343.5 486.6 3,879.6 3,393.0

2018 147.4 353.8 501.2 4,328.6 3,827.4

2019 151.8 364.4 516.2 4,829.6 4,313.4

2020 156.4 375.3 531.7 5,388.6 4,856.9

2021 10,199.0 161.1 333.5 10,693.2 5,943.7 (4,749.5) 2022 165.9 343.5 509.4 6,556.0 6,046.7

2023 170.9 353.8 524.7 7,231.4 6,706.8

2024 176.0 364.4 540.4 7,976.4 7,436.0

2025 181.3 375.3 556.6 8,798.1 8,241.5

2026 10,199.0 186.7 333.5 10,718.9 9,553.8 (1,165.1) 2027 192.3 343.5 535.8 10,374.4 9,838.6

2028 198.1 353.8 551.9 11,265.5 10,713.6

2029 204.0 364.4 568.4 12,233.1 11,664.6

2030 210.2 375.3 585.5 13,283.8 12,698.3

2031 (39,946.3) 216.5 386.6 (39,343.2) 14,424.7 53,768.0 FIRR 2.9%

NPV 21,626.2 FIRR = financial internal rate of return, NPV = net present value. ( ) = negative. Source: Asian Development Bank project completion review mission.

CONTRIBUTION TO ADB RESULTS FRAMEWORK

Level 2 Result Framework Revised Target Aggregate Output Methods/Comments No. Indicator Target Transport 1 Use of roads built or upgraded Average daily At full operation of the project highway in (average daily vehicle-km in the vehicles-km was 2013, the average daily traffic was 7,250 first full year of operation) 4,763,975 in 2013 vehicles 2 Roads built or upgraded - Rehabilitate and 657.1 km of national At completion, 657.1 km of national highways Expressways and national widen 662 km of highways were were widened to four lanes, including 594.3 highways (km) national highways, widened to four lanes km through public funding and 62.8 km including 592 km through private sector participation through public funding and 70 km through private sector participation ADB = Asian Development Bank, km = kilometer. Source: Asian Development Bank project completion review mission.

Appendix 13 45