Report and Recommendation of the President to the Board of Directors
Project Number: 37066 November 2005
Proposed Multitranche Financing Facility India: Rural Roads Sector II Investment Program
CURRENCY EQUIVALENTS (as of 31 October 2005)
Currency Unit – Indian rupee/s (Re/Rs)
Re1.00 = $0.022 $1.00 = Rs44.995
ABBREVIATIONS
ADB – Asian Development Bank CPF – community participation framework CSP – country strategy and program DPR – detailed project report EA – executing agency EAF – environmental assessment and review framework ECOP – environmental codes of practice EIRR – economic internal rate of return FFA – framework financing agreement ICB – international competitive bidding IEE – initial environmental examination IRC – Indian Roads Congress LCB – local competitive bidding LIBOR – London interbank offered rate MOU – memorandum of understanding MFF – multitranche financing facility MORD – Ministry of Rural Development NRRDA – National Rural Roads Development Agency OMMAS – online management, monitoring, and accounting system PFR – periodic financing request PIC – project implementation consultant PIU – program implementation unit PMGSY – Pradhan Mantri Gram Sadak Yojana (Prime Minister’s Rural Roads Program) RRSI – Rural Roads Sector I Project SRRDA – state rural roads development agency TSC – technical support consultant
NOTES
(i) The fiscal year (FY) of the Government and its agencies ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2004 ends on 31 March 2004.
(ii) In this report, "$" refers to US dollars.
Vice President L. Jin, Operations Group 1 Director General K. Senga, South Asia Department Director N. Patel, Officer-In-Charge, Transport and Communications Division
Team leader H. Iwasaki, Project Specialist (Roads), South Asia Department Team members M. Alam, Project Implementation Specialist, South Asia Department C.N. Chong, Principal Portfolio Management Specialist, Central Operations Services Office E. Glennie, Financial Management Specialist, South Asia Department M. Gupta, Social Development Specialist, South Asia Department J. Miranda, Senior Advisor, Regional and Sustainable Development Department N. Patel, Principal Project Management Specialist, South Asia Department V.S. Rekha, Senior Counsel, Office of the General Counsel S. Tsukada, Principal Transport Specialist, South Asia Department D. Utami, Senior Environment Specialist, South Asia Department H. Yamaguchi, Transport Specialist, South Asia Department
CONTENTS Page
FACILITY AND INVESTMENT PROGRAM SUMMARY i MAPS I. THE PROPOSAL 1 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 4 III. THE PROPOSED INVESTMENT PROGRAM 7 A. Impact and Outcome 7 B. Outputs 7 C. Special Features 9 D. Cost Estimates 11 E. Financing Plan 11 F. Implementation Arrangements 12 IV. INVESTMENT PROGRAM BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 17 A. Overall Impacts and Benefits 17 B. Sustainability of Investment 18 C. Sustainability of Policy and Institutional Interventions 18 D. Economic Analysis 18 E. Social Impact 19 F. Environmental Impact 21 G. Risks 22 V. ASSURANCES 22 VI. RECOMMENDATION 26 APPENDIXES 1. Design and Monitoring Framework 27 2. Subsector Analysis 30 3. External Assistance to the Road Sector 35 4. Selection Criteria and Approval Process for Subprojects 37 5. Design Features and Technical Standards 39 6. Policy Matrix 41 7. Outline Community Participation Framework 44 8. Summary Initial Environmental Examination 50 9. Cost Estimates and Financing Plan 56 10. Organizational Structure for Project Implementation 57 11. Indicative Implementation Schedule 58 12. Summary Poverty Reduction and Social Strategy 59
SUPPLEMENTARY APPENDIXES (available on request) A. Habitations Eligible for Road Connectivity Works under PMGSY B. Capacity-Building Support C. Indicative Contract Packages for Sample Subprojects D. Outline Terms of Reference for Project Implementation Consultants E. Outline Terms of Reference for Technical Support Consultants F. Financial Management Assessment G. Project Preparation and Implementation Flow H. Economic and Distribution Analysis
FACILITY AND INVESTMENT PROGRAM SUMMARY
Borrower India
Classification Classification: General intervention Sector: Transport and communications Subsector: Roads and highways Themes: Sustainable economic growth, governance Subtheme: Fostering physical infrastructure development, civil society participation
Environment Category B. Initial environmental examinations were undertaken Assessment and a summary is attached (Appendix 8).
Sector Investment As one of the key features of the Government’s poverty reduction Program Description agenda for the rural sector, the Government is implementing a nation-wide rural road investment program, Pradhan Mantri Gram Sadak Yojana (PMGSY). PMGSY aims to provide all-weather road connectivity to currently unserved habitations in India’s rural areas, where 70% of the population live. PMGSY is in its fifth year of implementation and has successfully improved, through participating states, 66,000 kilometers (km) of rural roads with an additional 47,000 km nearing completion, connecting 34,000 habitations (20% of eligible habitations under PMGSY) nationwide to a greater transportation network.
PMGSY also includes noninvestment interventions to strengthen the capacity of state level agencies for the implementation of the program in the area of project planning and design, management oversight for construction activities, safeguards, procurement and fiduciary arrangements.
The latest estimate for the overall PMGSY financing requirement is about $30 billion. Currently available financing sources include a portion of the excise tax (cess) on high-speed diesel oil ($0.9 billion annually), ADB ($0.4 billion committed under the first loan), and the World Bank ($0.4 billion under its first loan-credit). The financing gap is huge. While exploring the possibilities of domestic borrowing, the Government approached ADB and World Bank for additional financial assistance.
ADB has been requested to provide assistance to the Investment Program through a multitranche financing facility (MFF). The MFF is most appropriate in this instance. The Government has a well- defined program with clear program goals, well-structured standard operating procedures based on an annual program implementation cycle, and the long-term need for co-financing. Involvement of multiple state level agencies with different levels of absorption capacity will require flexible financing arrangements ii
that allow fund allocation on the basis of progress achieved and readiness for new investment in each participating state. The MFF caters well to these two sets of needs: one for predictable financing sources, and the other for flexible financing arrangements.
The Investment Program is expected to construct or upgrade about 30,000 km of rural roads connecting about 19,000 habitations. For the investments in physical infrastructure to be effective, the Investment Program will also focus on capacity building, especially in relation to planning, design, operation, safeguard, financial, road safety, and maintenance matters.
The financing plan for the Investment Program currently includes ADB and the cess proceeds allocated to the Investment Program states.
Multitranche Financing The Government asked ADB to extend financing through an MFF. Facility The requested MFF is for $750 million over 5 years. It represents 36% of the total financing plan for the identified Investment Program. The MFF has a maximum utilization period of 5 years. Individual and periodic financing requests will be converted into individual or separate loans.
The Government has entered into a Framework Financing Agreement (FFA) with ADB. The FFA satisfies the requirements set forth in Appendix 4 of the Pilot Financing Instruments and Modalities. Pursuant to the FFA, the Government has submitted to ADB the first Periodic Financing Request (PFR) in the amount of $100 million. The first PFR is presented to the Board together with the FFA.
Prior to ADB acceptance of a PFR, ADB will ensure that the Government and the participating states comply in full with the terms and conditions of the FFA. ADB teams will conduct due diligence on these to ensure that they are being satisfactorily adhered to. The minimum loan size will be $30 million.
Rationale Poor road infrastructure affects economic growth in rural areas. It impacts negatively on domestic and local trade, on the final cost of goods, competition and competitiveness, logistics in general, movement of people, inward investment opportunities, and ultimately on employment. Poor road connectivity has a strong link to poverty. Past neglect of the rural road network has cut off rural communities from mainstream economic centers in the country and even locally. Poor connectivity has resulted in slow development, and in some cases a faster than needed exodus of iii
young people to cities. The Government is trying to redress this problem under PMGSY. Assam, Orissa, and West Bengal, which are first targeted under the Investment Program, are among the 10 states with large rural populations that lack adequate coverage in terms of all-weather road connectivity. The poverty head count rates in these states are among the highest in India.
Impact and Outcome The overall objective of the Investment Program is to help reduce poverty and deprivation, and support economic growth of rural communities in India by providing them with enhanced access to markets; employment opportunities; and social services, including health and education. The immediate output—better and more efficient physical infrastructure—will lead to improved connectivity between rural and urban communities, and through this, to greater access to markets and economic activity in general. Improved connectivity will reduce the cost of final goods, entice inward investment, and create and keep jobs in rural areas. Infrastructure contributes to poverty reduction and better living standards. The rural sector will remain the mainstay of the economy in many states.
Cost Estimates The total cost of the Investment Program for the selected states is estimated to be about $2.1 billion.
($ million) Financing Plan Source Total Percent Asian Development Bank 750.0 36 Government 1,350.0 64 Total 2,100.0 100 Source: Asian Development Bank estimates.
Multitranche Financing An MFF of up to $750 million from the ordinary capital resources Facility Amount and of ADB will be provided. Final terms and conditions will be Terms determined in the context of each individual loan, and be based on prevailing policies within ADB. Financing that will be made available will be subject to interest to be determined in accordance with ADB’s London interbank offered rate (LIBOR)- based facility. The Government has the option to choose between eligible currencies and the interest rate regime most suitable for each individual loan. ADB also provides flexibility in terms of repayment and interest swaps during the financing period. Repayment schedules can be structured for each individual loan, in essence to match the needs of each batch of subprojects with their cost recovery and sustainability profile.
Period of Utilization End March 2009. (Closing date for submission of periodic financing requests)
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Executing Agencies Ministry of Rural Development (MORD) and state governments of participating states (initially Assam, Orissa, and West Bengal, and later as may be requested by the Government and accepted by ADB)
Implementation At the central level, MORD will be the Executing Agency and will Arrangements oversee the mandate of the National Rural Roads Development Agency (NRRDA) in relation to the Investment Program. The NRRDA will be responsible on a day-to-day basis for supervision of the Investment Program. At the state level, the implementing agencies will be the state rural road development agencies (SRRDAs). Each is run by a chief executive officer, supported by suitably qualified technical, legal, financial, and other professional and administrative staff. Consulting services will be provided for subproject design and execution tasks.
Procurement All goods and services to be financed by the loans to be provided under the MFF will be procured in accordance with ADB’s Guidelines for Procurement. All civil works contract packages under the individual loans will be procured following PMGSY’s standard competitive bidding procedures found acceptable to ADB.
Consulting Services All consulting services to be financed by the loans under the MFF will be procured in accordance with ADB’s Guidelines on the Use of Consultants and other arrangements satisfactory to ADB for the engagement of domestic consultants.
Benefits and Improving rural connectivity is a priority in the selected states. Beneficiaries Economic activity is constrained if the movement of people, goods, and services is constrained. Many communities in the target states have been isolated for years. Infrastructure road facilities require rehabilitation. Although the program focuses on new infrastructure, part of the investments will also improve existing networks. This approach arrests the depreciation of fundamentally sound assets, but also delivers economies of scale—rehabilitation costs will decrease if the contracts are mixed with the construction of new assets.
The Investment Program will contribute to the economic well- being of rural communities in the selected states, and thus poverty reduction. Agriculture will benefit. Agricultural input distribution will be easier, but so will the dispatch of final products to market. Other things being equal, the cost of distributing inputs and final products will decrease. Greater and better access to markets will inevitably make a difference. Farm income ought to increase. But greater market access will also fuel competition and benefit customers. Better connectivity will help investors. More inward investment, especially in agribusiness, will have a positive impact on jobs and income. Construction and wholesale and retail v
trade will increase, together with housing and selected public utilities such as rural water, communications, and electricity. Labor mobility benefits both rural and urban areas. The exodus of the young to the city is expected to decrease. This will create impetus for more and better education and health services.
Quantifiable economic benefits include (i) lower transport and vehicle operating costs, (ii) greater passenger time savings, and (iii) reduced spoilage of agricultural inputs and produce.
The economic internal rate of return of the first batch of subprojects involving 3,200 km is around 18.0%. Beneficiaries include farmers, users of road transport (including owners/operators of buses and trucks) and laborers. Urban communities will also benefit, including wholesalers and retailers, construction groups and construction workers, banking and insurance service providers, communication companies, and input distributors.
Risks and Assumptions The risk of implementation delays has been addressed by establishing an SRRDA in each state to act as the implementing agency. The SRRDA will have authority to decide on implementation including procurement, and suitably qualified core staff to manage implementation effectively. MORD will provide the SRRDAs with sufficient resources to engage consultants and contractors to perform the main engineering and civil works tasks, as well as requisite social and environmental studies.
The economic analysis of the investments suggests no significant economic risks. Sensitivity tests and risk analysis undertaken on sample subprojects show that the subprojects selected in accordance with the Investment Program selection criteria will be economically viable even under a combination of adverse scenarios.
The risk of adverse social and environmental impacts has been addressed by examining sample subprojects. Consultations with local stakeholders were made and will continue during implementation. The risk of road connectivity improvements leading to increased road accidents is to be addressed through the capacity-building component.
The fiduciary risk under PMGSY will be manageable and addressed mainly through the use of standardized procedures in the areas of procurement, accounting, and reporting. The Government will continue training state government officials on financial management and reporting as part of its effort to make the online management, monitoring, and accounting system fully functional.
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ADB will address risk associated with the use of the MFF, which is new to both India and ADB, by ensuring capacity of ADB’s India Resident Mission for reviewing and monitoring Investment Program implementation, particularly with respect to fiduciary and safeguard oversight, while providing sufficient support to the Government in the form of an advisory technical assistance in these areas.
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Dehradun HARYANA PEOPLE'S REPUBLIC DELHI OF CHINA ARUNACHAL NEPAL PRADESH SIKKIM Itanagar Gangtok UTTAR PRADESH BHUTAN A S S A M Dispur NAGALAND R A J A S T H A N Jaipur Lucknow B I H A R MEGHALAYA Kohima Shillong Imphal 25 o 00'N Patna 25 o 00'N MANIPUR BANGLADESH TRIPURA Aizawal Gandhinagar JHARKHAND Bhopal WEST Agartala MIZORAM BENGAL Ranchi G U J A R A T M A D H Y A Kolkata P R A D E S H Raipur MYANMAR
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I. THE PROPOSAL
1. I submit for your approval the following report and recommendation on a proposed multitranche financing facility (MFF) to India for the Rural Roads Sector II Investment Program (Investment Program).1
II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES
A. Performance Indicators and Analysis
2. India’s road network mainly consists of three road categories: (i) about 60,000 kilometers (km) of national highways; (ii) about 600,000 km of secondary roads, comprising state highways and major district roads; and (iii) about 2.7 million km of rural roads. The total road length is estimated to be about 3.4 million km. National highways, providing high-density links between states, comprise only 2% of the network but carry about 40% of the traffic. State highways link national highways with district headquarters, important towns, and minor ports. Major district roads run within districts, connecting areas of production with markets, and rural areas to district headquarters and to state and national highways. The secondary system comprises about 18% of the network and carries about 40% of the traffic. Rural roads link rural communities with the highway network, providing access to higher agricultural incomes, employment opportunities, and social services. They represent about 80% of the network and carry about 20% of the traffic. An analysis of the rural roads subsector is in Appendix 2.
3. India’s sustained underinvestment in road infrastructure has affected the entire road network.2 The national highways and secondary system have not been able to meet the demands of the rapid traffic growth. During the past decade, freight traffic increased at about 12% per year and passenger traffic at about 8%. This rapid growth led to congestion, road deterioration, and high costs of transport. In 2000, in rural areas where 70% of India’s population lives, about 330,000 habitations, 40% of the total 850,000 habitations, were without all-weather road connectivity. Many villages still rely on earth tracks that are unsuitable for motorized traffic and become impassable during the rainy season. Even where all-weather connections are provided, the standard of rural roads is low, maintenance is poor, and many roads are in need of rehabilitation.
4. A task force on infrastructure, set up by the Prime Minister in 1998, identified the need to triple or quadruple the ongoing rate of investment in transport infrastructure. As a first step, the task force supported the 13,000-km National Highway Development Project to establish an integrated national highway network. This involved upgrading the links between major metropolitan towns and two central transverse routes, one north-south and the other east-west, to 4 or 6 lanes in heavily trafficked sections. Project implementation was entrusted to the National Highways Authority of India for completion by 2010.
5. In 2000, the Government established a national rural roads program: Pradhan Mantri Gram Sadak Yojana (PMGSY), the Prime Minister’s Rural Roads Program, to address the problem of lack of rural road connectivity. Its objective is to provide good all-weather road connections3 to all habitations with a population of 1,000 or more by 2003 and to all habitations
1 The design and monitoring framework is in Appendix 1. 2 Since the 6th Five-Year Plan, 1980–1985, annual investment in roads varied between 0.6% and 1.5% of gross domestic product, with an average of 1.1%. 3 PMGSY defines an all-weather road as one that is negotiable in all weather conditions, and has adequate cross- drainage structures to effectively drain the roadbed. 2 with a population of 500 or more by 2007. In hilly or desert areas, or scheduled tribe areas as defined in Schedule V of the Constitution of India, the objective is to connect all habitations with a population of at least 250 by 2007. On this basis, PMGSY identifies more than 170,000 unconnected habitations requiring new road connectivity investments. Details of the eligible habitations under PMGSY are in Supplementary Appendix A.
6. PMGSY is funded by the central Government, with the Ministry of Rural Development (MORD) acting as the overall coordinating ministry. State governments have responsibility for state planning and implementation, as well as for planning, funding, and executing maintenance. The latest estimated total cost of PMGSY to provide all-weather connectivity to eligible habitations is about Rs1,320 billion (about $30 billion equivalent). A 50% share of the special excise duty (cess) on high-speed diesel oil (about Rs24 billion or $0.5 billion annually) was initially identified for the development of rural roads under PMGSY; this was increased by 50%.4 From fiscal year (FY) 2001 to FY2005, a total of Rs120 billion was allocated from the cess on high-speed diesel oil. The Government approached external agencies, including the Asian Development Bank (ADB) and the World Bank, for financing for the PMGSY scheme in 10 core states5 with large numbers of unconnected habitations. ADB’s first loan, Rural Roads Sector I Project (RRSI) for $400 million, was to finance the construction and upgrading of rural roads in the states of Chhattisgarh and Madhya Pradesh and related project management and implementation support.6 The World Bank’s first loan-credit for $400 million was approved in September 2004 to finance road improvement under PMGSY in Himachal Pradesh, Jharkhand, Rajasthan, and Uttar Pradesh.
7. MORD provides national administration of PMGSY, and the National Rural Roads Development Agency (NRRDA) provides technical support. The state governments each designate one or two executing agencies (EAs) for PMGSY, typically the rural development department or the public works department. The department is required to (i) appoint district program implementation units (PIUs) to be responsible for program implementation, and (ii) identify or establish an autonomous state agency with a distinct legal status to receive funds from MORD. All PMGSY road investments are executed by private contractors engaged through competitive tendering.
8. In consultation with the states, MORD has established various guidelines, manuals, and instructions for state implementation of PMGSY.7 They provide the following guiding principles and definitions: (i) improvements are limited to roads categorized as other district roads and village roads forming part of the core rural roads network of through routes and link routes;8 (ii)
4 The Central Road Fund Act, 2000 introduced an additional excise duty (cess) of Rs1.00 per liter on petrol and Rs1.00 on high-speed diesel oil, to be allocated as follows: (i) 50% of the cess on high-speed diesel to the development of rural roads; and (ii) 50% of the cess on high-speed diesel and 100% of the cess on petrol to development and maintenance of national highways, road bridges under or over railway lines, safety work at unstaffed railway crossings, and development and maintenance of state roads. The cess on high-speed diesel was increased to Rs1.5 per liter in 2003. 5 Assam, Bihar, Chhattisgarh, Himachal Pradesh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, and West Bengal. 6 ADB. 2003. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to India for the Rural Roads Sector I Project. Manila. 7 These guidelines include Ministry of Rural Development, Government of India. 2004. Pradhan Mantri Gram Sadak Yojana Programme Guidelines. Delhi; and Ministry of Rural Development, Government of India. 2005. Pradhan Mantri Gram Sadak Yojana Operations Manual. Delhi. 8 The core network is the minimal network of roads needed to provide all eligible habitations with access to basic social and economic services through at least a single all-weather road. Through routes collect traffic from several link roads or a long chain of habitations and connect to marketing centers either directly or through higher category 3 providing new all-weather connectivity has precedence over improvement of existing fair- weather connectivity, and upgrading fair-weather through routes has precedence over upgrading fair-weather link routes; and (iii) among eligible roads of similar type, precedence is given to those serving a larger population. The guidelines also establish (i) the technical specifications and geometric design standards for PMGSY roads to ensure that all roads built will be of sound design with adequate drainage, in accordance with Indian Road Congress standards; and (ii) a three-tier quality control system consisting of the PIU or executive engineer, independent state quality monitoring, and independent national quality monitoring.
9. The PMGSY guidelines also establish the approach to state, district, and block PMGSY planning. The guidelines explain the procedures for developing each district’s plan for connecting all eligible habitations, with choice of routing for each eligible habitation to be determined by weighing socioeconomic and infrastructure variables to select the route that will maximize socioeconomic benefits of the new connection. The preparation of plans requires extensive community consultation. Plans are first prepared at the block level for approval by the intermediate panchayat.9 Block plans are consolidated into district plans for approval by the zilla panchayat. After this exercise, link roads identified in district plans as forming the core network are included in the Comprehensive New Connectivity Priority List, from which annual project proposals for PMGSY financing are selected.
10. The PMGSY guidelines indicate that establishing and implementing satisfactory mechanisms to provide funding and other assistance for maintaining PMGSY assets will be a key requirement for states to be considered for future PMGSY assistance. The guidelines require states seeking PMGSY financing to use standard bidding documentation with a 5-year postconstruction maintenance component. Before submitting annual project proposals for MORD approval each year, the states are required to approve budgeting of an annual slice of required funds under the 5-year road maintenance contracts. The guidelines require the states to identify suitable zilla or intermediate panchayat institutions for undertaking maintenance of the rural roads developed under PMGSY, and to hand over PMGSY roads to such institutions.10 The state government is also required to provide an undertaking to remit to these institutions the costs of the requisite maintenance through either budget allocations or alternative sources of funding.
11. Although not meeting the first phase target, PMGSY has made good progress in its first 4 years of implementation. MORD allocated Rs22 billion–Rs25 billion (about $0.5 billion equivalent) in each of FY2001 to FY2005. As of April 2005, a cumulative Rs119 billion ($2.8 billion equivalent) had been disbursed to participating states for about 40,000 road works, which are to connect about 20% of the eligible habitations under PMGSY. By March 2005, about 24,600 road works were completed including about 95% of the 13,217 road works in the FY2001 allocation and about 81% of the 11,131 road works in the FY2002-2003 allocation.11
roads. Link routes connect a single habitation or group of habitations to through routes or district roads leading to market centers. 9 A panchayat is a body of directly elected people responsible for development of activities in an area. The three levels of panchayats comprise gram panchayat at village level, intermediate panchayat at block level, and zilla panchayat at district level. These panchayats are collectively called the panchayati raj institutions. 10 Following the 73rd Constitutional Amendment in 1992, state governments are to assign responsibility for maintenance of rural roads to panchayats and to remit necessary financial resources for this purpose. 11 The annual allocations for FY2002 and FY2003 were combined and done at one time. Due to the time required by the states to prepare project proposals and tender, and by NRRDA to review proposals, normally a minimum 6- month interval follows the beginning of a fiscal year and the start of road works under the annual allocation.
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12. Recently, the Government announced a revised time frame for achieving rural connectivity under an umbrella program, Bharat Nirman,12 to rebuild rural infrastructure. The revised target to achieve connectivity to all habitations with a population of 1,000 (500 in the case of hilly or tribal areas) or more by 2009/10 would require about Rs480 billion ($11 billion equivalent) from FY2006 to FY2010. About 40% of this requirement is to be funded from the cess on high-speed diesel oil, and about 7% from the committed assistance from ADB and the World Bank; funding sources for the balance of 53% have not been identified. The Government has requested ADB and the World Bank to provide additional loans-credit to finance part of the identified funding gap. The Government is also considering mobilizing additional resources through domestic borrowing.
13. The three states to be initially covered under the Investment Program are among the 10 states with more than 10,000 unconnected habitations and were selected by the Government for focused PMGSY intervention. The state governments of Assam, Orissa, and West Bengal attach high priority to PMGSY. The three states are among the best-performing states in terms of the number of habitations connected under the PMGSY allocation from FY2001 to 2005.13 The national quality monitors rate the quality of the road works completed to date in the three states as average to very good, despite the long monsoons that disrupt construction works and difficulty in obtaining good construction materials, particularly in West Bengal.
B. Analysis of Key Problems and Opportunities
1. Key Challenges
14. The Investment Program is ADB’s second rural roads investment under PMGSY. The first, the RRSI, is currently improving about 1,000 km of rural roads in the states of Chhattisgarh and Madhya Pradesh. The RRSI identified policy issues to be addressed during project preparation and implementation, and included components in its project scope to address them. Policy issues with programwide implications include (i) provision of reliable implementation arrangements for large investments in rural roads including establishment of dedicated state rural road development agencies to streamline implementation; (ii) refinement of the project selection criteria to incorporate network efficiency considerations, economic return thresholds, and safeguard provisions; (iii) commitment to required levels of financing for maintenance and establishment of reliable approaches for planning and executing maintenance; and (iv) incorporating road safety measures to accompany PMGSY road connectivity improvements.
15. Recognizing the relevance of these issues in the effective implementation of PMGSY, MORD quickly expanded and upgraded PMGSY standard operating procedures over the past 2 years to address these issues, in consultation with the participating states and through dialogue with ADB and World Bank. MORD also refined the planning and monitoring tools. Notable improvements to the standard operating procedures include
(i) establishment of a state rural roads development agency (SRRDA) in all participating states; (ii) adoption of the network concept including through routes to achieve better connectivity in the project selection criteria;
12 The finance minister, in his budget speech of 28 February 2005, announced that rural roads comprise one of the six components of Bharat Nirman (meaning Laying the foundation for India). The other proposed components are irrigation, rural housing, rural water supply, rural electrification, and rural telecommunication connectivity. 13 During the period, 2,232 habitations were connected in Assam, 2,668 in Orissa, and 2,717 in West Bengal; the three states rank from fourth to sixth among all states. 5
(iii) introduction of a transect walk (para. 37) at the project preparation stage to ensure active community participation and to address community concerns at an early stage of project preparation; (iv) mandatory use of the standard bidding document for civil works with a 5-year postconstruction maintenance component, and budgetary allocation of funds by participating states for this component; (v) introduction of a maintenance planning process based on a simple road surface condition indicator—the pavement condition index; and (vi) introduction of a road safety audit and inclusion of financing provisions under PMGSY for road safety awareness-raising activities.
16. To implement these new initiatives, MORD prepared an operations manual that spells out detailed procedural requirements consolidating administrative circulars and instructions previously issued by MORD and NRRDA. For monitoring purposes, MORD is introducing the online management, monitoring, and accounting system (OMMAS), which enables effective monitoring of work progress and reporting of fund flow via the PMGSY website.14 MORD monitors compliance of the state implementing agencies with requirements under these initiatives, and has made some of the key requirements conditions for MORD approval of state annual project proposals. In sum, PMGSY is administered by a very strong national government agency capable of identifying and addressing problems in a timely and effective manner, and willing to adopt good practices.
17. While the states generally follow the PMGSY procedural requirements, early implementation of the RRSI and formulation of the Investment Program identified a few areas requiring improvement that would be facilitated through ADB intervention. These include the following:
(i) The community consultation scheme introduced during project preparation (transect walk, etc.) is yet to be fully implemented. (ii) Substantial capacity expansion is required at the PIU, State Technical Agency (STA), and SRRDA to meet the current technical, fiduciary, and other procedural requirements under PMGSY; and to process the increased workload that will need to be undertaken under ADB financing. (iii) Technical expertise currently available at the PIU, STA, and SRRDA needs to be diversified and broadened to handle safeguard issues that arise during project preparation and implementation.
2. External Assistance
18. ADB’s support for the road subsector has been developed in close collaboration with the Department for International Development (United Kingdom), Japan Bank for International Cooperation, and World Bank. ADB and the World Bank have adopted the Coordinated Assistance Strategy for the Road Sector, which was prepared jointly in March 2001 and updated in January 2002. Based on this strategy, they hold regular tripartite meetings with the Government to discuss impending road policy issues. ADB has also met regularly with the World Bank team that prepared its Rural Roads Project, and the two banks have shared their respective project preparatory studies. For the preparation of the Investment Program, ADB adopted an approach to streamline procedural requirements and harmonize those with World Bank interventions. The two institutions have started a dialogue on joint review of their
14 http://pmgsy.nic.in, http://pmgsyonline.nic.in.
6 respective rural roads projects. Japan Bank for International Cooperation and ADB are exploring possible cofinancing of road projects in India. A summary of external assistance is in Appendix 3.
19. PMGSY has received two loans-credit totaling $800 million, one from ADB and the other from the World Bank, both for $400 million. The World Bank is also providing a technical assistance loan of $8.5 million to (i) prepare manuals and pilot projects, (ii) purchase laboratory and survey equipment, and (iii) provide training to the engineers of the state agencies as well as of the contractors. The Government of the United Kingdom provided $1.7 million to finance technical assistance for project preparation for the RRSI and the Investment Program. To meet even the revised and more realistic target of connecting all habitations with a population of 1,000 (500 in the case of hilly or tribal areas) by 2009/10, the funding gap is huge. The World Bank plans to increase its support to rural roads by expanding the coverage of its financing.15
20. PMGSY, with its clear program goals, generally well-established standard operating procedures based on an annual program cycle, and high level of central Government commitment to continuously allocate necessary funds to the program, offers a good opportunity for ADB to apply the newly introduced MFF.16 ADB’s second and third loans to finance PMGSY were originally programmed at $400 million for 2005 and $350 million for 2007. The proposed Investment Program combines these two into a single MFF covering the period up to 2009/10, providing a predictable financing source for the Government and at the same time allowing the central Government flexibility to flow funds to rural road investments in core PMGSY states in an effective and efficient manner, on the basis of progress achieved by the states under preceding annual fund allocations and the states’ readiness for new investment.
3. Lessons Learned
21. To ensure effective and timely delivery of intended output, the Investment Program will have the following design features, reflecting lessons learned from ADB’s experience in past and ongoing transport sector projects and PMGSY implementation during the last 5 years: (i) use of the existing implementation setup for PMGSY, which is capable of implementing a large Investment Program; (ii) use of agency procedures for procurement and financial management; (iii) greater delegation of authority under the sector loan modality to the EA, taking full advantage of the well-established and standardized operating procedures of PMGSY; (iv) streamlining of procedural requirements and harmonization of those with World Bank interventions, particularly with respect to safeguards; (v) improved upstream community participation to better address safeguard issues at an early stage of subproject preparation; and (vi) strengthened performance monitoring.
4. Asian Development Bank Sector Strategy
22. The theme of ADB’s country strategy and program (CSP)17 for India is mainstreaming poverty reduction. In line with the Government’s priorities for the 10th Five-Year Plan 2002– 2007, this is to be addressed primarily by supporting economic growth, including both high growth and equitable pro-poor growth. The CSP points to emerging consensus over the importance of infrastructure in poverty reduction, through its indirect impact on growth leading to increased incomes and employment, and its direct contributions to incomes and employment and reducing human poverty by improving access to social services. The CSP update for 2005–
15 The World Bank’s Country Strategy for India lists Rural Roads II at $500 million for 2007. 16 ADB. 2005. Pilot Financing Instrument and Modalities. Manila. 17 ADB. 2003. Country Strategy and Program (2004–2006): India. Manila. 7
200718 highlights strong connectivity to link poor rural families to social services and markets as the organizing theme for the transport sector. The CSP update also identifies the need for infrastructure projects to incorporate institutional reforms to improve sustainability, particularly by establishing sound approaches to maintenance. The RRSI was formulated to combine each of these thrusts of the CSP and CSP update.
23. The Investment Program will build on the achievements of ADB’s initial rural roads intervention under the RRSI, and seek to assist PMGSY in introducing the good practices adopted at the central level to the Investment Program states. The Investment Program will also seek to improve program delivery by streamlining ADB’s procedural requirements including adoption of agency procedures capable of handling a large-scale investment while ensuring quality output. The supplementary operating procedures developed for the Investment Program to improve program planning, execution, and monitoring have incorporated lessons learned from ADB’s initial intervention and benefited from the practices and operating procedures developed for the World Bank’s Rural Roads Project.
III. THE PROPOSED INVESTMENT PROGRAM
A. Impact and Outcome
24. The Investment Program is a subset and an area and time slice of the Government’s rural roads program—PMGSY; and therefore shares the objective common to all PMGSY investments: to reduce poverty and deprivation, and support economic growth of rural communities in India by providing them with enhanced access to markets; employment opportunities; and social services, including health and education.
B. Outputs
25. This outcome will be attained by (i) providing rural habitations in the most poorly connected states—initially Assam, Orissa, and West Bengal, and any other states meeting the Investment Program requirements—with all-weather road connections; and (ii) improving efficiency and sustainability of PMGSY implementation in these states by providing support for capacity building in technical, safeguard, financial management, and road safety aspects. The Investment Program will build and upgrade about 30,000 km of rural roads to an all-weather standard; they are expected to connect about 19,000 habitations to a greater transportation network. The outputs of the noninvestment interventions will be high-quality rural roads and increased capacity of the state institutions responsible for managing the rural road investment and maintenance.
1. Road Connectivity Component
26. The Investment Program will include investments for rural roads that form part of PMGSY. The Investment Program will be implemented in batches, generally coinciding with the PMGSY annual project approval and fund allocation cycle. The Investment Program will be financed by central Government’s funds and borrowing from ADB. ADB financing will be provided in the form of an MFF, under which actual funds will be provided in multiple loans, each financing a clearly defined investment project (hereinafter called the Project) comprising a set of subprojects and components. A framework financing agreement (FFA) recording basic conditions and terms applicable to individual loans and overall MFF operation is attached. The
18 ADB. 2004. Country Strategy and Program Update (2005–2007): India. Manila.
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Government will submit periodic financing requests (PFRs), which will be reviewed and converted into individual loan and project agreements by ADB.
27. Subprojects covering 3,200 km of rural roads, about 1,000 km each in Assam and West Bengal and about 1,200 km in Orissa, have been prepared for inclusion in the first batch to be implemented under the Investment Program. The procurement of civil works for these subprojects is at an advanced stage for implementation in the first year of the Investment Program. In addition to ADB-financed subprojects, the first yearly batch of the Investment Program will include about 3,800 km of subprojects to be implemented in the three states.
28. The remaining subprojects, covering about 23,000 km of rural roads, will be prepared by the states in phases, and implemented in the subsequent three annual batches. The MFF, under each of the subsequent individual loans, will cover about one third of the annual financing requirement of the Investment Program.
29. The subprojects to be included in the first batch serve as samples for developing selection criteria for ADB financing, which supplement the PMGSY guidelines. Throughout Investment Program implementation, subprojects seeking ADB financing will be prepared in accordance with the selection criteria given in Appendix 4. These selection criteria establish requirements for subprojects in terms of (i) eligibility of road connectivity investment in accordance with the PMGSY guidelines, (ii) preparedness and adherence to technical specifications, and (iii) compliance with agreed safeguard requirements applicable at the subproject preparation stage. Adherence to eligibility requirements will be monitored during subproject implementation and only subprojects meeting the technical, safeguard, fiduciary, and maintenance funding requirements in Appendix 4 will be eligible for ADB financing by the loans under the MFF. For the design of subprojects, the technical standards and specifications of PMGSY roads (summarized in Appendix 5) will be followed.
30. ADB will review subproject proposals seeking ADB financing before completion of the procurement process. However, if it finds that an individual state’s capacity to prepare subprojects to the agreed standards is evident in the additional subproject proposals from that state, ADB may delegate subproject approving authority to MORD for that state. Approval procedures to be followed for additional subprojects seeking ADB financing are also in Appendix 4. ADB will conduct regular review of overall performance and compliance by the Government and the state governments with the agreed procedures.
2. Capacity-Building Component
31. PMGSY is administered nationally by MORD with technical and management support from NRRDA, which is a lean organization equipped with a highly qualified staff. During the last 5 years of PMGSY implementation, the three participating states have developed a sound technical and operational track record in road planning, design, and supervision of engineering works. This capacity has been developed principally in the context of PMGSY rules, regulations, and requirements pertaining to procurement, safeguards, fiduciary oversight, and administration as a whole. The central and state governments are generally satisfied with their expertise and the experience. However, for operations funded through multilateral development institutions such as ADB, both parties are aware of the additional policy and administrative requirements. Further, adoption of an MFF, a financing modality new to both India and ADB, will require additional support, at least at the early stage, for smooth operation and risk management under the MFF. Thus the Investment Program includes noninvestment interventions, all aimed at strengthening capacity and expertise. These interventions will be channeled through two 9 means: (i) engagement of external experts to the implementing agencies; and (ii) a more active and longer term involvement in the execution of the Investment Program by ADB staff.
32. Capacity building provided by external experts to the implementing agencies will build on RRSI interventions and focus on state capacity building for subproject implementation. The RRSI was designed to provide capacity-building support to mainly address national policy issues with respect to road maintenance and road safety, and to develop and implement national training programs. This support will continue while the Investment Program is implemented. The resulting standard operating procedures in the form of guidelines and manuals will benefit the states as well. Capacity building under the Investment Program will focus on state support to build institutional capacity to prepare and implement rural road development in an efficient and sustainable manner, and to properly address policy issues such as safeguard and road safety throughout the investment cycle. Policy areas addressed under the RRSI and the Investment Program and the status of ADB intervention are summarized in a policy matrix in Appendix 6. The areas of capacity building on which the Investment Program will focus are highlighted in Supplementary Appendix B.
33. Capacity building provided by more active and longer term involvement of ADB staff in program execution will require that ADB program teams on standby offer advice and guide the EAs on specific issues and problems pertaining to operations under the MFF. The Government is providing ADB with a set of specific “warranties and representations” on various fronts and may need “real time” support prior to formal submission of PFRs under the MFF. ADB will handle this requirement in two ways. Firstly, ADB will ensure capacity of the India Resident Mission for review and monitoring of Investment Program implementation, particularly with respect to fiduciary and safeguard oversight, while providing sufficient support to the Government in the form of an advisory technical assistance to be separately provided for these areas. Secondly, headquarters staff responsible for the Investment Program will use time saved during processing to supervise and monitor Investment Program implementation. This is clearly one of the advantages of the MFF.
C. Special Features
34. In recognition of the good progress achieved by PMGSY to date and the substantial improvements made to its standard operating procedures, and considering the community- based, small-scale nature of the road works involved, the Investment Program will maximize the use of the existing government system for PMGSY implementation.
35. Under the Investment Program, authority under the sector-lending modality to approve subprojects seeking ADB financing will be largely delegated to the EA fully taking advantage of the well-established and standardized operating procedures applicable to PMGSY. The Investment Program will operate with streamlined procedural requirements, which are harmonized with those of the World Bank, particularly with respect to safeguards.
36. Although centrally financed and administered, the PMGSY planning and implementation processes employ decentralized decision making and extensive community participation. At the planning stage, panchayats play the central role in selecting and prioritizing eligible roads and road works to be implemented under PMGSY. Over the past 5 years of PMGSY implementation, MORD has expanded the scope for community participation under PMGSY by formalizing the process of preparing rural road plans and consultation with the local community during design.
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37. The PMGSY guidelines require PIUs to consult with the local community in coordination with the gram (village) panchayat concerned to determine the suitable road alignment, resolve issues of land availability, and address other adverse social and environmental impacts while preparing the detailed project report. The PMGSY guidelines set out detailed requirements for a transect walk to be conducted as part of the community consultation process. Representatives of the village and PIU engineers will traverse the entire stretch of the road/path to be improved, and conduct consultations with interested persons.
38. In line with the community-based nature of the road works, the customary community practice is to make land and associated assets available for PMGSY investment as a voluntary donation. This practice has proven effective, allowing implementation of 66,000 km of PMGSY road works nationwide and 5,700 km in Assam, Orissa, and West Bengal over the last 4 years.
39. The Investment Program will seek to strengthen the existing PMGSY community participation process with a view to strengthening ownership of road improvements by the community and minimizing adverse social and environmental impacts of the road improvements. Each of the three states has prepared a community participation framework (CPF) to supplement the existing PMGSY guidelines and to establish requirements for transparent community-based decision making to deal with safeguard issues. The CPF provides detailed procedural steps to be followed by the PIUs from preparation for advance publicity for the transect walk to dissemination of information on the process of land transfer, support/assistance provisions, and grievance procedures to the affected communities. The PIUs will be supported by project implementation consultants (PICs), who will include social and environmental experts and assist PIU engineers in incorporating social and environmental considerations in the design and implementation of road works. External monitoring will be conducted by the technical support consultants (TSCs) engaged by NRRDA to check compliance with the agreed CPF procedures, and monitor and evaluate the participatory processes on a sample basis. The outline of the CPF is in Appendix 7.
40. For environmental safeguard, an environmental assessment and review framework (EAF) was developed to establish guidelines for the EAs, SRRDAs, PIUs and other parties concerned for preparing and implementing environmental mitigation measures under the Investment Program. Environmental codes of practice (ECOP) were developed based on the assessment of the environmental impacts in the first 3,200 km of subprojects, and will be used in the subsequent batches to effectively identify and implement required mitigation measures. The outline of the EAF is in Appendix 8.
41. Under the MFF, the amount and timing of the financing requests will be at the discretion of the Government, subject to meeting the MFF’s terms and conditions; and be mainly determined by the progress achieved under preceding annual fund allocations and the states’ readiness for new investment. The Government indicated that under the MFF it may request financing for PMGSY investments in Chhattisgarh and Madhya Pradesh, which are among the 10 core PMGSY states and are receiving financing under the RRSI. Subprojects in new participating states will be eligible for ADB financing under the MFF if ADB is satisfied that the new participating states are capable of implementing subprojects meeting the same technical, safeguard, economic, fiduciary, and sustainability requirements being met by those under the Investment Program in the Assam, Orissa, and West Bengal. The same selection criteria and approval process as indicated in Appendix 4 will be followed by subprojects in the new participating states. The governments of these states will have to adopt the CPF and EAF for social and environmental safeguards for the respective states. Implementation arrangements of the Investment Program are largely based on those for PMGSY, which are universally 11 applicable across India. The implementation arrangements currently proposed for Assam, Orissa, and West Bengal can be easily replicated in the new participating states.
D. Cost Estimates
42. The total cost of the Investment Program is estimated at about $2.1 billion equivalent inclusive of taxes, duties, and interest and other charges on the loans from ADB during construction (Table 1). Detailed cost estimates are in Appendix 9.
Table 1: Cost Estimates ($ million)
Item Totala
Road Connectivity Componentb 2,039.0 Capacity-Building Componentc 2.0 Interest during Construction 59.0 Totald 2,100.0 a In mid-2005 prices. b Including social and environmental mitigation, civil works, and project implementation consultants. c Including technical support consultants for capacity building. d Including taxes and duties estimated to be about $86 million. Source: Asian Development Bank estimates.
E. Financing Plan
43. The Government has requested financing of up to an equivalent of $750 million from ADB’s ordinary capital resources to help finance the Investment Program. The financing will be provided under an MFF in accordance with ADB policy.19 The MFF will extend multiple loans to finance a range of subprojects under the Investment Program, subject to submission of a related PFR by the Government and execution of the related loan and project agreements. The Government has entered into a FFA with ADB. The FFA satisfies the requirements set forth in Appendix 4 of the Pilot Financing Instruments and Modalities (see footnote 19). The Government is required to comply with the FFA requirements. Pursuant to the FFA, the Government has submitted to ADB the first PFR in the amount of $100 million. The first PFR is presented to the Board, together with the FFA. The loans under the MFF will finance civil works, and consulting services and other capacity building supports. The minimum amount of a loan request will be $30 million. All of the provisions of the ordinary operations loan regulations applicable to ADB’s LIBOR-based loans20 will apply to each loan, subject to modifications, if any, that may be included under any loan agreement. The Government has the option to choose between eligible currencies and the interest rate regime for each loan. The specific terms of each loan will be based on the related PFR with interest to be determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility. The Government has provided ADB with (i) the reasons for its decision to borrow under ADB’s LIBOR-based lending facility, and (ii) an undertaking that these choices were its own independent decision and not made in reliance on any communication or advice from ADB.
19 ADB. 2005. Pilot Financing Instruments and Modalities. Manila. 20 ADB. 2001. Ordinary Operations Loan Regulations Applicable to LIBOR-Based Loans Made from ADB's Ordinary Capital Resources. Manila.
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44. If the Government requests any cofinancing arrangements or related assistance for the projects under the ADB MFF, these may be assisted by ADB, subject to related ADB policy and procedures.
45. The Government will provide the proceeds of the loans under the MFF in local currency to MORD and through MORD to the governments of the participating states on a grant basis.21 The Government will bear the foreign exchange risk on the loans. The financing plan for the Investment Program is in Table 2.
Table 2: Financing Plan ($ million)
Source Total Percent
Asian Development Bank 750.0 36 Government and state governmentsa 1,350.0 64 Total 2,100.0 100 a Including taxes and duties, and interest during construction. Source: Asian Development Bank estimates.
F. Implementation Arrangements
1. Application
46. The Investment Program is a subset of PMGSY and its implementation will generally follow the procedures, regulations, and other requirements of PMGSY. For subprojects intended for financing by the loans under the MFF, implementation arrangements described in this section, which are in accordance with ADB’s standard policy and operation requirements, will generally apply. Arrangements and requirements specific to individual loans/projects under the MFF will be included in the corresponding legal documents.
2. Management
47. The EAs for the Investment Program are MORD at the central level and the governments of the participating states (initially Assam, Orissa, and West Bengal) at the state level. MORD, with technical and management support from NRRDA, will be responsible for overall Investment Program supervision and execution. The state governments, through their respective state departments responsible for rural road improvement, will be responsible for executing the Investment Program at the state level. The MORD joint secretary will chair a coordination committee, to be set up by the Government within 3 months of loan effectiveness of the first loan to be provided under the MFF. The committee will meet quarterly and monitor the use of loan funds and overall implementation performance of the Projects under the MFF. The committee members will comprise senior officials of MORD; the Department of Economic Affairs; NRRDA; and the governments of Assam, Orissa, and West Bengal.
48. The implementing agencies for the Investment Program are the SRRDAs in the participating states, namely Assam State Road Board, Orissa State Rural Roads Agency, and
21 As required under the PMGSY guidelines, the proceeds will be provided directly by MORD to the SRRDAs. 13
West Bengal State Rural Development Agency.22 The SRRDAs are each headed by a chief executive officer who is the state program director for overall coordination of implementation, including planning, management, consultant selection, and procurement. The chief executive officer is supported by experienced personnel at state headquarters and in the district PIUs, which implement PMGSY investments. In Assam, 19 PIUs cover 23 districts; in West Bengal, 19 PIUs cover one district each; and in Orissa, 29 PIUs cover 30 districts. A PIU is normally headed by a superintending/executive engineer and staffed with assistant/junior engineers and clerks/cashiers.
49. To monitor the use of loan funds and overall implementation performance of the Projects under the MFF at the state level, and to ensure coordination among the key agencies involved, each participating state will establish a project implementation committee within 3 months of loan effectiveness of the first loan. The committee will meet monthly, and be chaired by the chief executive officer of the SRRDA, with representation from the respective state department responsible for rural road development,23 PIUs, and consultants. As necessary, other state agencies may be invited to this committee to assist in implementing the Project in areas such as forestry and land availability. The organizational structure for program implementation is in Appendix 10.
3. Implementation Period
50. The Investment Program will be implemented over 5 years inclusive of preconstruction activities. Each civil works contract will require 12 months for completion. Based on the estimated schedule, the civil works are expected to be implemented in four annual batches. The first batch of subprojects (the sample subprojects) is expected to be ready for contract award in December 2005. For each of the subsequent subproject batches, the Government and the SRRDAs will develop detailed implementation schedules by the time of submission of the corresponding PFR. An indicative implementation schedule is in Appendix 11.
4. Procurement
51. Procurement to be financed by the loans under the MFF will be carried out in accordance with ADB’s Guidelines for Procurement. The upper limit for a civil works contract to be procured through local competitive bidding (LCB) procedures will be initially set at $10 million, and be reviewed during implementation. The PMGSY standard bidding documents and procedure developed by NRRDA for procurement of civil works based on item unit rates are found acceptable to ADB, and will be used for all LCB contracts by the loans under the MFF. The PMGSY bidding process follows the single-stage, two-envelope system in which each bidder simultaneously submits its technical and financial proposals in two separate envelopes, and only the financial proposals of technically qualified and responsive bidders will be opened and evaluated.
52. The PMGSY guidelines specify that civil works contract packages should be in the range of Rs10 million to Rs50 million ($0.2 million to $1.1 million), but encourage use of larger
22 The three SRRDAs were all established in 2003 as nonprofit organizations under the Firms and Societies Act to implement PMGSY. Their staff focus on planning and managing PMGSY. Design, supervision, and civil works are outsourced to private consultants and contractors. Outsourcing was adopted both to ensure the quality and value for money of works undertaken and to avoid creating a large establishment that would become underemployed once the main PMGSY activities are completed. 23 Assam State Public Works Department, Orissa State Department of Rural Development, and West Bengal State Department of Panchayat and Rural Development.
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contracts. Civil works contract packages under the Investment Program will be prepared with due consideration to the geographic setting against which the civil works are carried out, i.e., the remoteness of subproject locations often noncontiguous and the small size of individual civil works. The 3,200 km of first batch subprojects have been packaged into about 300 contract packages in the range of $0.2 million to $3 million, with an average size of $0.9 million (Supplementary Appendix C). Contract packages for additional subprojects will be decided during implementation, generally following the PMGSY norm and based on experience gained during early Investment Program implementation. To facilitate timely implementation of the subprojects, consultants have been assisting the SRRDAs in preparing bidding documents for civil works. The same assistance will be provided by the PICs.
53. In addition, to support timely contract approvals while ensuring sound practice, ownership, and accountability, post facto approval procedures will be adopted for LCB civil works contracts intended for financing by the loans under the MFF. For the first five civil works packages under LCB in each state intended for ADB financing under the MFF, the SRRDA will submit bid evaluation reports for ADB’s review and approval before awarding the contracts. If ADB finds bid evaluation for the first five contract packages satisfactory, the SRRDA will proceed with procurement procedures and contract award for subsequent contract packages without prior ADB review and approval. In these cases the following post facto approval procedures will apply: (i) the SRRDA will retain a record of all procurement documentation, including copies of the signed contracts and the bid evaluation reports, to be available for inspection; (ii) at the time of each contract award, the SRRDA will provide ADB with a certified summary sheet reporting on the main aspects of the bid evaluation and contract award; (iii) the procurement processes and contract awards will be audited annually as part of the performance audit; and (iv) if any contract award is found to be unacceptable, ADB may refuse to finance the contract.
5. Advance Procurement Action and Retroactive Financing
54. At the second Management Review Meeting, ADB management approved (i) advance action for procurement of civil works, and (ii) the request to seek ADB Board’s approval for retroactive financing, both, for each of the individual loans under the MFF. Up to 20% of the proceeds of each individual loan, provided that expenditures are incurred for civil works and consulting services eligible for financing under the MFF in accordance with agreed procedures and during the 12 months before the signing of the corresponding individual loan agreement, will be eligible for retroactive financing. The Government has been informed that approval of advance procurement action and retroactive financing does not in any way commit ADB to finance the subprojects.
6. Consulting Services
55. Consulting services will assist the EAs and the SRRDAs to implement the Investment Program. Government-financed PICs will be engaged in accordance with PMGSY procedures found acceptable to ADB and will assist the PIUs of the SRRDAs in (i) preparing additional subprojects; (ii) supervising civil works; (iii) implementing the CPF to address social impacts, if any; and (iv) implementing the EAF and the relevant provisions of the ECOP. Outline terms of reference for the PICs are in Supplementary Appendix D.
56. NRRDA will engage ADB loan-financed TSCs to provide technical support to the SRRDAs in social and environmental safeguards, and road safety. The TSC will comprise a team of domestic experts who will (i) conduct checking of detailed project reports and random 15 checks of roads under construction to ensure that road safety measures are properly incorporated; (ii) provide support to the PIUs in implementing road safety awareness-raising schemes being developed under the RRSI; (iii) check compliance of subprojects with CPF and EAF/ECOP provisions during subproject preparation and implementation; and (iv) conduct impact monitoring. For each individual state, the TSC will require 12 person-months of inputs for the first batch, and 11 person-months of inputs for subsequent batches. Outline terms of reference for the TSC are in Supplementary Appendix E.
57. All consultants financed by the loans under the MFF will be selected and engaged in accordance with ADB’s Guidelines on the Use of Consultants and other arrangements for recruitment of domestic consultants acceptable to ADB. The domestic consultants will be selected and engaged in accordance with procedures acceptable to ADB, and the selection and engagement of the consultants will be subject to ADB approval with regard to their competence and experience for carrying out the assignment. As soon as the proposals received have been evaluated but before negotiations are started with the consultants selected for negotiations, ADB will be provided with three copies of (i) a list of consultants invited, (ii) an evaluation of the proposals (together with one set of the first-ranked proposal), and (iii) justification for the selection. After the conclusion of negotiations but before the signing of the contract, the contract as negotiated will be provided to ADB for approval. Promptly after the contract is signed, ADB will be provided with three copies of the signed contract. If any substantial amendment of the contract is proposed after its execution, the proposed changes will be submitted to ADB for prior approval.
7. Anticorruption Policy
58. ADB’s Anticorruption Policy (1998) was explained to and discussed with the Government. Consistent with its commitment to good governance, accountability and transparency, ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Projects under the MFF. To support these efforts, relevant provisions of ADB’s Anticorruption Policy are included in the loan regulations and the bidding documents for the Projects under the MFF. In particular, all contracts financed by ADB in connection with the MFF shall include provisions specifying the right of ADB to audit and examine the records and accounts of the Executing Agency and all contractors, suppliers, consultants, and other service providers as they relate to the Projects under the MFF.
8. Disbursement Arrangements
59. Loan disbursements will be in accordance with ADB’s Loan Disbursement Handbook (2001) and Interim Guidelines for Disbursement Operations, LIBOR-Based Loan Product (2002) using direct payment and reimbursement procedures. Any individual payment to be reimbursed under statement of expenditure procedures will not exceed $100,000.
9. Accounting, Auditing, and Reporting
60. The existing financial management arrangements with the autonomous SRRDA entrusted with administering the PMGSY funds and the OMMAS as a comprehensive online monitoring tool have been assessed and found to be capable of adequately accounting for project resources and expenditures, with the Government’s continued support to improve state arrangements. Projects to be financed under the MFF will rely on the existing financial management arrangements with specific requirements listed in the following paragraphs.
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Financial management assessment of the three participating states is in Supplementary Appendix F.
61. The EAs and SRRDAs will maintain separate records and accounts adequate to identify the goods and services financed from the loan proceeds, the expenditures incurred for the Investment Program components and their subprojects under each individual project, and use of local funds under each individual Project. These accounts and related financial statements will be audited annually in accordance with sound auditing standards by independent auditors. The Government will submit to ADB within 9 months after the end of each fiscal year consolidated annual audited reports and related financial statements under each Project, identifying separate accounts of subprojects as required for the individual states. The auditor’s opinion of that part of the examination relating to the statement of expenditure should be separately set out in the auditor’s opinion. Since the PMGSY guidelines require state governments to engage chartered accountants of standing to audit PMGSY accounts, wherever possible the same auditors that audit the SRRDA will audit Project accounts in each state.
62. In addition, state governments will be required to undertake an objective and independent performance audit of subprojects on a sample basis to evaluate adherence to procurement procedures, overall contract performance, and value for money. ADB will conduct procurement audits during implementation as part of its regular review process.
63. The SRRDAs will submit to MORD, through the relevant state government, monthly progress reports of subproject implementation under the road connectivity component, in such form and detail as required. Day-to-day reporting from the PIUs through the SRRDAs to MORD/NRRDA will be by way of the existing OMMAS. Based on these reports, MORD, with assistance from NRRDA, will prepare and provide ADB with quarterly progress reports on subproject implementation. Such reports will include a report on progress made during the period of review, changes if any of the implementation schedule, problems or difficulties encountered and remedial actions taken, and work to be undertaken in the coming quarter. The reports, which will be submitted to ADB within 45 days of the close of each quarter, will include a summary financial account for each subproject, expenditures to date, and report on benefit monitoring.
64. The Government will submit to ADB a project completion report within 3 months of physical completion of the subprojects financed under each individual loan and an MFF completion report within 3 months of physical completion of the subprojects under the MFF. These reports will include a detailed evaluation of the project and the Investment Program, respectively, covering the design, costs, contractors’ and consultants’ performance, social and economic impact, economic rate of return, and other details relating to each individual Project/Investment Program for each state as may be requested by ADB.
10. Performance Monitoring and Evaluation
65. Existing PMGSY planning and monitoring procedures provide a substantial database for all roads, including details of traffic before improvement, population served, and social facilities along the alignment, and the progress of individual road works to help establish baseline data for monitoring the indicators at the outcome and impact levels of the design and monitoring framework (Appendix 1). MORD has also been conducting impact assessment studies in 17 selected PMGSY participating states.24 Performance monitoring and evaluation under each Project and under the Investment Program will utilize this existing setup, and strengthen the monitoring of key impact and outcome indicators and associated assumptions. For this purpose, within 3 months of the effective date of the first loan agreement, MORD through the SRRDAs will carry out the necessary arrangement for systematic performance monitoring, integrated with the OMMAS, for the Investment Program as well as for each Project under the MFF.
11. Review
66. In addition to regular reviews including a midterm review for each loan by ADB staff, a detailed midterm review of the Investment Program will identify any problems or weaknesses in implementation arrangements, and agree on any changes needed to achieve the Investment Program objectives. The midterm review will be conducted during the third year of implementation; terms of reference will be included in the MFF administration memorandum prepared by ADB’s inception mission for the MFF. Overall Investment Program preparation and implementation flow is shown in Supplementary Appendix G.
IV. INVESTMENT PROGRAM BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS
A. Overall Impacts and Benefits
67. ADB support to the Investment Program will help the Government meet the target set under Bharat Nirman to provide universal connectivity to habitations with a population of 1,000 (500 in the case of hilly or tribal areas) or more by 2010. Improving rural connectivity is also a priority in the selected states. Economic activity is constrained if the movement of people, goods, and services is constrained. Many communities in the target states have been isolated for years. Existing roads require rehabilitation. Although the program focuses on new infrastructure, part of the investments will improve existing networks. This approach arrests the depreciation of fundamentally sound assets, and delivers economies of scale—rehabilitation costs will come down if the contracts are mixed with the construction of new assets.
68. The Investment Program will contribute to the economic well-being of rural communities in the selected states, and thus reduce poverty. Agriculture will benefit. Agricultural input distribution will be easier, as will the dispatch of final products to market. The cost of distributing inputs and final products will decrease. Greater and better access to markets will inevitably make a difference, with farm income expected to increase as a result. But greater market access will also fuel competition and benefit customers. Better connectivity will make it easier for investors. More inward investment, especially in agribusiness, will have a positive impact on jobs and income. Construction and wholesale and retail trade will increase, together with housing and selected public utilities such as rural water, communications, and electricity. Labor mobility benefits rural and urban areas alike. The exodus of the young to the city is expected to decrease. This will create impetus for more and better education and health services.25
24 Assam, Himachal Pradesh, Madhya Pradesh, Mizoram, Orissa, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal. 25 ADB’s recent studies on the impact of infrastructure on poverty reduction (Cook, C., T. Duncan, W. Guobao, S. Jitsuchon, and A. Sharma. 2005. Assessing the Impact of Transport and Energy Infrastructure on Poverty Reduction. Manila: ADB) confirmed that the impacts of past rural transport improvements in India include the following: (i) travel time savings, (ii) increased employment opportunities and higher wages, (iii) increased availability and accessibility of educational and health services, (iv) reduced vulnerability of the poor, and (v) positive effect on participation of the poor in activities outside the rural community.
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B. Sustainability of Investment
69. The investment proposed will be sustainable as the PMGSY design requires a high level of commitment by the participating states to finance post-construction road maintenance. Two key requirements are effectively linked with MORD’s approval of states’ project proposals: (i) mandatory use of the standard bidding document for civil works with a 5-year post-construction maintenance component, and (ii) written commitment required of the states to allocate funds for this component in their state budget. Signing civil works contracts with a maintenance component obligates states to allocate funds to meet the maintenance expenditure. For FY2005, the three participating states budgeted and allocated the required maintenance funds. During Investment Program implementation, states’ commitment and actual budget allocation to 5-year maintenance will be closely monitored. The state governments also provided assurances that they will enter into contractual commitments to maintain the entire PMGSY rural road network, including the Investment Program roads, for the subsequent 5 years. A simple and practical maintenance planning process based on the pavement condition index will be used to determine maintenance priority.
C. Sustainability of Policy and Institutional Interventions
70. The Investment Program is not new to India or ADB. Rural and nonrural roads have been financed many times in the past, with and without ADB involvement. The country and the individual states have considerable expertise in the subsector. This track record covers planning, design, and implementation of operations. It addresses procurement, safeguards, financial management, administration, contract supervision, and monitoring. National systems, those developed for PMGSY in particular, are quite sophisticated in each of these areas and the level of oversight appears to be high compared with many other countries in which ADB operates. The Projects under the MFF will adopt many of these systems found compatible with ADB requirements. The differences between the PMGSY requirements and the requirements specific to the Projects under the MFF have been narrowed. Interventions specific to the Projects under the MFF are limited to the areas of road safety, and social and environmental safeguards. Even in these areas, ADB interventions are aligned with the existing PMGSY initiatives.
71. The longer term objective of ADB interventions will be to leave in place systems, people, and procedures that can outlive the Investment Program itself. The central and state governments are especially keen on this approach and accordingly provided assurances to work with ADB toward this endeavor. The central Government will continuously improve the PMGSY standard operating procedures and provide training to state officials involved in PMGSY implementation.
D. Economic Analysis
72. Quantifiable economic benefits consist of (i) lower transport and vehicle operating costs, (ii) greater passenger time savings, and (iii) reduced spoilage of agricultural inputs and produce. The economic internal rate of return (EIRR) was calculated by comparing the with- and without- investment scenarios for about 3,200 km of the first batch subproject roads in the three states. To have EIRRs on ensured benefits, only the first two types of benefits were considered in the 19 economic analysis. Without the investment, transport cost to and from rural habitations will remain very high. With the investment, transport costs will be significantly reduced, leading to savings for existing traffic, rapid growth in generated traffic, and a shift in traffic composition toward more efficient modes.
73. The estimated overall EIRR for the sample subprojects is 18.0%; the overall EIRRs for Assam, Orissa, and West Bengal are 15.6%, 18.0%, and 20.2%, respectively. Sensitivity analysis shows that the proposed investment will remain economically viable under adverse scenarios, including increased costs, decreased benefits, and implementation delays. The economic and distribution analysis is in Supplementary Appendix H.
E. Social Impact
1. Poverty Reduction
74. The states of Assam, Orissa, and West Bengal have a large rural population26 with the majority dependent on agriculture for their livelihood. Despite the improvements during the recent decade, these states are still among the poorest in India in terms of various development indicators. Poverty is particularly acute in rural areas. In terms of the proportion of rural population living below the poverty line, Orissa ranks at the top at 48%, Assam 3rd at 40%, and West Bengal 12th at 32%, all above the national average of 26%. Indeed, the total rural population living below the poverty line in the three states accounts for 21.5% of that of India, higher than the three states’ share in India in terms of rural population (15.4%) and total population (14.1%).
75. The provision of all-weather roads in rural areas will lead to increased access to rural markets and rapid economic diversification increasing the incomes of farmers in all income groups. Farmers will benefit from reduced cost of supply of agricultural inputs. This will increase the size of the agricultural surplus contributing to increase in income, which will be spent on other goods and services. Improved access will lead to greater mobility enabling rural communities to shift from subsistence farming to more commercially-oriented agricultural production. Production and marketing of high-value perishable products will become possible on a commercial basis. Increased mobility will support poor households to access better paying jobs outside their villages. The improvement of connectivity is also expected to encourage investments in nonagricultural enterprises and larger investments in transport services. Communities with all-weather roads will attract assistance from government programs and district poverty reduction projects. The Investment Program is expected to have an immediate and short-term impact on poverty reduction due to labor opportunities for rural poor who will be hired during construction. Another major benefit will be reliable access to schools and health services through reduced travel time and transportation costs, contributing directly to the accumulation of human capital, which is a key factor in sustainable poverty reduction. The summary poverty reduction and social strategy is in Appendix 12.
2. Gender Impacts
76. Women in both poor and non-poor households in rural areas are disadvantaged by low status in households and communities in terms of access and control. The status of women is
26 The proportion of population living in rural areas is at 88% in Assam, and 83% in Orissa—much higher than that of all India at 72%. West Bengal has the same proportion of rural population as all India, but in absolute number, its rural population of 56.5 million is larger than that in Assam and Orissa combined.
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better in West Bengal compared with the other two states. Gender assessment carried out as part of social and poverty assessment found that the Investment Program will improve connectivity to nearby towns and villages, thereby increasing access to health and educational services. Better transport services will open up opportunities for more girls to access higher education outside the village. Improved rural roads will also contribute to safe motherhood by augmenting access to medical facilities outside the village and reducing obstacles to improved health services within the village. Women noted that better roads would make travel safer and more comfortable as presently they travel on foot; improved roads will also mean increased transportation facilities, which will enable them to travel at all times.
3. Land Availability
77. The construction of rural roads will be carried out mostly within existing right-of-way, however in some cases, straightening of alignment will require narrow strips of land to be made available. The survey carried in the sample roads in the three states revealed that the impact due to land take will be mostly on marginal farmers.27 West Bengal and Assam will face loss of residential and commercial structures28 by both titled and nontitled households. Transect walks undertaken for the sample subprojects demonstrated that, through design modification, impacts on structures could be mostly minimized. A similar exercise will be carried out for other subprojects, with the impacts on structures expected to be minimized.
78. Most of the adverse social impacts will be mitigated by the selection of alternative alignments and design modifications. However, if extra land must be secured for specific subprojects, the voluntary land donation system will be used, recognizing the effectiveness of the system for rural road developments in India. The procedural requirements are provided in the resettlement and participation framework developed for the World Bank-financed Rural Roads Project. Under the MFF, ADB requirements will be harmonized with those of the World Bank with necessary adjustments in consideration of the specific situations of the participating states. A CPF, which incorporates key elements of the resettlement and participation framework together with necessary adjustments to it, was developed for each of the three participating states for project preparation and implementation. The CPF adopts road selection criteria similar to those of the World Bank’s resettlement and participation framework, in which rural roads in question will not be financed until relevant social issues are resolved. The outline of the CPF is in Appendix 7. The EAs will ensure that the road selection criteria, process for community participation, and documentation requirements comply with the CPF principles and procedures.
79. Implementation of this system needs to be monitored closely. The internal monitoring will be carried out by the PIUs with support of the PIC, and external monitoring will be carried by the TSC appointed by NRRDA for each of the states. These arrangements are introduced on a pilot basis. ADB will review effectiveness of these arrangements jointly with the Government and the World Bank at an appropriate time during implementation, and appropriate modifications to the safeguard frameworks made as required. In addition to this ongoing monitoring, ADB will closely review the sample subprojects and an additional 100 km of roads from each state. Based on the initial review, ADB will discuss any revisions and agreements for corrective action before finally delegating subproject approving authority to MORD.
27 In West Bengal, 46% of affected agricultural households were marginal farmers, 30% in Orissa, and 2.6% in Assam. 28 In West Bengal, 3 residential and 1 commercial structures are affected. In Assam, 105 residential and 12 commercial structures are affected with impacts mostly on fences and frontages of the homestead land. In Orissa, only 2 residential and 2 commercial structures are affected. 21
4. Indigenous People
80. The social assessment of the sample subprojects identified the presence of scheduled tribes in the three states. These groups are largely assimilated into the local population. The Investment Program will not have any differential impact on scheduled tribe population; they will receive similar benefits from the Investment Program as the non-scheduled-tribe households. No significant impact will be made on their tribal and cultural identity. The assessment indicates that the rural road construction will benefit scheduled tribe households by providing connectivity to habitations and increasing access to better facilities in health, education, and markets. In addition, the Investment Program is expected to open up alternate opportunities for employment in nearby towns thereby diversifying their sources of income. As stipulated in the CPF, for any impact on land involving traditional and tenurial rights of the scheduled tribes, national and state legal provisions pertaining to land transfers will be duly followed. The CPF identifies special provisions for all scheduled tribe households to ensure that their living standards are not adversely affected as a result of land donation or in the event of any loss of nonland asset and impacts on their livelihoods.
F. Environmental Impact
81. This Investment Program is categorized as “B” in accordance with ADB’s Environmental Assessment Guidelines (2003). An initial environmental examination (IEE) of sample subprojects was prepared as part of the detailed project reports. The IEE rates the physical interventions of the Investment Program as minor; none of the sample subprojects involve realignment or the establishment of new road alignment. The Investment Program activities are mostly related to providing black topping of 3.5 meter carriageway and earthen shoulders, and side drains if the roads run through residential areas. Based on these activities, the predicted environmental impacts occur mostly during construction. The characteristics of impacts are temporary and reversible. The mitigation measures are available and can mostly be integrated into construction works. In this context, an ECOP setting out generic mitigation measures to be implemented throughout the investment cycle, from selection of the alignment, preparation of the detail engineering design, construction, and operation is being prepared to provide guidelines for mainstreaming environmental concerns into the development of rural roads. The environmental assessment of the additional subprojects will follow procedures under the sector loan modality. The agreed EAF will govern the preparation and implementation of the additional subprojects. The summary IEE with the EAF is in Appendix 8.
82. Although the environmental impacts are insignificant, continued monitoring to ensure that the mitigation measures are well implemented is needed. The existing institutional arrangement to develop rural roads has no setup to address environmental concerns identified by the IEE studies. Therefore, each SRRDA will assign an environment officer with a primary responsibility to mainstream environmental concerns related to development of rural roads. At the initial implementation of the Projects under the MFF, environment specialists will be engaged as part of the TSC to work closely with the environment officers in the respective states to appraise additional subprojects and to monitor implementation of the mitigation measures. The environmental checklist, which serves as the IEE, to be prepared as part of the detailed project report for each subproject, will identify the relevant provisions of the ECOP, which in turn will serve as an environmental management plan for the subproject, to be adhered to during subproject implementation. ADB will provide special training early in project implementation to the environment officers as well as to the PIUs of the SRRDAs.
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G. Risks
83. The risk of implementation delays has been addressed by establishing an SRRDA in each state to act as the Implementing Agency. The SRRDA will have authority to decide on implementation including procurement, and suitably qualified core staff to manage implementation effectively. MORD will provide the SRRDAs with sufficient resources to engage consultants and contractors to perform the main engineering and civil works tasks, as well as requisite social and environmental studies.
84. The economic analysis of the investments suggests no significant economic risks. Sensitivity tests and risk analysis undertaken on sample subprojects show that the subprojects selected in accordance with the selection criteria will be economically viable even under a combination of adverse scenarios.
85. The risk of adverse social and environmental impacts has been addressed through examinations of sample subprojects. Consultations with local stakeholders were made and will continue during the Investment Program. Support for a program of this nature is universal. The risk of road connectivity improvements leading to increased road accidents are to be addressed through the capacity-building component.
86. The fiduciary risk under PMGSY will be manageable and addressed mainly through the use of standardized procedures in the areas of procurement, accounting, and reporting. The Government will continue providing training to state government officials on financial management and reporting as part of its effort to fully functionalize the OMMAS.
87. ADB will address the risk associated with the MFF, which is new to both India and ADB, by ensuring capacity of the India Resident Mission for reviewing and monitoring Investment Program implementation, particularly with respect to fiduciary and safeguard oversight, while providing sufficient support to the Government in the form of an advisory technical assistance in these areas.
V. ASSURANCES
88. In addition to the standard assurances, the national Government and the governments of the states (Assam, Orissa, and West Bengal at the outset) have given the following assurances, which have largely been incorporated in the attached FFA, and will be incorporated in the individual loan agreement and project agreement(s) as applicable and mutually agreed between the Government and ADB for each Project under the MFF.
1. General
89. (i) The Project will be carried out in accordance with the PMGSY guidelines as supplemented by specific requirements described in the FFA, including those described more fully in the agreed CPF and the EAF for the participating states, as applicable.
(ii) A Coordination Committee will be set up at MORD to assist in implementation of the Project.
(iii) Each participating state will likewise set up a Project implementation committee for implementation of the Project at state levels.
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90. Each state will assist in obtaining the requisite approvals and clearances for timely implementation of the Project.
91. Each state will provide, as necessary, respective counterpart staff, land facilities, and counterpart funding for the Project in accordance with the financing plan; cost of making land available for the subprojects and assistance, and implementation and monitoring under the CPF and EAF (including unforeseen expenses beyond the estimates); utility relocation; general project management expenses; and road maintenance in a timely manner through approved annual budget allocations.
92. Each state will ensure that the respective IAs will recruit PICs with expertise in social development and environmental management to help implement the provisions of the CPF and the EAF for all subprojects in the related state.
2. Road Maintenance
93. In accordance with the PMGSY guidelines, the states will provide adequate and timely funding for proper maintenance of the PMGSY roads. Any increases in the actual amounts to be provided will be met by the respective state through additional budget allocations, or other alternative sources of financing.
94. As also required under the PMGSY guidelines, except as ADB may otherwise agree, the states will require the respective IAs (through the PIUs) to ensure proper maintenance of the PMGSY roads until these are transferred to the designated zilla panchayats in accordance with the PMGSY guidelines. The states will also allocate the requisite funds to the relevant functionaries (the related PIU/zilla panchayat) for such maintenance in accordance with the requirements of the PMGSY Guidelines.
95. The states will ensure that related PIU/zilla panchayat, as the case may be in each state, will enter into further maintenance contracts with competitively procured contractors (on the basis of the standard performance-based contracts for road maintenance prepared by project management consultant under ADB funded RRSI. The contracts will begin upon completion of the initial 5-year maintenance period under the related construction contracts and will cover routine maintenance and renewal of all PMGSY roads for further periods of not less than 5 years.
3. Road Safety
96. As part of the midterm review of the Investment Program as also under each Project, MORD, the states, and ADB will review the outcomes of the road safety program, to consolidate the institutional mechanism, financing modalities, and detailed implementing arrangements to further ensure sustainable road safety programs for the roads to be developed under PMGSY and the Investment Program at the national and state levels.
4. Land Availability
97. The states will ensure that the respective IAs implement the relevant provisions of the CPF for all subprojects as agreed upon with ADB and in conformity with all applicable laws and regulations of the Government/respective state government.
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98. The states will ensure that the IAs will, subject to compliance with the relevant provisions of the CPF and EAF/ECOP and in accordance with all applicable laws and regulations of the Government/respective state government, acquire or make available the land and rights to land free from any encumbrances, and clear the utilities, trees, and any other obstruction from such land, required for commencement of construction activities in accordance with the schedule agreed under the related civil works contract.
99. The states will ensure that (i) the respective IAs will (a) carry out the community consultation process for all subprojects in accordance with the PMGSY Guidelines as supplemented by the CPF; (b) disseminate the information on process of land transfer/availability as the case may be, support/assistance provisions, and grievance procedures to the project-affected communities in a timely manner so that all related issues are resolved before awarding civil work contracts; and (c) ensure that in case of voluntary land donations/transfer, these are undertaken in a transparent manner under proper documentation, and avoid any kind of coercion or forced donations/transfer; and in this regard will not exercise any eminent domain or related mechanisms that may be deemed to be compulsory acquisition of land; and (ii)the details of land made available in accordance with the procedures prescribed in the PMGSY Guidelines, are reflected in the local land records in a timely manner and not later than commencement of the related civil works contract under a subproject.
5. Execution of Civil Works Contracts
100. Subject to compliance with the requirements of CPF and EAF/ECOP, the states will (i) acquire or make available on a timely basis the land and rights in land, free from any encumbrances; and (ii) clear the utilities, trees, and any other obstruction from such land, on a timely basis, i.e., strictly in accordance with the schedule as agreed under the related civil works contract, as required for construction activities relating to each section of the related civil works contract under the subproject.
101. The states will ensure that, subsequent to award of civil works contract under any subproject, no section or part thereof under the civil works contract will be handed over to the contractor unless the applicable provisions of the CPF and the EAF/ECOP have been complied with.
102. Any changes to the land alignment or environment impacts on account of detailed designs of related subproject roads will be subject to prior approval by ADB or related agency (MORD) as the case may be in accordance with the subproject selection criteria and procedures included in Appendix 4.
6. Social Impacts
103. The states will ensure (i) through specific provisions in the bid documents and the civil works contracts under each individual Project under the MFF that the contractors will (a) disseminate information at work sites on the risks of sexually transmitted diseases and HIV/AIDS as part of the health and safety measures for those employed during construction; (b) follow legally mandated provisions on health, sanitation, and appropriate working conditions, including accommodation, where appropriate, for construction workers at camp sites; (c) comply with all applicable labor laws, not employ child labor for construction and maintenance activities, and provide appropriate facilities for children of laborers in construction campsites; and (d) provide equal opportunities for women for road construction activities, and not differentiate wages for men and women for work of equal value; and (ii) that compliance with provisions in 25 clause (i) of this paragraph is monitored by the respective IAs. The civil works contracts will also provide for their termination by the employer for breach of any provision.
104. The states will ensure acceptance of the Project through effective community participation in selecting and implementing subprojects in accordance with the PMGSY Guidelines as supplemented by the CPF.
105. In case of any significant or related impacts on scheduled tribes under any subproject, these will follow the requirements as set out in the CPF as agreed by ADB (the CPF lays down special provisions for all scheduled tribe households to ensure that their living standards are not adversely affected as a result of land donation or in the event of any loss of non-land asset and impacts on their livelihoods). As also laid down in the CPF, for any impact on land involving traditional and tenurial rights of the scheduled tribes, the legal provisions laid down by the Government and the state governments pertaining to transfer of land will be duly followed.
7. Environment
106. ADB will only finance subprojects that meet the eligibility requirements set out in Appendix 4, and that adhere to relevant requirements of the PMGSY Guidelines, the CPF, the EAF, and other applicable guidelines for subproject implementation. The states will monitor the implementation of subprojects through to their completion of each subproject.
107. The states will ensure that (i) subprojects will be implemented in accordance with the EAF; and (ii) relevant provisions of the ECOP identified in the subproject preparation stage are incorporated into the subproject designs and followed during subproject design, construction, operation, and maintenance.
108. The states will require the related SRRDA to implement each individual Project under the MFF in accordance with all applicable laws and regulations regarding wildlife and protected areas/forest areas for subprojects that involve roads passing through forest areas and address these under the relevant IEE for such subprojects. No construction work will be undertaken on sections of subprojects that pass through a forest reserve unless clearance is granted by India’s Ministry of Environment and Forest under applicable laws and regulations of India/respective state, and no subproject will be located within or close to an environmentally sensitive area such as a wildlife sanctuary, national park, or other areas with significant ecological functions that are declared as national parks, sanctuaries, or national/international cultural heritage.
8. Subproject Selection and Approval Process
109. MORD will ensure that the subprojects follow the selection criteria and are promptly processed for approval by ADB as described in detail in Schedule 2 of the FFA.
9. Inclusion of Subprojects in New Participating States
110. PFRs for financing subprojects in states other than the states of Assam, Orissa, and West Bengal will be subject to satisfactory due diligence and preparation of relevant frameworks and other documents. The Government and ADB will agree on a schedule to initiate these activities, within not more than 6 months of the effectiveness of the first loan to be provided under the MFF.
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VI. RECOMMENDATION
111. I am satisfied that the proposed multitranche financing facility would comply with the Articles of Agreement of ADB and recommend that the Board approve the provision of loans under the multitranche financing facility in an aggregate principal amount not exceeding $750,000,000 equivalent to India for the Rural Roads Sector II Investment Program from ADB's ordinary capital resources, with interest to be determined in accordance with ADB's LIBOR- based lending facility, and such other terms and conditions as are substantially in accordance with those set forth in the Framework Financing Agreement presented to the Board.
Haruhiko Kuroda President
28 November 2005 Appendix 1 27
DESIGN AND MONITORING FRAMEWORK
Design Performance Data Sources/Reporting Assumptions Summary Targets/Indicators Mechanisms and Risks Impact Three to four years after Assumption Contribute to completion of subprojects • Census (next due in 2011) • Various government reduction in poverty under the Investment Program • State and district statistics rural development and deprivation, and (2011 for first loan • Sample impact study schemes are effectively support economic subprojects): conducted by NRRDA coordinated growth of the • Reduction in poverty rates • Impact monitoring by the community in rural areas served by technical support connected by Investment Program roads consultant of selected Investment Program by 5% roads in their principal roads. • Improvement in social villages indicators in rural areas served by Investment Program roads by 10%, including for maternal and infant deaths, safe delivery, immunization, post primary dropout, and primary school teacher attendance
Outcome By the end of the Investment Assumption Improved Program (2010): • OMMAS • Availability of transport connectivity of rural • Investment Program states • State and district statistics modes and services to community to to have rural road networks • Completion reports of newly connected markets, district connecting all habitations each individual loan and habitations headquarters, and with populations of 1,000 the multitranche financing other centers of and above with all-weather facility economic activity via roads (as of April 2005, • Sample impact study Investment Program habitations in this conducted by NRRDA roads population class without • Impact monitoring by the all-weather connectivity are technical support 4,692 in Assam, 2,151 in consultant of selected Orissa, and 9,533 in West roads in their principal Bengal) villages • Improved access to markets, and health and education facilities measured in terms of the number of days when access to these facilities are disrupted (currently up 1/4 of the year down to less than 15 days per year) • Diversified income opportunities in rural areas measured in terms of the number of people obtaining work outside the village and the change in cropping pattern and agricultural produce marketing (increase in perishable crops in both cropping and marketing)
28 Appendix 1
Design Performance Data Sources/Reporting Assumptions Summary Targets/Indicators Mechanisms and Risks Outputs By the end of the Investment • OMMAS Assumptions 1. Construction and Program (2010): • National quality monitor • Continuous allocation of upgrading of rural • 30,000 km priority rural inspection reports central Government’s roads into all- roads in the Investment • Biennial pavement funds to PMGSY in the weather standard Program states condition index survey Investment Program constructed and upgraded • Quarterly progress reports states to all-weather standard and loan completion • Continuous allocation of connecting about 19,000 reports state Governments’ rural habitations (ADB • ADB review missions funds for financing to cover about • ADB midterm review postconstruction 1/3 of this requirement) mission maintenance works • All roads constructed or • External monitoring of • Quality control and upgraded to be rated community participation monitoring of civil works collectively 30% higher effective than the current ratings • Active participation of (“very good” rating rural community in currently at 28% in Assam planning and and West Bengal, and 50% preparation of in Orissa) subprojects • Rural roads improved under earlier-completed loans of the Investment Program to maintain pavement condition index (defined in PMGSY Operations Manual) value of 5
2. Improved • Improvements to PMGSY community community consultation participation procedures measured by satisfaction of the affected communities
Activities with Milestones Inputs • ADB OCR financing of 1.0 Subproject Preparation $750 million 1.1 Appraisal of sample subprojects (about 3,200 km) completed by August 2005. • Government financing of 1.2 Additional subprojects to be prepared and appraised by the Government with ADB $1,350 million review of additional 100 km of subproject proposals from each of the Investment • ADB staff time for Program states multitranche financing facility administration 2.0 Framework Financing Agreement including review of PFRs 2.1 Signed in November 2005 and preparation of loan/project agreements 3.0 Periodic Financing Request for individual loans 3.1 First PFR submitted in November 2005 3.2 ADB review of ongoing subprojects—biannually 3.3 ADB review of states’ readiness to implement additional loans—to be done concurrently with above review of ongoing subprojects 3.4 Government to notify ADB of forthcoming PFR—at least 15 days in advance 3.5 Government to submit PFR and ADB to approve the requested financing through execution of a corresponding loan agreement—within 30 days of PFR
Appendix 1 29
Activities with Milestones Inputs
4.0 Safeguards 4.1 Social and environmental safeguard frameworks prepared during processing 4.2 For new states to be included under the multitranche financing facility, safeguard framework documents to be prepared 4.3 Community consultation completed and land made available in accordance with construction schedule—applicable to all subprojects under the facility
5.0 Subproject Implementation 5.1 PICs in place before commencement of 1st loan civil works contracts—expected in December 2005 5.2 Under subsequent loans, civil works contracts to be awarded toward the end of the monsoon season (by October-November) to have a longer working period
6.0 Monitoring and Reporting 6.1 Baseline survey by December 2005 6.2 Monthly internal monitoring using OMMAS 6.3 Quarterly progress reporting 6.4 Quarterly external monitoring of safeguard implementation 6.5 Annual impact monitoring at end 2006, end 2007, end 2008, end 2009, and Investment Program completion 6.6 Impact monitoring by NRRDA to continue after completion of the Investment Program
ADB = Asian Development Bank, NRRDA = National Rural Roads Development Agency, OMMAS = online management, monitoring, and accounting system, PFR = periodic financing request, PIC = project implementation consultant, PMGSY = Pradhan Mantri Gram Sadak Yojana.
30 Appendix 2
SUBSECTOR ANALYSIS
A. Introduction
1. India’s transport system is one of the largest in the world. It serves a land area of 3.3 million square kilometers (km2) and consists mainly of roads, railways, and air services. Inland water transport plays a small role in some states and has a total traffic share of 0.15%. In the past, railways were the predominant transport mode. In 1960, railways carried 85% of goods traffic (in ton km) and 51% of passenger traffic (in passenger km). By 2001, the figures had declined to 32% of goods and 13% of passenger traffic. Road transport is now the dominant mode and accounts for 68% of goods traffic (in ton km) and 87% of passenger traffic (in passenger km).
B. Status of Roads Subsector and Government Strategy
1. Current Status
2. India’s road network mainly consists of three categories of roads: (i) about 60,000 km of national highways, (ii) about 600,000 km of the secondary system comprising state highways and major district roads, and (iii) about 2.7 million km of the tertiary system mainly consisting of rural roads. The total road length is estimated to be about 3.4 million km. National highways provide the high-density links between states. They comprise only 2% of the network but carry about 40% of traffic. State highways link national highways with district headquarters, important towns, and minor ports; and major district roads run within districts, connecting areas of production with markets, and rural areas to district headquarters and to state highways and national highways. The secondary system comprises about 18% of the network and carries about 40% of traffic. Rural roads link rural communities with the highway network, providing access to higher agricultural incomes, employment opportunities, and social services. They represent about 80% of the network and carry about 20% of traffic.
3. The sustained underinvestment in road infrastructure in India has affected all levels of the road network.1 The national highways and the secondary system had not been able to meet the rapid traffic growth. In the road subsector, freight traffic increased at about 12% per year and passenger traffic at about 8% in the past decade. The rapid growth in traffic led to congestion, road deterioration, and high costs of transport. Widespread overloading of freight vehicles damages the road pavement. Mixed use of the roadway by both motorized and nonmotorized vehicles (bicycles, animal-drawn vehicles, etc.) causes congestion and high levels of traffic accidents. In rural areas, where 70% of India’s population lives, many villages still rely on earth tracks that are unsuitable for motorized traffic and become impassable during the rainy season due to the poorly finished road surface; missing bridges; and inadequate, defective, or missing drainage structure. Even where all-weather connections have been provided, the standard of rural roads is low, maintenance is poor, and many roads are in need of rehabilitation.
4. Improving the road transport network is important for the economic development and social integration of the country. Providing rural areas with all-weather roads is a key component of rural development and economic growth, and will significantly improve the quality of life of the majority of the people. Roads have considerable impacts on poverty reduction as they lead to
1 Since the 6th five-year plan, 1980–1985, annual investments in roads varied between 0.6% and 1.5% of gross domestic product, with an average of 1.1%. Appendix 2 31 higher agricultural incomes, increased productive employment opportunities, and improved access to economic and social services.
2. Government Strategy
5. The main objective for the road subsector in the Government’s 10th plan (2002–2007) is the balanced development of the total road network, which includes adding capacity by widening roadways, improving riding quality, strengthening road safety measures, and establishing wayside amenities. Two major investment initiatives are being implemented. The first is the National Highway Development Project comprising the 6,000 km golden quadrilateral linking Delhi, Mumbai, Chennai, and Kolkata; and the 7,300 km north–south, east–west corridors from Kashmir to Kanyakumari and Silchar to Porbandar. This project, which is being implemented by the National Highway Authority of India, envisages creating four/six-lanes on the existing network at a cost of Rs540 billion ($11 billion). Financing comes from earmarked excise duty (cess)2 on petrol and diesel, multilateral funding, budgetary allocations, and market borrowing.
6. The second major initiative is the Pradhan Mantri Gram Sadak Yojana (PMGSY), the Prime Minister’s Rural Roads Program, established in 2000, which has the overall objective of connecting rural habitations with populations of 500 or more to all-weather roads by 2007. Recently, the Government announced a revised time frame for achieving rural connectivity under an umbrella program for rebuilding rural infrastructure called Bharat Nirman.3 The revised target to achieve connectivity to all habitations with a population of 1,000 (500 in the case of hilly or tribal areas) by 2009 would require about Rs480 billion ($11 billion) from the fiscal year (FY) 2006 to 2010. Financing is being provided from earmarked cess, multilateral funding, and budgetary allocations. The Government is also considering mobilizing additional resources through domestic borrowing.
C. Rural Roads Subsector
1. Current Status
7. The tertiary road network in India comprises about 2.7 million km; the majority are rural roads. The rural road network consists of zilla parishad roads, gram panchayat roads,4 and community roads. Following the 73rd Constitutional Amendment in 1992, state governments are to assign responsibility for management of rural roads to the panchayati raj institutions and to remit necessary financial resources for this purpose. This has not yet been fully implemented. Most of the states still retain the rural roads under their responsibility. Due to this ambiguity in responsibility and lack of mechanisms to systematically assess the conditions of the rural roads, their status is not well inventoried and only partially recorded in government statistics. According
2 The Central Road Fund Act, 2000 introduced an additional excise duty (cess) of Re1.00 per liter on petrol and Re1.00 on high-speed diesel oil, to be allocated as follows: (i) 50% of cess on high-speed diesel to the development of rural roads; and (ii) 50% of cess on high-speed diesel and 100% of cess on petrol to development and maintenance of national highways, road bridges under or over railway lines and safety work at unstaffed railway crossings, and development and maintenance of state roads. The cess on high-speed diesel was increased to Rs1.5 per liter in 2003. 3 The finance minister, in his budget speech on 28 February 2005, designated rural roads as one of the six components of Bharat Nirman (meaning Laying the foundation for India). The other proposed components are irrigation, rural housing, rural water supply, rural electrification, and rural telecommunication connectivity. 4 A panchayat is a body of directly elected people responsible for development of activities in an area. The three levels of panchayat comprise gram panchayat at village level, intermediate panchayat at block level, and zilla panchayat at district level. These panchayats collectively called “panchayati raj institutions.” 32 Appendix 2 to statistics published by the Ministry of Shipping, Road Transport, and Highways, of 412,600 km gram panchayat roads, only 57,300 km (14%) were surfaced in 2002. These figures do not cover those roads being added under PMGSY. Table A2.1 shows the status of different types of rural roads.
Table A2.1: Status of Rural Roads in India Total Length Surfaced Length Surfaced Category (km) (km) (%) Zilla Parishad Roads 499,462 283,832 57 Village Panchayat Roads 412,595 57,338 14 Panchayat Samiti Roads 148,104 37,273 25 Panchayat Raj Roads Totala 1,060,161 378,443 36 Rural Roads Constructed under Jawahar 900,000 183,202 20 Rojgar Yojna km = kilometer. a Excludes roads being improved under PMGSY. Source: Ministry of Shipping, Road Transport, and Highways website.
2. Rural Roads under PMGSY
8. PMGSY focuses on providing all-weather connectivity5 to rural habitations that are lacking this. The road works to be financed under PMGSY are to create the “last 1 mile” connectivity to villages in rural areas. A nationwide planning exercise conducted in 2000 to identify unconnected habitations and eligible roads under PMGSY found that in rural areas where 70% of India’s population lives, about 330,000 habitations, 40% of the total 850,000 habitations, were without all-weather road connectivity. To maximize the impacts of the investment under PMGSY, the Ministry of Rural Development (MORD) established criteria to give priority to habitations with a larger population. The original target was to provide good all- weather road connections to all habitations with a population of 1,000 or more by 2003 and to all habitations with a population of 500 or more by 2007. In hilly or desert areas, or scheduled tribe areas as defined in Schedule V of the Constitution of India, the objective is to connect all habitations with a population of at least 250 by 2007. On this basis, PMGSY has identified more than 170,000 unconnected habitations requiring new road connectivity investments for about 370,000 km of roads. Details of the eligible habitations under PMGSY are in Supplementary Appendix A.
9. The level of rural connectivity varies significantly across the states. The eligible unconnected habitations under PMGSY are concentrated in the following 10 states: Assam, Bihar, Chhattisgarh, Himachal Pradesh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, and West Bengal; and account for 88% (151,000) of the eligible habitations under PMGSY nationwide. MORD has selected these states for focused PMGSY intervention. The first Asian Development Bank (ADB) loan, Rural Roads Sector I Project (RRSI), for $400 million is to finance PMGSY in the states of Chhattisgarh and Madhya Pradesh. The World Bank’s first loan-credit for $400 million is to finance PMGSY in Himachal Pradesh, Jharkhand, Rajasthan, and Uttar Pradesh. The proposed Rural Roads Sector II Investment Program is to finance PMGSY in Assam, Orissa, and West Bengal. Bihar may be covered under the ongoing World Bank project.
10. Key indicators related to the road subsector of Assam, Orissa, and West Bengal are in Table A2.2. Of the three states, Assam has the poorest road network with only 14% of the roads
5 PMGSY defines an all-weather road as one that is negotiable in all weather conditions, and has adequate cross- drainage structures to effectively drain the roadbed. Appendix 2 33 surfaced. Table A2.3 provides some of the PMGSY planning and progress indicators. In spite of the impressive progress made to date, these states remain among those with the greatest number of unconnected habitations with more than 40% of the unconnected habitations with populations greater than 1,000 nationwide.
Table A2.2: Key Road Subsector Indicators in Assam, Orissa, and West Bengal Item Assam Orissa West Bengal Area (km2) 78,438.0 155,707.0 88,752.0 Population (million) 26.6 36.7 80.2 Total Road Length (km) 89,486.0 238,034.0 92,023.0 National Highway (km) 2,836.0 3,704.0 2,325.0 Surfaced Road Length (km) 12,882.0 52,245.0 49,517.0 14.4% 22.0% 53.8% Road Density (km/km2) 1.14 1.52 1.04 km = kilometers, km2 = square kilometer. Percentages are with respect to the total road length. Source: Ministry of Shipping, Road Transport, and Highways website.
Table A2.3: PMGSY in Assam, Orissa, and West Bengala West Total of Total of Item Assam Orissa Bengal Three States India Total Number of Habitations 22,936 49,018 51,472 123,426 849,337 Number of Unconnected 15,786 28,299 35,667 79,752 330,647 Habitations Number of Eligible Unconnected 13,144 14,393 25,288 52,825 172,772 Habitations under PMGSY 7.6% 8.3% 14.6% 30.6% Road Length to be Covered 18,987 29,374 23,652 72,013 369,386 under PMGSY to Connect 5.1% 8.0% 6.4% 19.5% Eligible Habitations Number of Eligible Habitations 2,232 2,668 2,717 7,617 33,875 Connected under PMGSY 6.6% 7.9% 8.0% 22.5% Allocation from 2000/01 to 2004/05 Number of Eligible Habitations 10,912 11,725 22,043 44,680 137,534 Remaining to be Connected 7.9% 8.5% 16.0% 32.5% Population 1,000+ 4,692 2,151 9,533 16,376 38,669 12.1% 5.6% 23.9% 42.3% Population 500–999 3,684 5,973 11,009 20,666 70,733 5.2% 8.4% 15.6% 29.2% Population 250–499 2,536 3,601 1,501 7,638 28,132 9.0% 12.8% 5.3% 27.2% km = kilometer, PMGSY = Pradhan Mantri Gram Sadak Yojana. a Percentages are with respect to the total of India. Source: PMGSY Briefing Book, April 2005.
3. Key Sector Issues
11. Funding Gap. Because PMGSY is a fully Government-sponsored scheme, the financial viability of the program depends on the willingness and ability of the Government to raise and allocate funds to effect its delivery and achieve its targets. Full achievement of program targets as originally scheduled has been constrained due to limited funding availability. Current estimates suggest that the total investment required to meet PMGSY targets is about Rs1,320 billion (approximately $30 billion). Based on this estimation, several billion per year is required to deliver PMGSY targets within a reasonable time frame. A more realistic target set under the 34 Appendix 2
Bharat Nirman still requires about Rs480 billion from FY2006 to 2010. About 40% of this requirement is to be funded from the cess on high-speed diesel and about 7% from the committed assistance from ADB and the World Bank; for the balance of 53%, funding sources remain to be identified. MORD is seeking domestic and external borrowing to deliver the program, and is taking steps to find ways to lower the unit costs of new roads and reduce the overall investment requirement. Program support for these efforts is recommended to strengthen the overall financial viability of PMGSY.
12. Maintenance Funding. Sustainability of the PMGSY investment will be dependent on effective implementation of appropriate design and construction standards and an adequate maintenance regime. PMGSY requires implementation of technical oversight during design and contractor supervision during construction, as well as inclusion in the construction contract of a 5- year maintenance component to be implemented by the construction contractor. The maintenance component, which includes the construction/defects liability period, is separately financed by the state.
13. State governments are also required to furnish a certificate to the effect that the provision of funds for maintenance has been made for PMGSY roads separately in the state budget, as a precondition for submitting annual project proposals to the central Government. Amounts budgeted and allocated for FY2005 are (i) Assam. Rs600 million (about $14 million) are budgeted for the entire road network under state responsibility, of which Rs150 million (about $3.5 million) were deposited in the Assam State Road Board (ASRB) account as of April 2005. (ii) Orissa. Rs12.6 million (about $0.3 million) are budgeted and this amount has been deposited in the Orissa State Rural Roads Agency (OSRRA) account. (iii) West Bengal. Has budgeted Rs30 million (about $0.7 million) earmarked for payment to PMGSY contractors.
14. Although funding required to meet existing contractual obligations is relatively modest, funding requirements will increase exponentially as PMGSY roads constructed under the new form of contract are completed. This requirement will experience another significant increase when ADB-funded roads begin to come online in FY2008. Maintenance requirements for FY2007 to FY2012 in constant rupees, without taking inflation into consideration are as follows: (i) Assam from Rs130 million ($3 million) in FY2008 to Rs790 million ($18.2 million) in FY2012; (ii) Orissa from Rs330 million ($7.6 million) in FY2008 to Rs1.140 billion ($26.2 million) in FY2012; and (iii) West Bengal from Rs230 million ($5.3 million) in FY2008 to Rs1.320 billion ($30.3 million) in FY2012.
15. These are significant when compared with the existing level of maintenance funding budgeted by the respective states. Moreover, state financing of program maintenance for new roads should not result in a reduced level of funding for maintenance already committed to by each state for existing roads.
16. With maintenance of existing state rural road networks already significantly underfunded, this program will need to explore ways to more reliably and effectively ensure adequate financing for the maintenance of all state rural roads—existing and proposed, particularly core rural road networks. In this regard, loan assurances agreed upon for ADB support of the RRSI, with respect to road maintenance, will also be required for the second phase of ADB support. Appendix 3 35
EXTERNAL ASISTANCE TO THE ROAD SECTOR
A. Asian Development Bank
Amount No. Project Name Type Date Approved ($’000)
Technical Assistance 0955 Road Improvement PP 75 24 Feb 1988 1058 Pavement Management A&O 490 3 Jan 1989 1059 Expressway System Planning A&O 260 3 Jan 1989 1164 Second Road PP 100 9 Jun 1999 1325 Vadodara-Bombay Expressway PP 600 15 Jun 1990 1402 Pavement Management for National Highways A&O 760 30 Oct 1990 1403 Private Sector Participation in Expressway Financing, A&O 500 30 Oct 1990 Construction and Operation 1404 Road Construction Industry A&O 340 30 Oct 1990 1325 Vadodara–Bombay Expressway (Supplementary) PP 250 19 Mar 1991 1678 Third Road PP 250 26 Mar 1992 1942 Faridabad–Noida–Ghaziabad Expressway PP 550 27 Aug 1993 1951 Bombay–Vadodara Expressway TA Project Environmental PP 90 10 Sep 1993 Impact Assessment 2001 Road Safety A&O 210 29 Nov 1993 2002 Environmental Management of Road Projects A&O 240 29 Nov 1993 2003 Technical Standards of Highway Concrete Structures A&O 350 29 Nov 1993 2986 Western Transport Corridor─Facilitating Private Participation PP 1,000 9 Feb 1998 3142 North–South Corridor Development in West Bengal PP 1,000 23 Dec 1998 3361 Capacity Building for Contract Supervision and Management in A&O 600 22 Dec 1999 the National Highways Authority of India 3365 Capacity Building for Social Development A&O 800 23 Dec 1999 3445 Establishing a Public Private Joint Venture for the West Bengal A&O 150 25 May 2000 North–South Economic Corridor Development 3538 Preliminary Engineering for the West Bengal Corridor PP 150 13 Nov 2000 Development 3539 Resettlement and Environmental Assessment for the West PP 150 13 Nov 2000 Bengal Corridor Development 3540 Economic and Poverty Analysis for the West Bengal Corridor PP 150 13 Nov 2000 Development Project 3724 Enhancing the Corporate Finance Capability of National A&O 700 20 Sep 2001 Highways Authority of India 3751 Madhya Pradesh State Road Sector Development PP 600 29 Oct 2001 3752 National Highway Corridor and Public–Private Partnership PP 700 29 Oct 2001 3845 Madhya Pradesh State Road Development PP 1,000 14 Mar 2002 3914 Economic Studies for the Rural Roads Sector Development PP 150 3 Sep 2002 3915 Engineering Studies for the Rural Roads Sector Development PP 150 3 Sep 2002 3916 Environmental Analysis for the Rural Roads Sector PP 100 3 Sep 2002 Development 3917 Institutional and Policy Development Studies for the Rural PP 150 3 Sep 2002 Roads Sector Development 3918 Social Analysis for the Rural Roads Sector Development PP 150 3 Sep 2002 3995 Chhattisgarh State Roads Sector Development PP 800 21 Nov 2002 4013 Institutional Strengthening and Capacity Building for Madhya A&O 1,500 5 Dec 2002 Pradesh State Road Sector 4036 National Highway Corridor (Sector) PP 500 16 Dec 2002 4152 National Highway Sector II PP 300 21 Jul 2003 4220 Rural Roads Sector II PP 1,000 20 Nov 2003 4271 Development of High-Density Corridors under the Public– A&O 700 18 Dec 2003 Private Partnership 4355 High Priority National Highways PP 1,000 8 Jul 2004 4378 Northeastern State Roads PP 800 23 Aug 2004 4013 Institutional Strengthening and Capacity Building for Madhya A&O 600 29 Apr 2005 Pradesh State Road Sector (Supplementary)
36 Appendix 3
Amount No. Project Name Date Approved ($ million)
Loans from Ordinary Capital Resources 0918 Road Improvement 198.00 10 Nov 1988 1041 Second Road 250.00 30 Oct 1990 1274 National Highways 245.00 29 Nov 1993 1747 Surat–Manor Tollway Project 180.00 27 July 2000 1839 Western Transport Corridor 240.00 20 Sept 2001 1870 West Bengal Corridor Development 210.00 11 Dec 2001 1944 East–West Corridor 320.00 26 Nov 2002 1958 Madhya Pradesh State Roads Sector Development (Program 30.00 5 Dec 2002 Loan) 1959 Madhya Pradesh State Roads Sector Development (Project Loan) 150.00 5 Dec 2002 2018 Rural Roads Sector I 400.00 20 Nov 2003 2029 National Highway Corridor (Sector) I 400.00 4 Dec 2003 2050 Chhattisgarh State Roads Development Sector 180.00 15 Dec 2003 2154 National Highway Sector II 400.00 21 Dec 2004
B. Other Funding Sources
Project Length Loan Amount $ Million Region/State Project Name (km) (yen million) Equivalent
Japan Bank for International Cooperation Uttar Pradesh Mathura–Agra 51 4,855 43.3 Uttar Pradesh Allahabad–Naini Bridge 5 10,037 89.6 Andhra Pradesh Chilakaluripet–Vijayawada 83 11,360 101.4 Orissa Jagatput–Chandikhol 33 5,836 52.1 Uttar Pradesh Ghaziabad–Hapur 33 4,827 43.0
Amount ($ million) IBRD IDA Date Approved World Bank Group Countrywide Roads 72.11 1 Jun 1961 Bihar Bihar Rural Roads 35.00 1 Nov 1980 Countrywide National Highway 200.00 1 May 1985 Gujarat Gujarat Rural Roads 119.60 1 Feb 1987 Countrywide State Roads 80.00 1 Oct 1988 Countrywide State Roads 170.00 1 Oct 1988 Countrywide Second National Highways 153.00 1 May 1992 Countrywide Second National Highways 153.00 1 May 1992 Countrywide State Road Infrastructure Development 51.50 1 Dec 1996 Technical Assistance Andhra Pradesh State Highways 350.00 1 Jun 1997 Countrywide Third National Highways 516.00 12 May 2000 Countrywide Gujarat State Highways 381.00 15 Sep 2000 Countrywide Grand Trunk Road Development 589.00 21 Jun 2001 Karnataka Karnataka State Highways Improvement 360.00 24 May 2001 Kerala Kerala State Transport 255.00 14 Mar 2002 Mizoram Mizoram State Roads 60.00 14 Mar 2002 Uttar Pradesh Uttar Pradesh State Roads 488.00 19 Dec 2002 Tamil Nadu Tamil Nadu Road Sector 348.00 17 Jun 2003 Himachal Pradesh, Rural Roads 99.50 300.00 23 Sep 2004 Jharkhand, Rajasthan, Uttar Pradesh Uttar Pradesh, Bihar Lucknow-Muzaffarpur National Highway 465.00 21 Dec 2004 A&O = advisory and operational, IBRD = International Bank for Reconstruction and Development, IDA = International Development Association, PP = project preparatory . Sources: Asian Development Bank, Japan Bank for International Cooperation, and World Bank.
Appendix 4 37
SELECTION CRITERIA AND APPROVAL PROCESS FOR SUBPROJECTS
A. General
1. The Rural Roads Sector II Investment Program (Investment Program) and related subprojects will be carried out in accordance with the Prime Minister’s Rural Roads Program (PMGSY) guidelines,1 as supplemented by requirements specific to the multitranche financing facility (MFF) including those of the agreed community participation framework (CPF) and the environmental assessment and review framework (EAF).
B. Subproject Selection Criteria
2. Selection and preparation of subprojects under the Investment Program will be primarily the responsibility of the state implementing agency: the state rural roads development agency (SRRDA). The following criteria will apply in selecting subprojects intended for financing under the MFF:
(i) Subprojects will cover rural roads that lack an all-weather road connection. (ii) Subprojects will be eligible for construction or upgrading in accordance with the PMGSY guidelines, and be included in the respective district core network. (iii) Subprojects will be ranked using an area approach given in the PMGSY guidelines, selecting packages of roads that contain (a) a link road connecting the highest priority habitation in the comprehensive new connectivity priority list; (b) a through road that serves the link road; and (c) other eligible link roads that connect to the through road. (iv) Subprojects will be technically feasible, and cost-effective as required under the PMGSY guidelines. (v) Road safety measures will be incorporated in the subproject designs as required under the PMGSY guidelines. (vi) Design of subprojects will be finalized based on input from community consultation conducted in accordance with the PMGSY guidelines, as supplemented by the CPF. (vii) If a subproject requires land to be made available, community consultation processes in accordance with the PMGSY guidelines, as supplemented by the CPF will be conducted. Information on the process of land transfer, assistance/support options, and grievance procedures will be disseminated to the project-affected communities, and issues will be resolved before awarding civil work contracts. (viii) Subprojects will be environmentally sound; none will be located within or close to an environmentally sensitive area, such as a wildlife sanctuary, national park, or other areas having significant ecological functions. (ix) An environmental checklist will be prepared for the subproject in accordance with the EAF, and relevant provisions of the environmental codes of practice (ECOP) will have been identified. (x) Sufficient counterpart funding will be allocated by the Government or related state governments, as required, to implement the subproject as scheduled and
1 These guidelines include Ministry of Rural Development, Government of India. 2004. Pradhan Mantri Gram Sadak Yojana Programme Guidelines. Delhi; Ministry of Rural Development, Government of India. 2005. Pradhan Mantri Gram Sadak Yojana Operations Manual. Delhi; and other related manuals and instructions. 38 Appendix 4
maintain the subproject road under the post-construction 5-year maintenance contract. (xii) All necessary central and state government approvals will have been obtained for the subproject.
C. Approval Procedures for Subprojects
3. Approval procedures for road connectivity subprojects will follow the process given in the PMGSY guidelines as supplemented by the requirements of the CPF and EAF (including ECOP).
4. For additional subprojects intended for financing under the MFF, approval procedures will be as follows:
(i) The SRRDA will prepare subproject proposals in formats given in the PMGSY operations manual, CPF, and EAF indicating compliance of each proposed subproject with the selection criteria; and will submit the proposals to the National Rural Roads Development Agency (NRRDA).2 (ii) NRRDA will review the subproject proposals, check compliance with the selection criteria, and for those found compliant with the selection criteria, recommend approval to the Ministry of Rural Development (MORD). (iii) MORD through NRRDA will submit the subproject proposals it intends to finance under the Asian Development Bank (ADB) loan to ADB for review and approval before formally sending the subproject proposals to the Empowered Committee for clearance. (iv) ADB will approve the subproject proposals, subject to any modifications required. (v) Subject to addressing any modification as required under subclause (iv), MORD will give final approval for the subproject proposals to the SRRDA. (vi) The SRRDA will proceed with tendering as guided by the PMGSY guidelines.
5. Notwithstanding para. 4 subclauses (iii), (iv) and (v), unless otherwise required by ADB, for financing to be provided to each state under the MFF, prior approval by ADB will be required for subproject proposals only for the first 100 km of rural roads in such state.
D. Monitoring during Implementation
6. Adherence to requirements of the PMGSY guidelines, CPF, EAF (including ECOP) and other applicable guidelines for subproject implementation will be monitored through the completion of each subproject and only those subprojects meeting the requirements will be eligible for ADB financing. The existing monitoring mechanism under PMGSY, namely the online management, monitoring, and accounting system and the state and national quality monitors, will be supplemented by input from the technical support consultant for safeguard compliance and road safety.
2 The PIUs of the SRRDA, with support of the project implementation consultants, will finalize the detailed project reports of proposed subproject roads meeting all the selection criteria, and will submit them to the state technical agency for technical scrutiny after completing all the procedural requirements of the PMGSY guidelines, CPF, and EAF. Compliance with the requirements of the CPF and EAF will be concurrently reviewed by the technical support consultant financed under the MFF. Appendix 5 39
DESIGN FEATURES AND TECHNICAL STANDARDS
1. The roads to be constructed or upgraded under the Rural Roads Sector II Investment Program are rural roads comprising village roads and other district roads to provide all-weather connectivity to habitations. The project roads will be built along the alignments of the existing earth/gravel roads, which are in poor condition. The majority of these roads are impassable for 3–4 months during the wet season. As they presently carry a low volume of traffic—on average, less than 50 motorized vehicles per day—and projected traffic for them after 20 years will still be below 1,000, the project roads are classified as low-traffic.
A. Design Standards for Investment Program Roads
2. The design criteria adopted are in accordance with the Indian Roads Congress (IRC) publication Rural Roads Manual (IRC:SP:20-2002) and other IRC design codes that have been followed by the Prime Minister’s Rural Roads Program (PMGSY). The standards are consistent with standard international practices adopted by the American Association of State Highway and Transportation Officials design standards and Transport Research Laboratory Overseas Road Note 31: Guide to the Structural Design of Bitumen-Surfaced Roads in Tropical and Subtropical Countries, and are found appropriate.
3. The following codes have been developed by IRC to provide guidelines on the geometric design standards of rural roads.
(i) IRC:73-1980 Geometric Design Standards for Rural (Nonurban) Highways. (ii) IRC:52-2001 Recommendations about the Alignment Survey and Geometric Design of Hill Roads. (iii) IRC:SP:23-1983 Vertical Curves for Highways. (iv) IRC:38-1988 Guidelines for Design of Horizontal Curves for Highways and Design Tables. (v) IRC:SP:48-1998 Hill Road Manual.
4. PMGSY only requires that roads be negotiable in all kinds of weather. The choice of surfacing takes into account factors such as traffic, soil type, and rainfall. Under the Rural Roads Sector II Investment Program, the subprojects must meet an economic criterion to ensure that they are economically justified. In many cases, bitumen surfacing will be the most economic option, particularly because (i) under monsoon conditions, gravel-surfaced roads could be washed away by rains; and (ii) gravel roads require frequent maintenance if they are to realize their potential life, and include uncertainties about establishing a permanent capacity sufficient for carrying out required activities.
B. General Design Consideration
5. The major improvements on the project roads are as follows:
(i) Widen the existing roadway to 7.5 meters (m)—efforts will be made to confine widening within the existing right-of-way to minimize adverse environmental and social impacts.
40 Appendix 5
(ii) Provide a 3.75 m wide carriageway with granular subbase, waterbound macadam as base, and bitumen overlay. Where the traffic is low and is not likely to increase in the future,1 width of 3 m will be provided.
(iii) Provide a 3.75 m shoulder (1.875 m on each side).
(iv) Raise the embankment to provide a minimum subgrade level of 0.5 m above the natural ground level or 0.6 m above the highest flood level to meet hydraulic requirements.
(v) Improve horizontal and vertical alignment to allow a design speed of 50 kilometers/hour on level terrain. The existing alignment will be followed in most cases to minimize resettlement.
(vi) Provide adequate road safety features through a safety audit.
(vii) Provide proper cross-drainage structures, where necessary, to ensure all- weather connectivity. Conduits for future irrigation pipes will be provided.
(viii) Provide road furniture, including signs and kilometer posts.
(ix) Establish tree plantations along the roads where appropriate.
1 In case the road has a dead end.
POLICY MATRIX
Issue Intervention Impact Status A. Project Selection
1. National level • (RRSI) Policy dialogue with Ministry • Giving priority to rural roads • Preparation of core network based on development of concept of of Rural Development (MORD) to forming part of core network will district rural roads plan, procedures to core network and identify a core network of rural allow for the optimization of draw up lists of priority roads for new procedures to identify roads in each district that will be the network benefits from the connectivity and upgrading, and priority rural road backbone providing connectivity to investment in rural roads selection procedures to prepare an investment all planned link rural roads annual list of project roads incorporated in updated PMGSY guidelines 2. Incorporation of economic • (RRSI) Give priority to developing • Will ensure economic efficiency • Consideration to economic viability viability criterion economically viable rural roads and sustainability forms part of eligibility criteria in the newly issued PMGSY Operations Manual
B. Financing: National 1. Financing of project • (RRSI) Policy dialogue with MORD • Will encourage more states to use • Incorporated in updated PMGSY preparation and supervision to allow the use of Pradhan Mantri consultants for preparing detailed guidelines activities Gram Sadak Yojana (PMGSY) project reports (DPRs), and for funds to finance consulting services supervising works. This in turn will for project preparation and help increase the professionalism supervision with which DPRs are prepared and project supervision is carried out
C. Project Implementation 1. National a. Formulate • (RRSI) Policy dialogue with MORD • Use of standardized documents • MORD introduced mandatory use of standardized to formulate standardized contract will help states ensure effective the standard contract documents with contract documents documents for project preparatory consultancy and contracting 5-year post-construction maintenance consulting services, project implementation arrangements for in 2003/04 construction works, and project project preparation, construction, • Procedures and documents for supervision consulting services, and supervision thus helping recruiting consultants largely based on including the option for states to ensure the quality of the roads ADB procedures currently pilot-tested,
finance maintenance of roads by constructed and to be used in RRSII states 6 Appendix the contractor for the first 5 years operations
41
42 Issue Intervention Impact Status 2. State b. Establish • (RRSI) Policy dialogue with • This will improve the efficiency • State rural roads development
autonomous rural roads government of Chhattisgarh to and speed of implementation agencies established in most of the 6 Appendix development agency to establish such authority to allow PMGSY participating states in 2003 implement PMGSY efficient decision making, especially for procurement
c. Use consultants for • (RRSII) Policy dialogue with • This will allow state governments • Governments of Assam, Orissa, and project preparatory governments of Assam, Orissa, and to mobilize required resources for West Bengal used consultants for consulting services and West Bengal to adopt use of project delivery without building up DPR preparation and will engage project supervision consultants for project delivery in-house resources and to focus project implementation consultants consulting services their resources on core activities under RRSII for further DPR preparation and civil works supervision D. Project Sustainability 1. Maintenance planning • (RRSI) Policy dialogue with MORD • Adequate planning and financing • Under updated PMGSY guidelines, and financing to require states participating in commitments are necessary for MORD requires state governments to PMGSY to provide firm the road assets to be sustainable approve budgeting of an annual slice undertakings regarding the over their useful economic lives of funds required for post-construction planning and financing of future 5-year maintenance as a precondition maintenance of rural roads network for annual approval for new project proposals
E. Safeguard Policies 1. National a. Include experts • (RRSII) Policy dialogue with MORD • This will help address safeguard • To be incorporated in RRSII for safeguard in to include the centrally financed issues from an early stage in centrally financed project implementation consultants project preparation throughout project preparation social/resettlement and project implementation, and and supervision environment experts propagate the same approach consulting services toward the PMGSY 2. State a. Environment • (RRSII) Policy dialogue with • This will help ensure that ADB’s • Environmental assessment and review implementing agencies to address safeguard policy principles relating framework endorsed by the RRSII project-related environmental to the environment are generally states issues by preparing an adhered to, while allowing use of • Environmental codes of practice environmental assessment and country/agency-specific systems currently being finalized review framework and to address environmental issues environmental codes of practice to be applied at the project preparation and implementation stages
Issue Intervention Impact Status b. Land acquisition and • (RRSII) Policy dialogue with • This will help ensure that ADB’s • CPF to be used under RRSII for resettlement implementing agencies to prepare a safeguard policy principles relating selection, preparation, and community participation framework to resettlement are adhered to, implementation of subprojects (CPF) that has voluntary donation while allowing use of as a standard modality to make country/agency-specific systems land available for ADB-financed to address resettlement issues subprojects and strengthen PMGSY’s community consultation process
F. Road Safety 1. National and state a. Community-based • (RRSI) Policy dialogue to introduce • This will mitigate the risk of road • Being developed under RRSI and road safety a community-based road safety accidents and establish implemented in RRSII program to mitigate road accident community initiatives to support risks by raising awareness road safety b. Road safety audit • (RRSI) Policy dialogue to introduce • This will help reduce the risk of • To be incorporated in RRSII road safety audit within PMGSY to building PMGSY roads with design mitigate potential accident risks at weaknesses that would lead to the design stage road accidents
RRSI = Rural Roads Sector I Project, RRSII = Rural Road Sector II Investment Program.
Appendix 6 Appendix 43
44 Appendix 7
OUTLINE COMMUNITY PARTICIPATION FRAMEWORK
1. The proposed multitranche financing facility (MFF) will finance the construction and upgrading of rural roads eligible for Pradhan Mantri Gram Sadak Yojana (PMGSY), the Prime Minister’s Rural Roads Program, in the selected states (initially Assam, Orissa, and West Bengal, and any other states meeting the requirements in the Framework Financing Agreement). The criteria for subproject selection, social assessment, and review procedures are provided here.
A. Social Criteria for Subproject Selection
2. Criteria include the following:
(i) adequate land width availability as specified in the Rural Roads Manual, Specification for Rural Roads 2004 and PMGSY Operations Manual 2005; (ii) the proposed alignment involves limited land loss, and the remaining land and or/structures remain viable for continued use; (iii) if impacts are unavoidable, the impacts will be minimized through one or more of the following mechanisms: (a) design modifications by reducing land width, shifting the alignment, modifying cross-sections, etc., to the extent required by safety considerations; (b) voluntary donation of land/assets by the land/asset owner by means of memorandum of understanding (MOU) or other documentation acceptable to ADB; and (c) provision of support and assistance to vulnerable affected people1 through gram panchayat2 and rural development schemes and agreed mitigation matrix; and (iv) roads with no scope for addressing social impacts through any of the mechanisms above will not be taken up under the MFF for that particular year. Such roads will be taken up after the social issues are resolved by the community.
B. Social Assessment Requirement
3. After subproject selection (para. 2), the following processes will be undertaken and documented in specified formats:
4. Planning. This involves the following activities:
(i) Disseminate project information to (a) sensitize the communities on project- related issues, and (b) articulate community expectations of the proposed project and the mechanism for beneficiaries’ land contribution. (ii) Finalize alignment through community planning: (a) transect walk conducted by the PIU, panchayat, and local community; (b) joint on-site inventory, cross- checking, verification of alignment, and transfer of information on revenue maps; (c) identification and redress of grievances;(d) initiation of the process of land
1 Affected people are defined as people (households) who stand to lose, as a consequence of the project, all or part of their physical and nonphysical assets irrespective of legal or ownership titles. 2 A panchayat is a body of directly elected people responsible for development of activities in an area. The three levels of panchayat comprise gram panchayat at village level, intermediate panchayat at block level, and zilla panchayat at district level. Appendix 7 45
transfer; (e) identification of vulnerable3 people affected by the project identified; (f) community acceptance of the project and road alignment; (g) voluntary land donations made through MOU or other documentation acceptable to ADB; and (h) adjustment of community/panchayat land to mitigate severe livelihood disturbances arising from land donations. (iii) The PIU/gram panchayat consults with people affected by the project after 15 days of the transect walk to (a) disseminate information and data on how the concerns of affected people (AP) are incorporated in design modifications; (b) describe procedures to be adopted for land transfer; (c) outline entitlement provisions for vulnerable affected people for targeted support/assistance through linkages with rural development schemes, civil support mechanisms, or cash assistance; (d) describe disbursal procedures to vulnerable AP; and (e) outline inputs required from the community: construction labor, temporary use of land for diversion. (iv) Develop a profile of AP: the PIU and gram panchayat will (a) survey AP to estimate asset ownership, sources of livelihood, and lost assets and livelihood; and (b) identify vulnerable AP to provide targeted support/assistance based on their vulnerability (living below the poverty line; households moving below the poverty line; scheduled tribes; scheduled castes; households headed by women; handicapped people suffering losses of their land, shelter, or source of livelihood). (v) Disseminate the process of land transfer and finalize entitlement provisions. (vi) Form village and district land management committees4 and grievance redress committees to resolve grievances, if any. (vii) Submit MOU or other documentation acceptable ADB to panchayati raj institution (PRI) and documentation of structure losses that are to be replaced by the PIU, state, and/or panchayat.
5. Mitigation Measures Matrix. A voluntary land donation system is adopted for the project in recognition of the effectiveness of the system for rural roads development in India. The project will also ensure that (i) there is full consultation with landowners and any nontitled people on site selection (ii) voluntary donations do not severely affect the living standards of affected people and are directly linked to benefits for the affected people, with community sanctioned measures to replace any losses that are agreed through verbal and written record by affected people; (iii) any voluntary donation will be confirmed through verbal and written record, and verified by an independent third party; and (iv) adequate grievance redress mechanisms are in place.
6. To mitigate the possible adverse impacts of the subprojects, the community participation framework (CPF) lists various types of impact categories and mitigation measures which would apply to sample as well as additional subprojects, based on the specific project impacts.
3 Vulnerable people affected by the project are defined as (i) households living below the poverty line as per the state poverty line for rural areas; (ii) households who will lose income and move below the poverty line as a result of loss to assets and/or livelihoods; (iii) households losing structure, households headed by women, scheduled caste, scheduled tribe, or the disabled. 4 A land management committee will be formed by the gram panchayats consisting of all gram panchayat members. 46 Appendix 7
Table A.7: Mitigation Measures Matrix
Impact Mitigation Measures Responsibility Category Loss of • Willing transfer of land by means of memorandum of understanding (MOU) or Gram Agricultural other documentation acceptable to ADB panchayat, Land • Advance notice to harvest standing crops project • For vulnerable affected people (AP), assistance/support by means of (i) implementation alternate land sites provided by gram panchayat, or (ii) cash assistance as per unit (PIU), and replacement costa by gram panchayat to meet loss of land; and inclusion as state beneficiaries in the existing poverty reduction/livelihood restoration programs government • For land involving traditional and tenurial rights, the legal provisions applicable of the central and state governments pertaining to transfer of land will be followed; existing customary rights of tribal communities on various categories of land will be taken into account during the process of land transfer Loss of • Provision of an alternate plot of land and structure of equivalent quality and Gram Structure value to be provided as per AP’s choice, or cash assistance by gram panchayat panchayat, to meet the loss of land and structure allowing AP to purchase land and rebuild PIU, and state structure of an equivalent standard government • For loss of boundary walls, fences, and other structures, willing transfer by means of MOU or other documentation acceptable to ADB. If voluntary donation of such structures is not possible, cash assistance as per replacement cost by gram panchayat to meet the loss of such structures, or provision of materials and/or labor by gram panchayat to allow AP to replace/rebuild the same • For vulnerable AP, inclusion as beneficiaries in the rural development programs/housing schemes • For tenants, assistance to find alternative rental arrangements by gram panchayat, or cash assistance equivalent to advance payments made to the owner • For squatters, provision of alternative relocation site, or cash assistance as per replacement cost, or provision of building material and/or labor by gram panchayat, or inclusion as beneficiaries in the rural development programs/housing schemes • For land and structure involving traditional and tenurial rights, the legal provisions applicable of the central and state governments pertaining to transfer of land will be followed; existing customary rights of the tribal communities on various categories of land shall be taken into account during the process of land transfer Loss of • For vulnerable AP, inclusion as beneficiaries in the existing poverty Gram Livelihood reduction/livelihood restoration programs; in case of noninclusion in such panchayat and programs, cash assistance to meet the loss of income during transitional phase PIU and for income restoration • Assistance for asset creation by community and gram panchayat
Loss of Assets • Willing transfer of the asset by means of MOU or other documentation Gram Such as Trees, acceptable to ADB panchayat, Well, and • For vulnerable affected people, assistance for the loss of these assets through PIU, and state Ponds inclusion as beneficiaries in the existing poverty reduction/livelihood restoration government programs; in case of noninclusion in such programs, cash assistance by gram panchayat to meet the loss of assets and income
Loss of • Relocation or construction of assets by gram panchayat with technical inputs Gram Community- from the PIU panchayat, and Owned Assets • Consultations with the concerned section of the community in the case of PIU (such as temple, grazing land, etc. wells, ponds, grazing land, etc.) Appendix 7 47
Impact Mitigation Measures Responsibility Category Temporary • Civil works contract conditions to include provisions to obligate the contractor to PIU Impacts during implement appropriate mitigation measures for the temporary impacts including Construction disruption of normal traffic, increased noise levels, dust generation, and damage to adjacent parcel of land due to movement of heavy machinery. Other Impacts • Unforeseen impacts will be documented and mitigated based on the principles in this framework. not Identified a Replacement cost means the "cost" to replace the lost asset at current market value or its nearest equivalent, plus any transaction costs such as administrative charges, taxes, and registration and titling costs allowing the individual/community to replace what is lost and their economic and social circumstances to be at least restored to the preproject level.
7. Implementation. The following activities will be undertaken:
(i) For the implementation of civil works, the states will acquire or make available on a timely basis the land and rights in land, free from any encumbrances. (ii) The PIU will facilitate enrollment of vulnerable AP in rural development schemes with prior disclosure of information of the process and schedule. (iii) Entitlements will be disbursed through civil support mechanism by gram panchayat or any other agency that holds jurisdiction over such disbursement. (iv) For lands involving traditional tenurial rights, the PIU and gram panchayat, through consultations, will assess the impacts of such land donations and the extent of dependence of the local community on such land. (v) Loss of other assets (well, trees, etc.) will be accounted for either through willing transfer (MOU or other documentation acceptable to ADB) or relocation/construction by gram panchayat/community with technical inputs from the PIU. (vi) Grievances will be resolved through the land management committee and grievance redress committees. (vii) The PIU takes physical possession of land. (viii) Temporary use of land during construction will be through written approval of the land owner or the panchayati raj institution. Contractor will bear the costs of any impact on structure or land due to movement of machinery and other construction-related reasons. Construction camp will to be sited in consultation with local community and panchayati raj institution.
8. Monitoring. The following will be undertaken:
(i) Internal monitoring The PIUs with support will conduct internal monitoring supported by the social development and safeguard specialist of the project implementation consultants (PICs). (ii) The technical supervision consultant (TSC), engaged by National Rural Roads Development Agency (NRRDA), will carry out external monitoring.
C. Review Procedure for Social Assessment of Subproject, Responsibilities, and Authorities
9. PIU Responsibilities. The following responsibility structure will be used for reviews. In particular, the PIU will
(i) prepare plans based on CPF using specified formats and append them with the detailed project report (DPR); 48 Appendix 7
(ii) with the gram panchayat, assess the impacts on land with traditional tenurial rights and the extent of dependence of the local community on such land and document the findings; (iii) disclose the entitlement provisions to all vulnerable AP; (iv) ensure timely linking of vulnerable AP to rural development programs, disbursement of entitlements and relocation/construction of assets; and help them obtain benefits from such programs on a priority basis; (v) make available MOU or other documentation acceptable to ADB for land donation by owners of land affected by the project prior to commencing construction activities; and (vi) monitor progress and resolve grievances and disseminate project progress information.
10. SRRDA Responsibilities. The SRRDAs will
(i) ensure that all DPR for subprojects are completed with the required formats on community participation and social safeguard aspects; (ii) ensure that the DPRs are reviewed by the TSC and the state technical agency; (iii) ensure that bidding documents for civil works cover relevant impact social mitigation measures to address temporary impacts during construction; and (iv) undertake routine monitoring on the implementation of mitigation measures and grievances and advise PIUs on resolving grievances.
11. State EA Responsibilities. These include the following:
(i) Provide the SRRDAs and PIUs with resources required to implement the CPF and plans. (ii) Ensure that all CPF requirements are met by the SRRDAs. (iii) Ensure that MOU or other documentation acceptable to ADB are signed and support/assistance provided on time.
12. MORD and NRRDA Responsibilities. These include the following:
(i) Undertake due diligence systematically for implementing the CPF and plans. (ii) Guide state agencies to resolve critical implementation issues and, if required, update the CPF through review of internal and external monitoring outputs. Enforcement of all such changes will be carried forward with prior approval from ADB. (iii) Submit subproject proposals for the first 100 km of rural roads for each state for ADB review prior to giving final approval. ADB will also conduct field review of the implementation of the framework/plans provisions for the same subprojects. If ADB is satisfied with the implementation of the plan/CPF for the first 100 km subprojects, MORD will approve subsequent subproject proposals.
13. The PIUs will be responsible for conducting the transect walk with support from the PICs and prepare plans based on the CPF using specified formats that will be attached to the DPR. The plans will be reviewed by the TSCs as part of the DPR scrutiny conduced by the state technical agency. The TSC will also verify on a sample basis the information contained in these documents through field visits to project-affected communities. After review by the TSC and approval by the state technical agency, a summary overview of project impact will be included in the state’s subproject proposals to NRRDA for further review and sanctioning. The procedures Appendix 7 49 described in this paragraph, however, will not apply to the subprojects prepared under ADB project preparatory technical assistance for the MFF.
14. After NRRDA approves the DPR, the PIU will ensure the MOUs or other documentation acceptable to ADB are signed, support/assistance provisions are disclosed and disbursed, and timely linkages to rural development schemes are established. The PIUs will prepare the monthly monitoring formats on the progress of implementation and submit them to the SRRDA.
15. The TSC will undertake external monitoring and evaluation. The TSC will be social development/monitoring specialists as part of the team, who will be responsible for organizing tasks for monitoring and evaluation. The monitoring cycle will be once every 6 months. The TSC will submit monitoring reports to the SRRDA, NRRDA, and ADB.
16. Due Diligence. NRRDA, MORD, and the state will ensure that ADB is given access to all necessary documents to undertake due diligence of social issues for all subprojects. However, the state EA is responsible for undertaking due diligence and monitoring the implementation of social mitigation measures for each subproject. Due diligence processes and monitoring implementation of the plan/CPF need systematic documentation. In addition, ADB will conduct systematic monitoring of implementation. Internal monitoring reports submitted to ADB will include information on land donation and other related issues. ADB will reserve the right to monitor subproject documents and implementation on a random basis.
17. Public Disclosure. The following will be undertaken:
(i) Information will be disseminated on subproject progress at gram panchayat buildings and at other prominent places. (ii) Each SRRDA is responsible for ensuring that all formats specified in the CPF and monitoring reports are properly and systematically kept as part of the project- specific record. (iii) Reports of transect walk, CPF, and plans, including specified formats included in DPR, will be disclosed to the public including all AP, panchayats, nongovernment organizations involved, and other community-based organizations. 50 Appendix 8
SUMMARY INITIAL ENVIRONMENTAL EXAMINATION
A. Overview of the Environmental Concerns Related to the Investment Program
1. The Rural Roads Sector II Investment Program (Investment Program) will finance part of Pradhan Mantri Gram Sadak Yojana (PMGSY), the Prime Minister’s Rural Roads Program, road investment in the following three states: Assam, Orissa, and West Bengal. The Investment Program will finance improvement to around 30,000 kilometers (km) of rural roads. The Investment Program is categorized as a “B” project in accordance with Asian Development Bank (ADB) Environmental Assessment Guidelines (2003). The Investment Program is not subject to the Indian Environmental Impact Assessment Notification of the Ministry of Environment and Forests (MOEF). The Government of India does not require an environmental assessment for this Investment Program and its subprojects.
2. The Investment Program will not involve a significant physical intervention due to the characteristics of the construction works involved. Rural roads under PMGSY vary from 1 to 25 km in length; the average is about 10 km. PMGSY does not finance reconstruction or improvement of bridges longer than 25 meters (m). The rural road improvement will involve (i) improvement of the road to an all-weather standard; (ii) widening of the existing alignment to accommodate a 3.75 m single carriageway, and 1.875 m shoulders, which may be adjusted by taking into account the availability of land along the alignment; and (iii) construction of a side drain along the road in residential areas. Considering the magnitude of individual works under this Investment Program, no significant impacts are expected. However, some stretches of the rural roads may pass through a forest area, where expansion of the existing road will require a permit from the state Forest Department. The Forest Protection Act requires any activities involving forest areas to “forest clearance” from the Forest Department. Under the same act, any activities involving tree cutting are required to compensate the damage by planting two trees for every tree cut.
3. On the basis of the environmental classification of the Investment Program, as well as potential environmental impacts related to the Investment Program, initial environmental examinations (IEE) of sample subprojects were prepared by the project preparatory technical assistance (TA) consultant on behalf of the Ministry of Rural Development (MORD).
B. Environmental Impacts of the Sector
4. Rural road investments under the Investment Program are expected to provide rural communities with better access to essential basic services such as education and health, and to contribute to increasing the incomes of rural communities by providing improved access to markets for agriculture products and to employment opportunities. The Investment Program is also expected to support improvements in rural productivity and to help reduce urbanization over the longer term.
5. MORD commissioned a rapid independent assessment of the socioeconomic impact of PMGSY on the livelihoods of rural communities in Assam, Himachal Pradesh, Madhya Pradesh, Mizoram, Orissa, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal. The findings of the assessment show that improvements of rural roads in those states resulted in increased agriculture production for commercial purposes. However, the improvement of rural roads has also led to increased consumption of agrochemicals such as fertilizer and pesticides.
Appendix 8 51
6. Impact on the industrial sector has not yet resulted in increased numbers of new small industries. However, impacts on the existing cottage and small industries were observed in terms of easier access to raw materials and availability of commercial vehicles to transport bulk product to the market. This has led to improved economic conditions in some rural areas in Assam and Mizoram states.
7. Significant positive impacts on health and education of rural communities were observed in all states where the study was conducted. Similarly, positive impacts on employment generation was observed, particularly in processing postharvest products, as well as shifting from grain to cash crops and moving to multiple cropping.
C. Summary of IEEs for Sample Subprojects
8. An IEE was prepared for each of the Investment Program states, instead of for each road project. From the total 1,000 km subproject roads in each state, the IEE was carried out for around 100 km. The total sample subprojects cover 322 km scattered in the three states— Assam, Orissa, and West Bengal. For the remaining about 900 km of subprojects included in the first batch in each state, the environmental scrutiny is based on the information provided in the environmental checklists, which serve as the IEE for these subprojects.
1. Subproject Description
9. The Investment Program will cover improvement to the existing roads by providing black topping of a 3.75 m carriageway and as much as possible to provide a 1.875 m earth shoulder on each side of the road. In residential areas, side drainage will be provided along the roads. The roadway is expected to have a width of 7.5 m in flat areas and 6 m in hilly mountainous areas.
2. Environmental Conditions
10. Assam. The physiographic of Assam is categorized into four distinct divisions: (i) the eastern and central plains with elevation of 600 m above mean sea level; (ii) the Cachar plains with elevation of 50 m; (iii) the North Cachar Hills and Rengma Hills with elevation ranging 150– 300 m; and (iv) the north and south Brahmaputra hills with the remaining plains in the central and eastern part of the state. All of Assam is within the Brahmaputra River Basin with the Brahmaputra River traversing the state in a highly braided channel characterized by numerous sand bars or chars. Flood-prone areas can be found mainly along the Brahmaputra River from the east to west. Soil condition is dominated by entisols predominant along the Brahmaputra River and the southern part of the state, with the mollisoils prevalent in the western and northern fringes, and the alfisols occurring in central parts. Land utilization is classified into arable, reserved forest, protected forest, orchard and plantation, scrub and grass, and urban.
11. Field investigation of the floral components was carried out within the Investment Program districts. The dominant flora is trees along rural roads particularly in agricultural lands. Most of these trees do not have ecological and/or significant economic value. No wildlife or threatened or endangered species are reported within the corridor of impact of the road proposals.
12. West Bengal. The physiographic of Darjeeling, Jalpaiguri, and Koch Bihar in the Himalayan Region is classified as hilly with elevation ranging from 100 to 3,500 m above sea level. Puruliya district, the western part of Barddhaman and Medinipur districts, and the western 52 Appendix 8 and northern part of Birbhum form a fringe of the western plateau. The Sunderbans area of South 24 Parganas and a small part of North 24 Parganas form a part of the deltaic zone. The remaining central and eastern parts are mainly alluvial plains. West Bengal has three major river basins namely the Ganga draining about 80% of the state, the Brahmaputra and Subarnarekha draining the remaining. Some of the chronically drought-prone areas are Puruliya and part of Bankura and Medinipur districts; while the chronically flood-affected areas are parts of Barddhaman, Haora, Hugli, Medinipur, and Murshidabad districts and a few patches in the northern districts of Koch Bihar and Jalpaiguri. The state has numerous low-lying areas that flood during the monsoon and remain waterlogged due to inadequate drainage outlets for the receding floodwaters. The soil conditions in Darjeeling and Jalpaiguri districts are dominated by brown soil. Red acidic lateritic soils are predominant in Bankura, Birbhum, Puruliya, and parts of Barddhaman and Medinipur districts. Deltaic and saline soils occur in Bankura, Barddhaman, Birbhum, Dinajpur, Haora, Medinipur, Murshidabad, and North 24 Parganas districts. Land utilization within the Investment Program districts is broadly classified into uncultivable, forestland, for cultivation, wasteland, urban area and industrial.
13. Field investigation of the floral components was carried out within the Investment Program districts. The dominant flora is trees along rural roads particularly in agricultural lands. Most of these trees do not have ecological and/or significant economic value. No wildlife or threatened or endangered species are reported within the corridor of impact of the road proposals.
14. Orissa. The physiographic of Orissa is categorized into two broad regions namely the coastal districts with coastal tracts interspersed with estuarine environment, with elevation of 0– 1,200 m above sea level, and the upland districts with elevation of 50–750 m. Orissa has three major river basins, with the Mahanadi River largely draining the central and southern parts of the state, the Brahmani River draining the central part, and the Subarnarekha River draining the northern part. The soil in most areas is dominated by alfisols and inceptisols, with mostly deltaic alluvial soils prevalent in the coastal districts. Some of the chronically drought-prone areas are the Balangir, Kalahandi, Koraput districts, while the most frequently affected cyclone area is the Gajapati district along the southern coast. Land utilization within the Investment Program districts is broadly classified into arable irrigated, arable unirrigated, forest areas, wasteland/scrub, and rural/urban settlement.
15. Field investigation of the floral components was carried out within the Investment Program districts. The dominant flora is trees along rural roads particularly in agricultural lands. Most of these trees do not have ecological and/or significant economic value. No wildlife or threatened or endangered species are reported within the corridor of impact of the road proposals.
3. Potential Impacts and Mitigation Measures
16. Environmental Impacts Due to Location of Subprojects. No adverse environmental impacts due to the location of the rural roads are perceived. Of the total 322 km of sample rural road construction works in 48 different stretches, none passes through national parks or wildlife sanctuaries. No archaeological, historical, or protected heritage monuments; natural habitats or nature reserves; or reserve, protected, or unclassified forest areas are situated within a 5 km radius of the subproject roads in the first annual batch.
17. Environmental Impacts Related to Subproject Design. The design of the rural roads will not pose any significant environmental problem. Assessment of the present road conditions Appendix 8 53 and the construction proposals indicate no major embankment construction with a height greater than 1.2 m. The proposals are also confined to the existing alignment with minor corrections to vertical or horizontal profile to minimize any environmental impacts. Provision of small drainage structures is expected to improve the existing drainage system. Considering the length of the rural roads (mostly less than 10 km), they are not projected to cause major adverse environmental impacts.
18. Environmental Impacts during Construction. Most of the environmental impacts will arise during construction. These impacts, however, are temporary and negligible. The vegetative cover within the right-of-way will be affected due to clearing operations for road construction. To mitigate this impact, the cleared corridor will be replanted. Other environmental impacts such as increasing dust, noise, and emissions from the construction equipment, hot mix plants, and other vehicles deployed, as well as sedimentation, soil erosion, and run-off from earth borrowing or quarrying activities are expected to occur during construction. However, following good construction practice such as equipment maintenance, efficient materials handling, and site maintenance, can mitigate such impacts. The rural road construction works are not expected to generate construction debris that requires safe handling prior to disposal. Hence, no specific mitigation measures are required.
19. Environmental Impacts Resulting from Operation. No major environmental problems in the operation phase of rural road investment are perceived. The rural road investments are expected to have positive environmental impacts that will improve environmental conditions along the road corridors. The revegetation of the corridor will enhance the aesthetics and provide serenity to road users. Ambient air and noise quality will be improved due to the retrieved tree cover and paved surface.
4. Institutional Arrangement and Environmental Monitoring
20. The IEE identified the need for generic monitoring of implementation of mitigation measures as well as monitoring of the adverse impacts. During construction phase, the environmental monitoring will focus on implementation of the mitigation to minimize dust, volatile substances from hot-mix plant, and logging of drainage and streams.
21. Implementation of mitigation measures during construction will be the responsibility of the contractor. An environment consultant, who will be part of the project implementation consultant group to assist the project implementation unit (PIU), will be responsible for preparing contractual documentation to obligate the contractor to implement mitigation measures during construction. This environment consultant will also assist the PIU in monitoring and supervising the contractor in implementing mitigation measures. The state rural roads development agencies (SRRDAs) will be responsible for implementing overall environmental monitoring program for overall Investment Program implementation.
D. Environmental Assessment and Review Framework
1. Environmental Selection Criteria for Subprojects
22. Considering the potential direct and indirect impacts of the Investment Program, additional subprojects will be selected by taking into account the following environmental criterion: Subprojects will be environmentally sound and none will be located within or close to an environmentally sensitive area such as a wildlife sanctuary, national park, or other areas with significant ecological functions that are declared as national parks, sanctuaries, or national/international cultural heritage. 54 Appendix 8
23. Assessment of the environmental impacts of the sample roads reveal that environmental impacts associated with Investment Program subprojects are similar across the 322 km sample roads. The environmental impacts have the following characteristics: (i) occur only during construction or are temporary, (ii) reversible, and (iii) mitigation measures could be easily incorporated into design and construction. Taking into account the IEE findings for these sample roads, standard guidelines for environmental management plans—environmental codes of practice—will be prepared to guide the subprojects in incorporating the environmental management plan.
24. Taking into account the potential impacts related to the sample subprojects and ADB’s environmental assessment guidelines, the environmental requirement for the follow-on subprojects is as follow: For each individual subproject, an environmental checklist, which will serve as IEE, will be prepared. However, if the environmental checklist indicates that significant impacts are likely, a standard full IEE in accordance with ADB’s Environmental Assessment Guidelines (footnote 1) will be prepared.
25. Since the Investment Program is not subject to the Government’s Environmental Impact Assessment Notification, the specific procedure to mainstream environmental concerns into Investment Program implementation is formulated in accordance with ADB’s Environmental Assessment Guidelines (footnote 1).
2. Responsibilities and Authorities
26. Project Implementation Unit. The PIU will
(i) complete the detailed project report (DPR) using the environmental checklist that serves as IEE for construction, and ensure that construction will be along the existing alignment; and (ii) obtain necessary statutory environmental clearance prior to commencement of civil works.
27. State Rural Roads Development Agencies. The SRRDAs will
(i) ensure that DPRs for follow-on subprojects are completed with the environmental checklists that serve as IEE; (ii) ensure that the environmental checklists are reviewed by the environmental officer of the concerned SRRDA;1 (iii) ensure that all required statutory environmental clearances are obtained and the conditions noted in the clearances are implemented; (iv) ensure that the relevant provisions of the environmental codes of practice are followed as part of the effort to mainstream environmental concerns; (v) ensure that bidding documents cover required environmental mitigation measures; (vi) ensure that the environmental checklist, which covers recommendations to mitigate the impacts, is made available to the contractors; and (vii) undertake routine monitoring of the implementation of the identified mitigation measures.
1 If the environmental checklist indicates that significant impacts are likely, the SRRDA will report to ADB through MORD for further guidance. Appendix 8 55
28. Ministry of Rural Development. MORD will
(i) ensure that the SRRDAs have environmental officers; (ii) ensure that the SRRDAs meet all environmental assessment requirements; (iii) undertake random monitoring of the implementation of environmental mitigation measures; (iv) review the conditions of environmental clearance for construction of new roads with new alignment, as applicable; and (v) undertake environmental due diligence randomly.
3. Environmental Due Diligence and Public Disclosure to Ensure Compliance with ADB’s Environment Policy
29. MORD, the Executing Agency, should ensure that ADB is given access to undertake environmental due diligence for all subprojects, if needed. However, MORD has the responsibility for undertaking environmental due diligence and monitoring of the implementation of environmental mitigation measures for all subprojects. The due diligence as well as monitoring of the implementation of the environmental management plan needs to be documented systematically.
4. Public Disclosure and Public Consultation
30. During the preparation of the DPR and filling up the checklist through the transect walk exercise, the PIU has to ensure that consultation with the affected people and their concerns are recorded. Aside from consultations, all environmental assessment documents are subject to public disclosure. These documents should be made available to the public, if requested. In this context the following system will be adopted:
(i) The SRRDAs are responsible for ensuring that all environmental checklist documentation, including the environmental due diligence and monitoring reports, are properly and systematically kept as part of the Investment Program specific records. (ii) MORD must make the IEE report for the new construction road with new alignment available on its website.
5. Staffing Requirements and Budget
31. Environment specialists of the technical support consultants will check and review the environmental checklists, and to monitor and supervise the implementation of environmental mitigation measures. The environment specialists will work closely with the state pollution board to institutionalize the environmental codes of practice as the environmental guidelines for development of rural roads.
32. The Investment Program costs have incorporated budget and resources needed to (i) implement the environmental assessment and review procedure; (ii) conduct a survey to complete the environmental checklists, and conduct IEE for new roads; and (iii) monitor the implementation of the mitigation measures.
56 Appendix 9
COST ESTIMATES AND FINANCING PLAN ($ million)
Foreign Local Item Total ADB Government Exchange Currency
A. Road Connectivity 1. First Batch Subprojects a. Land Acquisition and Environment 1.0 1.0 1.0 b. Civil Works 115.3 141.0 256.3 214.2 42.1 c. Consulting Services (PIC) 10.0 10.0 10.0 d. Taxes and Duties a 11.5 11.5 11.5 Subtotal (A1) 115.3 163.5 278.8 214.2 64.6 2. Remaining Subprojects Subtotal (A2) 744.2 1016.0 1,760.2 534.8 1,225.4 Subtotal (A) 859.6 1179.4 2,039.0 749.0 1,290.0
B. Capacity Building 1. Consulting Services (TSC) 1.0 1.0 1.0 2. Incremental Administration 1.0 1.0 1.0 Subtotal (B) 0.0 2.0 2.0 1.0 1.0
Total Base Cost 859.6 1,181.4 2,041.0 750.0 1,291.0
Interest During Constructionb 59.0 59.0 59.0 Total Investment Program Cost 918.6 1,181.4 2,100.0 750.0 1,350.0 Financing Percentage 43.7% 56.3% 35.7% 64.3% PIC = project implementation consultants, TSC = technical support consultants. aTaxes and duties are estimated as 4.3% of base cost of civil works, and 10.4% of consultants' remuneration. b Interest was calculated using the London interbank offered rate for 6-month deposits in US dollars plus a 0.6% spread. Source: Asian Development Bank estimates.
ORGANIZATIONAL STRUCTURE FOR PROJECT IMPLEMENTATION
Executing Agency Ministry of Rural Coordination Committee NQM NRRDA Technical Development Chairperson: Joint Secretary, MORD Technical and management (MORD), Government Members: Representatives from NRRDA, DEA, Quality support to MORD of India and Governments of Participating States Assurance
Project State Level Organizational Structure Management In a Participating State Consultant Executing Agency (PMC) a Government of Participating State • Management Project Implementation Committee ADB and Chairperson: CEO, SRRDA Inception/ Coordination State Technical Agency Members: Representatives from state review • Monitoring • Technical scrutiny of department responsible for PMGSY, missions • Capacity DPRs PIUs, PICs, and TSC Midterm Building reviews TSC • Road safety Implementing Agency • Social safeguards State Rural Road Development Agency • Environmental safeguards • External monitor Headquarters CEO
PICs • DPR preparation PIU PIU PIU • PIU support SE or EE SE or EE SE or EE • Social and environmental safeguards • Training • Construction supervision Contractors
10 Appendix CEO = chief executive officer, DEA = Department of Economic Affairs, Ministry of Finance, DPR = detailed project report (road design), EE = executive engineer, MORD = Ministry of Rural Development, NQM = national quality monitor, NRRDA = National Rural Roads Development Agency, PIU = project implementation unit, PIC = project implementation consultant, PMC = project management consultant, PMGSY = Pradhan Mantri Gram Sadak Yojana, SE = superintending engineer, TSC = Technical Support Consultant. a Existing under the ongoing Rural Roads Sector I Project (ADB. 2003. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to India for the Rural Roads Sector I Project. Manila). 57
INDICATIVE IMPLEMENTATION SCHEDULE 58 Appendix11
Component 2005 2006 2007 2008 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Road Connectivity Batch I Subproject Preparation under PPTA Consultancy services Civil Works Procurement Civil works Civil Works PIC Selection Supervision of Civil Works by PIC Batch II Subproject Preparation by PIC Civil Works Procurement Civil Works Supervision of Civil Works by PIC Batch III PIC Selection Subproject Preparation by PIC Civil Works Procurement Civil Works Supervision of Civil Works by PIC Batch IV Subproject Preparation by PIC Civil Works Procurement Civil Works Supervision of Civil Works by PIC Capacity Building
Technical Support Consultant continuous Consultant Selection intermittent Consulting Services Road Safety Safeguards Monitoring
PIC = project implementation consultants, PPTA = project preparatory technical assistance. Source: Asian Development Bank estimates. Appendix 12 59
SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY
A. Linkages to the Country Poverty Analysis
Is the sector identified as a national Yes Is the sector identified as a national Yes priority in country poverty analysis? priority in country poverty partnership No agreement? No Contribution of the sector/subsector to reduce poverty in India:
Lack of access to market centers, government services such as education, health, and employment opportunities due to lack of road is one of the main reasons for the persistence of poverty particularly in rural areas. To provide connectivity to unconnected habitationsa and promote access to economic and social services, the Government of India launched the national program Pradhan Mantri Gram Sadak Yojana (Prime Minister’s Rural Roads Program or PMGSY) in 2000. To help finance PMGSY, the Asian Development Bank (ADB) is extending loans under a multitranche financing facility (MFF) to the Government for rural road investment in selected core PMGSY states having large numbers of unconnected habitations, initially the states of Assam, Orissa, and West Bengal. The Rural Roads Sector II Investment Program (Investment Program) will provide augmented access to social and economic facilities and markets, and connect remote villages leading to increased agricultural incomes and productive employment/trading opportunities for the local villagers. B. Poverty Analysis Proposed Classification: General intervention What type of poverty analysis is needed?
The core sample subprojects for the Investment Program in 11 districts in the three states were identified for poverty analysis. The three Investment Program states have a largely agrarian economy with the majority of the population dependent upon agriculture for their livelihood. These states are among the poorest states in India and lagging in terms of a number of key development indicators such as per capita income, poverty ratios, and unemployment. Table A12 illustrates the proportion of population living below the poverty line in the three states; each has a higher proportion vis-à-vis the national average. Poverty is a particularly widespread reality in the state of Orissa with 47.15% of the total population living below the poverty line.b The proportion of poor is even higher in the rural areas of each of these states thereby necessitating the need of sustainable poverty reduction in these areas.
Table A12. Population Living Below the Poverty Line in India and the Program States
Poverty Line Population Living Below the Rural Population Living Below Area (in Rs) Poverty Line (%) the Poverty Line (%) All India 327.56 26.10 27.09 Assam 365.43 36.09 40.04 Orissa 323.92 47.15 48.10 West Bengal 350.17 27.02 31.85 Source: Government of India. 2001. National Human Development Report. Delhi.
In Assam, as per the survey findings in the subproject districts, 3.4% of households are below the poverty line and 32% derive their livelihood from agriculture or worked as agricultural laborers. The population in the subproject areas comprises primarily poor and low-income groups with nearly 73% having an annual income less than Rs30,000. Nearly 42% households are illiterate with only 13% reported to have completed primary level education. In terms of access to water supply, the surveyed population depends primarily on ground wells (64%); 65% of households have no access to sanitation facilities.
In Orissa, nearly 22% of the households live below the poverty line; about 14% are engaged in agriculture; 22% are wage laborers and derive their livelihoods from agricultural or nonagricultural activities. Similar to other states, the poor and low income groups (90%) with annual incomes of less than Rs30,000 predominate in the subproject areas. In terms of educational attainments, 20% of the households are illiterate and only 7% have completed primary education. In terms of access to water supply, 54% depend on public stand posts and very few (4%) have access to sanitation facilities.
In West Bengal, 12% of the households in the subproject areas live below the poverty line. Nearly 38% households are engaged in agriculture and as daily wage laborers. Only 9% of households are involved in small trade and businesses. The poor and low-income groups predominate (76%), earning less than Rs30,000 per annum. In the subproject areas, 15% households are illiterate and 21% have completed primary education. In terms of water supply, 58% have access to piped water system and only 24% have proper sanitation facilities.
60 Appendix 12
A comparative assessment of the socioeconomic characteristics of poor and non-poor households in the three states found no significant difference in access to facilities in rural areas. However, the poor households had lower levels of income, fewer assets, and smaller landholdings; most were scheduled castes or scheduled tribes.
Community assessments carried out in the three states reveals that rural households perceive a positive linkage between road improvement and poverty reduction. The analysis reveals that the improvement of rural roads will improve economic lives (income poverty) and the social way of life (human poverty) of the poor in the subproject areas. The perceived socioeconomic benefits identified by nearly 80–90% of rural households in the three states are (i) increase in income; (ii) increased access to facilities like schools, hospitals, and health centers; (iii) increase in employment opportunities associated with increased mobility; (iv) industrial development; and (v) improvement in transportation systems. Provision of all-weather roads will also lead to increased access to rural markets and rapid economic diversification increasing the incomes of farmers in all income groups. Production and marketing of high- value perishable products will become possible on a commercial basis, thus potentially increasing the incomes of marginal farmers. The poor households mostly engaged as wage labor regard improved mobility as an opportunity that would provide them with better-paying jobs outside their villages. The improved connectivity is expected to encourage investments in nonagricultural enterprises and larger investments in transport services. Communities with all-weather roads will also attract assistance from existing government programs and district poverty reduction projects.
Overall, the Investment Program will have an immediate and short-term impact on poverty reduction by providing labor opportunities to rural poor who will be hired during construction. In the longer term, improved rural roads will enable farmers to gain access to markets, benefit from reduced cost of supply of agricultural inputs, and in turn, increase the size of agricultural surplus contributing to increases in income, which will be spent on other goods and services. Improved access will lead to greater mobility enabling rural communities to shift from subsistence farming to more commercial agricultural production. One of the major benefits of the Investment Program will be reliable access to schools and health services through reduced travel time and transportation costs, which will contribute directly to their accumulation of human capital, which is a key factor in sustainable poverty reduction.
C. Participation Process
Is there a stakeholder analysis? Yes No
Is there a participation strategy? Yes No
During Investment Program preparation, discussions, interview schedules and small group meetings were conducted with the subproject-affected communities to ascertain their response to the Investment Program, their needs and demands, estimates of losses that they might suffer, and steps to mitigate the same. These interviews and group meetings were held in groups comprising men, women, farmers, scheduled castes, scheduled tribes, and other backward classes to ensure a comprehensive perspective of the Investment Program as well as its impacts. These processes brought forth unanimous support from the communities for the Investment Program, primarily due to the prospective socioeconomic benefits that it will bring.
D. Gender and Development Strategy to maximize impacts on women:
The assessments undertaken during Investment Program preparation brought forth that the proposed road construction will not entail any adverse impacts on women. As part of gender analysis focus group discussions were organized with women belonging to various castes, communities, and income groups in the subprojects to get their feedback on the proposed Investment Program and to ascertain the probable positive or negative impacts on them. According to them, the augmented access to medical facilities during rainy seasons would be one of the major benefits especially during childbearing. Road improvement would make travel safer and more comfortable for women as presently they travel on foot; road improvement would enable them to travel at all times due to availability of other means of transportation.
Has an output been prepared? Yes No
Appendix 12 61
E. Social Safeguards and other Social Risks Significant/ Item Not Significant/ Strategy to Address Issues Plan Required None Resettlement Significant Overall, the land acquisition and resettlement impact of the Full Investment Program will be significant. Most of the Short Not significant improvements will be carried out within existing right-of-way None in the three states and will affect mostly narrow strips of None agricultural land. The finalization of the alignment was Community carried out through a community consultation process and participation design modification to minimize impact on structures, and framework titled and nontitled holders to the extent possible. A prepared for voluntary land donation system is adopted for the preparation and Investment Program in recognition of the effectiveness of implementation the system for rural roads development in India. The of ADB-financed Investment Program will also ensure that the voluntary subprojects, and donation does not severely affect the living standards of plans prepared affected people, and provides mitigation measures to for core sample replace losses related to assets, livelihoods, and common subprojects. property resources, which will be recorded and verified by an independent third party, the gram panchayat.
Indigenous Significant The Investment Program will lead to loss of a narrow strip of Yes People agricultural land and structures by scheduled tribe No Not significant households in the three states. The assessment indicates that the rural road construction will be beneficial, providing Special None connectivity to the habitants but bringing them in contact provisions are with wider society and consequently better facilities in health included in the and education. In addition, the Investment Program is community expected to open up alternate options of employment in participation nearby towns thereby diversifying sources of income. Also framework and the subproject areas show a remarkable degree of plans prepared assimilation and integration of the scheduled tribe for core sample population, which can be primarily attributed to scheduled subprojects. tribes living in close proximity with the non-scheduled tribe population; and in some states dominating some districts. Thus the Investment Program does not envisage any differential impact on the scheduled tribe population compared with the nonscheduled tribe population; they will benefit equally. Any impact on scheduled tribe households will be addressed through the provisions as outlined in the community participation frameworks and plans. Labor Significant During construction labor opportunities will be available for Yes both men and women in local communities at minimum No Not significant wage rates. Not required None Affordability Significant The proposed road construction will not have any Yes affordability issues. No Not significant Not required None Other Risks Significant Increase in safety hazards for the communities, especially Yes and/or where the proposed road is passing through a village. To No Vulnerabilities Not significant mitigate these, an awareness generation program on road Road safety safety issues will be developed under the previous loan.c awareness None program being prepared under previous loan. a In 2000, about 40% of villages in rural India still remained unconnected by all-weather roads. Ministry of Rural Development, Government of India. 2004. Pradhan Mantri Gram Sadak Yogana. Delhi. b Government of India. 2002. National Human Development Report 2001. Delhi. c ADB. 2003. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to India for the Rural Roads Sector I Project. Manila (Loan 2018-IND).