Validation Report

Reference Number: PVR-299 Project Number: 23241 Loan Number: 1556 and 1557 December 2013

India: and Chennai Ports Project

Independent Evaluation Department

ABBREVIATIONS

ADB − Asian Development Bank CHPT − Trust CPS – Country Partnership Strategy EIRR − economic internal rate of return FIRR − financial internal rate of return MBPT − Mumbai Port Trust MOST − Ministry of Surface Transport MOT − marine oil terminal PCR − project completion report PIO − Project Implementation Office PSP − private sector participation TA − technical assistance TEU − twenty-foot equivalent unit

NOTE

In this report, “$” refers to US dollars.

Key Words adb, asian development bank, chennai, container-handling equipment, demurrage, independent evaluation department, , mumbai, ports, port operation, project completion report, sea transport, shipping costs, technical assistance, validation

The guidelines formally adopted by the Independent Evaluation Department (IED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of IED management, there were no conflicts of interest of the persons preparing, reviewing, or approving this report.

In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, IED does not intend to make any judgments as to the legal or other status of any territory or area.

PROJECT BASIC DATA Project Number: 23241 PCR Circulation Date: Nov 2011 Loan Numbers: 1556 and 1557 PCR Validation Date: Dec 2013 Project Name: Mumbai and Chennai Ports Project Country: India Approved Actual ($ million) ($ million) Sector: Transport and ICT Total Project Costs: 245.00 235.58 ADB Financing: ADF: 0.00 Loan: 113.00 47.93 ($ million) 1556 97.80 43.42 1557 15.20 4.51 Borrower: 0.00 0.00

OCR: Beneficiaries: 0.00 0.00 97.80 (1556) Others: 15.20 (1557) MPBT 55.30 73.76 CHPT 39.90 17.34 Private sector 36.80 96.55 Cofinancier: Total Cofinancing: 0.00 0.00 Approval Date: 29 Sep 1997 Effectiveness Date: Mumbai Port (1556) 24 Dec 1998 6 Jan 1999 Chennai Port (1557) 24 Dec 1998 23 Feb 1999 Signing Date: 25 Sep 1998 Closing Date: Mumbai Port (1556) 30 Sep 2003 1 Jun 2001 Chennai Port (1557) 30 Mar 2003 11 Sep 2002 Project Officers: Location: From: To: U. Witulski ADB headquarters Dec 1998 Nov 1999 M. Mizutani ADB headquarters Dec 2000 May 2001 P. Dutt ADB headquarters Jun 2001 Nov 2001 P. Pattison INRM Dec 2001 May 2002 T. Kandiah INRM Jun 2002 Aug 2002 A. Motwani INRM Sep 2002 Dec 2002 Validator: J. Supangco, Peer Reviewer: F. D. De Guzman, Consultant Evaluation Officer, IED2 Quality Reviewers: C. Kim, Principal Director: H. Hettige, IED2 Evaluation Specialist, IED2 R. Vasudevan Evaluation Specialist, IED1 ADB = Asian Development Bank; ADF = Asian Development Fund; CHPT = Chennai Port Trust; ICT = information and communication technology; IED1 = Independent Evaluation Department, Division 1; IED2 = Independent Evaluation Department, Division 2; INRM = India Resident Mission; MPBT = Mumbai Port Trust; OCR = ordinary capital resources; PCR = project completion report.

I. PROJECT DESCRIPTION

A. Rationale

1. In the early 1990s, considerable progress was made in India in loosening up government regulations, especially in the area of foreign trade where export-driven growth was emphasized. Many restrictions on private companies were lifted and new areas were opened to private capital. Even with these changes, India remained one of the world's most tightly regulated major economies as powerful vested interests—including private firms benefiting

2 from protectionism, labor unions, and much of the bureaucracy—opposed liberalization. There was considerable concern that liberalization would reinforce class and regional economic disparities.

2. The expected growth in foreign trade would require adequate transport infrastructure, including ports, to cope with the forecast growth in demand. Combined with the increased prevalence of containerized cargoes, the port infrastructure, which is old and lacks appropriate cargo-handling equipment and technical skills to operate modern and efficient facilities, would require modernization, new investments, and improvements in productivity. As the government could not provide adequate budget support for port investments, it considered alternative means of increasing capacity, such as build-operate-transfer, for developing new port facilities or managing ports to improve performance.

3. At Mumbai port, the submarine pipelines of the marine oil terminal (MOT) were more than 40 years old, had passed their safe economic life, and could have failed at any time with disastrous economic and environmental consequences. With the constrained throughput, MOT was operating at a level that resulted in long and costly vessel waiting times for ships at anchorage. Vessel average waiting time at berth had increased slightly from 2.4 days in 1989 to 2.6 days in 1997, but waiting time at anchorage during the same period had increase substantially from 0.7 to 2.1 days. Further congestion would lead to vessel diversion to other ports. Demurrage on import product tankers in MOT rose between Rs87 per ton in fiscal year (FY) 1993 to Rs92 per ton in 1994, while those in other ports decreased. Thus, modernization of the facility was required as a matter of urgency.1

4. At Chennai Port, which is the gateway for container traffic on India’s east coast, the Asian Development Bank (ADB) had provided financial support to create the country’s first modern container handling facility. 2 Both container and general cargo berths required structural improvements and the container yard needed to be expanded as the government expected containerized traffic to triple to 64 million tons by FY2002. Productivity at many ports in India was low compared to international standards, such as the already best-equipped port of Chennai with about 12 twenty-foot equivalent units (TEUs) per vessel hour compared with 30 TEUs in Colombo, 40 TEUs in Bangkok, and over 60 TEUs in Singapore. To augment capacity at India’s ports, the government needed to (i) intensify utilization of existing infrastructure by improving operation and management; (ii) expand facilities to handle at least 50% of general cargo in containers; (iii) modernize and rehabilitate the existing port facilities and use modern technology to improve the efficiency of operations; (iv) improve the productivity of labor and equipment; and (v) obtain alternative financing sources for port development, such as private sector participation (PSP) in selected port activities.

B. Expected Impact

5. The expected impact of the project was improved economic growth in the hinterland areas of Mumbai and Chennai ports through reduced total sea transport costs. Another envisaged impact was increased capacity and enhanced port productivity for both ports to help lower the cost of transporting imported commodities and decrease shipping costs for exports. Envisaged impact indicators were reduced total sea transport costs in the hinterland of Mumbai and Chennai ports and increased port capacity and traffic.

1 ADB.1997. Report and Recommendation of the President to the Board of Directors: Proposed Loans to the Board of Trustees of Mumbai Port Trust and Chennai Port Trust and Technical Assistance Grant to India for the Mumbai and Chennai Ports Project. Manila. 2 ADB. 1996. Project Performance Audit Report on the Ports Development Project in India. Manila. 3

C. Objectives or Expected Outcomes

6. The project outcome statements indicated in the project frameworks of the report and recommendation of the President (footnote 1), also reproduced in the project completion report (PCR),3 referred to project outputs such as submerged oil pipelines replaced and oil jetties modernized in Mumbai port; and container terminal expanded and operated by PSP, including rehabilitation and upgrading of the inner harbor in Chennai Port. Thus, this validation adjusted the existing outcome statements, based on the information provided in Appendix 10 of the PCR and recent data (para. 19).

7. For Mumbai Port, the recommended expected outcomes were increased ship calls and savings in ship waiting time at anchorage and added berth through faster unloading of oil cargo with the increased capacity and utilization of the new oil pipelines and modernized oil jetties. The savings were to be passed on to shippers through the removal of demurrage on import product tankers (para. 3) and lower costs of oil products. In addition, environmental risks would be significantly reduced by the modern facilities. Fire and explosion hazards were to be reduced significantly, ecological damage avoided, and livelihood of fisher folks improved.

8. For Chennai Port, the recommended expected outcomes were likewise similar. 4 Additionally, with PSP providing container handling equipment and terminal operation, it was expected that container handling productivity would improve significantly to levels achieved in other international ports such as Colombo and Bangkok. Dredging at Inner Harbor was to improve safety in vessel operations, contribute to the decrease in waiting time at anchorage, and allow bigger vessels to call at the port. For either ports, no targets were given in the project framework on the reduction in ship waiting time at anchorage and berth, and improvement in container handling productivity. D. Components and Outputs

9. For the Mumbai Port project, the outputs envisaged at appraisal included the (i) replacement of seven submarine pipelines with five new lines between Pir Pau and ; (ii) upgrading of three oil berths, including repair of damaged structures and modernization of firefighting, safety, and transfer facilities; and (iii) replacement of loading arms and support and the onshore service pipeline system. At completion, the following were achieved: (i) modernization of the MOT−Jawahar Deep berths 1, 2, and 3 and their associated facilities; (ii) replacement of the outdated submarine pipelines between the berths and Pir Pav manifold; and (iii) construction of an onshore pipeline connecting Pir Pav manifold with the marketing and storage terminals located at Sewere and Vadala (footnote 3).

10. For the Chennai Port project, outputs envisaged at appraisal included the (i) extension of the container berth, expansion of the container yard, and upgrading of existing berths; (ii) provision for cargo-handling equipment;5 (iii) rehabilitation of existing berths and dredging at Inner Harbor; and (iv) provision of safety equipment. At completion, the following were achieved: (i) extension of the existing berth by 285 meters, and (ii) modernization of all other support facilities and related container-handling equipment. The private sector concessionaire also

3 ADB. 2011. Completion Report: Mumbai and Chennai Ports Project in India. Manila. 4 The difference was for the Chennai Port, higher capacity of the container terminal was used instead of increased capacity and utilization of the new oil pipelines and modernized oil jetties. 5 To operate the container terminal, cargo handling equipment was to be provided separately by a private sector party. It was to be selected by the Chennai Port Trust (CHPT) using competitive bidding procedures. 4 developed other associated facilities and equipment and made further investments to accommodate increased traffic (footnote 3).

E. Provision of Inputs

11. The project cost was estimated at $245.0 million with $150.5 million (61%) in foreign exchange cost (including $13.5 million for interest during construction) and $94.5 million (39%) in local currency cost. ADB provided two loans to the two ports totaling $113 million. The loans were guaranteed by the . The cost for the Mumbai Port project was estimated at Rs5.4 billion ($153.1 million equivalent). The loan amount was $97.8 million and the Mumbai Port Trust (MBPT) was to finance the remaining $55.3 million. The cost for the Chennai Port project was estimated at Rs3.2 billion ($91.9 million equivalent). The loan amount was $15.2 million. A private sector party, to be selected by CHPT, was to finance the foreign exchange cost of $28 million and local currency cost of $8.8 million equivalent for the cargo- handling equipment, with CHPT financing the remaining $39.9 million.

12. Of the completion cost of $235.58 million, $96.55 million was funded by the private sector, $73.76 million by MBPT, $17.34 million by CHPT, and $47.93 million by ADB. At an advanced stage of implementation, MBPT and CHPT decided to close the loan and undertook the completion of the project with their own funds. The undisbursed loan amount was canceled and the disbursed amount prepaid. The PCR pointed out that the cancellation and prepayment were triggered by the reduction of interest rates in domestic financial markets, exchange rate movements, and improved financial positions of MBPT and CHPT (footnote 3).

F. Implementation Arrangements

13. The implementation arrangements were as envisaged at appraisal. The borrowers— MBPT and CHPT—were also the executing agencies responsible for the respective loans. As required under the loan, the Project Implementation Office (PIO) for the Mumbai Ports project was established on 1 July 1997 and was headed by a deputy chief engineer. The PIO for the Chennai Port project was established with the redeployment of existing staff and was headed by a chief engineer and project director. There were two sets of loan covenants under the project. The government and the executing agencies generally complied with the respective loan covenants even after the loan cancellation and prepayment in 2001 (Mumbai) and 2002 (Chennai).6

G. Related Technical Assistance

14. An advisory TA was processed with the project to operationalize the government’s port policy reform initiatives pertaining to the enhancement of port commercialization and introduction of corporatization policy, issuance of policies and guidelines for PSP, and implementation of cost-based tariffs in major ports by establishing the Tariff Authority for Major Ports (footnote 1). The executing agency for the TA component was the Ministry of Surface Transport (MOST). The MBPT, CHPT, the Trust, and the Tariff Authority for Major Ports were the implementing agencies. Consultants were fielded in September 1998 and the TA component was completed in September 2001. The TA completion report was circulated in September 2001. The completion report assessed that the TA component was successfully implemented, within budget, and without any major problems. The TA component achieved its objectives and was rated generally successful (PCR, Appendix 8).

6 These dates are based on PCR basic data regarding “cancellation on closure.” 5

II. EVALUATION OF PERFORMANCE AND RATINGS

A. Relevance of Design and Formulation

15. The PCR rated the project highly relevant based on its consistency with the government’s overall development objectives. It noted that the upgraded components at the two ports were the logical next step to complement the facilities created by an earlier ADB support,7 averted the risk of environmental damage to the harbor from a possible failure of the old submarine pipelines in Mumbai Port, and helped turn Chennai Port into a clean cargo port since the coal and hazardous cargo was moved to the Ennore Port, about 20 kilometers north of Chennai. The government and the port trusts advanced the commercialization of ports and enhancement of PSP, which were the government's major policy initiatives in development, capacity augmentation, and operation of ports.

16. This validation notes that the government’s development strategy, as set out in the Eighth Five Year Plan covering 1992 to 1997, included, among others, (i) encouraging high levels of capacity utilization to raise productivity and cost efficiency, (ii) attracting private initiative by reducing the government’s regulatory controls, and (iii) reforming the public enterprise sector. The growing infrastructure constraints in India underscored the need to attract PSP in infrastructure development. In the ports subsector, the policy and regulatory framework was evolving to privatize or lease selected port operations. Furthermore, there was a need to increase autonomy of the major port trusts to promote and establish companies or joint ventures and grant them greater administrative and financial autonomy to manage their operations with the objective of eventually corporatizing them.

17. Under the country operational strategy for India published in 19968 and consistent with the ADB’s development strategy and policy reforms and priorities in the Medium-Term Strategic Framework, the overall strategic emphasis was to provide support to, among others, promoting competition and private sector development. The ports subsector had great potential to develop projects with closer cooperation and risk sharing between the private and public sector. The emphasis of ADB was to support (i) policy reforms to improve the operations and efficiency of ports and their capacity to involve the private sector, (ii) the private sector to develop new port facilities; (iii) privatization and commercialization of most of the existing facilities of ports; and (iv) rehabilitation, modernization, and upgrading of the existing ports to improve their productivity and utilization.

18. This validation notes that the project design was well prepared. However, the traffic forecast during appraisal proved inaccurate.9 For the MOST, the increased capacity of the new submerged pipelines was not utilized as the proposed refinery expansion project—the source of the expected growth in crude oil shipments—was cancelled. In Chennai Port, the increase in container traffic was significantly higher than forecast. The terminal concessionaire had to construct additional facilities to accommodate the increased container throughput. This could have been caused by a number of factors, such as the higher containerization rate, or the shift

7 ADB.1996. Project Performance Audit Report on the Ports Development Project. Manila; ADB. 2001. Project Performance Audit Report on the Second Ports Project. Manila; and ADB. 1987. Report and Recommendation of the President to the Board of Directors: Proposed Loan to India for the Ports Development Project. Manila. 8 ADB. 1996. Country Operational Strategy Study India. Manila. 9 IED had also noted “overly optimistic” traffic forecasts in 2001 in the Project Performance Audit Report on the Second Ports Project (Loan 1016-IND). A more recent review of ports in India is available in Independent Evaluation Department. 2007. Transport Sector in India—Focusing on Results. Manila: ADB (Appendix 2). 6 from general to container cargo, or higher import growth. On the whole, this validation rates the project relevant.10

B. Effectiveness in Achieving Project Outcomes

19. The PCR rated the project effective. The project achieved its primary objective of rehabilitating and reconstructing port facilities by modernizing outdated liquid cargo-handling systems and eliminating the possibility of failure of the oil pipelines at Mumbai Port, and expanding the existing port facilities to increase cargo-handling capacity for containers and other general cargo at Chennai Port.

20. To determine whether the project was effective in achieving outcomes, the validation utilized PCR data and collected recent data on ship calls and cargo throughputs at both Mumbai and Chennai ports to measure traffic growth. For the Chennai Port project, the container port was privatized in 2001 and the concessionaire took over and commenced operations in the same year. At appraisal in FY1997, the port had handled 256,500 TEUs and had reached 1.15 million TEUs in 2011.The terminal entered the one-million TEU club in 2007. This validation estimates a container traffic growth rate of 11.3% per annum from FY1997 to FY2011, higher than the 9% estimated at appraisal. This validation estimates a 6.85% annual growth rate in break bulk traffic from FY1997 to FY2011, which is within the 5%–9% per annum assumed at appraisal. In terms of ship waiting time at anchorage, this declined substantially from 1.8 days in FY1997 to 1.07 hours by FY2011.11

21. For the Mumbai Port project, the MOT handled imported crude for the refineries, the coastal movement of crude for the Oil and Natural Gas Commission, and the export of products from the refineries and import of products for marketing in the hinterland by the refining companies. The refining capacity expansion that was projected at appraisal did not materialize and as a consequence the traffic mix has changed more toward products rather than crude. While crude oil throughput declined from FY1997 to 2011, other products throughput increased by 1.8% per annum, which is lower than the 2.8% per annum estimated at appraisal. In terms of ship waiting time at anchorage, this declined from 2.1 days in FY1997 to 0.48 days by FY2011. For average time spent at berth, this declined from 2.6 days in FY1997 to 1.48 days by FY2011.12 Based on the cargo traffic volume handled and the decline in average time spent at berth and at anchorage, this validation rates the project effective in achieving project outcomes.

C. Efficiency of Resource Use in Achieving Outputs and Outcomes

22. The PCR rated the project efficient. It observed that the project generated its intended benefits of (i) cost savings through reduction in vessel turnaround time inclusive of ship waiting and service times, and (ii) avoidance of diversion to other facilities. Handling costs at these ports have also been reduced. For the Mumbai Port project, the imminent danger of oil spills caused by 40-year-old pipelines was reduced.

23. For the Mumbai Port project, the economic and financial reevaluations were carried out at the time of PCR preparation. The recomputed economic internal rate of return (EIRR) was 15.1%, lower than the appraisal estimate of 18%. 24. For the Chennai Port project, economic reevaluation was carried out for the Inner Harbor and for the container terminal. As envisaged at appraisal, CHPT awarded the

10 The concerned regional department expressed the view to maintain the highly relevant rating in the PCR. 11 www.dpworldchennai.com 12 www.mumbaiport.gov.in 7

concession to the private sector in 2001 for providing container-handling equipment and for the operation of the container terminal. The EIRR for the container terminal was computed at 22.3% compared with the appraisal estimate of 19.8%.

25. The EIRR for the Inner Harbor was recomputed at 22.3% compared with the appraisal estimate of 13.8%. This validation finds the methodology used at appraisal and by the PCR to be valid. Based on the above findings, this validation rates the project efficient, the same as the PCR.

D. Preliminary Assessment of Sustainability

26. The PCR rated the project’s sustainability likely. While it noted that the government and the port trusts still needed to address adequate port infrastructure and connectivity, high cost, labor inefficiencies, and obsolete equipment to be at par with international standards, expansion projects were already either being planned or implemented. The financial performance of the ports had improved and the government had undertaken policy initiatives for PSP in port development and operations.

27. This validation notes that the Chennai Port concessionaire had significantly improved cargo-handling productivity resulting in shorter vessel turnaround time and increased container movements. Increased container traffic growth necessitated additional investments from the concessionaire to increase port capacity. The higher financial performance as reflected in the recomputed financial internal rate of return (32% versus 16%) at PCR supports the view that the port is generating sufficient financial returns to ensure sustainability.

28. For Mumbai Port, this validation notes that while crude oil traffic had declined below forecast, growth in the import of products such as petroleum, oil, and lubricants and other products have increased, albeit slowly. With the new pipelines and accessories and state-of- the-art safety equipment, the project objective of mitigating environmental disaster has been attained. The lower recomputed financial internal rate of return of 5% from the appraisal estimate of 8% still shows that the port is financially capable to maintain and operate the pipelines. Based on the above discussions, this validation also considers the project likely to be sustainable.

E. Impact

29. The PCR did not rate the impact of the project. The appraisal document and PCR did not provide data on the expected socioeconomic impact of the project. On environmental impact, the project did not require an environmental impact assessment since it was intended to introduce environmental improvements at Mumbai and Chennai ports. The replacement of the submarine oil pipelines at Mumbai Port had prevented potential leakages. Through modernization of the oil jetties and loading and unloading facilities, accidents from oil tankers and ships carrying and unloading hazardous and toxic chemicals were avoided resulting in improved operating conditions at the port (footnote 3). Given the time lag in the preparation of the PCR, the likely sustainability of the project is already actualized.

30. At Chennai Port, the project, together with the coal ports project, helped shift coal cargo to Ennore Port and transformed Chennai Port into a clean port. The coal cargo at Chennai Port used to substantially pollute air in the city of Chennai. The project’s positive environmental impacts far outweigh the negative impacts, if any.

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31. This validation considers that the improved port productivity at both Mumbai and Chennai would have resulted in lower shipping costs, removal of demurrage, enhanced competitiveness of India’s exports, and lower prices of commodities. At appraisal, it was agreed that MBPT and CHPT would monitor, to the extent possible, other tangible benefits directly or indirectly attributable to the project, such as employment creation within the port hinterland, new ancillary industries attracted to the port area or its hinterlands, and environmental benefits arising from pollution-reducing operations at the port. No information on these was provided in the PCR. Based on the above factors, this validation rates the impact of the project significant.

III. OTHER PERFORMANCE ASSESSMENTS

A. Performance of the Borrower and Executing Agency

32. The PCR did not rate the performance of MBPT, CHPT, the borrowers, and executing agencies for the project. The PCR observed that the PIOs were set up as per appraisal in a timely manner. Procurement activities were, however, delayed resulting in delayed award of contracts. The executing agencies complied with the loan covenants during project implementation. Cooperation of the officials and staff from MOST, the executing agency for the TA component, contributed to its successful implementation.

33. Based on the assessment of the performances of MBPT and CHPT in the implementation of their project components, this validation rates their performance satisfactory.

B. Performance of the Asian Development Bank

34. The PCR rated the performance of ADB satisfactory. The PCR noted that ADB administered and supervised the project from ADB headquarters, but subsequently transferred this to the ADB India Resident Mission. ADB conducted an inception mission and three review missions before the loans were cancelled. The Mumbai Port project was canceled first, and prepaid before the project’s transfer to the resident mission. Although loans were cancelled and the disbursed amounts prepaid by the borrowers, the PCR maintained that this was purely the decision of the two port trusts based on financial realities and had not been due to any issues with ADB. This validation rates ADB performance satisfactory, the same as the PCR rating.

C. Others

35. There were no resettlement and rights-of-way issues identified. The project was implemented within the two existing ports’ operating areas or boundaries. Thus, no land acquisition and resettlement issues were involved.

IV. OVERALL ASSESSMENT, LESSONS, AND RECOMMENDATIONS

A. Overall Assessment and Ratings

36. Both the PCR and this validation rate the project successful. On relevance, PCR had rated the project highly relevant but did not give sufficiently convincing reasons for the rating. The project was consistent with the then prevailing medium-term plan of India and that of ADB country strategy. However, although the project design was well prepared, traffic forecast proved highly inaccurate (para. 18). Hence, this validation rates the project relevant.

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37. Validation assesses the project effective due to the higher than expected traffic growth in Chennai project and the lower than expected traffic growth in Mumbai project plus better than expected waiting time at anchorage The projects are assessed efficient given the reasonable EIRRs. Sustainability is likely based on the financial performance and policy initiatives undertaken. A comparison of the ratings given at PCR and at validation is summarized in the table below.

Overall Ratings

Criteria PCR IED Review Reason for Disagreement and/or Comments Relevance Highly relevant Relevant Demand forecasts for the two ports were not accurate (para. 18). Traffic forecasts should have been undertaken with more rigor, especially for Mumbai. Effectiveness in achieving Effective Effective outcome Efficiency in achieving Efficient Efficient outcome and outputs Preliminary assessment of Likely to be Likely to be sustainability sustainable sustainable Overall assessment Successful Successful Borrower and executing Not rated Satisfactory Refer to paras. 32–33. agency Performance of ADB Satisfactory Satisfactory

Impact Not rated Significant The improved port productivity would have resulted in lower shipping costs, removal of demurrage, enhanced competitiveness of India’s exports, and lower prices of commodities (para. 31). Quality of PCR Less than The PCR was done 9 years after satisfactory completion. There were significant data deficiencies including port statistics that could have strengthened the conclusions reached at PCR. A number of sections were omitted in the PCR, i.e., lessons, recommendations for follow-up, monitoring and evaluation design, and recommendation on IED follow-up (para. 42). ADB = Asian Development Bank, IED = Independent Evaluation Department, PCR = project completion report. Note: From May 2012, IED views the PCR's rating terminology of "partly" or "less" as equivalent to "less than" and uses this terminology for its own rating categories to improve clarity. Source: ADB Independent Evaluation Department.

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B. Lessons

38. Given the time lag between project completion and PCR preparation, the usefulness of lessons obtained from the project’s implementation would be limited. For example, delays in procurement during project implementation were traced to the confusion in applying the government’s or ADB procurement rules. This had already been remedied in subsequent ADB projects by training the executing agency and PIO staff on ADB procurement procedures.

39. The cancellation and prepayment of the project loans by the executing agencies were premature and abruptly cut ADB participation in the project and in the ports subsector. This explained the delay in the preparation of the PCR and the lack of data after project completion on socio-economic impacts, among other things. Also, ADB incurred upfront costs, such as feasibility study preparation, deployment of project review missions, and related activities for the project.

C. Recommendations for Follow-Up

40. The loans had been prepaid and there would be no motivation for the port trusts, for example, to conduct a follow-up study on the socioeconomic impacts of the project. The PCR did not indicate if there were project performance monitoring systems operating in these ports. There were no recommendations made in the PCR.

V. OTHER CONSIDERATIONS AND FOLLOW-UP

A. Monitoring and Evaluation Design, Implementation, and Utilization

41. The project outcomes were actually outputs and no targets had been established for the performance indicators. For example, increase in cargo throughputs due to the project were not given in the framework, although forecast traffic growth was given in the economic and financial analysis.

B. Comments on Project Completion Report Quality

42. Typically, PCRs are undertaken 12 to 24 months after completion of the project, but this PCR was completed in November 2011, which was 7 and 9 year delay after completion of the Mumbai and Chennai Port projects respectively (para. 39). Due to their favorable financial positions (para. 12), MBPT and CHPT requested and ADB agreed to cancel the undisbursed amounts of their loans (footnote 3). Both loans were prepaid by the two port trusts. Subsequent to loan cancellation and loan prepayment, CHPT and MBPT completed the project utilizing their financial resources. There was a misunderstanding regarding the need to prepare a PCR for a prepaid project and it took a few years to realize that a PCR was needed. Given the elapsed time between project completion and PCR preparation, data may not have been available to provide reliable and accurate information on port traffic, productivity, and impacts. The PCR discussion on impact was limited only on environmental impacts. There was no discussion on the project’s socioeconomic impact or no data was provided to allow this validation to rate the project’s overall impact. The ratings on some criteria given by the PCR were not properly supported by evidence. A number of PCR sections were omitted. These were the lessons and recommendations, including follow-up, monitoring and evaluation, and 11

timing of the project performance evaluation report. This validation finds the PCR quality less than satisfactory.13

C. Data Sources for Validation

43. The data sources used for this validation included the project’s report and recommendation of the President, PCR, back-to-office reports, ADB Country Operational Strategy Study: India, India CPS 2009–2012 of ADB, ADB Country Strategy and Program, 2003–2006 for India, and PCRs of previous port projects in India.

D. Recommendation for Independent Evaluation Department Follow-Up

44. IED follow-up is not necessary given that project loans were cancelled and prepaid, and there is only limited information in the PCR.

13 The concerned regional department expressed the view for a satisfactory rating of the PCR quality.