Completion Report
Project Number: 36317-013 Loan Number: 1981 Technical Assistance Number: 4053 November 2020
India: Railway Sector Improvement Project
This document is being disclosed to the public in accordance with ADB's Access to Information Policy.
CURRENCY EQUIVALENTS
Currency unit – Indian rupees (₹)
At Appraisal At Project Completion 26 November 2002 31 December 2011 ₹1.00 = $0.0208 $0.0188 $1.00 = ₹48.1300 ₹53.1050
ABBREVIATIONS
ADB – Asian Development Bank EIRR – economic internal rate of return MIS -- management information system MOR – Ministry of Railways NCB – national competitive bidding NRVY – National Rail Vikas Yojana PCC – project coordination committee PMC – project management consultant PPMS – project performance management system QCBS – quality- and cost-based selection RVNL – Rail Vikas Nigam Limited SPV – special purpose vehicle TA – technical assistance TOR – terms of reference
WEIGHTS AND MEASURES
km – kilometer km2 – square kilometer m – meter
NOTES
(i) The fiscal year (FY) of the Government of India ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2020 ends on 31 March 2020.
(ii) In this report, “$” refers to United States dollars.
Vice-President Shixin Chen, Operations 1 Director General Kenichi Yokoyama, South Asia Department (SARD) Director Ravi Peri, Transport and Communications Division (SATC), SARD
Team leader Mukund Kumar Sinha, Transport Specialist, SATC, SARD Team members Arlene Ayson, Senior Operations Assistant, SATC, SARD Marie Kristine Estrella, Associate Project Officer, SATC, SARD
In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.
CONTENTS
Page BASIC DATA i I. PROJECT DESCRIPTION 1 II. DESIGN AND IMPLEMENTATION 1 A. Project Design and Formulation 1 B. Project Outputs 2 C. Project Costs and Financing 4 D. Disbursements 5 E. Project Schedule 5 F. Implementation Arrangements 7 G. Technical Assistance 8 H. Procurement and Consultant Recruitment 8 I. Gender Equity 9 J. Safeguards 9 K. Monitoring and Reporting 9 III. EVALUATION OF PERFORMANCE 10 A. Relevance 10 B. Effectiveness 11 C. Efficiency 11 D. Sustainability 12 E. Development Impact 12 F. Performance of the Borrower and the Executing Agency 13 G. Performance of the Asian Development Bank 13 H. Performance of Consultants, Contractors, and Suppliers 13 I. Overall Assessment 14 IV. ISSUES, LESSONS, AND RECOMMENDATIONS 14 A. Issues and Lessons 14 B. Recommendations 15
APPENDIXES 1. Project Framework 16 2. Project Costs 22 3. Disbursement and Contract Awards of ADB Loan Proceeds 24 4. Actual and Planned Project Implementation Schedule 27 5. Chronology of Major Events 28 6. Organizational Structure for Project Implementation 30 7. Status of Compliance with Main Loan Covenants 31 8. Technical Assistance Completion Report 48 9. Economic and Financial Reevaluation 52 10. Project Procurement Packages 82 11. Snapshot of Achievements in Reforms at Loan Closure 83
BASIC DATA
A. Loan Identification
1. Country India 2. Loan number and financing source 1981-IND, ordinary capital resources 3. Project title Railway Sector Improvement Project 4. Borrower India 5. Executing agency Indian Railways, Ministry of Railways 6. Amount of loan $313,600,000.00 7. Financing modality Sector loan
B. Loan Data
1. Appraisal – Date started 12 September 2002 – Date completed 1 October 2002
2. Loan negotiations – Date started 20 November 2002 – Date completed 22 November 2002
3. Date of Board approval 19 December 2002
4. Date of loan agreement 21 April 2004
5. Date of loan effectiveness – In loan agreement 20 July 2004 – Actual 26 October 2004 – Number of extensions 2
6. Project completion date – In loan agreement 31 December 2007 – Actual1 31 December 2011
7. Loan closing date – In loan agreement 30 June 2008 – Actual 31 December 2011 – Number of extensions 3
8. Financial closing date – Actual 19 June 2012
9. Terms of loan – Interest rate LIBOR – Maturity (number of years) 25 – Grace period (number of years) 5
10. Terms of relending (if any) Not applicable
1 The Government continues to finance the project till its final completion.
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11. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval 9 December 2005 25 May 2012 78 months
Effective Date Actual Closing Date Time Interval 26 October 2004 19 June 2012 92 months
b. Amount ($) Original Net Increase Final Amount Undisbursed Category Allocationa (Decrease) Allocationb Disbursed Balance Civil works A 16,000,000 1,398,588 17,398,588 17,398,588 0 Civil works B 178,200,000 (15,071,281) 163,128,719 163,128,719 0 Supply of goods 105,000,000 (84,548,287) 20,451,713 20,451,713 0 Consulting services C 600,000 (239,414) 360,586 360,586 0 Consulting services D 6,400,000 (5,824,464) 575,536 575,536 0 Management information 7,400,000 (7,400,000) 0 0 0 system
Total 313,600,000 111,684,858 201,915,142 201,915,142 0 a Revised original allocation amounts based on Amendment to Loan Agreement dated 11 October 2006 b Final allocation amounts after final cancellation of $10,384,858.97 dated 19 June 2012
12. Local costs (financed) – Amount ($124,892.04) – Percent of Local Costs (2.31%) – Percent of Total Cost (0.06%)
C. Project Data
1. Project cost ($ million)
Cost Appraisal Estimate Actual Foreign exchange cost 340.80 Not available as the Local currency cost 238.40 project is not yet complete Total 579.20
2. Financing plan ($ million)
Cost Appraisal Estimate Actual Implementation costs Borrower-financed 238.400 244.753 ADB-financed 340.800 201.910 Total 579.200 446.663 ADB = Asian Development Bank.
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3. Cost breakdown by project component ($ million) Appraisal Estimate Actual Component ADB Government ADB Government A. Investment subprojects 299.2 226.6 200.979 244.7410000 B. Consulting services, training and 9.0 11.8 0.936 0.0011387 management information system C. Front-end fee 3.1 0.0 … … D. Interest during construction 29.5 0.0 … … Total 340.8 238.4 201.915 244.7421387 … = not available, ADB = Asian Development Bank.
4. Project schedule Item Appraisal Estimate Actual Land acquisition Q4 2002–Q2 2003 Q4 2002–Q4 2007 Project preparatory consulting services Q3 2002–Q2 2003 Q3 2002–Q4 2008 Procurement process of subprojects Q4 2002–Q3 2003 Q1 2003–Q2 2009 Construction and installation of subprojects Q3 2003–Q4 2007 Q1 2008–Q4 2020 Dates First procurement 25 May 2005 Last procurement 24 June 2010 Start of operations July 2008 Completion of tests and commissioning December 2020 Q = quarter.
5. Project performance report ratings Ratings
Implementation Implementation Period Development Objectives Progress From 9 December 2002 to 31 December 2002 Satisfactory Satisfactory From 1 January 2003 to 31 December 2003 Satisfactory Unsatisfactory From 1 January 2004 to 31 December 2004 Satisfactory Satisfactory From 1 January 2005 to 31 December 2005 Satisfactory Satisfactory From 1 January 2006 to 31 December 2006 Satisfactory Satisfactory From 1 January 2007 to 31 December 2007 Satisfactory Satisfactory From 1 January 2008 to 31 December 2008 Satisfactory Satisfactory From 1 January 2009 to 31 December 2009 Satisfactory Satisfactory From 1 January 2010 to 31 December 2010 Satisfactory Satisfactory From 1 January 2011 to 31 March 2011 On Track From 1 April 2011 to 30 June 2011 On Track From 1 July 2011 to 31 September 2011 On Track From 1 October 2011 to 31 December 2011 On Track From 1 January 2012 to 31 March 2012 On Track From 1 April 2012 to 30 June 2012 On Track Note: Beginning January 2011, ratings are based on single project performance ratings recorded in eOperations (PAI No. 5.08).
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D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person-Days of Members Consultation 11–17 July 2002 4 7 c, i, s, t Re-appraisal 12 September– 12 20 c (2), e, f (3), i, 1 October 2002 n, s, t (3) Consultation 10–12 November 1 3 i 2003 Inception 20–24 July 2004 2 5 a, i Review 1 6–9 May 2005 3 4 c, i, t Project Coordination Committee 9–12 September 2 4 i, t meeting 2005 Review 2 30 August– 5 8 a, f, i, s, t 6 September 2006 Project Coordination Committee 27 October 2006 2 1 i, t meeting Special loan administration 1 7–10 March 2007 1 4 i Review 3 20–30 March 2007 2 11 a, i Special loan administration 2 16–17 July 2007 3 2 p, t (2) Midterm review 12–22 November 3 11 a, i, t 2007 Review 4 3–21 July 2008 5 19 f, i, t (3) Special loan administration 3 4–5 November 2008 3 2 i, t (2) Review 5 12–23 January 2009 3 12 i, t (2) Review 6 2–14 July 2009 4 13 a, i, t (2) Review 7 18–28 October 2010 1 11 i Project completion review 1 12–23 August 2013 2 12 t, c Project completion review 2 3–7 February 2020 3 15 t,a,c a = analyst, c = consultant, e = environment specialist, f = financial specialist, i = implementation officer, n = counsel, p = project administration unit head, s = social specialist, t = transport specialist.
I. PROJECT DESCRIPTION
1. An efficient transport system is a prerequisite for sustained economic development. It is not only the key infrastructural input for the growth process but also plays a significant role in promoting climate-friendly mass transport, which is particularly important in a large and densely populated country such as India. Railways in India not only cater to the significant transport needs of the country but also bind together dispersed areas to promote vital linkages between economic activities. Railways are the sole high-capacity transport mode capable of meeting the long-term transport needs of the country. Despite these inherent advantages, railways have not maintained their market share. The Government of India saw the need for a strategic shift in the objectives of railways to regain some of the market share lost over the past few decades to competing modes of transport. The focus has been on modernizing and technologically upgrading railway systems, 1 augmenting capacity, and improving the safety and reliability of services.0
2. At the request of the government, the Asian Development Bank (ADB) approved a loan of $313.60 million equivalent from ADB’s ordinary capital resources for the Railway Sector 2 Investment Project.1 The loan agreement was signed on 21 April 2004 and made effective on 3 26 October 2004.2 The project’s goal was to promote economic growth and reduce poverty by improving the performance of the railway sector through (i) implementing a program of institutional and policy reforms to improve the commercial orientation of Indian Railways, and (ii) expanding core businesses by financing priority investments to overcome railway capacity bottlenecks and to improve operational efficiency and safety.
3. At appraisal, the project was envisaged to have two main outputs: (i) to implement a reform program to transform Indian Railways into a commercially oriented organization in stages, over the period from 2002 to 2010; and (ii) to finance priority investments to strengthen Indian Railways’ core business activities, to be implemented over a 5-year period during fiscal year (FY) 2003– 4 FY2007.3
4. In conjunction with the project, technical assistance (TA) to provide management consulting services to Indian Railways was approved in the amount of $590,000, of which ADB would finance $500,000 on a grant basis.
II. DESIGN AND IMPLEMENTATION
A. Project Design and Formulation
5. The project design and formulation at appraisal were aligned with government priorities 5 (para.1, footnote 1) and ADB’s country strategy for India.4 ADB’s country strategy sought to promote pro-poor economic growth by enabling greater access for the poor to the benefits of economic prosperity. In the railway sector, it focused on helping (i) expand the railway system by constructing lines in unserved, less-developed areas; (ii) modernize and increase capacity to improve efficiency on key routes of the national railway system; (iii) commercialize railway
1 Government of India, Planning Commission. 2002. Tenth Five-Year Plan 2002–2007. Vol-2, Sectoral Policies and Programmes. Delhi. 2 ADB. 2002. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant to India for the Railway Sector Improvement Project. Manila. 3 Loan Agreement (Ordinary Operations), Railway Sector Improvement Project, between the Republic of India and Asian Development Bank, 21 April 2004. 4 Stages of the reform program: phase 1 in 2002–2005, phase 2 in 2006–2007, and phase 3 in 2008–2010. 5 ADB. 2002. Country Strategy and Program Update: India, 2003–2005. Manila.
2 operations to improve efficiency; and (iv) increase railway competitiveness in the transport sector through restructuring and reform. Investments in railways help local industries access freight transport services.6The project was financed using ADB’s sector lending modality (footnote 2). It was found to be appropriate given that (i) the Ministry of Railways (MOR) had a well-defined investment plan to address high-priority capacity-expansion requirements and safety improvements in the railway sector; (ii) as one of India’s leading institutions with extensive experience in project implementation, the MOR had the institutional capacity to implement the investment plan; and (iii) through the reform component of the project, the MOR would implement an institutional and policy reform program to improve the overall sustainability of investment in the railway sector. The TA attached to the project also complemented the project by providing management consulting services to the MOR on the reform component.
6. At the time of project preparation, the government had initiated measures to promote more sustainable and efficient management of the rail network by (i) implementing reforms in organizational structure, procurement, financial and information management; (ii) enhancing capacity improvement and operational efficiency through investments in priority areas; and (iii) improving the regulatory environment to facilitate greater private sector involvement. The MOR monitored the implementation of the reform program with the support of the standing committee established for that purpose, and Rail Vikas Nigam Limited (RVNL) was incorporated under the MOR as a special purpose vehicle (SPV) to implement the investment component of the project. During implementation, the design and scope changed significantly in response to readiness concerns and changes made at that time (para. 16), which included the adoption of MOR procedures for procurement of goods and contracts (para. 19) and the reflection of the government’s intention to finance components of the project (para. 11). The project framework was not updated to reflect these changes and lacked quantifiable and measurable targets (para. 48).
B. Project Outputs
7. Reform program component. Phase 1 of the reform program sought to (i) establish an improved accounting system for Indian Railways that meets government and commercial accounting requirements; (ii) operate Indian Railways as a business, with social responsibilities to be delineated and separately funded by the government; (iii) set a first stage of restructuring noncore activities; (iv) improve customer orientation through various measures, with Indian Railways concentrating on operating the rail services and encouraging the private sector to take increasing responsibility for the customer interface; (v) continue to rightsize staff strength; (vi) continue to rationalize tariffs; and (vii) strengthen investment planning to concentrate on investments needed to improve business performance. In phase 2, the improved accounting system was to support a deepening of reforms through (i) restructuring core businesses as independent profit and/or cost centers, and (ii) completing the restructuring of noncore activities.
8. At project completion, several significant improvements had been made in the accounting system. The most significant was the development of an accounting architecture according to lines of business and on the accrual basis. In December 2009, in the White Paper and the Vision 2020 of Indian Railways, the government had committed to implement these improvements. In 2010, the MOR approved the accounting architecture and began to implement standardized computerization in accordance with the approved architecture.
6 ADB. 2013. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility to India for the Railway Sector Investment Program. Sector Development Initiatives in Indian Railways. Manila (accessible from the list of linked documents in Appendix 2).
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9. Apart from the accounting reforms, several steps were taken to improve the commercial orientation of the railways:
(i) By 2013, the original nine zones had been restructured into 16 zones.
(ii) From 2004–2005 to 2008–2009, 373 model stations and 426 modern stations were developed.7 In 2009–2010, 378 stations were developed as “Adarsh stations” with basic facilities such as drinking water, adequate toilets, catering services, waiting rooms and dormitories especially for female passengers, better signage, and so on.
(iii) Between 2009 and 2010, the passenger reservation system was expanded to more than 1,990 locations. Automatic ticket-vending machines were introduced to shorten passenger queues at counters.
(iv) The MOR continues to review the staff strength. In March 2002, the total number of people employed by Indian Railways was 1.51 million; by March 2009, that 8 number had declined to 1.38 million, and by March 2018 to 1.27 million.6F
(v) Until 2016, passenger and freight tariffs were decided as part of a separate annual railway budget approved by the Parliament. In September 2016, the government approved the merger of the railway budget with that of the central government. Since FY2017, the Parliament has approved the budget for railways as part of the union budget. In 2017–2018, to make rail transportation more attractive to customers, various initiatives were undertaken, including (a) rationalizing the coal tariff, (b) classifying new commodities, (c) expanding the freight basket through containerization, (d) introducing the double-stack dwarf container as a new delivery model, (e) establishing long-term tariff contracts with key freight customers using the predetermined price escalation principle, and (f) rationalizing and simplifying rate policies such as weighment.
10. Under phase 2 of the reform program, seven new zones and eight new divisions were created in 2002–2003, and the Salem division was added in 2007. Over the next several years, Indian Railways continued restructuring its core businesses as independent profit and/or cost centers. By 2018, Indian Railways operations had been divided into 17 zones, which are further subdivided into 73 divisions, each having a divisional headquarters. The restructuring of noncore businesses also went ahead. In discussions with Indian Railways, ADB’s project completion review mission confirmed that the implementation of the reform program up to the loan closure was satisfactory and that the program was carried forward in the subsequent loan. A snapshot of the achievements in relation to the reform program at the time of loan closure is in Appendix 11.
11. At appraisal, it was envisaged that the project would use international consulting services and purchase equipment for establishing a management information system (MIS) to provide financial and operating and management information required for enhancing the efficiency and commercial orientation of Indian Railways. However, during the midterm review of the project in November 2007, ADB and the government agreed that the loan allocation for civil works was
7 The model and modern stations schemes of the Indian Railways were planned investments to provide standardized basic passenger amenities in various classes of stations. 8 Government of India, Ministry of Railways. 2018. Indian Railways Year Book, 2017–18. New Delhi; Government of India, Ministry of Railways. 2009. Indian Railways Year Book, 2008–09. New Delhi; Government of India, Ministry of Railways. 2002. Indian Railways Year Book, 2001–02. New Delhi.
4 forecast to be insufficient due to the appreciation of the Indian rupee against the U.S. dollar, resulting in the cumulative contract award reaching the net loan amount. As agreed with ADB, the government dropped the MIS portion from the project and the loan proceeds were reallocated to civil works. The MIS was then proposed to be established using Indian Railways’ own funds. The total loan amount could not be used completely because of closure of the loan before completion of the investment subprojects, which were subsequently completed using government funds.
12. Investment subprojects. The project at appraisal was to finance priority investments to strengthen Indian Railways’ core business activities. Four sample subprojects were identified: (i) support the construction of a single nonelectrified railway line through the supply and installation of approximately 96.00 kilometers (km) of track structure (except ballast) from Tomka 9 to Keonjhar;7 (ii) build a second railway bridge of 2.10 km across the Mahanadi River; (iii) build a third nonelectrified track railway line of 60.00 km between Bhatapara and Urkura; and (iv) build approximately 151.00 km of a second nonelectrified track railway line between Gooty and Pullampet. In addition, the project also allowed the financing of additional subprojects that meet 10 the subproject selection criteria.8
13. With the approved changes in the loan agreement, the project actually covered five subprojects with civil works and supply of equipment: (i) the second railway bridge (2.10 km) across the Mahanadi River, (ii) a third nonelectrified railway line between Bhatapara and Urkura (60.00 km), (iii) approximately 151.00 km of the second nonelectrified track railway line between Gooty and Pullampet, (iv) the doubling of the Rajatgarh–Barang and Cuttack–Barang sections and the third line of the Khurda Road–Barang section of the East Coast Railway, and (v) the third 11 line of the Thiruvallur–Arakkonam section of the Southern Railway.9 The loan also financed the supply of signaling equipment for two other subprojects for which civil works were completed using government funds: (i) a third line of the Aligarh–Ghaziabad section, and (ii) a doubling of the Raichur–Guntakal section.
12 14. At loan closure, three of the five works for subprojects were completed.1 The third line of the Bhatapara–Urkura section of the South East Central Railway was 69.00% complete; the doubling of the Rajatgarh–Barang and Cuttack–Barang sections, and the third line of the Khurda Road–Barang section of the East Coast Railway were 50.00% complete. Of the 315.86 km, physical works for 259.50 km (82.20%) had been completed, as well as the reform program component. Although more than 80.00% of physical works under the investment subprojects have been completed, only one subproject, the 3.00-km second bridge over the Mahanadi River, was commissioned and opened to traffic in July 2008. At the time of this completion report, all subprojects, except a 6.65-km stretch of the third line from Khurda Road to Barang section in Odisha State, had been completed (para. 22).
C. Project Costs and Financing
15. At appraisal, the proposed project cost was $579.20 million, which comprised $313.60 million in an ADB loan (54.00%) and $265.60 million in government counterpart funds (46.00%). The loan was proposed primarily to cover the cost of the investment subprojects; coverage of
9 This was removed from the list of subprojects by the MOR because the project was not ready. 10 This was embodied in the loan agreement signed in April 2004 for this project. 11 Although all works were completed, the third line of the Khurda Road–Barang section of the East Coast Railway was not commissioned and open for traffic at the time of the project completion review mission in February 2020. It is expected to be commissioned by December 2020. 12 There is a substantial gap (about 8 years) between the closure of the loan and the writing of this report because subprojects under government financing remained largely incomplete at the time of the loan closure.
5 consulting services and training in relation to reforms constituted a very small fraction of the loan ($13.80 million). The original financing plan was for the loan to fund 57.00% of the expenditures for investment subprojects in foreign currency and for the government to cover the expenditures in local currency.
16. In July 2006, the government requested a change in the financing plan to reflect its decision to repackage civil works contracts and to finance those completely with government funds. ADB recorded its “no objection” for the change: the loan agreement was amended to reflect government funding for expenditures in foreign currency of $103.00 million out of its share of $225.80 million (43.00%). Furthermore, upon the government’s request, ADB agreed to a partial loan cancellation of $101.30 million, effective in March 2007. The civil works contracts for two subprojects in the Aligarh–Ghaziabad and Raichur–Guntakal sections, and contracts for the manufacture and supply of prestressed concrete sleepers, as well as 60-kg standard rails were now to be financed completely by the government. The undisbursed loan balance of $10.40 13 million at the loan closing was also canceled.11F
17. At completion, the disbursed loan amount stood at $201.92 million, which covered 45.20% of the total project cost, including 99.50% for civil works and 0.50% for consulting services and financial charges. The government covered $244.74 million (54.80%). The detailed project cost and financing plan at appraisal and completion, which the project completion review mission could capture, appear in Appendixes 2 and 3.
D. Disbursements
18. At the closing of the loan, the total amount disbursed for the project was $201.92 million. Disbursement was slow and by the end of 2006 had accounted for only 9.00% of the loan amount (para. 19). About 89.00% of the disbursements occurred from 2006 to 2011. Annual disbursement details of the ADB funds appear in Appendix 4. Projections for disbursements had been revised at the date of loan effectiveness because some projects were dropped, and at later stages because of loan cancellation.
E. Project Schedule
19. At appraisal, the project, including preconstruction activities for subprojects, was envisaged to be completed in 66 months, i.e., by December 2007, and the loan to be closed by 30 June 2008. The loan was approved in December 2002. The loan agreement was signed on 21 April 2004 and became effective on 20 July 2004. The delay in signing the loan agreement was primarily caused by the delay of the MOR in ascertaining the bidding mode for the civil works 14 contracts.2 Subsequently, on 17 March 2006, ADB and the government signed an amendment to the loan agreement to adopt post-qualification with single-stage bidding for the remaining civil works contracts to facilitate expeditious contract awards and greater competition.
20. During implementation, the loan was extended three times from 30 June 2008 to 31 December 2011. Project implementation took 91 months, 38.00% longer than envisaged at appraisal. The prolonged implementation resulted in cost and time overruns for all the 15 subprojects.13 ADB gave “no objection” to the request of the government to reallocate loan
13 ADB (South Asia Department). 2012. Cancellation of Unutilized Loan Balance. Letter. 19 June (internal). 14 ADB (South Asia Department). 2005. Seeking Acceptance and Agreement of Borrower to Amendment. Letter. 15 September (internal). 15 Due to the change in project scope, the project cost at completion does not show cost overrun.
6 proceeds within civil works to different categories of civil works, to cover the shortfall in one 16 category.14
21. Major reasons for the slower implementation of investment subprojects were (i) lack of access to the site for civil works contractors on railway lines in operation, and (ii) delays in granting of necessary blocks. ADB review missions noted that the performance of three civil works packages for subprojects in Odisha State were particularly poor, resulting in very slow progress compared with the other subprojects. All three civil works packages in Odisha were awarded to the same joint venture of three partners. The joint venture had cash flow problems and incompetent subcontractors, which caused performance issues in the civil works packages in the state.
22. The project also encountered delays in commissioning the subprojects after the physical works were completed. This was due to the lack of availability of blocks for safety testing and connecting the completed subprojects to the rest of the Indian Railways network so this could open for traffic. The following were completed: (i) the second bridge over the Mahanadi River was commissioned and opened to traffic in July 2008, (ii) the doubling of track on the Gooty–Pullampet section in February 2013, (iii) the doubling of track on the Cuttak–Barang section in September 2015, (iv) the third line on the Bhatapara–Urkura section in May 2016, (v) the third line on the Tiruvallur–Arakkonam section in July 2016, and (vi) the doubling of track on the Rajatgarh–Barang section in June 2017. The sections for which equipment was procured under the ADB loan were commissioned for (i) the third line of the Aligarh–Ghaziabad section, which opened for traffic in March 2012, and (ii) the doubling of track on the Raichur–Guntakal section, which opened for traffic in March 2017. A 6.65 km stretch of the third line from the Khurda Road–Barang section in Odisha State is likely to be completed in December 2020. The delay, considering all the subprojects together, is about 8 years.
23. A consortium of international consulting firms was engaged for the accounting reform program. The program envisaged upgrading the accounting system of the MOR and organizing the accounts according to lines of business for greater accountability. The tasks were expected to be completed in a 30-month implementation period, divided into two phases: the first 15 months for the design and the second 15 months for implementation. However, the process of accounting reforms continued beyond the closure of the loan. Progress was reviewed at loan closing and 17 during the due diligence for the subsequent loan.15 The review indicated in hindsight that the “reform program was overly ambitious and sought to implement several major reforms in a relatively short time frame and in a large complex organization.” With this, an action plan was drawn up to enhance and consolidate the reform process in conjunction with the subsequent loan. In addition, ADB provided TA to the MOR for management consulting services to assist the MOR in implementing the reform program (paras. 35 and 36). The ambitious nature of the reforms is adjudged an important factor in achieving substantial progress in the reform program. Small, piecemeal targets for ushering in a reform agenda would have had greater chances of failure owing to the intertwined nature of the mammoth institutional structure, and only a multipronged approach would have had a sizable impact in achieving the results.
16 ADB (South Asia Department). 2012. Loan 1981-IND: Railway Sector Improvement Project–Reallocation of Loan Proceeds. Letter. 31 May (internal). 17 ADB. 2011. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility to India for the Railway Sector Investment Program. Manila.
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F. Implementation Arrangements
24. The government assigned the chairperson of the Railway Board to provide guidance and policy advice on the implementation of the reform program. An additional member was appointed as project director for the reform program, assisted by an executive director, a director, and other senior staff from the Planning Directorate of Indian Railways. To monitor implementation of the reform program, a standing committee comprising executive directors and senior staff of the MOR was established before the loan effectiveness date. The standing committee members met periodically to review the status of implementation of the reform program and to report to the chairperson and the additional member of the Railway Board.
25. The MOR designated the RVNL as the project implementing agency. The investment subprojects were envisaged to be part of the government’s medium-term railway sector investment plan, known as National Rail Vikas Yojana (NRVY). To implement the NRVY, the RVNL was incorporated as a 100.00% owned public sector unit of the MOR on 24 January 2003, much earlier than the effectiveness date. The RVNL became fully functional by March 2005 and worked as an extended arm for and on behalf of the MOR. The RVNL is empowered to act as an umbrella SPV to undertake project development, resource mobilization, and the like, whether 18 directly or by creating project-specific SPVs or by any other suitable financing structure.6F
26. The RVNL’s managing director acted as the project director for the investment component. The implementation of each subproject was closely monitored by a full-time chief project manager for each zone, supported by adequate numbers of technical and administrative staff. The RVNL appointed a corporate coordinator in the head office in Delhi, who was responsible for coordinating, managing, and monitoring project implementation. The project implementation unit (PIU) for each subproject was headed by the chief project manager, who was responsible for monitoring implementation and preparing progress reports. At zone offices, the chief project manager was assisted by a general manager (projects) and by deputy project managers.
27. During the implementation, a project management consultant (PMC) assisted the PIU for each subproject in many aspects of implementation. Local offices of the PMC were established near each of the subprojects for routine project management activities. The PMC team leader for each subproject was stationed on site, with authority to act as the employer’s representative as defined in the civil works contracts. The corporate coordinator consolidated the reports for submission to the MOR and ADB. The corporate coordinator, chief project managers, all deputy project managers, and PMCs met when needed. The RVNL, as an SPV for expansion of the railway network, was adequately equipped with personnel who had the requisite skills and ability to muster adequate resources for meeting project demands. With monitoring at various levels, including at the head office and regional branches, there were adequate measures for mitigation of risk and timely response to unforeseen challenges.
28. Overall, the implementation arrangement during implementation was generally adequate. During implementation, the MOR set up a project coordination committee (PCC) to review the progress of projects and remedial action taken for speedy implementation. The first PCC meeting, chaired by the chairperson of the Railway Board, took place in Delhi on 12 September 2005, with participants from the MOR, RVNL, ADB, and the Ministry of Finance (MOF). The PCC was able to facilitate resolution of pending issues and measures to improve progress and performance.
18 Rail Vikas Nigam Limited. About RVNL. www.rvnl.org/en/pages/aboutrvnl.aspx.
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G. Technical Assistance
29. A separate TA was granted to provide management consulting services to Indian Railways. The total cost of the TA was estimated at $590,000.00 of which ADB was to finance $500,000.00 on a grant basis. The TA cost details are in Appendix 8. The consultant under the TA was mobilized in October 2004. The consultant’s responsibilities were to (i) advise the MOR on Indian Railways’ annual business performance, (ii) conduct annual monitoring of implementation of the reform program, and (iii) advise on management and business-related issues identified during the implementation of the reform program. In April 2008, the TA scope was changed because the scenario had changed since 2002 when the TA was designed. The MOR approved three additional studies: (i) a dynamic pricing policy; (ii) increased loading of wagons beyond their carrying capacity for better utilization of assets; and (iii) public–private partnership (PPP) initiatives in the creation of additional assets, both fixed and rolling stock. The consultant submitted two annual reports, one in October 2005 and another in 2006, detailing progress 19 achieved in the implementation of the agreed reform program. 17 Upon completion of the TA, the consultant prepared final reports on (i) setting up a focused business organization for parcel traffic, (ii) dynamic pricing policy and other tariff-related issues, (iii) permitting increased loading of wagons, (iv) PPPs, and (v) procurement of stores and materials.
30. ADB approved the recruitment of the international consultants for the accounting reform component on 12 April 2005. The consultant for the reform program was mobilized on 17 April 2006.
31. The TA is rated successful based on its relevant, effective, efficient, and likely sustainable ratings.
H. Procurement and Consultant Recruitment
32. Procurement of civil works, goods, and services was in compliance with the Guidelines for 20 Procurement under ADB Loans, dated February 1999 (amended from time to time).18 Only six contract packages were envisaged for the four sample projects under the loan. In all, 11 civil works contracts, three goods and equipment supply contracts, and two consulting services contracts were awarded. Procurement of all works, goods, and equipment met with some delays, mostly caused by the restructuring of the procurement packages. Obtaining applications for prequalification and evaluation took time, mainly because of changes in senior management positions in the MOR. The MOR submitted to ADB by 24 March 2004 the prequalification evaluation reports for six civil works packages of core subprojects under international competitive bidding. Bids received by the RVNL in December 2004 for the six packages were excessively higher than the engineers’ estimates. On 13 July 2005, to avoid further delays and to increase competition among potential bidders, the RVNL asked ADB to award future civil works contracts on the basis of post-qualification with single-stage bidding instead.
33. On 15 September 2006, to minimize further delays in implementation and to allow for repackaging, on the request of the MOR, a second loan amendment was signed, dividing the civil works allocation into three categories and allowing the MOR to adopt its own procedures for procurement of goods or works contracts under the project that were not financed by ADB (footnote 11). The contract award and disbursement projections during appraisal had to be
19 ADB (South Asia Department). 2006. Review Mission to India: Railway Sector Investment Project. Aide memoire. 30 August–6 September 2006 (internal). 20 ADB approved necessary changes to procurement methods at appraisal to assist with project implementation.
9 reviewed in light of the amendment to the loan agreement as there was a change in scope. Though the projections were reasonable, the delays in implementation happened mostly because of frequent design changes by Indian Railways and excessive delays in providing blocks for integrating the newly built infrastructure.
I. Gender Equity
34. The project was classified as having no gender element.
J. Safeguards
35. The project was categorized B for environmental safeguards. It did not have significant safeguards implications as the alignment was on existing railway land with minimal land acquisition and involuntary resettlement. The projects added either a second line or a third line that used railway land beside the existing line, thereby not requiring any land acquisition (para. 13). Safeguards implementation is assessed as satisfactory. The project complied with ADB’s Environment Policy (2002) and the conditions included in Schedule 6 of the loan agreement. On the basis of procurement review documents, initial environmental examinations were prepared 21 for six subprojects.19 The framework for land acquisition and resettlement for additional subprojects and the summary initial environmental examination were prepared and disclosed on the ADB website as part of the Report and Recommendation to the President on the project. Other safeguards documents prepared during processing were the summary remedial resettlement action plan, the framework for indigenous peoples development plan, the summary resettlement plan for the Gooty–Pullampet subproject, and the summary of short resettlement plan. Nongovernment organizations were engaged to conduct a detailed census and inventory of lost assets for core projects. Issues related to resettlement and rehabilitation compensation payment and the subsequent resettlement action plan were reported for the Raichur–Guntakal doubling subproject. The government excluded this subproject from ADB financing for civil works. The RVNL has confirmed that there are no pending grievances on the social safeguards side for this project.
K. Monitoring and Reporting
36. Almost all the loan covenants were complied with. The MOR was required to submit quarterly progress reports. It also reported progress during review missions, tripartite meetings, and PCC meetings, and consulted ADB when required. The project at appraisal included a project framework to monitor progress against specific output targets. The project in its original format included an MIS along with the implementation of a project performance monitoring system (PPMS) and the collection of baseline socioeconomic data. The format and scope of the surveys and the quantity and the quality of the data to be collected, and the frequency of collection were to be agreed upon mutually between the MOR and ADB. The MIS was to provide financial, operating, and management information required for enhancing the efficiency and commercial orientation of Indian Railways. However, as part of the scope change requested by the MOR and agreed to by ADB, because of the increase in overall cost, the MIS was excluded from the scope of ADB funding. The MOR agreed to establish an MIS from its own resources in an integrated manner for all the projects being implemented by the RVNL. ADB agreed to this proposal. Indian Railways has established the Center for Railway Information System (CRIS), which develops and manages all MIS for Indian Railways as well as operations, including both passenger and goods
21 ADB (Office of the General Counsel). 2005. Draft Prequalification Documents. Memorandum. 26 April (internal).
10 traffic. The passenger and freight data used in preparing this report was obtained from CRIS with the assistance of Indian Railways. Indian Railways is a rail network under a single management and has an impact on the socioeconomic parameters of the entire country. The subprojects selected under this loan, though critical, constitute a minuscule portion of the Indian Railways network. Hence, the project’s impact on the overall socioeconomic parameters of the country as a whole, as its proportionate contribution in the overall impact by Indian Railways, would be negligible.
37. Independent chartered accountants audited the financial accounts and statements, and the MOR submitted audited financial statements to ADB, albeit with some delays. The implementing agency reported progress during review missions and submitted to ADB the audited financial statements of the project as required in the project implementation agreement. However, not all records are available, and the financial statements in the final years did not have a cumulative description of project funds. The status of compliance with major loan covenants is in Appendix 7.
III. EVALUATION OF PERFORMANCE
A. Relevance
38. The project is rated relevant to the government’s development objectives and policies (para. 1), as well as to ADB’s country partnership strategy, with an objective to improve the performance of the railway sector. The project continues to be aligned with ADB 2030 in the provision of infrastructure that would create opportunities for the poor and vulnerable (para. 43). The sector lending modality was found to be appropriate at appraisal. Even in hindsight, the project modality is adjudged an effective strategy—as an exhaustive reform agenda for improving the efficiency of a public organization followed up with investment projects that are essentially concomitant with the same objective. A basket of reforms alone, which would require policy changes and not substantial financial support, would have been difficult to follow up. Standalone projects would have been devoid of the finance-plus aspect. The piggybacked TA served as an instrument to suggest policy intervention measures, thus providing much needed direction to the reform program (para. 5). The design of the project at appraisal was guided by the reform program and detailed analysis for selection of the investment subprojects, with specific targets for outputs. ADB had started a policy dialogue with the MOR in 1997 for long-term strategic assessment of Indian Railways. The initial preparatory work for the loan started in 1998. From 1999 to 2002, the MOR, in consultation with ADB, established a consensus on the need for reforms in specific areas. The project framework in its original form had targets specific to project outputs. The project completion review mission noted that the reform program and all of the investment subprojects, except for one stretch in one subproject, had been completed. The project aimed to improve the railway sector and was relevant with its design at appraisal and completion of outputs, despite the prolonged implementation period (paras. 8–10). The scope was changed to mitigate issues of project readiness and to align with the imperatives of subproject implementation and enhance project relevance (para. 6). The subprojects implemented are on the busiest routes of Indian Railways and align with the project objectives and relevance. The project did not overlap with the initiatives of the World Bank and other development partners as ADB took the lead in coordinating railway sector reforms with the government and in formulating a basis for resuming external assistance.
11
B. Effectiveness
39. The project is rated effective. At appraisal, the project envisaged MOR reforms and sample investment subprojects to be completed. At loan closure, the reform program and three of the five investment subprojects had been completed. Subsequently, at the time of writing of this report, all the projects except a small portion of one subproject have been completed. The investment subprojects yielded the (i) intended outcome of savings in travel time of passengers, (ii) increase in throughput of the railway sections, (iii) savings in operation and maintenance of rolling stock inventory after commissioning, and (iv) reduced road overlay cost. The aggregate time saving for the subprojects is about 13.00% and for some of the individual subprojects, more than 50.00%, which is substantial.22 Throughput of railways has doubled from 2004 to 2018. The estimated annual savings for the year 2018 in maintenance cost for wagons and coaches of individual subprojects ranged from Rs. 1.15 million to Rs. 44 million and Rs. 0.67 million to Rs. 202 million respectively. Savings from road overlay cost ranged from Rs. 8 million to Rs. 423 million during the same period (Appendix 9). Achievement of reforms was reviewed upon loan closure and during due diligence for the subsequent loan (footnote 16). The review indicated in hindsight that the “reform program was overly ambitious and sought to implement several major reforms in a relatively short time frame and in a large complex organization.” However, as explained in para. 23, the ambitious reform agenda did lead to significant progress: (i) approval by the MOR of an accounting architecture according to lines of business and on an accrual basis, and initial implementation of standardized computerization in accordance with the approved accounting architecture; (ii) improved commercial orientation of the railway sector, including the development of model and modern stations, expansion of the passenger reservation system and use of automatic ticket vending machines, and rightsizing of the staff complement; and (iii) restructuring of core businesses as independent profit and or cost centers, and noncore businesses (paras. 8–10). The achievements in the reform program at the time of loan closure are listed in Appendix 11. The project framework in Appendix 1 shows that there were substantial achievements for almost all the performance targets. Therefore, the project is rated effective.
C. Efficiency
40. The project is rated efficient in achieving its outputs and intended outcome. The investment subprojects were located along the “golden quadrilateral and its diagonals” of Indian Railways that carries the densest traffic and bulk commodities. The subprojects have eased the congestion and the bottlenecks at their specific locations. Despite substantial delays (by 4 years), the subprojects have been able to meet the intended outcomes. At appraisal, the economic internal rate of return (EIRR) for the project was 16.80%, and the EIRRs for three of the individual subprojects that were implemented were in the range of 15.30% to 17.80%. Despite the increase in costs and delays experienced, at completion, the EIRR for the project was 13.90%, while the EIRR for the nine individual subprojects were between 11.00% and 20.60%. The investment is viable, with the EIRR at completion being higher than that at appraisal and well above the discount rate envisaged, despite the delays.
41. Though there were delays in the initial period on account of bidding modalities which led to the amendment in the loan agreement, and also in the last stages where integration of the completed projects with the operational railway lines took time because of the lack of availability of block time, the core project implementation has been relatively fast under the given circumstances. The chosen subprojects are along the busiest sections of the Indian Railways
22 The aggregate million hours saved by the Project in 2018, 2025, 2030 and end of analysis period was estimated as 66, 109, 129 and 135 respectively (Appendix 9)
12 network, and even a slight disruption on account of integrating the newly constructed lines with the operational ones has the potential of adversely affecting the overall performance of the railways. Therefore, the block time had to be chosen with utmost care during the relatively lean period to minimize the impact on ongoing operations. The zones of the railway network in which these projects were implemented had greater priority for achieving quarterly to annual traffic targets, and the staff were too apprehensive in scheduling blocks on account of fears that the blocks could adversely affect the traffic targets. The principal reason for delay was the lack of availability of block times for safety testing, quality checks, and connection to the main Indian Railways network; the delay was not attributable to the progress in implementing the core subprojects (para. 14). The actual time taken for the construction of the additional lines were relatively less compared to similar projects undertaken from the executing agency’s own resources. Project readiness and implementation were enhanced through (i) project management, coordination and oversight at various administrative levels; (ii) consistent adequate staffing of PIU; (ii) data collection, management and reporting; (iii) maintenance management; and (iv) environmental and social safeguard management. While these actions were sustained and proved to be useful in achieving better implementation, some factors in particular had a substantive positive impact, viz., introduction of the construction supervision consultants and setting up dedicated PIUs. The details of the economic reevaluation are presented in Appendix 9.
D. Sustainability
42. The project is rated likely sustainable. It has contributed to improving the overall performance of the railway sector in India with support from the implementation of the reforms to strengthen the commercial orientation of Indian Railways. The project had direct positive impact through the capacity augmentation achieved by implementing investment subprojects with reduced travel time and increased tonnage transported. The project, with completion of the reform program, has achieved the institutional arrangements required to ensure sustainability at completion. The RVNL, which was set up as the extended arm of the MOR, carries out planning, development, resource mobilization, and execution of railway-related projects on fast track. These projects include not only those that are government-financed but also those financed by external- budgetary resources. At appraisal, the financial internal rate of return (FIRR) for the project was 15.40% and the weighted average cost of capital (WACC) was 6.50. The FIRRs at appraisal for the three individual investment subprojects that were eventually implemented were 11.20% to 22.30%. At completion, the FIRR for the project was 12.86% and the WACC was 4.00. The range of FIRR for individual subprojects is 6.42% to 17.03%. The FIRR for the overall project and the individual subprojects is above the WACC. Hence, the project is considered financially viable.
E. Development Impact
43. The impact of the project is rated satisfactory. The project had a direct impact on increased socioeconomic benefits through the additional railway lines constructed, though not measurable because of the lack of sources for such data.23 The parameters of the project’s impact were to be assessed 3 to 5 years after the project was opened to traffic. Nevertheless, on the basis of the economic returns calculated for the project, it can be said that the investment components contributed to reducing poverty by (i) contributing to national economic growth, which increases employment and income-earning opportunities for the poor; (ii) facilitating employment creation and income-earning opportunities for poor people living in areas previously without efficient transport links; and (iii) providing employment opportunities for poor people during construction.
23 The project’s contribution to the ADB results framework is on operational priority 1.3.1, infrastructure assets established or improved, with 315.86 km of railway lines constructed.
13
The project contributed to Strategy 2030’s Operational Priority 1 (1.3.1), as it constructed 315.86 kilometers of railway line (para 38).
F. Performance of the Borrower and the Executing Agency
44. The performance of the borrower and the MOR is rated satisfactory. This being the first ADB loan in the sector, the MOR worked closely with ADB in meeting project outputs. During implementation, an adequate organizational framework was established for efficient and timely project management. The MOR exercised close coordination and regular monitoring of project progress. The government provided adequate and timely counterpart funds for the investment subprojects. As the implementing agency, the RVNL was responsible for day-to-day project management and facilitated the successful implementation of subprojects. The RVNL monitored the PMCs, which prepared the required monthly and quarterly progress reports. Apart from one incomplete section of the investment, the institutional component subproject consisting of accounting reforms took significantly longer beyond the loan closure. The project accounts and financial statements were audited by an external chartered accountant acceptable to ADB, and the audit reports were submitted to ADB as required in the loan agreement. The MOR and the RVNL facilitated well and fully supported all ADB review missions.
G. Performance of the Asian Development Bank
45. ADB’s performance is rated satisfactory. The project was administered and supervised from ADB headquarters. During implementation, ADB provided substantial guidance and support to the government and the RVNL in all aspects of project implementation: (i) approving advance actions, (ii) preparing procurement documents and evaluation reports, (iii) engaging consultants and contractors, and (iv) commenting on safeguards and technical issues. ADB was closely involved in identifying potential problems and critical activities. The progress of the institutional component was not captured in detail during the review missions because these were long lead- time components and not much progress could be observed at smaller intervals. Also, the reform component was broad based and general, and specific measurable targets could not be assigned. There were measurable targets such as increase in gross domestic product and downsizing of human resources. However, they were discussed during missions and review forums, such as the tripartite portfolio review meetings between the government and ADB. Over the prolonged implementation period of this project, ADB had the challenge of maintaining records pertaining to the project while record-keeping systems at its headquarters changed. When efforts were made to change the scope of the project, ADB agreed to loan amendments that resulted in fewer delays. ADB also engaged an international consultant for periodic monitoring of the implementation of the investment component, including the implementation of the environmental management plans and resettlement plans.
H. Performance of Consultants, Contractors, and Suppliers
46. The performance of consultants and contractors is rated less than satisfactory and caused delays in design, procurement, and implementation of the project. The PMCs appointed by the MOR provided the necessary support and guidance to the consultants and contractors. The contractors in Odisha lacked adequate cashflow and skilled staff, which resulted in poor progress and delayed the investment subprojects in the state, thereby delaying the overall implementation of the project. The consultants and contractors did not submit all the progress reports in accordance with the contracts signed.
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I. Overall Assessment
47. The project is rated successful on the basis of the assessment of its relevance, effectiveness, efficiency, and sustainability.
Table 2: Overall Project Rating Criteria Assessment Relevance Relevant Effectiveness Effective Efficiency Efficient Sustainability Likely sustainable Overall Assessment Successful Development impact Satisfactory Borrower and executing agency Satisfactory Performance of ADB Satisfactory Performance of contractors, consultants and Less than satisfactory suppliers ADB = Asian Development Bank. Source: Asian Development Bank.
IV. ISSUES, LESSONS, AND RECOMMENDATIONS
A. Issues and Lessons
48. Project design. The project framework and design were not updated to reflect changes in scope. The project lacked a clear monitoring framework with defined targets. The project could have benefitted from the revision of the DMF during MTR as these would have provided appropriate measurement of achievements.
49. Project readiness and implementation. The project had several significant components in the reform program, as well as the investment subprojects. The reform program covered almost the gamut of railway performance, and the selected subprojects were along the busiest routes of the Indian Railways network. This complexity was bound to cause challenges. There were shortfalls in the readiness of some of the projects because of land acquisition and procurement delays. As a result, some projects had to be dropped. The purpose of the accounting reforms was to improve cost effectiveness, efficiency, and sustainability. Though progress in the accounting reforms was not commensurate with the intended target at appraisal, during the processing of the subsequent loan, ADB assessed the reform program as ambitious, and determined that substantial progress had been achieved. There were significant delays in the implementation of the investment subprojects, attributable to two factors: (i) initial delays on account of issues in land acquisition and procurement; and (ii) extensive delays in getting blocks for integrating the newly constructed lines with the operational lines, as the projects were on the busiest routes of Indian Railways with almost no lean periods. With the completion of the subprojects, the respective sections have seen a substantial boost in traffic throughput, which is also reflected in the significantly high EIRR and FIRR at completion despite delays. Details of reasons for the delays in implementation appear in section II.E.
50. Using country systems for MIS. The initial scope of the project considered the PPMS as part of the MIS. Indian Railways has established the CRIS, which develops and manages all MIS for the Indian Railways. Indian Railways is a network under one administration and has an impact on the socioeconomic parameters of the country as a whole. The subprojects selected
15 under this loan, though critical, constitute a very minuscule portion of the entire Indian Railways network. Hence, their impact on the overall socioeconomic parameters of the country as its proportionate contribution in the overall impact by Indian Railways would be negligible. Therefore, the MIS and the accompanying PPMS were dropped with the mutual agreement of the MOR and ADB. The information required for the purpose of writing of this report were collected from CRIS and MOR. There is also a need for ADB to make a better follow-up of the compliance with submission of the audited project financial statements as mandated in the project implementation agreement.
B. Recommendations
51. Financial sustainability. Indian Railways needs to continue to (i) give attention to control of operational costs while improving efficiency, (ii) improve service standards and enhance private sector participation in operations, and (iii) continue monitoring the reform process.
52. Timing of project performance evaluation report. It is recommended that the project performance evaluation report be prepared in 2023 or later, by which time the project will be complete in all sections and would have been in full operation for at least 3 years.
53. Project design and scope. The project gives an insight that a sector lending modality with a reform agenda and followed up with investment projects, which are essentially concomitant with the same objective as reforms, can be an effective strategy for ushering in an exhaustive reform program. Reforms in large organizations pose challenges and may take substantial time to implement. Also, the reform agenda needs to be exhaustive to be effective and to cover intertwined aspects of various facets of a large organization as was in this project.
54. Project readiness. Future projects should ensure procurement is planned strategically by (i) providing focused attention during procurement transactions, (ii) achieving high project readiness, and (iii) putting reinforced effort into implementing contracts.
16 Appendix 1
PROJECT FRAMEWORK
Design Summary Performance Indicators and Targets Project Achievements Goal Promote economic growth and • Increase in gross domestic product • The gross domestic product of India at 2010 poverty reduction by improving the • Improved social indicators constant prices increased from $950.30 billion in performance of the railways sector 2002 to $1,431.80 billion in 2008, and to $2,846.10 billion in 2018.a
• The percentage of school enrollments in tertiary education increased from 10.10% in 2002 to 15.00% in 2008, and 28.00% in 2018.a
Purpose 1. Implement a program of • Approval of reform progress by the • Indian Railways’ Vision 2020 was approved on institutional and policy reforms to Ministry of Railways (MOR) 18 December 2009, establishing service improve the commercial quality benchmarked to the best railway orientation of Indian Railways systems in the world.
2. Invest in expansion of core • Establishment of standing committee • The Standing Committee was established railway businesses offering high to oversee reform prior to loan effectiveness to monitor financial and economic returns implementation of the reform program.
• Achievement of reform • Reform milestones were achieved, as implementation milestones discussed in the outputs section.
• Improved financial and operational • The operating ratio has improved from 96% in performance of Indian Railways, with FY2001 to 91% in FY2004 and further to 83% operating ratio to be not more than in FY2005. It improved still further in FY2007 90.00% from fiscal year (FY) 2003 to 75.9%. However, with the increase in onward salaries as mandated by the Pay Commission, operating ratio increased to 96.5% in FY2017 and 98.4% in FY 2018.
• Improved services and increased • Initiatives for increasing customer orientation: business on remunerative routes Indian Railways delegated more powers to
Appendix 1 17
Design Summary Performance Indicators and Targets Project Achievements general managers (zonal heads) in a number of areas, e.g., passenger amenities, works, enhanced powers to settle accident claims for both passengers and freight, and has also decentralized procurement of 45 items of regular use. • As explained by Indian Railways, feedback from surveys are sent to concerned directorates in Indian Railways, and these form a basis for future strategies of these departments. This is a continuous process. • Benefits from the investment projects as measured in the economic analysis included - Aggregate time saved due to higher speed in 2018 ranged from 0.07 to 21 million hours for individual subprojects while it is 66 million hours for entire project - Aggregate freight operation cost saved (train vs road) in 2018 ranged from Rs. 0.8 to 445 million for individual subprojects - Reduced overlay cost savings every 5 years ranged from Rs. 8 to 423 million for the subprojects - Aggregate maintenance cost savings for wagons ranged from Rs. 1.15 to 44 million and for coaches it ranged from Rs. 0.67 million to 202 million for the individual subprojects - Aggregate rolling stock savings: number of wagons ranged from 17 to 714 units, coaches ranged from 1 to 168 units and engines was 0 to 7 units for individual subprojects
18 Appendix 1
Design Summary Performance Indicators and Targets Project Achievements Components/Outputs 1. Reform Program, Phase 1 • In accordance with MOR’s reform program and agreed medium-term framework for Asian Development Bank support to the reform program
1.1. Upgrade cost accounting 1.1. Design and introduce computerized 1.1. Achieved. In 2010, the MOR approved the system accounting system capable of providing accounting architecture using the line-of-business government accounts and commercial (LOB) and accrual bases, and commenced initial account by 2004, and complete training implementation of standardized computerization. and adaptation by 2006 There are nine major LOBs: (i) passenger, (ii) freight, (iii) suburban, (iv) fixed infrastructure, (v) rolling stock, (vi) manufacturing, (vii) construction, (viii) internal services, and (ix) welfare services.
1.2. Restructure core business 1.2. For core business, accounting 1.2. Achieved. Nine old zones were restructured separation of principal lines of business into 16 zones. For passenger businesses, as cost/profit centers, with breakdowns improved and higher level of passenger amenities for individual services by 2005 at stations were developed through model and modern stations, and the passenger reservation system was expanded from 115 in 2004 to 1,990 locations in 2010. For freight, the freight operating information system automated collection and processing of operational data for performance monitoring; the terminal management system automated 70.00% of the originating freight traffic with computer-generated railway receipts; and the introduction of the e-payment facility enabled the collection of charges related to railway receipts to 25.00% of Indian Railways freight earnings.
1.3. Restructure and hive off non- 1.3. Accounting separation and 1.3. Achieved. Eleven noncore activities agreed core activities establishing for non-core activities as between Indian Railways and ADB are now cost/profit centers by 2005 outsourced, such as catering, bed roll provision and onboard cleaning of important trains, electrical
Appendix 1 19
Design Summary Performance Indicators and Targets Project Achievements • Agree action plans to restructure and locomotive sub-assemblies like generators, production units and initiate traction motors, coach components, etc. implementation by 2005
1.4. Increase private sector 1.4. Introduce concessions for operating 1.4. Achieved. Five branch lines were identified as participation loss-incurring lines and private sector concession pilots; Indian Railway Catering and terminal services and competition in rail Tourism Corporation commenced activities like container services by 2004 running tourist trains and sale of tickets for some hill lines piloted as concessions; the policy on private participation in rail container services was announced in January 2006: 15 private container train operators with agreements to own or lease rolling stock and container terminals and offer container trains for running; private investment was approved for 128 rakes as of 2007.
1.5. Reengineer business 1.5. Complete design and piloting of 1.5. Achieved. Codes and manuals were processes and customer interface reengineered business processes for continuously revised by various departments to customer interface and services, and increase process efficiency, simplify procedures, start full implementation by 2005 and bring adaptability and flexibility for new technologies. A major initiative was the delegation of power to general managers for efficient project administration. In 2009, Indian Railways reviewed the process of project appraisal with help from the Indian Institutes of Management; further studies were expected to be undertaken.
1.6. Delineate social and 1.6. Implement decision on public 1.6. Achieved. Public services obligation is being commercial objectives service obligation mechanism to funded completely by internal Indian Railways compensate Indian Railways for having resources. Aside from tariff rationalization, to operate loss-incurring services by measures were taken to increase throughput and 2005 revenue: (i) enhanced carrying capacity of frontline wagons, (ii) use of lighter materials in wagons to improve tare to payload ratio, and (iii) increased speed potential of new design wagons to 100
20 Appendix 1
Design Summary Performance Indicators and Targets Project Achievements kilometers (km) per hour for loaded and empty conditions.
1.7. Tariff rationalization 1.7. From FY2003 to FY2007, MOR to 1.7. Achieved. Dynamic pricing regime was implement tariff rationalization to introduced to align tariffs with market condition: improve the profitability and (i) applying busy season surcharge, and (ii) linking competitiveness of its passenger and freight rate of exported iron ore to international freight services prices. To reduce losses, revenues increased from the passenger segment: (i) upgrading passengers from lower to higher segments to improve train occupancy, (ii) adding coaches to popular passenger trains to increase revenue with limited incremental cost, and (iii) introduced fully airconditioned prototype double-decker coach to substantially increase the seating capacity and reduce losses.
1.8. Rightsize staff strength 1.8. Net staff reduction of 2.00% per 1.8. As of 2009, total staff strength of Indian annum in 2002–2010, leading to staff Railways was reduced to 1.37 million from 1.51 strength of 1.41 million in 2005 and 1.18 million in 2002. Traffic handled per employee has million in 2010 increased by 85.00%, from 0.55 million converted ton-km (CTKM) in 2002 to 1.01 million CTKM in 2009.
1.9. Institutionalize improved 1.9. Prepare medium-term investment 1.9. Achieved (with delay). Vision 2020 was investment planning and selection plan for determining annual investment prepared by Indian Railways in 2009, enumerating program by 2004 goals for 2020. Investment planning was undertaken according to routes and other traffic requirements, such as increased axle load, operations on mineral routes, etc. long-range decision support system software is used to identify capacity bottlenecks of the network and guides proposal formulation.
Appendix 1 21
Design Summary Performance Indicators and Targets Project Achievements 2. Investment component
2.1. Sample investment 2.1. Subprojects at appraisal for 2.1. Substantially achieved (with delay). All the subprojects (i) Tomka–Kenosha new line, subprojects were commissioned (by project (ii) Pullampet–Gooty second track, completion report writing) except for the 6.65 km (iii) Bhatapara–Urkura third line, and stretch of the third line from Khurda Road to (iv) Mahanadi River second bridge (OP Barang section in Odisha state. 1.3.1)
2.2. Additional subprojects to be 2.2. Additional subprojects to be 2.2. Achieved. In addition, six nonsample selected during implementation selected for (i) priority track expansions subprojects were taken up under the investment to address freight bottlenecks, (ii) new component: (i) Cuttack–Barang doubling, lines with high economic and financial (ii) Ranjathgarh–Barang doubling, (iii) Barang– returns, and (iii) efficiency Khurda road third line, (iv) Aligarh–Ghaziabad improvements on congested routes (OP third line, (v) Pattabiram–Arakkonam additional 1.3.1) line, and (vi) Raichur–Guntakal doubling. Except for a partial section of one of the subprojects, all Changes in 2004:b (i) second railway the others were commissioned. The partial section bridge (2.1 km across the Mahanadi is expected to be commissioned by December river; (ii) third nonelectrified track 2020. railway line between Bhatapara and Urkura (60 km); (iii) approximately 151 km of second nonelectrified track railway line between Gooty and Pullampet route; (iv) doubling of Rajatgarh–Barang, Cuttack–Barang sections, and third line of Khurda road– Barang section of East Coast Railway; and (v) third line of Thiruvallur– Arakkonam section of Southern Railway (OP 1.3.1) a World Bank Database. b The loan agreement was amended in 2004 to allow the phased acquisition of land and rights in land and their handover to the contractor. Contribution to the ADB Results Framework: OP 1.3.1 Infrastructure assets established or improved. Achieved: 315.86 kilometers of railway line constructed. Sources: Executing agency project completion report and Asian Development Bank project completion review mission.
22 Appendix 2
PROJECT COSTS
Table A2.1: Project Cost at Appraisal and Actual ($ million) Appraisal Estimate Actual ADB Government Total ADB Government Total
Item Financing Financing Cost Financing Financing Cost A. Reform Program 1. Consulting services 6.40a 1.60a 8.00 0.58 0.001 0.58 2. Management information 7.40 1.80 9.20 0.00 0.00 0.00 systems
B. Railway Investment
1. Land acquisition and 5.00 5.00 resettlement 2. Civil works and equipment 244.74 445.72 supply and installation 299.20 221.60 520.80 200.98 3. Consulting services a. Project preparation 3.00b 3.00 0.36 0.00 0.36 b. Monitoring of subprojects 0.60 0.60
Total Baseline Costs 313.60 233.00 546.60 201.92 244.74 446.66
Front-end fee 3.10 3.10 Interest during construction and 29.50 29.50 commitment fees
Total Project Cost (A+B) 313.60c 265.60c 579.20 ADB = Asian Development Bank. Note: Numbers may not sum precisely due to rounding. a Including (i) process reengineering; (ii) investment planning and selection procedures; and (iii) other studies to be identified during the implementation of the reform program. b Subproject preparation studies and precontract services for the project and the proposed project in 2005. c Including taxes and duties. Sources: Asian Development Bank. 2002. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant to India for the Railway Sector Improvement Project. Manila; ADB loan financial information system; and Rail Vikas Nigam Limited, Government of India.
Appendix 2 23
Table A2.2: Project Cost at Completion by Financier ($ million) % of ADB % of Cost Government Cost Total Item Financing Category Financing Category Cost A. Reform Program 1. Consulting services 0.58 99.83 0.001 0.17 0.58 2. Management information 0.00 0.00 0.00 systems
B. Railway Investment 1. Land acquisition and resettlement 2. Civil works and equipment 45.09 244,741.00 54.91 445.72 supply and installation 200.98 3. Consulting services a. Project preparation 0.36 100.00 0.00 0.36 b. Monitoring of subprojects
Total Project Cost (A+B) 201.92 45.21 244.74 54.79 446.66 ADB = Asian Development Bank. Note: Numbers may not sum precisely due to rounding. a Including (i) process reengineering; (ii) investment planning and selection procedures; and (iii) other studies to be identified during the implementation of the reform program. b Subproject preparation studies and precontract services for the project and the proposed project in 2005. c Including taxes and duties. Sources: Asian Development Bank. 2002. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant to India for the Railway Sector Improvement Project. Manila; ADB loan financial information system; and Rail Vikas Nigam Limited, Government of India.
24 Appendix 3
DISBURSEMENT AND CONTRACT AWARDS OF ADB LOAN PROCEEDS
Table A3.1: Annual and Cumulative Disbursement of ADB Loan Proceeds ($ million) Annual Disbursement Cumulative Disbursement Amount % of % of Amount Actual Total Total Year Planned 2004 9.00 2005 33.08 1.485 0.74 1.485 0.74 2006 50.00 16.646 8.24 18.132 8.98 2007 70.00 50.342 24.93 68.473 33.91 2008 54.374 26.93 122.847 60.84 2009 24.935 12.35 147.782 73.19 2010 NA 28.839 14.28 176.621 87.47 2011 21.028 10.41 197.649 97.89 2012 4.266 2.11 201.915 100.00 Total 201.915 100.00 ADB = Asian Development Bank, NA = not applicable. Source: Asian Development Bank.
Appendix 3 25
Figure A3.1: Actual Cumulative Disbursement of ADB Loan Proceeds ($ million)
250
200
150
100
50
0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ADB = Asian Development Bank. Source: Asian Develoment Bank.
26 Appendix 3
Table A3.2: Annual and Cumulative Contract Awards of ADB Loan Proceeds
Annual Contract Awards Cumulative Contract Awards Year Amount Amount ($) % of Total ($) % of Total 2004 2005 17,398,587 8.62 17,398,587 8.62 2006 164,909,554 81.67 182,308,141 90.29 2007 15,764,892 7.81 198,073,033 98.10 2008 2009 2010 3,842,099 1.90 201,915,132 100.00 2011 2012 Total 201,915,132 100.00 ADB = Asian Development Bank. Source: Asian Development Bank.
Appendix 4 27
ACTUAL AND PLANNED PROJECT IMPLEMENTATION SCHEDULE
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Project component Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Land acquisition Preparatory Studies for subprojects Procurement for subprojects Construction, Installation and Commissioning
Planned Actual
Sources: Rail Vikas Nigam Limited and Asian Development Bank project completion review mission.
28 Appendix 5
CHRONOLOGY OF MAJOR EVENTS Date Main Event 2002 11–17 July Consultation mission 12 September–1 October Re-appraisal mission 25 October Management review meeting 7 November Staff review committee meeting 20–22 November Loan negotiations 19 December Board approval 2003 March Publication of the general procurement notice in the ADBBO 17 April Publication of IFP for six civil works and supply of goods packages in ADBBO (Core Sample Projects–Phase 1) 1 July Re-publication of IFP for six civil works and supply of goods packages 16 July Publication of expression of interest advertisement for consulting services for monitoring of subproject preparation and implementation 1 September Publication of expression of interest advertisement for consulting services for accounting reform 10–12 November Consultation mission 2004 21 April Loan signing 20–24 July Inception mission 26 October Loan effectiveness 2005 15 March Award of first civil works contract 6–9 May Review mission 1 11 August ADB approval of the six additional subprojects 2006 27 February Award of contract for consulting services for accounting reform 10 May Confirmation of amendment to Section 1.02 and paragraph 10 of Schedule 4 and a new paragraph of Schedule 6 of the Loan Agreement 30 June–12 October Award of the remaining civil works contracts 10 August Major change in financing arrangements for each category under the investment subprojects 30 August–6 September Review mission 2 27 September Award of contract for consulting services for monitoring of subproject preparation and implementation 30 September Confirmation of the second amendment to the loan 18 December AwardAgreement of the first goods contract 2007 12 January Award of the second supply of goods contract 28 February Award of the third goods contract
Appendix 5 29
Date Main Event 2 March Cancellation of the undisbursed loan balance of $101.3 million for three packages 7–10 March Special loan administration mission 1 20–30 March Review mission 3 16–17 July Special loan administration mission 2 12–22 November Midterm review mission 2008 27 February First extension of loan closing date—from 30 June 2008 to 31 December 2009 3 April Major change in project scope and reallocation of loan proceeds—removal of MIS from the loan and reallocation to civil works category 3–21 July Review mission 4 4–5 November Special loan administration mission 3 2009 12–23 January Review mission 5 2–4 July Review mission 6 25 November Second extension of loan closing date—from 31 December 2009 to 31 December 2010 2010 18–28 October Review mission 7 2011 18 January Third extension of loan closing date—from 31 December 2010 to 31 December 2011 2012 19 June Actual loan closing date and cancellation of unutilized loan 2013 balance 12–23 August Project completion review 1 2020 3–7 February Project completion review 2 ADB = Asian Development Bank, ADBBO = Asian Development Bank Business Opportunities, IFP = invitation for prequalification, MIS = management information system, TA = technical assistance. Source: Asian Development Bank.
30 Appendix 6
ORGANIZATIONAL STRUCTURE FOR PROJECT IMPLEMENTATION
Executive Director (ED)
Chief Project Manager (CPM)
PMC Project Finance Team Execution Team Team
Project Project AGM/ Manager Director (PD) Finance (PM)
Resident Sr. DGM/ Sr. DGM/ Engineer Project Finance (RE)
Project/ DGM/ Project DGM/ Expert Finance
Site Manager/ Manager/ Engineer Project Finance
Assistance Manager/ Project
AGM = assistant general manager, DGM = deputy general manager. Source: Project management office.
Appendix 7 31
STATUS OF COMPLIANCE WITH MAIN LOAN COVENANTS
Reference in Loan Covenant Agreement Status of Compliance General Covenants Section 2.02. The Borrower shall pay to ADB interest as Article II, Being complied with determined in accordance with Section 3.02 of the Loan page 4 Regulations. Section 2.03. The Borrower shall pay a commitment Article II, Complied with charge at the rate of three-fourths of one percent (0.75%) page 5 per annum. Such charge shall accrue on amounts of the Loan (less amounts withdrawn from time to time), during successive periods commencing sixty (60) days after the date of this Loan Agreement, as follows: during the first twelve-month period, on $47,040,000 during the second twelve-month period, on $141,120,000 during the third twelve-month period, on $266,5600,000 and thereafter, on the full amount of the Loan. Section 2.04. The Borrower shall pay ADB a front-end fee Article II, Complied with in an amount equal to one percent (1%) of the amount of page 5 the Loan. Section 2.05. Interest and other charges on the Loan shall Article II, Being complied with be payable semiannually on 15 June and 15 December in page 5 each year. Section 2.06. The Borrower shall repay the principal Article II, Being complied with amount of the Loan withdrawn from the Loan Account in page 5 accordance with the provisions of Schedule 2 to this Loan Agreement. Section 3.01. The Borrower – (a) shall make the proceeds Article III, Complied with of the Loan allocated to Parts A, B and C available to SPV page 6 under the SPV MOU, on a non-reimbursable basis, and shall cause SPV to apply such proceeds to the financing of expenditures of the Subprojects in accordance with the provisions of this Loan Agreement and the Project Implementing Agreement; (b) shall cause MOR to apply the proceeds of the Loan allocated to Part D to the support of the Sector Reform Program. Section 3.02. The goods and services to be financed out Article III, Complied with of the proceeds of the Loan and allocation of amounts of page 6 The loan agreement was the Loan among different categories of such goods and amended on 17 March 2006 services shall be in accordance with the provisions of and again on 15 September Schedule 3 to this Loan Agreement as such Schedule may 2006. be amended from time to time by agreement between MOR and ADB. Section 3.03. Each Subproject shall be submitted to ADB Article III, Complied with for approval prior to its implementation. For this purpose, page 6 the Borrower shall cause MOR to submit to ADB an application for approval for each Subproject. Such application shall be in a form satisfactory to ADB and shall
32 Appendix 7
Reference in Loan Covenant Agreement Status of Compliance contain a description and appraisal of the Subproject, a list of all government approvals required thereof and an assurance that all such approvals have been obtained, and such other information as ADB shall reasonably request. Section 3.04. Upon approval by ADB of each Subproject, Article III, Complied with ADB shall allocate the amount of the Loan necessary to page 6 The loan reallocation was carry out the Subproject as approved. If the amount of the approved by the ADB on 31 Loan allocated to any Subproject (or any part of the May 2012 to utilize an Project), at any time appears to be insufficient to finance amount from the all agreed expenditures for that Subproject (or that part of uncontracted loan balance the Project) to the extent required to meet the estimated from Civil Works B be shortfall, amounts of the Loan which have not been reallocated to Civil Works A allocated or which have been allocated to another and Supply of Goods to Subproject or another of the Project but, in the opinion of cover shortfall in the total ADB, are not needed to meet expenditures for that contract awards for the two Subproject or that part of the Project. If the amount of the categories. Loan allocated to any Subproject or any part of the Project appears at any time to exceed all agreed expenditures for that Subproject (or that part of the Project), ADB may, in consultation with MOR reallocate such excess amount to any other Subproject (or any part of the Project) as required. Section 3.05. Except as ADB may otherwise agree, all Article III, Complied with goods and services to be financed out of the proceeds of page 6 the Loan shall be procured in accordance with the provisions of Schedule 4 and Schedule 5 to this Loan Agreement. ADB may refuse to finance a contract where goods or services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB. Section 3.06. Except as ADB may otherwise agree, the Article III, Complied with Borrower shall cause all goods and services financed out page 7 of the proceeds of the Loan to be used exclusively in the carrying out of the Project. Section 3.07. The closing date for withdrawals from the Article III, Complied with Loan account for the purposes of Section 9.02 of the Loan page 7 The closing date was Regulations shall be 30 June 2008 or such other date as extended for the first time to may from time to time be agreed between ADB and the 31 December 2009, the Borrower. second time to 31 December 2010, the third time to 31 December 2011, and the fourth and final time to 19 June 2012. Particular Covenants Section 4.01. (a) The Borrower shall cause MOR and Article IV, Complied with SPV to carry out the Project with due diligence and page 7 efficiency and in conformity with sound administrative, financial, engineering, environmental and railway practices.
Appendix 7 33
Reference in Loan Covenant Agreement Status of Compliance Section 4.01 (b) In the carrying out of the Project and Article IV, Complied with operation of the Project facilities, the Borrower shall cause page 7 MOR and SPV to perform all obligations set forth in Schedule 6 to this loan agreement. Section 4.02. The Borrower shall make available to MOR Article IV, Complied with and SPV, promptly as needed, the funds, facilities, page 7 services, land and other resources which are required, in addition to the proceeds of the loan, for carrying out of the Project and for the operation and maintenance of the Project facilities Section 4.03. The Borrower shall ensure that the activities Article IV, Complied with of its departments and agencies with respect to the page 7 carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures. Section 4.04. (a) The Borrower, (i) acting through MOR, Article IV, Partially complied with shall cause SPV to maintain, records and accounts page 7 Not all audited financial adequate to identify the goods and services financed out statements of the SPV are of the proceeds of the loan, in accordance with available in records and the appropriate auditing standards consistently applied, by statements of the final years independent auditors whose qualifications, experience and do not have a cumulative terms of reference are acceptable to ADB; (ii) cause MOR amount for project to furnish to ADB, as soon as available but in any event expenditure as required by not later than nine (9) months after the end of each related the project implementation fiscal year, preliminary financial statements, and not later agreement. The statements than twelve (12) months after the end of each related for FYs 2006, 2007, 2008, fiscal year the Annual report and Accounts of Indian 2010, and 2011 are Railways, all in English language; (iii) furnish to ADB such available in soft copy. other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. Section 4.04. (b) The Borrower shall enable ADB, upon Article IV, Complied with ADB’s request to discuss SPV’s financial statements for page 7 the Project and its financial affairs related to the Project from time to time with SPV’s auditors, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of MOR and SPV unless the Borrower shall otherwise agree. Section 4.05. The Borrower shall take all action which Article IV, Complied with shall be necessary on its part to enable SPV to perform its page 8 obligations under the Project Implementing Agreement, and shall not take or permit any action which would interface with the performance of such obligations. Section 4.06. The Borrower shall cause MOR and SPV to Article IV, Complied with enable ADB’s representatives to inspect the Project, the page 8 ADB and its officers goods financed out of the proceeds of the loan, and any conducted visits to the relevant records and documents. investment subprojects
34 Appendix 7
Reference in Loan Covenant Agreement Status of Compliance during the review missions for inspection. Effectiveness Article VI, Complied with page 8 ADB has approved inclusion Section 6.01. (a) MOR shall have disclosed to the public of the sample subprojects the RRAP for Tomka Keonjhar Sample subproject and the – into the investment program RPs for the other Sample subprojects and shall have upon compliance. Tomka made RRAP and RPs available to APs, in a manner – Keonjhar subproject was not satisfactory to ADB; included in the investment (b) MOR shall have submitted evidence satisfactory to subprojects that were ADB that all necessary action has been taken to implemented under the adequately compensate people affected by the Tomka – project. Keonjhar subproject referred to in part A in accordance with RRAP agreed upon by the Borrower and ADB; Section 6.01. (c) the SPV MOU agreed upon by MOR, Article VI, Complied with SPV and ADB, shall have become effective and MOR page 9 shall have forwarded to ADB a copy of the SPV MOU and all other information requested by ADB on the equity, assets, management structure and personnel employed by and/or assigned to SPV. Section 6.01 (d) MOR shall have submitted evidence to Article VI, Complied with satisfactory to ADB that bids for consulting services which page 9 are required for the establishment of an improved fully computerized accounting system of Indian Railways under Part D, shall have been evaluated and shall have been submitted to ADB or approval of tender award. Section 6.01 (e) taking account of ADB’s comments and Article VI, Complied with suggestions, MOR shall have approved an action plan for page 9 outsourcing part of its non-core activities. Section 6.02. A date ninety (90) days after the date of the Article VI, Complied with loan agreement is specified for the effectiveness of the page 9 The loan effectiveness date loan agreement for the purpose of Section 10.4 of the loan was extended by ADB twice. regulations. Delegation of Authority Article VI, Complied with page 9 Section 7.02. Any action taken or any agreement entered into by SPV pursuant to the authority conferred under Section 7.01 of this loan agreement shall be fully binding on the Borrower and shall have the same force and effect as if taken by the Borrower. Taxes Schedule 3, Complied with para. 2, No withdrawals form the loan account shall be made in page 17 respect of any local taxes. Percentages of Bank Financing Schedule 3, Complied with para. 3, ADB made changes to the Except as ADB may otherwise agree, the items of the page 17 loan agreement during Categories and subcategories listed in the Table shall be implementation to cater to financed out of the proceeds of the loan on the basis of the project needs during the percentages set forth in the Table in Schedule 3.
Appendix 7 35
Reference in Loan Covenant Agreement Status of Compliance implementation, and revisions are complied with. Notwithstanding paragraph 5 of this Schedule, any Schedule 3, Complied with contract awarded to a local supplier after effective para. 4, international competitive bidding or international shopping page 17 pursuant to the relevant provisions of Schedule 4 to this loan agreement shall be financed out of the proceeds of the Loan on the following basis: (a) Where the goods procured from a local supplier are manufactured locally, 100% of the ex-factory price of goods supplied (exclusive of any taxes); and (b) Where the goods procured from a local supplier have been entirely imported, 100% of the foreign- currency component of the contract price. Loan expenditure Schedule 3, Complied with para. 5, Loan proceeds up to the amount equivalent to $5,400,000 page 17 may be withdrawn from the loan account in foreign currency for the purposes of financing local expenditure. Reallocation Schedule 3, Complied with para. 6, ADB made reallocation to Notwithstanding the allocation of loan proceeds and the pages 17, 18 meet the project withdrawal percentages set forth in the Table and subject requirements. to paragraph 5 of schedule 3, (a) If the amount of the loan allocated to any category appears to be insufficient to finance all agreed expenditures in that category, ADB may, by notice to the Borrower, (i) reallocate to such Category, to the extent required to meet the estimated shortfall, amounts of the loan which have been allocated to another category but, in the opinion of ADB, are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable to such expenditures in order that further withdrawals under such category may continue until all expenditures thereunder shall have been made; and (b) If the amount of the loan then allocated to any Category appears to exceed all agreed expenditures in that Category, ADB may, by notice to Borrower, reallocate such excess amount to any other Category. Conditions of Withdrawals from Loan Account Schedule 3, Complied with para. 7, Notwithstanding any other provision of this Loan page 18 Agreement, no withdrawals shall be made from the loan account until the front-end fee is paid in full to ADB. Schedule 4, Complied with Procurement para. 2, page 20
36 Appendix 7
Reference in Loan Covenant Agreement Status of Compliance Procurement of goods and services shall be subject to the provisions of the “Guidelines for Procurement under Asian Development Bank loans” dated February 1999 as amended from time to time which have been furnished to the Borrower. Procurement of goods and services shall be made without any restriction against, or preference for, any particular supplier or contractor or any particular class of suppliers or contractors, except as otherwise provided in paragraph 8 and paragraph 6 below. International Competitive Bidding Schedule 4, Complied with para. 4 (a), (a) Each civil works contract estimated to cost the (b) and (c), equivalent of $3,000,000 or more and each supply page 20 contract for equipment or materials estimated to cost the
equivalent of $500,000 or more shall be awarded on the basis of international competitive bidding as described in Chapter II of Guidelines of Procurement. Bidders for civil works contracts shall be prequalified before bidding. (b) For contracts to be awarded on the basis of international competitive bidding, there shall be submitted to ADB as soon as possible, and in any event not later than 90 days before the issuance of either the first prequalification invitation or the first invitation to bid for the Project, a General Procurement Notice (which ADB will arrange to publish separately) in such form and detail and containing such information as ADB shall reasonably request. ADB shall be provided the necessary information to update such General Procurement Notice annually as long as any goods and works remain to be procured on the basis of international competitive bidding. (c) For contracts to be awarded on the basis of international competitive bidding, procurement actions shall be subject to review by ADB in accordance with the procedures set forth in Chapter IV of the Guidelines for Procurement. Each draft prequalification invitation and each draft invitation to bid, to be submitted to ADB for approval under such procedures, shall reach ADB at least 42 days before it is issued and shall contain such information as ADB shall reasonably request to enable ADB to arrange for the separate publication of such invitation. International Shopping Schedule 4, Complied with para. 5 (a), (a) Each equipment supply contract estimated to cost less (b) and (c), than the equivalent of $500,000 shall be awarded on the page 21 basis of international shopping as described in Chapter III
of the Guidelines of Procurement. (b) Each draft invitation to bid and related bid document shall be submitted to ADB for approval before they are issued.
Appendix 7 37
Reference in Loan Covenant Agreement Status of Compliance (c) Notwithstanding paragraph 3.03 (b) of the Guidelines of Procurement, any award of contract shall be subject to prior approval by ADB. Local Procurement Schedule 4, Complied with para. 6, Civil works contracts for less than the equivalent of page 21 $3,000,000 may be awarded on the basis of local competitive bidding among prequalified contractors in accordance with the standard procurement procedures of SPV and acceptable to ADB. Prequalification selection and engagement of contractors shall be subject to the approval of ADB. As soon as the bids received have been evaluated, the proposal for award of contract shall be submitted to ADB for approval. For this purpose, ADB shall be furnished with three copies of (i) an account of the public opening of bids; (ii) a summary of evaluation of the bids; (iii) the proposal for award; and (iv) a draft contract or a draft letter of acceptance. Promptly after each contract is awarded, ADB shall be furnished with three copies of contract as executed. Direct Procurement Schedule 4, Complied with para. 7, Equipment estimated to cost, in the aggregate, the page 21 equivalent of less than $100,000, may be procured directly from the manufacturers of the original equipment or their agents. Prior to such procurement, a list of individual items to be procured, an estimate of their costs, an indication of potential sources of supply and any related documents shall be submitted to ADB for approval. After award, three copies of each contract for such items shall be furnished to ADB. Domestic Preference Schedule 4, Complied with para. 8 (a) In comparing bids under international competitive bidding, and (b), a margin of preference may be provided, at the option of page 21 the Borrower and in accordance with the provisions of the
Attachment to this schedule for (a) goods manufactured in the territory of the Borrower, provided that the bidder offering such goods shall have established to the satisfaction of the Borrower and ADB that the domestic value added equals at least 20 percent of the ex-factory bid price of such goods; and (b) civil works to be carried out by eligible domestic contractors, as defined by ADB. Intellectual Property Rights Schedule 4, Complied with para. 9 (a) (a) The Borrower shall cause MOR and SPV to ensure and (b), that all ADB-financed goods and services procured page 22 (including without limitation all computer hardware, software and systems, whether separately procured or incorporated within other goods and services procured) do not violate or infringe any industrial property or intellectual property right or claim of any third party.
38 Appendix 7
Reference in Loan Covenant Agreement Status of Compliance (b) The Borrower shall cause MOR and SPV to ensure that all ADB-financed contracts for the procurement of goods and services contain appropriate representations, warranties, and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in subparagraph (a) of this paragraph. Conditions of Contract Award Schedule 4, Complied with para. 10, Except with the prior approval of ADB no contract for civil page 22 works shall be awarded for any subproject until such time
as the following conditions are satisfied: For the sample subprojects referred to under Part A(b), (c) and (d) and the Additional subprojects, MOR shall have provided ADB with evidence satisfactory to ADB that for the subproject facilities (i) all land and rights in land and other rights and privileges for the Project shall have been acquired; (ii) counterpart funds for compensation for lost assets and related entitlements under the RF shall have been provided in full to APs prior to their displacement from housing and prior to their loss of land and other assets in accordance with the RPs agreed upon by MOR and ADB and the RF set out in the RAP; and (iii) all necessary resettlement activities shall have been carried out in accordance with ADB’s policy on Involuntary Resettlement, Policy on Indigenous People and Section 53 of ADB’s operations manual. Consultants Schedule 5, Complied with paras. 1 and The terms of reference of the consultants shall be as 2, page 29 determined by agreement between ADB and MOR. The selection, engagement and services of the consultants shall be subject to the provisions of this schedule and the provisions of the “Guidelines on the Use of Consultants by Asian Development Bank and its Borrowers” dated April 2002 (hereinafter called the Guidelines on the Use of Consultants) as amended from time to time, which have been furnished to the Borrower. Consulting Firms Schedule 5, Complied with paras. 1 and Consultants shall be selected and engaged as a firm shall 2, page 29 be selected by MOR and SPV using quality-and-cost-basis (QCBS) method in accordance with the following procedures. Individual Consultants Schedule 5, Complied with para. 4, In addition, individual consultants shall be selected and page 30 engaged by MOR or SPV in accordance with the following procedures: (a) A list of candidates together with their qualifications and a draft contract shall be furnished to ADB for approval before the selection of consultants; (b) Promptly after the contract is signed, ADB shall be furnished with the evaluation of the candidates and a brief
Appendix 7 39
Reference in Loan Covenant Agreement Status of Compliance justification for the selection, together with three copies of signed contract; (c) if any substantial amendment of the contract is proposed after its execution, the proposed changes shall be submitted to ADB for prior approval. Domestic Consultants Schedule 5, Complied with paras. 5 and In addition, the services of domestic consultants shall be 6, pages 30 utilized for the purposes of Part D. The domestic and 31 consultants shall be selected and engaged in accordance with procedures acceptable to ADB, and the selection and engagement of the consultants shall be subject to the approval of ADB 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 consultants selected for negotiations, ADB shall be furnished with three copies of (i) a list of consultants invited; and (ii) an evaluation of the proposals (together with one set of the first-ranked proposals); and (iii) justification for the selection. After the conclusion of negotiations but before the signing of the contract, the contract as negotiated shall be furnished to ADB for approval. Promptly after the contract is signed, ADB shall be furnished with three copies of signed contract. If any substantial amendment of the contract is proposed after its execution, the proposed changes shall be submitted to ADB for prior approval. Intellectual Property Schedule 5, Complied with para. 8, The consulting contracts The Borrower shall cause MOR and SPV to ensure that all page 31 have appropriate warranty ADB-financed contracts with consultants contain and indemnity clauses appropriate representations, warranties and, if included. appropriate, indemnities from the consultants to ensure that the consulting services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party. Advance Action Schedule 5, Complied with para. 9, Prior to the date of this loan agreement, ADB approved page 31 advance action for consulting services under the project up to, but not including, contract signing, in respect of consulting services to be financed by ADB. Notwithstanding approval of such advance action, the Borrower shall ensure that consulting services are carried out in accordance with the provisions of this loan agreement. General Implementation Arrangements Schedule 6, Complied with para. 1 (a), A. Project Execution page 32 The Borrower declares its commitment to the objective of the Project and, to this end, without any limitation or restriction upon any of its other obligations under this agreement, the Borrower: (a) shall cause MOR and SPV
40 Appendix 7
Reference in Loan Covenant Agreement Status of Compliance to exercise their rights under the SPV MOU, in such manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Project and, except as ADB shall otherwise agree, the Borrower and/or SPV shall not assign, amend, abrogate, suspend or waive the SPV MOU, or any provision thereof; (b) shall promptly inform, or cause MOR and SPV to Schedule 6, Complied with promptly inform ADB, of any condition which interferes or para. 1 (b), threatens to interfere with the progress of Parts A, B and C page 32 and/or implementation of the Sector Reform Program; (c) shall take, or cause to be taken, all action, including the Schedule 6, Complied with provision of funds, facilities, services and other resources para. 1 (c), necessary or appropriate to enable MOR and SPV to page 32 perform their obligations and; (d) shall cause SPV to perform in accordance with the Schedule 6, Complied with Project Implementing Agreement all obligations of SPV para. 1 (d), therein set forth. page 32 B. Project Executing Agency and Project Schedule 6, Complied with Implementing Agency para. 2, The MOR was the project page 32 executing agency, and the MOR shall be the Project executing agency. SPV RVNL, which was established by MOR before the effective date, shall be the established before the Project Implementing Agency. effective date by the MOR, was the project implementing agency. C Implementing Arrangements Schedule 6, Complied with paras. 3 (a) (a) The Chairperson, Railway Board, who shall be directly and (b), accountable to the Minister of Railways, shall be page 32 responsible for providing guidance and policy advice on the implementation of the Sector Reform Program; (b) Under the guidance of Chairperson, Railway Board, the additional member shall be the Project Director of the Sector Reform Program and be responsible for the execution of the Sector Reform Program. The additional member shall be assisted by an Executive Director, a Director and other suitable qualified staff members assigned to this task on a full-time basis from Planning Directorate of Indian Railways; (c) The Standing Committee established before effective Schedule 6, Records not available with date shall monitor the implementation of the Sector para. 3 (c), Indian Railways Reform Program. The standing committee, shall be page 32 composed of Executive Directors of Indian Railways. It shall meet at least once every month to review the status of implementation of the Sector Reform Program and shall report to the Chairperson, Railway Board and the Additional Member.
Appendix 7 41
Reference in Loan Covenant Agreement Status of Compliance (d) The Managing Director shall be Project Director for Schedule 6, Complied with parts A and B of the Project as set out in Schedule 1 to para. 3 (d), this loan agreement. Under the general supervision of the page 32 Chairperson, Railway Board, and the Additional member, the Managing Director shall liaise with ADB concerning all matters relating to the Project implementation. The Managing Director shall be assisted by a PIU established by SPV prior to the effective date, which shall be staffed with an adequate number of suitably qualified and experienced staff throughout project implementation. (e) The SCCs, established for Part A prior to effective date Schedule 6, Complied with and for Part B prior to approval of each Additional para. 3 (e), subproject by ADB, shall be responsible for coordinating page 32 the implementation of subprojects by SPV with the zonal railways of Indian Railways, government agencies and customers. Appraisal, Selection and Approval of Subprojects Schedule 6, Complied with para. 4, The MOR and SPV A. Sample Subprojects page 33 commenced the MOR and SPV shall commence implementation of the four implementation of three sample subprojects under Part A promptly after the sample subprojects. One effective date in accordance with the schedule agreed was excluded due to issues upon by MOR and ADB. relating to safeguard compliance. B. Additional Subprojects Schedule 6, Complied with para. 5, MOR shall be responsible for selecting and appraising page 33 Additional subprojects, which meet the requirements of paragraph 6 of this Schedule. C. Approval of Additional Subprojects Schedule 6, Complied with para. 7, MOR shall prepare a list of potential Additional page 34 subprojects, which shall include a (i) description of scope of the additional subproject, (ii) justification for the need of the additional subproject and (iii) explanations regarding the compliance of Additional subproject with the criteria set out in paragraph 6 of this schedule. Financial Schedule 6, Complied with para. 9, Except as ADB shall otherwise agree, Indian Railways page 34 shall maintain ratios of total operating expenses excluding depreciation of total operating revenues, which shall not be higher than 90 percent for the fiscal years 2002/2003 and thereafter. Three months before the end of each fiscal year, MOR shall review, based on objectively verifiable indicators agreed upon by MOR and ADB, whether there are constraints which may prevent Indian Railways from meeting the applicable ratio of total operating expenses excluding depreciation to total operating revenues during the current financial year and the financial year following thereafter. MOR shall furnish ADB the results of such reviews and shall take all necessary measures to enable
42 Appendix 7
Reference in Loan Covenant Agreement Status of Compliance Indian Railways to meet the requirements set out in this paragraph.
Subject to approval by Parliament, MOR shall take all Schedule 6, Complied with necessary action to rationalize tariffs to improve para. 10, profitability and competitiveness of passenger and freight page 35 services. Specific Implementation Arrangements Schedule 6, Complied with para. 11, Environmental and Social Matters page 35 In addition to providing a certification of the environmental soundness of the subprojects in accordance with paragraphs 8 and 6 (e) of this schedule, the Borrower shall cause MOR and SPV to take all necessary steps to ensure that the design, implementation and operation of the subprojects are carried out in such a way that any adverse environmental impact be minimized. The Borrower shall cause MOR and SPV (i) to fully implement the mitigating measures specified in the IEE and SIEE to ensure that all construction under the project and the operation and maintenance of the project facilities shall be in accordance with the government’s requirements and ADB’s environmental guidelines; (ii) to ensure that all construction materials, particularly sand and gravel, shall only be procured from suppliers who follow environmentally sound practices and do not procure such materials who follow environmentally sound practices and do not procure such materials from prohibited areas; and (iii) to ensure that a permit from the Department of Forest and Environment shall have been obtained for cutting any trees. MOR and SPV shall conduct a training program to Schedule 6, Complied with enhance Indian Railways’ capacity in addressing para. 12, environmental concerns associated with its activities, page 35 including supervising implementation of the environmental management plan set out in the IEE. Moreover, MOR and SPV shall take all necessary measures to integrate environmental concerns in the planning of their program of expansion of railway facilities and address environmental problems associated with operation of Indian Railways facilities, in particular maintenance workshops, railway stations and diesel filling stations associated with the project. MOR shall prepare, or cause SPV to prepare, an environmental training manual in accordance with terms of reference agreed by MOR and ADB. The Borrower shall cause MOR and SPV to comply with Schedule 6, Complied with the principles of ADB’s policy on gender and development para. 13, during implementation of the project. MOR and SPV shall page 36 take all necessary actions to encourage women to participate in planning and implementing project activities,
Appendix 7 43
Reference in Loan Covenant Agreement Status of Compliance including the resettlement. MOR and SPV shall monitor project effects on women during project implementation through project monitoring and evaluation and any assessment of project impacts in poverty counties, in consultation with related organizations. The Borrower shall cause MOR and SPV to ensure that Schedule 6, Complied with the civil works contractors comply with all applicable labor para. 14, laws, do not employ child labor for construction and page 36 maintenance activities, provide appropriate facilities for children in construction campsites, and conduct adequate number of information and education campaigns at worksites on sexually transmitted diseases and HIV/AIDS for construction workers as part of the health and safety program during the construction period. The Borrower shall cause MOR and SPV to require Schedule 6, Complied with contractors not to differentiate wages between men and para. 15, women for work of equal value. The Borrower shall ensure page 36 that the bidding documents for any contracts for project facilities include specific clauses on these undertakings, and that compliance will be strictly monitored during project implementation. The Borrower shall cause MOR and SPV to ensure that Schedule 6, Complied with any material change in the design or alignment of para. 16, subprojects shall be approved by ADB to ensure that page 36 these subprojects are designed in such a manner that they comply with ADB’s Policy on Involuntary Resettlement, Handbook on Resettlement, Policy on Indigenous People and Section 53 of ADB’s Operations Manual, as amended from time to time. The Borrower agrees that any change of scope or realignment of subproject facilities shall require updates to the IEE and SIEE and the RP to be discussed and mutually agreed between the Borrower and ADB prior to the carrying out of any construction activities related to the change of project scope or realignment of such subproject facilities. The Borrower shall cause MOR and SPV to ensure that Schedule 6, Complied with following detailed design of all subprojects a full census para. 17, and inventory of lost assets for all subproject facilities shall page 36 be undertaken. The Borrower shall cause MOR and SPV to: (i) ensure Schedule 6, Complied with that compensation for land acquisition and other loss of para. 18, assets to APs shall be paid at least two months prior to the page 36 dislocation of APs from the acquired properties and that other benefits to due to APs in accordance with the resettlement framework set out in RAP, including implementation of income restoration and community mitigation measures, shall be carried out during implementation of the subprojects; (ii) ensure that vulnerable groups, such as schedule tribes, schedule caste, households headed by women, shall be provided
44 Appendix 7
Reference in Loan Covenant Agreement Status of Compliance with an additional entitlement package, other administrative and technical assistance as required, and that a separate compensation package is made available to land users and squatters without a formal title to land; (iii) appoint NGOs to assist in the implementation of the resettlement plans and RRAP and recruit an independent monitoring agency or expert within three months of the effective date for periodical monitoring and evaluation of the implementation of resettlement plans and RRAPs including resettlement disbursements and expenditures; (iv) to meet unforeseen obligations in excess of budget estimate; (v) carry out adequate supervision, monitoring and reporting; (vi) ensure adequate information dissemination and consultation with APs and documentation of consultation and grievances. The Borrower shall cause MOR and SPV to ensure that, to Schedule 6, Complied with the extent any indigenous peoples are likely to be affected para. 19, significantly under any subproject, the measures set forth page 37 in the IPDP and the IPDP framework agreed upon by the Borrower and ADB shall be carried out for each subproject in accordance with the IPDP and IPDP framework, applicable laws and regulations of the Borrower, and ADB’s Policy on Indigenous Peoples. MOR and SPV shall coordinate implementation of the IPDP and IPDP framework for the additional subprojects and ensure that appropriate resources are provided for the preparation and implementation of the IPDP. During construction of the project facilities, the Borrower Schedule 6, Complied with shall cause MOR and SPV to liaise with appropriate para. 20, government authorities to ensure that contractors page 37 disseminate information on the risks of socially transmitted diseases to those employed during project implementation. The Borrower shall take all necessary steps during the Schedule 6, Complied with planning and design of the project facilities to ensure para. 21, public consultation with stakeholders. page 37 Disbursements Schedule 6, Complied with para. 22, All disbursements under the project shall be in accordance page 37 with ADB’s Loan Disbursement Handbook, as amended from time to time. Sector Reform and Restructuring Schedule 6, Complied with para. 23, The sector reform program shall, at a minimum, provide page 37 for the following milestones to be met: (i) Within 14 months after effective date: a. MOR shall have awarded to private operators’ railway operating concessions for loss-making branch lines, on a pilot basis. Any such
Appendix 7 45
Reference in Loan Covenant Agreement Status of Compliance concessions shall be awarded through open, competitive and transparent bidding procedures. b. MOR shall have completed the design and implementation of improvements to its accounting system which are required to establish a fully computerized accounting system for Indian Railways capable of providing existing government accounts and commercial accounts consistent with generally accepted accounting standards for the core and noncore activities of Indian Railways, with breakdowns by main lines of business and by main services within these lines of business, and shall have obtained all necessary approvals for establishing such a system throughout Indian Railways. (ii) Within 24 months after the effective date: a. MOR shall have implemented an action plan for outsourcing of part of the noncore activities. b. Consistent with the framework, MOR shall have adopted a time-bound action plan to create focused business organizations, and shall have completed implementation of such action plan. c. MOR and MOF shall have taken a decision on a PSO mechanism to compensate MOR for being required to continue operation of nonremunerative services and shall have commenced implementation of such decision. (iii) Within 30 months after the effective date: a. MOR shall have implemented throughout Indian Railways, a fully computerized system capable of providing both government accounts and commercial accounts for the core and noncore activities of Indian Railways, with breakdowns by main lines of business and by main services within these lines of businesses. Moreover, MOR shall have implemented an accounting separation of its main lines of business for its core and noncore activities, thereby separately identifying the main services within such lines of business as independent profit and cost centers. b. MOR shall have conducted a review of the pilot cases where railway operating concessions for the operation of the loss-making branch lines were awarded, and shall have prepared and approved a program for further award of such concessions. c. MOR shall have prepared and approved action plans for restructuring of its production units. d. MOR shall have approved plans for reengineering its internal business processes and shall have implemented such plans on a pilot basis in one zone, and commenced implementation throughout Indian Railways.
46 Appendix 7
Reference in Loan Covenant Agreement Status of Compliance e. MOR shall have published a medium-term investment plan prioritizing investments on the basis of expected financial returns. f. MOR and MOF shall have conducted an evaluation of the performance of the railway sector and prepared a detailed assessment of the status of implementation of the reform program, and conveyed their findings to ADB. g. MOR shall have reduced its total staff strength to not more than 1.41 million persons. Performance Monitoring System Schedule 6, Not applicable para. 24, The Borrower shall cause MOR and SPV to establish page 39 promptly after the effective date the PPMS to measure, assess, and monitor outputs and impacts of all subprojects, including efficiency improvement and socioeconomic and environmental impacts; and shall take all necessary measures to enable MOR and SPV to enhance their capability for systematic project performance monitoring and analysis. The PPMS shall be an integral part of the MIS to be established under the project. To measure project performance during the Schedule 6, Not applicable implementation and operational periods of the project, the para. 25, PPMS shall use a set of objectively verifiable indicators page 39 agreed between MOR and ADB. The PPMS shall develop and conduct within three months after the effective date independent socioeconomic sample surveys for the purpose of establishing socioeconomic baseline data. Such information shall be incorporated into a baseline survey report which shall be submitted to ADB. Thereafter, socioeconomic surveys on all subprojects shall be conducted annually. The format and scope of surveys and the quantity and quality of the data to be collected, and the frequency of collection, shall be agreed upon by MOR and ADB. Tripartite Meetings and Midterm Review Schedule 6, Complied with para. 26, The Borrower shall cause MOR and SPV to participate, page 39 and assist ADB, in periodic reviews of progress in project implementation, and in its midterm review of the project. To this end, MOR shall establish, promptly after the effective date, the PCC. The PCC shall meet during the 24 months period after the effective date, at regular intervals of six months and thereafter at such intervals as shall be agreed upon by MOR and ADB. A detailed midterm review of the project shall be carried Schedule 6, Complied with out 26 months after the effective date, or at such other para. 27, time as may be agreed upon by ADB and MOR. page 39 Appropriate terms of reference for the midterm review of the project shall be agreed upon by the government and
Appendix 7 47
Reference in Loan Covenant Agreement Status of Compliance ADB. Three weeks prior to the dates of the PCC meetings and two months prior to the date of the midterm review, the government shall submit to ADB detailed progress reports on the implementation and achievements of the sector reform program. Th meetings of the PCC and the midterm review of the Schedule 6, Complied with project shall be chaired by the Chairperson, RB and shall para. 28, be attended by ADB, MOR, and SPV. page 39 ADB = Asian Development Bank, AP = affected people, FY = fiscal year, IEE = initial environmental examination, IPDP = indigenous people development plan, MIS = management information system, MOR = Ministry of Railways, MOU = memorandum of understanding, NGO = nongovernment organization, PCC = project coordination committee, PIU = project implementation unit, PPMS = project performance management system, PSO = private sector operations, RAP = resettlement action plan, RB = Railways Board, RF = resettlement framework, RP = resettlement plan, RRAP = resettlement and rehabilitation action plan, RVNL = Rail Vikas Nigam Limited, SCC = special conditions of contract, SIEE = summary initial environmental examination, SPV = special purpose vehicle. Source: Asian Development Bank project completion review mission.
48 Appendix 8
TECHNICAL ASSISTANCE COMPLETION REPORT
TA Number, Country, and Name: Amount Approved: $500,000.00 TA 4053-IND: Management Consulting Services to Indian Revised Amount: Not applicable Railways Executing Agency: Source of Funding: Amount Undisbursed: Amount Used: Ministry of Railways (MOR) Technical Assistance $127,241.13 $372,758.87 Special Fund (TASF) TA Approval Date: TA Signing Date: TA Completion Date 19 December 2002 22 May 2003 Original Date: Latest Revised Date: 30 June 2006 30 November 2010
Financial Closing Number of Date: Extensions: 28 December 2011 Two
TA Type: TA Arrangement: Advisory technical assistance (TA) Piggybacked to L1981-IND: Railway Sector Investment Project
Description The advisory TA was provided for management consulting services to Indian Railways. The Ministry of Railways (MOR) decided to carry out a program of institutional and policy reforms to transform Indian Railways into a commercially oriented organization in stages over the period 2002–2010. The Asian Development Bank (ADB) provided support for implementation of the MOR’s reform program and established a medium-term framework for linking future ADB support to accomplish reform implementation milestones.
Expected Impact, Outcome, and Outputs The TA covered the (i) study of business development and business opportunities, (ii) study of progress and implementation of the reform program and reform implementation milestones at periodic intervals, and (iii) advice on management- and business-related issues to be identified during the implementation of the reform program. The TA did not have a separate project framework from the loan.
Implementation Arrangements A domestic consulting firm, CRISIL Infrastructure Advisory, India, was recruited using ADB’s quality- and cost-based selection method, and according to ADB’s Guidelines on the Use of Consultants. Upon mobilization on 1 April 2004, an estimated 4 person-months of international inputs and 37 person-months of national inputs were set. A total of 41 person-months was utilized until contract completion on 30 November 2010, with nine contract variations processed.
The consultants reported to the MOR’s Additional Member, Planning, who chaired the steering committee for the TA. The steering committee was composed of representatives of different offices in the MOR and the implementing agency, Department of Economic Affairs, Ministry of Finance (DEA, MOF), and ADB.
The MOR provided office accommodation, local communications, office support staff, local transport, and other necessary equipment and facilities. It also established a counterpart team headed by a project coordinator.
Most of the studies to be done under the TA were not firmed up at the time of the approval but had to be decided mutually between the MOR and ADB from time to time. At the closure of the TA, about 74% of the proposed amount had been used up. This was mainly because the number of studies mutually agreed upon between ADB and the MOR got completed within the allocated provisions.
Conduct of Activities Upon mobilization, it was agreed that the consultants would prepare three reports annually: (i) business development and business opportunities identification for Indian Railways, (ii) study of progress in the implementation of reforms as agreed to between ADB and the MOR, and (iii) customer satisfaction survey. Several inception reports were submitted on 7 May 2004, and annual reports were submitted for items (i) and (ii) in October 2005 and April 2007.
Appendix 8 49
At a tripartite meeting on 7 August 2007 in New Delhi, the MOR, ADB, and the consultants agreed to reassess the specific work to be undertaken under the TA because the situation had changed since the TA was designed in 2002. Additional areas of study that were still in line with the original terms of reference of the TA were identified: (i) improvement in materials procurement and management function within Indian Railways, and (ii) increasing commercial orientation of the parcels business. Material procurement and management was the second biggest item in the Indian Railways’ operating budget and any savings from those would directly increase the efficiency of Indian Railways. Similarly, having a parcels business as a distinct line of business would help increase the commercial operation of Indian Railways. For this, ADB approved a major change in the scope of the TA on 1 April 2008. Three additional studies related to the two areas were approved by the MOR: (i) dynamic pricing policy (DPP); (ii) permitting increased loading of wagons beyond their carrying capacity for better utilization of assets; and (iii) public–private partnership (PPP) initiatives in the creation of additional assets, both fixed and rolling stock.
Completion of the parcel study experienced delays due to the unavailability of data on origin–destination flows, which was stipulated in the terms of reference of the study. Indian Railways was only able to partially provide data on origin and destination of parcels. To resolve this, the consultants, in consultation with Indian Railways, worked out the origin– destination flows based on the total transport system study (conducted by RITES), the market search report, and on other details collected from Indian Railways. An action plan to implement parcels as a focused business organization with short-, medium-, and long-term goals was recommended.
The PPP draft final report outlined the concept of PPP, Indian Railways’ initiatives, and recommendations on how those may be improved. Some of the recommendations were (i) separation of Indian Railways’ roles as licensor, operator, and regulator; (ii) preparation of requests for quotations, requests for proposals, and concession agreements according to international standards, to provide for proper allocation of risks for activities like land acquisition and getting approvals, and which should clearly lay down the rights and responsibilities of the concession giver and the concessionaire; (iii) early implementation of the accounting reforms and monitoring of PPP initiatives centrally; and (iv) laying down a detailed procedure for apportioning operations and maintenance costs for investors to work out cash flows and to approach lenders for the debt portion.
The study on the materials and stores procurement system identified eight core issues: (i) purchase; (ii) warehousing; (iii) scrap management; (iv) supply of uniforms to staff; (v) procurement and supply of fuel and rationalization of fueling points; (vi) leveraging information technology for efficiency enhancement; (vii) miscellaneous issues; and (viii) performance evaluation, as well as recommendations on how those areas may be more efficient. For instance, a few recommendations to improve purchase included (i) rationalizing procurement lead time with the use of materials management information and e-procurement systems; (ii) purchase prioritization by procuring vital and essential items from prequalified suppliers; and (iii) indigenous development of sources for imported items and development of new technology items by factoring in the cost of buying new technology or entering into long-term contracts with the firm developing the item and/or technology with a currency of 3 to 7 years requirement for the item developed.
Upon TA completion, the consultants prepared the inception and final reports on (i) setting up a focused business organization for parcel traffic, (ii) DPP and other tariff-related issues, (iii) permitting increased loading of wagons, (iv) PPP, and (v) stores and material procurement. An interim report for stores and material procurement system, and progress reports on the parcel study were also delivered by the consultants.
Technical Assistance Assessment Ratings Criterion Assessment Rating Relevance The TA was aligned to the development needs and priorities of the Relevant government and ADB’s strategic program, even with the extended implementation period. A major change of the TA scope ensured that it aligned with the evolving situation at that time. The studies on improving parcel business, encouraging public–private partnership, permitting increased loading of wagons, and improving materials and stores procurement were all aligned with the Vision 2020 of the Indian Railways. These had a direct relevance to the reform components too as detailed in Appendix 11. Effectiveness The TA outputs were met in line with its objectives. The studies done by Effective the consultants were considered in the reform program implemented under the loan. While some information was not available, the consultants and Indian Railways agreed on alternative sources and types of information so that the reports would still be meaningful.
50 Appendix 8
Criterion Assessment Rating Efficiency The TA expenditures were within the approved amount. Recruitment of Less than efficient the consultants was slightly delayed. The expected reports were delivered, although with some delays due to unavailability of some information. Engagement of the consultants was also extended to enable them to perform the additional tasks that resulted from the major change of TA scope. At approval, the TA entailed specific outcomes in terms of a study on the progress of reforms and a customer satisfaction survey, but also some generalized studies which needed to be firmed up in consultation with the MOR. Therefore, the budgeted amount was not watertight and had to be flexible. The MOR could have utilized the remaining amount for additional studies if so required. Overall Substantial progress was achieved in the reform program, which has Successful Assessment been mentioned in detail in the section on effectiveness. This includes (i) accounting reforms, (ii) core and non-core business restructuring, (iii) increase in private sector participation, (iv) tariff rationalization, (v) rightsizing of manpower, and (vi) delineating social and commercial objectives. Sustainability The new initiatives of dynamic fare, private participation to bring in Likely sustainable efficiency, improved goods and parcel operations, and hiving off of core business will add further to enhancing the operating ratio of the Indian Railways, which has been continuously favorable from the advent of the loan. The operating ratio is likely to be 95% for 2019–2020, from 98.3% in 2000–2001. It was 95% in 2011–2012, thereby showing an improving trend during the loan disbursement period.
Lessons Learned and Recommendations Design and/or planning While approving the subsequent loan to Indian Railways, ADB had acknowledged that the reforms have been ambitious. Timeframe for far- reaching organizational reforms may be substantially more than the envisaged timelines for investment projects. Care needs to be taken when bundling both. Implementation and/or delivery There is a need for robust record-keeping in ADB. Important records such as the contract agreement between ADB and consultants for the TA which was administered by ADB could not be traced either at ADB Headquarters or at the resident mission. The executing agency did retrieve a copy of this despite not being a signatory. Management of staff and The MOR has provided sufficient number of counterpart staff and adequately consultants managed the consultants. Knowledge building Record-keeping is essential to knowledge building from past experience. Stakeholder participation The TA of this nature with government and government agencies involved requires efficient access to each of the stakeholders for quick decision-making and progress. The coordination with the stakeholders is better handled from ADB Headquarters rather than the government agency itself being the executing agency. Post-TA financial resource Not applicable as Indian Railways has a revenue budget of its own. Other lessons Better record-keeping should be practiced to ensure completeness of information once the preparation of the TCR is due.
Follow-up Actions In future projects, administration of piggybacked TAs should be undertaken by the ADB unit administering the loan for better synchronization and coordination between the two projects.
Prepared by: Designation and Division:
Mukund Kumar Sinha Transport Specialist, South Asia Transport and Communications Division, Asian Development Bank
Appendix 8 51
TECHNICAL ASSISTANCE COST
Table A8.1: Technical Assistance Cost by Activity ($) Amount Item Original Revised Actual 1. Consultants 351,800.00 000.00 316,713.00 2. Training and/or seminars 20,000.00 000.00 11,767.00 3. Studies 44,000.00 000.00 42,187.00 4. Miscellaneous TA administration 4,000.00 000.00 0.00 5. Contract negotiations 5,600.00 000.00 2,092.00 6. Contingency 74,600.00 000.00 0.00 Total 500,000.00 000.00 372,759.00 TA = technical assistance. Source: Asian Development Bank.
Table A8.2: Technical Assistance Cost Summary ($) Item TASF 1. Original 500,000.00 2. Revised NA 3. Actual 372,759.00 4. Unused 127,241.13 NA = Not applicable, TASF = Technical Assistance Special Fund. Source: Asian Development Bank.
52 Appendix 9
ECONOMIC AND FINANCIAL REEVALUATION
A. Introduction
1. The India Railway Sector Improvement Project comprises two main components: (i) a reform program to transform Indian Railways into a commercially oriented organization in three phases, and (ii) investment subprojects. Under the investment subprojects, the five subprojects that the Asian Development Bank (ADB) financed for civil works and supply of equipment are (i) the construction of a second railway bridge, 2.1 kilometers (km) across the Mahanadi river; (ii) the construction of a third non-electrified track railway line, 60 km between Bhatapara and Urkura; (iii) the construction of approximately 151 km of a second non-electrified track railway line between Gooty and Pullampet route; (iv) the doubling of Rajatgarh–Barang and Cuttack–Barang sections, and the third line of the Khurda road–Barang section of the East Coast Railway; and (v) the third line of the Thiruvallur–Arakkonam section of the Southern Railway. The two subprojects for which ADB financed only the supply of equipment are (i) the third line of the Aligarh–Ghaziabad section, and (ii) the doubling of the Raichur–Guntakal section. At appraisal stage, the capacity of the existing lines was saturated.1
2. Upon completion of the project, the direct benefit expected was increased capacity that will serve freight traffic and yield savings in travel distance and travel time for passenger traffic. The economic reevaluation at completion covers the following 20 years of full operation using 2020 prices. The economic benefits were estimated by a comparison of the with-project and without-project cases. The economic and financial reevaluation was carried out for all subprojects using the same concept and principles applied at appraisal.
B. Growth Trends and Traffic Forecast
3. At the appraisal of the project, the actual traffic data from the detailed project reports were considered for the analysis. For the current analysis at completion, the passenger and freight traffic data for all the subprojects under the project were provided by Indian Railways. The passenger and freight traffic details for each subproject are presented in Table A9.1.
Table A9.1: Traffic on Investment Subproject Sections, 2018 Freight Traffic Reserved Unreserved Gross Passenger Traffic Passenger Traffic Subproject (NTKM) (PKM) (PKM) Bridge over Mahanadi river 2,101,008,147 38,007,000,016 82,260,315 Bhatapara–Urkura 16,200,489,325 532,446,924 32,679,715 Gooty–Pullampet 4,055,212,796 3,166,079,940 113,657,193 Rajatgarh–Barang 986,402,675 58,562,787 159,445 Cuttack–Barang 27,324,802 214,487,359 1,100,582 Khurda road–Barang 1,574,337,892 646,295,615 65,306,090 Thiruvallur–Arakkonam 982,914,232 13,016,290,531 18,158,350 Aligarh–Ghaziabad 19,335,917,669 3,475,869,057 342,056,237 Raichur–Guntakal 456,576,452 1,959,644,637 134,808,031 NTKM = net ton kilometer, PKM = passenger kilometer. Source: Indian Railways.
1 ADB. 2002. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant to India for the Railway Sector Improvement Project. Manila.
Appendix 9 53
4. The major commodities carried by rail on these corridors are coal, cement, iron ore, and other minerals. The corridors serve areas of Andhra Pradesh, Karnataka, Odisha, Tamil Nadu, Telangana, Uttar Pradesh, and West Bengal states.
5. At appraisal, all the existing lines in the subproject corridors have reached their capacity and were experiencing severe detention times ranging from 1 hour at the Mahanadi Bridge corridor to 2.5 hours at the Bhatapara–Urkura corridor, to 5 hours on the Gooty–Pullampet corridor.
6. All the subproject routes are established rail routes and existing traffic on those were assessed based on the passenger and goods traffic data provided by Indian Railways for specific routes. Major commodities carried along the subproject routes are coal, cement, iron and steel, ores, petrol, and oil lubricants. The growth trends for each of these commodities were assessed and considered in deriving traffic growth rates for respective routes. Major commodities that are carried along the subproject routes are presented in Table A9.2.
Table A9.2: Tonnage Moved on Route by Commodity Type, 2018 (%) Iron Petrol, Food and Oil, and Subproject Cement Coal Fertilizer Grains Ores Steel Lubricants Stones Others Total Mahanadi river 6 26 5 5 8 5 5 21 18 100 bridge Bhatapara–Urkura 8 28 9 8 11 5 4 14 13 100 Gooty–Pullampet 6 16 4 13 11 7 6 18 18 100 Rajatgarh–Barang 5 27 9 5 3 7 1 20 23 100 Cuttack–Barang 6 27 7 5 9 7 5 15 19 100 Khurda road– 6 24 7 8 7 6 5 14 23 100 Barang Thiruvallur– 7 13 3 21 3 9 14 13 16 100 Arakkonam Aligarh– 5 28 3 9 0 10 14 8 23 100 Ghaziabad Raichur–Guntakal 15 29 8 13 3 9 8 3 13 100 Source: Indian Railways.
7. The growth rate of freight traffic for all subprojects was based on the growth rates for commodities considering the recent growth trends in the country. The growth rate for major commodities being transported on rail over the past decade are calculated from the data available in Indian Railway year books for respective years and are presented in Table A9.3.
Table A9.3: Growth Rate of Various Commodities Transported by Rail 2007–2017 Bulk Commodities (%) Coal 5.1 Ores 0.2 Cement 3.6 Mineral oils 1.9 Food grains 1.4 Fertilizers 3.1 Iron and steel 7.7 Limestone and dolomite 7.0 Stones other than marble (includes gypsum) 6.3 Commodities other than above 3.5 Source: Ministry of Railways, Indian Railways Year Books 2007 to 2017.
54 Appendix 9
8. The growth of the freight traffic on the subprojects was estimated with weightage to the growth of commodities being transported in the respective route. It is assumed that expansion of the road network in the respective states catered by the subprojects will result in the reduction of the freight traffic on rail. Hence, the growth rates are reduced by 10% every 5 years until 2030 and assumed to stabilize. The adopted growth rates for freight traffic on the subprojects are presented in Table A9.4.
Table A9.4: Adopted Growth Rates for Freight Traffic (%) Subproject 2020–2025 2025–2030 Beyond 2030 Second bridge across Mahanadi river 4.5 4.1 3.6 Third line between Bhatapara–Urkura 4.5 4.1 3.6 Doubling of Gooty–Pullampet 3.0 2.7 2.4 Doubling of Rajatgarh–Barang 4.5 4.1 3.6 Doubling of Cuttack–Barang 4.0 3.6 3.2 Third line of Khurda road–Barang 4.0 3.6 3.2 Third line of Thiruvallur–Arakkonam 3.5 3.2 2.8 Third line of Aligarh–Ghaziabad 4.5 4.1 3.6 Doubling of Raichur–Guntakal 4.0 3.6 3.2 Source: Asian Development Bank estimates.
9. The passenger traffic (non-suburban) on Indian railways in terms of originating passengers have been growing at an annual rate of 2.02% between 2008 and 2017. The upgrading of the road network, increased car ownership, and increased air transport options have been giving more competition to railways in the past decade. But the steep increase in airfares and safer and comfortable rail travel compared to road travel are helping maintain the passenger growth on railways. The passenger growth rate is expected to continue at the same rate and maintain a minimum growth rate of 2.00% over the analysis period.
C. Project Costs and Analysis Parameters
10. The total construction cost for each investment subproject was obtained from the implementing agency and was considered in the economic reevaluation. The construction costs are presented in Table A9.5.
Table A9.5: Construction Costs by Subproject Financial Cost Subproject (₹ million) Second bridge across Mahanadi river 1,538.28 Third line between Bhatapara–Urkura 3,336.53 Doubling of Gooty–Pullampet 5,694.27 Doubling of Rajatgarh–Barang 2,370.24 Doubling of Cuttack–Barang 1,147.93 Third line of Khurda road–Barang 2,614.37 Third line of Thiruvallur–Arakkonam 1,834.74 Third line of Aligarh–Ghaziabad 3,137.16 Doubling of Raichur–Guntakal 948.87 Source: Rail Vikas Nigam Limited.
11. Actual construction period for each subproject was obtained from the implementing agency. The project also had delays in commissioning the subprojects to operation after the
Appendix 9 55
physical works were completed. These are due to non-availability of blocks for safety testing and connecting the completed subprojects to the rest of the Indian Railways network to open these for traffic: The second bridge over river Mahanadi was commissioned and opened to traffic in July 2008; the doubling of track Gooty–Pullampet was in February 2013; the doubling of track Cuttak– Barang was in September 2015; the third line Bhatapara–Urkura was in May 2016; the third line Tiruvallur–Arakkonam was in July 2016; and doubling of track Rajatgarh–Barang was in June 2017. Regarding the sections for which equipment was procured from the ADB loan, the third line of Aligarh–Ghaziabad was commissioned and opened for traffic in March 2012 and the doubling of track Raichur–Guntakal was in March 2017.
12. The prolonged implementation resulted in cost and time overruns for all the subprojects. The bid prices for each of the subprojects exceeded the Engineer’s estimates significantly. The cost per kilometer at completion for the third line of Bhatapara–Urkura increased by 96.00% from that considered in analysis at appraisal, while it increased by 54.00% for the doubling of the Gooty–Pullampet subproject. The cost per km at completion for the second bridge over Mahanadi River also increased by 25.00% compared to that considered in the analysis at appraisal. The significant increase in the costs was due to the significantly delayed procurement process and high bid prices. Based on information obtained during meetings with the Ministry of Railways (MOR) and the Rail Vikas Nigam Limited (RVNL), the maintenance costs from the completion of construction to commissioning of the projects are not very significant and are generally covered by the construction contract under the capital cost. Negative benefits have not been considered in the analysis.
13. Standard unit rates for annual routine maintenance costs, i.e., average life for the tracks, coaches, wagons and engines, were obtained from the railway yearbook and considered in the analysis. Economic costs of prices were derived from the financial prices by applying a conversion factor of 0.9.2 A discount rate of 12.00% similar to that considered at appraisal was used in the economic analysis. Other operating costs for financial analysis include rolling stock and equipment, operation and maintenance, traffic operation, and fuel.
14. The value of work-related travel time was estimated using per capita income. The worker participation rate of 37.36% and consumption expenditure of 70.66% were utilized in the estimation.3 The value of time for work trips for second-class ordinary passengers was assumed as 75.00% of the estimated per capita income per employed person (₹65 per hour), and the same for second-class mail and/or express passengers was taken equal to per capita income per employed person (₹86 per hour). For upper-class passengers, it was assumed as 3 times per capita income per employed person (₹258). In 2017 to 2018, 57.20% of rail passengers travelled in ordinary second class, 38.40% in second class mail and/or express, and 4.40% in upper class.4 It is also assumed that 50.00% of second-class and 25.00% of upper-class travel are non-work related and the value of time for a non-work related trip is taken as one-third of the value of work- related trip time.
D. Project Benefits
2 Shadow exchange rate factor (1.05), shadow wage rate factor (0.667) were estimated from information obtained from the World Bank, databank and wage rates from Ministry of Labor and Employment. Equipment costs considered as traded component (4.58%), taxes (8.50%) and un-skilled labor (4%) were used in estimation of Conversion factor at completion. 3 World Bank, Data bank. 4 Indian Railways, Railway Year Book, 2017–2018, New Delhi, India.
56 Appendix 9
15. The project at completion has added either a second line or a third line to the respective routes. The project routes were operating at or above their charted line capacity at appraisal. Congestion was prevailing with freight trains experiencing high detention times as passenger trains are given priority. With the project, detention time was reduced and average speeds on the routes increased. Discussion with officials of railways indicated the completed project routes are not expected to reach capacity during the analysis period.
16. The analysis carried out is similar to the analysis at appraisal. The benefits considered to existing traffic include (i) savings in operating cost for passenger and freight trains, (ii) savings in rolling stock costs arising from its better utilization, and (iii) time savings for passengers due to higher train speed. Without the project, railways would not be able to accommodate the traffic demand and the incremental traffic will have to use the only alternative, i.e., road. Therefore, additionally (i) the savings in vehicle operating cost for freight traffic on road on account of shift to rail were considered as economic benefit in the current economic analysis. In the case of passenger traffic, it is assumed that the increase will be accommodated with longer and marginal additional trains and some deterioration of service, and passenger growth until about 2018 will be catered without the project; and therefore (ii) the benefit due to savings in costs associated with strengthening of the roads that shall be utilized in the without-project case was also considered as economic benefit in the current analysis.
17. The difference in net average travel time due to reduction of detention times among sections without and with the capacity improvement was used in the estimation of the benefits. Train time savings translate into savings in engine-hours, coach and wagon-hour, leading to overall savings in rolling stock and its maintenance. Time savings bring additional benefits for passengers (freight savings not used in current analysis) because destinations are reached faster. Without the project, traffic projections in terms of net ton kilometer (NTKM) cannot be met with existing capacity and alternatives will have to be used. The most likely alternative is road and therefore it is assumed that the component of freight that cannot be transported by rail will move by road. The difference in operating costs brings significant economic benefits to the project.
18. To estimate the benefits, parameters such as railway operating costs, speeds, and cost of coaches, wagons, locomotives, etc., were all collected from annual reports, year books, and other data from the RVNL and the MOR (footnote 4 of Appendix 9). The vehicle operating costs on road and overlay costs were worked out based on recent estimates available from feasibility study reports for roads and highway projects in the country.
19. At appraisal, savings in time for freight traffic as well as net additional economic benefits arising from increase in production of mineral resources due to increased railway capacity were also considered in the analysis. In the reevaluation, savings in time freight traffic and the net additional economic benefits arising from increase in production of mineral resources due to increased railway capacity were not considered due to non-availability of data.
E. Economic Internal Rate of Return and Sensitivity Analysis
20. Economic reevaluation was carried out for each of the project routes by comparing the cost of transportation “with” and “without” the project options and the results are summarized in Table A9.6. Benefits considered include (i) savings in rolling stock inventory cost (engines, wagons, coaches) with reduced travel time; (ii) savings in maintenance cost due to reduction in rolling stock requirement; (iii) savings in passenger time due to reduced travel time due to increased speeds; (iv) reduced transport operation cost in case of using rail than alternate road transport; and (v) reduced road overlay cost required for strengthening the road in case of using
Appendix 9 57 rail than alternate road transport. The EIRR for the whole project at completion was estimated as 13.90% and net present value (NPV) at ₹3,038.02. The EIRR estimated for each of the subprojects range from 11.00% to 20.60%. The EIRR for the whole project and the individual subprojects are above the discount rate. The results are presented in Table A9.6. The tables showing details of economic analysis of individual subprojects are in para 31.
Table A9.6: Results of Economic Analysis At Appraisal At Completion EIRRa EIRR ENPV Project Route (%) (%) (₹ million) Second bridge across Mahanadi river 15.3 20.6 1,165.18 Third line between Bhatapara–Urkura 17.8 11.0 (262.93) Doubling of Gooty–Pullampet 17.1 13.5 496.68 Doubling of Rajatgarh–Barangb … 11.5 (84.57) Doubling of Cuttack–Barang … 12.2 16.82 Third line of Khurda road–Barang … 11.7 (53.09) Third line of Thiruvallur–Arakkonam … 12.7 112.72 Third line of Aligarh–Ghaziabad … 19.0 1,545.70 Doubling of Raichur–Guntakal … 11.6 (18.39) WHOLE PROJECT 16.8 13.9 3,038.02 … = not available, EIRR = economic internal rate of return, ENPV = expected net present value. a Overall EIRR at appraisal includes a fourth subproject with an EIRR of 16.4% that was not implemented. The EIRRs of projects that were not identified at the time of appraisal are not available. b A 6.64-kilometer stretch is completed for construction but is yet to be commissioned for traffic. Source: Asian Development Bank estimates.
21. The overall EIRR at appraisal was based on the analysis of only four investment subprojects comprising four individual sections, while analysis at completion considered five investment subprojects for construction and two subprojects for supply of equipment comprising a total of nine individual sections (paras. 12, 13, and 14 of main report).
22. Over the analysis period of the project, a requirement for purchase of inventory in rolling stock such as wagons and engines to meet the transport demand on the subprojects is estimated to be reduced by about 22.00% with the implementation of the project. It is estimated that passengers shall accrue about 13.00% of travel time savings over the analysis period due to the implementation of the project. A higher EIRR at completion for the second bridge across the Mahanadi river subproject is attributed to the relatively small increase in capital cost per km and significantly higher base year traffic at completion. The third line between Bhatapara–Urkura and the doubling of Gooty–Pullampet yielded lower EIRRs at completion due to significantly higher increase in capital cost per km (para. 12 of this appendix).
23. A sensitivity analysis was carried out over the base case with respect to adverse changes in the costs and benefits. The following cases were analyzed: (i) case I: annual maintenance costs increased by 15.00%; (ii) case II: slower growth in freight and passenger traffic – growth decreased by 15.00%; and (iii) case III: annual maintenance costs increased by 15.00%, and traffic growth decreased by 15.00%. The results of sensitivity analysis indicated that all subprojects have an EIRR of more than 12.00% in all cases. Considering the overall benefit to the economy with lower transport cost for raw materials by rail, and savings in construction cost of road overlay due to additional road traffic without the project, the project is considered economically viable.
58 Appendix 9
Table A9.7: Results of Sensitivity Analysis (Economic) Case I Case II Case III Project Route EIRR ENPV EIRR ENPV EIRR ENPV (%) (₹ Million) (%) (₹ Million) (%) (₹ Million) Second bridge across Mahanadi river 20.6 1,162.29 18.6 844.63 18.6 842.18 Third line between Bhatapara–Urkura 10.6 (343.68) 9.9 (506.18) 9.6 (574.82) Doubling of Gooty–Pullampet 13.3 399.81 12.0 4.69 11.7 (77.65) Doubling of Rajatgarh–Barang 11.5 (90.50) 10.5 (261.29) 10.5 (266.33) Doubling of Cuttack–Barang 12.1 9.09 11.0 (77.44) 10.9 (84.00) Third line of Khurda road–Barang 11.5 (93.70) 10.6 (254.04) 10.4 (288.56) Third line of Thiruvallur–Arakkonam 12.6 94.62 11.5 (68.27) 11.4 (83.66) Third line of Aligarh–Ghaziabad 18.4 1,388.14 17.2 1,065.42 16.6 931.49 Doubling of Raichur–Guntakal 11.5 (26.38) 10.4 (77.78) 10.2 (84.57) WHOLE PROJECT 13.7 2,619.60 12.5 771.67 12.3 416.02 ( ) = negative, EIRR = economic internal rate of return, ENPV = economic net present value. Source: Asian Development Bank estimates.
24. The EIRR at completion for the whole project is above 12% for all sensitivity cases (Tables A9.6 and A9.7). Hence, the project is considered economically viable as envisaged at appraisal. The detailed cash flows of the EIRR calculations for the whole project are presented in Table A9.8.
Table A9.8: Cash Flow for Economic Analysis – Whole Project
Incremental Benefitsa
b
Overall Net
Road
Construction Cost Maintenance Costs between Railand
Increased Road Inventory Benefits AnnualStock Construction Timeto Passengers OperationCosts
Rolling Stock Reduced Travel Reduced Rolling Reduced Transport Savingsdue to Year Costof Benefits 2004 979.72 0.00 0.00 0.00 0.00 0.00 (979.7) 2005 985.89 0.00 0.00 0.00 0.00 0.00 (985.9) 2006 1,850.01 0.00 0.00 0.00 0.00 0.00 (1,850.0) 2007 5,778.76 0.00 0.00 0.00 0.00 0.00 (5,778.8) 2008 4,197.85 0.05 81.70 0.10 0.00 0.00 (4,116.0) 2009 2,382.05 0.06 206.40 0.25 0.00 0.00 (2,175.3) 2010 2,920.68 0.58 226.88 0.64 0.09 0.00 (2,692.5) 2011 1,265.20 1.10 249.87 0.84 0.18 0.00 (1,013.2) 2012 67.62 691.36 174.93 33.30 0.00 967.2 2013 150.18 2,124.91 466.10 91.29 8.40 2,840.9 2014 148.45 2,057.35 427.65 123.63 0.00 2,757.1 2015 155.21 1,820.69 372.37 149.90 0.00 2,498.2 2016 278.73 2,460.70 493.57 200.52 0.00 3,433.5 2017 312.65 3,076.64 552.40 496.39 296.32 4,734. 4 2018 327.00 3,704.53 554.35 800.55 431.20 5,817.6 2019 345.16 3,359.59 562.66 889.51 0.00 5,156.9 2020 359.80 3,485.54 599.48 929.00 112.56 5,486.4 2021 372.63 3,555.25 624.37 970.08 239.96 5,762.3 2022 385.94 3,626.35 650.07 1,012.80 605.50 6,280.7 2023 461.52 5,651.89 1,022.26 1,057.22 431.20 8,624.1 2024 477.08 5,764.93 1,056.60 1,103.43 0.00 8,402.0 2025 507.60 6,124.09 1,177.97 1,146.68 112.56 9,068.9
Appendix 9 59
Incremental Benefitsa
b
Overall Net
Road
Construction Cost Maintenance Costs between Railand
Increased Road InventoryBenefits AnnualStock Construction Timeto Passengers OperationCosts
Rolling Stock Reduced Travel Reduced Rolling Reduced Transport Savingsdue to Year Costof Benefits 2026 523.21 6,246.57 1,214.18 1,191.48 239.96 9,415.4 2027 544.44 6,752.37 1,279.99 1,237.90 605.50 10,420.2 2028 553.64 5,774.49 1,312.66 1,284.72 422.80 9,348.3 2029 570.67 5,889.98 1,352.15 1,334.49 0.00 9,147.3 2030 557.51 4,915.36 1,301.64 1,371.90 39.76 8,186.2 2031 377.82 4,009.33 868.61 1,201.55 239.96 6,697.3 2032 388.65 4,089.52 893.58 1,242.84 309.18 6,923.8 2033 255.15 2,142.31 498.72 1088.97 0.00 3,985.1 2034 243.71 2,083.50 483.76 956.93 0.00 3,767.9 2035 242.99 1,748.53 469.79 967.91 0.00 3,429.2 2036 14.02 145.92 21.32 903.99 0.00 1,085.2 EIRR (%) 13.91 ENPV (₹ Million) 3,038.02 ( ) = negative, EIRR = economic internal rate of return, ENPV = expected net present value. a The operation and maintenance costs were incorporated in the benefit calculation. b Thicker overlays due to increased traffic. Source: Asian Development Bank.
F. Financial Analysis
25. Financial analysis has been carried out to assess the viability of the proposed project investment based on the incremental earnings and operational cost savings that accrue to Indian Railways as a result of the implementation of the projects. 5 The analysis was carried out on an incremental basis using the discounted cash flow method and calculating the internal rate of return of the project. The financial internal rate of return (FIRR) was compared with the weighted average cost of capital (WACC). In estimating the WACC, the nominal cost of loan from ADB was considered as 2.74% and the cost of capital from the government budget as 9.00%. The revenue and cost streams are compared for a 20-year period after commissioning of the respective routes.
26. The WACC in real terms to Indian Railways for the whole project investment is estimated at 4.00%.6 The WACC in real terms was used as the desired discount rate to compare the FIRR for all subprojects and to calculate the NPV. The summary results of the financial analysis are given in Table A9.9. The FIRR at completion for the whole project is estimated at 12.86% while the FIRR at completion of the subprojects ranges from 6.42% to 17.03%, well above the desired weighted average cost of capital, indicating that the investment is financially viable. The tables showing details of economic analysis of individual subprojects are at para 31.
5 The average rate for passenger-km of travel and freight earnings per million ton transported on the project sections was obtained from Indian Railways and used in estimating the earnings from increased passenger-km of travel and increased ton km of freight transported due to the additional capacity. 6 WACC was calculated based on the loan terms applying exchange rate risk as 2.5% and inflation data obtained from World Bank, Databank in real terms, considering ADB loan portion as 54.79% and government-financed portion as 45.21%.
60 Appendix 9
Table A9.9: Financial Analysis Result Summary At Appraisal At Completion FIRRa FIRR FNPV Project Route (%) (%) (₹ million) Second bridge across Mahanadi river 22.3 17.03 5,364.17 Third line between Bhatapara–Urkura 22.0 11.03 8,782.86 Doubling of Gooty–Pullampet 11.2 13.08 15,833.31 Doubling of Rajatgarh–Barang … 6.42 1,238.19 Doubling of Cuttack–Barang … 10.17 1,677.46 Third line of Khurda road–Barangb … 9.86 4,729.35 Third line of Thiruvallur–Arakkonam … 15.64 8,201.14 Third line of Aligarh–Ghaziabad … 16.25 12,906.71 Doubling of Raichur–Guntakal … 13.61 2,919.40 WHOLE PROJECT 15.4 12.86 61,652.59 … = not available, FIRR = financial internal rate of return, FNPV = financial net present value. a Overall FIRR at appraisal includes a fourth subproject with an EIRR of 9.8% that was not implemented. The FIRR of projects which were not identified at the time of appraisal are not available. b A 6.64-kilometer stretch is completed for construction but is yet to be commissioned for traffic. Source: Asian Development Bank estimates.
27. A sensitivity analysis was carried out over the base case with respect to adverse changes in the costs and benefits. The following cases were analyzed: (i) case I: increase of rolling stock and maintenance costs by 15.00%, (ii) case II: decrease in earnings by 15.00%, and (iii) case III: increase in costs by 15.00% and decreased earnings by 15.00%.
28. The results of sensitivity analysis are presented in Table A9.10. The overall project has an FIRR that is more than the WACC in all sensitivity tests, indicating a robust financial return for the project investment. The detailed cash flows of the FIRR calculations for the whole project are presented in Table A9.11.
Table A9.10: Results of Sensitivity Analysis (Financial) Case I Case II Case III FIRR FNPV FIRR FNPV FIRR FNPV Project Route (%) (₹ million) (%) (₹ million) (%) (₹ million) Second bridge across Mahanadi river 16.57 5,069.90 14.99 4,061.50 14.45 3,767.24 Third line between Bhatapara–Urkura 10.20 7,307.49 9.23 5,566.48 8.15 4,091.10 Doubling of Gooty–Pullampet 12.17 13,739.59 11.00 10,675.84 9.89 8,582.13 Doubling of Rajatgarh–Barang 5.96 960.40 5.06 479.45 4.47 201.66 Doubling of Cuttack–Barang 9.99 1,603.66 8.91 1,209.06 8.69 1,135.26 Third line of Khurda road–Barang 9.36 4,138.30 8.42 3,103.27 7.78 2,512.22 Third line of Thiruvallur–Arakkonam 15.49 8000.64 14.34 6,532.77 14.17 6,332.27 Third line of Aligarh–Ghaziabad 14.63 10,538.40 13.18 8,211.83 11.08 5,843.51 Doubling of Raichur–Guntakal 12.88 2,578.20 11.72 2,029.53 10.80 1,688.33 WHOLE PROJECT 12.09 53,936.58 10.91 41,869.74 9.95 34,153.72 ( ) = negative, FIRR = financial internal rate of return, FNPV = financial net present value. Source: Asian Development Bank estimates.
Appendix 9 61
Table A9.11: Cash Flow for Financial Analysis – Whole Project (₹ million) Cost of Operation & Gross Overall Net Year Construction Maintenance Costs Earnings Benefits 2004 1,088.58 0.00 0.00 (1,088.58) 2005 1,095.43 0.00 0.00 (1,095.43) 2006 2,055.57 0.00 0.00 (2,055.57) 2007 6,420.84 0.03 0.00 (6,420.87) 2008 4,664.28 0.96 13.19 (4,652.05) 2009 2,646.72 2.35 34.76 (2,614.31) 2010 3,245.20 27.37 108.62 (3,163.95) 2011 1,405.78 52.51 187.80 (1,270.49) 2012 276.24 593.70 317.46 2013 716.88 1033.19 316.31 2014 1,157.05 1587.39 430.35 2015 1,560.73 2349.45 788.72 2016 2,228.90 3529.13 1,300.23 2017 3,014.93 5135.12 2,120.19 2018 3,828.13 7201.55 3,373.42 2019 4,619.24 9440.84 4,821.60 2020 5,031.88 10831.49 5,799.60 2021 5,464.34 12353.00 6,888.66 2022 5,917.75 14016.31 8,098.56 2023 6,393.28 15833.20 9,439.92 2024 6,892.24 17816.42 10,924.19 2025 7,369.47 19882.59 12,513.12 2026 7,869.11 22128.24 14,259.13 2027 8,392.47 24567.57 16,175.10 2028 8,548.54 25046.87 16,498.33 2029 9,103.45 27746.96 18,643.51 2030 9,202.59 26430.87 17,228.28 2031 6,425.77 19970.48 13,544.71 2032 6,814.99 22000.63 15,185.64 2033 4,240.78 12853.71 8,612.94 2034 3,830.77 11777.45 7,946.68 2035 3,943.65 12124.09 8,180.43 2036 478.49 1555.39 1,076.90 FIRR (%) 12.86 FNPV (₹ Million) 61,652.59 ( ) = negative, FIRR = financial internal rate of return, FNPV = financial net present value. Source: Asian Development Bank.
29. The results of sensitivity analysis indicate individual sections and the overall project FIRR is higher than the WACC in all the sensitivity cases. Hence, the overall project is considered financially viable at its completion.
30. Other results pertaining to the analysis such as the time savings, cost savings, etc., for individual subprojects in base case for various years is presented in Table A9.12.
62 Appendix 9
Table A9.12: Other Results from Analysis
Doubling Third - Doubling Third line line - 2nd Doubling Raichur - - Doubling Third line Khurda Third line - Bridge Cuttack - - Rajatgarh Bhatapara - Gooty - - Aligarh - Rd - Tiruvallur - over Unit Barang Guntakal - Barang - Urkura Pullampet Ghaziabad Barang Arakkonnam Mahanadi
Year of commissioning Year 2015 2017 2017 2016 2013 2012 2016 2016 2008
1. Time savings due to higher speed by train Average Speed w/out project kmph 20 38 31 22 19 30 23 46 18 Average Speed with project kmph 40 40 45 40 24 35 40 50 20 Savings in 1st year m.hours 3.56 1.20 1.94 7.55 28.29 8.86 7.55 9.66 3.49 Savings in year 2018 m.hours 4.67 1.28 1.74 8.57 0.07 9.99 8.57 10.39 20.57 Savings in year 2025 m.hours 5.49 1.51 1.97 11.76 30.78 15.85 10.61 12.23 18.64 Savings in year 2030 m.hours 6.06 1.67 2.18 12.98 33.98 17.50 12.98 20.69 20.58 Average Annual Time Savings ₹ Million 292.88 84.05 113.62 644.31 1070.46 673.83 613.91 712.38 688.24
2. Freight transport cost savings by rail vs by road Operation Cost by Road ₹/ton.km 1.15 1.15 2.30 1.15 1.15 1.15 1.15 1.15 1.15 Operation Cost by Rail ₹/NTKM 0.94 0.94 0.94 0.94 0.94 0.94 0.94 0.94 0.94 Savings in 1st year ₹ Million 6.19 69.66 395.61 27.00 45.70 39.63 4.15 4.10 0.09 Savings in year 2018 ₹ Million 9.28 78.36 445.06 34.71 102.83 118.89 5.33 5.28 0.81 Savings in year 2025 ₹ Million 13.99 117.53 625.35 48.66 147.23 172.94 12.33 7.50 1.14 Savings in year 2030 ₹ Million 17.36 145.43 745.21 57.91 177.44 210.35 18.20 9.00 1.35 Average Annual Operation costs savings ₹ Million 13.38 116.84 652.42 48.79 127.51 136.26 13.26 6.52 0.71
3. Reduced road overlay cost every 5 years Average Overlay cost (every 5 years) saved ₹ Million 39.76 227.08 82.10 168.00 422.80 296.32 71.96 72.80 8.40
4. Rolling stock savings Coach hours saved in 1st year hours 163.69 126.40 14.66 1165.54 4194.59 2675.83 630.86 675.05 3.67 Coach hours saved in year 2018 hours 214.65 134.30 13.13 1323.00 9.91 3014.70 716.08 726.47 21.65 Coach hours saved in year 2025 hours 252.53 159.13 14.94 1814.82 4564.22 4785.29 885.98 855.19 19.61 Coach hours saved in year 2030 hours 278.82 175.69 16.49 2003.70 5039.26 5283.35 1084.52 1446.44 21.65 Coach saved in year 2018 number 14.31 7.46 0.88 88.20 0.55 167.48 47.74 36.32 1.08 Coach saved in year 2025 number 16.84 8.84 1.00 120.99 253.57 265.85 59.07 42.76 0.98 Coach saved in year 2030 number 18.59 9.76 1.10 133.58 279.96 293.52 72.30 72.32 1.08
Appendix 9 63
Doubling Third - Doubling Third line line - 2nd Doubling Raichur - - Doubling Third line Khurda Third line - Bridge Cuttack - - Rajatgarh Bhatapara - Gooty - - Aligarh - Rd - Tiruvallur - over Unit Barang Guntakal - Barang - Urkura Pullampet Ghaziabad Barang Arakkonnam Mahanadi Wagons without project in 1st year number 28.27 148.12 97.72 576.72 410.60 454.76 484.34 96.19 0.25 Wagons with project in 1st year number 13.73 65.32 25.07 102.60 185.66 142.78 229.00 17.36 0.20 Wagons without project in 2018 number 34.99 164.74 117.41 743.71 818.21 1019.80 511.78 121.61 86.72 Wagons with project in 2018 number 17.49 82.37 58.70 223.11 409.11 305.94 153.54 36.48 43.36 Wagons without project in 2025 number 46.70 228.52 175.65 1041.00 1133.60 1403.67 660.99 169.03 121.41 Wagons with project in 2025 number 23.35 114.26 87.82 312.30 566.80 421.10 198.30 50.71 60.71 Wagons without project in 2030 number 55.54 271.78 208.89 1238.05 1348.18 1669.37 786.10 201.02 144.40 Wagons with project in 2030 number 27.77 135.89 104.45 371.42 674.09 500.81 235.83 60.31 72.20 Engines without project in 1st year number 0.30 1.57 1.04 6.13 4.36 4.83 5.15 1.02 0.00 Engines with project in 1st year number 0.15 0.69 0.27 1.09 1.97 1.52 2.43 0.18 0.00 Engines without project in 2018 number 0.37 1.74 1.24 7.87 8.66 10.79 5.41 1.29 0.92 Engines with project in 2018 number 0.19 0.87 0.62 2.36 4.33 3.24 1.62 0.39 0.46 Engines without project in 2025 number 0.49 2.42 1.86 11.01 11.99 14.85 6.99 1.79 1.28 Engines with project in year 2025 number 0.25 1.21 0.93 3.30 6.00 4.46 2.10 0.54 0.64 Engines without project in 2030 number 0.59 2.88 2.21 13.10 14.26 17.66 8.32 2.13 1.53 Engines with project in year 2030 number 0.29 1.44 1.11 3.93 7.13 5.30 2.50 0.64 0.76
5. Maintenance cost savings Wagons maintenance in 1st year number 7.3 41.40 72.65 237.06 224.94 155.99 127.67 39.41 0.05 Wagons savings in 1st year ₹ Million 1.13 6.43 11.29 36.84 34.96 24.24 19.84 6.13 0.01 Wagons maintenance in 2018 number 10.2 40.97 58.70 283.54 62.44 205.54 56.66 10.49 7.37 Wagons savings in 2018 ₹ Million 1.59 6.37 9.12 44.06 9.70 31.94 8.81 1.63 1.15 Wagons maintenance in 2025 number 16.1 72.86 87.82 491.64 220.13 474.26 161.10 43.68 24.72 Wagons savings in 2025 ₹ Million 2.50 11.32 13.65 76.40 34.21 73.70 25.04 6.79 3.84 Wagons maintenance in 2030 number 20.5 94.49 104.45 629.58 327.42 660.24 248.69 66.07 36.21 Wagons savings in 2030 ₹ Million 3.19 14.68 16.23 97.84 50.88 102.61 38.65 10.27 5.63 Coaches maintenance in 1st year number 10.9 7.02 0.98 77.70 233.03 148.66 42.06 33.75 0.18 Coaches savings in 1st year ₹ Million 13.19 8.49 1.18 93.92 281.66 179.68 50.83 40.79 0.22 Coaches maintenance in 2018 number 14.3 7.46 0.88 88.20 0.55 167.48 47.74 36.32 1.08 Coaches savings in 2018 ₹ Million 17.30 9.02 1.06 106.60 0.67 202.43 57.70 43.90 1.31 Coaches maintenance in 2025 number 16.8 8.84 1.00 120.99 253.57 265.85 59.07 42.76 0.98 Coaches savings in 2025 ₹ Million 20.35 10.68 1.20 146.23 306.48 321.32 71.39 51.68 1.19 Coaches maintenance in 2030 number 18.6 9.76 1.10 133.58 279.96 293.52 72.30 72.32 1.08 Coaches savings in 2030 ₹ Million 22.47 11.80 1.33 161.45 338.37 354.76 87.39 87.41 1.31
64 Appendix 9
31. The cash flow details for economic analysis and financial analysis for each subproject are presented in Tables A9.13 to A9.30.
Table A9.13 Economic Analysis Cash Flow for Cuttack–Barang
Incremental Benefitsa
b
Overall Net
Road
Construction Cost Maintenance Costs between Railand
Timeto Passengers Construction InventoryBenefits AnnualStock Increased Road OperationCosts
Rolling Stock Reduced Travel Reduced Rolling Reduced Transport Savingsdue to Year Costof Benefits 2004 27.2 0.0 0.0 0.0 0.0 0.0 (27.2) 2005 59.4 0.0 0.0 0.0 0.0 0.0 (59.4) 2006 139.6 0.0 0.0 0.0 0.0 0.0 (139.6) 2007 279.7 0.0 0.0 0.0 0.0 0.0 (279.7) 2008 187.6 0.0 0.0 0.0 0.0 0.0 (187.6) 2009 114.3 0.0 0.0 0.0 0.0 0.0 (114.3) 2010 153.4 0.0 0.0 0.0 0.0 0.0 (153.4) 2011 71.9 0.0 0.0 0.0 0.0 0.0 (71.9) 2012 0.0 0.0 0.0 0.0 0.0 - 2013 0.0 0.0 0.0 0.0 0.0 - 2014 0.0 0.0 0.0 0.0 0.0 - 2015 3.9 50.1 4.4 1.5 0.0 60.0 2016 4.1 209.4 15.0 7.2 0.0 235.8 2017 4.4 221.6 16.0 8.3 0.0 250.2 2018 5.0 262.6 18.9 9.3 0.0 295.8 2019 5.2 274.4 19.8 10.3 0.0 309.7 2020 5.4 279.8 20.3 10.9 39.8 356.2 2021 5.5 285.4 20.8 11.5 0.0 323.2 2022 5.7 291.2 21.3 12.1 0.0 330.2 2023 5.8 297.0 21.8 12.7 0.0 337.3 2024 6.0 302.9 22.3 13.4 0.0 344.6 2025 6.2 309.0 22.8 14.0 39.8 391.7 2026 6.3 315.2 23.4 14.6 0.0 359.5 2027 6.5 321.5 23.9 15.3 0.0 367.2 2028 6.7 327.9 24.5 16.0 0.0 375.0 2029 6.9 334.4 25.1 16.7 0.0 383.1 2030 7.0 341.1 25.7 17.4 39.8 430.9 2031 7.2 348.0 26.2 18.0 0.0 399.4 2032 7.4 354.9 26.8 18.8 0.0 407.9 2033 7.6 362.0 27.5 19.5 0.0 416.5 2034 7.8 369.3 28.1 20.2 0.0 425.3 2035 2036 EIRR (%) 12.2 ENPV (₹ Million) 16.8 ( ) = negative, EIRR = economic internal rate of return, ENPV = expected net present value. a The operation and maintenance costs were already incorporated in the benefit calculation. b Thicker overlays due to increased traffic. Source: Asian Development Bank.
Appendix 9 65
Table A9.14 Economic Analysis Cash Flow for Raichur–Guntakal
Incremental Benefitsa
b
Overall Net
Road
Construction Cost Maintenance Costs between Railand
Timeto Passengers Construction InventoryBenefits AnnualStock Increased Road OperationCosts
Rolling Stock Reduced Travel Reduced Rolling Reduced Transport Savingsdue to Year Costof Benefits 2004 0.0 0.0 0.0 0.0 0.0 0.0 - 2005 0.0 0.0 0.0 0.0 0.0 0.0 - 2006 0.0 0.0 0.0 0.0 0.0 0.0 - 2007 0.0 0.0 0.0 0.0 0.0 0.0 - 2008 0.0 0.0 0.0 0.0 0.0 0.0 - 2009 516.7 0.0 0.0 0.0 0.0 0.0 (516.7) 2010 337.3 0.0 0.0 0.0 0.0 0.0 (337.3) 2011 0.0 0.0 0.0 0.0 0.0 - 2012 0.0 0.0 0.0 0.0 0.0 - 2013 0.0 0.0 0.0 0.0 0.0 - 2014 0.0 0.0 0.0 0.0 0.0 - 2015 0.0 0.0 0.0 0.0 0.0 - 2016 0.0 0.0 0.0 0.0 0.0 - 2017 10.5 50.7 12.8 52.2 0.0 126.2 2018 10.5 71.8 15.4 78.4 0.0 176.1 2019 11.5 75.5 17.1 87.1 0.0 191.3 2020 12.0 77.0 17.9 91.7 0.0 198.7 2021 12.4 78.6 18.7 96.6 0.0 206.3 2022 12.9 80.2 19.5 101.7 227.1 441.3 2023 13.3 81.8 20.3 106.9 0.0 222.4 2024 13.8 83.4 21.2 112.4 0.0 230.8 2025 14.3 85.1 22.0 117.5 0.0 238.9 2026 14.8 86.8 22.9 122.8 0.0 247.3 2027 15.3 88.5 23.7 128.3 227.1 483.0 2028 15.8 90.3 24.6 134.0 0.0 264.8 2029 16.4 92.1 25.6 139.9 0.0 273.9 2030 16.9 93.9 26.5 145.4 0.0 282.7 2031 17.4 95.8 27.4 151.1 0.0 291.7 2032 17.9 97.7 28.3 157.0 227.1 528.0 2033 18.5 99.7 29.3 163.0 0.0 310.5 2034 2035 2036 EIRR (%) 11.6 ENPV (₹ Million) (18.4) ( ) = negative, EIRR = economic internal rate of return, ENPV = expected net present value. a The operation and maintenance costs were already incorporated in the benefit calculation. b Thicker overlays due to increased traffic. Source: Asian Development Bank.
66 Appendix 9
Table A9.15 Economic Analysis Cash Flow for Rajatgarh–Barang
Incremental Benefitsa
b
Overall Net
Road
Construction Cost Maintenance Costs between Railand
Timeto Passengers Construction InventoryBenefits AnnualStock Increased Road OperationCosts
Rolling Stock Reduced Travel Reduced Rolling Reduced Transport Savingsdue to Year Costof Benefits 2004 56.1 0.0 0.0 0.0 0.0 0.0 (56.1) 2005 122.6 0.0 0.0 0.0 0.0 0.0 (122.6) 2006 288.2 0.0 0.0 0.0 0.0 0.0 (288.2) 2007 577.6 0.0 0.0 0.0 0.0 0.0 (577.6) 2008 387.4 0.0 0.0 0.0 0.0 0.0 (387.4) 2009 236.1 0.0 0.0 0.0 0.0 0.0 (236.1) 2010 316.8 0.0 0.0 0.0 0.0 0.0 (316.8) 2011 148.5 0.0 0.0 0.0 0.0 0.0 (148.5) 2012 0.0 0.0 0.0 0.0 0.0 - 2013 0.0 0.0 0.0 0.0 0.0 - 2014 0.0 0.0 0.0 0.0 0.0 - 2015 0.0 0.0 0.0 0.0 0.0 - 2016 0.0 0.0 0.0 0.0 0.0 - 2017 8.1 54.5 11.9 197.8 0.0 272.3 2018 6.6 97.7 10.2 445.1 0.0 559.5 2019 7.8 98.7 11.9 494.5 0.0 612.8 2020 8.1 100.6 12.4 514.6 0.0 635.6 2021 8.4 102.6 12.8 535.5 0.0 659.3 2022 8.7 104.7 13.3 557.2 82.1 766.1 2023 9.1 106.8 13.8 579.8 0.0 709.5 2024 9.4 108.9 14.4 603.3 0.0 736.0 2025 9.7 111.1 14.9 625.4 0.0 761.1 2026 10.1 113.3 15.4 648.1 0.0 786.9 2027 10.5 115.6 15.9 671.8 82.1 895.8 2028 10.8 117.9 16.5 696.2 0.0 841.4 2029 11.2 120.3 17.0 721.6 0.0 870.1 2030 11.6 122.7 17.6 745.2 0.0 897.0 2031 11.9 125.1 18.1 769.6 0.0 924.8 2032 12.3 127.6 18.7 794.8 82.1 1,035.5 2033 12.7 130.2 19.3 820.8 0.0 983.0 2034 13.1 132.8 19.9 847.7 0.0 1,013.4 2035 13.6 135.4 20.5 875.4 0.0 1,044.9 2036 14.0 145.9 21.3 904.0 0.0 1,085.2 EIRR (%) 11.5 ENPV (₹ Million) (84.6) ( ) = negative, EIRR = economic internal rate of return, ENPV = expected net present value. a The operation and maintenance costs were already incorporated in the benefit calculation. b Thicker overlays due to increased traffic. Source: Asian Development Bank.
Appendix 9 67
Table A9.16 Economic Analysis Cash Flow for Bhatapara–Urkura
Incremental Benefitsa
b
Overall Net
Road
Construction Cost Maintenance Costs between Railand
Timeto Passengers Construction InventoryBenefits AnnualStock Increased Road OperationCosts
Rolling Stock Reduced Travel Reduced Rolling Reduced Transport Savingsdue to Year Costof Benefits 2004 320.1 0.0 0.0 0.0 0.0 0.0 (320.1) 2005 320.1 0.0 0.0 0.0 0.0 0.0 (320.1) 2006 173.0 0.0 0.0 0.0 0.0 0.0 (173.0) 2007 890.5 0.0 0.0 0.0 0.0 0.0 (890.5) 2008 582.8 0.0 0.0 0.0 0.0 0.0 (582.8) 2009 163.1 0.0 0.0 0.0 0.0 0.0 (163.1) 2010 366.0 0.0 0.0 0.0 0.0 0.0 (366.0) 2011 187.4 0.0 0.0 0.0 0.0 0.0 (187.4) 2012 0.0 0.0 0.0 0.0 0.0 - 2013 0.0 0.0 0.0 0.0 0.0 - 2014 0.0 0.0 0.0 0.0 0.0 - 2015 0.0 0.0 0.0 0.0 0.0 - 2016 68.3 247.9 91.6 15.7 0.0 407.8 2017 68.1 455.9 135.6 30.9 0.0 659.5 2018 75.5 482.3 150.7 34.7 0.0 708.6 2019 83.7 529.9 170.1 38.6 0.0 783.7 2020 88.9 599.3 189.0 40.1 0.0 877.2 2021 92.0 611.3 195.4 41.7 168.0 898.7 2022 95.2 623.5 202.0 43.4 0.0 920.7 2023 98.5 636.0 208.8 45.2 0.0 943.3 2024 101.9 648.7 215.8 47.0 0.0 966.5 2025 105.2 661.6 222.6 48.7 0.0 989.5 2026 108.6 674.9 229.6 50.4 168.0 1,013.1 2027 112.1 688.4 236.8 52.2 0.0 1,037.3 2028 115.7 702.1 244.3 54.1 0.0 1,062.1 2029 119.4 716.2 251.9 56.1 0.0 1,087.5 2030 122.9 730.5 259.3 57.9 0.0 1,112.7 2031 126.5 745.1 266.9 59.8 168.0 1,138.5 2032 130.3 760.0 274.7 61.7 0.0 1,165.0 2033 134.1 775.2 282.7 63.7 0.0 1,192.0 2034 138.1 790.7 290.9 65.8 0.0 1,219.7 2035 142.2 806.5 299.4 68.0 0.0 1,248.1 2036 EIRR (%) 11.0 ENPV (₹ Million) (262.9) ( ) = negative, EIRR = economic internal rate of return, ENPV = expected net present value. a The operation and maintenance costs were already incorporated in the benefit calculation. b Thicker overlays due to increased traffic. Source: Asian Development Bank.
68 Appendix 9
Table A9.17 Economic Analysis Cash Flow for Gooty–Pullampet
Incremental Benefitsa
b
Overall Net
Road
Construction Cost Maintenance Costs between Railand
Timeto Passengers Construction InventoryBenefits AnnualStock Increased Road OperationCosts
Rolling Stock Reduced Travel Reduced Rolling Reduced Transport Savingsdue to Year Costof Benefits 2004 109.3 0.0 0.0 0.0 0.0 0.0 (109.3) 2005 49.5 0.0 0.0 0.0 0.0 0.0 (49.5) 2006 105.3 0.0 0.0 0.0 0.0 0.0 (105.3) 2007 1288.1 0.0 0.0 0.0 0.0 0.0 (1,288.1) 2008 1128.8 0.0 0.0 0.0 0.0 0.0 (1,128.8) 2009 724.1 0.0 0.0 0.0 0.0 0.0 (724.1) 2010 1045.5 0.0 0.0 0.0 0.0 0.0 (1,045.5) 2011 674.1 0.0 0.0 0.0 0.0 0.0 (674.1) 2012 0.0 0.0 0.0 0.0 0.0 - 2013 74.8 1326.2 269.7 38.1 0.0 1,708.8 2014 65.6 1232.0 237.1 57.1 0.0 1,592.0 2015 59.1 887.9 169.8 68.6 0.0 1,185.4 2016 53.1 557.3 108.1 80.0 0.0 798.5 2017 48.5 275.0 51.8 91.4 0.0 466.7 2018 44.5 3.8 10.4 102.8 422.8 584.3 2019 40.4 -266.6 -31.2 114.3 0.0 (143.1) 2020 42.1 -271.9 -29.3 119.3 0.0 (139.7) 2021 44.0 -277.3 -27.4 124.6 0.0 (136.1) 2022 45.9 -282.9 -25.3 130.1 0.0 (132.2) 2023 109.7 1664.5 322.5 135.8 422.8 2,655.2 2024 113.1 1697.8 331.6 141.7 0.0 2,284.1 2025 116.3 1731.7 340.7 147.2 0.0 2,335.9 2026 119.6 1766.4 350.0 153.0 0.0 2,388.9 2027 123.0 1801.7 359.5 158.9 0.0 2,443.1 2028 126.5 1837.7 369.3 165.1 422.8 2,921.4 2029 130.1 1874.5 379.3 171.5 0.0 2,555.4 2030 133.6 1912.0 389.3 177.4 0.0 2,612.3 2031 137.2 1950.2 399.4 183.6 0.0 2,670.4 2032 140.9 1989.2 409.8 189.9 0.0 2,729.9 2033 2034 2035 2036 EIRR (%) 13.5 ENPV (₹ Million) 496.7 ( ) = negative, EIRR = economic internal rate of return, ENPV = expected net present value. a The operation and maintenance costs were already incorporated in the benefit calculation. b Thicker overlays due to increased traffic. Source: Asian Development Bank.
Appendix 9 69
Table A9.18 Economic Analysis Cash Flow for Aligarh–Ghaziabad
Incremental Benefitsa
b
Overall Net
Road
Construction Cost Maintenance Costs between Railand
Timeto Passengers Construction InventoryBenefits AnnualStock Increased Road OperationCosts
Rolling Stock Reduced Travel Reduced Rolling Reduced Transport Savingsdue to Year Costof Benefits 2004 0.0 0.0 0.0 0.0 0.0 0.0 - 2005 0.0 0.0 0.0 0.0 0.0 0.0 - 2006 240.0 0.0 0.0 0.0 0.0 0.0 (240.0) 2007 1042.4 0.0 0.0 0.0 0.0 0.0 (1,042.4) 2008 976.1 0.0 0.0 0.0 0.0 0.0 (976.1) 2009 248.2 0.0 0.0 0.0 0.0 0.0 (248.2) 2010 316.7 0.0 0.0 0.0 0.0 0.0 (316.7) 2011 0.0 0.0 0.0 0.0 0.0 - 2012 66.0 415.6 174.0 33.0 0.0 688.6 2013 73.3 493.6 195.4 52.8 0.0 815.1 2014 80.1 486.9 189.4 66.1 0.0 822.5 2015 88.9 513.2 197.0 79.3 0.0 878.3 2016 96.9 526.3 200.7 92.5 0.0 916.4 2017 105.5 550.1 219.5 105.7 296.3 1,277.1 2018 113.6 561.8 234.4 118.9 0.0 1,028.7 2019 121.6 575.4 249.5 132.1 0.0 1,078.6 2020 125.8 586.9 258.4 138.4 0.0 1,109.5 2021 130.0 598.6 267.7 144.9 0.0 1,141.3 2022 134.5 610.6 277.3 151.7 296.3 1,470.3 2023 139.1 622.8 287.1 158.7 0.0 1,207.7 2024 143.8 635.3 297.3 166.1 0.0 1,242.4 2025 164.0 891.8 395.0 172.9 0.0 1,623.8 2026 169.0 909.7 406.9 180.1 0.0 1,665.7 2027 174.2 927.9 419.2 187.4 296.3 2,005.0 2028 179.5 946.4 431.8 195.1 0.0 1,752.7 2029 185.0 965.3 444.7 203.0 0.0 1,798.0 2030 190.2 984.6 457.4 210.3 0.0 1,842.6 2031 2032 2033 2034 2035 2036 EIRR (%) 19.0 ENPV (₹ Million) 1545.7 ( ) = negative, EIRR = economic internal rate of return, ENPV = expected net present value. a The operation and maintenance costs were already incorporated in the benefit calculation. b Thicker overlays due to increased traffic. Source: Asian Development Bank.
70 Appendix 9
Table A9.19 Economic Analysis Cash Flow for Khurda road–Barang
Incremental Benefitsa
b
Overall Net
Road
Construction Cost Maintenance Costs between Railand
Timeto Passengers Construction InventoryBenefits AnnualStock Increased Road OperationCosts
Rolling Stock Reduced Travel Reduced Rolling Reduced Transport Savingsdue to Year Costof Benefits 2004 61.8 0.0 0.0 0.0 0.0 0.0 (61.8) 2005 135.2 0.0 0.0 0.0 0.0 0.0 (135.2) 2006 317.8 0.0 0.0 0.0 0.0 0.0 (317.8) 2007 637.1 0.0 0.0 0.0 0.0 0.0 (637.1) 2008 427.3 0.0 0.0 0.0 0.0 0.0 (427.3) 2009 260.4 0.0 0.0 0.0 0.0 0.0 (260.4) 2010 349.4 0.0 0.0 0.0 0.0 0.0 (349.4) 2011 163.8 0.0 0.0 0.0 0.0 0.0 (163.8) 2012 0.0 0.0 0.0 0.0 0.0 - 2013 0.0 0.0 0.0 0.0 0.0 - 2014 0.0 0.0 0.0 0.0 0.0 - 2015 0.0 0.0 0.0 0.0 0.0 - 2016 36.8 283.3 53.7 2.8 0.0 376.6 2017 47.5 455.9 61.7 4.7 0.0 569.9 2018 49.2 482.3 66.5 5.3 0.0 603.4 2019 51.2 529.9 73.6 5.9 0.0 660.6 2020 53.0 540.5 77.1 6.9 0.0 677.5 2021 54.9 551.3 80.8 7.9 72.0 766.9 2022 56.8 562.4 84.6 9.0 0.0 712.8 2023 58.9 573.6 88.5 10.1 0.0 731.1 2024 61.0 585.1 92.5 11.3 0.0 749.8 2025 63.0 596.8 96.4 12.3 0.0 768.5 2026 65.0 608.7 100.4 13.4 72.0 859.6 2027 67.2 620.9 104.6 14.6 0.0 807.2 2028 69.4 633.3 108.8 15.8 0.0 827.3 2029 71.6 646.0 113.2 17.0 0.0 847.9 2030 75.3 730.5 126.0 18.2 0.0 950.1 2031 77.6 745.1 130.6 19.4 72.0 1,044.6 2032 79.9 760.0 135.2 20.6 0.0 995.8 2033 82.3 775.2 140.0 21.9 0.0 1,019.4 2034 84.7 790.7 144.9 23.2 0.0 1,043.6 2035 87.3 806.5 149.9 24.6 0.0 1,068.3 2036 EIRR (%) 11.7 ENPV (₹ Million) (53.1) ( ) = negative, EIRR = economic internal rate of return, ENPV = expected net present value. a The operation and maintenance costs were already incorporated in the benefit calculation. b Thicker overlays due to increased traffic. Source: Asian Development Bank.
Appendix 9 71
Table A9.20 Economic Analysis Cash Flow for Thiruvallur–Arakkonnam
Incremental Benefitsa
b
Overall Net
Road
Construction Cost Maintenance Costs between Railand
Timeto Passengers Construction InventoryBenefits AnnualStock Increased Road OperationCosts
Rolling Stock Reduced Travel Reduced Rolling Reduced Transport Savingsdue to Year Costof Benefits 2004 305.7 0.0 0.0 0.0 0.0 0.0 (305.7) 2005 26.7 0.0 0.0 0.0 0.0 0.0 (26.7) 2006 161.5 0.0 0.0 0.0 0.0 0.0 (161.5) 2007 624.0 0.0 0.0 0.0 0.0 0.0 (624.0) 2008 358.4 0.0 0.0 0.0 0.0 0.0 (358.4) 2009 120.2 0.0 0.0 0.0 0.0 0.0 (120.2) 2010 35.2 0.0 0.0 0.0 0.0 0.0 (35.2) 2011 19.5 0.0 0.0 0.0 0.0 0.0 (19.5) 2012 0.0 0.0 0.0 0.0 0.0 - 2013 0.0 0.0 0.0 0.0 0.0 - 2014 0.0 0.0 0.0 0.0 0.0 - 2015 0.0 0.0 0.0 0.0 0.0 - 2016 15.9 226.4 23.1 1.7 0.0 267.0 2017 15.8 560.1 42.3 4.7 0.0 622.8 2018 17.1 584.6 45.5 5.3 0.0 652.5 2019 18.4 611.1 48.9 5.9 0.0 684.3 2020 19.0 623.3 50.4 6.1 72.8 771.6 2021 19.6 635.8 51.9 6.4 0.0 713.7 2022 20.2 648.5 53.5 6.6 0.0 728.9 2023 20.8 661.5 55.1 6.9 0.0 744.4 2024 21.4 674.7 56.8 7.2 0.0 760.2 2025 22.1 688.2 58.5 7.5 72.8 849.1 2026 22.7 702.0 60.2 7.8 0.0 792.7 2027 28.5 1096.9 90.5 8.1 0.0 1,224.0 2028 29.3 1118.8 92.9 8.4 0.0 1,249.4 2029 30.1 1141.2 95.3 8.7 0.0 1,275.3 2030 2031 2032 2033 2034 2035 2036 EIRR (%) 12.7 ENPV (₹ Million) 112.7 ( ) = negative, EIRR = economic internal rate of return, ENPV = expected net present value. a The operation and maintenance costs were already incorporated in the benefit calculation. b Thicker overlays due to increased traffic. Source: Asian Development Bank.
72 Appendix 9
Table A9.21 Economic Analysis Cash Flow for Mahanadi–Second Bridge
Incremental Benefitsa
b
Overall Net
Road
Construction Cost Maintenance Costs between Railand
Timeto Passengers Construction InventoryBenefits AnnualStock Increased Road OperationCosts
Rolling Stock Reduced Travel Reduced Rolling Reduced Transport Savingsdue to Year Costof Benefits 2004 99.52 0.0 0.0 0.0 0.0 0.0 (99.5) 2005 272.37 0.0 0.0 0.0 0.0 0.0 (272.4) 2006 424.63 0.0 0.0 0.0 0.0 0.0 (424.6) 2007 439.24 0.0 0.0 0.0 0.0 0.0 (439.2) 2008 149.41 0.0 81.7 0.1 0.0 0.0 (67.6) 2009 -1.03 0.1 206.4 0.2 0.0 0.0 207.7 2010 0.30 0.6 226.9 0.6 0.1 0.0 227.9 2011 1.1 249.9 0.8 0.2 0.0 252.0 2012 1.6 275.8 1.0 0.3 0.0 278.6 2013 2.2 305.1 1.0 0.4 8.4 317.1 2014 2.7 338.4 1.1 0.5 0.0 342.7 2015 3.2 369.6 1.1 0.5 0.0 374.5 2016 3.7 410.1 1.2 0.6 0.0 415.7 2017 4.3 452.9 0.9 0.7 0.0 458.8 2018 4.9 1157.5 2.5 0.8 8.4 1,174.1 2019 5.4 931.2 2.9 0.9 0.0 940.5 2020 5.6 949.9 3.3 0.9 0.0 959.7 2021 5.8 968.9 3.6 1.0 0.0 979.3 2022 6.1 988.2 3.9 1.0 0.0 999.3 2023 6.3 1008.0 4.3 1.1 8.4 1,028.1 2024 6.6 1028.2 4.7 1.1 0.0 1,040.5 2025 6.8 1048.7 5.0 1.1 0.0 1,061.7 2026 7.0 1069.7 5.4 1.2 0.0 1,083.3 2027 7.3 1091.1 5.8 1.2 0.0 1,105.4 2028 2029 2030 2031 2032 2033 2034 2035 2036 EIRR (%) 20.6 ENPV (₹ Million) 1165.2 ( ) = negative, EIRR = economic internal rate of return, ENPV = expected net present value. a The operation and maintenance costs were already incorporated in the benefit calculation. b Thicker overlays due to increased traffic. Source: Asian Development Bank.
Appendix 9 73
Financial Analysis - Cash Flow for Subprojects
Table A9.22 Financial Analysis Cash Flow for Cuttack–Barang Cost of Operation & Gross Overall Net Year Construction Maintenance Costs Earnings Benefits 2004 30.17 0.00 0.00 (30.17) 2005 65.95 0.00 0.00 (65.95) 2006 155.06 0.00 0.00 (155.06) 2007 310.83 0.00 0.00 (310.83) 2008 208.48 0.00 0.00 (208.48) 2009 127.04 0.00 0.00 (127.04) 2010 170.47 0.00 0.00 (170.47) 2011 79.93 0.00 0.00 (79.93) 2012 0.00 0.00 0.00 2013 0.00 0.00 0.00 2014 0.00 0.00 0.00 2015 4.79 36.23 31.45 2016 13.73 156.93 143.21 2017 21.15 182.39 161.23 2018 28.74 212.92 184.17 2019 35.71 241.14 205.43 2020 40.02 261.31 221.29 2021 44.54 283.06 238.51 2022 49.29 306.51 257.22 2023 54.28 331.80 277.52 2024 59.52 359.05 299.53 2025 64.56 387.48 322.92 2026 69.85 418.05 348.19 2027 75.40 450.90 375.50 2028 81.23 486.22 404.99 2029 87.35 524.18 436.83 2030 93.27 563.72 470.46 2031 99.48 606.13 506.65 2032 106.00 651.59 545.59 2033 112.85 700.33 587.48 2034 120.04 752.57 632.53 2035 2036 FIRR (%) 10.17 FNPV (₹ Million) 1677.46 ( ) = negative, FIRR = financial internal rate of return, FNPV = financial net present value. Source: Asian Development Bank.
74 Appendix 9
Table A9.23 Financial Analysis Cash Flow for Raichur–Guntakal Cost of Operation & Gross Overall Net Year Construction Maintenance Costs Earnings Benefits 2004 0.00 0.00 0.00 0.00 2005 0.00 0.00 0.00 0.00 2006 0.00 0.00 0.00 0.00 2007 0.00 0.00 0.00 0.00 2008 0.00 0.00 0.00 0.00 2009 574.10 0.00 0.00 (574.10) 2010 374.77 0.00 0.00 (374.77) 2011 0.00 0.00 0.00 0.00 2012 0.00 0.00 0.00 2013 0.00 0.00 0.00 2014 0.00 0.00 0.00 2015 0.00 0.00 0.00 2016 0.00 0.00 0.00 2017 49.49 68.95 19.47 2018 101.64 124.99 23.35 2019 151.42 254.30 102.89 2020 179.21 327.74 148.53 2021 208.34 408.88 200.55 2022 238.86 498.41 259.55 2023 270.88 597.05 326.17 2024 304.46 705.60 401.13 2025 336.57 818.31 481.74 2026 370.17 941.65 571.48 2027 405.36 1076.50 671.13 2028 442.24 1223.79 781.56 2029 480.89 1384.56 903.66 2030 518.01 1551.26 1033.25 2031 556.86 1732.40 1175.54 2032 597.57 1929.10 1331.53 2033 640.24 2142.57 1502.33 2034 2035 2036 FIRR (%) 13.61 FNPV (₹ Million) 2919.40 ( ) = negative, FIRR = financial internal rate of return, FNPV = financial net present value. Source: Asian Development Bank.
Appendix 9 75
Table A9.24 Financial Analysis Cash Flow for Rajatgarh–Barang Cost of Operation & Gross Overall Net Year Construction Maintenance Costs Earnings Benefits 2004 62.29 0.00 0.00 (62.29) 2005 136.18 0.00 0.00 (136.18) 2006 320.18 0.00 0.00 (320.18) 2007 641.80 0.00 0.00 (641.80) 2008 430.47 0.00 0.00 (430.47) 2009 262.31 0.00 0.00 (262.31) 2010 351.98 0.00 0.00 (351.98) 2011 165.03 0.00 0.00 (165.03) 2012 0.00 0.00 0.00 2013 0.00 0.00 0.00 2014 0.00 0.00 0.00 2015 0.00 0.00 0.00 2016 0.00 0.00 0.00 2017 24.45 82.49 58.04 2018 68.89 179.29 110.40 2019 108.44 250.85 142.41 2020 125.09 288.85 163.76 2021 142.51 330.63 188.12 2022 160.75 376.53 215.78 2023 179.86 426.92 247.06 2024 199.87 482.17 282.30 2025 218.92 538.72 319.81 2026 238.82 600.41 361.59 2027 259.62 667.64 408.02 2028 281.38 740.89 459.51 2029 304.14 820.64 516.50 2030 325.86 902.22 576.36 2031 348.53 990.63 642.09 2032 372.23 1086.41 714.17 2033 397.01 1190.13 793.12 2034 422.93 1302.41 879.48 2035 450.07 1423.93 973.86 2036 478.49 1555.39 1076.90 FIRR (%) 6.42 FNPV (₹ Million) 1238.19 ( ) = negative, FIRR = financial internal rate of return, FNPV = financial net present value. Source: Asian Development Bank.
76 Appendix 9
Table A9.25 Financial Analysis Cash Flow for Bhatapara–Urkura Cost of Operation & Gross Overall Net Year Construction Maintenance Costs Earnings Benefits 2004 355.70 0.00 0.00 (355.70) 2005 355.70 0.00 0.00 (355.70) 2006 192.19 0.00 0.00 (192.19) 2007 989.47 0.00 0.00 (989.47) 2008 647.50 0.00 0.00 (647.50) 2009 181.18 0.00 0.00 (181.18) 2010 406.62 0.00 0.00 (406.62) 2011 208.17 0.00 0.00 (208.17) 2012 0.00 0.00 0.00 2013 0.00 0.00 0.00 2014 0.00 0.00 0.00 2015 0.00 0.00 0.00 2016 127.26 180.24 52.98 2017 333.79 319.64 (14.14) 2018 525.58 661.05 135.47 2019 715.63 1048.27 332.63 2020 795.43 1233.02 437.59 2021 878.82 1436.61 557.79 2022 966.00 1660.72 694.72 2023 1057.15 1907.15 850.00 2024 1152.48 2177.88 1025.40 2025 1242.88 2455.38 1212.49 2026 1337.17 2758.49 1421.32 2027 1435.54 3089.37 1653.82 2028 1538.21 3450.30 1912.09 2029 1645.41 3843.79 2198.38 2030 1747.20 4246.82 2499.62 2031 1853.26 4684.11 2830.85 2032 1963.80 5158.35 3194.55 2033 2079.09 5672.45 3593.36 2034 2199.37 6229.51 4030.14 2035 2324.93 6832.89 4507.96 2036 FIRR (%) 11.03 FNPV (₹ Million) 8782.06 ( ) = negative, FIRR = financial internal rate of return, FNPV = financial net present value. Source: Asian Development Bank.
Appendix 9 77
Table A9.26 Financial Analysis Cash Flow for Gooty–Pullampet Cost of Operation & Gross Overall Net Year Construction Maintenance Costs Earnings Benefits 2004 121.50 0.00 0.00 (121.50) 2005 55.05 0.00 0.00 (55.05) 2006 117.04 0.00 0.00 (117.04) 2007 1431.24 0.00 0.00 (1431.24) 2008 1254.19 0.00 0.00 (1254.19) 2009 804.56 0.00 0.00 (804.56) 2010 1161.72 0.00 0.00 (1161.72) 2011 748.99 0.00 0.00 (748.99) 2012 0.00 0.00 0.00 2013 200.85 278.95 78.10 2014 397.43 337.06 (60.37) 2015 565.21 632.70 67.49 2016 756.01 812.21 56.20 2017 953.71 1196.56 242.86 2018 1151.14 1784.45 633.31 2019 1343.94 2332.79 988.84 2020 1436.33 2698.35 1262.02 2021 1533.23 3098.10 1564.87 2022 1634.90 3534.83 1899.94 2023 1741.62 4011.58 2269.96 2024 1853.69 4531.59 2677.90 2025 1960.98 5076.96 3115.99 2026 2073.39 5669.49 3596.10 2027 2191.26 6312.86 4121.61 2028 2314.90 7011.02 4696.12 2029 2444.67 7768.21 5323.54 2030 2569.45 8561.01 5991.56 2031 2700.23 9418.07 6717.84 2032 2837.41 10344.20 7506.80 2033 2034 2035 2036 FIRR (%) 13.08 FNPV (₹ Million) 15,833.31 ( ) = negative, FIRR = financial internal rate of return, FNPV = financial net present value. Source: Asian Development Bank.
78 Appendix 9
Table A9.27 Financial Analysis Cash Flow for Aligarh–Ghaziabad Cost of Operation & Gross Overall Net Year Construction Maintenance Costs Earnings Benefits 2004 0.00 0.00 0.00 0.00 2005 0.00 0.00 0.00 0.00 2006 266.63 0.00 0.00 (266.63) 2007 1158.21 0.00 0.00 (1158.21) 2008 1084.59 0.00 0.00 (1084.59) 2009 275.80 0.00 0.00 (275.80) 2010 351.94 0.00 0.00 (351.94) 2011 0.00 0.00 0.00 0.00 2012 198.45 320.83 122.38 2013 412.81 389.77 (23.05) 2014 630.84 787.03 156.19 2015 845.03 1132.57 287.53 2016 1063.22 1506.45 443.23 2017 1286.39 1911.47 625.09 2018 1507.89 2369.42 861.53 2019 1725.57 2865.67 1140.10 2020 1834.85 3193.59 1358.74 2021 1949.17 3551.31 1602.15 2022 2068.79 3941.37 1872.58 2023 2194.00 4366.46 2172.46 2024 2325.10 4829.53 2504.42 2025 2449.83 5307.24 2857.40 2026 2580.09 5825.32 3245.23 2027 2716.19 6387.00 3670.81 2028 2858.45 6995.75 4137.30 2029 3007.20 7655.29 4648.09 2030 3149.09 8334.99 5185.90 2031 2032 2033 2034 2035 2036 FIRR (%) 16.25 FNPV (₹ Million) 12,906.71 ( ) = negative, FIRR = financial internal rate of return, FNPV = financial net present value. Source: Asian Development Bank.
Appendix 9 79
Table A9.28 Financial Analysis Cash Flow for Khurd road–Barang Cost of Operation & Gross Overall Net Year Construction Maintenance Costs Earnings Benefits 2004 68.70 0.00 0.00 (68.70) 2005 150.21 0.00 0.00 (150.21) 2006 353.15 0.00 0.00 (353.15) 2007 707.90 0.00 0.00 (707.90) 2008 474.81 0.00 0.00 (474.81) 2009 289.33 0.00 0.00 (289.33) 2010 388.24 0.00 0.00 (388.24) 2011 182.03 0.00 0.00 (182.03) 2012 0.00 0.00 0.00 2013 0.00 0.00 0.00 2014 0.00 0.00 0.00 2015 0.00 0.00 0.00 2016 64.88 70.62 5.74 2017 80.61 162.12 81.51 2018 112.24 239.38 127.15 2019 142.53 342.28 199.76 2020 193.31 450.66 257.35 2021 246.38 570.89 324.50 2022 301.88 704.03 402.15 2023 359.91 851.26 491.35 2024 420.61 1013.84 593.23 2025 478.21 1180.65 702.44 2026 538.28 1363.68 825.39 2027 600.98 1564.30 963.32 2028 666.43 1784.00 1117.57 2029 734.78 2024.38 1289.60 2030 799.72 2270.85 1471.13 2031 867.41 2539.14 1671.73 2032 937.98 2830.98 1893.00 2033 1011.59 3148.25 2136.65 2034 1088.42 3492.95 2404.53 2035 1168.65 3867.27 2698.62 2036 FIRR (%) 9.86 FNPV (₹ Million) 4,729.35 ( ) = negative, FIRR = financial internal rate of return, FNPV = financial net present value. Source: Asian Development Bank.
80 Appendix 9
Table A9.29 Financial Analysis Cash Flow for Tiruvallur–Arakkonnam Cost of Operation & Gross Overall Net Year Construction Maintenance Costs Earnings Benefits 2004 339.64 0.00 0.00 (339.64) 2005 29.71 0.00 0.00 (29.71) 2006 179.50 0.00 0.00 (179.50) 2007 693.35 0.00 0.00 (693.35) 2008 398.24 0.00 0.00 (398.24) 2009 133.54 0.00 0.00 (133.54) 2010 39.13 0.00 0.00 (39.13) 2011 21.63 0.00 0.00 (21.63) 2012 0.00 0.00 0.00 2013 0.00 0.00 0.00 2014 0.00 0.00 0.00 2015 0.00 0.00 0.00 2016 32.57 148.42 115.85 2017 68.08 454.78 386.69 2018 106.59 736.16 629.58 2019 144.75 1056.61 911.85 2020 163.70 1236.90 1073.19 2021 183.97 1433.24 1249.27 2022 205.65 1646.85 1441.20 2023 228.87 1879.03 1650.17 2024 253.73 2131.18 1877.45 2025 278.87 2401.60 2122.73 2026 305.81 2694.57 2388.76 2027 334.70 3011.75 2677.04 2028 365.71 3354.90 2989.18 2029 399.01 3725.91 3326.90 2030 2031 2032 2033 2034 2035 2036 FIRR (%) 15.64 FNPV (₹ Million) 8,201.14 ( ) = negative, FIRR = financial internal rate of return, FNPV = financial net present value. Source: Asian Development Bank.
Appendix 9 81
Table A9.30 Financial Analysis Cash Flow for Mahanadi Second Bridge Cost of Operation & Gross Overall Net Year Construction Maintenance Costs Earnings Benefits 2004 110.58 0.00 0.00 (110.58) 2005 302.63 0.00 0.00 (302.63) 2006 471.81 0.00 0.00 (471.81) 2007 488.04 0.03 0.00 (488.08) 2008 166.01 0.96 13.19 (153.78) 2009 (1.14) 2.35 34.76 33.56 2010 0.34 27.37 108.62 80.92 2011 0.00 52.51 187.80 135.29 2012 77.79 272.87 195.08 2013 103.21 364.47 261.27 2014 128.77 463.30 334.53 2015 145.70 547.95 402.25 2016 171.23 654.25 483.03 2017 197.27 756.71 559.44 2018 225.43 893.88 668.45 2019 251.25 1048.93 797.68 2020 263.94 1141.08 877.14 2021 277.38 1240.28 962.90 2022 291.62 1347.06 1055.44 2023 306.73 1461.97 1155.23 2024 322.76 1585.58 1262.82 2025 338.66 1716.25 1377.60 2026 355.52 1856.58 1501.07 2027 373.41 2007.25 1633.84 2028 2029 2030 2031 2032 2033 2034 2035 2036 FIRR (%) 17.03 FNPV (₹ Million) 5,364.17 ( ) = negative, FIRR = financial internal rate of return, FNPV = financial net present value. Source: Asian Development Bank.
82 Appendix 10
PROJECT PROCUREMENT PACKAGES PCSS Contract Amount Procurement No. Contract ($) Method 1 Construction of second bridge over River Mahanadi (BBJ-Gammon JV) 17,398,588 ICB 2 Consulting services for accounting reforms (SF Ahmed & Co.) 575,536 ICB 3 Construction of roadbed, bridges, facilities, installation of traction (M/s Larsen & Toubro 14,586,573 ICB Ltd.) 4 Consulting services for monitoring of subproject preparation (M/s PADECO Co. Ltd. JV) 360,586 QCBS 5 Provision of third track on Bhatapara–Urkura Section (ERA Infra Engineering Ltd.) 20,171,203 ICB 6 Patch doubling of track on Gooty–-Pullampet section of South Central Railway (M/s 38,499,857 ICB Simplex Infrastructure Ltd., India) 7 Construction of roadbed–doubling line between Barang–Rajatgarh (HCIL–Adhikarya– 21,414,760 ICB ARSS JV) 8 Construction of major bridges–doubling railway line between Bar (HCIL–Adhikarya– 24,296,219 ICB ARSS JV) 9 Supply and installation of track, signaling, overhead equipment (HCIL–Adhikarya– 21,653,376 ICB ARSS JV) 10 Goods–Supply and manufacture of 7,775 mt of 52 kg IRS rails (Grade 880, c) (Steel 6,687,473 ICB Authority of India Ltd.) 11 Supply and installation of signaling for doubling of railway line (Leighton–Emrail– 16,663,977 ICB Kalindee JV) 12 Goods-Manufacture and supply of curved switches with ZU1-60 thick tong (Ganpati 11,650,870 ICB Industrial, India JV) 13 Goods–Manufacture and supply of cast manganese steel crossing for broad (Bhilai 2,113,369 ICB Engineering Corporation, Ltd.) 14 Construction of bridge no. 6101, 743, and 744 (M/s Malllikharjuna Engineering Const. 2,000,655 NCB and Cauveri Const.) 15 Construction of fobs and cops at different stations between Pullampet (M/s Vishnu 899,318 NCB Construction Company) 16 Fabrication, assembly, and launching of 16 x 45.7 m triangulated op. (M/s Braithwaite 2,942,781 NCB Burn and Jessop Const. Co.) Total 201,915,141 ICB = International competitive bidding, IRS = Indian Railways Standard, JV = joint venture, kg = kilogram, m = meter, mt = metric ton, NCB = national competitive bidding, PCSS = procurement contract summary sheet, QCBS = quality- and cost-based selection. Source: Asian Development Bank.
Appendix 11 83
SNAPSHOT OF ACHIEVEMENTS IN REFORMS AT LOAN CLOSURE
1. Accounting reforms. A new accounting architecture has been designed that provides a new chart of accounts, an accrual-based double entry and general ledger system of bookkeeping with commercial architecture following the line-of-business (LOB) accounting separation. Nine major LOBs were provided: (i) passenger, (ii) freight, (iii) suburban, (iv) fixed infrastructure, (v) rolling stock, (vi) manufacturing, (vii) construction, (viii) internal services, and (ix) welfare services. Under each LOB, a further block of activities has been separated as a line of services.
2. Core operations restructuring. The nine old zones were restructured into 16 new ones. In addition, nine more divisions were created by restructuring the existing ones. In zonal railways, initiatives were taken for increasing customer orientation, including delegation of more powers to general managers (zonal heads) in a number of areas, which include passenger amenities works, enhanced powers to settle accident claims for both passengers and freight, and decentralized procurement of selected items for regular use.
3. Noncore operations restructuring. Eleven noncore activities were agreed between Indian Railways and Asian Development Bank to be outsourced. Onboard services of important trains were hived off through the Indian Railway Catering and Tourism Corporation Ltd., which includes catering, bed roll provision, and on-board cleaning. Several local initiatives in terms of outsourcing were taken up in addition to the agreed eleven items.
4. Increasing private sector participation. A public–private partnership cell was set up in the Ministry of Railways for giving impetus to private sector participation in railways. Fifteen private container train operators signed agreements with Indian Railways to own or lease rolling stock and container terminals and to offer container trains for transportation over the Indian Railways network. Under the scheme, private investment in 96 train sets and six terminals has already materialized, amounting to about ₹19 billion. Similarly, wagon investment schemes elicited an investment of ₹12 billion during 2005–2009. The policy for private investment on railways sidings was formulated in November 2008. This was a landmark event as it allows private companies to invest in building of railway sidings.
5. Concessioning loss-making branch lines. Identification of five branch lines as pilot cases was done. The total number of loss-making lines had come down from 115 in 2001–2002 to 100 in 2008–2009.
6. More competition in rail container services. The policy on private participation in rail container services was announced in January 2006. Applications were called from private players interested in rail container movement (para. 4).
7. The wagon investment scheme that was announced in 2005 provides for private investment in wagons. Private investment has been approved for 128 rakes (each comprising 58 wagons) as of February 2007. 8. Re-engineering business processes. Codes and manuals were being revised continuously by the various departments to (i) increase process efficiency, (ii) simplify procedures, and (iii) bring adaptability and flexibility to imbibe new technologies. One of the major initiatives included the delegation of power to general managers for efficient project administration.
9. Tariff rationalization. Railways introduced a dynamic pricing regime whereby the tariffs were aligned with the market conditions. Busy season surcharge and linking freight rate of
84 Appendix 11
exported iron ore to the international price were the two initiatives taken under this policy. There was an effort to increase profitability in the freight segment by adopting an “increase volumes– reduce unit cost” strategy. This was similar to the strategy adopted for the passenger segment.
10. Rightsizing staff strength. As of 31 March 2009, the total staff strength of Indian Railways stood at 1.37 million, as compared to 1.51 million on 31 March 2002. This was a reduction of 0.14 million employees over a 7-year period. There had been a significant improvement in traffic units handled per employee. Traffic handled per employee rose from 0.55 million converted ton-km as of 31 March 2002 to 1.01 million converted ton-km as of 31 March 2009 (85% increase).