INDIA / /

NAGPUR RAIL PROJECT – CIN 1075

CONTENT

I - THE SECTOR AND ITS CHALLENGES ...... 2 1.1 - SECTOR PRESENTATION ...... 2 1.2 - GOVERNMENT POLICY ...... 3 1.3 - IMPORTANCE FOR THE COUNTRY ...... 3 1.4 - CONTRIBUTION TO FRENCH AID AND THE AFD’S STRATEGY ...... 3 1.4.1 - Lessons learnt from the main activities of the AFD and other French aid actors in the sector ...... 3 1.4.2 - Contribution to French aid and the AFD’s overall strategic goals ...... 4 II - PROJECT ...... 4 2.1 - OVERALL OBJECTIVE ...... 4 2.2 - SPECIFIC OBJECTIVES ...... 4 2.3 - PROJECT CONTENT ...... 4 2.4 - KEY ACTORS AND OPERATING METHODS ...... 5 2.5 - COST AND FINANCING ...... 5 2.6 - NATURE AND JUSTIFICATION OF THE FINANCIAL PRODUCT PROPOSED BY AFD ...... 6 III - PROJECT IMPACT EVALUATION ...... 7 3.1 - EXPECTED EFFECTS OF THE PROJECT ...... 7 3.1.1 - Economic impact ...... 7 3.1.2 - Environmental impact ...... 7 3.1.3 - Social impact ...... 7 3.1.4 - Institutional impact ...... 7 3.1.5 - Long-term project impact ...... 7 3.2 - ENVIRONMENTAL AND SOCIAL IMPACT ...... 8 IV - MONITORING MEASURES – ASSESSMENT AND INDICATORS ...... 9 4.1 - MONITORING – ASSESSMENT INDICATORS ...... 9 4.2 - IMPACT INDICATORS ...... 9 Aggregated indicators ...... 9

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I - THE SECTOR AND ITS CHALLENGES

1.1 - Sector presentation

Over the last decades, has faced a massive population growth. The rate of urbanization remains low and progresses rather slowly, as it increased from 28% in 2001 to 31% in 2011, date of the last census. However, the size of the Indian urban population is very important in numbers: urban dwellers are expected to increase from 377 million today to 590 million in 2030. Urban transport infrastructure does not meet this population growth. As an example, only 20 of 85 cities with over 500 000 inhabitants have a bus system organized by the public authorities.

The rapidly increasing number of private cars intensifies the phenomena of pollution and congestion in cities, especially because of the important diversity of flows on the roads (from the bike to the truck on the same path, with numerous auto-rickshaws in-between). Until recently, public transport essentially consisted in buses, which were usually old, poorly maintained and polluting. The development of metro projects as a mass transport solution is a relatively new phenomenon in India. The concentration of population and predictable growth of travel flows led the to favor the largest cities (over 2 million inhabitants) for the development of heavy modes of public transport such as metros. In these cities, the metro lines are usually built on viaducts in the middle of the primary road network, more rarely underground given the costs and delays caused by this technical solution.

Located in the State of Maharashtra, Nagpur lies precisely in the geographical center of India. The State of Maharashtra is the richest state in India, contributing up to 15 % of the national industrial output and up to 13% of the GDP. This is the second most populous state in India with 112 million inhabitants, with an urbanization rate of 42% which is well above the national average. With 2.5 million inhabitants, Nagpur is the 3rd largest city in the state. Its population growth of 18% over the period 2001-2011 remains below that of major Indian cities over the same period.

Its economy relies mainly on local trade, banking and dynamic industrial sector (power generation, cement, steel). Nagpur is also an important university city with one of the best literacy rates in India (93%), as well as the winter capital of the Federal Assembly. Over the decades, Nagpur has maintained a tradition of urban planning and public consultation. The prioritization of its road network, the respect of a land use plan and the preservation of land reserves in the city center are all markers of this good urban management, defined in the City Development Plan from 2006 and the Metropolitan Nagpur Development Plan for 2012-20. The city was ranked as the second cleanest and greenest in the country. It was recently chosen as a model city for experimenting renewable energy initiatives, especially in the solar sector.

In the South of the city, an ambitious economic development project is implemented around a Special Economic Zone of 4187 ha near the airport: the Multi-modal International Passenger and Cargo Hub Airport at Nagpur (MIHAN). Initiated a decade ago by the Maharashtra Airport Development Company (MADC), the project foresees the implementation of national and international export companies from different sectors. The land acquisition process was particularly long and the first companies are only beginning to take root: 32 companies are already located there and some 6 000 jobs have already been created. The ambitious goal is to eventually generate 150 000 direct jobs and 300 000 indirect jobs.

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With its strategic location, Nagpur is well connected by air and rail: every day, 160 trains from different localities carry 100 000 passengers, and 5 000 persons use the airport. The road network is well-dimensioned and prioritized. By a system of double urban ring road, the city has managed to relatively control its congestion until recently. The only public transport mode in the city is the urban bus network, whose management is delegated to an external operator. Following a model of public service delegation (net cost contract), Vansh Nimay Infrastructure Private Limited (VNIPL) currently operates 230 buses, carrying nearly 200 000 passengers per day on 42 routes.

Motorized travels in the city of Nagpur are overwhelmingly dominated by two-wheelers. Modal shares are distributed among private cars for 12%, public transports for 9%, auto-rickshaws for 12% and motorcycles for 65%. The motor park is constantly increasing, with 40 000 new vehicles registered per year over the past decade. Non-motorized travels represent only 15% of total trips.

1.2 - Government policy

Implemented in 2006, the National Urban Transport Policy promotes an integrated approach to transport, notably through the establishment of Unified Metropolitan Transport Authority (UMTA) in the cities of more than one million inhabitants. At the national level, the 12th Five Year Plan (2012-2017) highlights the difficulties linked to the major congestion in Indian cities. It recommends the development of urban rail systems at high speed and rapid regional networks, integrating different modes via unique tickets and with audits on social and gender issues.

Since his election in May 2014, Prime Minister stressed the need to develop cities and infrastructure to sustain economic growth. He announced his objective of implementing (i) the Smart Cities Mission, designed to develop 100 smart cities, and (ii) the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), aiming at renovating 500 cities. In May 2015, the Government of India officially announced the amount to be allocated by the central level to both urban infrastructure programs: respectively 48 000 crore and 50 000 crore. The improvement and development of urban transport will likely be among the flagship projects of these missions.

In the context of the Smart Cities Mission, Nagpur has been selected to benefit from the funds provided by the Government of India; its Smart City Proposal has not yet been validated by the Evaluation Committee. France has positioned itself to assist in this process the three cities of Nagpur, Chandigarh and Pondicherry through the provision of French experts under the framework of a three-year technical assistance program.

1.3 - Importance for the country

With 1.2 billion inhabitants and 40 cities of over one million inhabitants, India has become the third largest contributor in terms of greenhouse gas (GHG) emissions. The population growth, the increasing rhythm of urbanization, the problems related to pollution and congestion, require rapid response in terms of implementation of low-carbon public transport infrastructure in Indian cities. 1.4 - Contribution to French aid and the AFD’s strategy

1.4.1 - Lessons learnt from the main activities of the AFD and other French aid actors in the sector

In India, AFD has already financed several metro projects before . In 2012, AFD partially financed the Phase 1 of Metro for an amount of 110 M€. In 2013, AFD Cop-M2021 ope-M2021 NCO Note de communication publique operation PAY.doc 3/9 contributed to the financing of the first line of Metro for an amount of 180 M€, and provided a technical assistance to Rail Limited of 0,8 M€ on the integration of the different modes of transport. In 2014, AFD partially financed the Phase 2 of Bangalore Metro for an amount of 200 M€.

The urban transport sector in India presents one major difficulty, which is the land acquisition process. This process is very long, difficult, and usually causes many delays in the implementation of heavy infrastructure such as metros. AFD is particularly cautious on the anticipation in the process of securing the land, and on the procedures followed.

Several French companies succeeded in gaining market share in the urban transport sector, even while being subject to fierce competition. These companies include Thales, , Systra, Egis, Railtech, Lumiplan among others, on different metro projects such as Kochi Metro, , Bangalore Metro, Metro and others.

1.4.2 - Contribution to French aid and the AFD’s overall strategic goals

Since 2006, AFD has responded to requests for financing different types of urban transport: (Rabat, Casablanca, Tunis, Medellin), metros (Rio de Janeiro, Santo Domingo, Cairo, Istanbul, Bangalore, Hanoi), urban trains (Tunis, Bandung, Sao Paulo), cable cars (Medellin), water transports (Izmir) or rapid bus lanes (Addis Ababa, Curitiba, Lagos, Istanbul, Amman, Dhaka, Noumea).

The Nagpur Metro Rail project is consistent with the mandate of AFD in emerging countries, for green and inclusive growth and Sustainable Development Goals (SDGs). The development of urban transport is one of the key sectors of intervention for AFD in India, with an objective to promote a more sustainable organization of cities to reduce greenhouse gases emissions. With the implementation of the Nagpur Metro Rail project, the public transport demand of Nagpur residents will be met while the agglomeration will develop in a way that reduces pollution and congestion.

II - PROJECT

2.1 - Overall objective

The overall objective of the Nagpur Metro Rail project is to improve urban mobility in Nagpur while promoting a sustainable development of the agglomeration.

2.2 - Specific objectives

The Nagpur Metro Rail project pursues several specific objectives: - Increasing mobility and access to transport for people, guaranteeing a regular quality of service; - Serving key economic and administrative areas of the city; - Stopping the progression of the number of private vehicles, including motorbikes, offering an alternative public transport; - Reducing local emissions and carbon emissions from road traffic; - Promoting integrated urban development, strengthening inter-modality and densification around public transport routes.

2.3 - Project content

The project consists in two metro lines, for a total of 38.1 km including 35 stations: - A North-South line, Automotive Khapri Square Station: 19.6 km with 16 stations, Cop-M2021 ope-M2021 NCO Note de communication publique operation PAY.doc 4/9

- An East-West line of Prajapati Nagar Lokmanya Nagar: 18.5 km with 19 stations.

The metro is fully aerial, except 4.6 km at-grade, including the two stations of New Airport and Khapri. Two depots are planned, one in Lokmanya Nagar, at the West end of the East-West line, the other one in Khapri, at the South end of the North-South line. The two lines intersect with each other and with railways in Sitaburdi, which will become a major multimodal station.

The technical solution retained is light rail trains of three cars with a capacity of 764 passengers. Specifications are similar to those of other Indian metro projects: standard gauge track, power supply by 750V , cab signaling, electronic ticketing, etc. The stations are located approximately every 1 km. 352 000 passengers are expected to be carried daily, once the two lines are fully commissioned in December 2019. This figure corresponds to the lower range of capabilities of a metro; however, additional measures are proposed to ensure (i) the maximization of the number of passengers by an integration of transport with urban development, and by the implementation of feeder transport services to the metro and (ii) the coverage of the metro operating expenses by introducing dedicated taxes.

2.4 - Key actors and operating methods

The key actor of this project will be NMRC, a Special Purpose Vehicle (SPV) created for the purpose of implementing the project. The board of this structure is composed of five representatives of the Government of India and five representatives of state and municipal governments - three from the State of Maharashtra, one from Nagpur Municipal Corporation, and one from (municipal body with the competence for developing the outskirts of Nagpur). As of now, NMRC counts over a hundred employees. A private General Consultant is currently being recruited to assist NMRC in its objectives. The three shortlisted consortia are international railway engineering companies

Despite the decentralization efforts undertaken by the Government of India in 1994, the States and local authorities cannot borrow directly from foreign financial institutions. The primary beneficiary of the loan will be the Indian Government, through the Department of Economic Affairs (DEA), responsible for mobilizing external financing on behalf of the Ministry of Economy and Finance of India. Hence, the DEA will be signing the financing agreement (Credit Facility Agreement) with AFD. Another agreement (Project Agreement) will be signed between AFD and NMRC, to which funds will be on-lent. The transfer of funds will take place in accordance with the provision in Chapter 7 of the Indian Constitution, governing the procedures for the transfers of funds from the Central Government to the States. This transfer mechanism implies that the exchange risk is borne by the final beneficiary.

2.5 - Cost and financing

Estimated cost of the project Amount in millions € % - North-South Line 462 40 - East-West Line 463 40 - Cost revision and unexpected costs 225 20 Total 1150 100

The project cost is estimated at 1.15 billion euros for the two metro lines.

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Estimated financing plan Amount in millions € % AFD 130 11 Co-financiers 500 43 Self-financing: Government of India 194,3 17 Self-financing : Government of Maharashtra 216,9 19 Self-financing: Nagpur Improvement Trust 54,2 5 Self-financing: Nagpur Municipal Corporation 54,2 5 Remaining amount 0 Total 1150 100

The funding for the project is provided by the Government of India and the Government of the State of Maharashtra under the form of equity, subordinated debt, tax exemption and land transfer to a third of the total. 54 % of the funding is provided by the external debt, including EUR 130 million by AFD. It should be noted that municipal structures Nagpur, NMC and NIT, also participate in the financing for up to 10%, mainly through the sale of municipal land for the construction of the metro.

2.6 - Nature and justification of the financial product proposed by AFD

The proposed financial product is a loan at market conditions, with a maturity of 20 years including 5 years of grace period. In India, the financial conditions are negotiated annually; in 2016, this pricing is EURIBOR + 125 bp for sovereign loans.

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III - PROJECT IMPACT EVALUATION

3.1 - Expected effects of the project

3.1.1 - Economic impact

The metro will connect the residential areas, employment centers and industrial areas. It will serve the most dynamic central areas, many secondary and higher education centers, the stadium of the city, the railway station, the airport and the Special Economic Zone of MIHAN, contributing to the economic attractiveness of the agglomeration. The implementation of the first two metro lines will have a ripple effect on the urban economy.

3.1.2 - Environmental impact

The carbon footprint of the project reports a reduction of 50 000 teqCO2 / year. This figure is in the lower range of the carbon footprints of other public transport projects, due to the relative size of the city (compared to Indian megacities like Bangalore, for example), low culture of using public transport (9% modal shares in 2015) and the strong competition of motorcycles (65% of motorized trips) which provide an economical door-to-door mobility solution. The implementation of a low-carbon comprehensive mobility plan, planned as part of the Mobilize Your City initiative, is expected to increase the positive effects of the project on climate.

3.1.3 - Social impact

The project aims to facilitate commuting and allows equitable access to essential goods and services (jobs, schools and universities, administrative, etc.). It will significantly reduce travel time of residents and provide better travel conditions. The living conditions along the lines should be improved with a reduction of pollution (air and noise) and the development of services and shops nearby stations. The metro route covers the major residential corridors of the city, including many disadvantaged neighborhoods. A significant share of public housing programs (in-situ rehabilitation programs) for slum eradication undertaken by the municipality is located near the future metro lines. The metro will be fully accessible to people with reduced mobility, based on the State’s procurement guidelines. The fare of the metro will be progressive depending on the distance traveled, starting from Rs 8. This rate is similar to that of a bus ride and an auto- rickshaw ride, often shared between several people (Rs 60 / average trip).

3.1.4 - Institutional impact

The strong political support for the project at all levels (municipal, state, national), the recruitment of a private General Consultant with international experience, and the direct involvement of municipal structures in the governance and financing of the project, are all factors which will ensure the quality of management of this project.

3.1.5 - Long-term project impact

Heavy equipments such as metros are structuring across an agglomeration. A metro is sustainable since its operational life is expected to be over 30 years. The integrated approach to urban development and transport guarantees the sustainability of the proposed action on the long term. The capacity-building program Mobilize Your City, which will be implemented along this project, aims at strengthening the sustainability of the impacts of this project.

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3.2 - Environmental and social impact

According to the available studies, the main social risks concern the compensation of 314 properties, including 151 private, 55 government-owned and 108 leased. Additionally, 45 informal settlers will be affected by the project. The full census will be done within the framework of the Resettlement Action Plan. A matrix compensation for rights for the affected people has already been defined in accordance with the Indian Act and the recommendations of the KfW and the World Bank, which AFD follows. The acquisition of 87.4 hectares of land will be needed, which 76.4% (66.8 ha) was already completed in 2015.

The environmental impact study indicates that the impacts during the construction phase will include: diversion of traffic, risk of embrittlement of buildings near the construction site, air quality, noise, water quality, hygiene, and safety measures in the construction of bases lives. In the operational phase, the impacts will include: water quality, waste management, noise (19 km of anti-noise panels are provided). The realization of the Environmental Management Plan and detailed Resettlement Action Plan is currently ongoing and should be provided before the first disbursement of the work. NMRC has a team dedicated to environmental and social issues. In particular, two senior officials of Maharashtra State property department were recruited for land purchase. An independent expert will be hired to monitor the implementation of environmental and social measures, as well as of the gender and communication action plan proposed by NMRC.

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IV - MONITORING MEASURES – ASSESSMENT AND INDICATORS

4.1 - Monitoring – assessment indicators

The project will be monitored by AFD Regional Office in Delhi as well as AFD Headquarters during regular supervision missions in Nagpur and , where the authorities of the State of Maharashtra are established.

4.2 - Impact indicators

Aggregated indicators

Aggregated indicators Value of the indicators Unit of measure Lenght of the line 38,1 Km Number of passengers daily 352 000 Nb passengers/day Other indicators :

Reduction of CO2 emissions 50 000 teqCO2/year

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