Document of The World Bank Public Disclosure Authorized

Report No: 22169-IN Public Disclosure Authorized PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$589 MILLION EQUIVALENT

TO THE

GOVERNMENT OF INDIA

Public Disclosure Authorized FOR THE

GRAND TRUNK ROAD IMPROVEMENT PROJECT

May 30, 2001

Infrastructure Sector Unit South Asia Regional Office Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective January 18, 2001) Currency Unit = Indian Rupees (INR) INR 1.00 = US$0.022 US$1 = INR 45.42

FISCAL YEAR April 1 -- March 31

ABBREVIATIONS AND ACRONYMS

AADT - Annual Average Daily Traffic MOST - Ministry of Surface Transport ADB - Asian Development Bank NCB - National Competitive Bidding AIDS - AcquiredImmune Deficiency Syndrome NGO - Non governmental organization APL - AdaptableProgram Loan NHAI - National Highways Authorityof India BOT - Build-Operate-Transfer NHDP - National Highway Development C&AG - Controller& Auditor General of India Program CAS - Country Assistance Strategy NPV - Net Present Value CBO - CommunityBased Organization O&M - Operation and Maintenance CMU - Corridor ManagementUnit OD - Operational Directive EA - EnvironmentalAssessment PFMS - Project FinancialManagement EMP - EnvironmentalManagement Plan Systems ERR - EconomicRate of Retum PIC - Project Information Center ESMU - Environment& Social ManagementUnit PMR - Project ManagementReport GOI - Government of India PMU - Project ManagementUnit GTRIP - Grand Trunk Road ImprovementProject PPP - Public-PrivatePartnership HDM-III- Highway Design and Maintenance PSD - Private Sector Development Standards Model - Version III PWD - Public Works Departments HIV - Human ImmunodeficiencyVirus RAP - ResettlementAction Plan HO - Head Office R&R - Resettlementand Rehabilitation JBIC - Japanese Bank for International ROW - Right-of-Way Cooperation SC - SupervisionConsultants ICB - InternationalCompetitive Bidding SIL - Specific InvestmentLoan ICR - ImplementationCompletion Report SOE - Statement of Expenditure IL&FS - InfrastructureLeasing & Financial TN\HP- Third National Highway Project Services TTZ - The Taj Trapezium Zone MOEF - Ministry of Environment& Forestry UP - Uttar Pradesh MORTH- Ministry of Road Transport & Highways WTCP - Western Transport Corridor Project

Vice President: Mieko Nishimizu Country Manager/Director: Edwin R. Lim Sector Manager/Director: Vincent Gouarne Task Team Leader/Task Manager: Zhi Liu INDIA GRANDTRUNK ROAD IMPROVEMENTPROJECT

CONTENTS

A. Project Development Objective Page

1. Project development objective 2 2. Key performance indicators 2

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2 2. Main sector issues and Government strategy 2 3. Sector issues to be addressed by the project and strategic choices 5

C. Project Description Summary

1. Project components 6 2. Key policy and institutional reforms supported by the project 9 3. Benefits and target population 10 4. Institutional and implementation arrangements 10

D. Project Rationale

1. Project alternatives considered and reasons for rejection 11 2. Major related projects financed by the Bank and other development agencies 12 3. Lessons learned and reflected in proposed project design 14 4. Indications of borrower conmnitment and ownership 14 5. Value added of Bank support in this project 15

E. Summary Project Analysis

1. Economic 15 2. Financial 16 3. Technical 17 4. Institutional 17 5. Environmental I8 6. Social 22 7. Safeguard Policies 27

F. Sustainability and Risks

1. Sustainability 27 2. Critical risks 28 3. Possible controversial aspects 28 G. Main Loan Conditions

1. Effectiveness Condition 29 2. Other 29

H. Readiness for Implementation 29

I. Compliance with Bank Policies 30

Annexes

Annex 1: Project Design Summary 31 Annex 2: Detailed Project Description 35 Annex 3: Estimated Project Costs 38 Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 39 Annex 5: Financial Summary for Revenue-Eaming Project Entities, or 44 Financial Summary Annex 6: Procurement and Disbursement Arrangements 45 Annex 7: Project Processing Schedule 59 Annex 8: Documents in the Project File 60 Annex 9: Statement of Loans and Credits 62 Annex 10: Country at a Glance 66 Annex 11: Environment & Social Assessment, EMP, and RAP 68

MAP(S) IBRD 31387 INDIA Grand Trunk Road Improvement Project Project Appraisal Document

South Asia Regional Office SASIN Date: May 30, 2001 Team Leader: Zhi Liu Country Manager/Director: Edwin Lim Sector Manager/Director: Vincent Gouame Project ID: P071244 Sector(s): BI - Institutional Development, DV - Privatization, TH - Highways Lending Instrument: Specific Investment Loan (SIL) Theme(s): Public Sector; Private Sector; Transport Poverty Targeted Intervention: N Program FinancingData [X] Loan [ ] Credit [ Grant [1 Guarantee [] Other: For Loans/Credits/Others: Amount (US$m): 589.00 ProposedTerms (IBRD):Variable Spread & Rate Single CurrencyLoan (VSCL) Grace period (years):5 Years to maturity:20 Commitmentfee: 0.75% Front end fee on Bank loan: 1.00% Financing Plan (US$m): Source Local Foreign Total BORROWER 161.20 5.80 167.00 IBRD 377.60 211.40 589.00

Total: 538.80 217.20 756.00 Borrower: GOVERNMENT OF INDIA Responsibleagency: NATIONAL HIGHWAYS AUTHORITY OF INDIA NHAI Address: National Highway Authority of India, 1, Eastem Avenue, Maharani Bagh, New Delhi, 110065 Contact Person: Subhash Patel, Chief General Manager (World Bank Projects) Tel: 91-11-682-4974 Fax: 91-11-692-4383 Email: [email protected]

Estimateddisbursements ( Bank FY/US$m): FY 2002 2003 2004 2005 2006 2007 2008 Annual 88.00 147.00 177.00 118.00 59.00 Cumulative 88.00 235.00 412.00 530.00 589.00 Project implementationperiod: Five years Expectedeffectiveness date: 09/30/2001 Expectedclosing date: 12/31/2006 00SPAD FaV S Ma . 25 A. Project DevelopmentObjective

1. Project development objective: (see Annex 1) The Bank adopts a programmatic approach to support the Government of India's (GOI) National Highway Development Program (NHDP) through a series of loans. The Grand Trunk Road Improvement Project (GTRIP) is the second project in the series, following the Third National Highway Project (TNHP) which was approved by the Board in June 2000 and is under implementation. Thus the development objectives of the project are consistent with those of TNHP: (a) to reduce transport constraints on national economic activity; and (b) to improve institutional capabilities to manage road programs, assets, and services on a more commercial basis.

2. Key performanceindicators: (see Annex 1) (a) Vehicle travel time along the entire national highway corridor between Delhi and Calcutta reduced by 25-30% by end of project (EOP); (b) truck operating costs reduced by at least 10% by EOP; (c) incidence of road deaths reduced by 20% on project roads by EOP; and (d) about 1,200 km of national highways maintained under contract with private sector and managed by the Corridor Management Units (CMU) by EOP.

B. StrategicContext 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Documentnumber: R2001-0037/1[IFC/R2001-0037/11 Date of latest CAS discussion: 4/5/2001

The CAS identifies highway infrastructure bottlenecks as one of the major constraints to poverty reduction and private sector-led growth. The GTRIP supports the CAS sector goal of reducing highway infrastructure bottlenecks. The project is also designed to contribute to the two important areas emphasized by the CAS: (a) improving government capability and effectiveness to deliver core public services that are vital for economic growth and poverty reduction; and (b) enabling the environment for private sector investments in infrastructure. The major project works will be implemented in the states of Bihar, Jharkhand, and Uttar Pradesh, which are among the less developed states in India. The project is expected to improve the ability of these states to participate in the economic development and trade which is taking place to a larger extent elsewhere in India.

2. Main sectorissues and Governmentstrategy:

The national highway network has a total length of 57,700 km, which accounts for about 1.7 percent of the total road network of 3.3 million km but carries over 40% of the road traffic. Over 95% of the national highway network are two-lane roads or narrower, and a significant proportion is in poor surface condition. This results from years of inadequate allocation of resources to the core highway system and poor management of transport infrastructure by the public sector. During the market liberalization in the 1990s, steady economic growth has driven up the demand for improved road transport; and traffic on the national highways has been

-2 - growing at about 8-10% per annum. As a result, the trunk national highways are increasingly congested.

The level of service is further worsened by the mixed traffic of fast and slow vehicles, highly congested and unsafe urban crossings, and state border inspections/check points (for the purposes of tax collection and commodity permits) that often hold up truck traffic for many hours. It takes four to five days for a truck to go one way between Delhi and Calcutta (about 1,300 km). Moreover, the poor driving condition in mixed traffic on the two-lane national highways is a major contributing factor to road traffic accidents. India is among the nations with the highest road accident rate per vehicle, and 38% of the road accidents occur on national highways. Where both vehicle insurance system and health care are less developed, the economic and health impacts of traffic accidents on poor households are especially severe.

Improving the level of service on the national highway corridors requires both capacity investment and traffic efficiency/safety enhancement. The financial requirements for increasing the trunk highway capacity through 4-laning, 6-laning, and expressway construction are expected to be beyond the level that the public sector alone will be able to meet in the near future. However, private sector participation in road financing is just starting, and is facing a number of institutional and market constraints. For example, institutional capacity needs to be built up for the preparation, implementation, and monitoring of highway concession projects. The domestic financial market is yet to develop appropriate long-term financial instruments needed for private investment in road infrastructure. Few projects are financially viable for a stand-alone private investment, and most projects would require Public-Private Partnership (PPP) to become viable. However, various modalities of PPP are still under development and need to be tested. All these constraints must be overcome before private investment can be mobilized to provide significant additionality to public investment.

National highway development in India is also heavily constrained by the weak institutional capacity and lengthy procedures to address project-related environmental and social issues. While relevant laws and government institutions are in place to deal with the issues, technical capabilities are inadequate, and coordination is weak among the central and state administrative jurisdictions. Moreover, there is a lack of adequate mechanism for the consultation with and participation of the project affected people, stakeholders, and non-governmental organizations (NGOs) in the process. As many displaced households are of low income, their relocation and rehabilitation need to be handled more carefully. There is a need for social and environmental capacity building to ensure the speedy implementation of the NHDP.

To summarize, the following main issues are recognized in the national highway sector: (a) serious road capacity constraint on the national highway network; (b) worsening road safety amid growing motorization; (c) poor management of road infrastructure services by the public sector; (d) weak enabling environment for private sector participation in road financing; and (e) weak institutional capacity to address highway project related social and environmental issues.

Government strategy. The GOI recognizes that the poor performance of the national highway system has been a major drag on the growth of national economy and is determined to upgrade

-3 - the system through its NHDP. The program was based on the govemment strategy outlined in the 1996 India Infrastructure Report. Covering a network of 13,000km, the program includes the four-laning of a 6,000 km "Golden Quadrilateral" (linking Delhi, Calcutta, Chennai and Mumbai), the North-South and East-West corridors, and the trunk roads to key ports. It also includes the planning and construction of expressways where feasible. Total cost for the program is estimated to be US$12 billion over eight years, and funding sources include govemrnmentgrants, fuel levies, tolls, bonds, private investments, and loans from international development banks, including the on-going TNHP funded by the World Bank. A cess of Rs. 1 per liter on petrol and diesel was introduced by GOI in 1999, and a substantial portion (about Rs. 2000 crores or equivalent of US$430 million a year) of the cess revenues is earmarked for national highway development, maintenance, and operation. Moreover, GOI has made notable efforts to improve the enabling environment for private sector participation in national highway financing. The efforts include the development of policy guidelines and a legal framework for private investments in national highway projects. The National Highway Act was amended to permit tolls on national highways and to provide financial incentives such as public-private partnership to encourage private investments on toll roads. According to the policy guideline, the government may provide financial support up to 40% of the project cost to enhance the viability of the private investment projects, and the amount of support would be determined through competitive bidding. A number of projects have been identified for private investments through BOT schemes, and concessions have been signed for nearly 20 bridges and short bypass projects, although these projects are mostly small scale (less than 20 km each).

Institutional reform to improve the effectiveness of public road agencies is also an integral part of the government strategy. The Ministry of Road Transport & Highways (MORTH, formerly the Ministry of Surface Transport) had long been responsible for the development and management of the national highways. With close oversight, MORTH delegated considerable responsibilities to the national highway branches in the state Public Works Departments (PWDs). Under the National Highways Authority of India Act of 1988, GOI established the National Highways Authority of India (NHAI) to take charge of major works programs on the national highway network. The Act requires NHAI to act on business principles as far as possible in the discharge of its functions. The agency has maintained a lean organization by outsourcing most of its activities to the private sector. It has now assumed full responsibility for the implementation of NHDP, including the extemally-aided projects financed by the Asian Development Bank (ADB), the Japanese Bank for International Cooperation (JBIC) and the World Bank. As part of this program, NHAI has taken significant steps to develop and strengthen its institutional capacity for the development, maintenance, and operation of the national highway system in response to the needs of road users and other stakeholders. The institutional development being undertaken by NHAI is fostering a cultural change in the Indian road sector of viewing roads as a service instead of merely a physical infrastructure. However, NHAI is still in the early stages of reforms in accounting policies and strengthening of its financial management systems, in its move towards being an effective agency managing its resources on business principles. In this regard, actions are being planned to address several policy and process related issues during implementation of the GTRIP and the TNHP. NHAI is also a designated implementing agency for the preparatory work and monitoring the implementation of private investment projects on the national highway network. Recently the agency has taken responsibility for the maintenance and operation of 6,000

-4 - km Golden Quadrilateral, and is exploring suitable maintenance contracts with the private sector, partly through the implementation of the CMU concept under the TNHP.

3. Sector issues to be addressedby the projectand strategicchoices:

The GTRIP will help address all five main sector issues discussed above by: (a) adding much needed capacity to the heavily congested part of the national highway network; (b) reducing the risks of road accidents and improving traffic efficiency; (c) promoting private sector participation in road financing; and (d) enhancing institutional capacity for the effective delivery and management of national highway assets and services. This broad scope of the project is desired due to the expected great impact, and also realistic as the project will complement and consolidate the similar effort being made under the on-going TNHP. TNHP comprises three major components: (a) upgrading of 475 km national highway; (b) corridor management and road safety works; and (c) institutional strengthening and training. It mainly aims to improve NHAI's capacity in the areas of project implementation, accountability, strategic planning, and asset management. The GTRIP will take a significant step further along the same institutional strengthening direction set forth by the TNHP, especially with regard to private sector participation and road safety.

Due to the programmatic approach, the GTRIP broadly follows the strategic choices made under the TNHP. In addition, a strategic choice is made to support private sector participation in road financing.

Institution choice. The GTRIP fully supports the GOI's strategy of shifting responsibility for the NHDP from MORTH to NHAI. Both the TNHP and GTRIP, as well as ADB's proposed Western Transport Corridor Project (WTCP), support NHAI's institutional development towards a non-bureaucratic agency that manages national highways like a business. In addition to the effort to maintain a lean organization through outsourcing most of its activities to the private sector, NHAI is exploring various financial sources outside the central government budget, and is taking initial step to include a national highway user group representative as a member of its Board. Moreover, NHAI has demonstrated strong commitment through satisfactory progress in the implementation of the TNHP and the preparation of the GTRIP. The institutional strengthening actions to be supported under the GTRIP are defined in close coordination with the TNHP and WTCP under the institutional development strategic framework agreed by NHAI, ADB, and the Bank.

Public or private finance. Private investments in the road sector have so far been very limited, and there are still many institutional and market constraints to overcome before private sector is able to play a greater role in road financing. GOI is actively pursuing various options for attracting private sector funding. The Bank has been providing assistance in this aspect through an on-going Infrastructure Leasing & Financial Services (IL&FS) Project. NHAI is actively exploring and experimenting various options to encourage private investments on national highways. Nevertheless, in the short to medium term, before the enabling environment is matured for substantial private sector financing, a large part of India's road infrastructure will need to be provided and managed by the public sector. This project focuses on the urgently needed public

- 5- investments, while supporting NHAI's efforts to promote private sector participation broadly in road financing, operation and maintenance, construction and engineering services. A private sector participation component is defined to help NHAI test a modality of PPP through a relatively large pilot BOT project. This pilot project is timely as the private investment in road infrastructure needs to be stimulated by successful examples and demonstration of government commitment.

Corridor choice. There is coordination among the World Bank, ADB, and JBIC in terms of assistance to the improvements of priority corridors in the NHDP. The major works of this project and the on-going TNHP are on National Highway 2 (NH-2, also popularly known as Grand Trunk Road) between Delhi and Calcutta. Interventions focusing on one particular national highway corridor have an advantage for effectively addressing: (a) project related environmental and social issues; and (b) corridor transport efficiency issues through a combination of capacity investment, corridor management, and reduction of traffic delays caused by border check posts. Moreover, the project will finance civil works associated with road safety, Corridor Management Units, and public-private partnership on other selected national highways. These civil works are proposed as part of the support to NHAI's institutional capacity building.

C. Project DescriptionSummary 1. Projectcomponents (see Annex 2 for a detaileddescription and Annex 3 for a detailed cost breakdown):

Highway upgrading: The national highway sections proposed for upgrading under the GTRIP, totaling 420 kin, are all located along the 1,000 km of NH-2 from Agra in Uttar Pradesh (UP) to Barwa Adda in Jharkhand. The entire stretch is divided into 16 construction sections. Eight sections were chosen for financing under the TNHP on the basis of implementation readiness. The sections proposed by NHAI for financing under the GTRIP are all remaining sections except one (Allahabad section) which will be considered for financing under the Bank's next national highway project. The upgrading works mainly involve the widening of existing two lanes to a 4-lane divided carriageways with service roads, bypasses, and other traffic separation measures where required. In one section between Agra and Bhognipur, widening to 6 lanes is proposed for accommodating the heavy traffic. The project also makes a provision for low-cost interim traffic management measures, as necessary, to deal with the short-term congestion in the existing national highway stretch passing through the city of Allahabad.

Road safety and corridor management works: This component includes the civil works associated with the support to NHAI's institutional capacity building in the areas of road safety and corridor management. It finances the improvement of hazardous locations on selected national highways, and the implementation of civil works associated with the new Corridor Management Units to be established under the project.

- 6 - Public-private partnership in road concession: In collaboration with similar and related efforts by ADB, this component will assist NHAI to undertake detailed preparation and implementation of a pilot project to upgrade, under an innovative public-private partnership scheme, a selected national highway section (over 60 kin) outside the NH-2 corridor. One candidate section would be the stretch between Tindivanam and Tiruchirapalli on the NH-45 within Tamil Nadu. The entire stretch is 200 km long, and is proposed to be upgraded from 2 lanes to 4 lanes. The project is expected to require NHAI financial support (estimated to be around US$25 million) to enhance its financial viability for private sector participation. It is proposed that a BOT scheme be awarded based on competitive bidding on the required NHAI share of public-private investment, under the fixed toll rate and fixed concession period. The feasibility study, detailed engineering design, and draft Environmental Assessment (EA) and Resettlement Action Plan (RAP) for the stretch have been completed with funding from the Bank's Second National Highway Project. The component will fund consultant service for the preparation of concession (including legal advisory, preparation of bid documents, and evaluation of bids) and a portion of the bidden government (NHAI) financial support for the project or another more suitable candidate section.

Institutional strengthening: The component builds on the similar component under the TNHP, and is designed in a close coordination with ADB's WTCP (which has a similar implementation timetable to the current project) under the institutional development strategic framework agreed among NHAI, ADB, and the Bank. A joint assistance strategy for the India's road sector between the Bank and ADB has recently been developed in consultation with MORTH and NHAI to help coordinate the assistance program of the Bank and ADB and policy dialogue in the national highways and state highways subsectors. The TNHP focuses mainly on technical assistance to NHAI to develop and implement the institutional strengthening program, setting up of a road information system, establishment of two pilot CMUs, and implementation of a program of minor road improvements to increase operational efficiency and reduce accidents. The GTRIP will enhance the capacity of MORTH and NHAI to improve road safety and traffic efficiency, expand its program of corridor management, strengthen the newly created social and environmental unit, strengthen the public-private partnership for road financing, and develop a computerized national highway asset inventory. Specifically, the component will include the following sub-components: (a) NHAI's social and environmental capacity building, including (i) a poverty and highway development study that would help understand the poverty dimension of the social issues involved in highway development, and (ii) consultant services for training and streamlining monitoring procedures; (b) training of trainers and dissemination of road safety manual; (c) public road safety education and campaign through mass media; (d) implementation of road safety action plan to be formulated under the TNHP; (e) computerizing the Golden Quadrilateral national highway asset inventory; (f) CMUs related consultant services; (g) a cross-state border road efficiency study; and (h) provision for subsequent project preparation and sector studies, including expressway project preparation (the stretch from Vadodara to Mumbai is proposed as one of the candidates for detailed project study).

-7- Indicative Bank- % of Component Sector Costs % of financing Bank- _ _M_ L Total - $M ficing 1. Highway upgrading of 420 km of Highways 685.30 90.6 527.40 89.5 NH-2 to four or six lanes including construction, supervision, land acquisition and resettlement, and environmental management. 2. Road safety and corridor Highways 20.20 2.7 16.20 2.8 management works. 3. Public-private partnership in road PSI 25.60 3.4 20.60 3.5 concession, including technical assistance, funding NHAI's share of public-private financing of pilot BOT project on NH-45. 4. Institutional strengthening, including Institutional 19.00 2.5 18.90 3.2 (a) NHAI's social and environmental Development capacity building; (b) training of trainers and dissemination of road safety manual; (c) public road safety education and campaign through mass media; (d) implementation of road safety action plan; (e) computerizing the Golden Quadrilateral national highway asset inventory; (f) CMUs consultant service; (g) a cross-state border road efficiency study; and (h) project preparation and sector studies.

Total Project Costs 750.10 99.2 583.10 99.0 Front-end fee 5.90 0.8 5.90 1.0 Total Financing Required 756.00 100.0 589.00 100.0

-8 - 2. Key policy and institutional reforms supported by the project:

The GTRIP seeks to support NHAI's long term transition from an agency focusing on the delivery of national highway infrastructure to the one that will effectively manage the provision, maintenance and operation of national highway assets on business principles. The recently completed institutional development study proposed an Institutional Development Strategy and a range of actions to improve NHAI efficiency and effectiveness. The TNHP will finance the implementation of immediate and short-term actions, which mainly focus on NHAI's capacity in project implementation, highway operation and maintenance, and on MORTH's capacity in overall planning, policy and regulations. The GTRIP focuses on institutional strengthening actions that would expand or complement the similar actions supported by TNHP. The main policies and institutional reforms supported under the TNHP and GTRIP as well as ADB's WTCP include: (a) keeping the NHAI lean by outsourcing to the private sector most of NHAI's functions related to design, construction, maintenance, operation, and collection of road network infornation and condition data; (b) making NHAI more responsive and accountable to users and stakeholders; (c) making NHAI more autonomous and financially independent; and (d) leveraging NHAI's limited resources with private financing to promote public-private partnerships in financing roads along viable corridors.

Moreover, the GTRIP will support two policy oriented studies: (i) a study on the poverty impact of highway development that will lay the ground work for measuring the impact of highway development on poverty reduction and on other social dimensions, so as to enhance NHAI's capacity to address highway project related poverty issues; and (ii) a national highway transport efficiency study that aims at consensus building for removing the freight traffic delays caused by cross-state border inspection and taxation. As part of the agreed institutional strengthening action plan between the Bank and ADB, ADB will support four key studies under the WTCP, namely (i) study of bond issues by NHAI and lessons learned; (ii) securitization study and development of an action plan for NHAI; (iii) a study to enhance NHAI's treasury functions; and (iv) a study of toll systems.

Road safety is another key policy area for intervention. Although both the Bank-financed Second National Highway Project and TNHP have a road safety component, road safety is still very much a "green" area for urgent public action, largely due to the rapidly growing magnitude of the problem. The GTRIP will support the implementation of a comprehensive road safety action plan, training, public education and campaign, as well as safety audit and hazardous location improvement works.

-9- 3. Benefitsand targetpopulation:

The major benefits include: (a) a reduction in transport costs, which will directly lower the economic costs of goods and services, widen markets, and promote regional trade and private business growth; (b) a reduction in road accidents and improved ability to alleviate the impact of traffic accidents, which will have significant implication to public health improvement and poverty reduction; (c) improved efficiencies in the utilization of public resources in the form of higher level of output per unit agency cost; and (d) greater participation of private sector in the provision of highway infrastructure and services.

The project will directly benefit the users of the national highways, roadside communities and businesses, and the cities, towns and rural areas directly served by the project roads. These benefits are mostly in the forn of (a) increased accessibility to markets, resources, jobs, education, and health services, (b) improved security against economic shocks through access to alternative jobs and to emergency services, and (c) more job opportunities from the civil works during the project implementation and maintenance. These benefits will be measured through a project component--a study of the poverty impact of highway development--which will collect baseline and follow-up data for monitoring socioeconomic impacts, especially poverty impacts.

4. Institutionaland implementationarrangements:

The project is prepared and will be implemented by NHAI with extensive outsourcing to the private sector and close coordination with the states of UP, Bihar, and Jharkhand. Within NHAI, implementation of the major works components is under the direct responsibility of a Chief General Manager, supported by 5 Project Directors on site, each in charge of one of the 5 construction packages. High-level State Project Coordinating Committees have been established in each of the three states to facilitate land acquisition, resettlement, utility shifting, forestry and other issues which may require coordination between NHAI and the states. Responsibility for land acquisition and resettlement and financing of all project-related costs will remain with NHAI. NHAI has taken on state PWD engineers on deputation as well as specialists in environment, land acquisition, social and financial management to assist with project implementation.

The road safety component will involve NHAI, MORTH and the states where the project roads are located. While MORTH will be responsible for coordinating the implementation of the component, NHAI will be responsible for the procurement activities of the component. The cross-state border road efficiency study will be conducted under the general guidance of MORTH, and NHAI will be responsible for the procurement of consultant services.

Accounting and Internal Control Arrangements: NHAI has decentralized accounting arrangements. Its on site project management teams prepare monthly trial balances which are sent to the headquarters. All projects are supervised by independent professional construction supervision consultants. The contractor's bills are checked by the consultants in addition to ensuring quality control. Bills are also checked by NHAI technical and accounts staff before making payments to contractors. The process of development of the computerized integrated financial management system initiated for TNHP, being implemented by NHAI, is now in

- 10- advanced stages and the system and its scope has now been widened to cover all NHAI activities and will not be limited to project related accounting. NHAI has a strong team of finance professionals who will coordinate the consolidation and subrnission of reimbursement claims for the project. The internal audit function will be re-established and will assist management in improving financial management functions. They will also assist NHAI to update the manual on operational accounting policies and procedures.

D. Project Rationale 1. Projectalternatives considered and reasonsfor rejection:

Some of the project alternatives considered were discussed in Section B-3.

Specific Investment Loan (SIL) vs. Adaptable Program Loan (APL). SIL is considered appropriate for this project, as the major physical investment of the project and its implementation timetable are clearly defined by the client. APL was considered as an alternative to support GOI's NHDP, but it was rejected on the ground that SIL is a better, more focused alternative for addressing highway development related resettlement and relocation issues in India at this stage. Moreover, the Bank's assistance to GOI's NHDP adopts a programmatic approach through a series of SILs. The long term commitment of this approach can provide the leverage and time frame needed to build step-by-step a program with stronger policy content in the sector. The project is designed to further enhance the institutional policy objectives of the TNHP and strengthen NHAI's planning, implementation and management capacity which at present would not be considered adequate for undertaking APLs. Similarly, subsequent national highway projects could be built upon the achievement of the objecti-vesof this project.

4-Laning vs. expressway. GOI recognizes that the development of an expressway network is necessary in the medium term for supporting trade and economic growth. However, land acquisition for expressway construction is extremely difficult and is expected to be very time-consuming. Four-laning mainly within the existing right-of-way is thus considered to be a reasonable compromise for meeting the urgent need for highway capacity, and is found to be economically attractive. Moreover, four-laning is considered to be necessary for reducing the friction between fast and slow vehicles. Expressway development requires careful planning and strong institutional capacity to address environmental and social issues. Enhancing NHAI's capabilities in these areas is supported by the institutional strengthening component of this project.

National highways vs. state highways. Additional capacity is required for both national highway and state highway networks. This project focuses on the national highways in parallel with the Bank's state highway program in India. This project is also considered to be a timely vehicle to help the central government implement urgent actions for road safety. Given the magnitude of the road safety issues in India, public actions are required at both national and state levels, but the central govermment road agency should act as a national champion for road safety initiatives.

-11 Upgrading vs. maintenance. The national highway services can be improved through capacity upgrading, better maintenance, or a combination of both. This project focuses on upgrading works because improving road surface condition through clearance of maintenance backlog on the core national highways would not be sufficient for achieving the level of service required by the current and future levels of traffic. However, the project addresses the highway maintenance issue through support to the Corridor Management Units which will test the alternative maintenance contracts with the private sector. Moreover, the institutional development framework agreed among NHAI, ADB, and the Bank sets forth a market-oriented approach for improving the maintenance practice, mainly through performance-based O&M contracts with the private sector.

2. Major related projectsfinanced by the Bank and/orother developmentagencies (completed, ongoingand planned). LatestSupervision SectorIssue j Project (PSR)Ratings ______Ba k f n n ed p o e t Implementation Development Bank-financed Progress(IP) Objective (DO) COMPLETEDor ONGOING - Construction/rehabilitationof rural Bihar Rural Roads Project U U roads (Cr.1072-IN) - Construction/rehabilitationof rural Gujarat Rural Roads Project S S roads (Cr.1757-IN) - Capacityexpansion of national First National Highways U U highway.Four laning and strengthening Project(Ln.2534-IN) in four states - Capacityexpansion of state roads and States' Road Project U U institutionaldevelopment of state road (Ln.2994-IN,Cr.1959-IN) agencies - Capacityexpansion of national SecondNational Highways S S highwaysand institutional Project(Ln.3470, Cr.2365-IN), strengtheningof MORTH and NHAI and Third NationalHighways Project(Ln.4559-IN) -Enhancementof institutionalcapacity State Roads Infrastructure S HS to prepare projects at the state-level DevelopmentTechnical Assistance(Ln.4114-lN) -Capacityexpansion, maintenance and Andhra Pradesh State Highway S HS institutionaldevelopment of state road Project(Ln.4192-lN) agency Gujarat State HighwayProject S S (Ln 4577-IN)

KarnatakaState Highways ImprovementProject (Ln 4606-rN)

- 12 - - Wideningand strengtheningof two InfrastructureLeasing & S S state roads in Gujarat in a commercial FinancialServices (Ln format: Vadodara- Halol SH and 3992-IN;Cr. 2838-IN) Ahmedabad - Mahesana SH

PLANNED ProposedKerala, Uttar - Capacityexpansion and maintenance Pradesh,Mizoram, Tamil of state roads and institutional Nadu, Orissa and Rajasthan developmentof stateroad agencies State Highwaysprojects (FY2001-03)

- Capacityexpansion of national Fifth NationalHighway Project highwaysand institutionalstrengthening (FY2003) of NHAI/MORTH Otherdevelopment agencies ONGOING ADB - Capacityexpansion of national First HighwayProject, Second highwaysand institutionalstrengthening Highway Project, National of NHAI/MORTH HighwayProject, and Surat-ManorTollway Project. -JapaneseBank for International YamunaBridge Project, Cooperation(formerly OECF) - National HighwayProject. Capacityexpansion of national highwaysand institutionalstrengthening of NHAI/MORTH - ADB - TA for preparation of national Western National Highway highwayproject Corridor Study 1998/99 - ADB - TA for preparation of West Bengal, North-South investmentplan and strategy for the CorridorDevelopment, 1998/99 north-southcorridor development in West Bengal

PLANNED ADB - Capacityexpansion of national ProposedWestern Transport highwaysand institutionalstrengthening Corridor Project, 2001, of NHAI/MORTH NationalHighway Corridor I & lI, 2002 and 2003 ADB - Capacityexpansion of state ProposedMadhya Pradesh highwaysand institutionalstrengthening State HighwayProject, 2002 of state road agency

IP/DORatings: HS (HighlySatisfactory), S (Satisfactory),U (Unsatisfactory),HU (HighlyUnsatisfactory)

- 13 - 3. Lessons learned and reflected in the project design:

To varying degrees all projects initiated before the mid-i 990s have suffered from (a) poor quality at entry and, in one case, long delay for start-up; (b) weak institutional capacities for project management, and contract and consultant services administration; (c) inexperience in Bank's procurement methods; (d) inadequate inter-agency coordination; (e) inordinate delays in handing over project sites; (f) weak contractor capabilities and inadequate consultant capacity; (g) excessive delays due to weak dispute resolution and decision mechanisms and also due to belated payments to contractors; and (h) lack of awareness and low degree of acceptance towards integration of environment and social issues in technical design.

A great deal of the above issues have been addressed during the preparation and implementation of the TNHP. For the current project, key aspects of the preparation process have included: * Substantial attention to the implementation progress for TNHP.

* Much stronger engineering preparation using international consultants, larger construction packages and more thorough contractor prequalification. Very high degree of readiness for implementation would be achieved prior to loan approval, with all engineering designs completed and bids invited.

* Much stronger processes for environmental assessment, stakeholder consultation, land acquisition and resettlement, and government clearances. Full site readiness of substantial reaches of each package (sections to be handed over to the contractor on mobilization) will be a condition of contract award.

* Support and facilitate NHAI's effort to attract international road construction contractors to work in India in order to promote competition and technological improvement of India's construction industry.

4. Indicationsof borrowercommitment and ownership:

The GTRIP and TNHP support GOI's NHDP, which was proposed by the Prime Minister's Taskforce in 1998, and is GOI's top priority infrastructure investment program. The Prime Minister took a comprehensive review of the program on May 26, 2000. NHAI has demonstrated strong borrower commitment and ownership through: (a) the successful preparation of the TNHP and GTRIP; (b) the satisfactory progress made so far in the implementation of TNHP; and (c) the agency's performance in the improvement of institutional capabilities during the last few years. The TNHP became effective in October 2000. Since then, the agency has made significant progress in the procurement of civil works and consultant services, and in the institutional arrangement for implementing the project-related safeguard policies. Civil works contracts for over 70% of the total scope of the project have been awarded and mobilized. All these experiences will be directly beneficial to the implementation of the GTRIP. NHAI has also made significant effort in the preparation of the GTRIP, especially the social and environmental safeguard measures.

- 14 - 5. Value addedof Bank support in this project:

The most important contribution of the Bank in this sector is the knowledge of effective institutions, policies, financing and implementation mechanisms in other parts of the world, and experience with analysis of economic, social, environmental and poverty impacts of project. This project focuses on the strengths and weaknesses of current practices in the sector, and will mobilize technical expertise in examining and experimenting new approaches. Many of the procedures which have been put in place during the preparation of TNHP and the current project are now being adopted by NHAI for all of its project preparation activities, including procurement, engineering, environment, land acquisition, resettlement, construction supervision and dispute resolution practices.

The Bank has been supporting NHAI's institutional development, and more broadly, facilitating the exchange of information between central government, states and the private sector. Continued involvement of the Bank will facilitate institutional reforms in sound business management, accountability and responsiveness to external stakeholders (including prompt and accurate financial reporting consistent with national accounting standards), improved management of road assets and traffic flow efficiency and safety, and better planning, policy and regulatory capacity. The Bank is a key partner of the Global Road Safety Partnership, and has comparative advantage in providing technical assistance for road safety.

The Bank's financial participation is also important to the implementation of India's NHDP, before a more sustainable financial mechanism is developed for national highway development and maintenance. The project will not only provide needed funding, but also help mobilize other financial sources through support to the public-private partnership.

E. Summary Project Analysis (Detailedassessments are in the projectfile, see Annex 8) 1. Economic(see Annex 4): * Cost benefit NPVUS$908 million;ERR = 25.9 % (see Annex 4) O Costeffectiveness O Other(specify)

The highway upgrading component including contingencies represents 90% of the total project cost. Benefits were determined from savings in road user costs due to improved pavement condition, reduced traffic congestion, and increased separation of fast and slow moving traffic, and from savings in future maintenance costs arising from timely rehabilitation. The economic analysis was based on the well-established Highway Design and Maintenance Standards Model (HDM-III) developed by the Bank. Traffic volumes on the 7 selected packages ranged from 6,000 to 21,000 vehicles per day, including 65% to 90% trucks and buses. Various investment alternatives were examined in terms of number of lanes, pavement type and strength, service roads and bypasses. For the selected alternatives, the analysis showed Economic Rates of Return (ERR) of 16.7% to 45.3% with an overall rate of return of 25.9% and Net Present Value of US$ 908 million. If benefits are reduced by 20% and costs increased by 20%, the overall rate of return

- 15- is 19.3%. A switching values analysis indicates that the cost of highway upgrading works would have to increase by 175% or the benefits to drop by 64% before the NPV would fall to zero.

2. Financial (see Annex 4 and Annex5): NPV=JUS$million; FRR = % (see Annex4) NHDP is the major expenditure program for the national highways for the next few years till 2008. It includes the upgrading of 13,000 km. core national highways and its total costs are estimated to be US$12 billion. NHAI is entrusted to deliver the program. NHAI was established under the 1988 National Highways Authority of India Act, and became operational in 1995. The Act requires NHAI to act on business principles in the discharge of its functions. The sources of NHAI funding include normal government budget, fuel levies (cess), bonds, tolls, and loans. Levies of Rs. 1 per liter on petrol and diesel are collected under the Central Road Fund which was created through the Parliament legislation. A fixed share of the cess revenues is allocated to NHAI. It amounts to Rs 2,000 crores (or equivalent of US$ 435 million) in 2000/01, and is expected to increase with total cess revenues. For externally financed projects, NHAI will get 80% of the external assistance as grant from GOI, and 20% as loan that NHAI will be required to pay back to GOI, presumably through incomes generated from tolls, agency fee, etc. Moreover, all counterpart fund will come from NHAI's fund (mainly the cess).

NHAI currently has few independent assets and little independent revenues. There will be a financial gap between NHAI's current fund and the NHDP financial requirement. The gap is expected to be closed by borrowing, tolls, and private investment. The key is to develop a sustainable national highway financial mechanism. GOI is taking initial steps in this direction. For example, a cess of Rs. 1 per liter on petrol and diesel was introduced by GOI in 1999. The revenues are earmarked as dedicated fund for the development and maintenance of national, state, and rural road infrastructure. A substantial portion of the revenues is allocated to NHAI for national highway development. With the assistance from ADB, NHAI is exploring various financial instruments (including bond issues, securitization, and toll systems) that would enable the agency to be more financially independent. A Rs 500 crores (or equivalent of US$ 110 million) National Highway Bond was recently issued. NHAI is also examining a market-oriented approach for funding road maintenance, possibly through performance-based O&M contracts with the private sector.

The substantial investment to be supported under the project is unlikely to crowd-out private fund for road investment, as private road financing is still at the experimental stage, and would not be mobilized fast enough to fund the urgently needed highway capacity. The project supports a public-private partnership for a BOT project, which is designed to attract additional resources from the private sector. It is a pilot project expected to provide demonstration effect that would stimulate greater private sector financing.

Fiscal Impact: The fiscal impact of the project is expected to be minimal, as GOI has made budget commitment to the NHDP and necessary policy provision to NHAI to tap other financial sources. Moreover, the budget commitment to the maintenance and development of the national highways is made in

- 16 - a fixed portion of the total cess revenues which are expected to grow with increasing motorization. The current cess revenues allocated to the entire national highway system (under MORTH and NHAI) amount to US$750 million a year.

3. Technical: Capacity and safety of the project roads will be substantially improved through widening from two lanes to divided carriageways with at least four lanes and paved shoulders. Bypasses, service roads, grade separated intersections, raised embankments and provision for pedestrians and local traffic are provided as required to meet local conditions. Preparation studies considered pavement alternatives of asphalt or cement concrete, and proposed a combination of the two, with additional provisions for strengthening quality oversight for newly introduced construction methods. Safety audit will be performed on the engineering design of all project roads and the design will be modified according to the safety audit recommendations. The management of mixed traffic to achieve traffic efficiency and safety after the 4-laning will be carried out through the corridor management program to be supported by the project and facilitated in township areas by provision of parallel service lanes.

4. Institutional:

4.1 Executingagencies: NHAI's capability to implement the current project, including environment and social safeguard policies, has been greatly strengthened through the implementation of the TNHP. 4.2 Projectmanagement: The capacity of NHAI for project management will be further strengthened through project preparation and especially the implementation of TNHP. NHAI has mobilized a strong team in headquarters and on site to work closely with consultants and local authorities during project preparation, and this will continue during the implementation phase. Additional skills in land acquisition, environment, resettlement and rehabilitation (R&R), and financial management are being built up. 4.3 Procurementissues: No significant procurement issues are expected at this stage. If any issues emerge, they will be addressed based on the actual experience from the TNHP. 4.4 Financialmanagement issues: NHAI is also implementing the TNHP. The assessment and review of the financial management arrangements for the implementation of this project have focused primarily on the follow-up on actions agreed during the earlier appraisal.

The key issues that have been identified are as follows:

* There has been little opportunity to establish the adequacy of the financial management arrangements as no reimbursement claims or project management reports have been received by the Bank for the TNHP.

- 17 - * NHAI will seek the assistance of the internal auditors to be appointed to update accounting manual and merge it with financial management manual (first draft to be prepared by December 31, 2001).

* The computerized Project Financial Management System (PFMS) is in advanced stage of preparation. The PFMS will ensure that the project-specific financial reporting system is the product of mainstream accounting systems, and not limited to meeting just the Bank's requirement.

* The current business and accounting practices do not allow NHAI to work out project wise under or over absorption of their indirect costs. These costs are not directly allocated or attributed to projects but charged off to Profit & Loss Account to offset against agency commission income. It also implies that this percentage of works, capitalized as assets (as NHAI is the owner of the works) is treated as revenue income in the Profit & Loss Account. This is contrary to standard accepted accounting practices. It is recommended that NHAI review this policy at the earliest.

* NHAI has not had internal audit done (except the internal reviews carried out by their own staff) since 1998-99. NHAI is currently in the process of preparing a short list of firms of chartered accountants to undertake the internal audit for the year 2001-2002.

NHAI is audited by the Controller & Auditor General of India (C&AG). NHAI needs to initiate discussions with the C&AG on ways to streamline the entire audit process in order to meet the time frame. NHAI will carry out a time-bound action plan detailed in Annex 6 for the strengthening of the agency's financial management system. NHAI will work with a firm of chartered accountants to assist in the consolidation and finalization of the accounting statements by August 15, 2001, to meet the Bank's timeline for submission of audited statements and report. Moreover, NHAI intends to convert its current disbursement system to the Project Management Report (PMR) based disbursement by January 1, 2003.

5. Environmental: EnvironmentalCategory: A (Full Assessment) 5.1 Summarizethe steps undertakenfor environmentalassessment and EMP preparation(including consultationand disclosure)and the significantissues and theirtreatment emerging from this analysis. Base EAs of the GTRIP and TNHP, together, from Agra to Barwa Adda section of the NlI-2, were carried out during 1998-2000. The approach adopted was a reiterative one in which environmental issues were identified in successive levels of detail and specificity at each step in the process, and feedback from the stakeholders and public consultation process was incorporated. Analysis of alternatives, community consultation and stakeholder involvement were key steps in the EA process. Since the beginning with TNHP, the EA process of the GTRIP has evolved, and addressed the potential impacts and mitigation measures in greater details. The Consolidated E1A for the GTRIP and the 7 contract (package) specific Environmental Management Plans (EMPs) address impacts and propose adequate mitigation and environmental enhancement measures. An independent review summarizes that the EA and the EMPs adequately address the Bank's environment and social safeguard policies.

- 18 - Key Environment Issues: Besides construction related impacts, the project may also lead to potential impacts from induced development especially along the bypasses, in the Gautam Buddha Wild life Sanctuary, and the Taj Trapezium Zone (TTZ). To address any unforeseen impacts on the Gautam Buddha Wildlife Sanctuary and the TTZ, a contingent fund of US$1.5 million is made available in case of need for further impact study and implementation of further mitigation measures.

The TTZ covers an area of about 10,400 km and has been identified as the zone of influence for the protection of the Taj Mahal from pollution sources, especially air. Package I-A of the GTRIP traverses the TTZ (and the west end of Package I-B touches the TTZ), although at its nearest, it is more than 10 km. away from the Taj Mahal or any other World Heritage sites, within the zone. The GTRIP is in confornity with the TTZ Development Plan, which envisages highway widening to ease traffic congestion and reduce pollution (the initial 22 km. of Package I-A will be 6-laned, and the remaining 4-laned). Additional mitigation measures in the EMP include 10 m thick band of roadside plantation on either side of the highway. A detailed landscape plan has been prepared.

Due to intense agricultural activities in the region, natural forests along the project road have long been removed except in some parts such as Agra Reserved forest area (Package I-A, for a 2 km. stretch), and the Kaimur Hills forest area (Package IV-C). The project acquires 0.5 ha. of the Agra Reserved forest area (Package I-A), and 2.35 ha. of the Kaimur Hills forest area (Package IV-C). The Agra reserved forest is a degraded area, the green cover is thin, and is used as a garbage dumping site. The Kaimur Hills Forest has been already reduced from dry deciduous to scrub land. The EMP for Packages I-A and IV-C propose, in addition to compensatory afforestation, physical barriers to prevent any further dumping of wastes; closing access for trucks; regular policing and patrolling to prevent unwarranted intrusion in forest areas.

Package VB passes through 36.4 km. of protected forest area, 18 km. of which is through the Gautam Buddha Wildlife Sanctuary (no forest land is proposed to be acquired for the project). The sanctuary exists in two parts on either side of the road, with the road passing through the buffer zone (400 m on either side of the highway had been designated as buffer when the sanctuary was established. The road existed since the medieval age, and the area was declared as a sanctuary in the 1970s). During the EA process, consultations included inputs from the community as well as forestry and wildlife specialists. The EMP incorporates the Sanctuary Management Plan, developed by the Department of Forest and Wildlife. The EMP measures include check dams, water holes, screen plantation, animal underpasses, check posts, noise control, signage, closure of unregulated access for trucks, prohibition on extracting construction materials from within the sanctuary area. Adequate resources have been allocated for implementation of these measures, including an additional sum of INR 5 million to be transferred to the sanctuary authorities linked to the progress of the implementation of the Sanctuary Management Plan. At the Project Management Unit (PMU) an additional Manager (Environment) will be specially deputed for coordinating implementation of the EMP for Package V-B. A coordination committee is being constituted to oversee implementation of the EMP for Package V which includes mitigation measures specifically related to the project area. In

- 19- concurrence with other relevant agencies, NHAI will issue the order creating the committee by July 31, 2001. Release of funds to the contractors will be linked to implementation progress in performance indicators agreed in the Bills of Quantities for all works undertaken. The NHAI Environmental Manager will be responsible for monitoring and oversight. The coordination committee will recommend whether further mitigation measures/additional funds will be necessary, and in consultation with the Bank, NHAI will decide on fund allocation from the aforementioned contingent fund of US$1.5 million.

The EA has studied the potential of induced development in detail, and identified the highway stretches which would be subjected to successive levels of urban-industrial development pressure in future. The EA desegregated these highway stretches into 8 different policy zones for controlled/guided development, and sets of policies for each zone have been prepared. Effective control of ribbon development is an interdepartmental issue and is beyond just NHAI's purview. However, budget allocation has been made in the EMPs to enable a policy dialogue at GOI level and NHAI. The Corridor Management Units, proposed as part of the project will coordinate these development controls.

Construction related issues and impacts: Improvement of the proposed highway is restricted to the existing right-of-way, except in the case of the 15 bypasses. The project requires a large volume of material excavation, procurement and transport; use of potable water (for concrete pavement); setting up of stone-crushers, hot-mix plants and concrete batch plants, transport and round-the-clock laying of concrete, etc. Additional impacts will result from spills of oil, fuel, lubricants and bitumen, and operation of borrow areas, quarries and construction camps. These impacts will be managed by implementation of the EMPs, which contain good environmental management and mitigation measures, conservation and prevention measures, redevelopment plans and a substantial tree plantation program. 5.2 What are the main features of the EMP and are they adequate? Detailed EMPs include implementation schedule, monitoring program, budget, institutional arrangements, and integration of the proposed mitigation measures into the contract. The EMP measures include road landscape and plantation; preventive measures for minimizing air/noise/water pollution; protection and restoration of surface water bodies (cascades, silt-fencing, sedimentation chambers, oil interceptors), groundwater recharging pits; gabion structures, turfing, reinforced earth walls and brick/stone pitching to prevent erosion; conservation and redevelopment borrow areas; use of fly ash; noise enforcement measures and noise barriers (especially in front of schools and hospitals); provision of underpasses for livestock/animals; and pedestrian and other local facilities, etc. NHAI's Roadside Tree Plantation Strategy covers all plantation regimes (compensatory, roadside, median, and possibility of transplantation), coordination of NHAI with the Forest department including management of funds.

Each EMP contains enhancement plans for several sites (altogether about 100), which are important from environmental, ecological or community point of view. All enhancement plans are complete with implementation designs and bill of quantities.

- 20 - As part of the evolving EA process since TNHP, the consolidated EA for GTRIP also addresses issues such as gender in construction management (including involving women as managers during construction) and health issues such as the spread of HIV/AIDS. The EMPs provide such recommendations that are in the purview of the project and can be facilitated or coordinated by NHAI, such as a health management plan at the construction site, and safety plan during construction.

The EMPs also provide for further and contingency actions. A pilot study on HIV is proposed. The project also includes a road safety component and involves a road safety audit of the engineering designs. With respect to Forests and Protected areas, major efforts are being made by NHAI through EMPs to revitalize these areas within the Corridor of impact. In particular, NHAI has provided US$1.5 million under the GTRIP for additional safeguard measures. This fund will be made available in case of need for further study and mitigation measures relating to the TTZ and the Gautam Buddha Sanctuary. 5.3 For CategoryA and B projects,timeline and status of EA: Date of receipt of final draft: February2001 (ConsolidatedEA and EMPs for selectedcontract packages)

5.4 How have stakeholdersbeen consultedat the stage of (a) environmentalscreening and (b) draft EA report on the environmentalimpacts and proposedenvironment management plan? Describemechanisms of consultationthat were used and which groups were consulted? Since the project has been developed through a participatory process, stakeholder consultations were carried out as part of the Environment and Social Assessment process at different stages during project preparation and will continue through the rest of the project cycle. This has been documented in the EA report in the Chapter on Community Consultations. In the same token, NHAI will be conducting workshops in March 2001 to build further consensus to involve the people in implementation of the EMPs that have been developed.

Community consultation was carried out at the Screening, Feasibility and during the Social/Environment Assessment of the project. The different consultation means included door-to-door personal interviews, village meetings, focus group discussions, and consultation with experts and NGOs working in the area. Additionally, various stakeholders were consulted (in 13 separate consultation sessions) and as per the GOI, MOEF guidelines, 9 district level public hearings were conducted.

The key stakeholders consulted were the urban, semi-urban and rural people, some of them who may lose land or properties; communities, which may be impacted by increased traffic and safety concerns; and hospitals, schools, and libraries, which may be impacted; road users including road user associations; government officials from the line departments; local government agencies including village level 'panchayats'; NGOs and community based organizations (CBOs) working in the region; experts including forestry, wildlife and environmental professionals.

-21 - The Base EAs were disclosed by NHAI in March 2000 to the Public in the affected districts. The Consolidated EA and the EMPs for the GTRIP have been disclosed at project affected sites and the Bank's Project Information Center (PIC) both in Washington and New Delhi in January 2001.

Further details on consultations are described ahead in Section 6.2 and 6.3. 5.5 What mechanismshave been establishedto monitor and evaluatethe impact of the projecton the environnment?Do the indicatorsreflect the objectivesand results of the EMP? Institutional measures: Independent consultants, procured through International Competitive Bidding (ICB) will act as the Supervision Consultants (SC) or Engineers, and will be responsible for implementing and monitoring all aspects of the project. Four such consultants will be engaged, each with an Environmental Specialist. The PMUs of NHAI will be staffed, among others, with Managers (Environment). The Environment and Social Management Unit at the NHAI Corporate Office will coordinate the implementation of environmental components of the project. Training of the NHAI staff, the SC and the Contractors' personnel will be undertaken as per the training plan prepared as part of the EMPs. The training plan considers immediate and construction related, medium-term and long-term environmental issues in highway development program.

Monitoring: Day-to-day monitoring of the project is the responsibility of the SC. Further monitoring by the PMU and the NHAI Corporate is proposed. Detailed monitoring and reporting formats have been prepared, covering all aspects of the EMPs. During construction period, the contractor will report to the SC once a month on implementation of the EMPs, and compliance. Similarly, the SC will report to the PMU every month, and the PMU will submit quarterly reports to the NHAI Corporate. Quarterly reports will be submitted by the NHAI to the Bank.

Environment performance indicators have been developed to reflect the objectives and results of the EA in the EMP. To ensure effective monitoring of the EMPs, monitoring formats include monitoring of performance indicators, as part of the supervision strategy for the project. 6. Social: 6.1 Summarizekey social issues relevantto the project objectives,and specify the project's social developmentoutcomes. The project is expected to result in social benefits through improved access and linkages of backward areas. It involves Resettlement & Relocation (R&R) of affected and displaced titleholders, squatters and encroachers. A social irnpact assessment has been carried out during the project preparation, consisting of the following: (i) early screening as part of project feasibility studies; (ii) public consultation; (iii) preparation of a project specific R&R entitlement framework consistent with GOI's and the Bank's Operational Directives (OD) 4.30 and 4.20; (iv) census and baseline socioeconomic survey of the potentially affected population; and (v) preparation of a time-bound RAP.

A full census was undertaken to document the status of the potentially affected population within the project impact area, with respect to their assets and sources of livelihood. This provided the basis for establishing a cut-off date for determining who may be entitled to relocation assistance or other benefits from the project. A detailed socioeconomic survey of a sample of the potentially

- 22 - affected population was also carried out to develop the monitoring and evaluation parameters and to develop the database. This survey also provided a baseline against which mitigation measures and support will be measured and includes a comprehensive examination of people's assets, incomes, important cultural or religious networks or sites, and other sources of income such as dependence on common property resources. An analysis of survey results included a gender analysis and examined the needs and resources of different groups and individuals, including intra-household issues.

Acquisition of agricultural land and residential and commercial structures will be required for the upgrading and widening of the road, to the extent that either resettlement or relocation is necessary for the affected people. In some cases small portions of roadside dwellings and businesses will be affected due to widening the legal right of way (ROW). In all cases, however, compensation and assistance will be provided depending on the status and extent of the property taken. A total of 622 hectares (see table below) of land is required for widening the existing alignment and for 13 bypasses. The additional land required by the project falls under two classifications: (a) public land owned by the Departments of State Government and village level institutions; and (b) private land. A concerted effort by NHAI will be required to carry out the land acquisition according to the plan for the project, where the ROW to accommodate the proposed highway improvements in some alignments is not present, not sufficient, or not available. The process of land acquisition has been initiated by the NHAI under the National Highway Act and Land Acquisition Act.

Project-affected families and land required for each contract package

Contract Families Families Families Land to be Land to be affected Displaced Displaced Acquired Transferred* Titleholder Non-titleholder (ha) (ha)

I - A 1,125 307 336 71.08

I - B 1,713 397 40 103.33

I - C 1,764 690 143 216.41

II - B 1,347 21 1007 13.82 8.20

IV - A 1,089 568 274 24.75 6.72

IV -C 3,851 2,696 76 124.15 15.45

V-B 176 23 36 47.82 12.88

TOTAL 11,155 4,702 1912 622.36 43.80

* Includes governmentvested land and forest land.

- 23 - Resettlement is required where residential and/or commercial buildings must either be fully demolished or made uninhabitable. Relocation is required for displaced residents or affected businesses of these buildings and other public and religious buildings and structures. Rehabilitation will be required where resettlement relocation or other project impacts result in lost livelihood or income. Emphasis has been given to identify alternate land since majority of the people displaced will lose their agricultural land and for restoration of livelihood (annexl 1). In all cases, it will be necessary to restore the economic status of affected persons to at least pre-project levels or better. The displaced vulnerable people will receive the alternate land for agriculture, house and shop free of cost and the non-vulnerable will purchase it with the compensation and the assistance received to meet the replacement cost for the assets acquired.

NHAI prepared the R&R policy that includes an entitlement framework consistent with the Bank's O.D. 4.30 and O.D. 4.20 to deal with land acquisition and other potential adverse social impacts of the project. This was cleared by NHAI and endorsed by the Bank. The R&R policy addresses the nature of entitlements to be given to titleholders, all squatters and vulnerable encroachers. Moreover additional support will be extended under the R&R policy to achieve reduction and equity. Following consultations, a framework has been developed which distinguishes between compensation in cases of land acquisition or other losses of private property, and rehabilitation and assistance given to all the affected people. Additional support has been provided to vulnerable poor that also includes women headed households. To ensure property rights to women altemate plots provided for rehabilitation will be registered on joint names along with their spouses. The same policy will be applied for section III B and Etawah by-pass of approximately 13 km, that are excluded from the proposed GTRIP. A consolidated Resettlement Action Plan was prepared on the basis of individual RAPs that provides detailed mechanism for implementing the provisions of the R&R policy and was approved by NHAI. The Bank will endorse the document.

The prime considerations during project preparation were to avoid or minimize negative impact on the people/communities due to land acquisition within the limitations of technical requirements and cost effectiveness. Impacts have been avoided by lateral shifting of the proposed alignment depending upon the availability of land. The participatory planning with people has helped in minimizing losses, saving residential/commercial structures, cultural properties and community infrastructure. As far as possible concentric widening has been adopted in the built-up stretches, raised carriageways were incorporated wherever possible on bypasses and along the corridor to minimize impact on properties or to avoid land acquisition.

The social impact assessment for 422.78 km. project roads identified 11,155 project affected families that includes 8441 titleholders and 2,714 non-titleholders. Out of the total number of affected families 6,614 will be displaced that includes 4,702 titleholders and 1912 non-titleholders (see the above table). The figures in correlation with the quantity of land to be acquired indicate that majority of the affected and displaced are due to acquisition of agricultural land. Further details are given in the Executive Summary. Since the proposed project is to upgrade the existing two lane to four lane within the existing right of way to the extent feasible, the project will not have an impact on tribal community or groups. However, there are 66 tribal families who will be affected and are thinly spread over the entire length. The social impact assessment documented

- 24 - the resource base of these families and their losses that is included in the RAP. The budgetary provisions for tribals are included in the overall budget prepared for the implementation of RAP. Others belonging to the vulnerable groups in particular those on the threshold of poverty line and below it are given targeted support in the RAP in accordance with the policy. The data collected is disaggregated for each recognized category vulnerable and non-vulnerable and contains information about their socioeconomic status in the RAP.

No large-scale movements of groups of people are envisaged. However, resettlement sites will be developed if more than 25 families are willing to settle in a cluster. The project will seek to facilitate people's self-relocation by giving adequate resources and support, rather than developing clustered resettlement sites.

Studies on HIV/AIDS highlight that the truckers are carriers of virus. With increase in traffic with the proposed project, the risks related to sexually transmitted infection may spread. This impact will be minimized through effective preventive plans for awareness building and facilitate convergence of National and State Health programs and is included in the RAP. A pilot study has been undertaken to identify sensitive locations through focus group discussions with truckers and other high risk groups. Detailed plans to implement the preventive measures with the help of NGOs have been prepared.

Another potentially negative social impact is the risk of road accidents associated with increased traffic speeds. In number of places widening has been proposed to minimize the propensity of accidents by proposing service roads. Underpasses have been provided to facilitate the people living on either side of the road to have access to facilities and to avoid disruption of social relations and network. This impact will be further minimized through a safety audit on the engineering design of the project and recommendations will be implemented. 6.2 ParticipatoryApproach: How are key stakeholdersparticipating in the project?

As per the framework developed in the R&R policy, NHAI carried out public and community consultations as an integral part of the environmental and social assessment process with different social groups and stakeholders at the village, district and state level throughout project preparation. At the local level, group discussions, participatory mapping of the resources and infrastructure, and other methods have been used. Through comprehensive screening and local consultation, the project preparation has minimized cases where land acquisition may be required, or where there may be other loses of assets or resources. These consultations helped to finalize various issues like location of bus stops and religious structures, realignments and suggesting measures for economic rehabilitation and new rehabilitation sites. The process ensures that the affected population and other stakeholders are informed, consulted and allowed to participate actively in the development process. Moreover, follow-up consultations were organized at sensitive locations to disseminate the information about the final design and the details of the RAP and the NHAI prepared a separate document on the subsequent consultations.

A number of workshops and consultation meetings have been held in the three states (Uttar Pradesh, Bihar and Jharkand) with government representatives, consultants, project affected

- 25 - people and environmental protection agencies to build consensus on project objectives, design and implementation arrangements and discuss impacts and rehabilitation or mitigation measures. The project proposes to further ensure community participation during implementation of the provisions included in the RAP and the detailed mechanism is given in annex 11. To further strengthen the participatory processes for institutionalizing transparency all payments regarding compensation and assistance will be paid through checks in public meetings.

The R&R policy and the RAP have been made public through District offices and District Public Libraries and Bank's Public Information Center. The R&R policy has been translated in local language and will be distributed to the affected people during implementation. 6.3 How doesthe project involve consultationsor collaborationwith NGOs or other civil society organizations?

The R&R policy recognizes the importance of NGO involvement to facilitate the implementation of RAP through a participatory process. The process of appointing the NGOs has been initiated for the four packages. Their representatives will be members of District and Grievance Redress Committees that have been set-up for implementation. 6.4 What institutionalarrangements have been providedto ensure the project achieves its social developmentoutcomes'?

For implementation of RAP, state level committees set up for the entire project, will provide guidance on land acquisition and R&R issues. The NHAI has created a Social and Environment Cell at the corporate office, led by a General Manager and one R&R manager to coordinate the resettlement activities of all packages. Five PMUs have been established on site for the five packages. Each PMU has a project director and several line managers, including one in charge of EA and R&R. They, along with the NGOs for each package will be responsible to implement the RAP. District level committees have been set up to facilitate the acquisition proceedings and R&R related issues. Grievance redress comnmitteeshave also been established in each district. The organizational framework for the RAP agreed during appraisal has been adequately staffed.

To promote local capacity building, efforts have been made, during project preparation, to carry out the work in collaboration with the consultants and the project authorities. An Orientation training program has been organized and further five training modules have been developed that includes exposure to similar projects and sharing of experiences that will be carried out during project implementation. 6.5 How will the projectmonitor performancein terms of socialdevelopment outcomes'?

Monitoring arrangements and formats have been provided in the RAP. The NHAI will prepare monthly and quarterly progress reports during the first year of the implementation and for the remaining two years quarterly reports will be prepared to monitor the physical and financial progress. Annual and mid-term evaluation will be undertaken to evaluate the processes adopted during implementation of the proposed activities included in the RAP. An end term evaluation will be carried out to evaluate the impact the project has had on the project-affected people in

- 26 - achieving the objectives of the R&R policy. The NHAI will hire consultancy services to monitor and evaluate the R&R component of the project.

7. SafeguardPolicies: 7.1 Do any of the followingsafeguard policies apply to the project? Polic Applicabirit EnvironmentalAssessment (OP 4.01, BP 4.01,GP 4.01) * Yes 0 No Naturalhabitats (OP 4.04, BP 4.04, GP 4.04) * Yes0 No Forestry(OP 4.36, GP 4.36) 0 Yes * No PestManagement (OP 4.09) 0 Yes * No CulturalProperty (OPN 11.03) * Yes 0 No IndigenousPeoples (OD 4.20) * Yes 0 No InvoluntaryResettlement (OD 4.30) * Yes 0 No Safetyof Dams(OP 4.37, BP 4.37) 0 Yes * No Projectsin InternationalWaters (OP 7.50, BP7.50, GP 7.50) 0 Yes * No Projectsin DisputedAreas (OP 7.60, BP 7.60,GP 7.60) 0 Yes* No

7.2 Describeprovisions made by the projectto ensure compliancewith applicablesafeguard policies.

The NHAI has prepared the R&R policy that includes an entitlement framework consistent with the Bank's O.D. 4.30 and O.D. 4.20 to deal with land acquisition and other potential adverse social impacts of the investment program (see section 6.1).

F. Sustainabilityand Risks 1. Sustainability: Benefits of the project are likely to be sustained over time as the traffic volumes increase. Nevertheless, a key factor will be NHAI's capacity to maintain and efficiently operate the newly created road assets. The project will enhance this capacity through institutional strengthening, promotion of private sector involvement, and assured funding mechanisms. Key issues are (a) clarifying roles of NHAI, MORTH and the states; (b) establishing an overall strategy for national highway spending; and (c) adequate funding for maintenance. The implementation of the recommendations of the Institutional Strengthening study and Corridor Management study will be critical for project benefits to sustain over a period of time. Recent increases in NHAI revenues from levies on petrol and diesel fuel are also an important step.

- 27 - 2. Critical Risks (reflecting the failure of critical assumptions found in the fourth colunmuof Annex 1): Risk Risk Rating Risk MitigationMeasure From Outputs to Objective Newly increased traffic capacity is not M Secured maintenance funding and strengthened efficiently managed and maintained. maintenance practice.

NHAI and MORTH commitment on road M The progress will be closely monitored through safety actions is weak. quarterly and supervision mission reports, and the outcomes of road safety actions will be sustained through NHAI organizational restructuring that aims to effectively respond to the needs of road users.

Private sector participation is not actively M While the risk is small, it could arise due to the pursued through public-private slow response from the private sector. The risk partnership. could be mitigated through knowledge sharing and option study to be funded by the project.

NHAI and MORTH's commitment to M The progress will be closely monitored through policy and institutional reforms becomes quarterly and supervision mission reports, and weak. remedial actions taken as appropriate.

FromComponents to Outputs Delays in procurement and award of N NHAI's function in procurement and contracting contracts. is being strengthened under TNHP.

Delays in site readiness, and M Adequate staffing, high-level committees, early unsatisfactory implementation of RAP appointment of NGOs and monthly monitoring and EMP. of action plans.

Unsatisfactory consultant/contractor M Strict prequalification criteria, supervision by performance, construction delays, quality intemationally experienced consultants, large problems and cost overrun. construction packages.

Current accounting policies undermine M Recognizing that this may be a hindrance, NHAI NHAI objective of managing its resources has initiated discussions with GOI in order to on business principles define accounting policies more clearly.

Overall Risk Rating M Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligibleor Low Risk)

3. Possible Controversial Aspects:

- 28 - G. Main Loan Conditions 1. EffectivenessCondition Standardconditions only

2. Other [classifyaccording to covenanttypes used in the LegalAgreements.] 1. The NHAI will maintain state high-levelProject Coordinating Committees in the Statesof Uttar Pradesh, Bihar and Jharkhandto coordinateissues related to land acquisition,R&R, environment,and shiftingof utilities,supported by district level committeesand grievancecells for land acquisitionand R&R.

2. The NHAI will maintainthe ExternalStakeholders Advisory Group, which will meet at least twice each year to reviewthe overall programand strategybeing implementedunder the project.

3. The NHAI will implementResettlement Action Plans, EnvironmentalManagement Plans, and Tree PlantationStrategy, to the satisfactionof the Bank.

4. Any other road works which might be proposedfor implementationunder the project (e.g. becauseof unforeseenland acquisitionor environmentalconstraints or to utilize cost savings)would be consideredfor financingonly after completionof EnvironmentalManagement Plan and ResettlementAction Plan satisfactoryto the Bank.

5. The Bank'ssocial and environmentalsafeguard policies would be appliedto any BOT projectssupported underthe project,and the EA and RAP be completedprior to financialclosure that will be endorsedby the NHAI and clearedby the Bank.

6. The NHAI will initiate the cross-stateborder road transportefficiency study by December31, 2001.

7. The NHAI will produce annual reportson the conditionof NHAI road networkand projectedfuture user costs and projected asset conditionwith forecastlevels of maintenance.

8. The NHAI will produce annual report on travel speedsand accidentson road stretchesfor the hazardous locationimnprovement work.

9. The NHAI will produce a quarterlyreport on implementationprogress with agreed formnatpresented in the Borrower'sProject Implementation Plan, and mid-terrnreview report after 24 months.

10. For the two road sections along the NH-2 corridor from Agra to Dhanbad (Allahabad section and Etawah bypass) which are not included in the scope of the project, the NHAI will follow the same approach to the preparation and implementation of safeguard policies on these stretches as in the TNHP and GTRIP, and the EA, EMP and RAP for the Etawah bypass are subject to Bank review and supervision.

H. Readinessfor Implementation Z 1. a) The engineeringdesign documentsfor the first year's activitiesare completeand ready for the start of project imnplementation.

- 29 - E 1. b) Not applicable.

X 2. The procurementdocuments for the first year's activitiesare completeand ready for the start of project implementation. X 3. The ProjectImplementation Plan has been appraisedand foundto be realistic and of satisfactory quality. 1 4. The followingitems are lackingand are discussedunder loan conditions(Section G):

1. Compliancewith Bank Policies Z 1. This projectcomplies with all applicableBank policies. n 2. The followingexceptions to Bank policiesare recommendedfor approval. The project complieswith all other applicableBank policies.

Zhi Liu Vincent G uarne Lim TeamLeader SectorManager/Director CountryManager/Director

- 30 - Annex 1: Project DesignSummary INDIA: Grand Trunk Road ImprovementProject KeyPerformance Hierarchyof Objectives Indicators Monitoring& Evaluation CriticalAssumptions Sector-relatedCAS Goal: SectorIndicators: Sectorlcountry reports: (fromGoal to BankMission) Reduce highway Increasedtraffic capacityand Central government annual Government remains infrastructurebottlenecks to improvedtraffic safety on reports. committedto sector reforms. support poverty reduction and high-demand national private sector-led economic highway corridors. growth Expanded public-private MORTHand NHAI reports. Continued funding for the partnership in encouraging National Highway private investmentson large DevelopmentProgram. BOT projects.

More effective institutionfor The Bank CAS Progress Increased delegation, managing national highways. Reports. independenceand public accountabilityof NHAI. ProjectDevelopment OutcomeI Impact Projectreports: (fromObjective to Goal) Objective: Indicators: Reduce transport constraints Average vehicle travel time Project evaluation reports. Civil works are completedon on national economicactivity. along the national highway time and meet design corridor between Delhi and standards, and maintenance Calcuttareduced by 25-30% fundingis secured. from the current 4 to 5 days, by end of project (EOP).

Improved institutional Truck operating cost along Mid-tern review (MTR) Majority of the cost savings capacity to manageroad the national highway corridor mission reports. are capturedby road users, programs, assets, and between Delhi and Calcutta consumers,and farmers. services. reduced by 10% in real terms from the current Rs. 11 per kin, by EOP.

Incidence of road deaths ImplementationCompletion Relevant state governments reduced by 20% on project Reports(ICR). are engaged in seeking roads by end of project,by solutionsto remove the EOP. cross-stateborder barriers. About 1,200 km of national Annual road condition Central government assumes highways maintained under surveys. a role as road safety champion contract with the private and step up road safety sector and managedby the actions. Corridor ManagementUnits by EOP. Annual surveys on delays and Central government continues accidents. to pursue PSD initiatives. Strong NHAI and MORTH commitmenton policy and institutionalreforms continues.

- 31 - | Key Performance Hierarchyof Objectives Indicators Monitoring& Evaluation CriticalAssumptions Outputfrom each OutputIndicators: Projectreports: (fromOutputs to Objective) Component: 1. Cost effective deliveryof 1.1. Ex post ERRs of the 420 Quarterlyprogress reports; Newly increasedcapacity is increasedtraffic capacity and km project roads are on efficientlymanaged and improvedquality of national average above 26%. Supervisionmission reports; maintained. highways. 1.2. All civil work contracts Disbursementreports; deliveredto time, budget, cost and safety constraints. User surveys conductedfor baseline, MTR, and EOP; 1.3. 100%delivery of entitlements to PAFs and Annual road condition survey; restoration of common property resources as and Annual surveys on delays and when planned in RAP. accidentson NH-2.

1.4. All EMPs carried out in accordance with contract clauses.

1.5. Level of users' satisfaction with road infrastructure on project roads increased.

2. Improved road safety, 2.1. Safety audit and Both NHAI and MORTH maintenance and management hazardous location strongly commit to road of national highways. improvementworks safety. conductedon selectedsections of NIHDPnetwork.

2.2. A comprehensiveroad safety action plan implementedon a pilot basis.

2.3. Two new CMUs establishedby MTR.

3. Expanded public-private Public-private partnership NHAI and MORTHcontinue partnership in promoting successfullyexecuted to to pursue various options for private investmenton large support large scale (over 50 encouraging greater private BOT projects. km) BOT projects. sector participation in road sector.

- 32 - 4. Improved institutional 4.1. All technical assistance Strong NHAI and MORTH capacity in social and in effect; comrnitmenton policy and environmentalaspects, road institutionalreforms safety, corridormanagement, 4.2. NHAI HQ and field office continues. public-privatepartnership, staff trained; and managing traffic efficiency. 4.3. Options to eliminate cross-stateborder freight delays analyzedand policy dialogue with relevantstates initiated;

4.4. Over 120,000trees planted by MTR and over 200,000 trees planted by EOP;

4.5. Over 70% tree survival rate achievedby EOP.

- 33 - 000 0007--7 I 7 Key'efiacPerformance...... v , Hierarchyof Objectives* Indicators Monitoring& Evaluation CriticalAssumptions ProjectComponents IInputs: (budget for each Projectreports: (fromComponents to Sub-components: component) Outputs) 1. Highway upgradingof 420 1. US$ 685.29 million Quarterlyprogress reports; Timely procurementand km to 4-lanes or 6-lanes Supervisionmission reports. contract implementation; including works, supervision, land acquisition and Timely site readiness resettlement, and including land acquisition anid environmentalmanagement. utility relocation;

Full implementationof ResettlementAction Plan and EnvironmentManagement Plan;

Satisfactorycontractor performance.

2. Road safety and corridor 2. US$ 20.25 million Quarterlyprogress reports; MORTHsupport; managementworks, including Supervisionmission reports; safety audit and hazardous Consultantstudies on selected NHAI acts as the national location improvementworks topics. championof road safety; on existing national highways, and CMU civil Active participationof NGOs works. and civil society.

3. Public sector participation, 3. US$ 25.55 million Quarterlyprogress reports; Governmentremains including preparation and Supervisionmission reports; committedto implementing implementationof a pilot Consultantstudies on selected institutionalreforms and BOT project based on topics. retains strong ownership of competitivebid on action plans; governmentfinancial support requirements.

4. Institutional strengthening, 4. US$19.02million Central Governmentassumes includingNHAI capacity a role as the facilitator for building in social and cross-statepolicy dialogue. environmentalaspects, road safety, and highway asset inventory;an Interstate HighwayTransport Efficiency Study; and project preparation and studies.

- 34 - Annex 2: Detailed ProjectDescription INDIA: Grand Trunk Road ImprovementProject

ByComponent:

ProjectComponent t - US$685.29million 1. Highway Upgrading - $ 685.29 million, including contingencies. This includes:

(a) civil works for widening and strengthening of about 420 km of national highway from two lanes to four-six lane divided carriageway with service roads where required in seven contract packages ($590.41 million).

(b) supervision consultant services for civil works in four packages ($34.96 million).

(c) Land acquisition, utility relocation, resettlement and rehabilitation, environmental mitigation/management ($52.49 million) as described below - (i) Land acquisition and utility relocation ($26.31 million). This item will be financed entirely by NHAI. (ii) R & R assistance ($17.15 million) will be paid to beneficiaries for each package through a consultative process. Payments will be made from the project director's office, and the Bank share ($12.40 million) will be reimbursed on the basis of Statements of Expenditure (SOE). (iii) Resettlement implementation support, training and monitoring ($0.89 million) will be provided through: four supervision level NGO consultancy packages ($450,000 total); two to three monitoring consultancies ($200,000 total); training of NHAI and NGO staff plus other R&R implementation expenses by SOE ($240,000). (iv) Environment management and mitigation works ($5.29 million) and consultancy services for training, monitoring, evaluation and policy planning ($1.37 million) (v) Provision for additional safeguard measures (US$1.49 million). This fund will be made available in case of need for fiurther study and mitigation measures relating to the Taj Trapezium Zone and Gautam Buddha Sanctuary. A small fraction of the fund will be used to support the sanctuary stakeholder committee's review and monitoring activities of the implementation of the EMP for the stretch passing through the sanctuary.

(d) NHAI project management costs (not Bank financed, $7.43 million).

ProjectComponent 2 - US$20.25million Road Safety and Corridor Management Works - US$ 20.25 million, including contingencies

(a) consultant services for safety audit to be done on the road sections belonging to this project and the TNHP ($0.22 millions). The minor mitigation measures and recommendations identified through this study will be implemented during the execution of this project. The consultant services will be retroactively financed under this loan.

- 35 - (b) a program of road improvements specifically targeted at supporting improved methods for reducing accidents and improving the safety on the national highway network under NHAI ($11.13 million). Expenditures under this component will be limited to $1,000,000 per item/contract and subject to their selection and design by the consultancy services identified under the institutional strengthening component (item 4 (e)). It should be ensured by NHAI through appropriate monitoring that (i) candidate improvements directly address locations with accident problems and safety issues; (ii) selection should be made in consultation with police and local authorities.

(c) a program of maintenance works to introduce alternative contracting methods and strengthen maintenance management practices under two or three more Corridor Management Units ($8.90 million) which will be taken up after the pilot experience on two CMUs of the TNHP. Priorities, design and implementation support will be provided by the consultancy services listed under the institutional strengthening component (item 4 (e)).

ProjectComponent 3 - US$25.55 million Public-Private Partnership in Road Concession - $25.55 million, including contingencies (a) Consultant services including legal advisory, preparation of bid documents, and evaluation of bid (0.55 millions).

(b) NHAI financial support (estimated to be $25 million) for civil works, with 80% of Bank financing.

ProjectComponent 4 - US$19.02million Institutional Strengthening - US$ 19.02 million, including contingencies. This component includes:

(a) Social and environmental capacity building, including (i) a poverty and highway development study (US$0.77 million), which will be financed retro-actively; and (ii) Consultant services for training and streamlining monitoring procedures ($0.33 million).

(b) Road safety capacity strengthening (US$7.44 million), including training of trainers and dissemination of road safety manual for 2 to 3 years, public education and campaign through mass media, and implementation of the comprehensive road safety action plan.

(c ) National Highway Asset Inventory (US$4.00 million). This will involve digitizing all available data on the Golden Quadrilateral and computerizing the national highway asset inventory and characteristics to enable effective management, control and planning of road assets. If necessary, an aerial survey of NH-2 corridor will be undertaken after the completion of the upgrading works, to prepare ortho-photographic and strip maps of adequate scale (1:5000 or 1:2000) to show all features in the ROW including settlements and encroachments. The baseline information will be integrated with other road and traffic related databases using the GIS.

(d) A study on the cross-border road transport efficiency (US$0.33 million). The study will examine the current system of cross- border inspections, state taxes imposed on inter-state freight,

- 36 - freight tariffs, axle load control, etc. and recommendalternatives that will reduce or eliminatethe long delays occurringto traffic on the nationalhighways. The study will be conductedin collaborationwith MORTHand will adopt a stakeholderparticipatory approach.

(e) CorridorManagement Units related consultantservices (US$2.20 million).

(f) Projectpreparation and sector studies(US$ 3.96 million). This componentwill provide technicalassistance for conductingsector and projectpreparation studies, includingexpressway projectpreparation (the stretch from Vadodarato Mumbai is proposed as one of the candidates for detailed project study).

ProjectComponent 5 - US$5.89million Front End Fee ( $ 5.89 million)

- 37 - Annex 3: EstimatedProject Costs INDIA:Grand Trunk Road ImprovementProject

Local Foreign Total ProjectCost By Conponent _ US $million US $mitlion US $million Highway Upgrading 442.78 175.30 618.08 Private Sector Development 17.75 7.75 25.50 Corridor Management and Road Safety 16.30 1.90 18.20 Institutional Strengthening 11.40 6.25 17.65 TotalBaseline Cost 488.23 191.20 679.43 PhysicalContingencies 21.36 8.49 29.85 PriceContingencies 29.21 11.62 40.83 TotalProject Costs 538.80 211.31 750.11 Front-end fee 5.89 5.89 TotalFinancing Required 538.80 217.20 756.00

Local Foreign "Total ProjectCost ByCategory US $rnillion US $million US$million CivilWorks 454.98 186.85 641.83 Goods 2.28 2.28 4.56 Services 30.66 22.18 52.84 Miscellaneous 50.88 0.00 50.88 TotalProject Costs 538.80 211.31 750.11 Front-endfee 5.89 5.89 TotalFinancing Required 538.80 217.20 756.00

Identifiabletaxes and duties are O (US$m)and the totalproject cost, net oftaxes. is 756 (USS5n).Therefore, the projectcost sharingratio is 77.91%of total projectcost net of taxes.

- 38 - Annex 4: Cost BenefitAnalysis Summary INDIA:Grand Trunk Road ImprovementProject

Economic analysis was conducted for each of the nine highway upgrading packages. The total cost of the component including contingencies represents 90% of the total project cost. Economic analysis was not performed for the corridor management units works for which both international and domestic experiences suggest that these works will be highly economically viable.

Economic analysis for the individual upgrading packages was prepared by the consultants appointed for the feasibility studies. Details of the analysis are described in the relevant feasibility study reports, which are included in the project file. All analyses followed the conventional highway cost-benefit analysis methodology, and were based on well established highway project evaluation models, including the Highway Design and Maintenance Standards Model (HDM-III) developed by the World Bank. To ensure consistency, NHAI re-evaluated all packages using HDM-II1, with the same input data from the consultant reports. A summary of the results is given on the table below: [For projectswith benefitsthat are measuredin monetaryterms]

PresentValue of Flows FiscalImpact Economic FinancialAnalysis Analysis Taxes Subsidies Benefits: $1,461 m $1,623 m Savingsin road usercosts and road maintenance

Costs: $ 553 m $ 614 m Roadconstruction, land& resettlement, futuremaintenance NetBenefits: $ 908 m $ 1009 m

IRR: 25.9% 25.9%

A standardconversion factor of 0.90 has been used throughoutto convert financialcosts to economniccosts.

Summaryof Benefitsand Costs: The unit constructioncosts were based on the Bill of Quantitiesdeveloped by the consultantsfor the 420 km of roads for which the preliminaryengineering design was completed. Total costs includephysical and price contingencies,supervision costs, and costs of land acquisition,R&R and utility relocation. The averagecost of US$ 1.6 million per kilometerincludes widening to 4 and 6 lanes and shoulder reconstruction.Maintenance costs were based on the costs developedduring the Road MaintenanceStudy. The table below presentsthe main characteristicsof each package(Note that two packages,I-A and II-B, are further divided into two sub-packages,respectively, for the purpose of economic analysis):

- 39 - 1998 Total Total Length Traffic Road Cost Cost ERR NPV Package Section (km) (AADT) Widenin (M$) (M$/km (%) (M$)

._ _ g ) I-Al Agra- Tundla 22.0 17509 6 Lanes 54 2.45 45% 158 I-A2 Tundla - Thane Mathsena 28.8 11008 4 Lanes 40 1.38 36% 109 I-B Thane Mathsena - Etawah Byp. 59.0 6416 4 Lanes 72 1.22 23% 71 Start I-C Etawah Bypass End- Sikandara 72.8 8938 4 Lanes 101 1.38 31% 195 II-BI Bhaunti - Fatehpur Part I 30.5 8361 4 Lanes 72 2.35 17% 28 Il-B2 Bhaunti - Fatehpur Part 2 20.8 8361 4 Lanes 45 2.14 19% 26 IV-A Varanasi - Mohania 76.0 7056 4 Lanes 114 1.50 26% 169 IV-C Sasaram - Dehri 30.0 6919 4 Lanes 65 2.16 21% 62 V-B Barachatti - Gorhar 80.0 4117 4 Lanes 115 1.44 20% 91 Total 420.0 678 1.61 26% 908

The HDM-1II model estimates the net reduction in total transportation costs over the life of the project, taking account of savings in road user costs, primarily vehicle operating costs and time savings, along with changes in construction and maintenance costs. User cost savings depend mainly on changes in road roughness, traffic congestion and operating speeds. Existing traffic volumes range from 13,000 to 38,000 passenger car equivalents per day.

Safety impacts are uncertain due to offsetting effects of improved road standards and expected higher traffic speeds, and were not considered in the analysis due to lack of refined data on both accident occurrence and costs. It was observed that on the existing road the accident rates are around 37 fatalities per 100 million vehicle-km and 47 injuries per 100 million vehicle-kin, which are very high. The benefits of widening and paving the shoulders were included in the analysis through speed-flow equations based on lane and shoulder width. Speeds predicted by the HDM-III model were consistent with observations of speeds on the roads. The effects of narrow roads, non-motorized traffic, pedestrians and roadside activities were reflected in a "friction" factor affecting traffic speed that was estimated to be on average 0.70. Altemative road widths were considered in the analysis, before adopting the final pavement and shoulder widths.

MainAssumptions:

The base case without the project assumesthat roads are maintained(routine maintenance, pothole patching and reconstructionat 11 IRI) but not improvedover the 20-yearevaluation period. In the with-projectcase, further pavement strengtheningis providedthrough an overlay scheduledwhen the roughnessreaches 6.0 IRI. Roads are designedon the basis of currentlevels of truck overloading, recognizingthe substantiallack of success in introducingimproved load enforcementor truck fleet modernizationin India.

- 40 - For the purpose of economic analysis, a project life of 20 years is assumed. A 20% scrap value is assumed for the end year of project life. A discount rate of 12% is used for the calculation of NPV. Where applicable, a 0.9 standard conversion factor is used for converting financial costs into economic costs.

The base year traffic levels were updated from the latest traffic counts (all in recent years), and verified through field inspection. The traffic growth rates for each package were estimated based on the predicted rates of population growth and per capita income in the project areas, and the assumed income (total GDP) elasticities of traffic demand. The assumed elasticities were based on various international empirical studies of traffic growth at similar stage of economic development. Specifically, elasticities for passenger vehicle traffic range from 1.8 to 2.0, and for freight vehicle traffic, 1.0 to 1.25. On average, the annual traffic growth rate was estimated to be around 9% for passenger vehicles and between 7% and 8% for freight vehicles during the first 10 years of the evaluation period, afterwards, a conservative growth rate of 6% was adopted for all vehicles.

Generated traffic was also considered for the first year after project completion. A conservative price elasticity of 0.25 was assumed to estimate the generated traffic, which yields, on average, a generated traffic equivalent to 5% of the normal traffic. The road user benefits accrued to the generated traffic were calculated as 50% of the road user benefits accrued to normal traffic. Passenger value of tirne by type of vehicle was based on the per capita income level of the average passengers using that type of vehicle. The impact of road congestion was considered through the HDM-III model. The table below presents typical vehicle characteristics and road user costs:

Typical VehicleCharacteristics and Road User Costs

Light | Medium Heavy

Cars Buses Trucks Trucks Trucks

Vehicle Characteristics

Gross vehicle weight (tons) 1.2 13.2 7.0 16.2 25.0

Number of passengers(#) 4.8 43 0 0 0

Service life (years) 10 10 10 10 10

Kilometers driven per year (kmn) 18000 100000 65000 85000 85000

Hours driven per year (hours) 600 3000 2200 2900 2900

Economic Costs

New vehicle price (Rs) 213500 489000 460000 572800 776500

New tire price (Rs) 1000 6700 3000 6500 6500

Maintenance labor (Rs/hour) 10 10 10 10 10

- 41 - Driver wages (Rs/hour) 0 70 25 37 37

Time costs (Rs/hour) 22 15 0 0 0

Fuel price (Rs/liter) 10 9 9 9 9

Lubricants price (Rs/liter) 26 26 26 26 26

Typical Road User Costs (Rs per vehicle-kilometer)

Four/Six Lane Road (3 IRI) 5.1 15.6 4.8 6.8 9.9

Congested Two Lane Road (4 IRI) 6.0 21.2 5.7 7.4 11.2

Congested Two Lane Road (7 IRI) 6.5 22.5 6.8 8.9 12.9

Congested Two Lane Road (10 IRI) 7.6 25.5 8.4 10.9 15.0

Typical Traffic Composition (%) 28% 6% 11% 49% 6%

Sensitivity analysis / Switching values of critical items:

The major risks affecting economic analysis for the highway upgrading component are cost overruns, delays in implementation and lower-than-expected traffic growth. Cost overruns were considered by a 20% increase in costs. The delays in implementation were reflected by assuming one or two year delay in the opening of all works, with a commensurate delay in the benefit stream. To account of lower traffic growth, that can be caused by macroeconomic problems, a 6% and 4% growth rate for all vehicles was assumed over the evaluation period. All these sensitivity scenarios yield a project ERR greater than 18%. If benefits are reduced by 20% and costs increased by 20%, the project ERR is 19.3%. A sensitivity scenario considering the value of passenger and cargo time to be zero, yields a project ERR of 19.6%, which indicates that a high quality of the project benefits are coming from the expected improved surface condition of the project roads.

Sensitivity Scenarios ERR NPV ($ million) Base case 25.9% 908 One year delay in opening 23.0% 783 Two year delay in opening 20.0% 653 Traffic growth equal to 6% for all vehicles 22.3% 558 Traffic growth equal to 4% for all vehicles 18.7% 293 Value of passenger and cargo time equal to zero 19.6% 434 Benefits decreased by 20 % 22.0% 622 Cost increased by 20% 22.7% 804 Benefits down 20% and costs up 20% 19.3% 519

- 42 - Switchingvalues of criticalitems: The cost of highway upgradingworks would have to increaseby 175 percentor the benefitsto drop by 64 percent beforethe overallproject NPV would fall to zero. For a typical sectionwith an estimatedcost for wideningto four lanes of US$ 1.5 million per kilometer,the traffic would have to be around 5,000 AADT to justify the investmnentwith a 12%rate of return. For a typical sectionwith a current traffic of 8,000 AADT,the cost for wideningto four lanes would have to be aroundUS$ 3.0 millionper kilometerto justify the investrnentwith a 12%rate of return.

Distributionof benefits: All incomegroups use the nationalhighways, as travelers and as suppliersand consurnersof goods and services. Withoutthe project,high transportcosts would continueto affectprices and availabilityof servicesto the communitiesserved by the project,and would constraineconomic developmentat all levels. With the project, transportcosts will decrease,travel times will reduce,and servicessuch as electricity,health, education, and agriculturalextension are more likelyto become availablein rural areas. The truckingindustry in India is competitive,and is likelyto pass on the benefits of vehicleoperating cost savings throughlower freight rates, higher qualityof services,and extended servicecoverage. Bus servicesthat use the project roads are both publicly and privately operated. The project benefitsto the privatelyoperated bus servicesare likelyto reach the bus users throughlower fares and higherquality. Fares of the publiclyoperated bus servicesare not likelyto be reduced,but the extent and schedulesof bus services are likelyto respondto changesin road capacityand quality. The table below showsthe distributionof projectbenefits amongvehicle classesand sources of benefits,which indicatesthat 66% of the benefits will be allocatedto trucks, 17%to buses and 17%to passengercars. Vehicleoperating costs savings of the normaland generatedtraffic will accountfor 69% of the project benefits,while traveltime savings will accountfor 31% of the project benefits. ProjectNet Benefits(M$) Net Benefits 908 Costs -553 Benefits 1461 Distributionof Benefitsby VehicleClass (M$) Cars 248 17% Buses 248 17% Light Trucks 161 11% MediumTrucks 731 50% Heavy Trucks 73 5% Total 1461 100% Distributionof Benefitsby Sourceof Benefits (M$) Nornal Traffic 978 67% VOC Savings GeneratedTraffic 30 2% VOC Savings Normal Traffic 438 30% Time Savings GeneratedTraffic 15 1% Time Savings Total 1461 100%

- 43 - Annex 5: Financial Summary INDIA: Grand Trunk Road Improvement Project Years Ending

Year1eI arr Year3 4 Year5| Year6 Year7 Total Financing Required Project Costs InvestmentCosts 112.5 187.5 225.0 150.0 75.0 0.0 0.0 RecurrentCosts 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Costs 112.5 187.5 225.0 150.0 75.0 0.0 0.0 Front-endfee 5.9 0.0 0.0 0.0 0.0 0.0 0.0 ,Total Financing 118.4 187.5 225.0 150.0 75.0 0.0 0.0 Financing IBRD/IDA 88.0 147.0 177.0 118.0 59.0 0.0 0.0 Government 30.4 40.5 48.0 32.0 16.0 0.0 0.0 Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 UserFees/Beneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 118.4 187.5 225.0 150.0 75.0 0.0 0.0 Main assumptions:

- 44 - Annex 6: Procurementand DisbursementArrangements INDIA: GrandTrunk Road ImprovementProject

Procurement

A. InstitutionalCapacity

NHAI carries out procurementof works,goods and services in-houseby a divisionheaded by Member/ChiefGeneral Manager. NHAI has prior experienceof executionof large externally aided projects under assistance from ADB and JBIC. Both Bank and ADB are supporting NHAI'sNational Highway DevelopmentProgram and agency's institutionaldevelopment.

An assessmentwas carriedout earlier in February2000 to determinethe institutional capacityof the NHAI to undertakeproject procurementfor Third NationalHighway Project [LN. 4559-IN] and it was determinedthat NHAI has the institutionalcapacity to carry out project procurement.

NHAI has also confirmedthat its Board has been fully delegated authorityfor award of all contractswithout any limitationof value. NHAI has an exclusiveweb-site 'www.nhai.org'that gives procurementinformation on names of successfulbidder, current bids, etc.

NHAI has carried out procurementfor major consultancyand large work for Third NationalHighway Project and has thereforegained further experience/expertiseon Bank- funded procurement. The officers recruitedhave good educationalbackground. There is fairly effective audit systemcombined with reviewby internal and externalvigilance organization. NHAI has good procurementcycle managementsupport and control system, sound record keeping system and a fairly establishedmechanism for settlementof dispute.

The overallrisk assessment[with overallrating of - Average]and prior review thresholds in ParagraphD below are arrived at after assessingNHAI's capacity for carryingout project procurementas per Bank's ProcurementGuidelines.

B. ProcurementMethods

All project activitiesfinanced under the Loan shall be procuredin accordancewith Bank Guidelinesfor Procurement,January 1995,Revised Januaryand August 1996, September1997 and January 1999,in respect of Goodsand Works. Consultingservices to be fundedthrough the Bank's Loan would be procuredin conformitywith the Bank'sGuidelines for Selectionand Employmentof Consultantsby the World Bank Borrowers,January 1997, revised September 1997,and January 1999. All civil works,goods and serviceswill be procured usingIndia-specific Bank's Model StandardPre-qualification and Bidding Document. Specificprocurement arrangementsare summarizedin Tables A and Al, and are briefly describedas under:

- 45 - B]. Works [US $641.84 Million]

International Competitive Bidding [ICB]: US$615.41 Million Equivalent : The work relating to widening and strengthening of 420 km. of national highways from existing two lanes to four-six lane divided highway with service roads and other traffic separation measures where required will be implemented in seven contract packages of value, in the range of US$48 to US$96 million equivalent, for an aggregate value of about US $530 million [excluding price escalation and contingencies] equivalent. The pre-qualification applications have been received by NHAI and the selection process of firms is underway. As an advance action, bidding documents are under preparation by NHAI and bids are to be invited soon. There shall also be a component of work as a pilot project for private sector participation based on Intemational Competitive Bidding for an estimated value of US$ 25.00 million.

National Competitive Bidding [NCB] : US $10.01 Million Equivalent: The work relating to corridor maintenance and safety hazardous location improvement work shall be implemented in contract package sizes of US $1.00 to 2.00 million equivalent each, approximately [excluding price escalation and contingencies], for a cumulative value of US$8.90 million equivalent and US$11.13 million equivalent.

Direct Contracting/Shopping/Force Account: US $16.40 Million Equivalent: The work relating to minor improvement program/environment management program /provision for additional safeguard measure/small work for road safety and corridor management shall be on the basis of [i] lump sum fixed price contract soliciting quotation from at least three qualified suppliers/contractors [ii] direct contracting with a qualified supplier/contractor or [iii] as a last resort through force account, with the value of each contract being less than the equivalent of US $25,000 in all the three cases.

B2. Goods [US $4.56 Million Equivalent]

Direct Contracting/Shopping : US $4.56 Million Equivalent : It is envisaged that for implementation of road safety action plan there shall be need for Direct Contracting or Shopping for items like computers, data collection, training aids such as audio/video equipment, estimated to cost less than the equivalent of US $10,000 per contract, subject to cumulative value of US $560,000 equivalent.

The work of aerial survey estimated to cost US$ 4 million is envisaged to be done for the National Highway Network under NHAI through National Remote Sensing Agency, Hyderabad on a direct contracting basis.

B3. Consultancy Services [US $52.81 Million Equivalent]

- 46 - Arrangement in respect of procurement of consultancy services is as under:

S. No. Descriptionof Services EstimatedCost Method of [US $ Million] Selection [i] Supervisionof Civil Works 34.96 QCBS [Four Packages] [ii] Consultants Services (Legal, 0.55 QCBS Preparation of Bid Documents, Evaluation of Bids) [iii] Safety Audit on Engineering Design 0.22 SingleSource Selection [iv] Social and Environment Capacity 0.77 SingleSource Building: Selection

- Poverty and Highway Development Study [v] Social and Environment Capacity 0.33 LCS Building:

- Consultant Services (Training, Streamlining, Monitoring Procedure) [vi] Training of Trainers and dissemination 1.60 QCBS/Single of Road Safety manual Source Selection [vii] Public Education and campaign 2.64 QCBS through mass media [viii] Implementation of Road Safety Action 2.64 SFB Plan [ix] Cross State Border Road Efficiency 0.33 SFB Study [x] Corridor Management Units - 2.20 QCBS Consultants Services [xi] Project Preparation and Sector Studies 3.96 QCBS [xii] R&R support 0.85 QCBS/LCS [xiii] EnvironmentalManagement Plan 1.37 QCBS [xiv] Provisionof AdditionalSafeguard 0.39 SFB Measure For item [i] aboveProposals have been invitedby NHAIand consultantsshall be selectedone monthin advanceof startof constructionwork.

- 47 - C. Procurement Planning

NHAI has prepared a procurement plan for the identified packages under the project, in the format specified by the Bank. This has been reviewed and approved by the Bank and is being fed in SAP Operations Procurement also. Procurement of all packages would be undertaken in accordance with this procurement plan.

D. Review of Procurement Decisions by the Bank [Refer Table BI

Prior Review

- All ICB irrespective of value.

- All NCB civil works contracts [for corridor maintenance] valued US $5 Million equivalent and above and first two contracts, irrespective of value.

- Consultants' contracts with an estimated value of US $100,000 equivalent and above for firms, and US $50,000 equivalent and above for individuals.

E. NCB Provisions

With reference to the procedures for undertaking procurement on the basis of NCB, all NCB contracts shall be awarded in accordance with the provisions of Paragraphs 3.3 and 3.4 of the Guidelines for Procurement Under IBRD Loans and IDA Credits published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999 [the Guidelines]. In this regard, all NCB contracts to be financed from the proceeds of the Loan shall follow the following procedures:

[i] Only the model bidding documents for NCB agreed with the Government of India Task Force [and as amended from time to time], shall be used for bidding;

[ii] Invitations to bid shall be advertised in at least one widely circulated national daily newspaper, at least 30 days prior to the deadline for the submission of bids;.

[iii] No special preference will be accorded to any bidder either for price or other terms and conditions when competing with foreign bidders, state-owned enterprises, small-scale enterprises or enterprises from any given State;

[iv] Except with the prior concurrence of the Bank, there shall be no negotiation of price with the bidders, even with the lowest evaluated bidder;

[v] Extension of bid validity shall not be allowed without the prior concurrence of the Bank [i] for the first request for extension if it is longer than eight weeks; and [ii] for

-48 - all subsequent requests for extension irrespective of the period. [Such concurrence will be considered by Bank only in cases of force majeure and circumstances beyond control of NHAI];

[vi] Re-bidding shall not be carried out without the prior concurrence of the Bank. The system of rejecting bids outside a pre-determined margin or " bracket " of prices shall not be used; and

[vii] Rate contracts entered into by Directorate General of Supplies and Disposal will not be acceptable as a substitute for NCB procedures. Such contracts will be acceptable for any procurement under National Shopping procedures.

F. ProcurementInformation

Procurement information will be collected and recorded as follows:

[a] Prompt reporting of contract award information by the Project Management Units [PMU] for the respective components.

[b] Comprehensive quarterly reports by PMU indicating:

[i] revised cost estimates for individual contracts and total cost;

[ii] revised timings of procurement actions including advertising, bidding, contract award and completion time for individual contracts; and

[iii] compliance report by the borrower within three months of the Loan signing date.

G. ProposedProcurement Arrangements

The project elements, their estimated costs and proposed methods of procurement are summarized in Table A. Figures in parenthesis are the respective amounts to be financed by the IDA/Bank.

- 49 - Procurementmethods (Table A)

Table A: Project Costs by ProcurementArrangements (US$ million equivalent)

Procurement Method ExpenditureCategory 1CB NCB Other N.B.F. Total Cost 1. Works 615.40 10.01 16.40 0.00 641.81 (492.00) (8.00) (13.00) (0.00) (513.00) 2. Goods 0.00 0.00 4.60 0.00 4.60 (0.00) (0.00) (4.54) (0.00) (4.54) 3. Services 0.00 0.00 52.90 0.00 52.90 (0.00) (0.00) (52.85) (0.00) (52.85) 4. Miscellaneous 0.00 0.00 0.00 33.60 33.60 (0.00) (0.00) (0.00) (0.00) (0.00) 5. Front-endfee 0.00 0.00 5.89 0.00 5.89 (0.00) (0.00) (5.89) (0.00) (5.89) 6. Resettlementand 0.00 0.00 17.20 0.00 17.20 RehabilitationSupport (0.00) (0.00) (12.72) (0.00) (12.72) | Total r 615.40 10.01 96.99 33.60 756.00 ______| (492.00) (8.00) (89.00) (0.00) (589.00) i Figures in parenthesis are the amounts to be financedby the Bank Loan. All costs include contingencies. Includes civil works and goods to be procured throughdirect contracting,national shopping, or force account, consultingservices, servicesof contractedstaff of the project managementoffice, training, and technicalassistance services.

- 50 - Table Al: ConsultantSelection Arrangements (optional) (US$ millionequivalent)

Selection Method ConsultantServces ExpenditureCaWgory QCBS QBS SFB LCS CQ Other N.B.F. Total Cost A. Firms 44.90 0.00 5.34 0.78 0.00 0.99 0.00 52.01 (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) B. Individuals 0.00 0.00 0.00 0.00 0.00 0.80 0.00 0.80 (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) Total 44.90 0.00 5.34 0.78 0.00 1.79 0.00 52.81 (0.00) (0.00) (0.00) (000) (0.00) (0.00) (0.00) (0.00) 1\ Includingcontingencies

Note: QCBS = Quality- and Cost-BasedSelection QBS = Quality-basedSelection SFB = Selection under a Fixed Budget LCS = Least-CostSelection CO = Selection Basedon Consultants'Qualifications Other = Selectionof individualconsultants (per Section V of Consultants Guidelines), CommercialPractices, Single Source Selection, etc.

N.B.F. = Not Bank-financed Figures in parenthesisare the amounts to be financed by the Bank Loan.

- 51 - Priorreview thresholds (Table B)

TableB: Thresholdsfor ProcurementMethods and PriorReview1

ContractValue ContractsSubject to Threshold Procurement PriorReview ExpenditureCategory (US$thousands) Method (US$millions) 1. Works All ICB irrespective of ICB 8 contracts (US$555 nn. - Civil Works for value approximately) Wideningand/or Strengthening US$5 million or first two NCB First two irrespective of contracts irrespective of value (US$3 mn.) value 2. Goods Contracts for Aerial Direct Contracting 1 No. (US$4 mn.) Survey 3. Services - ConsultingServices For firms USS100,000and Bank Guidelines and as at 18 numbers (US$50 million above Paragraph B3 above approximately)

For Individual Consultants, US$50,000 and above 4. Miscellaneous 5. Miscellaneous 6. Miscellaneous

Total value of contractssubject to prior review: 612 million

OverallProcurement Risk Assessment

Average

Frequency of procurement supervision missions proposed: One every 12 months (includes special procurement supervision for post-review/audits)

Thresholdsgenerally differ by countryand project. Consult OD 11.04"Review of Procurement Documentation"and contactthe RegionalProcurement Adviser for guidance.

- 52 - Disbursement

Allocationof loanproceeds (Table C)

Table C: Allocation of Loan Proceeds

Expenditure Category Amountn in US$million T Financing Percentage 1. Civil Works 510.72 80% 2. Goods 4.54 100% of foreign or ex-factory costs and 80% of other items procured domestically 3. Consultants 52.85 100% of total expenditure net of taxes 4. Unallocated 15.00

Total Project Costs 583.11 _ Front-endfee 5.89 Total 589.00

Financial Management Issues:

The project will be implemented by NHAI established under the NHAI Act, 1988. NHAI is also implementing the TNHP. NHAI has already in place plans to build institutional financial and internal control capacity.

Current Accounting System:

NHAI follows commercial (accrual) double entry accounting systems based on accounting standards issued by the Institute of Chartered Accountants of India and significant accounting policies adopted by the Board of NHAI from time to time. However, it has been noted that there is one significant deviation from accounting standards in relation to notional income and this has been specifically described in the "Project Risks" section of this Annex. The Finance Division at the Head Office (HO) at New Delhi coordinates the finance function. The Division works in close coordination with the Project Management Units (PMUs) in implementation of the projects. NHAI follows decentralized payment and financial accounting procedure. At the HO, an off-the-shelf accounting package is used for accounting.

NHAI has several bank accounts in commercial banks for operation of its funds. PMUs also operate and maintain bank accounts. Payments for various projects are handled and the books of accounts maintained at the PMUs. Each PMU is treated as a separate payment/accounting center. PMUs prepare monthly trial balances which are sent to the HO. The accounting system at the PMUs is manual.

At the end of the year, the consolidation of accounts takes place at HO based on the trial balances submitted by the PMUs. The financial statements are prepared in the formats prescribed

- 53 - under the NHAI Rules, 1997. The Rules also provide for additional reports, as may be required by the Central Government, in consultation with the Comptroller and Auditor General (C&AG).

The budget of NHAI is compiled based on the information received from the PMUs and various departments at HO. Though the budget is monitored regularly by HO on the basis of monthly trial balances received from PMUs, NHAI does not prepare periodic statements comparing the actual expenditure/income against the budget.

All payments are supervised by independent professional construction supervision consultants. The contractor's bills are checked by the consultants in addition to ensuring quality control. Bills are also checked by PMU technical and accounts staff before making payments to the contractors. Cheques are signed jointly by the Project Manager and the Accounts Officer. Monthly trial balances prepared by the PMUs are reviewed by the HO.

Flow of Funds:

NHAI will receive funds required for the implementation of the project through Ministry of Road Transport & Highways (MORTH), Government of India (GOI) as capital grant through the budgetary allocations of GOI. Necessary funds to meet the project expenses are released from HO to PMUs on a quarterly basis.

Proposed Arrangements:

Accounts Manual:

The accounting guidelines, policies followed by NHAI are documented in an Accounts Manual prepared about five years back. New developments have required fresh guidelines to be issued from time to time. The Accounts Manual needs to be updated to incorporate these changes. NHAI will seek the assistance of the internal auditors to update the accounting manual also incorporating the financial management manual developed by consultants appointed for development of a project financial management system.

Project Financial Management System

The computerized Project Financial Management System (PFMS) is in advanced stage of preparation. NHAI has contracted AF Fergusons for the purpose. The project financial management system has been documented in a 'Financial Management Manual' which will now be merged with the updated accounts manual. The Manual would also serve as a reference document for all project staff. Substantial work has been done under the consultancy and the PFMS should be fully implemented by October 1, 2001. Key issues relating to the PFMS are as follows:

The development of a computerized integrated financial management system was initiated under TNHP and is expected to replace the "off the shelf' package currently being used by NHAI for its accounting. NHAI have renegotiated with the financial management consultancy firm, AF Fergusons to widen the scope of the PFMS from the project-specific financial reporting system

- 54 - for the proposed project to permit the project accounting system to be applied generally within NHAI to upgrade its project accounting and integrate it with the mainstream accounting system.

* The PFMS will provide all information required for PMR reporting - cover all aspects of project accounting, procurement and contract administration and provide financial information with adequate linkages to physical performance indicators. * A time bound action has been prepared for phased implementation and training of all accounting staff in the PFMS. As per the current plans, the PFMS will be installed initially in the 5 PMUs implementing the Bank Projects and in the HQ. 3 months implementation assistance has been built into the consultancy contract. In addition, a dedicated IT person will get associated with the PFMS project and take over the management of the systems from the consultants.

Until the PFMS is installed and becomes operational, the Bank would recommend that the NHAI ensure that the following accounting benchmarks are adopted as part of the accounting procedures:

* Quarterly consolidated financial statements are prepared. This would need the PMU's accounts to be incorporated on a quarterly basis into the HQ accounts.

o The quarterly financial statements provide a comparison of the actual expenditures against the budgeted provisions.

Staffing and Training

The Finance Division at the HO is headed by a General Manager (GM, Finance) who reports to the Member, Finance. The Member Finance is a member of the Board of NHAI and is on deputation from the Indian Administrative Service (IAS). He is supported by 3 Deputy General Managers (Accounts), 3 Managers, 3 Accounts Officers, 6 Accountants and a Cashier. The PMUs are staffed with an Accounts Officer and an accountant.

Training will be the most important requirement for the operation and implementation of the financial management system. Accounting staff at the PMU and HO will be provided with training on the Bank's disbursement and reporting requirements before the implementation process commences.

Disbursement Arrangements

Disbursements from the IBRD Loan would be initially be made according to the Bank's current transaction-based disbursement procedures (reimbursements with full documentation or against Statements of Expenditure, and direct payments). It is expected that the quarterly Project Management Reports (PMRs) would be prepared from the beginning of the project and used for project management purposes. It is however, expected that assured preparation of regular, timely and adequate PMRs could take up to eighteen months from the start of the project. Disbursement

- 55 - would be converted to PMR-based system after satisfactory, regular and timely quality PMRs has been demonstrated.

Financial Reporting Project management reports (PMRs) would be generated from the manual/ computenrzed accounting system for each implementing agency and for the whole project. These reports would be management-oriented and would be used for project management. The reports would include: (i) a comparison of budgeted and actual expenditure and analysis of major variances, including sources and application of funds (by components and expenditure categories) and key physical parameters and unit rates for selected key items; (ii) expenditures by disbursement categories; and (iii) forecasts for the next 2 quarters. The formats of these reports would conform to the Bank's requirements and will be incorporated in the Financial Management Manual. Auditing Arrangements

External Audit

NHAI is audited by the Controller & Auditor General of India (C&AG). The following audited annual project financial statements would be submitted to the Bank within 6 months of the close of GOIs fiscal year. Statement of Sources and Uses of funds classified by expenditure categories, components and sources of funds. Special Account reconciliation Statement of withdrawals from the Credit/Loan based on SOEs or PMRs.

The following audit reports will be maintained under ARCS:

Agency Audit Report Audited by

NHAI Project/SOE C&AG NHAI Entity C& AG GOI,Department of EconomicAffairs SpecialAccount C&AG

In accordance with the Bank policies for submission of a separate financial statement for the entity as a whole for all revenue earning entities, NHAI would be required to submit entity statement of accounts and an audit report on the same within six months of the close of the financial year in addition to the project audited reports.

Internal Audit

NHAI has not had internal audit done (except the internal reviews carried out by their own staff) since 1998-99. NHAI is currently in the process of preparing a short list of firms of chartered accountants to under take the internal audit for the year 2001-2002. A time-bound

- 56 - action plan for the process has been prepared, including obtaining the approval of Termnsof reference from the Bank. The process will be completed by July 31, 2001.

Project Risks

The issues that pose inherent risks are as follows: * The current business and accountingpractices do not allow NHAI to work out projectwise under or over absorptionof their indirectcosts. These costs are not directlyallocated or attributedto projects but charged off to Profit & Loss Account to offset against agency commissionincome. Agency commission is chargedat 3% (of the civil works & supervision costs) for externallyaided projects and 9% (of the civil works & supervisioncosts) for other projects.This is the standardpolicy followedby PWD in the states. It also impliesthat this percentageof works, capitalized as assets (as NHAI is the owner of the works) is treated as revenue income in the Profit & Loss Account.This is contrary to standardaccepted accountingpractices. In order to assistNHAI to move towards becoming an agency managing its assets on business principles:(a) the current accountingpolicy of creatingnotional revenue incomes as agency income at the cost of capitalization,which is a deviation from accepted accountingstandards, needs to be examinedby NHAI and GOI; and (b) NHAI needs to build on the processes of using accountinginformation to determinethe actual project wise under and over absorptionof their indirect costs as a factor criticalin arriving at informed managementdecisions relating to sustainability.This can be addressedby buildingan appropriatecosting module as part of the developmentof the computerizedPFMS. * Additionally,the PFMS being developeddoes not specificallyprovide for cost allocationsto arrive at projectwise profitabilitystatus. In the long run, this will be criticalin arrivingat informedmanagement decisions relating to sustainability.It is recommendedthat NHAI addressesthis issue in the future. e NHAI has not had internal audit done (exceptthe internal reviewscarried out by their own staff) since 1998-99.The Bank has agreed on a time-boundaction plan for the process, includingobtaining the approvalof Terms of referencefrom the Bank. * Delaysin the audit process. The annual accountsfor the year ended 31 March 1999 and the audit report thereon were issued in April 2000. The audit for the year 1999-2000has been completedbut the audit report has yet to be finalized.

The Bank requiresNHAI to providethe auditedfinancial statementsand audit report within six months of the close of the financialyear. With the introductionof the PFMS,NHAI plans to completethe process of consolidationand finalizationof accountsby the end of June to enable it to comply with the Bank'saudit requirements.

For the year 2000-2001,NHAI will work with a firm of charteredaccountants to completethe consolidationand finalizationof the accountingstatements to meet the Bank'stime line for submissionof audited statementsand report.

- 57 - Readinessfor Implementationand Next Steps

While current capacity withinNHAI to accountfor project funds is adequate,NHAI is upgradingthis capacity with thz developmentof the computerizedProject FinancialManagement System. A projectfinancial m2nagement manual has been developedin conjunctionwith the system. The systemwill be tested and debugged,and staff trained, over a 12 week period beginningin June 2001, so that the systemwill be fully implementedfrom October 2001.

AgreedActions By when

Quarterlyfinancial statements provide a comparisonof the For GTRIP: October2001 actual expendituresagainst the budgeted provisionsand explanationsof significantvariations. For entire NHAI: January 2002

Quarterly consolidatedfinancial statementsare prepared. August 2001 This would need the PMU's accounts to be incorporatedon a quarterlybasis into the HQ accounts.

Initiate 12-week system testing and debuggingprocess June 2001

Full implementationof PFMS for TNHP and GTRIP October2001

Appointment of chartered accountant firm for internal audit July 2001 purposes

Training of staff in Bank's accountirng,reporting July 2001 requirements and claim procedure

Prepare detailedplan for roll out of PFMS for all project accountingneeds of NHAI outside of GTRIP and TNHP December2001

Begin PFMS roll out in NHAI to integrate with mainstream January2002 accounts

Update and mergingof Accounts and Financial Management December2001 Manuals

- 58 - Annex 7: Project ProcessingSchedule INDIA: Grand Trunk Road ImprovementProject

ProjectSchedule Planned Actual Time taken to prepare the project (months) 15 10 First Bank mission (identification) 09/04/2000 09/04/2000 Appraisal mission departure 02/05/2001 02/12/2001 Negotiations 05/15/2001 05/23/2001 Planned Date of Effectiveness 09/30/2001

Prepared by: National Highways Authority of India

Preparation assistance: Consultants and India Country Office

Bank staff who worked on the project included: Name Speciality Zhi Liu Task Leader, Transport Economist A. K. Swaminathan Highway Engineer Anil Bhandari Highways Adviser, Institutional Strengthening Sonia Kapoor Environmental Specialist Mridula Singh Social and Resettlement Specialist Anil Somani Environmental Specialist Guang Zhe Chen Transport Economist, India Transport Team Leader Stein Lundebye Transport Specialist, Road Safety Piers Vickers Transport Specialist Rodrigo Archondo-Callao Technical Specialist, Economic Analysis Reidar Kvam Social and Resettlement Specialist N. Rarnan Procurement Specialist D. C. Mishra Procurement Specialist Rajat Narula Financial Management Specialist Manvinder Mamak Financial Management Specialist Irene Christy Program Assistant Douglas Gray Program Assistant N. S. Srinivas Team Assistant Sangeeta Anand Team Assistant

- 59 - Annex 8: Documentsin the Project File* INDIA: GrandTrunk Road ImprovementProject

A. Project ImplementationPlan 1. Grand Trunk Road Project, Borrower's Project Implementation Plan, Main Report, version 1.0, May 2001 2. Grand Trunk Road Project, Borrower's Project Implementation Plan, Appendices, version 2.0, May 2001

B. Bank Staff Assessments

C. Other 1. National Highways Authority of India (NHAI) - Grand Trunk Road Improvement Project: Consolidated environmental Impact Assessment Report - Volume I, February 2001 2. NHAI - Grand Trunk Road Project : Consolidated Environmental Impact Assessment Report - Executive Summary Draft: January 2001 3. NHAI - Grand Trunk Road Project: Noise Quality Assessment - Final Report, January 2001 4. NHAI - Tree Plantation Strategy - Grand Trunk Road Improvement Project, March 2001 5. NHAI - Grand Trunk Road Improvement Project: Consolidated Resettlement Action Plan - Final Report, February 2001 6. NHAI - Grand Trunk Road Improvement Project: Construction Period Road Safety Plan - Volume VI, Final Report, February 2001 7. NHAI - Grand Trunk Road Improvement Project: Independent Review Report - Volume II, Final Report, February 2001 8. NHAI - Grand Trunk Road Improvement Project: Air Quality Assessment - Volume III, Final Report, February 2001 9. NHAI - Grand Trunk Road Improvement Project: Executive Summary - Final Report, February 2001 10. NHAI - Grand Trunk Road Improvement Project: Road Landscape and Tree Transportation Plan - Volume V, Final Report, FebruLary2001 11. NHAI - Grand Trunk Road Improvement Project: Environmental Management Plan - Package IA, Final Report, February 2001 12. NHAI - Grand Trunk Road Improvement Project: Environmental Management Plan - Package IB, Final Report, February 2001 13. NHAI - Grand Trunk Road Improvement Project: Environmental Management Plan - Package IIB, Final Report, February 2001 14. NHAI - Grand Trunk Road Improvement Project: Environmental Management Plan - Package IC, Final Report, February 2001 15. NHAI - Grand Trunk Road Improvement Project: Environmental Management Plan - Package IVA, Final Report, February 2001 16. NHAI - Grand Trunk Road Improvement Project: Environmental Management Plan - Package IVC, Final Report, February 2001 17. NHAI - Grand Trunk Road Improvement Project: Environmental Management Plan - Package VB, Final Report, February 2001 18. NHAI - Grand Trunk Road Improvement Project: Appendices to EIA Report - Volume IA, Final

- 60 - Report, February 2001 19. NHAI -Grand Trunk Road ImprovementProject: Noise QualityAssessment - VolumeIV, Final Report, February 2001 20. NHAI - EconomicAnalysis, February 2000 21. InstitutionalStrengthening of NationalHighway Authority of India (NHAI),December 1999 22. NHAI, CorporatePlan 96-97, September1996 23. NHAI, Options Report, MediumTerm ConstructionPriorities for Expresswaysin India,December 1994 24. NHAI, CorporatePlan, ReferenceDocuments, April 1996 25. NHAI, Organizationand DevelopmentProposals, May 1995 26. NHAI, Organizationand DevelopmentPhase 2 Report, May 1996 27. Developmentof Long Term Plan for Expressways,Executive Summary, October 1991 28. Developmentof Long Term Plan for Expresswaysin India,Final Report, October 1991 29. Medium Term ConstructionPriorities for Expresswaysin India, 1996 30. NHAI, ResettlementAction Plan, October2000 - ConsultancyServices for Package- I, Four Laning and Strengtheningof the Existing Two-lanefrom km 199.66(Agra) to 393 (Rajpur)of NH-2 31. NHAI, ResettlementAction Plan NH-2 (PackageII), ConstructionPackage 'B' - Four Laningand Strengtheningof Highwayfrom km 393 (Sikandara)to km 115 (Khaga) Sectionof NH-2 (11/28/2000) 32. NHAI, NH2 Varansasi- Aurangabad4-laning and StrengtheningProject, Resettlementand RehabilitationAction Plan, ConstructionPackage A & Package C, September2000 33. NHAI, ResettlementAction Plan, ConsultancyServices for Four-laningand Strengtheningof the Existingtwo-lane Section of NH2, km 180.00to km 398.75(Madanpur to Barwa Adda) (package V(B)) 34. NHAI, Follow-upPublic ConsultationProgramme, April 2001.

*Including electronic files

- 61 - Annex 9: Statementof Loansand Credits INDIA:Cirand Trunk Road Improvement Project May-2001 Differenc-ebetween expected and actual Orginal Amountin US$ Millions disbursements Project iD FY Purpose IBRD IDA GEF Cancel. Undisb. Orig Frm Rev'd P055454 2001 KERALA RWSS 0.00 65.50 0.00 0.00 61.17 -0.11 0.00 P035173 2001 POWERGRIDII 450.00 0.00 0.00 0.00 450.00 0.00 0.00 P050658 2001 TECHN EDUC III 0.00 64.90 0.00 0.00 59.15 -0.51 0.00 P059242 2001 MP DPIP 0.00 110.10 0.00 0.00 103.53 -3.50 0.00 P010566 2001 GUJARATHWYS 381.00 0.00 0.00 0.00 340.11 1.45 0.00 P038334 2001 RAJ POWER I 180.00 0.00 0.00 0.00 161.46 -16.99 0.00 P067543 2001 LEPROSYII 0.00 30.00 0.00 0.00 29.57 0.00 0.00 P049770 2000 REN EGY II 80.00 50.00 0.00 0.00 125.24 3.67 0.00 P045049 2000 AP DPIP 0.00 111.00 0.00 0.00 100.77 -1.09 0.00 P035172 2000 UP POWER SECTORRESTRUCTUFtING PROJECT 150.00 0.00 0.00 0.00 134.69 15.02 0.00 P010505 2000 RAJASTHANDPIP 0.00 100.48 0.00 0.00 91.80 3.24 0.00 P067330 2000 IMMUNIZATIONSTRENGTHENING PROJECT 0.00 142.60 0.00 0.00 108.37 -14.04 0.00 P059501 2000 TAforEcon Reform Project 0.00 45.00 0.00 0.00 42.07 1.00 0.00 P055456 2000 TelecommunicabonsSector ReformlA 62.00 0.00 0.00 0.00 58.24 4.54 0.00 P050667 2000 UP DPEP III 0.00 182.40 0.00 0.00 143.17 28.28 0.00 P050657 2000 UP Health Systems DevelopmentPrcject 0.00 110.00 0.00 0.00 101.64 3.01 0.00 P009972 2000 NATIONALHIGHWAYS III PROJECT 516.00 0.00 0.00 0.00 485.B4 7.31 0.00 P049537 1999 AP POWER APL I 210.00 0.00 0.00 0.00 113.71 67.38 0.00 P050651 1999 MAHARASHHEALTH SYS 0.00 134.00 0.00 0.00 119.30 129.20 0.00 P050646 1999 UP SODICLANDS II 0.00 194.10 0.00 0.00 153.08 39.66 0.00 P050637 1999 TN URBAN DEVIl 105.00 0.00 0.00 0.00 38.99 -13.24 0.00 P045050 1999 RAJASTHANDPEP 0.00 85.70 0.00 0.00 73.19 31.49 0.00 P045051 1999 2ND NATLHIVIAIDS CO 0.00 191.00 0.00 0.00 136.50 1.45 0.00 P041264 1999 WTRSHDMGMT HILLS II 65.00 50.00 0.00 0.00 106.79 10.08 0.00 P010561 1998 NATLAGR TECHNOLOGY 96.80 100.00 0.00 0.00 150.05 63.35 0.00 P035169 1998 UP FORESTRY 0.00 52.94 0.00 0.00 29.73 15.46 0.00 P035824 1998 UP DIV AGRC SUPPORT 79.90 50.00 0.00 0.00 105.95 57.11 0.00 P035827 1998 WOMEN & CHILD DEVLPM 0.00 300.00 0.00 0.00 249.36 36.34 0.00 P010496 1998 ORISSA HEALTHSYS 0.00 76.40 0.00 0.00 65.86 24.81 0.00 P049477 1998 KERALAFORESTRY 0.00 39.00 0.00 0.00 22.92 2.11 0.00 P038021 1998 DPEPIII (BIHAR) 0.00 152.00 0.00 0.00 114.83 76.97 0.00 P049385 1998 AP ECONRESTRUCTURIN 301.30 241.90 0.00 0.00 330.20 122.29 0.00 P009584 1997 ECODEVELOPMENT 0.00 0.00 0.00 0.00 8.73 8.62 0.00 P036062 1997 ECODEVELOPMENT 0.00 28.00 20.00 0.00 15.28 12.10 0.00 P043728 1997 ENVCAPACITYBLDGTA 0.00 50.00 0.00 0.00 32.29 26.21 0.00 P044449 1997 RURAL WOMEN'S DEVELOPMENT 0.00 19.50 0.00 0.00 15.48 14.67 -0.80 P009995 1997 STATE HIGHWAYSl(AP) 350.00 0.00 0.00 0.00 226.72 90.06 0.00 P045600 1997 TA Srs RD INFRA DEV 51.50 0.00 0.00 0.00 12.35 12.94 12.94 P049301 1997 A.P. EMERG. CYCLONE 50.00 100.00 0.00 0.00 67.87 72.40 0.00 P010473 1997 TUBERCULOSISCONTROL 0.00 142.40 0.00 0.00 100.93 86.28 0.00 P010511 1997 MALARIACONTROL 0.00 164.80 0.00 0.00 118.24 81.34 0.00 P010531 1997 REPRODUCTIVEHEALTH1 0.00 248.30 0.00 0.00 147.32 107.50 67.31 P035158 1997 APIRRIGATIONIII 175.00 150.00 0.00 0.00 208.30 111.46 0.00 P035825 1996 STATE HEALTHSYSII 0.00 350.00 0.00 0.00 139.82 152.72 0.00 P010529 1996 ORISSAWRCP 0.00 290.90 0.00 0.00 93.68 50.20 0.00 P043310 1996 COALENV&SOCIALMITIGATION 0.00 63.00 0.00 0.00 30.57 28.85 0.00 P010480 1996 BOMBAY SEW DISPOSAL 167.00 25.00 0.00 10.00 74.99 81.57 6.49 P039935 1996 ILFS-INFRASFINANCE 200.00 5.00 0.00 168.87 9.61 179.09 0.00 P035821 1996 DPEPII 0.00 425.20 0.00 0.00 141.03 29.23 0.00 P035170 1996 ORISSA POWER SECTOR 350.00 0.00 0.00 0.00 222.18 162.45 0.00 P010484 1996 UP RURALWATER 59.60 0.00 0.00 7.20 28.42 24.56 6.92 P010485 1996 HYDROLOGYPROJECT 0.00 142.00 0.00 19.64 40.65 77.96 13.06 P010503 1995 AGRIC HUMAN RES DEVT 0.00 59.50 0.00 0.00 6.53 11.83 0.90 P010489 1995 AP 1ST REF. HEALTHS 0.00 133.00 0.00 0.00 30.11 28.91 0.00

- 62 - Differencebetween expected OriginalAmount in US$ Millions and actual disbursements Project ID FY Purpose IBRD IDA GEF Cancel. Undisb. Orig Frm Rev'd P010476 1995 TAMILNADU WRCP 0.00 282.90 0.00 0.00 113.16 118.67 24.73 P010461 1995 MADRASWAT SUP II 275.80 0.00 0.00 189.30 19.83 205.54 2.07 P010463 1995 INDUS POLLUTIONPREV 143.00 25.00 0.00 65.81 69.14 136.86 10.66 P010464 1995 DISTRICTPRIMARY ED 0.00 260.30 0.00 0.00 75.13 69.29 0.00 P010563 1995 FINANCIALSECTOR DEV PROJ. (FSDP) 700.00 0.00 0.00 316.30 6.23 -377.47 0.00 P010522 1995 ASSAM RURAL INFRA 0.00 126.00 0.00 0.00 58.58 42.60 30.96 P009870 1994 CONTAINERTRANSPORT 94.00 0.00 0.00 15.00 39.35 51.71 51.70 P009964 1994 WATER RES CONSOLID H 0.00 258.00 0.00 0.00 66.79 68.21 0.00 P010457 1994 POPULATIONIX 0.00 88.60 0.00 0.00 29.89 29.92 0.00 P010455 1994 BLINDNESSCONTROL 0.00 117.80 0.00 10.00 46.38 52.32 0.00 P010448 1994 FORESTRYRESEARCH ED 0.00 47.00 0.00 0.00 6.57 25.65 -2.05 P010410 1993 RENEWABLERESOURCES 75.00 115.00 26.00 0.00 36.83 69.60 0.00 P009977 1993 ICDS II (BIHAR & MP) 0.00 194.00 0.00 0.00 46.84 53.04 53.05 P009946 1992 NAT. HIGHWAYSII 153.00 153.00 0.00 0.00 45.36 34.59 27.12 P009963 1992 POPULATIONVlil 0.00 79.00 0.00 0.00 30.89 33.90 0.00 P009869 1989 NATHPAJHAKRI HYDRO 485.00 0.00 0.00 0.00 71.47 71.47 30.92

Total: 6025.90 6822.22 46.00 802.11 6942.83 2832.59 336.01

-63 - INDIA STATEMENT OF IFC's Held and Disbursed Portfolio May-2001 In Millions US Dollars

Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1990 TDICI-VECAUSII 0.00 0.74 0.00 0.00 0.00 0.74 0.00 0.00 1981/86/89/92/94 TISCO 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Tanflora Park 0.00 0.51 0.00 0.00 0.00 0.00 0.00 0.00 1989/90/94 Tata Electric 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1994 Taurus Starshare 0.00 2.53 0.00 0.00 0.00 2.53 0.00 0.00 1987/88/90/93 Titan Industries 0.00 0.52 0.00 0.00 0.00 0.52 0.00 0.00 1989 UCAL 0.00 0.54 0.00 0.00 0.00 0.54 0.00 0.00 1996 United Riceland 10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1991/96 VARUN 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1997 WIV 0.00 5.00 0.00 0.00 0.00 2.40 0.00 0.00 1997 Walden-MgtIndia 0.00 0.02 0.00 0.00 0.00 0.02 0.00 0.00 1997 20TH Century 7.00 0.00 0.00 0.00 7.00 0.00 0.00 0.00 1993 20th Century 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1989 AEC 5.93 0.00 0.00 0.00 5.93 0.00 0.00 0.00 1994 Ambuja Cement 2.67 4.94 0.00 0.00 2.67 4.94 0.00 0.00 1992/93 Arvind Mills 0.00 9.67 0.00 0.00 0.00 9.67 0.00 0.00 1997 Asian Electronic 0.00 5.50 0.00 0.00 0.00 5.50 0.00 0.00 2001 Basix Ltd. 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 1984/91 Bihar Sponge 0.00 0.05 0.00 0.00 0.00 0.05 0.00 0.00 1997 CEAT 19.80 0.00 0.00 0.00 19.80 0.00 0.00 0.00 1990/92 CESC 19.50 0.00 0.00 43.55 19.50 0.00 0.00 43.55 1995 Centurion Bank 0.00 4.67 0.00 0.00 0.00 4.67 0.00 0.00 2000 Chinai 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1994 Chowgule 11.71 4.58 0.00 17.97 11.71 4.58 0.00 17.97 1997 Duncan Hospital 7.00 0.00 0.00 0.00 7.00 0.00 0.00 0.00 1997 EEPL 0.00 0.03 0.00 0.00 0.00 0.03 0.00 0.00 1986 EXB-City Mills 0.48 0.00 0.00 0.00 0.48 0.00 0.00 0.00 1986 EXB-STG 0.31 0.00 0.00 0.00 0.31 0.00 0.00 0.00 1995 EXIMBANK 11.37 0.00 0.00 0.00 11.37 0.00 0.00 0.00 1995 GE Capital 6.25 4.39 0.00 0.00 6.25 4.39 0.00 0.00 1986/92/93/94 GESCO 0.00 1.85 0.00 0.00 0.00 1.85 0.00 0.00 1988/94 GKN Driveshafts 0.00 0.33 0.00 0.00 0.00 0.33 0.00 0.00 1994/97 GVK 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1994/98/00 Global Trust 0.00 5.00 0.00 0.00 0.00 2.78 0.00 0.00 Gujarat Ambuja 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1994 HDFC 0.00 0.49 0.00 0.00 0.00 0.49 0.00 0.00 1978/87/91/93 HOEL 0.00 0.28 0.00 0.00 0.00 0.28 0.00 0.00 1990 IAAF 0.00 2.30 0.00 0.00 0.00 1.37 0.00 0.00 1998 ICICI-IFGL 0.00 0.14 0.00 0.00 0.00 0.14 0.00 0.00 1990/94 ICICI-SPICFine 0.00 2.79 0.00 0.00 0.00 2.79 0.00 0.00 1990/95/00 IDFC 0.00 15.46 0.00 0.00 0.00 15.46 0.00 0.00 1998 IL & FS 0.00 3.12 0.00 0.00 0.00 3.12 0.00 0.00 1990/93/94/98 IL&FS Venture 0.00 0.60 0.00 0.00 0.00 0.60 0.00 0.00 1992/95 ITW Signode 0.00 0.34 0.00 0.00 0.00 0.34 0.00 0.00 1981/86/91/93/96 Total Poitfolio: 187.09 147.87 5.00 70.52 150.81 136.34 5.00 70.52

- 64 - ApprovalsPending Conmmitment FY Approval Company Loan Equity Quasi Partic 2000 SREI II 10.00 0.00 0.00 0.00 1999 Sarshatali Coal 30.00 0.00 5.00 0.00 2000 APCL 7.10 0.00 1.90 0.00 1999 Carraro 10.00 0.00 0.00 0.00 2001 GTF Fact 10.00 0.00 2.41 0.00 2000 IndAsia 0.00 0.00 15.00 0.00 2001 Internet Express 0.00 0.00 5.00 0.00 2001 Jetair 0.00 15.00 0.00 0.00 Total Pending Commitment: 67.10 15.00 29.31 0.00

- 65 - Annex 10: Country at a Glance INDIA: Grand Trunk Road Improvement Project

POVERTY and SOCIAL South Low. Indbi Asia Income Development diamond' 1999 Pnn-lAtion mid-valr Imnllionsl 997 5 1 t7t 2.417 Life expectancy GBtPDor csaoia fAtlas method. USSI 440 440 410 GNP fArlas method, USS bi,lionsl 441 A .'i1 9Rg: Averace annual orowth. 1993-99 Pnnrvlatirrn t%l 1 7 19 1 9* L.aborforco (% 21 2.3 23 GNP Gross Most recent *stimatelast*xt year available. 1993-99) capita anrimryntp Poverty (% of ooDulation below national oovesyv line) 3S llrhrn nnnofitonn tI% of lotsl ooouttlion) 27 7R J1 Lifo exnectancv at birth fvoarsl 63 62 s0 In-nt mnrtalilv (oar 1.000 live birthttsl 72 7* 77 r.hild nralnnltnth,n (% of cijtldren lJfdatr Sl S3 S1 43 Access to safe water Access to imoroved wator source (li of oovulation) 81 77 64 illito-rarv (I of nooulsltiOn antn 15.1 44 4r 19 Grom; orimrarv enrollment 1% of school-aoe oooulaton) 100 t0tl 9f -India Low-income group Mal. 1119 11n 1n2 Fe,mle 40 9n AA

KEY ECONOMtC RATIOS and LONG-TERM TRENDS 1979 1989 1998 1999 Economic ration' GDP IUS$bilionsl 150.1 290.5 419.1 447.3 G-ros do jnPrinveslm,nt/lGnP 27 R 24 1 21 P. 9 Pynortn nfnnndr. AndK Aervia.s/lnP fi 7 7 3 11 t 121 Trade Gross dor,estic savinaslGOP 20.7 21.R 19.2 20.0 Gross nratinntl avinnsiGnpP . 7>2 21 4 7;nA 2 1 Current account balancolGOP -0.5 .1 8 -0.8 -0.8 Domestic Intorrst ar-ymenlxfGDP l3 1 1 111 1.2 Investment tntal dPbht/GO,P 119 728 234 22 9 avings T otal debt setvicolotxorts 10 1 28.6 17.0 15.6 Present valueonf deht/G0P 20.1 Present valua of dettlexnorts . 143 3 Indebtedness 1979-S9 1f99.99 1998 1999 1999-03 (avaraDo annual orowthl tiOP 57 5.8 f.iR5 8.RLow-incomegroup India GNP n,eranitr .33 t, 9 4 9 4 9 4 7 Exoorts of coros and services 4.9 11.8 12.5 1.7 7.5

STRUCTURE of the ECONOMY 1979 1989 1998 1999 Growth of Investment and GDP (%) (I of GOPI Aarirl.,ture 3f.8 31.6 29.1 27.7 Industrv 25.0 27.6 25.7 26.3 1t Man,,fachtrinn 17 4 17.4 15i 1. S 7 _ Services 38.3 40.8 45.2 46.0 o9 Private r.n.-rmntinn f9 2 RC,1 SR R R8.n -15 G-neral novernment ronsm-otion 100 12.9 3 170 I-GDP -- ImDorts of ooods and services 8.7 9.6 14.0 15.0

1979-89 1989-99 1998 1999 Growth of exports and Imports (%) (averace annual arowthl Anricolt.re 34 3 772 I13 4e Industrv 6.6 6.5 4.0 8.8 30- Man0faOt-rino 7 n 7.0 3 8 8 5 20 Servires 8.7 7 A.3R 79 t_ Private r.nns,mntinn S.5 S.2 3 2.9 o ______rpeneral envernment cons,,mntinn 78 S 9 14 5 1093.3 Gross domestic investment 5.7 6.2 4.3 11 -10 5 Imnorts of nondc and services Fi s R 8 -2.5 -3 R Eexports *'Imports Gross national Droduct 5.5 5.8 6.7 6.8

Note: 1999 data are preliminary estimates. The diamonds show four kev indicators in the country tin boldl comoared with its income-orouo averaae. If data are missinn. the diamond will he incomnlete.

- 66 - In dia

PRICES and GOVERNMENT FINANCE 1979 1989 1998 1999 Inflation (%) Domestic prices (% change) Consumer prices 6.2 13.2 4.6 1_ Implicit GDP deflator 15.8 8.3 8.9 3.3 Government finance (% of GDP, includes current grants) Current revenue 23.5 21.8 23.6 94 95 96 97 98 99 Current budget balance 0.4 -1.7 -0.01 -GDP deflator CPI Overall surplus/deficit -12.5 -10.6 -11.4

TRADE 1979 1989 1998 1999 Export and Import levels (USS mill.) (US$ millions) Total exports (fob) 16,613 33.667 38,326 60oo0o Tea 550 547 564 Iron .. 557 380 374 40,000

Manufactures .. 12,730 26,870 31,314 Total imports (cif) 21,219 41,858 55,385 27 M II FoodFuel and energy .. 3,768714 6,4352,543 10,6822,459 290500 Capital goods .. 5,288 9,122 10,192 93 94 95 96 97 98 99 Fxnnrt rinr index f1995=1001 11 94 r9 99 ImDort Drice index (1995=1001 .. 89 92 90 Exports 'Imports Terms nf trade. 11995=1001 19R 17 '107 I

BALANCE of PAYMENTS IUSSmillions)l1979 1989 1998 1999 Current account balance to GOP (%) Exports of goods and services 9,980 21,201 47,484 54.047 o Imports of goods and services 13,120 27,934 58,565 67,250 Resource balance -3140 -6,733 -11,081 -13,203 Net income 527 -798 -2,955 -3,133 Net current transfers 1,852 2,281 10,587 12,638 '1l i t Current account balance -761 -5.249 -3,449 -3,699 Financing items (net) 985 4,400 7,382 9,487 Changes in net reserves -224 850 -3,933 -5,788 -2

Memo: Reserves includina oold fUSS mnillions) 7.581 4.582 33.584 38.150 C.onverrinn ratA (DEC.locallUSS) 8.1 16.7 42.1 43.3

EXTERNAL DEBT and RESOURCE FLOWS 1979 1989 1998 1999 fUSSmiltions) CompositIon of 1999 debt (USS mill.) Total debt outstanding and disbursed 17,898 75,407 98,232 102.626 IBRD 728 6,615 7,993 7,879 G 4,329 A 7,879 IDA 4,505 12,521 18,562 18,984 Total debt service 1,282 6,955 10,001 10,527 18,984 IBRD 127 881 1,627 1.415 IDA 43 188 1,372 458 _

Composition of net resource flows F: 42.241 c:26 Official grants 717 698 476 300 Official creditors 646 2,489 1,727 1,701 4,503 Private creditors 13 2,870 -1,433 414 Foreign direct investment 49 252 2,635 2,155 Portfolio equity 0 168 342 3,026 E:24,664 World Bank program Commitments 766 2,987 2,055 909 A - IBRD E- eilataral Disbursements 695 2,011 1,421 1,592 5B-IDA 0- Other multilateral F - Private Principal repayments 77 450 2,193 1,211 CC-IMF G-Short-erm Nettlows 619 1,561 -772 381 Interest payments 93 619 806 663 Net transfers 525 942 -1,578 -282

Development Economics 8125/00

- 67 - Additional Annex 11

Environment & Social Assessment, Environmental Management Plan, and Resettlement Action Plan India: Grand Trunk Road Improvement Project

This Annex is divided into four sections covering the (i) overall design process; (ii) analysis of alternatives; (iii) major issues and associated management measures; and (iv) implementation and monitoring. The material presented is based on the Executive Summary of the Final Report on Environmental and Social Assessments and Management Plans dated February 2001, and hereafter referred to as the Executive Summary report, which is available in the project files. 1. Overall Design Process 1.1 Environmental and Social Assessment The EA process for each consultancy package employed an iterative approach in which environmental issues have been identified in successive levels of detail and specificity at each stage. This process included Preliminary Environmental and Social Screening, documentation of Baseline Conditions, Assessment of Potential Impacts, Community Consultation, Integration of Environmental Assessments in the Design Process, Assessment of Alternatives, Mitigation & Enhancement Measures and Environmental Management Plans. These resulted in Base EA/EMPs. A Feasibility Study Report, Preliminary Project Report, Detailed Project Report, and EIA have been prepared for each consultancy package as well as an EMP for each contract package. A social impact assessment had been carried out on the basis of a census to (i) ensure that all impacted persons are identified and (ii) provide the basis for establishing a cut-off date for determining who may be entitled to relocation assistance or other benefits from the project. The assessment informed engineering designs and helped minimize negative impacts. Community consultations at various levels were undertaken to gather and disseminate information about the project from and to potentially project affected people. A RAP was prepared for each of the consultancy packages. A socioeconomic survey was conducted on 25% of the PAPs to provide a database to develop indicators for the monitoring and evaluation of the RAP. The entitlement framework was derived entirely from NHAI's R&R Policy, which was earlier endorsed by the GOI and the World Bank. The emphasis during project preparation has been to ensure that the environmental and social management measures are fully integrated into all stages of project development and operation.

1.2 Independent Review The Base EA/EMPs were subjected to a review by independent consultants, who identified deficiencies, obtained additional information as necessary and consolidated the Base EA/ EMPs. During consolidation, the consultants ensured that these met relevant World Bank safeguard standards and also ensured that the project design addressed the key environmental and social issues. Independent consultants also carried out a review and consolidation of the various individual RAPs. This resulted in (i) uniformnityacross the RAPs; (ii) additional provisions for participation of women in the project; (iii) additional plan components for safety and hygiene; (iv) enhancement of common property resources; (v) prevention measures and awareness campaign

- 68 - for highwayrelated diseases;(vi) a revised and detailedbudget; and (vii) a detailedmonitoring plan for the EMPs, completedwith monitoringprocedures and reporting formats.

1.3 Environmentaland Forestry Clearances The environmentallegislation applicable to the projectincluded: the Forest ConservationAct; EnvironmentProtection Act (includingthe EIA Notification);Wildlife ProtectionAct; Air Act; Water Act; and Motor Vehicles Act. The laws that formed the basis of planning, constructionand operationof the project in relation to the social and culturalenvironment included: the Land AcquisitionAct; the NationalHighways Act; EnvironmentProtection Act (includingthe EIA Notification);and Ancient Monumentsand ArchaeologicalSites and Remains Act.

The projecthas obtainedall the necessary Central(MOEF) and State Government(Pollution Control Board, Forest Department,Groundwater Board) clearances.

1.4 CommunityConsultation Public participationand communityconsultation has been integrated into the social and environmentalassessment process of the GTRIP. Consultationwas used as a forum to establisha two-wayprocess for sharinginformation, to build awarenessamong the stakeholdersand to translatethe outcomesinto projectdesign. It assistedin the identificationof problemsas well as the needs of the populationlikely to be impacted.This public consultation- carried out during screening,feasibility and assessmentstages - has been conductedthrough variousmeans: door-to-doorinterviews, focus group discussions(9 differenttypes), expert consultation(at districtlevel) and stakeholderconsultation. As per MOEF guidelines,district level public hearings were conducted.

The main issues raised during consultationswere related to resettlement,safety, culturalassets, bypasses,air pollution,noise, flora, roadsidedrainage and roadsideamenities. All of these issues have been incorporatedprior to finalizingthe project design. For instance,the densityand species selection of trees was altered; service roads, underpassesand parking bays were includedto improve road safety;and landscapingactivities were planned to enhancecultural assets.

1.5 Public Disclosure A list of locationswhere the EIA, EMP and RAP reports of the various packages have been disclosedis providedin Table 1. Additionalpublic informationdissemination was carriedout after the EA documentswere prepared through public notices, newspaperadvertisements, briefing material(in Hindi),maps, charts, banners,reading material (sunmmary of the EMPs and RAPsin Hindi) and audio visual presentationmaterials in Agra, Kanpur, Sasaramand Barhi.

Table 1: PublicDisdosure Locations for EIA, EMPand RAPreports Package - Route Description Locations I - A Agra- Shikohabad NHAI, PMU Office, Agra, UP DM Agra, UP I -B Shikohabad - Etawah Bypass (start) DM Ferozabad, UP Etawah bypass (end)- Bhognipur DM Etawah, UP I-C DM Auriya, UP Govt. Library, Lucknow, UP Regional Office, SPCB, UP

69 - 11- B Bhaunti - Fatehpur Border NHAI, PMU Office, Kanpur, UP DM Office, Kanpur Nagar, UP DM Office, Kanpur Dehat, UP UP State Pollution Control Board State Library, Kanpur IV -A Raja Talab - Mohania NHAI, PMU Office, Varanasi, UP IV -C Sasaram bypass Library, BHU, Varanasi, UP DM Office, Kaimur [Bhabhua], Bihar DM Office, Varanasi, UP DM Chandoli,UP UP, State Pollution Control Board State Library, Kanpur V- B Raniganj - Barakatha NHAI, PMU Office, Kodenna, Bihar DM Office, Gaya, Bihar DM Office, Hazaribagh, iharkhand State Pollution Control Board, Jharkhand

2. Analysis of Alternatives

2.1 General Approach The analysis of alternatives in the project has been carried out at 3 levels: strategic, program, and project levels. Various options were considered and eliminated at each successive level. Environment and social issues were included in the criteria against which the various altematives were evaluated at each level.

2.2 Alternatives At a strategic level, alternatives consisted of choices between various modes of transport. This was carried out as a part of the Eighth and Ninth Five-Year Plans. A number of studies were undertaken by the MoST and Planning Commission with regard to development of the surface transport network. The studies demonstrated the net positive impacts expressways and high-capacity highways might have in terms of social and economic development. The studies concluded that additional highway capacity would have positive net environmental benefits; primarily in terms of a reduction in the pollution load due to less congestion.

At a program level, during the late 1980's the MoST commissioned a study of the need for and identification of major expressways to be developed over the longer term. However, to date, the financial and institutional resources to embark on expressway construction have been limited. Therefore, the MoST proposed that a medium term programme be prepared for highway improvement and capacity augmentation. As part of this medium term program, studies for prioritization and analysis of options were carried out in 1995 for 3 high density corridors - Delhi-Ambala, Delhi-Kolkata, and Chennai-Trichy.

At a project design level, altematives were considered in terms of: (i) no action vis-a-vis the project; (ii) various alignment altematives available within the existing RoW; (iii) bypasses as altematives, and various bypass alignment altematives; (iv) road configuration alternatives; and (v) other engineering alternatives. Environment and social considerations were integral to the analysis of alternatives at these design stages. The avoidance and minimization of negative environmental and social impacts have been considered in project design.

- 70 - 3. Major Issues, Avoidance,Mitigation and EnhancementMeasures

3.1 Climate The GTRIP is located in a humid sub-tropical region with marked monsoon effects. The weather generally remains dry and hot, while in winters cold weather prevails. By and large, no change in the macroclimatic setting is envisaged. The micro-climate is likely to be temporarily affected by vegetation removal, potential decrease in surface water bodies and the addition of pavement surface. The proposed compensatory afforestation, landscape development and retention ponds will positively influence the microclimate.

3.2 Air Quality Ambient air quality monitoring was carried out to establish the baseline concentrations at receptors. The SPM levels already exceed permissible limits at major urban locations and in the Taj Trapezium Zone. Other air pollutants were within the permissible limits. During construction, an increase in the concentration of air pollutants is likely from hot-mix plants, batching plants and various construction activities. Adequate mitigation measures - restrictions on the including the location of plant, the use of dust extraction units on hot mix plants and spraying of water in dusty areas - have been included to address these temporary impacts.

During operation, the project should improve air quality, other things being equal, through the removal of bottlenecks and congestion in built-up areas. Special mitigation measures for the abatement of pollution in the Taj Trapezium - acquiring additional land for the planting of pollution resistant species - have also been included.

3.3 Water The project corridor traverses the Ganga drainage system. The baseline water quality monitoring carried out at 17 locations indicates that concentrations of major physico-chemical parameters along the entire GTRIP is within limits. Overall, the water table varies between 2 to 9m for most part of the year, and, therefore the availability of ground water is not a limiting concern. Waterlogging occurs at certain stretches along the road and is due to previous borrowing operations. No major adverse hydrological impacts are anticipated under this project. Construction activities around surface bodies can affect water quality and, therefore, adequate mitigation measures have been incorporated. These measures include protection of water body banks and edges, cascading to protect for scour, silt fencing to prevent construction run off entering water courses and oil interceptors. Many water bodies will be partially filled up due to the proposed widening. A total of 190 wells and 548 hand pumps will be relocated due to the project. Relocation of all these community water resources has been designed in consultation with the community. All community resources impacted due to the project will be relocated to suitable locations before construction starts. The project's water requirement will not alter the water availability scenario.

3.4 Soils - Erosion & Quality Soils along the road corridor are generally neutral to slightly alkaline. Heavy metal concentration in the soil is well below USEPA limits. Loss of topsoil, especially in irrigated areas, due to land

- 71 - acquisition is a long-term residual impact. However, land acquisition has been minimized, particularly along the stretches where agricultural use of land predominates. The potential for erosion is limited to a few high embankment areas due to shallow slopes and moderate rainfall in the corridor. Once trees are removed during pre- construction and ground cover is cleared on the expanding side for widening, erosion could increase. To mitigate soil erosion, slope protection works, including turfing of slopes, reinforce earth walls, stone and brick pitching and gabion structures - will be undertaken as applicable.

Contamination of soil can take place due to leakage or spillage of fuel, lubricants, asphalt and bitumen as well as refuse and solid waste generated from labor camps. Proper equipment and construction camp management practices will be adopted to ensure that these impacts do not occur.

3.5 Quarriesand Crushers Existingquarries and crushers that are alreadyin operation(with the required environmental clearances and approved redevelopment plans) will be used. No new quarries will be opened. Unless these crushers control the pollution level specified under the Air and Water Acts and satisfy CPCB norms, they will not be used. Though quarry materials are to be transported over long distances to construction sites, almost all quarries identified have proper access roads. Therefore, no major impact during the hauling of materials is envisaged.

3.6 Borrow Pits Borrow areas have been identified along the vicinity of the GTRIP corridor. These are barren areas (or areas which are not cultivable), areas where the owners are willing to create ponds, or fishponds, and agricultural areas where the existing level of ground is higher than the surrounding and the owners want these parcels of land to be lowered to facilitate irrigation. Borrow areas located within the Gautam Buddha Wild Life Sanctuary or any other forest will not be used. Productive agricultural areas have been avoided for borrowing. The selection of borrow areas to be used have been based on environmental as well as civil engineering considerations. The specific contractual requirements for borrowing have been developed for non-cultivable lands, productive lands, elevated lands, fish ponds and borrow areas near settlements. If the borrow area pits are not treated properly, stagnant water pools will be formed and these pose health hazards. To mitigate such impacts, specific redevelopment measures - filling and providing layer of preserved topsoil, plantation of trees along the edge of borrow areas - have been developed and included in contract clauses.

3.7 Fly Ash Utilization There are seven coal-based thermal power plants in the states of UP and Bihar, within a distance of 1OOkm from the corridor. Fly ash generated from these plants has the requisite physical properties for use as embankment fill material. Although fly ash is an excellent fill material, it poses potential adverse health impacts. Therefore, extreme care will be taken during handling and transportation of this material as fly ash gets air borne easily and causes dust nuisance. No adverse impact from fly ash is envisaged during the operation phase, as it will remain within the embankment in a compacted form and topped by a layer of turf to prevent erosion.

- 72 - 3.8 Noise Noise level monitoring was carried out for various land uses along the project corridor. The noise levels ranged between 5OdB(A) and 88dB(A). Along the Gautam Buddha Wildlife Sanctuary, a high daytime noise level of 76-78 dB(A) was observed. Noise levels close to the highway are already higher than permissible levels. These are predicted to remain high during project operation. At several locations, noise level will increase by as much as 5-l OdB(A). Some locations have very sensitive receptors such as schools and hospitals.

During construction, noise standards will be strictly enforced for all vehicles, plant, equipment, and construction machinery. Construction sites will not be located within 300 m of settlements. No hot mix, batching and aggregate crushing plants will be located within 200m of sensitive areas such as schools and hospitals. Noise barriers will be erected at several places where noise during operation is expected to be high and would severely impact sensitive receptors.

3.9 Flora-Roadsidetrees The total number of trees existing on the entire RoW is about 95,000. These are generally trees planted through social forestry programs, although some of the trees are quite old and some are in decay. A total no of 48,119 trees are to be felled due to the project. The cutting of trees may have several impacts including loss of shade, loss of tree products, temporary increase in erosion, reduction in air quality and rising ambient noise.

NHAI has developed a tree plantation strategy, which will be followed. Tree felling has been minimized and a significant proportion of trees (46 to 61% arnong different packages) has been saved through design modifications. The forest departments of UP, Bihar and Jharkhand will plant 2 saplings for each tree cut. In the case of trees which have significant cultural or societal value and which are healthy,transplantation will be undertaken- about 700 in all. There will be no pesticide use either for removing the existing vegetation or in promoting the growth of new roadside vegetation.

The implementation of NHAI's tree plantation strategy will be monitored by the state High Power Committees and by the project level supervision consultants and NGOs. The quarterly review meetings of the High Powered Committees will review and monitor funds transferred from NHAI versus fund received by each district forest officer by quarter, and compare these with amounted requested and released, to identify any delays in implementation for tree plantation. Memoranda of understandings are under negotiations between NHAI and the concerned state forestry departments to ensure funds for tree re-plantation will be released based on survival rates, which have been included in the project performance indicators. District forest officers will report to NHAI Environment Managers on number of trees planted by quarter and their survival rates in the following years (and at end of project).

3.10 Flora- Reserved Forests and Wildlife Sanctuary The project corridor traverses the Agra and Kaimur Hills Reserved Forests. Both these are degraded areas. The highway also passes through the buffer area (bands of 400m on either side of the highway) of the Gautam Buddha Wildlife Sanctuary. The forest cover in the sanctuary is

- 73 - deciduous, with grassland and scrubland. None of the flora found in the area is classified as rare, endangered or threatened as per the IUCN guidelines. Part of the Agra Reserved Forest that is close to the road is currently used as a rubbish dump, including unprotected disposal of slaughterhouse waste.

The major threats to flora in these areas come from deforestation for fuel, overgrazing and illegal tree felling. The road construction activity itself will not have an impact on the already degraded status of the reserved forests and sanctuary. No land is to be acquired for road construction in these areas. A total of 12,000 saplings within the sanctuary area will be planted. To prevent any further dumping of waste within the RoW or in the adjoining Agra Reserved Forest, a physical barrier to prevent trucks from emptying rubbish from the highway will be erected. The project will prohibit the use of quarries located within the forest areas. In addition to compensatory afforestation, measures such as regular policing and patrolling by the NHAI authorities have been planned to prevent unwarranted intrusion in forest areas.

3.11 Fauna No endangered or rare species have been reported in the area, except for the wildlife sanctuary stretch. However, the presence of endangered fauna, especially the tiger, in the area was a major driving force in the original declaration of the Gautam Buddha Wildlife Sanctuary. Other important species thought to live within the sanctuary include the wolf, leopard, hyena, jackal, spotted deer, sambhar, barking deer, chinkara and nilgai. The envisaged impacts on fauna during construction and operation are disturbance due to noise, and an increased risk of accidents given rising vehicle speeds. The only real potential road safety impact on fauna may occur within the stretch through the Gautam Buddha Wildlife Sanctuary, although there is no evidence of any road-kills in the recent years. Several mitigation measures for the Gautam Buddha Wild Life sanctuary have been proposed on the basis of consultatioiis with the local community, forest officials, wild life experts and also as per the recommendations of the Forest Management Plan. All the measures recommended by the stakeholders especially the wild life officials and NGOs have been incorporated in form of mitigation measures which form part of the respective contract documents - for example, construction activity restricted to ROW, location of construction camps outside Sanctuary, prohibition of use of water resources within the Sanctuary and inclusion of wildlife crossings. 3.12 Project Affected Persons Adverse socioeconomic impacts include all disruptions on the social and economic interactions of communities due to the road project. This involves effect on both the adjacent communities (mostly direct) as well as the nearby communities (mostly indirect). Although 11,155 families would be impacted, less than 60% would be actually displaced. The number of affected persons is 29,483 while that of the displaced persons 20,105 (68% of the total affected persons). Size of the displaced families (3 persons per family) is significantly higher than that of the affected families (2.6 persons per family) who are not displaced (mainly squatters and encroachers). Of the 11,155 families affected, about 6,614 families will be displaced. Of the displaced families, the share of ST and WHH families is low. The number of ST population displaced is only 45; that too dispersed over the entire 422km length of GTRIP (i.e. about 1 family per 10km).

- 74 - An EntitlementFramework has been developedand this providesfor distinctentitlements and assistancefor each categoryof the displacedfamilies/persons. Families or persons experiencing minor impacts (or partial impactsnot resulting in displacement)are also entitledfor separate awards. The Frameworkis shown in the Executive Summaryreport. Vulnerablegroups - woman-headedfamilies, scheduled caste families,scheduled tribe families, familiesbelow poverty line, disabledpersons, destitute persons and orphan families- constitute about 37% of all affectedfamilies. Most of the affectedvulnerable group familieslive below the povertyline. There are 2,714 non-titleholderfamilies affected by the project,which is about 24% of the total project-affectedfamilies. Of these families,1,912 will be displaced.Of the non-titleholderfarnilies, 323 (about 12%) are encroachers,and 1529 (about 56%) are squatters. Of the 11,155 families affectedby the project, around 10% are impacted due to full or partial loss of residentialstructures. Of the rest, about 71% derive their livelihoodfrom agriculturalactivities, and the remainderfrom commercialactivities. A large numberof familieswho derivetheir livelihoodsfrom agriculture,are either marginalfarmers (farmers with marginalland) or are sharecroppers/tenants.Similarly, the residual familiesderive their livelihoodfrom petty roadside businesses(includes petty roadsideindustrial units). All of them will fully or partly lose their livelihoodas a consequenceof acquisitionor eviction. Income restorationplans are developedto adequatelycompensate or mitigate losses for the affectedpeople regardlessof their tenure. 3.13 Land Acquisitionand Communityresources The total land required for wideningand upgradingthe project corridor is about 666 ha of which 622 ha will be acquiredfrom private holdings(agricultural land, residentialland, commercialland and residential-cum-commercialland). The other 44 ha will be transferredfrom governmentand forestlands.Families will be affectedand displaceddue to the acquisitionof this land. The land acquisitionplan is availablein the ExecutiveSummary Report. Communityresources - 52 schools, 8 police stations, 14 petrol pumps, 14 hospitals, I post office, and I powerhouse- are likely to be impacted due to the project,but none will be displaced. The locationof some of these amenitiesalong the NationalHighway is a concern as poorly planned locationsis contributingto congestionof the highway.

3.14 Avoidanceand Mitigation of Social Impacts Fear of futureuncertainties, inducement of land prices, inducementof squatter influx, public health and safety,as well as road safety were social issuesidentified by PAPs. Precautionarymeasures - such as public participationin decisionmaking, PAPs/NGOsinvolvement in valuing land, use of a baselinecut off date to establishwhether PAPs are eligiblefor assistanceor not - have been or will be taken to avoid or mitigate such generalsocial impacts.

Several measureshave been adopted for minimizingresettlement in differentpackages of the project.These includeapplying alternativealignments, adopting contextually suitable road cross-sections,lateral shifting of alignments,designing appropriate street furnitureand facilities. The participatoryplanning with people has helped minimizationof losses, saving residential/commercialstructures, cultural properties, and communityinfrastructure (schools,

- 75 - colleges,governmental buildings and bus shelters).

Supportwill be provided to affectedor displacedpersons and familiesto compensatefor the losses incurred by them. The project's entitlementframework has been developed.This addresses the loss of land and other assets, loss of diminishedlivelihood and indirect impacts.The support includes replacementcosts (specifiedin a detailed entitlementframework), as well as additional support for displacedfamilies, both titleholderand vulnerablenon-titleholders (includes indigenouspeople). The sites for resettlementhave yet to be identified. However, accordingto Section 8.3 of NHAI's R&R Principlesand Policy Framework,the standardsof servicesfor the resettlementsites should be better, and no worse, than those lost.

The Bank does not require provisionof assistanceto those non-vulnerablepeople supplementing their agriculturalincome from land they hold legallyby cultivatingother adjacentlands in public zones that are near enoughto use as opportunity(but not law) allows. In specificprojects (such as in the India State Highwaysprogram), a distinctionhas thereforebeen made between vulnerableand non-vulnerableencroachers. Non-vulnerableencroachers are asked to vacate the public property withoutcompensation or assistance,while vulnerablegroups among them are accordedmore targeted developmentassistance.

To assistPAFs regain their previousliving standards,income restoration plans have been developedand includedin the RAP. In addition,there are specialincome restorationplans for project displacedpersons/families, project-affected vulnerable group persons/familiesand, the other project-affectedperson/families needing assistancein skill upgradationor in alternative vocation.The incomerestoration plan is availablein the ExecutiveSummary report.

3.14 CulturalSites and Archaeology Many importantcultural and historicalsettlements lie along the highway, includingthe cities of Agra, Varanasi,Allahabad, Sarnath and Gaya. There are three archaeologicalprotected monumentsand sites of significancewithin 1kmof the project corridor- Budiyaka Taal and Rambagh in Package I, and Sher Shah Suri's tomb in PackageIVC. No other protected monuments,sites or culturalrelics are close to the highway.Of all the protectedmonuments, only Budiya ka Taal is located on the edge of RoW of the project road, but there will be no adverse physical impact on the protectedmonument. .

Fifty-fivekm of the road lies within the Taj Trapezium,although the Taj Mahal itself is on average about 15kmfrom the road and 9 km at its closest. The Taj TrapeziumZone includes over 40 protectedmonuments, four of which are listed as World HeritageSite (WHS) namely the Taj Mahal, the Agra fort and the Fatepur Sikri and a the Bird Sanctuarywithin the BharatpurNational Park. The tomb of Akbar (at Sikandra)and Itrnad-ud-Daula'stomb have been proposed for designationas the World Heritage Site. In addition,there are more than 40 protectedmonuments within the trapeziurn.These monumentsare not within 2km of the highway and are not directly impacted.As the proposedproject involvesthe improvementof road geometriesand quality of the pavement,the air quality is expectedto improve duringthe operationstage (in comparisonto the' no-project' scenario).Other heritage sites within the Taj TrapeziumZone are fiurtheraway from the project corridor.

- 76 - Thoughshrines and other sacred structuresare not of any significanceat the regional level,they are importantto local communities.Most of these structuresare within or adjacent to the existing RoW. There are a total of 152 temples, 14 mosques,41 shrines, 2 churches and a Gurudwara along the Project Road. A number of other communityresources also have some cultural relevanceto the community,especially when locatedclose to religious assets. These will be subjectedto varying degreesof impact dependingupon their location in relation to the RoW. Mitigationand enhancementmeasures have been planned.These will be selectedand implemented on a case-to-casebasis.

3.15 Road Safety Safety of the project road will be substantiallyimproved through widening from two lanes to divided carriagewayswith at least four lanes and paved shoulders. Bypasses,service roads, grade separatedintersections, raised embankmentsand provisionfor pedestriansand local traffic through parallel servicelanes will be providedto minimizethe conflictbetween local and throughtraffic which is so often the cause of accidents. A safety audit will be performed on the engineering design of all projectroads and detaileddesigns will be modifiedaccording to the safety audit recomnmendations.Furthermore, the projectincludes a pilot componentto address traffic and safety managementcomprehensively through a corridormanagement program. Other actionsthat tackle the non engineeringaspects of road safety- education,enforcement, institutional frameworkfor safety managementetc. - are being addressedthrough the Third NationalHighway Project.

4. Implementationand Monitoring 4.1 ImplementingAgencies The NHAI is responsiblefor the overallimplementation of the environmental,social and R&R measuresand will supervise,through Project ManagementUnits (PMUs) establishedat five locationsalong the corridor,the variousimplementing agencies - contractors,consultants, NGOs, local governmentbodies, pollutionmonitoring agencies and the respective state Motor Vehicles departments.

The NHAI has demonstratedthrough its implementationof the Third National Highway Project, that it has the capacityto execute satisfactorilythe necessarysafeguards for a World Bank financedproject. The NHAI has created an Environmentaland Social ManagementUnit (ESMU) at the NHAI HQ, headed by a General Manager,supported by separateenvironmental and social managers.At each PMU, environmentand social managershave been appointed. District Level Committeesand GrievanceRedress Committeesin each district have been set up. In addition,to facilitateimplementation of the RAP and the social actionsin the EMP, NGOs have been appointed.Co-ordination and policy support will come from the ESMU at the NHAI Corporate.

- 77 - 4.2 Training Adequate provision (Rs.2. 1 and Rs 1.16 million for EMP and R&R respectively) is included in the budget for the cost of training of staff from NGOs, NHAI (HQ and PMU), supervision consultants, contractors and PAFs. Environmental and social training under GTRIP has been devised taking into account the training already imparted under TNHP. The environmental training will use lecture, seminar and site visit formats to cover the topics appropriate for different target groups and delivery will be timed to ensure that skills and knowledge are raised prior to work starting. To develop in house expertise of an international standard, some of the environmental and social staff within NHAI will take formal training overseas lasting several weeks. There is also provision for broad based awareness raising of social and R&R issues within NHAI and the road construction industry. A training plan for income restoration of PAPs is available in the Executive Summary Report.

4.3 EnvironmentalManagement Plan (EMP) Seven EMPs, one for each civil works contract package, have been produced, together with a consolidated EMP for the project as a whole. These contain detailed actions to avoid, mitigate and manage the negative impacts and to enhance positive impacts on the project corridor. For each measure, its location, timeframe, imnplementationand supervision responsibilities have been specified. All the environmental elements have been incorporated in the design and bid documents.

Overall, the budget for EMP implementation is Rs. 327 million and the summary break-up is included in Table 2. This is apart from the cost of works that have been internalized in the civil works of the project.

Table2: EnvironmentalBudget in the project(in '000 INR)

Budget Head. I-A I-B T-C 11B IV-A IV-C V-B Total Mitigation / Enhancement costs 51,321 49,382 48,088 33,053 47,192 22,335 43,630 295,001 Monitoring Costs 1,549 1,651 1,648 1,807 1,693 1,277 1,777 11,402 Training & Mobilisation Costs* 500 500 500 500 500 500 500 3,500 Advocacy and Policy Planning 218 218 298 204 254 164 270 1,626 Total Amount assigned 53,588 51,751 50,534 35,564 49,639 24,276 46,177 311,529 Contingency @ 5% 2,679 2,588 2,527 1,778 2,482 1,214 2,309 15,576 Total (INRthousand) 56,267 54,339 53,061 37,342 52,120 25,490 48,486 327,106 'The provision for vehicle for monitoring will be made from contingency fimd for the EMP implementation.

4.4 RAP Implementation The Contract Resettlement and Rehabilitation Officer (CRRO) in each of the PMUs will be responsible for planning, implementation and monitoring of R&R with assistance from NGOs. They will ensure that civil works are not started on any road segment before compensation and assistance to the affected population have been provided in accordance with the NHAI R&R policy framework. The fund flow mechanism for the compensation and the assistance part of the budget has been prepared.

The total budget for implementing the R&R component of the project is Rs. 1720 million (US$ 37 million at February 2001 rate of exchange, World Bank Rs 617.8 million and NHAI Rs. 1,102.2 million), which is about 6.6% of the total cost of civil works in the project.

- 78 - All civil works contractswill includea clauserequiring the governmentto provide at least 30% of the land free of encumbrance,pay compensationto the affectedpeople, and begin relocationand rehabilitationof affectedpeople before worksare begun.

4.5 ContingencyPlans The project includesan additionalcontingency provision of $1.5 million for use in (i) better definingand analyzingunforeseen environmental or social impactsthat may arise during implementationin selectedsensitive locations such as the Taj TrapeziumZone and Gautam Buddha WildlifeSanctuary and (ii) implementingadditional mitigation measures as necessary.For the Gautam Buddha Sanctuary,a coordinationcommittee is being constitutedto oversee implementationof the EMP for PackageV which includesmitigation measures specificallyrelated to the project area. The coordinationcommittee will recommendwhether further mitigation measures/additionalfunds will be necessary,and NHAI will decide on fund allocationin consultationwith the Bank.

4.6 Monitoring To ensureeffective implementation, monitoring plans have been includedin the EMPs. Detailed formats for monitoringhave been prepared.A reporting systemwith two importantaspects has been formulated:reporting on progress and environmentalcompliance monitoring. The reporting systemwill operate linearlywith the contractorreporting to the SupervisionConsultant, who in tun will report to the PMU. The PMU will be responsiblefor preparingtargets for each of the identifiedEMP activities(the outline of such targets has alreadybeen prepared).All subsequent reportingby the contractorwill be monitoredas per these targets set by the PMU before the contractorsmove on to the site. The compliancemonitoring and the progress reports on environmentalcomponents will be clubbedtogether and submittedto the NHAI (throughthe PMUs) quarterlyduring implementation.The operationstage monitoringreports may be annual or biennialprovided the Project EnvironmentalCompletion Report shows that the implementation was satisfactory.Otherwise, the operationstage monitoringreports will have to be prepared as specifiedin the said Project EnvironmentalCompletion Report.

The ResettlementAction Plan containsindicators and benchmarksfor achievementof the objectivesunder the resettlementprogramme. Two levels of monitoringhave been identifiedin the RAP - intemal (NGOs, GrievanceRedressal Committees and Market Value Assessment Committees)and extemal (third party NGO). The basis for monitoringand evaluationwill be physicalindicators, financial indicators, the perceptionon the RAP and estimationof qualityof life.

- 79 -

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