MIZORAM STATE ROADS II- REGIONAL TRANSPORT CONNECTIVITY PROJECT Public Disclosure Authorized

Document of The World Bank

FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No: 83244-IN

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

Public Disclosure Authorized IN THE AMOUNT OF SDR 69.2 MILLION (US$107 MILLION EQUIVALENT)

THE REPUBLIC OF INDIA

FOR A

MIZORAM STATE ROADS II- REGIONAL TRANSPORT CONNECTIVITY PROJECT Public Disclosure Authorized

April 3, 2014

Sustainable Development Department India Country Management Unit South Asia Region

Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS

(Exchange Rate Effective February 28, 2014)

Currency Unit = INR 61.75 INR = US$1 1 US$ = SDR 0.6462

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

ADB Asian Development Bank INR Indian Rupees AADT Annual Average Daily Traffic IPF Investment Project Financing AE Assistant Engineer IRC Indian Roads Congress ASEAN Association of South East Asian Nations ISP Implementation Support Plan ACA Additional Central Assistance IFRs Interim Financial Reports AIDS Acquired Immuno-Deficiency Syndrome JEs Junior Engineers AMS Asset Management System KCT Karnafuli Container Terminal AMS Asset Management System KVIB Khadi and Village Industries Board AWP Annual Work Plans LA Land Acquisition BoQ Bill of Quantities LOC Letter of Credit BOT Build-Operate-Transfer LPI Logistics Performance Index CAAA Controller of Aid Accounts & Audit MERC Southern Cone Common Market OSUR CAG Comptroller and Auditor General MSRP I Mizoram State Roads Project CPS Country Partnership Strategy NE Northeastern CPS Country Partnership Strategy NER North East Region CTD Customs Transit Document NLTA Non-Lending Technical Assistance DEA Department of Economic Affairs NLUP New Land Use Policy DFID Department for International NPV Net Present Value Development EIA Environmental Impact Assessment NAFTA refers to the North American Free Trade Agreement ECOW Economic Community of West African ORAF Operational Risk Assessment Framework AS States EE Executive Engineer PAP Project Affected Person EU European Union PAHs Project-Affected Households EIRR Economic Internal Rate of Return PCC Project Coordination Consultant EIA Environmental Impact Assessment PCM Procurement and Contract Management Manual EMF Environmental Management Framework PDO Project Development Objective EMP Environment Management Plan PIU Project Implementation Unit FA Framework Agreement PPP Public-Private-Partnership FPIC Free Prior Informed Consultations PCN Project Concept Note FM Financial Management PPC Project Preparation Consultants

FY Financial Year PWD Public Works Department FY Fiscal Year PPC Project Preparation Consultants GAAP Governance and Accountability Action PWD Public Works Department Plan GDP Gross Domestic Product RSMP Road Sector Modernization Plan GSDP Gross State Domestic Product RE revised estimate GoI Government of India SAARC South Asia Association for Regional Cooperation GFR General Financial Rules SBD Standard Bidding Document HRD Human Resources Development SEPA Online procurement plan execution software HDM Highway Development & Management SA Social Assessment Model IFC International Finance Corporation SMF Social Management Framework ICB International Competitive Bidding SAR South Asia Region ICD Inland Container/Clearance Depot SLAO Special Land Acquisition Officer ICP Integrated Check Post WBG World Bank Group ICT Information and Communication ZOHAN Mizoram Handloom and Handicrafts Technology DCO Development Corporation Limited IDA International Development Association

Regional Vice President: Philippe H. Le Houerou Regional Integration/Country Director: Salman Zaheer, Onno Ruhl Sector Director: John Henry Stein Sector Manager: Karla Gonzalez Carvajal Task Team Leader: Diep Nguyen-van Houtte

INDIA MIZORAM STATE ROADS II- REGIONAL TRANSPORT CONNECTIVITY PROJECT

TABLE OF CONTENTS

Page

I. STRATEGIC CONTEXT ...... 1 A. Country Context ...... 1 B. Rationale for the Project and World Bank Involvement ...... 5 C. Sectoral and Institutional Context ...... 6 D. Higher Level Objectives to which the Project Contributes ...... 6

II. PROJECT DEVELOPMENT OBJECTIVE(S)...... 8 A. Project Development Objective ...... 8 B. Project Beneficiaries ...... 8 C. PDO Level Results Indicators ...... 8

III. PROJECT DESCRIPTION ...... 8 A. Project Components ...... 8 B. Lending Instrument ...... 10 C. Project Cost and Financing ...... 10 D. Lessons Learned and Reflected in the Project Design ...... 11

IV. IMPLEMENTATION ...... 12 A. Institutional and Implementation Arrangements ...... 12 B. Results Monitoring and Evaluation ...... 13 C. Sustainability...... 13

V. KEY RISKS AND MITIGATION MEASURES ...... 13 A. Risk Ratings Summary Table ...... 15 B. Overall Risk Rating Explanation ...... 15

VI. APPRAISAL SUMMARY ...... 15 A. Economic Analysis ...... 15 B. Technical ...... 17 C. Financial Management ...... 18 D. Procurement ...... 19

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E. Social (including Safeguards) ...... 20 F. Environment (including Safeguards) ...... 21 G. Other Safeguards Policies Triggered (if required)...... 22

Annex 1: Results Framework and Monitoring ...... 23

Annex 2: Detailed Project Description ...... 25

Annex 3: Implementation Arrangements ...... 33

Annex 4: Operational Risk Assessment Framework (ORAF) ...... 53

Annex 5: Implementation Support Plan ...... 57

Annex 6: Economic and Socio-Economic Analyses ...... 60

Annex 7: Governance and Accountability Action Plan ...... 68

Annex 8: MAP of Project Roads (and Roads under Development on Bangladesh side) ...... 74

. PAD DATA SHEET India Mizoram State Roads II- Regional Transport Connectivity Project (P145778) PROJECT APPRAISAL DOCUMENT

. SOUTH ASIA SASDT

Report No.: PAD900

. Basic Information Project ID Lending Instrument EA Category Team Leader P145778 Investment Project A - Full Assessment Diep Nguyen-Van Houtte Financing Fragile and/or Capacity Constraints [ X ] Project Implementation Start Date Project Implementation End Date 12-Jun-2014 31-Oct-2020 Expected Effectiveness Date Expected Closing Date 10-Sep-2014 31-Oct-2020 Joint IFC No Sector Manager Sector Director Country Director Regional Vice President Salman Zaheer/Onno Karla Gonzalez Carvajal John Henry Stein Philippe H. Le Houerou Ruhl

. Borrower: Department of Economic Affairs, Republic of India Responsible Agency: Public Works Department of Mizoram Contact: Mr. Lalrinkima Hnamte Title: Project Director Telephone 91-0389-234001 Email: [email protected] No.:

. Project Financing Data(in US$ Million) [ ] Loan [ ] Grant [ ] Guarantee [ X ] Credit [ ] IDA Grant [ ] Other Total Project Cost: 107.00 Total Bank Financing: 107.00 Financing Gap: 0.00

Financing Source Amount BORROWER/RECIPIENT 0.00 International Development Association (IDA) 71.00 IDA recommitted as a credit (IDAR) 36.00 Total 107.00

. Expected Disbursements (in US$ Million) Fiscal Year 2015 2016 2017 2018 2019 2020 Annual 10.34 17.12 22.17 25.58 17.77 14.03 Cumulative 10.34 27.46 49.63 75.20 92.97 107.00

. Proposed Development Objective(s) The proposed Project Development Objective is to increase transport connectivity along regional trade corridors in Mizoram.

. Components Component Name Cost (US$ Millions) Component A: Improvement of Priority Cross-border Roads 102.0 and Trade-Related Infrastructure Component B: Road Sector Modernization and Performance 5.0 Enhancement through Institutional Strengthening Institutional Data Sector Board Transport

. Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Mitigation Co- Co-benefits % benefits % Transportation Rural and Inter-Urban 70 Roads and Highways Industry and trade Other domestic and 30 international trade Total 100 I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project.

. Themes Theme (Maximum 5 and total % must equal 100) Major theme Theme %

Trade and integration Trade facilitation and market access 30 Rural development Rural services and infrastructure 70 Total 100

. Compliance Policy Does the project depart from the CAS in content or in other significant Yes [ ] No [ x ] respects?

. Does the project require any waivers of Bank policies? Yes [ ] No [x] Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [x] Does the project meet the Regional criteria for readiness for implementation? Yes [x] No [ ]

. Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X

. Legal Covenants Name: Recurrent Due Date Frequency Implementation Units/Cells Yes N/A Continuous Description of Covenant Mizoram to maintain: (i) a state-level Project Steering Committee (PSC); (ii) a Project Implementation Unit (PIU), within the Public Works Department (PWD); (iii) an Environmental and Social Cell (E&S Cell), within the PIU; (iv) a Procurement and Contracts Management Cell (P&CM Cell) within the PIU; and (v) District-specific Field Divisions in each state district targeted by the Project, all with qualified/experienced staff and adequate resources, satisfactory to the Association, as deemed necessary for the carrying out of their respective implementation responsibilities under the Project. Name: Recurrent Due Date Frequency Road Sector Modernization Group No 31-Dec-2014

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Description of Covenant Mizoram to establish and maintain a Road Sector Modernization Group (RSMG) with power and functions/competencies acceptable to the Association, in order to assist the PIU with the planning, review, prioritization and facilitation of activities to be implemented under Component B of the Project. Name: Recurrent Due Date Frequency Project Management Consultant No 28-Feb-2015 Description of Covenant Mizoram shall hire and maintain a Project Management Consultant (PMC) with qualification and experience satisfactory to the Association, to assist the PIU with the management and coordination of Project implementation (i.e. preparing bidding documents, ToRs, handling procurement disputes, etc). Name: Recurrent Due Date Frequency Construction Supervision No 31-Dec-2014 Consultant Description of Covenant Mizoram to hire and maintain a Construction Supervision Consultant with qualification and experience satisfactory to the Association, to assist the PIU with the certification of timing, quality and standard of road/infrastructure improvement works, and the contractors’ performance and compliance with statutory/regulatory requirements, governmental permits and the applicable safeguard documents. Name: Recurrent Due Date Frequency Governance & Accountability Yes N/A Continuous Action Plan Description of Covenant Mizoram to implement the Project in accordance with the GAAP. Name: Recurrent Due Date Frequency Mizoram Road Fund No December 31, 2014 Description of Covenant Mizoram to operationalize the Mizoram Road Fund capitalizing it with its own resources, and maintaining a minimum funding (by April 1, 2015 and thereafter) of INR150 million per annum. Name: Recurrent Due Date Frequency Safeguard Documents Yes N/A Continuous Description of Covenant Mizoram to carry out the Project in accordance with the Safeguard Documents (i.e. EMF, SMF, EIAs, EMPs, SIAs and RAP&IPDPs). Name: Recurrent Due Date Frequency Lunglei-Tlabung-Kawrpuichhuah No 31-Dec-2014 social and environmental documents

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Description of Covenant Mizoram not to award any contract for the upgrading of Lunglei-Tlabung-Kawrpuichhuah road (and work under sub-component A.2 and B) until/unless: (i) activities have been screened by the E&S Cell as per the SMF and EMF and if necessary EIAs, EMPs, SIAs and RAP&IPDPs have been prepared; (ii) the Association has reviewed and approved the foregoing documents; and, (iii) the document have been disclosed for at least 120 days. Name: Recurrent Due Date Frequency Pre-Construction Requirements Yes N/A Continuous Description of Covenant Mizoram to ensure that: (i) all necessary governmental permits and clearances for such civil works are in place; (ii) all pre-construction conditions imposed have been complied with/fulfilled; and (iii) all resettlement measures (i.e. full payment of compensation and/or provision of resettlement assistance) shall have been appropriately executed. Name: Recurrent Due Date Frequency Contractors’ Obligations Yes N/A Continuous Description of Covenant Civil works contracts for the Project to include the obligation of the relevant contractor to comply with the applicable safeguard documents. Name: Recurrent Due Date Frequency Safeguards Monitoring Yes N/A Continuous Description of Covenant Mizoram to: (i) maintain monitoring and evaluation protocols and record keeping procedures on implementation of/compliance with safeguard documents, and (ii) furnished to the association quarterly reports prepared by the E&S Cell and CSC on general compliance with the safeguard documents. Name: Recurrent Due Date Frequency Expenditures for Land Acquisition Yes N/A Continuous and Resettlement and Rehabilitation Description of Covenant Mizoram to ensure that all land acquisition required for the purpose of the Project and any compensation, resettlement and rehabilitation payment to Project-affected Persons in accordance with the provision of the RAP&IPDP are financed exclusively out Mizoram’s own resources. Team Composition Bank Staff Name Title Specialization Unit Diep Nguyen-Van Sr Transport Spec. Team Lead SASDT Houtte Ashok Kumar Sr Highway Engineer Sr Highway Engineer, SASDT Co-Team Lead Comfort Olatunji Program Assistant Program Assistant SASDO

Arnab Bandyopadhyay Sr Transport. Engr. Sr Transport. Engr. SASDT Anand Kumar Srivastava Senior Procurement Senior Procurement SARPS Specialist Specialist Sita Ramakrishna Senior Environmental Senior Environmental SASDI Addepalli Specialist Specialist Drona Raj Ghimire Environmental Specialist Environmental Specialist SASDI Sangeeta Kumari Senior Social Social Development SASDS Development Specialist Specialist Mridula Singh Senior Social Social Development SASDS Development Specialist Specialist Srihari Gopalaswamy Consultant – Social Social Development SASDS Safeguards Specialist Arvind Prasad Mantha Financial Management Financial Management SARFM Specialist Specialist Charles Kunaka Senior Trade Specialist Senior Trade Specialist PRMTR Martin Serrano Senior Counsel Country Lawyer LEGES Junxue Chu Senior Finance Officer Disbursement Specialist CTRLN Kumudni Choudhary Program Assistant Operations Assistant SASDO Krishnan Srinivasan ET Consultant - GAAP Governance Non Bank Staff Name Title Office Phone City Michel Zarnowiecki Consultant – Customs 33616303107 Toulouse and Trade Facilitation Neeraj Singh Consultant – Social Safeguards Ranjan Verma Consultant – Tribal Development Plan Samar Banerjee Consultant – Environmental Safeguards Jagir Kumar Consultant – Procurement and Contract Management Boominathan Consultant – Traffic and Muthuthevar Economic Analysis V. Murahari Reddy Consultant, Institutional Strengthening Kirti Bansal Consultant – Engineering

P K Lauria Consultant – Engineering Designs Surendra Joshi Consultant – Engineering Mansi Handa Consultant – Administrative Support

. Locations Country First Location Planned Actual Comments Administrative Division

I. STRATEGIC CONTEXT

A. Country Context

1. Reflecting a long history of political tensions and conflict, South Asia is the world’s least economically integrated region. Intra-regional trade currently accounts for just 5 percent of total trade (versus, e.g., 25% for ASEAN countries and 60% for the EU). Cross-border investment is also very low and there has been little cooperation to date on urgent, shared issues such as river and disaster risk management, which are more amenable to regional rather than national solutions. Removing obstacles to trade – inter alia through improved transport connectivity, logistics facilitation measures and lowering tariffs and other trade barriers – is a high priority for South Asia (and especially for its poorest landlocked regions) as a key element of the effort to build shared prosperity and improve people’s welfare. The World Bank’s 2012 Logistics Performance Index (LPI), a global multidimensional assessment of logistics performance, shows that as in previous years, South Asia lags behind all other regions except Sub-Saharan Africa in overall logistics performance. India’s performance is relatively strong overall (ranked 46); but the three landlocked countries, Afghanistan, Bhutan and Nepal, are among the weakest performers (ranked 131, 107 and 151 out of 155, respectively). Afghanistan and Nepal are also the poorest countries in the region. The seven landlocked states of Northeastern (NE) India are also among the poorer states in India. This is consistent with analytical research that concludes that being landlocked impacts transport costs considerably, since landlocked regions depend on their neighbors for access to the sea for third-country trade and cannot control shipping conditions outside of their borders. Available estimates suggest that annual intra-regional trade in the region could increase from the current US$5 billion to US$20 billion if barriers to trading with neighbors were removed,1 and that a 10 percent reduction in transaction costs at the border could increase a country’s exports by about 3 percent.2

2. The high cost of limited regional integration and trade in the Northeastern part of South Asia is clearly illustrated by the case of Mizoram. Despite its potentially advantageous geographic location between Myanmar and Bangladesh, Mizoram state in India’s Northeastern Region (NER) is one of the poorest in the country, ranking 26th out of 28 states in terms of per capita income. Mizoram’s lagging economic development is in large part due to their landlocked location, poor infrastructure, and equally importantly, limited linkages with the markets and ports of neighboring countries including Bangladesh, Nepal, Bhutan, China and Myanmar. The latter are physically closer to the Seven Sisters than the rest of India and could offer opportunities for productive commerce and connection to world markets, but the lack of infrastructure connectivity coupled with continued political and tariff barriers to the movement of goods and people means that the potential for expanded trade is severely circumscribed.

1 Ahmed, Sadiq & Ghani, Ejaz, 2008. "Making regional cooperation work for South Asia's poor," Policy Research Working Paper Series 4736, The World Bank and Ahmed, Sadiq & Ghani, Ejaz, 2009. "Accelerating Growth and Job Creation in SouthAsia," OUP Catalogue, Oxford University Press. Raihan (2012) suggests that there would be an increase in South Asian countries’ exports to each other in the range of 94 to 1105 percent (India to Sri Lanka, and Pakistan to India, respectively), with most other bilateral export increases in between. 2 De, Khan and Chaturvedi 2008. Transit and Trade Barriers in Eastern South Asia: A review of the Transit Regime and Performance of Strategic Border Crossings. ARTNeT Working Paper Series, No. 56. 1

3. As the preceding suggests, goods produced in NER are generally not competitive once transport costs are factored in, and the population living in NER faces much higher costs for non- local consumer and capital goods. Transport/travel from Aizawl, the capital of Mizoram, involves an approximately 2,400 km journey via the congested, 11 km-wide Siliguri corridor (termed the “Chicken’s Neck”) to Delhi or 1547 km to the nearest Indian port of Kolkata, impacting connectivity to larger markets. As a result, prices for basic staples (e.g., rice, sugar, tea and tomatoes) can cost as much as three times more in Mizoram and the NER states compared with most cities in India. Price differences with neighboring countries (e.g., Bangladesh) are similarly large. The nearest major Indian city from Aizawl is Guwahati (Assam State, NER), about 500 km away, and it takes about two days to cover this distance because of the under-developed and poor condition of the road network. Improving transport links within the NER and with Bangladesh – and, especially its Chittagong Port (only about 100km away from the borders of Tripura and Mizoram states and not much more from Assam and Manipur) – would therefore make a very significant impact, both by lowering prices for Mizoram’s consumers and businesses and by giving it (and through Mizoram other NER states) access to the wider markets accessible via Bangladesh.

4. Difficult trade logistics and absence of transport connectivity for cross-border trade has been costly not only for NER but also for the closest neighboring countries – principally Bangladesh and Nepal. For Bangladesh the NER is a natural market given its proximity to the country’s eastern border, but lack of infrastructure within the NER and transport connectivity between NER and Bangladesh, seriously limit the development of trade and investment links. For landlocked Nepal, as well, improved connectivity within NER and between NER and Bangladesh would be beneficial from two standpoints: (i) Nepal’s exports of daily consumption products (e.g., lentils) to the NER could be significantly increased if transportation links within NER were improved; and (ii) improved direct connectivity between NER, Bangladesh and other parts of India could significantly reduce congestion on the narrow Siliguri corridor (the “Chicken’s Neck”) through which the bulk of goods going in and out of both Nepal (and Bhutan) and NER must now pass. For Nepal (and Bhutan), transit through the 54km stretch of Indian Territory at the Siliguri Corridor is key to enabling trade with Bangladesh and to accessing the seaports of Mongla and Chittagong in Bangladesh, as alternatives to the congested Kolkata Port in West Bengal, India. In turn, all four South Asian countries – Bangladesh, India (NER), Nepal and Bhutan – would undoubtedly benefit from improved transport connectivity with Myanmar, and through Myanmar to points further east, an opportunity that has now become available given the recent economic opening of Myanmar.

South Asian Regional Connectivity Initiatives 5. Recognizing the potential for growth presented through intra-regional trade, and the special impediments to growth that landlocked countries/states face, the South Asia Association for Regional Cooperation (SAARC) – South Asia’s official organization for facilitating regional cooperation – has declared the present decade to be “the Decade for Intra-Regional Connectivity in SAARC”. This initiative is based on the recommendations of a major SAARC study on regional connectivity, which was formally endorsed by the Transport Ministers of all eight SAARC member countries. The SAARC Declaration and study defined key multi-modal transport and economic corridors that would facilitate intra-regional trade. These have in common the objective of unblocking regional trade for landlocked countries or states, including 2

Afghanistan, Nepal, Bhutan and NE India. The SAARC Corridors are listed in Annex 2, Table 1 and correspond to the Asian Highway and Railway networks developed by UNESCAP and are under varying stages of development. The transport initiative is complemented by a series of associated programs aimed at enhancing trade through Integrated Check Posts (ICPs), reducing onerous documentation requirements and addressing other tariff and logistical barriers.

6. Complementing the SAARC Multi-modal Transport initiative, the three governments of Bangladesh, India and Nepal agreed in 2011 to facilitate trade through the Siliguri Corridor for Bangladesh and Nepal, including allowing Nepal access to the Bangladeshi ports of Mongla and Chittagong, and to enhance connectivity through Bangladesh for NE India to facilitate bilateral trade as well as trade with third countries. All three governments committed to addressing missing links in physical infrastructure, as well as to addressing policy and institutional barriers to trade. Meanwhile, India and Myanmar are building connectivity through a multi-modal transport plan that will involve sea links between India’s eastern ports and Sittwe Port in Myanmar and further linkage to Mizoram and the rest of NER through riverine transport on the Kaladan River and road connectivity thereafter. The agreement between the two countries extends beyond transport per se to other trade facilitation initiatives including improvements to cargo handling and the establishment of ICPs. India's efforts to better integrate its North East are also encouraged by the 'BIMSTEC' initiative, a grouping of seven countries, including Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal whose aim is to improve connectivity and regional integration between member countries. The third heads of government summit of the BIMSTEC initiative is scheduled to be held in Myanmar during March 1-4, 2014.

The Northeastern Regional Transport Connectivity Program 7. Within the frameworks of the SAARC Multi-modal Transport Initiative and the agreement to facilitate trade and transit between Bangladesh, India and Nepal, the three governments have each identified a series of priority investments for intra-regional connectivity that will address gaps in physical infrastructure for trade and transit. While each country is principally focused on projects within its own territory, the projects have been prioritized on the basis of their relevance for intra-regional connectivity. These transport projects – most within national borders but with vital relevance for regional (cross-border) connectivity – are now in varying stages of development and implementation including:

• Bangladeshi initiatives to strengthen railway connections between Khulna and Mongla (currently underway) and plans to upgrade railway and road links along the Siliguri Corridor – to help facilitate railway and road transport for transit goods from Nepal and Bhutan • Construction by India of national highways in NER including Assam (East-West Corridor), Meghalaya and Mizoram, the India-Myanmar Kaladan project mentioned above which will benefit the NER, Bangladesh and Myanmar and building of ICPs on the borders with Nepal, Bangladesh (Tlabung) and Myanmar (Champhai). • Efforts by the Government of Nepal to facilitate transit and address bottlenecks at the Siliguri Corridor (partly financed through the Bank-financed Nepal-India Regional Trade and Transport Project).

The Bank’s Role

8. The World Bank Group’s program for supporting SAARC countries to facilitate transit, trade and regional cooperation follows SAARC’s Multi-modal Transport Plan and selects specific high-value activities and investments that would unblock barriers to trade, especially for landlocked countries, states and provinces, across multiple priority corridors. Given the varying degrees of complexity and capacity, the projects have been prepared as they achieve the appropriate level of readiness. The UK’s Department for International Development (DFID) has been a key partner in financing much of the Bank team’s technical assistance on corridor development and trade facilitation projects and activities in South Asia, including trust-funded support for both Bank and Recipient-Executed activities. The International Finance Corporation (IFC) works closely with the Bank team to explore private sector development investment opportunities along the priority corridors in the Bank’s South Asia program. The IFC also provides technical assistance on trade facilitation measures specifically focusing on regulatory and procedural issues that hamper private sector investments. The Bank also coordinates closely with the Asian Development Bank’s transport and trade facilitation initiatives through the South Asia Sub-Regional Economic Cooperation (SASEC) Program which includes interventions to facilitate transport and trade for Bangladesh, India, Nepal and Bhutan including through the Siliguri Corridor.

Table 1. World Bank Program Supporting SAARC Priority Corridors (Eastern Side)

Project Activities/Interventions Nepal-India • Capacity support to Nepal for transit and trade discussions with India, Regional Trade Bangladesh and other countries and Transport • Facilitate Electronic Data Interchange between Nepal and India: automated Regional IDA Customs Transit Document (CTD) Project (P144335) • Develop Nepal National Single Window and National Trade Portal Reduce Approved June border crossing time at Birgunj/Raxaul border post 2013 • Improve Bhairahawa Inland Container/Clearance Depot (ICD) • Construct new ICD at Kathmandu (SAARC Road • Improve efficiency of railway movement along the Kathmandu-Birgunj- Corridor 2 and Kolkata Corridor Rail Corridor 3) • Expansion and rehabilitation of Narayanghat-Mugling road, a key road section along Kathmandu-Birgunj-Kolkata Corridor (Bank-Executed) India: Capacity support for NE Indian states in trade production and South Asia livelihoods, marketing and trade promotion capacity, and multi-modal Eastern Corridor transport planning. Engagement with Land Port Authority of India on Programmatic Integrated Check Post (ICP) Program. Integrated Checkposts are building Trade and built or planned on the borders with Nepal, Bangladesh, and Myanmar. Transport Bangladesh: Technical assistance, capacity support and preparatory studies Facilitation NLTA for Bangladesh for projects along the Siliguri Corridor (e.g. improvement of Project (P147957) border posts along Siliguri Corridor), for transit discussions with India and Approved Nepal, for improving connectivity between NE India, Nepal and Bangladesh

November 2013 (including through Chittagong Hill Tracts Districts), and support to Ministry of Shipping for improvement of inland waterways, sea ports and Land Port Authority of Bangladesh for land ports/border crossings.

Nepal: Technical assistance, capacity support and preparatory studies for Nepal especially for projects along the Siliguri Corridor (e.g. improvement of border posts along the Corridor, and for transit discussions with India and Bangladesh. Bhutan: Trade and economic corridor development assessment; preparatory studies for Bhutan inland water transport, southern East-West Corridor Development and trade-related infrastructure development, and technical assistance for Brand Bhutan trade marketing efforts. Bangladesh Trade Technical assistance, capacity support and preparatory studies for Bangladesh and Transport to improve connectivity with Nepal, Bhutan and NE India including Studies RETF feasibility, design and safeguards studies for strategic prioritization and (P148881) dredging of IWT routes; development of Karnafuli Container Terminal Approved January (KCT) at Chittagong Port; efficiency improvements at Mongla Port, 2014 development of Thegamukh Land Customs Station on the border with NE India; improvement of border posts in Siliguri Corridor, and multi-modal connectivity options to connect Thegamukh, NE India and Chittagong Port. Mizoram Regional Rehabilitate/upgrade roads that go to borders of Bangladesh and Myanmar to Connectivity enhance regional connectivity, improve border post at border with Project (P145778) Bangladesh, and build border haats/markets along project roads. Proposed Project Proposed Investments in dredging of IWT routes; development of Karnafuli Container Bangladesh Trade Terminal (KCT) at Chittagong Port; efficiency improvements at Mongla Port, and Transport development of Thegamukh Land Customs Station on the border with NE Facilitation India; and multi-modal connectivity options to connect Thegamukh, NE India Regional IDA and Chittagong Port. Project (FY15-16)

B. Rationale for the Project and World Bank Involvement

9. The World Bank’s South Asia Regional Strategy recognizes regional cooperation and integration as a key strategic objective. It pinpoints limited intraregional trade and connectivity, cumbersome procedures, non-tariff barriers, and costly road transport and logistics services as key impediments to increasing trade in the region. The SAR Regional Strategy Updates for 2012 and 2013 specifically recognize the importance of regional trade and transport systems for the South Asia Region. The World Bank Group (WBG) is also well placed to address SAARC’s regional connectivity and economic growth objectives as the WBG’s national portfolios and growing regional connectivity portfolio address many of the building blocks to regional connectivity and growth expounded in SAARC’s vision and strategies. These include addressing infrastructure, policy and institutional constraints to connectivity, but also enabling the production aspect of growth through the Bank’s portfolio of private sector development, agriculture and livelihoods projects, as well as urban development, rural development, education and health, and environmental conservation projects.

10. The overarching objective of the World Bank Group’s India Country Partnership Strategy (CPS)3 for the period FY2013–17 is to support poverty reduction and shared prosperity in India. That objective is closely aligned with the vision for development outlined in the country’s 12th

3 Report number 76176-IN, discussed at the Board on March 21, 2013. 5

Five-Year Plan (FY2013– 17), which calls for “faster, sustainable, and more inclusive growth”; focusing on poverty reduction, equality, regional balance, empowerment, environmental management, and employment. Economic integration—nationally and regionally—is central to the WBG’s strategy in India, and supporting the Government to respond to the country’s massive infrastructure needs is a large component of the program. The proposed Project will contribute to two outcomes under the CPS engagement area of economic integration: improved transport connectivity and strengthened regional trade and infrastructure integration. The is also in line with the WBG’s gradual rebalancing of its program towards low-income and special category states—like Mizoram—that, despite recent strong growth rates, remain behind All India averages in terms of Gross State Domestic Product (GSDP), and a range of human development indicators, and are heavily impacted by cross-border issues.

C. Sectoral and Institutional Context

11. The Government of India’s 12th Five-Year Plan aims to develop a more balanced multimodal transport network to link the northeast and special-category states to the rest of the country. The strategy also emphasizes safety—especially for women—energy efficiency, environmental conservation, and social impact. By the end of the Plan, it is envisaged that all villages will be connected to an all-weather road, most national and state highways will be upgraded to a two-lane standard or better, and flagship projects—the eastern and western freight corridors—will have been completed. The Plan also prioritizes institutional strengthening, enhanced accountability, and capacity building among the various state and national highways agencies; and this strategic priority is supported by the World Bank.

12. Mizoram’s road network is poor in quality and under-developed, and has among the lowest density in all of India. Key issues and challenges in the road sector include: inadequate sector funding, inadequate maintenance, weak planning for investments, not the most up-to-date road engineering practices and business procedures, limited capacity of road agency staff, low capacity of the local construction industry, and poor road safety management.

13. The Public Works Department (PWD), Mizoram is responsible for managing the entire state road network. Its original institutional structure and procedures are based on sound principles but these were evolved for small works and have undergone little change over time due to lack of efficient mechanisms to adopt latest industry practices. In today’s context, these are largely outdated. PWD needs substantial enhancements and revisions in its traditional way of doing business to further improve its performance and transform it into a modern road agency.

D. Higher Level Objectives to which the Project Contributes

14. The Project proposed in this document – focused on mountainous Mizoram State in the NER – is the second regional IDA investment project (and fourth key activity) in the Bank’s program to facilitate transit and trade along the Eastern Corridor of South Asia Region. The program’s objective is to support the agreement to facilitate trade and transit between Bangladesh, India and Nepal, and the SAARC priority corridors that aim to facilitate intra- regional trade, particularly through unblocking barriers to transit for landlocked Nepal, Bhutan and NE India through Bangladeshi and Indian territory. The Project will enhance connectivity for

6 the state of Mizoram and the rest of NE India to Bangladesh and the Port of Chittagong (as well as Myanmar), while complementary projects in the program will enhance connectivity for landlocked Nepal to Bangladesh through the Siliguri Corridor of India. The link to Bangladesh will facilitate greater bilateral trade as well as facilitate access for Mizoram and other NE Indian states to the Port of Chittagong (which is the nearest shipping port for the NER) and other parts of India, Nepal and other neighboring countries. The link to the border with Myanmar will facilitate connectivity to Myanmar and the rest of East Asia beyond. The participation of the three countries in the regional IDA program is as follows: • Nepal: the Nepal-India Regional Trade and Transport Project partly finances Nepal’s negotiations with India and Bangladesh to facilitate transit and trade through the Siliguri Corridor to increase Nepali trade with India, and Bangladesh. Concurrently, the ADB has financed interventions at the Kakarbitta and Phulbari-Banglabandha border posts, and a road in the Siliguri Corridor to improve connectivity between Nepal, Bangladesh and India. • India: the proposed Mizoram State Roads II Regional Transport Connectivity Project which finances regional trade corridors in Mizoram including to the borders with Bangladesh (and Myanmar). The ADB is also rehabilitating a complementary section of road in Mizoram, and exploring support for the rehabilitation and expansion of another key road corridor in the NE Indian state of Manipur. • Bangladesh: the proposed FY15-16 regional IDA Bangladesh Regional Trade and Transport Facilitation Project which will finance investments at Chittagong Port (Karnafuli Container Terminal), Mongla Port, inland waterways along the Bangladesh- India Bilateral Protocol Route, road/IWT connectivity to Mizoram, NE India, and border posts bordering Mizoram (Thegamukh-Tlabung), and the Siliguri Corridor (Burimari Border Post, on the border with India).

15. Bangladesh, India and Nepal also meet periodically to harmonize their policies on transport and trade facilitation through the SASEC Initiative (Bangladesh, India, Nepal and Bhutan) and through SAARC fora. Benefits of the proposed Project and regional program will accrue to all three participating countries, and Myanmar.

16. In addition to supporting the phased implementation of planned SAARC Transport Corridors, the proposed project is an integral part of three prongs of the Government of India’s broader development strategy – it is a targeted intervention to reduce barriers to the growth prospects of the country’s lagging northeastern states, a part of India’s renewed focus on expanding economic and strategic relations with East Asia through its “Look East” policy, and a part of the agreement with Bangladesh and Nepal to alleviate transport and trade bottlenecks. The improved integrated, multi-modal regional transport network supported by the program will bolster export-led growth and provide better accessibility to services for poor people and lagging states. The main beneficiaries of long-term impacts of program interventions include: (i) Poor people in Bangladesh, India and Nepal who will benefit from improved transport connectivity; (ii) traders and businesses who will benefit from reduced time and cost of exporting and importing goods; and (iii) consumers who will benefit from lower prices of imported goods.

II. PROJECT DEVELOPMENT OBJECTIVE(S)

A. Project Development Objective

17. The proposed Project Development Objective is to increase transport connectivity along regional trade corridors in Mizoram.

B. Project Beneficiaries

18. Residents of Mizoram will benefit from the increased connectivity – and therefore economic growth through expected increased trade. Independent of the regional trade scenario, this project will enhance the human development and economic growth prospects for the residents of Mizoram through increased intra-state connectivity. Women will especially benefit as lower transport and trade costs will improve the competitiveness of Mizoram’s key export products particularly in the agricultural and textiles sectors which employ significant numbers of women. As demonstrated by the success of the first World Bank-financed Mizoram State Roads Project (MSRP I), the roads constructed reduced travel time by half, and has triggered significant socioeconomic benefits in the project influence area.

C. PDO Level Results Indicators

19. The project seeks to achieve the following key results:

i. Increase in traffic along project corridors ii. Reduction in travel time on project corridors

Key intermediate indicators include: iii. Roads improved/rehabilitated iv. Roads in good and fair condition as a share of total classified roads v. Market haat structures built or improved along project road/trade corridors vi. District level road maintenance contracts implemented

The project’s results framework including other intermediate result indicators is presented in Annex 1.

III. PROJECT DESCRIPTION

A. Project Components

20. The Mizoram State Roads II Regional Connectivity Project aims to increase intra-state and regional connectivity for the residents of landlocked Mizoram. The Government of India has requested the World Bank to provide financing for about 420 km of roads that enhance connectivity in Mizoram. However, since the preparatory activities for the proposed road works are at varying degrees of readiness, this proposed Project will fund the 91 km of roads that are design-ready or with studies at an advanced stage, as well as fund preparation studies for the remaining approximately 330 km of road which could be considered for a follow-on project or

additional financing when the designs are ready. The project has two components to support the PDO:

Component A: Improvement of Priority Cross-border Roads and Trade-Related Infrastructure (US$ 102 million)

i. Widening and strengthening of 91km of road and preparation studies for approximately 330km of road (US$ 99.0 million). Widening and strengthening of three sections of (Group 1) road totaling 91 km including (i) a 22.0 km section of Lunglei – Tlabung – Kawrpuichhuah Road on the border with Bangladesh; (ii) the 27.5km Champhai-Zokhawthar Road on the border with Myanmar; and (iii) the 41.7km Chhumkhum-Chawngte North-South alignment connecting to the border roads with Bangladesh to the west and Myanmar to the south. Concurrently, the project would fund detailed studies and designs for approximately another 330km of (Group 2) roads in the North-South Corridor and remaining road sections along the Lunglei – Tlabung – Kawrpuichhuah Road. Many of these roads would be greenfield, and would increase the connectivity both within the state – improving access to transport infrastructure and services for isolated communities – as well as to key international trunk roads and transport corridors that connect to other NE India states, Bangladesh, Chittagong Port and the rest of South Asia, and to Myanmar. The Group 2 North-South alignment starts at Junction NH44A (Origination) passing through Chungtlang, Darlung, Buarpui, Thenhlum, Zawlpui, Phairuangkai and Chawngte. Road Safety Improvement pilot projects will also be incorporated in project corridors to demonstrate good practice examples of road safety engineering measures that effectively address road safety hazards.

ii. Construction or improvement of trade-related infrastructure along project roads including market haat structures and truck stops (US$ 3 million). These infrastructure not only improve the trade capacity of the residents of the state and of the region, they also are key benefit-sharing measures as requested by the communities, and help improve road safety along project roads. Market haat structures provide a safe place for local communities to market and sell their produce and goods, instead of selling on the side of the road in self-made structures that may be unsound and that may be located in unsafe locations from a road safety perspective. Truck stops provide a safe place for drivers to stop along project corridors which would enhance safety for both truck drivers as well as other traffic sharing the road and residents living along project corridors.

Component B: Road Sector Modernization and Performance Enhancement through Institutional Strengthening (US$ 5 million). This component will support gradual transformation of PWD into a modern road agency through implementation of a Road Sector Modernization Plan (RSMP) which will carry forward and deepen various institutional development initiatives introduced under the MSRP I. The RSMP will be periodically reviewed and modified during project implementation and will focus on: i. Modernization of policies, engineering practices, and business procedures. Key activities include development and modification of sector policies and strategies,

engineering manuals and studies, and a procurement and contract management manual to introduce improved practices of design, construction, quality monitoring, and maintenance of hill roads, and the carrying out of related studies; ii. Asset management and maintenance. Modification of the existing maintenance management system into an Asset Management System (AMS) including development of an asset management strategy and asset management information system for the strategic core road network comprising key state and regional corridors; operationalization of the existing road maintenance fund; provision of technical assistance to mobilize additional funds for road maintenance; and utilization of simple maintenance contracts to deliver maintenance works including community – based contracts funded through PWD’s maintenance budget; iii. Institutional and Human Resource Development. Development and implementation of a Human Resources Development Strategy to improve PWD’s institutional structure, strengthen the capabilities of PWD engineers and other staff, increase efficiency and staff productivity, strengthen PWD’s Design Cell, and carry forward the computerization of PWD initiated under MSRP I. A separate strategy will also be developed to build the capacity of the local construction industry. iv. Road Safety Management. Support further refinement and implementation of PWD’s road safety strategy by increasing the road safety management capacity of PWD and related agencies, support the establishment of a Road Safety Fund, implement road safety audits and road safety improvement projects along priority road corridors, integrate road safety measures into the Asset Management System, and implement awareness programs on road safety and work zone safety. v. Improved environmental and social safeguards capacity and management. Capacity of the Environmental and Social Cell will be developed in PWD to improve the planning, implementation and monitoring of environmental and social safeguards policies. An environmental and social safeguards policy will be developed for PWD for road development projects, including a policy related to forest and biodiversity conservation. Forest and biodiversity conservation measures will be planned and implemented along project roads/corridors.

B. Lending Instrument

21. The project will be financed through an Investment Project Financing (IPF) IDA credit in the amount of US$ 107 million to the Government of India.

C. Project Cost and Financing

22. The Project’s total cost is estimated at US$107 million which will be financed with IDA funds from the country envelope and the regional IDA envelope. The table below presents the detailed project costs for each component.

Table 2: Project Cost and Financing

Project Components Project cost IDA Credit % Financing A. Widening and strengthening of 91 km of Group 1 Roads, Preparation Studies for 99.0 99.0 100.0 approximately 330km of Group 2 Roads, and Construction/Improvement of Market Haats and Truck Stops (excluding land acquisition and R&R costs)

- Works package 1 38.5 38.5 100.0 - Works package 2 26.3 26.3 100.0 - Works package 3 25.0 25.0 100.0 - Consulting Services (CSC and PMC) 3.5 3.5 100.0 - Project Preparation Consultants for Group 2 Roads 2.7 2.7 100.0 - Border Haats 3.0 3.0 100.0

B. Road Sector Modernization and 5.0 5.0 100.0 Performance Enhancement through Institutional Development

Total Baseline Costs 104.0 104.0 100.0 Physical and Price Contingencies 3.0 3.0 100.0 Total Financing Required 107.0 107.0 100.0

D. Lessons Learned and Reflected in the Project Design

23. The proposed Project builds on the Bank’s operational experience with the first completed Mizoram State Roads Project (MSRP-I), the first significant transport project in one of the least developed, most remote and hilliest regions of India. Lessons from preparing and implementing the MSRP-I, that the World Bank team has paid special attention to include: (i) ensuring good quality engineering designs to mitigate against increases in financial cost of works contracts; (ii) ensuring good contractor quality and contract management to mitigate against implementation delays and cost increases; (iii) planning for difficult terrain and short construction season to better manage construction cost increases and supervision costs; (iv) addressing gaps in implementing agency capacity including fiduciary capacity and project management capacity (including for coordination between field and central offices); and (v) building in a significant contingency fund to mitigate against the uncertainties associated with the above factors (difficult terrain, short construction season, poor quality engineering designs and contractor quality).

24. Lessons from the World Bank’s extensive experiences in the implementation of regional projects, especially from the Africa Region, include: (i) given the complex and often highly politicized nature of regional projects, national projects or components should be prepared separately when ready, but as key building blocks to an integrated regional program; and (ii) knowledge products, technical assistance, and capacity development are key complementary

activities that help support regional dialogue, preparation and implementation readiness. As such, this project is designed to be part of an integrated regional program, with parallel Non-Lending Technical Assistance (NLTA) and investment projects that complement each other’s objectives; and (iii) there is significant political risk in regional projects, more so than in national projects, both from the cross-border relationships perspective and from the perspective of managing national stakeholders. As such, it is best to choose projects to implement that are well-embedded in national development plans.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

25. The Public Works Department (PWD) will be the implementing agency for the Project. It has already set up a Project Implementation Unit (PIU) at Aizawl headed by a Project Director reporting to the Chief Engineer of Roads. Each road contract is assigned an Executive Engineer to monitor the design and implementation of the works. GoM has agreed to set up a Road Sector Modernization Group headed by the Engineer-in-Chief of PWD with topical sub-groups to implement the RSMP. GoM has also set-up a High Level Project Steering Committee to monitor project preparation and implementation progress and to resolve issues as they emerge. The Steering Committee includes representation from PWD, Finance, Revenue, Planning, Forests, Rural Development and Trade Departments. Staffing for procurement, financial management, environmental and social safeguards and land acquisition have been mobilized as described below.

26. Procurement and Financial Management. A Procurement and Contracts Management (PCM) Cell headed by an Executive Engineer and supported by two Assistant Engineers has been created in the PIU, reporting to the Project Director. This cell will be solely responsible for the entire procurement cycle and for providing oversight to contracts management for the proposed Project. This PCM cell needs capacity support as current staff have not implemented large contracts and projects in recent years. The World Bank has provided capacity support and training in procurement during project preparation. The proposed Project Management Consultant to assist the PIU will have one procurement and contracts management expert in their team. For financial management, a divisional accountant from Finance Department/Accounts and Treasury has been deputed for the Project and a Financial Management Specialist will be additionally hired on a contract basis to provide support on financial management functions.

27. Environmental Safeguards. One Executive Engineer (EE) for Environment (Env.) has been assigned to the PIU for overseeing effective implementation of the EMP. Under the EE for Environment, three Assistant Engineers (AEs) will be designated, each one with responsibility for a particular road. The AEs will be responsible for effective implementation of the EMPs and settle problems at their level whenever possible. They will also communicate complaints to the EE for Environment. Three Junior Engineers (JEs), one for each road to directly assist the AEs.

28. Social Safeguards. Three Assistant Engineers have been designated as R&R Managers (RRMs), one for each road. They will be responsible for implementing the land acquisition and coordinating the implementation of the combined Resettlement Action Plan and Indigenous People Development Plan (RAP&IPDP). Non-Government Organizations will be hired to

facilitate the implementation of the RAP&IPDP including documenting and addressing any complaints after verification at the site to the extent feasible. These reports will be submitted to the Social Specialist at the PIU (Special Land Acquisition Officer or SLAO) for monitoring the redressal of complaints and coordinating the activities of NGOs. The Special Land Acquisition Officer will have overall responsibility for land acquisition and disbursement for compensation and grants and has been on board since August 2013.

B. Results Monitoring and Evaluation

29. An Assistant Engineer has been assigned to assist the Project Director with project monitoring and evaluation. The AE will coordinate with the staff assigned to monitor the implementation of works, procurement, and environmental and social safeguards, to collect data on project implementation progress, on implementation progress of the Governance and Accountability Action Plan as well as data to inform the project’s results indicators.

C. Sustainability

30. The MSRP I Project proved to be an important learning experience for the PWD, which proactively supported the proposed road sector reforms and took initiatives to demonstrate its new capabilities in handling large new civil works projects. The World Bank will continue to support PWD’s efforts to embrace the practice of greater transparency through ‘clean’ procurement and consultation with road users, other government branches and civil society. To ensure sustainability, funds have been set aside in Component B for the implementation of a Road Sector Management (and Institutional Strengthening) Plan to: (i) ensure sufficient funds will be set aside for road maintenance, and innovative routine maintenance solutions adopted; (iii) increase PWD’s capacity to plan and design projects; (iv) manage contracts; (v) monitor quality; (vi) improve disaster response and preparedness; and, (vii) improve management of road safety issues. A task-force consisting of representatives from PWD and the Finance, Revenue, Planning functions has been set up to explore ways of addressing the issue of inadequate maintenance funding. PWD also plans to introduce simple maintenance contracts for routine maintenance to be executed through local communities.

V. KEY RISKS AND MITIGATION MEASURES

31. The project design has incorporated lessons learned from the MSRP I Project which includes: the need for quality preparation to ensure satisfactory quality at entry; strong client ownership and good interdepartmental cooperation; involvement of key stakeholders from inception; encouragement of the development and modernization of local contractors; the importance of sustained funding for maintenance; and site readiness for timely implementation of the civil works contracts. The RSMP supported by Component B will address many of these lessons.

32. Key risks include: (i) cost over-runs due to implementation delays linked to the poor quality of contractors and the short construction season (affected by seasonal monsoons); (ii) addressing hill-cutting and slope stability issues during and post-construction; and (iii) ensuring

adequate environmental and social safeguards protection in a state with multiple biodiversity hotspots and tribal populations, and ensuring timely implementation of land acquisition and R&R. Corresponding mitigation measures include: (i) the Bank and PIU teams have given extensive attention during the design stage to assuring good quality designs and accurate cost estimates. Ground verification of designs have initiated and will continue through implementation. The services of a Project Management Consultant and Construction Supervision Consultant will also help ensure quality and timely implementation. Measures have also been built into Component B to enhance the capacity of local contractors. Finally, it has been agreed that additional financing sources will be sought to address any cost-overruns not addressed by Project financing; (ii) the designs have limited hill-cutting to the extent possible and have built in bioengineering measures to improve slope stability. The designs also incorporate the re-use of cut materials for road works to minimize costs; and, (iii) in addition to the detailed protection measures and mitigation plans built into the safeguards instruments detailed below, Component B includes a sub-component to enhance the capacity of the Environmental and Social Safeguards Cell of PWD to improve the planning, implementation and monitoring of environmental and social safeguard policies. An environmental and social safeguards policy will be developed for PWD for road development projects, including a policy related to forest and biodiversity conservation. Forest and biodiversity conservation measures will be planned and implemented along project roads/corridors. The impact on most habitations has been avoided through design alternatives. However, land acquisition in small strips is expected throughout the alignment. The land acquisition process will be closely linked with the civil works contract awards process. The Bank and PIU teams have been following closely the process for obtaining environmental and forest clearances which are on track. Contract documents include penalties for non-compliance with EMPs.

33. Due to land acquisition, presence of scheduled Tribe Population, complex geomorphology, wooded areas, and sensitive habitat issues, the proposed Project is a Category A to address environmental and social safeguards aspects. Potential key environmental issues include slope stability (related to landslides, erosion and water management), management of the significant amount of excavated materials, impacts on forests, and construction period issues (e.g. noise, dust, health and safety, sanitation and labor camps, etc.). Key social issues include loss of private land and assets, common property resources, and HIV/AIDS. The scheduled tribe communities living along the project roads are likely to get exposed to the risks and vulnerability associated with increased trade and transport activities. The documents Environmental Impact Assessment (EIA) and Environmental Management Plan (EMP), Social Impact Assessment (SIA) and Resettlement Action Plan and Indigenous People’s Development Plan (RAP&IPDP) for each of the Group 1 roads, as well as a detailed Environmental Management Framework (EMF) and Social Management Framework (SMF) for the Project include mitigation measures. For the adverse impact on people and community assets, the documents provide details on the financial support for loss of assets at market rate, grant for relocation, subsistence allowance and additional grant to the vulnerable. The NGOs will facilitate appropriate usage of financial entitlements to restore the livelihoods of the affected. The preventive action plan on HIV/AIDS will primarily focus on awareness programs along the corridors at identified locations such as toll-plazas, construction camp sites and truck-parking lay-by in respective corridors.

A. Risk Ratings Summary Table

Risk Rating Risk Rating Project Stakeholder Risks Project Risks - Stakeholder Risk Moderate - Design High Operating Environment Risks - Social and Environmental High - Country Low - Program and Donor N/A - Sector and Multi-Sector Substantial - Delivery Monitoring and High Sustainability Implementing Agency (IA) Risks (including - Other (Optional) Fiduciary Risks) - Capacity High - Other (Optional) - Governance Substantial - Fraud and Corruption Substantial Overall Preparation Risk High Overall Implementation Risk High

B. Overall Risk Rating Explanation

34. Although the State of Mizoram has successfully prepared and implemented a World Bank road infrastructure project, and that some of the staff from that project are involved in this project, the Overall Preparation Risk is High as the project preparation timeline is short and seasonal monsoons can interrupt preparation activities, the PIU’s capacity is relatively low, the design risk is high due to the difficult terrain and low capacity of contractors, and the environmental and social safeguards risks are high. The Overall Implementation Risk is also High as local contractor capacity is low, the capacity of the PIU is low while the terrain is hilly, difficult to access and prone to landslides. A long monsoon season makes the construction season even shorter than elsewhere in South Asia.

VI. APPRAISAL SUMMARY

A. Economic Analysis

35. The Project will improve basic access in a remote, hilly, and mountainous region. Road transport is the only mode of transport within the state of Mizoram and improvements to the network should enhance the environment for development and growth by reducing freight and passenger transport costs, and by providing quicker and safer access to all parts of the state and to neighboring states and countries. The impacts will be felt at two main levels, intra-state and between Mizoram and neighboring states and countries, namely Bangladesh and Myanmar (Table 3).

Table 3: Expected Direct Impacts of Project Component/Activity Expected Impact Component A: Widening and strengthening of Reduced vehicle operating costs and key road sections (Lunglei – Tlabung – travel time. Kawrpuichhuah: 22 km; Champhai-Zowthowkar: Increased cross-border trade 27.5km; Chhumkhum-Chawngte: 41.7km) Component B: Road Sector Modernization and Improved capacity and efficiency in Performance Enhancement road sector management including improved maintenance. Improved road safety Increased cross-border trade

36. Based on empirical evidence, improvements in state, regional, and international connectivity should foster over the long-term: (a) increased economic and social development; (b) better access to health and education services for a large portion of the state's population especially women and girls; (c) lower costs for goods and services; and (d) improved market access for Mizoram’s agricultural and industrial products. In addition to these impacts, the Project will also have other economic and social benefits especially increased economic activity from the promotion of tourism; and allowing members of the same communities on opposite sides of international borders to interact socially and economically.

37. The evaluation of the expected impacts of the project were assessed in two parts: a) the direct impacts of improvements to the road infrastructure network; and b) impacts from improved connectivity within the state and with neighboring countries. Recommended practice in the World Bank is that a project such as this one should satisfy the transport specific impacts before wider economic benefits are considered, i.e. the project should be feasible first from a transport perspective before other impacts are included.

38. The transport impacts were estimated using cost benefit analysis with an opportunity cost of capital of 12% per annum. The sum of the discounted costs and benefits were used to obtain the economic net present value of the project, together with the associated EIRR for individual roads and the package of interventions. The results of the cost benefit analysis are shown in Table 4.

Table 4: Results of Economic Analysis Normal Scenario Sl. No. Details Length (km) EIRR (%) NPV (USD million) 1 Champhai Zokhawthar Road 27.2 16.41% 12.27 2 Lunglei – Kawrpuicchuah Road 22.0 15.47% 8.38 3 Chhumkhum - Chawngtte Road 41.5 20.90% 36.75 Total (all roads) 91.0 16.96% 57.40

39. The results show that the EIRR values of the individual roads are in range of 15.5% to 20.9%. The EIRR for Lunglei – Kawrpuicchuah Road is 15.47 %; Champhai Zokhawthar Road 16.41% and Chhumkhum - Chawngte Road 20.9%. As the values are higher than 12%

16 each individual road section is found to be economically viable. The EIRR for the overall package of roads is 16.96% which also confirms the feasibility of the overall intervention. The results were tested for various shocks such as a 20% increase in costs or similar reduction in benefits and a delay in commencement of works and found to be robust.

40. The second aspect of the analysis considered the likely trade impacts. All the project interventions will impact on the regions they pass through in Mizoram as well as on trade between the state and Bangladesh and Myanmar. The impacts would take two forms, through linkages between transport and the regional economy and the competitive advantage that the State of Mizoram would derive by being better connected to neighboring countries. The latter impacts would include welfare improvements due to a reduction in prices of some commodities Mizoram currently imports from other parts of India using the trade route through the Chicken’s Neck. Both types of impacts would be expected to increase economic output and employment. They would be expected to have a disproportionate impact on women who are mostly involved in agricultural production, which is the mainstay of the economy of the state.

41. Empirical evidence from on-going trade facilitation activities and infrastructure development by India and neighboring countries further suggest that the existing poor road infrastructure is a major impediment for cross-border traffic between the NE states and neighboring countries. Private sector enterprises estimate that improvements in road infrastructure and border facilities will result in a significant growth in cross-border trade volumes.4 Analysis of traffic projections suggest that there will be a 50% increase in private vehicle and 75% increase in commercial vehicle traffic following the project interventions while there will be a growth of close to 20% per annum in Mizoram’s exports to neighboring countries.

42. The results of the economic evaluation are a conservative estimate of the likely impact of the project. They do not quantify the road safety and trade related impacts. These other impacts can be substantial. Still based on the conservative estimates, the project is found to be economically feasible. The EIRR values for all the sections are more than 12%. The results were also found to be robust except in the case of various shocks all occurring at the same time. This is deemed unlikely, based on similar projects the World Bank is financing in the same state and region. A detailed description of the economic evaluation is presented in Annex 6.

B. Technical

43. Technical Selection of Roads: The project roads are part of the strategic network identified by the state for connectivity to Bangladesh and the rest of South Asia on the western and northern side, and Myanmar on the eastern and southern side. The engineering designs were prepared in 2010 which were reviewed and modified during project preparation to incorporate the changes occurred since then in land use and traffic and to minimize hill cutting with a

4 Based on a meeting with the representatives of Mizoram Truck Owners Association and Mizoram Chambers of Commerce on 27 December 2014 at Aizawl. 17

particular attention to slope stability, recycling of disposed materials, bioengineering techniques, and road safety features to protect vulnerable road users including pedestrians, cyclists and motorcyclists.

44. Engineering Designs: Roads will be improved to a carriageway width of 7 meters by adopting uniform standards for a defined section, and by providing adequate geometry, pavement, drainage, bridges, and road safety engineering measures, including special treatment for urban sections, improved junctions, and some wayside facilities (such as parking spaces and bus stops). Total formation width will be mostly 12 meters, as per Indian Roads Congress (IRC) standard. Lined drains, stabilized earth or sealed shoulders, and treatment of hill slopes are provided for critical locations. The pavement consists of a soil stabilized sub-base, a macadam base, a dense bitumen macadam base, and a wearing course of bitumen concrete.

45. Cement stabilized sub-base has been used in the pavement designs to effectively use the material from hill cutting and considering the general shortage of good quality aggregates in Mizoram. This has shown some cost-savings over the conventional techniques. PWD will field verify all the engineering designs before the actual construction starts and make necessary changes specifically to reduce the amount of hill cutting. This includes adjustment of cut slopes according to the engineering and geological characteristics. Similarly, after the hill cutting, PWD will again check the design to find if there is any significant variation between the design and actual value of subgrade strength and make necessary modifications in the pavement design.

46. Unit costs for the project are relatively high as compared to other Indian states but average for hilly areas (from US$ 860,000 to US$ 1 million per km). Contributors to the cost include large quantities of hill cutting and slope stability measures, very significant length of lined drains, and a 12 meter formation width, large number of cross drainage structures, high embankments to mitigate flood damage, high cost of construction material due to long haulage, high cost of owning and operating equipment due to the relative scarcity of spare parts, less availability of skilled and semi-skilled workers, and the limited construction period due to prolonged and heavy monsoons.

C. Financial Management

47. The accounting and payment function will be centralized at the office of the PIU in Aizwal. Separate books of accounts will be maintained for this project. Additionally, an off-the- shelf accounting system will be used by the Project for accounting and financial reporting. A divisional accountant from Finance Department/Accounts and Treasury has been deputed for the Project and a Financial Management Specialist will be additionally hired on a contract basis to provide support on financial management functions. The funding requirement of the Project will be provided within the budget of the PWD as a separate budget line under Externally-Aided Projects. The budgets will be prepared and approved on the basis of annual work plans developed by the PIU. The Finance Department will provide expenditure sanction to PWD, and on this basis a ‘Letter of Credit’ (LOC) will be issued by PWD to PIU. The funds will be drawn from GoM treasury into the Project bank account. The disbursements will be based on Interim Financial Reports (IFRs). The Comptroller and Auditor General of India (CAG) will be the

external auditor for the Project. The audit report will be submitted to the Bank within six months from the close of each financial year. 48. Overall, the financial management arrangements proposed under this project are considered to be adequate to account for and report on the project expenditures. These arrangements will satisfy the fiduciary requirements of OP/BP 10.00. Further details are provided in Annex 3.

D. Procurement

49. The PIU has developed a Procurement Plan for procurement of civil works and consulting services which has been approved by the Bank. Online procurement plan execution software (SEPA) will be used under the proposed project and the PIU has attended the training for use of SEPA. The PIU has set up an appropriate evaluation committee with representation of technical and financial experts and has been advised to co-opt appropriate subject matter experts in their evaluation committee to help in carrying-out specific evaluations. Procurement documentation and record keeping at the PIU needs improvement, enhancement in secure storage space and streamlining. A procurement and contract management manual and appropriate complaint handling mechanism will be prepared by the PIU. The Bank has conducted an e-Procurement capacity and risk assessment, and recommended to the PIU to reduce the number of steps in bid submission process to make it user-friendly and efficient. However, the PIU has informed that they are in the process of switching to a new e-Procurement portal, the Mizoram State Portal (MSP) which is a replica of the Central Public Procurement Portal (CPPP). The Bank will assess the MSP after its installation and launch to confirm its suitability as an e-Procurement system.

50. The PIU has prepared a procurement plan for procuring three NCB works contracts estimated to cost around US$ 90 million. Out of these three packages, two may be bid out manually before implementation of the MSP. The PIU has prepared draft bidding documents and invited bids for two NCB works contract packages relating to improvement and upgradation of roads, which are estimated to cost around US$ 65 million. The bids are planned to be opened in April 2014 and contracts are expected to be awarded in May/June 2014. The PIU will endeavor to carry-out all future procurements using the e-Procurement system, when it is cleared by the Bank for use under the proposed Project.

51. The Project has also started the procurement of consulting services, and finalization of contracts for hiring Project Preparation Consultants (PPC) for two separate packages is at an advanced stage. The hiring of the Construction Supervision Consultant required to supervise and monitor the construction of roads is also at an advanced stage and the CSC is expected to be in place when the roads works begin. PIU has initiated action to hire the Project Management Consultant.

52. Both the PCN and appraisal stage procurement risk assessment using PRAMS are completed and archived. Use of electronic no objection will be used under the proposed project to enhance efficiency in procurement reviews and record keeping.

E. Social (including Safeguards)

53. The entire population of the state is designated as “Scheduled Tribes”, as per Schedule VI of the Constitution. The detailed assessment of 69.3 km out of 91 km for road widening has completed. Accordingly, the adversely effects are 859 Project-Affected Households (PAHs) comprising 5040 Project-Affected People (PAPs). Of these, 759 PAHs are land owners, while 230 PAHs are either owners or tenants of 248 structures; common properties account for 45 structures. Approximately 102.1 hectares (ha) will be acquired. Public information and Free Prior Informed Consultations (FPIC) were held in all the six villages/town during the social screening and census and socio-economic survey stages which covered individual consultations and public meeting. Stakeholder consultations provided a platform to participants to express their views, concerns and apprehensions that might affect them positively or negatively. Consultations provided meaningful contributions with regard to reducing adverse impacts, address safety issues, etc. Concerns, views and suggestions expressed by the participants during these consultations were integrated in the design.

54. Both the social safeguard operational policies 4.12 and 4.10 are triggered among the three project road sections. Most of the population of the state is tribal. As such, Schedule VI as enshrined in the Constitution of India governs the state to safeguard the rights of tribal communities. The adverse impact due to road widening will impact only tribal households. Thus, one document is prepared to comply with both the Bank operational policies for resettlement, and for indigenous peoples, i.e. Resettlement Action Plan and Indigenous Peoples Development Plan (RAP&IPDP).

55. The Government of Mizoram prepared the Social Management Framework (SMF) to facilitate preparation of the RAP&IPDP for specific road corridors. It broadly includes resettlement and rehabilitation principles and approach to be followed in mitigating project- induced adverse impacts, entitlement matrix, census and socio-economic survey, acquisition process through negotiated settlement, preparation of Social Impact Assessment (SIA) and RAP&IPDP, strategies for mainstreaming gender, income and livelihood restoration, HIV/AIDS awareness and prevention, framework for consultation and participation, institutional arrangements at PIU and project road levels and a mechanism for redressal of grievances. Accordingly, RAP&IPDPs have been prepared and disclosed for 69.3 km.

56. The state will benefit from the increased connectivity both within the state and potential regional connectivity to Bangladesh and Myanmar. However, scheduled tribe communities living along the project roads are likely to get exposed to the risks and vulnerability associated with increased trade and transport activities. The communities closer to the international borders are particularly marginalized and vulnerable and may have limited ability to participate in and benefit from the development. To address these concerns, the Bank-executed program to facilitate trade and transport across South Asia Region will support a study on the participation and practices of indigenous people in trade across regional boundaries i.e. Mizoram, Bangladesh, Myanmar and Nepal for informed on-going dialogue at the policy level for improved infrastructural facilities that may open up opportunities for tribal communities to participate in trade to enhance and diversify sources of income.

F. Environment (including Safeguards)

57. The project will be implemented in Aizawl, Mamit, Champhai, Serchhip and Lunglei districts. The project districts’ terrain is predominately hilly with fragile slopes and high rainfall from May to September. The area, in general, is susceptible to erosions and landslides. There are important environmentally sensitive sites such as protected area, reserve forests, village forests and plantation areas in the project districts. The project will upgrade the existing single-lane road to double-lane road (from current formation width of about 6 m to about 12 m wide). The roads will be upgraded in two groups (Group 1 and Group 2). None of the project roads proposed in Group 1 passes through protected areas. Group 2 roads will be prepared during implementation.

58. Potential environmental concerns of the road upgrading are related to widening of the road, new construction in re-alignment sections, disposal of excavated materials, blasting, quarrying, and operations of construction equipment/ plants (hot-mix plants, crushers plants) and facilities including camp. Potential adverse environmental impacts include slope stability (related to landslides, erosion and water management), management of huge amount of excavated materials, disruption to natural drainage, impacts on forests and bio-diversity, effects on water source/ channels, impacts on physical cultural sites, and construction period issues (e.g. noise, dust, health and safety, damage to crops and assets, sanitation and labor camps, etc.). Improvement/ upgrading of the roads with environmental mitigation measures is likely to generate environmental benefits such as: (a) improved roads; (b) improved drainage; (c) reduced landslides and soil erosion; (d) increased road safety; (e) recycling of debris and surplus excavated material to create new sites for development and prevent the negative impacts of indiscriminate dumping; (f) afforestation (10 native trees will be planted for each tree lost), enhancing degraded forests; and (g) introduction of “environment sensitized” construction management and machinery and landscaping of the Project’s surrounding areas, thus improving the aesthetics. Mitigation measures typically used include cut-fill balance & re-use of materials, disposal of excess excavated materials at designated site with protection measures, landslides & slope protection works including bio-engineering & water management, compensatory planting for lost tree, protection around drain-outlets, re-instating community infrastructures, protection of cultural site or replacement of the same, drainage facilities, provision of water & sanitation facilities for construction and workers, health & safety items, quarry operation with environmental protection measures, etc. The environmental safeguard policies triggered are: Environmental Assessment 4.01, Natural Habitat 4.04, Forests 4.36, and Physical Cultural Resources 4.11. Environmental Management Framework and EIAs/ EMPs have been prepared accordingly.

59. Environmental Management Framework. The PIU has prepared the Environmental Management Framework (EMF) for the Project. This provides detailed guidance with regard to screening, carrying out of EIA, consultations, monitoring, as well as institutional assessment and capacity strengthening measures. The EIA and EMP have been prepared for C-C Road and C-Z Road. As per the provision of the EMF, the other project activities (L-T-K Road and Group 2 Roads) will be subjected to screening, EIA and EMP. These safeguard documents will be reviewed and cleared by the Bank before clearing linked bidding documents.

60. All civil works will be subjected to regular environmental monitoring during implementation by the PIU’s Environment Cell and by the environmental specialist of the 21

supervision consultant. Quarterly monitoring reports will be prepared. Besides, the Project may also engage expert agencies such as forest and wildlife agencies or a third party for independent monitoring or for carrying out a special study of particular aspects, if necessary.

61. Institutional Arrangements. The Public Works Department (PWD) of Mizoram will be the implementing agency. The Project Implementation Unit (PIU) at Aizawl has already been set up. The PWD/ PIU has deputed an Executive Engineer (EE) as Environmental focal person, who will be assisted by an Assistant Engineer (AE) and a Junior Engineer (JE) for each road. During implementation, this arrangement will be converted into an Environment Cell which will be supported by the environment team of the Project Preparation Consultant (PPC) during preparation of L-T-K and Group 2 roads and by the Construction Supervision Consultant’s environmental specialist during project implementation stage. The Environment Cell and team of environmental specialists are expected to continue environmental management as part of PWD’s long-term plans. To this effect, the institutional development component of the project will dovetail their role in PWD. The EMF as well as EIAs have identified various trainings and capacity building needs.

G. Other Safeguards Policies Triggered (if required)

Annex 1: Results Framework and Monitoring

India: Mizoram State Roads II- Regional Transport Connectivity Project

. Results Framework

Project Development Objective

. The proposed Project Development Objective is to increase transport connectivity along regional trade corridors in Mizoram. Project Development Objective Indicators Cumulative Target Values Data Source/ Responsibi

lity for Unit of End Frequenc Methodology Data Indicator Name Core Baseline YR1 YR2 YR3 YR4 YR5 Measure Target y Collection

Increase in traffic Number of C-Z: 1280 C-Z: 1280 C-Z: 1280 C-Z: 1280 C-Z: 1280 C-Z: 1280 C-Z: 1792 End of Traffic along project C-C: 1123 C-C: 1123 C-C: 1123 C-C: 1123 C-C: 1123 C-C: 1123 C-C: 1572 PWD vehicles project Survey corridors L-T-K: 1053 LTK: 1053 LTK: 1053 LTK: 1053 LTK: 1053 LTK: 1053 LTK: 1474

Reduction in C-Z: 75 C-Z: 75 C-Z: 75 C-Z: 75 C-Z: 75 C-Z: 75 C-Z: 52 End of Traffic travel time on Minutes C-C: 140 C-C: 140 C-C: 140 C-C: 140 C-C: 140 C-C: 140 C-C: 98 PWD project Survey project corridors LTK: 78 LTK: 78 LTK: 78 LTK: 78 LTK: 78 LTK: 78 L-T-K: 54 Note: 1. Average Annual Daily Traffic (AADT) in Number of vehicles (All motorized traffic only).

Intermediate Results Indicators Cumulative Target Values Data Responsibilit

Source/ y for Unit of Methodolog Data Indicator Name Core Baseline YR1 YR2 YR3 YR4 YR5 End Target Frequency Measure y Collection Component A: Expansion and Rehabilitation of key road corridors/links Roads rehabilitated or Road Asset Km 0 0 0 30 60 80 91 Annual PWD improved, Rural Yes Survey Component B: Road Sector Strengthening and Performance Enhancement Roads in good and fair condition as a Road Asset percentage 20 20 20 25 25 30 30 Annual PWD share of total Yes Survey classified roads District level road maintenance contracts Number 0 0 2 3 4 5 5 Annual Field Survey PWD implemented* *Maintenance contracts covering at least one-quarter of the road network

Annex 2: Detailed Project Description India: Mizoram State Roads II- Regional Transport Connectivity Project

1. Recognizing the impediments to growth that being landlocked presents, and the potential for growth presented through intra-regional trade, the South Asia Association for Regional Cooperation (SAARC), South Asia’s official organization for facilitating regional cooperation defined key multi-modal transport and economic corridors that would facilitate intra-regional trade. These have in common the objective of unblocking regional trade for landlocked countries or states, particularly Nepal, Bhutan and NE India. The SAARC Corridors listed in Table 1 correspond to the Asian Highway and Railway networks developed by UNESCAP and under varying stages of development.

Table 1: SAARC Corridors

Corridor Countries and Landlocked Areas Facilitating Transit for NE India SAARC Road Corridor 1: Lahore–New Delhi–Kolkata–Petrapole/Benapole– Pakistan-India- Dhaka–Akhaura/Agartala (2,453kms) Bangladesh- Landlocked NE India SAARC Rail Corridor 1: Lahore–Delhi–Kolkata–Dhaka–Imphal (2,830kms) (Akhaura/Agartala in SAARC Rail Corridor 2: Karachi–Khokhrapar–Munabao–Jodhpur (707kms) Mizoram; Imphal in Manipur) SAARC Road Corridor 6: Agartala–Akhaura–Chittagong (227kms) Landlocked NE India- Bangladesh SAARC IW Corridor 1: Kolkata–Haldia–Raimongal–Mongla–Kaukhal– India-Bangladesh- Barisal–Hizla–Chandpu –Narayanganj–Aricha–Sirajganj–Bahadurabad– Landlocked NE India Chilmari–Pandu (1,439kms) Facilitating Transit for Nepal SAARC Road Corridor 2: Kathmandu–Birgunj–Kolkata/ Haldia Ports Landlocked Nepal- (1,323kms) India (and beyond) SAARC Road Corridor 7: Kathmandu–Nepalganj–New Delhi–Lahore– Karachi (2,643kms)

SAARC Rail Corridor 3: Birgunj–Raxaul–Kolkata/Haldia Ports (704/832kms) SAARC Road Corridor 4: Kathmandu–Kakarvitta–Phulbari–Banglabandha–i) Landlocked Nepal- Mongla (1,314kms) or ii) Chittagong (1,394kms) India-Bangladesh SAARC Rail Corridor 4: Birgunj–Katihar–Chittagong Port (1,146kms) Facilitating Transit for Bhutan SAARC Road Corridor 3: Thimphu– Phuentsholing–Jaigon–Kolkata/Haldia Landlocked Bhutan- (1,039kms) India SAARC Road Corridor 5: Samdrup Jongkhar–Shillong–Sylhet–Dhaka– Landlocked Bhutan- Kolkata (906kms) Landlocked NE India- Bangladesh-India SAARC Road Corridor 8: Thimphu–Phuentsholing–Jaigon–Changrabandha– Landlocked Bhutan- Burimari–i) Chittagong (966kms) and ii) Mongla (880kms) Bangladesh

62. The Mizoram State Roads II Regional Connectivity Project aims to increase intra-state and regional connectivity for the residents of landlocked Mizoram. The Government of India has requested the World Bank to provide financing for about 420 km of roads that enhance connectivity in Mizoram. However, since the preparatory activities for the proposed road works are at varying degrees of readiness, this proposed Project will fund the 91 km of roads that are design-ready or with studies at an advanced stage, as well as fund preparation studies for the remaining 330 km of road which could be considered for a follow-on project or additional financing when the designs are ready. The project has two components to support the PDO:

Component A: Improvement of Priority Cross-border Roads and Trade-Related Infrastructure (US$ 102 million) i. Widening and strengthening of 91km of road and preparation studies for approximately 330km of road (US$ 99.0 million). Widening and strengthening of three sections of (Group 1) road totaling 91 km including (i) a 22.0 km section of Lunglei – Tlabung – Kawrpuichhuah Road on the border with Bangladesh; (ii) 27.5km Champhai- Zokhawthar Road on the border with Myanmar; and (iii) the 41.7km Chhumkhum- Chawngte North-South alignment connecting to the border roads with Bangladesh to the west and Myanmar to the south. Concurrently, the project would fund detailed studies and designs for another 330km of (Group 2) roads along Lunglei – Tlabung – Kawrpuichhuah Road and in the North-South Corridor. Many of these roads would be greenfield, and would increase the connectivity both within the state – improving access to transport infrastructure and services for isolated communities – as well as to key international trunk roads and transport corridors that connect to other NE India states, Bangladesh, Chittagong Port and the rest of South Asia, and to Myanmar. The alignment starts at Junction NH44A (Origination) passing through Chungtlang, Darlung, Buarpui, Thenhlum, Zawlpui, Phairuangkai and Chawngte. Road Safety Improvement pilot projects will also be incorporated in project corridors to demonstrate good practice examples of road safety engineering measures that effectively address road safety hazards. Five accident black spots will be identified through the road safety audits under Component 2 for implementation of pilot projects. ii. Construction or improvement of trade-related infrastructure along project roads including market haat structures and truck stops (US$ 3 million). These infrastructure not only improve the trade capacity of the residents of the state and of the region, they also are key benefit-sharing measures as requested by the communities, and help improve road safety along project roads. Market haat structures provide a safe place for local communities to market and sell their produce and goods, instead of selling on the side of the road in self-made structures that may be unsound and that may be located in unsafe locations from a road safety perspective. Truck stops provide a safe place for drivers to stop along project corridors which would enhance safety for both truck drivers as well as other traffic sharing the road and residents living along project corridors.

Modernization Plan (RSMP) which will carry forward and deepen various institutional development initiatives introduced under the MSRP I as detailed in Table 2 below. The RSMP will be reviewed and modified by PWD each year in order to incorporate implementation experiences, lessons learned and emerging priorities. All the activities outlined in the RSMP will not necessarily be completed under the Project. Instead, implementation will continue even after the Project’s closing and will be used as tool to modernize PWD on an ongoing basis based on future priorities, emerging research and developments in the road sector.

Table 2: Road Sector Modernization Plan (RSMP, 2014-2019) Key actions Key actions S.No. Objective/ key issue Key Result Area Present Status Short term Medium term (0 to 3 years) (3 to 5 years) Road Sector Strategy 1 Lack of clearly defined Updated Road Policy Road Policy is in place Revise the existing Road policy into Using the umbrella of the and robust policy, as well frame work in place and which needs revision to take a long-term and comprehensive road sector policy, as a financing and implemented care of the changed sector development policy covering develop separate institutional framework to situation. strategic planning, asset strategies on specific manage the sector management, maintenance, safety, issues such as road sector financing, capacity building, financing, safety and accountability and modernization human resource aspects. development. 2 Comprehensive road i. Road development i. No core road network PWD to prepare core road network i. Evolve Master Plan for development in the state Master Plan in and master plan exists. for the state after conducting Road Development for duly involving position. ii. Schemes are being strategic options studies in the entire state duly stakeholders ii. Core road network be identified on ad hoc coordination with the stakeholders involving all established. basis. with the help of a reputed stakeholders and in consultant under the project. consultation with road user groups. ii. The core road network to be revised /modified after every five years in coordination with the stakeholders. 3 Enhance capacity of local Qualified and capable i. Construction industry is i. Position an expert/ consultant to Review the existing construction industry in local contractors are very weak in the State. review the existing status of norms/yardsticks of the Construction available in sufficient Only very few contractors construction industry and registration of contractors Management of road & numbers for taking up are available that too not recommend steps to enhance their for different categories bridge works Road development & experienced in FIDIC capacities and encourage new based on the enhanced maintenance works Contracts to take up the entrepreneurs to enter in the skills of the construction road and bridge works. industry. industry. ii. No training institutes are ii. Assess the needs of construction available to train the industry and evolve strategy and contractors and their action plan and formulate training personnel. programs.

4 Enhance the capacity of i. Inbuilt policy for i. No regular policy for the i. Regular policy for the training of i. Ensure regular training PWD engineers for regular training of all training of the engineers. the engineers be framed with the of at least ten days per management of the the PWD engineers at ii. No proper infrastructure help of a specialized individual year for all the present needs of the sector least two weeks every like consultant in coordination with engineers of PWD. year. furniture/computers/lates the PWD engineers of all ranks. ii. Coordinate with some ii. Proper infrastructure is t equipment like total ii. Arrange training for at least one reputed engineering available in all the station for surveying etc. week for twenty five percent of colleges/public PWD offices. iii. No proper library facility the engineers of the department training institutes iii. Proper office and is available. under the project. established in NE residential iii. Proper furnishing and states for regular accommodation is procurement of training and refresher available throughout computers/necessary equipment course for the the State. for surveying etc be arranged for engineers for the at least one division in each department district of the state. iv. Proper library with all up to date technical journals and manuals be established at headquarter of PWD. v. Computerization of the entire PWD is completed under this project. 5 Addressing road safety i. Road safety action i. State road safety council i. Establish traffic engineering unit With Technical issues. plan for the state in in place. at headquarters of PWD. Assistance of the Bank, place. ii. Road accident data ii. Develop accident recording develop pilot strategy for ii. Proper system for available with the police system with trained staff in road safety actions. the analysis of road department but not being consultation with police and accident data along shared with PWD. analyze the data for identifying with identification of the accident prone areas (black accident prone areas spots) and improve them. (black spots) for all iii. Evolve road safety guide lines the core network specifying roles and roads in place. responsibilities of the organization iii. Meeting of the state involved. road safety council iv. GoM to provide necessary funds to take place at least to improve the accident prone twice a year. areas. v. Conduct road safety audits of all states highways and all major districts roads. Work out the remedial action like improvement of geo-metrics and proper maintenance of the carriage way etc.

6 Asset management i. No encroachments i. GoM enacted a i. Initiate identification of ROW for i. Enact highways and misuse of Road Highway Act. But the all road networks under PWD and encroachment and Boundaries. same is yet to fix boundary stones. prevention bill ii. Proper maintenance operationalize. GoM to ii. Finalize updating of ROW powers empowering PWD of carriage way and notify the competent to highway Engineers managing engineers with structures. authority. the road network duly amending magisterial powers. iii. Proper geo-metrics ii. No road inventory the existing Highways Act. ii. To meet the especially curve database is in place. iii. GoM to provide sufficient funds requirement of improvements etc. iii. Lack of sufficient funds for regular and as well as periodic maintenance funds, for proper upkeep and maintenance of the roads as per road fund be made maintenance of road norms. operationalized. network. iv. Road users’ satisfaction survey iii. Adopt performance be conducted every year. based maintenance for v. Adopt performance based the entire core road maintenance for long period network of the state. (within three years) for at least iv. Conduct road users two districts of the state in satisfaction survey on totality. This can be either through a regular basis every community based or through year. micro enterprise or a combination v. Revise the roads of both. It may require nearly Rs inventory and road 15 crores per year. GoM shall condition database on ensure availability of this amount regular intervals with to PWD in second year for proper the help of in house implementation of these contracts. staff. vi. Develop a standard bidding document for performance based maintenance contracts. vii. Establish road inventory and road condition database for all the state highways and major district- roads of the state with the help of reputed consultants under the project.

Procurement, Contracting, and Contract management 7 E-procurement in roads E-procurement in place E-procurement not in use GoM to make mandatory e- GoM to revise the norm contracting. for all the works of procurement for all the works of of Rs 2 crores at regular value more than 2 crores in intervals seeing the needs PWD. It is used only for addition to all works of PMGSY of the construction PMGSY and national and NH. industry. highway works 8 Transparent procurement i. To achieve economy, i. At present CPWD tender i. Training of PWD and contract management efficiency and forms are being used in i. Develop a separate standard engineers be continued. procedures efficacy in the PWD. For EAP and bidding document for all the ii. Revision of difference procurement. PMGSY works Bank works (roads and buildings manuals be taken up as ii. Procurement and NCB document being separately) with the help of a per the needs of the contract management adopted. It is better to reputed individual consultant industry. manual in place develop standard bidding under the project. iii. Trained man power document on the lines of available in PWD to NCB document for all ii. Develop procurement and manage the the works departments in contract management manual for procurement and the State. the PWD, with the help of a contract management. ii. Capacity of PWD reputed individual consultant engineers for under the project. procurement and contract management is not iii. Develop quality control and adequate. operational manual for the department, with the help of a reputed individual consultant under the project.

iv. Train all the PWD engineers and procurement and contract management issues. Quality Management 9 Improve quality in Better roads at optimum i. The existing PWD labs i. Strengthen the existing labs of All the PWD engineers be construction and price need strengthening. the PWD under the project with trained and training be maintenance ii. Under PMGSY and large the procurement of proper continues on regular size contracts, contractors equipment and gadgets. basis. establish site labs for site ii. Adequate training be provided quality control. (within the country and as well as by exposure trips to foreign countries) to at least twenty five percent of PWD engineers. This can also be arranged with some reputed engineering college/training centers available 31

in NE states. iii. Staff of construction industry be also provided suitable onsite training for quality control. Social and Environmental Aspects 10 To protect and enhance Better environment Environmental issues are Prepare and issue environmental and Strengthened the environment conditions. not given sufficient social policies for the road projects. environmental safeguards importance in the project Develop and implement a plan for units in place following design, implementation and forest and biodiversity conservation systematic policies and after completion. along project roads/corridors. procedures for safeguards for all roads projects 11 Rehabilitation and Persons affected by the State govt. has policy in Implement the R&R policy and Strengthened social Resettlement issues are project are rehabilitated place and PWD has an monitoring mechanism. safeguards units in place well addressed and and their social status has effective monitoring following systematic implemented improved. mechanism in place. policies and procedures for safeguards for all roads projects

Annex 3: Implementation Arrangements India: Mizoram State Roads II Regional Transport Connectivity Project

Project Institutional and Implementation Arrangements

1. Overall Implementation Strategy: The project will be implemented by PWD, using its existing structures at its HQ and field offices to the extent possible, and through support from other GoM departments, including Revenue, Forest, Finance, Planning, district collectors and local offices. An adequately staffed PIU headed by a Project Director has already been setup during preparation and the same will be responsible for overall project implementation under the guidance of Engineer-in-Chief and Chief Engineer, Roads. The PIU includes many staff involved in MSRP I. The PIU already has designated units/staff for engineering designs, procurement, contract management, social, environmental, financial management, computerization, institutional development, governance and accountability, and road safety. The PIU has also engaged a revenue officer, Special Land Acquisition Officer, and environmental specialist to facilitate land acquisition, utility shifting, and forest clearances.

2. The RSMP will be implemented by a Road Sector Modernization Group (RSMG) which is headed by the Engineer-in-Chief of PWD with many subgroups consisting of various Chief Engineers and other staff of PWD. The RSMP will be implemented through wider participation of PWD staff beyond the PIU.

3. Project Steering Committee: GoM has set-up a High Level Project Steering Committee headed by the Chief Secretary with participation of the secretaries of PWD, Forest, Finance, Revenue, Planning, and Trade to periodically review and guide project implementation

4. Implementation Arrangements in the Project Districts: PWD field divisions will be responsible for implementing all project-related preconstruction activities like land acquisition and utilities shifting, etc. in their respective districts. Operationalization of AMS including data collection, preparation, and implementation of maintenance contracts, implementation of road safety improvement projects, and coordination with local administration and local communities.

5. Supervision Consultants: All the road works contracts will be supervised by supervision consultants as Engineer and PWD as the Employer.

6. Resource Persons: Experienced resource persons will be engaged on need basis to provide implementation and knowledge support to PWD especially to implement the RSMP. Table below summarizes the implementation arrangement for the project.

Table 1: Implementation Arrangements

Identity Role and/or Responsibility Overall Implementation Arrangements High Level Project Overall project monitoring, interagency coordination, guidance, and high Steering/ Monitoring level project related decisions by GoM. The Committee will meet each Committee quarter during project implementation. Engineer-in-Chief, PWD, Overall project performance monitoring and guidance to PWD on project

Mizoram implementation, and assignment of responsibilities within PWD; coordination with other GoM departments. CE office Overall responsibility of project implementation, all project related procurements, and coordination with various units of PWD and GoM offices. PMC Technical assistance and proactive implementation support to all Project- related activities including regular support during project preparation of approximately 330 kms of Group 2 roads. Field divisions of PWD Implementation of all project related activities in the field. Procurement and Contracts Headed by an Executive Engineer and supported by two Assistant Management Cell Engineers has been created in the PIU, reporting to the Project Director. PCM cell will exist throughout the project preparation and implementation period till completion of defect liability period of all contracts and one year after the closing date of the project, whichever is later.

They will be responsible for establishing the eProcurement system and ensuring that the same is used in the Project.

The PCM cell members are solely responsible for carrying-out and managing the entire procurement cycle including preparing and updating procurement plan using SEPA, preparing and publishing various notifications, development of bidding documents/REOIs/RFPs, conducting bidding/selection process, contract award, oversight to contracts management, procurement quality assurance and completion.

They will be responsible for implementation of procurement and contract management risk mitigation measures as identified at the time of project preparation and updated from time to time during project implementation.

They will be responsible for ensuring that an appropriate standing evaluation committee is in place with option of co-opting subject matter expert(s) as per need. They will develop a Procurement and Contracts Management Manual and Online Procurement Complaint Handling System. Carry-out procurement and contracts management due diligence and make sure that procurement is carried-out in accordance with provisions of financing and project agreement including Bank’s guidelines, SBD.

Carry-out necessary procurement disclosure as per the Bank’s Guidelines. Update the status of procurement and contracts management, provide information sought by the Bank on timely manner, respond to the needs identified in the respective aide-memoire.

They will ensure safekeeping, back-up and security of data, bids, proposals and other procurement and contracts documents including back-up in electronic form as may be required. The members of cell will attend two weeks’ procurement workshop and 3 days’ contracts management workshop before September 2014 to augment their capacity. They will prepare a capacity building plan and annual training calendar for the Project.

Joint FM-Procurement- An internal auditor (firm) will be selected by the IA to carry out periodic Contracts Management joint Procurement-Financial Management-Contract Management audit Audit during the implementation of the proposed Project. Project Management Cell The Project Management Cell will have one Procurement and Contracts Management Expert to assist the PIU in procurement and contracts management oversight for all works, goods and consultancy contracts. Component I: Improvement of priority Cross-border Roads and Trade-Related Infrastructure Project Preparation Implementation Project Director, PIU Overall responsibility for project Overall responsibility for preparation including engineering implementation of various designs and bid documents, preparation project components. of RFPs for different consultancies Implementation of RAP and (construction supervision, project EMP; timely decision for award management, engineering designs, etc.). of work contracts/consultancies. Bid evaluation, coordination with Review of progress, revenue, forest and other GoM coordination with districts, and departments. management meetings with contractors/consultants. Interdepartmental coordination for speedy and timely resolution of issues like forest clearances/shifting of utilities. Releasing all payments under the project contractors, suppliers, consultancies, etc. Resolution of issues for timely and speedy construction of the work facilitation of the land acquisition process and site readiness issues. Addressing grievances redressal. Special Land Acquisition Initiate land acquisition process as per Announcement and Officer (SLAO), PIU. Act, undertake verification of property disbursement of awards and and assets affected, hold consultations oversee implementation of RAP for assessing the replacement value of & IPDP. affected properties, prepare draft award, obtain approval from the Govt. Social Development - Guide and supervise the RAP & Specialist, PIU. IPDP implementation agencies for resettlement and rehabilitation and rolling out HIV prevention activities. Undertake field visits and consultations with PAPs for first-hand information, compile data related to resettlement and rehabilitation activities received from field offices and decide on suitable measures to be taken.

Monitor implementation of RAP & IPDP. Environmental Cell (EE Commissioning and quality control of Overall environmental oversight Environment, AE and JE) environmental safeguard documents and enforcement (screening, EIA, EMP, etc) Review and verify supervision Translation of environmental consultant environmental safeguards documents monitoring reports Translation into local language Prepare consolidated quarterly environmental performance/ status report Construction Supervision Reviewing of engineering designs and Construction supervision of Consultants making of suitable changes with the road improvement works as approval of the Chief Engineer. engineer. Monitoring on a regular basis the quality of construction, execution of works, certification of the contractors bills, and monitoring of RAP&IPDP, EMP implementation. For road rehabilitation and strengthening works, the supervision consultants will only monitor the quality of construction and compliance to contract specifications. PWD Field Divisions Assisting the PIU for assessing land Providing assistance to the PIU acquisition, forestry clearances, and for land acquisition, shifting of utility shifting. Liaison with the utilities, and other site readiness concerned district officers for timely activities. and speedy land acquisition, tree SDEs/AEs designated as cutting, and shifting of utilities. Resettlement and Rehabilitation Manager for each road will work with implementation agency for smooth implementation of RAP&IPDP. AE/JE assigned for environmental management oversight and enforcement. Project preparation Preparation studies including PWD Consultants finalization of alignment on the basis of LIDAR surveys. Preparation of engineering designs and cost estimates for 270 kms of Group II roads. Environment and Social Preparation of environment and social Consultant safeguards documents including required consultations NGOs Providing support to PIU/PWD in the implementation of RAP& IPDP. Independent Consultants for Mid-term and end-term

Evaluation of RAP & IPDP evaluation of RAP&IPDP Implementation implementation. Component II: Road Sector Modernization and Performance Enhancement through Institutional Strengthening Road Reforms and Overall implementation of RSMP. Modernization Task Force Sub-Groups of RRM-TF Responsible for different tasks like Policy, Planning, Procurement and Contracting, Human Resources Development, Computerization, Management Information System, Monitoring and Evaluation, Quality, Design and Standards, Social and Environment, Asset Management and Maintenance, and Governance. CE Office Coordination of activities of the sub-groups for proper and timely implementation. IT Cell Overall responsibility for the computerization of the PWD HQ and field division in phases. PWD quality control Implementation of testing of construction materials and training activities. division Project Director, PIU Overall responsibility for implementation of GAAP with support from various units of PWD and PWD field divisions. Road Safety Working Managing all activities of the road safety component. Group Procurement and Contracts Lead responsibility for Procurement and Contract Management Manual. Management Cell Develop procurement and contract management capacity of PWD, and strengthen procurement and contract management systems and procedures within PWD.

Financial Management

7. A Divisional Accountant from the Finance Department/Accounts and Treasury has been deputed for the Project and a Financial Management Specialist will be additionally hired on contract basis to provide support on financial management functions. The PIU will have the overall accountability for the financial management aspects and ensuring that these are carried out in accordance with the Project’s legal agreements. These activities would include: (a) adequate annual budgetary provision and effective utilization; (b) sufficient and timely flow of funds for Project activities; (c) adequate and competent financial management staff; (d) appropriate accounting of project expenditures; (e) preparation and timely submission of Interim Financial Reports (IFRs); and (f) timely submission of audit reports and financial statements to the Bank.

8. Budgeting: At GoM level, the Project’s funding requirement will be provided within the budget of PWD under Externally-Aided Projects. In FY 2013-14, PWD has opened a separate budget head for this project and adequate budget provision was made to finance expenditures for project preparation activities. The yearly budgets will be approved based on the Annual Work Plans (AWP) developed by the PIU in PWD.

9. Funds Flow (GoM to Project Bank Account): The PWD and Finance Department have stated that although there are merits in using the regular treasury mechanism for executing payments, in particular the ‘Letter of Credit’ (LOC) system adopted by PWD, considering the

weak/inconsistent financial position of the State, inordinate delay is expected on payments to large contracts and consultants. The PWD will therefore open a separate bank account for this project and funds will be drawn from GoM Treasury and deposited into the Project bank account. This arrangement would address the fund flow issue to a large extent and would facilitate timely payments. On the basis of the approved budget, the Finance Department will provide expenditure sanction to PWD and on this basis the LOC will be issued by PWD to the DDO of the PIU. Based on the Project’s physical progress and funding needs, the funds will be allowed to be drawn from the GoM Treasury into the Project bank account. There are some administrative delays expected in issuance of expenditure sanction by the Finance Department and issue of LOC by PWD. Therefore, the Finance Department will provide expenditure sanction within two weeks from receipt of request from PWD and the LOC will be accordingly issued by PWD to the Project. The payment function will be centralized at the PIU. The Project will follow the existing procedures of PWD for payment to contractors, along with pre-certification provided by the Supervision Consultant (upon post-verification of physical works). Initially, the payments will be processed through cheques, with joint signatories. In future, the Project will explore options of online payments/RTGS transfers directly into the contractor’s/consultant’s bank account and appropriate controls will be put in place to process such payments.

10. Accounting and Financial Reporting (IFRs): The accounting and payment function will be centralized at the office of the PIU in Aizawl. Separate books of accounts will be maintained for this Project. The PIU will use the latest version of Tally accounting system for recording financial transactions. The chart of accounts will be appropriately developed to classify project expenditures based on project components/major activities. The Interim Financial Reports will be generated from this system and will be submitted to the Bank within 45 days from the end of each calendar quarter. This IFR will form the basis of disbursement. A financial management manual will be updated to guide the project finance staff on accounting and internal control procedures.

11. For civil work expenditures the financial records (i.e. measurement books, bill books. registers and running account bills, etc.) will be maintained as per the norms prescribed in the CPWD manual and account code. . These policies and procedures are comprehensive and lay down adequate internal control procedures for accounting and financial reporting.

12. Finance Staffing and Training: A Divisional Accountant from Finance Department/Accounts and Treasuries has been deputed exclusively for this project who will report to the Project Director. He will provide oversight and will be responsible for establishing the agreed financial management arrangements i.e. budget preparation and project accounting, smooth and timely flow of funds, executing timely payments, providing financial reports and seeking reimbursement from the Bank, and submission of audit reports to the Bank, etc. Additionally, a Financial Management Specialist will be hired on a contract basis to provide requisite support to the Divisional Accountant. The terms of reference of the FM Specialist has been shared by the Bank. Sufficient training will be provided to the finance staff by the Project and the Bank on disbursement policies/ procedures and the Project’s financial management arrangements.

13. Internal Audit: A firm of chartered accountants will be selected through a competitive process to be prior reviewed by the Bank. The internal auditor will initially assist PIU in maintenance of books of accounts in TALLY system and going forward will be required to assess the operation of project financial management system, review of internal control processes, procurement and contract management functions. The audits will be conducted semi- annually and will provide feedback to management on control weaknesses and issues that require management attention. The internal audit reports along with the corrective actions taken by the project to address the control weaknesses (if any) will be shared with the Bank. The terms of reference for the audit will be agreed with the Bank.

14. External Audit: The Comptroller and Auditor General of India (CAG) will be the external auditor for the project. The CAG’s office will conduct an annual audit of the project financial statements covering sources and uses of funds by project categories and components. The audit will be conducted as per the terms of reference agreed with the Bank and the audit report will be submitted within six months from the close of each financial year. The audit report for the expenditures incurred under Project Preparation Advance of US$ 3 million will be combined with the first year audit report of the Project (expected to be due by September 30, 2015). The annual audit report would consist of (i) audit opinion; (ii) project financial statements; and (iii) management letter highlighting weaknesses, if any. The following audit reports will be monitored in PRIMA:

Implementing Agency Audit Report Auditor Due Date PIU, PWD, GoM Audit report and project C&AG of India September 30 of financial statements each year

15. Supervision Plan: The Project risk is assessed as Substantial due to the PIU’s weak fiduciary capacity in carrying out accounting and contract management functions. The Project will need intensive supervision in the areas of (i) budget preparation accounting and financial reporting; (ii) addressing fund flow constraints; (iii) operationalizing accounting system; (iv) training on the Bank’s fiduciary policies and disbursement matters. As implementation progresses, the supervision would involve half-yearly field visits, review of IFRs and external audit reports.

16. Public Disclosure: The annual audit reports and financial statements will be disclosed on the PWD website.

Procurement

17. Procurement of all goods, works and non-consulting services required for the proposed Project and to be financed out of the proceeds of the Financing shall be done in accordance with the requirements set forth or referred to in Section I of the World Bank’s Guidelines: Procurement of Goods, Works and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers (January 2011). Selection of consulting services required for the proposed Project and to be financed out of the proceeds of the Financing shall be done in accordance with the requirements set forth or referred to in the Bank’s Guidelines: Selection and Employment of

Consultants under IBRD Loans and IDA Credits by World Bank Borrowers (January 2011); and the provisions stipulated in the Financing Agreement.

18. The Project will use the Bank’s Standard Bidding Document for ICB procurement of goods and works, and Standard Request for Proposal for procurement of Consulting Services. For NCB procurement of goods and works, bidding documents as agreed with the Government of India’s Task Force and updated from time to time will be used, as mentioned in the latter part of this Annex.

19. A Procurement and Contracts Management (PCM) Cell headed by an Executive Engineer and supported by two Assistant Engineers has been created in the PIU, reporting to the Project Director. The PCM cell members are solely responsible for carrying out and managing the entire procurement cycle including development of bidding documents/RFPs, conducting bidding/selection process, contract award, oversight to contracts management, procurement quality assurance and completion. This PCM cell needs capacity support as current staff have not implemented large contracts and projects in recent years. The Bank has provided capacity support and training in procurement during project preparation. The members of the PCM Cell are required to attend a two week-duration procurement training and 3-day-duration contract management workshop before September 2014 to augment their capacity. The PCM Cell needs to build capacity for handling Bank-funded procurement and contract management. In addition, the proposed Project has initiated action to hire Project Management Consultants. The proposed PMC will have one Procurement and Contract Management expert in their team.

20. The Mizoram PWD has proposed to adopt e-Procurement. The earlier e-Procurement system, NextTender, was assessed by the Bank and the key issues identified during the assessment were earlier communicated to the PIU. However, the PIU is switching over to another system, Mizoram State Portal (MSP) as their contract with NextTender is concluding soon. MSP is a replica of the Central Public Procurement Portal (CPPP) and NIC is the Service Provider. For future bids valued over INR 10 million the PIU will invite bids/proposals through the e-Procurement system. The PIU has proposed the use of this system for procurement of works, goods and consulting services. On successful installation and launch of MSP, the Bank will conduct an assessment of the system to confirm that it can be used as an e-Procurement system under the Project. The switch to MSP should be implemented expeditiously so that there are no delays in switching from the manual system of bidding which has been initiated as an exceptional measure to ensure project readiness. The PIU will endeavor to carry-out all future procurements using the MSP e-Procurement system, after it has been cleared by the Bank for use under the proposed Project. The use of Electronic No Objection (ENO) has been proposed under the proposed Project to enhance efficiency in procurement reviews.

Assessment of the Agency’s Capacity to Implement Procurement

21. The Mizoram PWD has been designated as the implementing agency for the proposed Project, and the PIU headed by the Project Director of the level of Superintending Engineer has been set up for day-to-day management of the proposed Project. An assessment of the procurement capacity of the PIU was carried out by the Bank both at PCN and Appraisal stage and archived. The PIU informed that they have the expertise of handling donor-funded project.

The Mizoram PWD had implemented the MSRP I Project under World Bank financing. The lessons learned from MSRP I have been incorporated in the design of the institutional arrangements to mitigate risks. Currently, three persons comprising an Executive Engineer and two Assistant Engineers are dedicated to carry out the procurement and contracts management aspects of the proposed Project.

22. The evaluation of bids and proposals are carried out under the chairmanship of PWD’s Engineer-in-Chief, and due diligence is ensured throughout the bidding process. However, in order to streamline the bid/proposal evaluation, the PIU will establish a standing evaluation committee for the proposed Project comprising 3-5 members including one member with a finance background, at least one member with a technical background and one member from a procurement background, with a provision of co-opting a subject matter expert as needed for specific contract packages.

23. A strong Procurement and Contract Management (PCM) team is critical for success of the proposed Project. The staff manning the Procurement and Contracts Management (PCM) Cell needs capacity support as they have not implemented large contracts and projects in recent years. Short-term capacity support on procurement and contract management aspects has been provided by the Bank to PIU staff. This support will continue to be provided to the PIU, with a suitable overlap, until the Project Management Consultant with one procurement and contract management expert has been hired by the PIU.

24. The PCM cell would further enhance their capacity by attending a two-week program on “Procurement under World Bank-Funded Projects” and a workshop on contract management before September 2014.

25. Long tenure and continuity of the procurement team is critical for effective implementation of the proposed Project The Government of Mizoram and PIU will, therefore, ensure that the procurement capacity being enhanced will not be affected due to transfers and rotation of the assigned staff, and the current incumbents will be available throughout the implementation of the proposed Project until all procurement activities have been fully completed.

26. Risks and Mitigation Measures: The main areas of procurement risks, based on the management of public finances in the country generally are: (a) procurement of goods and works at the PIU level which has normal fiduciary risks of transparency, fairness, and capacity; (b) requirement to put in place a complaint monitoring system detailed below; and (c) established system of public disclosure of information on procurement actions as indicated below. The key procurement risks and mitigation measures have been identified and highlighted in the following paragraphs.

27. Capacity Building Measures: The PIU staff have been associated with project preparation but they do not have sufficient experience with procurement under a Bank-funded project, although the head of the PCM Cell was engaged in MRSP I as Environmental Engineer. The PIU will take urgent measures through organized training programs including institutional training to enhance the exposure and capacity of the staff in the PCM Cell. Meanwhile, the Bank

has provided capacity support on procurement until the PIU engages a PMC with a Procurement and Contract Management expert.

28. Complaint Handling Mechanism: To address procurement complaints received by the proposed Project, a complaint handling mechanism will be implemented by the PIU. On receipt of complaints, immediate action would be initiated to acknowledge the complaint and to redress within a reasonable timeframe. All complaints will be addressed at levels higher than the level at which the procurement process was undertaken or the decision was taken. Any complaint received will also be forwarded to the Bank for information, and the Bank would be kept informed after the complaint is redressed. The PIU will endeavor to establish an online procurement complaint handling system during the implementation of the Project.

29. Disclosure Requirements: The proposed Project will comply with the disclosure requirements stipulated in the Banks’ Procurement Guidelines, January, 2011 and Consultant Guidelines, January 2011. Accordingly, the following documents shall be disclosed on the Project’s website: (a) the Procurement Plan and all subsequent updates; (b) invitations for bids for goods and works for all ICB and NCB contracts; (c) Requests for Expression of Interest for selection/hiring of consulting services; (d) contract awards of goods and works procured following ICB/NCB procedures; (e) lists of contracts/purchase orders placed following Shopping procedure on a quarterly basis; (f) short lists of consultants; (g) contract awards for all consulting services; (h) lists of contracts following Direct Contracting (DC), Consultant Qualification Selection (CQS), or Single Source Selection (SSS) on a quarterly basis; and, (i) action-taken reports on the complaints received on a quarterly basis.

30. The following details shall be published by the PIU or sent to the Bank for publishing on their behalf on the Bank’s external website and UNDB online: (a) invitations for bids (Specific Procurement Notices) for procurement of goods and works using ICB procedures; (b) Requests for Expression of Interest for consulting services estimated to cost more than US$ 300,000; (c) contract award details of all procurement of goods and works using ICB procedure; (d) contract award details of all consulting services, with estimated cost of more than US$ 300,000; and, (e) lists of contracts/purchase orders placed following DC, SSS, or CQS procedures on a quarterly basis. The proposed Project will also publish on its website any information required under the provisions of disclosure, as specified by the Right to Information Act of India.

31. The overall Project risk for procurement is High. After mitigation measures are implemented, the residual risk would be Substantial. Procurement risks and mitigation plan to address these risks by enhancing the procurement capacity of PIU has been archived using the Procurement Risk Assessment and Management System (PRAMS).

32. Prior-Review Thresholds: Prior review and procurement method thresholds agreed with the proposed Project based on the risk assessed are detailed in the tables below. These thresholds shall be reviewed and revised, if necessary, during the life of the proposed Project so that these are consistent with the risk assessments made periodically.

Table 2. Procurement Thresholds, Methods and Value thresholds for Civil Works

Expenditure Value* (Threshold per Procurement Contracts subjected to Prior Category contract) Method Review/Post Review Civil Works (a) Civil Works estimated to Shopping Post review only cost equivalent to US$ (Minimum 3 100,000 or less per contract. quotations)

Force Account, if Post review only any (b) Roads (Civil Works) National First NCB works contract estimated to cost more than Competitive regardless of value, and all other the equivalent to US$ Bidding (NCB) contracts above US$ 5 million 100,000 per contract and are subject to prior review. less than US$ 40 Million. (c) Roads (Civil Works) International All ICB contracts >US$ 5 millon estimated to cost more than Competitive value will be subject to prior US$ 40 million. Bidding (ICB) review.

* If bids are called concurrently for several contracts in a package and the PIU invites cross discounts, the aggregate value of the total package will form the basis to determine the procurement method as well as the prior review threshold requirements

All amendments to prior review contracts > 15% in contract value or time will be subject to prior review

Table 3. Methods and Value Thresholds for Goods

Goods & and Non- Value Threshold Methods Review Arrangements Consulting Services Equipment, (i) US$ 100,000 equivalent or Shopping Post review only Machinery, less per contract. (Minimum 3 Vehicles, Furniture, quotations) IT Systems and Non- (ii) Proprietary equipment; Direct Prior review above Consulting Services software; print, audio or visual Contracting contracts worth US$ etc. educational publications; and 50,000 with other learning resources justifications as per irrespective of value. Guidelines. (iii) Contracts of more than National First contract regardless US$ 100,000 equivalent but Competitive of value and all other less than US$ 3 Million Bidding (NCB) contracts above US$ 0.5 equivalent. million are subject to prior review by the Bank. (iv) Contracts of more than International All ICB contracts >0.5 US$ 3 Million equivalent. Competitive million are subject to Bidding (ICB) Prior review by the Bank.

Goods & and Non- Value Threshold Methods Review Arrangements Consulting Services (v) Framework Agreement As per Para 3.6 All FAs are subject to (FA) @ Subject to inclusion of of GL review for acceptance. “FA” as procurement method for specific items in the Procurement Plan.

All amendments to prior review contracts > 15% in contract value or time will be subject to prior review

* If a transaction comprises several packages, lots or slices and cross-discounts are invited, the aggregate estimated value of contracts determines the applicable threshold amount. #DGS&D Contracts can be used at par with shopping. However, State Rate Contracts cannot be used at par with Shopping. If state rate contract exists for an item, the same can be considered as one of the 3 quotations to be sought under shopping procedures.

@ If DGS&D rate contracts are used under Framework Agreement (FA) method, the Project would require ensuring the following: • Use of DGS&D rate contracts as FA must be reflected on the procurement plan agreed by the Bank for particular goods contract package. • Before issuing the purchase order, the borrower carries-out a price analysis on the specific goods that is intended to be purchased. If after this due diligence the borrower concludes (and Bank agrees) that the DGS&D rate contract is not suitable, then the borrower will have to use NCB or shopping depending on the value of procurement. • To meet the Bank's requirements for right to audit and F&C, these clauses may be included in the Purchase Orders (in case the purchasers are directly placing the purchase orders to DGS&D rate contract holders). On the other hand, if indent is placed through DGS&D, the Purchaser has the option to sign a separate undertaking with DGS&D rate contract holder, where Bank’s right to audit and F&C clauses could be mentioned.

2. Pre-qualification: Not Applicable

3. Proposed Procedures for CDD Components (as per paragraph. 3.17 of the Guidelines) Not Applicable

4. Reference to (if any) Project Operational/Procurement Manual: A Procurement and Contracts Management Manual is under preparation by the Implementing Agency. The manual will be reviewed with the Bank and after clearance of the Manual by the Bank all procurement in the project will be done as per procedures described in it and the manual will work as guidance for the contract management.

5. Any Other Special Procurement Arrangements:

A. Contracts procured in advance will be financed under retroactive financing within the specified limits, if agreed to in the Credit Agreement.

B. National Competitive Bidding (NCB) method for procurement and goods and works as per the above value thresholds will be conducted in accordance with paragraph 3.3 and 3.4 of the World Bank Procurement Guidelines and the following provisions:

i. Only the model bidding documents for NCB agreed with the Government of India’s Task Force (and as amended from time to time), shall be used for bidding. ii. Invitations for bid shall be advertised in at least one widely circulated national daily newspaper (or on a widely used website or electronic portal with free national and international access along with an abridged version of the said advertisement published in a widely circulated national daily inter-alia giving the website/electronic portal details from which the details of the invitation to bid can be downloaded), 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 for 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 with reference to Contracts subject to Bank prior review without the prior concurrence of the Bank (i) for the first request for extension if it is longer than four weeks; and (ii) for 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 the control of the Purchaser/ Employer). vi. Re-bidding shall not be carried out with reference to Contracts subject to Bank prior review without the prior concurrence of the Bank vii. The system of rejecting bids outside a pre-determined margin or "bracket" of prices shall not be used in the project viii. Rate contracts entered into by Directorate General of Supplies and Disposals will not be acceptable as a substitute for NCB procedures unless agreed with the Bank on case to case basis. Such contracts will be acceptable however for any procurement under the Shopping procedures. ix. Two or three envelope system will not be used (except when using e-Procurement system assessed and agreed by the Bank)

Table 4. Methods and Value Thresholds for Consultancy Services

Expenditure Value* (Threshold per Procurement Method Contracts subjected to Category contract) Prior Review/Post Review Consultancy (a) More than US$300,000 [i] Quality and Cost Based First Contract of each Services equivalent per contract. Selection (QCBS) Or method of selection (Firms) Quality Based Selection (QBS) irrespective of value and all [ii] Short-list may comprise subsequent contracts valued entirely national consultants for above US$ 200,000 will be contracts below US$ 800,000 subject to Prior Review. All (b) up to US$300,000 Quality and Cost Based Selection other contracts will be equivalent (QCBS) Or subject to post review. Quality Based Selection (QBS) Or Selection based on Consultant’s Qualification (CQS) Or Selection based on a Fixed Budget (FBS) Or Selection Based on Least Cost Basis (LCS) (c) Single-Source Selection (SSS) The single source selection As per paragraphs 3.9- can be used only for the 3.11 of Guidelines contracts which are included in a procurement plan cleared with the Bank The justifications for all contracts to be issued on the basis of single-source or direct contracting (except for contracts less than US$ 50,000 in value) will be subject to prior review. Individual Competitive Selection based on Prior Review of all contracts Consultants comparison of the relevant overall valued above $100,000. All capacity of at least 3 qualified other contracts will be consultants in accordance with subject to post review Section V of the Guidelines. Single-Source Selection (SSS) The single source selection as per paragraphs 5.6 of can be used only for the Guidelines contracts which are included in a procurement plan cleared with the Bank The justifications for all contracts to be issued on the basis of single-source or direct contracting (except for contracts less than US$ 50,000 in value) will be subject to prior review.

* If proposals are called concurrently for several contracts in a package and the PIU invites cross discounts, the aggregate value of the total package will form the basis to determine the procurement method as well as the prior review threshold requirements

All amendments to prior review contracts > 15% in contract value or time will be subject to prior review

1. Short list comprising entirely of national consultants: Short list of consultants for services, estimated to cost less than US$800,000 equivalent per contract, may comprise entirely of national consultants in accordance with the provisions of the World Bank Consultant Guidelines.

2. Any Other Special Selection Arrangements:

(a) Contracts procured in advance will be financed under retroactive financing within the specified limits, if agreed to in the Credit Agreement. (b) Requests for Expression of Interest (REOI) for assignments expected to cost more than US$ 300,000 shall be advertised in UNDB online in accordance with Para 2.5 of the Consultant Guidelines. Besides, all REOIs prepared by the PIA shall be submitted to the World Bank for publishing them on the Bank’s external website.

33. National Competitive Bidding (NCB) method for procurement and goods and works as per the above value thresholds will be conducted in accordance with paragraph 3.3 and 3.4 of the World Bank Procurement Guidelines and the following provisions:

x. Only the model bidding documents for NCB agreed with the Government of India’s Task Force (and as amended from time to time), shall be used for bidding. xi. Invitations for bid shall be advertised in at least one widely circulated national daily newspaper (or on a widely used website or electronic portal with free national and international access along with an abridged version of the said advertisement published in a widely circulated national daily inter-alia giving the website/electronic portal details from which the details of the invitation to bid can be downloaded), at least 30 days prior to the deadline for the submission of bids xii. No special preference will be accorded to any bidder either for price or for other terms and conditions when competing with foreign bidders, state-owned enterprises, small-scale enterprises or enterprises from any given State. xiii. Except with the prior concurrence of the Bank, there shall be no negotiation of price with the bidders, even with the lowest evaluated bidder. xiv. Extension of bid validity shall not be allowed with reference to Contracts subject to Bank prior review without the prior concurrence of the Bank (i) for the first request for extension if it is longer than four weeks; and (ii) for 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 the control of the Purchaser/ Employer). xv. Re-bidding shall not be carried out with reference to Contracts subject to Bank prior review without the prior concurrence of the Bank xvi. The system of rejecting bids outside a pre-determined marg“n or "b”acket" of prices shall not be used in the project xvii. Rate contracts entered into by Directorate General of Supplies and Disposals will not be acceptable as a substitute for NCB procedures unless agreed with the Bank on case to

case basis. Such contracts will be acceptable however for any procurement under the Shopping procedures. xviii. Two or three envelope system will not be used (except when using e-Procurement system assessed and agreed by the Bank)

34. Procurement Planning: The PIU has prepared a Procurement Plan for works packages and consulting services to be procured in the first 18 months of the Project implementation, which has been agreed with the Bank. The PIU will update the procurement plan after assessing their needs of procurement of goods and additional contract packages under consultancy services and works. The Procurement Plan as agreed will be uploaded in SEPA (Online Procurement Plan Execution System).

35. The Procurement Plan will be updated throughout the duration of the proposed Project at least annually by including contracts previously awarded and to be procured in the next 12 (twelve) months. All Procurement Plans, their updates or modifications shall be subject to Bank’s prior review and no objection before implementation.

36. SEPA: SEPA (Online Procurement Plan Execution System), a web-based tool owned by the Bank, was developed in 2006 by the LAC Region to prepare, review, and approve procurement plans and track dates of the different stages of a procurement activity that is planned or under implementation. The system establishes a new, easy to use, and more efficient way for Bank teams and Bank clients to interact, while at the same time providing an audit trail of the process. SEPA has been used for more than five years in Latin America and is being used in ECA Region. SEPA has been introduced in South Asia Region and the Project staff has been trained in it so that PIU can adopt it effectively.

37. Major items of works packages and key consulting services included in the Procurement Plan agreed with the Bank are detailed below: (1 US$ = INR 62.00)

SN Description of Works Estimated Cost Method Domestic (in US$ of Preference Millions) Procurement 1 Improvement & Upgradation of 38.56 NCB Not Chhumkhum- Chawngte Road – Applicable 41.53 KM 2 Improvement & Upgradation of Not Champhai – Zokhawthar Road – 26.32 NCB Applicable 27.25 KM 3 Improvement & Upgradation of Not Lunglei – Chhumkhum Road 25.00 NCB Applicable 0 - 22 KM

SN Description of Estimated Selection Review by Expected Comments Consulting Services Cost in Methods the Bank Proposals Assignment US$ Prior/Post Submission million Date

Recd. on Project Preparation Evaluation 1 1.5 QCBS Prior Sept 09, Consultant I Completed 2013 Recd. on Project Preparation Evaluation 2 1.2 QCBS Prior Sept 09, Consultant II Completed 2013 Construction Supervision QCBS March 10, 3 Consultant for Civil 2.0 Prior RFP issued 2014 Works (3 Contracts) Project Management May 20, REOI 4 1.5 QCBS Prior Consultant 2014 issued 5 Internal Auditor 0.025 QCBS/QBS Prior - -

Procurement plan, for first 18 months, agreed with the PIU at the time of negotiation will be filed in image Bank and detailed procurement plan & schedule will be uploaded through SEPA

38. The PIU would establish documentation to detail out a system to streamline procurement monitoring, contract management and modifications to contracts including variations (if any) and extension of time during initial period of implementation.

39. Incremental Operating Costs: The Project will support various incremental costs for efficient and timely project implementation. Operating costs will be financed by the Project according to an annual budget approved by the Bank. Activities would be procured using the PIU’s administrative procedures which were reviewed and found acceptable to the Bank.

40. An internal auditor will be selected by the IA to carry out joint Procurement-Finance Management-Contract Management audit during the implementation of the proposed Project.

Environmental and Social (including safeguards)

41. Institutional Arrangements for Implementation of EMP: The Project will be implemented in Aizawl, Mamit, Champhai, Serchhip and Lunglei districts. The project will upgrade the exiting single lane road to double lane road in two groups: Group 1 and Group 2. During upgrading works of Group 1 roads, the project would fund studies and designs for Group 2 roads.

42. Draft Environmental Management Framework (EMF) for the Project has been prepared. This provides detailed guidance with regard to screening, carrying out EIA, consultations, monitoring, as well as institutional assessment and capacity strengthening measures. Draft EIA and EMP have been prepared for two roads in Group 1. As per the provision of the EMF, Group 2 roads and the other project activities will be subjected to screening, EA and EMP. These safeguard documents will be reviewed and cleared by the Bank before clearing bidding

documents of the same. Besides consultations as well as dissemination of information are required at different stages during preparation as well as implementation.

43. In order to implement the above requirements and environmental mitigations as well as monitoring following institutional arrangement has been made. One Executive Engineer (EE) for Environment (Env) is assigned to PIU for overseeing effective implementation of the EIA and EMP. Under the EE for Environment, three AEs will be designated, each one with responsibility for each road. The AEs will be responsible for effective implementation of the EMPs and settle problems at their level whenever possible. They will also communicate complaints to the EE for Environment. Three Junior Engineers, one for each road to directly assist AEs. This arrangement will be formalized as the Environment Cell of PIU/PWD during implementation. The Environment Cell will be supported by environmental team of the Project Preparation Consultant (PPC) and Supervision Consultant. The Environment Cell with be supported by the Supervision Consultant and will be responsible for monitoring during implementation, and preparing quarterly monitoring reports. PWD/PIU may also engage, if needed, expert agencies such as forest and wildlife agency or an independent consultant for monitoring certain aspects of the project and NGO/ community for some types of activities. Various trainings will be implemented for strengthening capacity. The Environment Cell and team of environmental specialists are expected to continue environmental management as part of PWD’s long-term plans. To this effect, the institutional development component of the Project will dovetail their role in PWD.

Fig 1: Proposed Environment Cell in PIU for MSRP-2

Engineer- in- Chief

Chief Engineer-

Project Director- MSRP-2

EE (Environment)

AEE for C-Z AEE C-C road AEE LTK road road (Environment) (Environment) (Environment) Group-2 roads Group-2 roads

JEE JEE JEE (Environment) (Environment) (Environment) PIU office PIU office Site

44. Institutional Arrangement for Implementation of R&IPDP: Three (3) AEs to be designated as R&R Managers, one for each road. They will be responsible for effective implementation of R&IPDP and settle problems at their level whenever possible. They will also communicate complaints to the SLAO. They will conduct verification of complaints on the spot as they are received, and bring immediately to the attention of the SLAO. Three Junior Engineers, one for each road to directly assist RRMs. Figure 2: Institutional Arrangement for R&IPDP Implementation

Chief Engineer (Roads), PWD, Govt. of Mizoram

Special Committee GRC at District Level (Replacement value & Project Director, PIU, PWD (R&R issues) Negotiated Settlement)

Special Land Acquisition M&E Agency SCHM (PIU) (general Officer (SLAO) project related issues) (Third Party)

Construction 3 RRM (Site Office), one Social Development Supervision for each road Specialist (SDS) Consultant

R&IPDP Implementation 3 Junior Engineer to Agency (NGO) assist AEs/RRMs

Monitoring & Evaluation 45. An Assistant Engineer has been assigned to assist the Project Director with project monitoring and evaluation. The AE will coordinate with the staff assigned to monitor the implementation of works, procurement, and environmental and social safeguards, to collect data on project implementation progress, on implementation progress of the Governance and Accountability Action Plan as well as data to inform the project’s results indicators.

Role of Partners 46. The Asian Development Bank is (ADB) is rehabilitating a complementary section of road in Mizoram, as well as exploring rehabilitating and expansion of another key road corridor in the Northeastern Indian state of Manipur. ADB also provides budget support and technical assistance through its SASEC program on trade facilitation activities to Bangladesh and Nepal. The Bank team coordinates regularly with ADB teams to ensure complementarity of support.

47. The UK’s Department for International Development (DFID) has been a key partner in financing much of the Bank team’s technical assistance on corridor development and trade facilitation projects and activities in South Asia, including trust-funded support for both Bank and recipient-executed activities.

48. The International Finance Corporation (IFC) works closely with the Bank team to explore private sector development investment opportunities along the priority corridors in the Bank’s South Asia program. The IFC also provides technical assistance on trade facilitation measures specifically focusing on regulatory and procedural issues that hamper private sector investments.

Annex 4: Operational Risk Assessment Framework (ORAF)

India: Mizoram State Roads II- Regional Transport Connectivity Project (P145778) Stage: Appraisal 1.1 Stakeholder Risk Rating Moderate Risk Description: Risk Management: (a) Risk that local Tribal leaders and the (a) The project team has made exhaustive efforts to ensure full disclosure of proposed designs and diverse populations along the route will not implementation plans which have been communicated to local communities with strict adherence to Bank support the road development projects. safeguard policies. The project will develop strategies to engage with the tribal communities along the project roads and (b) Risk of non-cooperation from make them beneficiaries of the project as part of the Tribal Development Plan. MDONER or MORTH (b) GoI has been closely engaged throughout project preparation, which builds on existing relationships established during the Mizoram I project. Resp: Client Status: Not Stage: Both Recurrent: Due Frequency: Yet Date: Due 2. Implementing Agency (IA) Risks (including Fiduciary Risks) 2.1 Capacity Rating High Risk Description: Risk Management:

(a) Risk of poor quality DPRs, poor (a) PWD will have technical support from expert project management consultants, thereby strengthening its supervision and contract management review/control of project preparation processes, particularly on consultant outputs on environmental and social which may impact work quality and lead to safeguards, planning and policy. Construction supervision consultants will also provide quality assurance and cost and time overruns. contract management support during implementation. (b) Risk of mis-procurement and/or project (b) A dedicated Procurement and Contract Management Cell will be established; specific manuals for project delays, poor quality of contract procurement will be prepared and if necessary, early and ongoing staff training will be provided in project deliverables, time and cost overruns. preparation and implementation; project contracts will be packaged in an efficient manner and use of SBDs will (c) Risk of delays/errors in financial be mandatory for ICB works; Subject to a Bank assessment, the project will use the recently rolled out e- management transactions and reporting. Procurement system. (d) Risk of poor ownership given that some (c) A Divisional Accountant from GoM has been deputed and an experienced Financial Management Specialist of the experienced project staff may retire will be additionally hired on contract basis. An accounting system will be procured for recording financial before end-of-project and risk of high staff transactions and sufficient training will be provided to project staff. The Comptroller and Auditor General of turnover given the typical PWD India (CAG) will be the external auditor and an internal auditor will be additionally hired to assess project environment. operations, internal control systems including procurement and contract management functions. (d) PWD has committed to assign staff for the duration of the project. Several of these staff had worked on the previous project.

Resp: Bank Status: Not Stage: Both Recurrent: Due 30-Sep-2014 Frequency: Yet Date: Due 2.2 Governance Rating Substantial Risk Description: Risk Management: (a) Risk of roads not adequately benefiting (a) Support to expand the existing complaint handling system into a comprehensive system of complaints, for road users. ease of monitoring and follow-up. This will enable registration and tracking of complaints that are received (b) Risk of road user concerns on land online, by email and regular mail. acquisition, social, environmental and/or (b) In addition to at least two road user surveys, the project will support development of a mechanism to elicit road safety aspects not incorporated in road stakeholder feedback through quick surveys/opinion polls on select issues of interest to the PWD/PMT. development. Environmental and social safeguards assessments and mitigation plans have also incorporated stakeholder (c) Poor utilization of community resources concerns. in roadside development, maintenance and (c) The project will explore ways to foster participation of local and tribal community groups in providing value road safety advocacy. added services such as greening of road sides, improvement of sidewalks of connecting roads, emergency assistance during crashes and awareness building campaigns in schools and selected venues (against drunken driving and speeding and for adhering to traffic rules). (d) The project has established a Steering Committee or Project Monitoring Committee comprising Trade, Agriculture, Forest and Environment, Finance and Treasury departments in addition to PWD and chaired by the Chief Secretary to ensure balanced representation of all relevant views. Resp: Client Status: Not Stage: Both Recurrent: Due 30-Sep-2013 Frequency: Yet Date: Due Risk Management: (a) PWD will implement an agreed upon Governance and Accountability Action Plan (GAAP), including new institutional and community based measures for F&C minimization. (b)Bi-annual third-party audit of work quality at project sites to flag major deviations in value, quantity or length & compliance with technical standards, social and environmental safeguards, and in-depth scrutiny of IPCs, use of mobilization advances etc. In addition, there may be random inspections by the State PWD’s Quality Control Unit either suo moto and/or based on the third-party reports to identify/deter F&C in implementation. Resp: Client Status: Not Yet Stage: Both Recurrent: Due 30-Sep-2013

Due Date: 3. Project Risks 3.1 Design Rating High Risk Description: Risk Management: Risk of poor quality DPRs, especially for hill a) Bio-engineering techniques will be utilized.

54 roads that are predominant in the state, which b) The Bank team has been providing significant technical assistance to ensure that the designs are technically may impact work quality and lead to cost sound and address potential key environmental issues including slope stability (related to landslides & erosion and time overruns. and water management), management of huge amount of excavated materials, impacts on forests and biodiversity, and construction period issues (e.g. noise, dust, health & safety, sanitation & labour camps etc). Resp: Both Status: Compl Stage: Prepa Recurrent: Due 30-Sep-2013 Frequency:

eted ration Date: 3.2 Social and Environmental Rating High Risk Description: Risk Management: (a) Risk of delays in the implementation of (a) The impact on most habitations have been avoided through design alternatives. However, land acquisition in land acquisition, resettlement and small strips is expected throughout the alignment. The land acquisition process will be closely linked with the rehabilitation. Weak social management civil works contract awards process. capacity of PWD. (b) An Environmental Management Framework and a Social Management Framework have been prepared to (b) Delay in producing EMF, EIAs, EMPs, guide the preparation of the entire project. For two roads (C-C Road and C-Z Road), detailed EIA and SIA and SMF, SIA and RAP&IPDPs, and obtaining project specific EMPs and Resettlement Action Plan and Indigenous Peoples Development Plans (RAP&IPDPs) regulatory environmental and forest have been prepared and will be implemented. The Bank and PIU teams have been following closely the process clearances may affect project execution. for obtaining environmental and forest clearances which are on track. (c) Weak environmental and social (c) Greater participation of the staff from the PWD’s Environment and Social Cell and strengthening of the cell safeguard management capacity of PWD. is envisaged to strengthen oversight of related issues in the project; contract documents to include penalties for non-compliance with EMPs. Resp: Client Status: Not Stage: Both Recurrent: Due Frequency: Yet Date: Due 3.3 Program and Donor Rating N/A Risk Description: Risk Management: None. None. Resp: Status: Stage: Recurrent: Due Frequency:

Date: 3.4 Delivery Monitoring and Rating High Sustainability Risk Description: Risk Management: (a) Unprecedented behavior of poor (a) The Bank has been providing significant technical assistance to ensure that the pavement design is suitable to subgrade may lead to localized premature local conditions. pavement failures. (b) Implement measures such as project-centered third party monitoring, new PWD design review process and (b) Quality of construction suffers due to proof-checking of DPRs in project implementation. Use of Project Management Consultant and Construction

55 poor quality design and poor execution Supervision Consultant to provide implementation support. quality. (c) Contractor capacity is verified before awarding the contract. Contractor daily resource management to be (c) Delays in construction due to duly recorded and monitored. Use of Project Management Consultant and Construction Supervision Consultant contractor's poor performance. to provide implementation support. (d) Risk of poor sustainability of assets (d) Under this project, IT systems for road asset management and newer methods of road maintenance will be created under the project due to poor introduced that will enable PWD to implement improved sustainability plans for built assets. project selection, planning, management, or (e) The road safety component envisages multi-sectoral interventions on a high risk corridor with robust maintenance. monitoring and evaluation system aimed at reducing the number of fatalities; subsequent roll out of the approach (e) Risk of poor sustainability of benefits throughout the State will be based on success of these interventions. The CZS provisions will be integrated in from project-assisted Road Safety (RS) updating of code(s) and manuals, as well as in training. planning / interventions / piloting and (f) The project has established a Steering Committee or Project Monitoring Committee comprising Trade, Construction Zone Safety policy Agriculture, Forest and Environment, Finance and Treasury departments in addition to PWD and chaired by the (CZS)/capacity-building measures. Chief Secretary to ensure balanced representation of all relevant views. The group has so far met biweekly to ensure proper project implementation. Resp: Client Status: Not Stage: Imple Recurrent: Due Frequency: Yet menta Date: Due tion

Annex 5: Implementation Support Plan India: Mizoram State Roads II Regional Transport Connectivity Project (P145778)

Strategy and Approach for Implementation Support

1. The Implementation Support Plan (ISP) provides the support required for continued policy dialogue, timely implementation of project activities and disbursement of project funds, and implementation of mitigation measures identified in the ORAF and the GAAP in order to ensure that major risks are addressed. The ISP will be undertaken by World Bank staff to provide support to enhance PWD’s capacity in a range of technical and specialized areas. The Bank team will continue policy dialogue with GoM and PWD on institutional development, maintenance policy, road safety measures, trade corridor development and regional connectivity, cross-border trade opportunities and challenges, enhancement of trade production and marketing capacity and potential, and livelihood development opportunities for the people of Mizoram and the Northeast.

2. The Bank team will conduct due diligence including through field visits for ground verification to ensure compliance with designs, bidding documents, environmental and social safeguards frameworks, and other relevant guidelines and criteria. Field visits will involve group conversations with the project beneficiaries to gauge the impact of the projects and beneficiary satisfaction. This information will be used to continually improve project practice.

3. The Bank team will undertake regular and comprehensive fiduciary implementation support of PWD management procedures. This will include thorough attention to procurement capacity and standards and regular financial management reviews including the assessment of interim financial management reports. Particular attention will be given to the findings of the annual procurement post review of contracts, financial audit and integrated performance audit and implementation of recommendations provided in these reports.

Implementation Support Plan

4. The Bank's supervision team will include two co-Task Team Leaders, Washington-based and country-based. Fiduciary, procurement and safeguards staff will be country-based to the extent possible. Additional technical support will be provided in the areas of road and bridges design/engineering, road safety expert, trade production capacity and livelihoods, trade marketing, Customs policy and border post management, international transit and corridor management systems, and trade facilitation.

5. Financial Management (FM): A Bank financial management specialist based in Delhi will conduct two or more FM supervision missions every year throughout the life of the project. FM supervision will cover, in addition to the operational status and capability of financial management systems, quality of financial reports, reconciliation of financial data, capacity of FM staff, review of audit reports and follow up on implementation of recommendations.

6. Procurement supervision: A Bank procurement specialist based in Delhi will be a member of the project team throughout the project. During project implementation, the procurement specialist will provide due diligence services for procurement documents and will join the

implementation support missions, expected to be twice per year. In addition to the prior review due diligence to be carried out by the Bank team, procurement post reviews are to be carried on at least 20 percent of the contracts subject to post review. The specialist will review the red flags required to be checked for all procurement under the project; implementation of the procurement risk mitigation framework; and implementation of recommendations provided in the various audit reports.

7. Environmental Safeguards supervision: A Bank environmental specialist will be a member of the project team throughout the project to ensure compliance with environmental safeguards provisioned in the project EMF and EIA-EMPs. The specialist will assess performance of project management consultants and supervision consultants, discuss recommendations provided in the integrated performance audit and monitor implementation of recommendations.

8. Social Safeguards supervision: A Bank social development specialist based in Delhi will be a member of the project team throughout the project to ensure compliance with environmental safeguards provisioned in the project SMF and RIPDPs. Field visits of the works sites will include consultations with persons affected by the project and assessment of the grievance redress mechanism. The specialist will assess performance of project management consultants and supervision consultants, discuss recommendations provided in the integrated performance audit and monitor implementation of recommendations.

9. In order to support GoM and PWD with the effective implementation and good governance of the project, the task team will undertake enhanced supervision in the areas of implementation of GAAP and institutional strengthening activities and closely monitor procurement and contract management under the project.

Time Focus Skills Needed Resource Estimate First Quality of implementation: Ensure quality preparation of Procurement, TBD twelve environmental screening reports, EIAs/EMPs, RIPDPs financial management, months for Group 2 roads and satisfactory implementation of the environment same documents for Group 1 roads; satisfactory safeguards, information disclosure and stakeholder consultation; social development and quality assurance plans in civil works contracts are in safeguards, institutional place. development, Governance and accountability: Ensure that project transport economics, management systems (financial management, contract highway engineering, administration) are in place; integrated performance audit road safety expert, trade is launched; production capacity and Random review of check-list of red flags provided with livelihoods, trade bid evaluation reports. marketing, Customs Institutional development: policy and border post Review of terms of reference for consultants selected to management, implement activities in the institutional development international transit and component. corridor management Trade/livelihood production and marketing opportunities: systems, and trade continued studies and implementation of plans for facilitation. enhancing livelihood and trade production opportunities for residents along trade corridors. Enhancing connectivity and corridor development, cross-

border trade: continued dialogue with GoM on cross- border trade opportunities and challenges, and enhancing connectivity and corridor development 12-48 Quality of implementation: Highway engineering, TBD months Review quality of works, road safety component, procurement, compliance with fiduciary and safeguards policies, financial management, quality assurance plans in civil works contracts are in environmental place; safeguards, Review monitoring indicators, implementation social development and performance and achievement of objectives. safeguards, institutional Governance and accountability: development, Satisfactory implementation of GAAP; integrated M&E, performance audit is carried out. road safety expert, trade Institutional development: production capacity and Review implementation of institutional component; livelihoods, trade compliance with maintenance policy; quality of advisory marketing, Customs services provided as part of the institutional development policy and border post component. management, international transit and corridor management systems, trade facilitation.

Skills Mix Required Skills Needed Number of Staff Weeks Number of Trips Comments Task management 60 12 International trip Washington-based Task management country- 90 18 Field-based based (highway engineer) Procurement specialist 24 12 Field-based Financial management 24 12 Field-based specialist Environment specialist 40 12 Field-based Social development specialist 40 12 Field-based Institutional Development 20 10 Field-based /governance specialist Trade production/livelihoods 20 10 Field-based specialist Border post management 10 5 International trip specialist Corridor development 10 5 International trip specialist TOTAL 338 108

Annex 6: Economic and Socio-Economic Analyses India: Mizoram State Roads II Regional Transport Connectivity Project

1. The Project will improve basic access in a remote, hilly, and mountainous region. Road transport is the only mode of transport within the state of Mizoram and improvements to the network should enhance the environment for development and growth by reducing freight and passenger transport costs, and by providing quicker and safer access to all parts of the state and to neighboring states and countries. The impacts will be felt at two main levels, intra-state and between Mizoram and neighboring states and countries, namely Bangladesh and Myanmar (Table 1).

Table 1: Expected Direct Impacts of Project Component/Activity Cost Expected Impact ($m) Component A: Improvement of Priority 102 Reduced vehicle operating costs and Cross-border Roads and Trade-Related travel time. Infrastructure (Lunglei – Tlabung – Increased cross-border trade Kawrpuichhuah: 25.0 km; Champhai- Zowthowkar: 27.5km; Chhumkhum- Chawngte: 41.7km) Component B: Road Sector 5 Improved capacity and efficiency in Modernization and Performance road sector management. Enhancement Improved road safety Increased cross-border trade

2. The evaluation of the expected impacts of the project were assessed in two parts: a) the direct impacts of improvements to the road infrastructure network and b) impacts from improved connectivity within the state and with neighboring countries. The direct impacts are based on deriving a combined monetary value for the time and cost savings due to project interventions while the connectivity impacts are estimated as part of the wider economic benefits of the project interventions. Recommended practice in the World Bank is that a project should satisfy the transport specific impacts before wider economic benefits are considered, i.e. the project should be feasible first from a transport perspective before other impacts are included. The assessment therefore utilized cost-benefit analysis as a first step in the evaluation. Based on empirical evidence, improvements in state, regional, and international connectivity should foster: (a) increased economic and social development; (b) better access to health and education services for a large portion of the state's population especially women and girls; (c) lower costs for goods and services; and (d) improved market access for Mizoram’s agricultural and industrial products. In addition to these impacts, the project will also have other economic and social benefits especially increased economic activity from the promotion of tourism; and allowing members of the same tribe on opposite sides of international borders to be in contact socially and economically.

Cost Benefit Analysis

3. Cost-benefit analysis was used to estimate the value of the costs of the infrastructure interventions and the cost and time savings they will induce compared to not implementing the project. The reductions in road user costs include both motorized and non-motorized traffic which is common in the rural areas where the project will be implemented. Cost savings would include those associated with operating and maintaining vehicles as well as reductions in the cost of deterioration. Time savings relate to time saved by users as well as in vehicle operations. Normally the cost and savings from improved road safety would be considered as part of the analysis – however, the paucity of data on road traffic accidents in the project area made it difficult to estimate this. However, similar projects implemented elsewhere in NE India have resulted in reduced traffic accidents and the same can be expected under this project. As such, the assessment of the benefits of the project can be regarded as an underestimate of what is expected.

4. The analysis was carried out using the HDM-4 model. The model was used to estimate the Vehicle Operating Costs for traffic in each vehicle category on each selected road sections with and without improvement taking into account the speed and travel time including surface quality and road congestion. Each road was assessed separately before all are assessed as a package to obtain Economic Internal Rates of Return (EIRR) and net present values.

5. The economic unit costs parametric values for motorized and non-motorized vehicles were adopted from Indian Roads Congress guidelines (2009) 5 and updated to 2013 prices. Additional data were collected from a limited field survey and from studies in India. The vehicle related data used in the model are shown in Annex A. Vehicle operating costs include fuel, oil, tire and parts costs, crew and maintenance labour costs, capital depreciation, borrowing costs, and overhead costs.

6. Streams of all cost and time savings and investment costs were discounted to obtain their net present value. The economic evaluation was been carried out for a 23 year time horizon including the construction period in which the operation period after construction was 20 years. The with improvement includes annual “Routine Maintenance” with Periodical Maintenance at five year intervals and overlay after 10 years.

7. The economic internal rate of return is calculated by the model applying an opportunity cost of 12% to the annual undiscounted net differences of the economic elements considered in the analysis. The sum of these discounted values gives the economic net present value of the project which is generated and presented, together with the associated EIRR for individual roads and the package of roads. The results of the cost benefit analysis are shown in Table 2.

5 IRC:SP30-2009, Manual on Economic Evaluation of Highway Projects in India 61

Table 2: Results of Economic Analysis Normal Scenario Sl. No. Details Length (km) EIRR (%) NPV (USD million) 1 Champhai Zokhawthar Road 27.2 16.41% 12.27 2 Lunglei – Kawrpuicchuah Road 22.0 15.47% 8.38 3 Chhumkhum - Chawngte Road 41.5 20.90% 36.75 Total (all roads) 91.0 16.96% 57.40 Source: Analysis

8. The results show that the EIRR values of the individual roads are in range of 15.5% to 20.9%. The EIRR for Lunglei – Kawrpuicchuah Road is 15.47 %; Champhai Zokhawthar Road 16.41% and Chhumkhum - Chawngtte Road 20.9%. As the values are higher than 12% each individual road section is found to be economically viable. The EIRR for the overall package of roads is 16.96% which also confirms the feasibility of the overall intervention.

Sensitivity Analysis

9. The results of the costs benefit analysis were tested for sensitivity under different scenario: • 20% increase in project cost • 20% reduction in project benefits • One year delay in construction • All above three combined (worst scenario)

10. The results of the sensitivity analysis are shown in Table 3.

Table 3: Sensitivity Analysis Results Champhai Lunglei – Chhumkhum All Zokhawthar Kawrpuicchuah - Chawngtte Roads Details Road Road Road EIRR EIRR EIRR EIRR Main Evaluation (Base Case) 16.41% 15.47% 20.90% 16.96% Cost Overrun (Capital and 14.52% 13.48% 18.52% 14.90% maintenance) Decrease in Project Benefits 14.12% 13.06% 18.02% 14.47% One Year Delay in 15.65% 14.66% 20.34% 16.23% Implementation All Three Tests Combined 11.40% 10.16% 15.09% 11.61%

11. Taken separately each of the different scenarios resulted in EIRR values above the 12% threshold. The results suggest that the economic justification of the project is proven even if the cost of civil works increased by 20%, or the projected traffic is not achieved or there is a one year construction delay. However, the sensitivity analysis for the worst case scenario where all factors are taken together obtained EIRR values in the range of 10.2% to 15.1%. The flow of benefits in the worst case scenario is shown in Figure 1. Even though the results are borderline for two of the three roads under the worst case scenario, the chances of all three conditions occurring simultaneously are slim, as (a) current trends in economic growth point to continued

62 growth in traffic, (b) there is little uncertainty on the cost of the works and (c) VOCs are unlikely to be reduced in view of the past trend for the price of inputs such as fuel, lubricants, tires, and salaries.

200.00

150.00

100.00

50.00

0.00 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 -50.00

-100.00

Figure 1. Flow of Benefits Under Worst case Scenario

Wider Economic Impacts

12. By being squarely in the center of future traffic between Myanmar and South East Asia, on the one hand, and Bangladesh, Nepal and the rest of India on the other, Mizoram and other NE states will benefit from the proposed road project (as well as from the complementary projects and activities described in Section 1A). The benefits would include better access to goods and services and hence reduced prices; enhanced economic activity, especially closer to the road project; increased agricultural output and exports as a result of reduction in costs of inputs as well as costs of transport to markets.

13. All the project interventions will impact on the regions they pass through in Mizoram as well as on trade between the state and Bangladesh and Myanmar. They would therefore be expected to have regional impacts on the space economy of the regions as well as impact on trade flows between Mizoram and the two neighboring countries. Assessing such regional impacts can take different forms.

14. Where estimates of the trade and regional impacts are needed, as for this project, the most commonly used approach is to employ gravity modelling. Gravity modelling can be used to estimate trade generation and diversion impacts of a project such as this. However, in order to effectively use such a model, various data are needed including elasticities of trade volume with respect to transport costs and times. Such elasticities are not readily available for NE India.

15. Nevertheless, as time and cost savings have already been included in the cost benefit analysis there is a risk of double counting of benefits and as such a trade gravity model would not provide additional insights that have not already been established. It would only complement and reinforce the findings of the cost benefit analysis. Under the circumstances, the evaluation followed the recommendation in the World Bank’s Transport Research Note 19 to use a qualitative approach to explore the likely wider impacts of the project.

16. The trade impacts of the project would take two forms, through linkages between transport and the regional economy and the competitive advantage that the State of Mizoram would derive by being better connected to neighboring countries. The latter impacts would include welfare improvements due to a reduction in prices of some commodities Mizoram currently imports from other parts of India using the trade route through the Chicken’s Neck. Both types of impacts would be expected to increase economic output and employment. They would be expected to have a disproportionate impact on women who are mostly involved in agricultural production, which is the mainstay of the economy of the state.

17. Evidence from elsewhere in India suggests that improvements to the road network would affect the location and productivity of some enterprises in Mizoram. For instance, a review of the impact of improvements to the Golden Quadrilateral network in found that there had been positive effects on the organized manufacturing sector, with substantial growth in firm entry rates and total factor productivity among manufacturing plants in districts within 10 kilometers of the network, patterns which were absent in districts farther away. The timing of improvements in the manufacturing sector was found to be tied to the timing of the improvements in the network. Impacts were absent from a similar network for which improvement was delayed.

18. Other empirical evidence from on-going trade facilitation activities and infrastructure development by India and neighboring countries further suggest that the existing poor road infrastructure is a major impediment for cross border traffic between the NE states and neighboring countries. Private sector enterprises estimate that improvements in road infrastructure and border facilities will result in a significant growth in cross-border trade volumes.6 A detailed review of the cross border traffic for Mizoram with neighboring countries is presented in Appendix 2. Analysis of traffic projections suggest that there will be a 50% increase in private vehicle and 75% increase in commercial vehicle traffic following the project interventions while there will be a growth of close to 20% per annum in Mizoram’s exports to neighboring countries.

6 Based on a meeting with the representatives of Mizoram Truck Owners Association and Mizoram Chambers of Commerce on 27 December 2014 at Aizawl. 64

Table 4: Export Potential of Different Agro-Products from Mizoram (tonnes)

Year Crop 2013 2014 2015 Chilies 5874 6168 6285 Ginger 20661 21694 22108 Squash 39900 41895 42693 Passion 540 567 577 Banana 71437 75008 76437 Lime/Lemon 14804 15544 15840 Mandarin orange 13292 13957 14222 Sweet orange 2520 2646 2696 Hatkora 2189 2299 2342 Pummelo 1357 1449 1477 Cotton 103 105 107

Conclusion

19. The results of the economic evaluation presented here are conservative estimates of the likely impact of the project. They do not quantify the road safety and trade related impacts. These other impacts can be substantial. Still based on the conservative estimates, the project is found to be economically feasible. The EIRR values for all the sections are more than 12%. The results were also found to be robust except in the case of various shocks all occurring at the same time. This is deemed unlikely, based on similar projects the World Bank is financing in the same state and region.

Appendix 1: Vehicle Characteristics

Two Three 2-Axle Multi Axle Item Car Bus LCV Tractor Wheel Wheel Truck Truck Vehicle Price Rs. 383062 48535 1,32,483 989281 1024610 1155670 6,37,600 585707 No. of Wheels 4 2 3 6 6 10 4 7 No. of Axles 2 2 2 2 2 3 2 3 Passengers 4 1 3 25

Tyre Price Rs. 2648 892 892 8952 8397 8397 4143 4143 Fuel Per/Lt. Rs. 30.11 30.11 30.11 27.82 27.82 27.82 27.82 27.82 Lubricating Oil (Rs) 78 78 78 78 78 78 78 78 Maint. Labor (per 59.4 25.57 84.61 120.9 131.55 128.52 110.33 110.33 hr.) Rs. Crew Wages ( 30.28 - 21.11 82.58 132.34 132.34 34.44 34.44 Rs.per hr) Annual Overhead 22088 1165 3417 148756 31063 57688 12656 12656 (Rs.) Interest Rate (%) 12 12 12 12 12 12 12 12

Passenger Work Time Value (Rs. 85.75 43.90 59.68 59.68 - per/hr.)

Non work Time 25.73 13.17 17.90 17.90 Value ( Rs. per hr) Cargo Time Value - - - - 30.50 57.10 10 10 (Rs. per/hr.) PCSE 1 1 1 2 2 2 2

Working Hours 1,950 1,300 3,600 2,200 2,100 2,100 1,500 350 Annual km 32,000 16,000 21,900 1,00,000 75,000 75,000 60,000 4,000 Avg. life (Years) 10 10 8 8 8 8 8 10 Source: Updated from IRC : SP30 and values adopted from other similar studies in India

Appendix 2: Estimates of Cross Border Traffic Volumes Through Various Border Posts

No. of vehicles/day (AADT) LUNGLEI – KAWRPUICCHUAH ROAD Champhai Zokhawthar Road (CZR) Chhumkhum - Chawngtte Road (CCR) (LTK) Vehicle Type Cross Cross Cross % % % Normal Border Total Normal Border Total Normal Border Total Composition Composition Composition Based Based Based

A. Motorised vehicles 1,280 793 2,073 100.00% 1,053 654 1,707 100.00% 1,123 695 1,818 100.00% 1. Bus 28 21 49 2.40% 30 23 53 3.10% 40 30 70 3.80% 2. Mini Bus - - 0.00% - - 0.00% - - 0.00% 3. Multi Axle Truck 25 19 44 2.10% 25 19 44 2.60% 23 17 40 2.20% 4. Truck - 3 Axles 50 38 88 4.20% 86 65 151 8.80% 49 37 86 4.70% 5. Truck - 2 Axles - - 0.00% - - 0.00% - - 0.00% 6. LCV 311 233 544 26.30% 236 177 413 24.20% 282 212 494 27.10% 7. Two Wheelers 315 158 473 22.80% 227 114 341 19.90% 206 103 309 17.00% 9. New Tech Car 353 177 530 25.50% 315 158 473 27.70% 382 191 573 31.50% 10. Old Tech Car - - 0.00% - - 0.00% - - 0.00% 11. Autorickshaw 198 149 347 16.70% 134 101 235 13.70% 141 106 247 13.60% B. Non-Motorised vehicles 66 0 66 100.00% 66 0 66 100.00% 39 0 39 100.00% 1. Animal Drawn Vehicle - 0.00% - 0.00% - 0.00% 2. Cycle 24 24 36.10% 24 24 36.40% 0 - - 0.00% 3. Cycle Rickshaw 42 42 63.90% 42 42 63.60% 39 39 100.00% Note: 1. Estimates done using IRC framework/standards. 2. Normal traffic is adopted from the survey data provided by Mizoram PWD. 3. Cross border traffic is assumed based on the detailed review of regional trade prospects and its impact on project roads.

Annex 7: Governance and Accountability Action Plan India: Mizoram State Roads II Regional Transport Connectivity Project

1. Worldwide, the construction sector is perceived to be most susceptible to corruption, and especially so in public works contracts7. India’s road sector (and by extension, Mizoram’s road sector) suffers from some of the same issues applicable to the road construction industry elsewhere: project delays due to land acquisition and rehabilitation and/or environmental clearances, frequent design changes, resource constraints and corruption in the construction industry8. Several projects in the road sector in India have suffered from these implementation challenges. According to a recent report by the Ministry of Statistics and Program Implementation (MOSPI), the MoRTH has the maximum number of delayed projects among all infrastructure sub-sectors, with 68% of its projects (90 out of 132 projects, each worth more than $30 million), plagued by time delays in the range of one month to five years9. In Mizoram, even the Bank-aided first Mizoram State Roads Project (MSRPI) had an overall cost overrun of 68% and a time overrun of 198% over the original estimated project cost and time of completion.10 2. Recently, the state government has decided to implement an enhanced performance monitoring system and has mandated forty departments (including the PWD) to prepare results framework documents (along the lines of similar document developed by MoRTH) from 2013- 14.11 The state had already promulgated a Mizoram Highway Act in 2002 to provide for the regulation, construction, development and maintenance of highways in the state. Under MSRPI, the PWD reforms led to the establishment of procurement, contract management and management information systems to effectively monitor large size programs and improve accountability12. As part of MSRPI, the GoM reduced the PWD administrative costs by about 15 percent of the total of state road sector budget, made progress in implementing organizational reform, prepared a road policy and a road safety action plan, and introduced a maintenance management system to facilitate rational decision-making based on resource allocation in accordance with technical and economic reasoning, rather than local politics. It also initiated ISO 9001 certification in all its divisions and undertook some measures to enhance efficiency in its business processes. 3. The state also has a two-tiered system of vigilance namely a State Anti-Corruption Bureau (ACB)13 that is primarily concerned with the prevalence of corruption and abuse of official authority amongst the officials of various government departments as well as other statutory bodies over which the Governor exercises control inside and outside Mizoram, and the State’s Chief Vigilance Officer (CVO) who acts as a watchdog to handle fraud and corruption (F&C) complaints/cases for the entire Government of Mizoram. The Chief Secretary of the state is the state’s CVO. The ACB also investigates anonymous complaint that are serious and of

7Bribe Payer’s Index 2011, Transparency International, Berlin, Germany, November 2011. 8Indian Road Construction Industry: Capacity Issues, Constraints, and Recommendations. The World Bank,Washington, DC, 2008 9Bumpy ride for road sector, tops list of delayed projects, Hindustan Times, New Delhi, January 26, 2012 10 Implementation Completion Report & Results Report, No.ICR00001765, The World Bank, December 2011 11 Vide GoM, Department of Personnel & Administrative Reforms Office Memo No.A.45011/2/2012- DP&AR(GGC)/Pt dated 7 February 2013 12IEG Implementation Completion Report (ICR) Review - Mizoram State Roads Project, 2013 13 Vide GoM, Vigilance Department No.C-31011/1/2006-VIG dated January17 2008 68

substantial nature. The ACB14 also investigates anonymous complaints that are serious and of a substantial nature. The state also has several active NGOs that are vigilant against corruption.15 4. All these initiatives and enabling factors would undoubtedly provide the impetus for ensuring good governance and accountability on the proposed project. However, the GoM may need to take some additional measures to ensure effective and efficient project implementation. In support of this objective, this Governance and Accountability Action Plan (GAAP) has been prepared, to improve the overall risk management, enhance efficiency and development impact and ensure that allocated resources are spent for the intended purposes. To this end, it identifies key risks and the various procedures/processes that GoM proposes to mitigate the same.

Key Risks 5. Some of the key areas of vulnerability and factors that engender bad governance in the state’s road sector are as follows: political interference in project identification/selection, preconstruction delays especially in land acquisition and in obtaining regulatory clearances, inadequate level of competition, collusion, fraud such as misrepresentation of bidders’ qualifications, leakage of bid evaluation information and deficient bid evaluation (procurement stage), poor quality control and sustainability arrangements for roads, ineffective performance monitoring due to difficulties in supervising large number of projects widely dispersed geographically, poor enforcement of contractual remedies, delayed payments to contractors, delayed decision-making (contract execution stage) and lack of adequate mechanisms for independent technical audits, citizen feedback, record maintenance and public disclosure of project information. 6. All these risks contribute to bad governance in a variety of ways. For instance, poor selection of roads leads to wastage of scarce public monies that may not really benefit road users; poor design with little or no accountability of the design consultants or ground-truthing often leads to profile course corrections that may inordinately delay the project due to need for further land acquisition and/or other clearances; delays of pre-construction activities in projects lead to waste of contractor resources that in turn lead to payment disputes that often end up in long- drawn litigation and/or re-negotiation of the contract. Collusion and other fraud in procurement of contractors often results in sub-standard work and associated time and cost overruns. Specific to the proposed project (based on lessons learned in the earlier Bank funded MSRP), the following pose further governance challenges: • Lack of computerized contract level information for reporting project progress and inadequate level of public disclosure of road works; • Poor understanding of execution risks by the domestic road construction industry leading to delays; • Poor due diligence in verifying contractors’ credentials, with specific reference to hill road design and construction that is endemic in Mizoram • Poor availability of suitable construction material, coupled with a long material and equipment supply chain; • Inadequate site visits and physical inspections during supervision;

14 Currently staffed by 1 Director, 1 Deputy Superintendent of Police and 8 inspectors. 15 Such as People’s Right to Information and Development Implementing Society of Mizoram (PRISM), and Society for Social Action (SOSA) 69

• Environmental risks associated with fragile geological exposed cut surfaces; • Poor planning in sequencing of physical works across components, which is especially critical considering the relatively small window for physical construction during the year. • Inadequate systems for grievance redress and for enabling community engagement in road works • Poor interdepartmental coordination leading to delays in pre-construction activities • Inadequate resources allocated for maintenance16 • High cost of establishment17

7. Based on an assessment of the above risks, existing systems, procedures and processes in the KSTP/state PWD (see snapshot in Table 1), GoM initiatives and performance on the MSRPI, the overall governance risk of the project has been assessed as Substantial.

Yes ()/ Partial or Fully Existing Mechanism(s) Partial () Absent Mechanism(s) A) Information Disclosure Mechanisms Mizoram Highway Act  Results Framework Document Highway Development Policy  Physical Progress of works online Display Boards at Site  MSRPII information online B) RTI Mechanism Public Information Officer in place  Section 4(a) compliant  C) Complaint Handling Mechanisms State-level Anti-Corruption Bureau  Vigilance information online Basic online mechanism for feedback  Internal Vigilance Mechanism  Process description on website D) Quality Monitoring Quality Control Wing  Peer Review of feasibility studies and DPRs  Third Party Quality Monitors?  E) Procurement Tender information online?  Online Contractor Registration Schedule of Rates  List of debarred contractors online List of registered contractors  e-Procurement  F) Financial Management Functional Financial Management System  e-payments and online status of bills PWD Budget  Financial progress of works online G) Familiarity with World Bank projects Familiarity with World Bank road sector projects 

The GAAP 8. The GAAP has been prepared through extensive discussions with the PWD, taking into consideration the key risks in project implementation, lessons from MSRPI, Bank’s sector

16 According to the PWD, typically just 10% of the requirement is allocated for maintenance each year 17 For 2013-14, the cost of direction and administration as a percentage of the total allocated budget (excluding that externally aided projects) was about 25%. 70

18 experience, studies/reports and the existing measures to mitigate the impact of these risks on the achievement of the PDO. It builds on GOI’s Right to Information Act, 2005 (RTIA), the Prevention of Corruption Act (1988), the PWD’s Results Framework Document (2013-14), the national e-governance program and GoM’s own initiatives (described earlier) to foster good governance in the PWD’s working. Actions in the GAAP (Table 2) have been designed to supplement actions under the Road Sector Modernization Plan (RSMP) Component to improve the capacity of the PWD for good governance. The GAAP aims to strengthen organizational arrangements and procedures, project design, contract management and supervision, procurement and financial management, mechanisms for quality control, project coordination and seeks to foster public participation in project planning and implementation through enhanced transparency and grievance redress.

Focus areas

9. Typically, most of the GAAP actions would be supported either under the civil works component (such as the Third Party audits) or under RSMP. Specific GAAP actions that would be supported through project funds are: • Development of the project website and the public resource center • Development of procurement, road cost and contractor databases • Study on institutional assessment of capacity, governance issues and industry constraints • Commissioning of the beneficiary satisfaction/perception surveys; • Training on RTIA to all staff. Activities that are integral to the GAAP, supported by the state’s existing mechanisms are: • Reporting of all serious cases of fraud and corruption to the State Anti-Corruption Bureau for further investigation. • Random audit of all works and flag deviations including that may indicate the likelihood of fraudulent practices in execution by the Quality Control Wing of PWD.

Implementation and Monitoring of GAAP

10. The GAAP is a dynamic document and may be revised as necessary to reflect emerging governance issues and to incorporate appropriate solutions during project implementation. The PIU will appoint a nodal officer to monitor the implementation of GAAP regularly through appropriate indicators and the same will be reflected in the monthly progress reports and supervision missions. The PWD will have overall responsibility for the GAAP and it will consult with the Bank on any supplemental measures to be included therein based on identified weaknesses/systemic deficiencies related to departmental activities.

18 Notably, the Transport Sector GAAP Guidance Note and the Integrity Vice Presidency’s Report on Curbing Fraud, Corruption, and Collusion in the Road Sector. 71

Table 2: GAAP Risk Matrix Risk(s) Action(s) to be Taken to Mitigate Risk Level (P-Project, Timeline/ Entity Performance S – Sector) Status Indicator A. Actions to enhance Sector Management and Capacity Risk of poor project Undertake study with project support on institutional S By mid-term of PIU Action plan developed management due to assessment of capacity, governance issues affecting the project and endorsed by PWD. weak sector and constraints affecting local road capacity/planning, construction industry, to facilitate review of road sector policy/ sector policy. management, low Conduct knowledge-sharing workshops and training for S Periodically Bank/PWD/ Number of exposure to best PWD/PIU on latest industry business procedures and PIU workshops/training practices and international best practice in road engineering. sessions conducted. industry constraints B. Actions to reduce collusion, fraud and corruption Risk of collusion in Use of e-procurement in project works once e- P Implementation PIU/Bank Use of e-procurement procurement, fraud procurement system is satisfactorily assessed by Bank in project. and corruption Creation of a database of procurement related P Starting with PIU Updated procurement (F&C) in contract information (number of bids, bid prices, unit prices, the first plans and execution. specifications, time and cost overruns) for contract comprehensive benchmarking of related indicators and analysis of database of bid related trends of contract awards, contractor performance and information online benchmarking of unit construction costs. Risk of cost and Conduct random audit of all works and flag deviations P Bi-annual over Quality Audit reports. time overruns due to including that may indicate the likelihood of fraudulent project period. Control Wing weak planning and practices in execution. monitoring Report all complaints on F&C that are deemed serious P Continuous; PIU/PWD/ Copy of complaints to the state Anti-Corruption Bureau (ACB) for further ACB forwarded to ACB investigation. Development and use of a computerized Contract S As in RSMP PIU Progress in use of Management System (CMS) or other tools, to strengthen CMS/ other tools for internal accountability during project implementation. project management. C. Actions to enhance Transparency and road user input Lack of Formulate a project-specific public disclosure policy P 3 months of PIU Frequency and transparency and to disclose all project related information. effectiveness comprehensiveness of

Risk(s) Action(s) to be Taken to Mitigate Risk Level (P-Project, Timeline/ Entity Performance S – Sector) Status Indicator accountability that Develop and maintain a dedicated project website P Continuous PIU project updates and may adversely affect and disclose all project-related information therein. information on citizen project outcomes. information boards at Training on RTIA for all PWD officers and staff. S Periodically PIU/PWD site(s); number of RTI trainings conducted; Publish established procedures to deal with different P Continuous PIU Periodic review of types of complaints on project website. Maintain an complaint statistics updated database on complaints received and action and records; field-level taken. checks, review of quarterly reports to the Bank on complaints;. D. Actions to enhance quality and sustainability Risk that key Commission road user / beneficiary P At start of PIU Periodicity of reports stakeholder perception/satisfaction surveys to obtain user feedback project, at mid- of surveys and actions concerns are not and publish findings on project website. term and at taken. incorporated; Risk close of project of substandard quality of design Third-party review of DPRs, cost estimates and designs, P As required PIU Review reports. including integration of safety and construction safety and works. aspects. Risk of poor Development of a road asset management system for S As in the PIU Progress on these sustainability due to better asset and portfolio management. RSMP systems as provided in weak project QPRs. planning and asset maintenance. E. Measures to enhance project coordination Risk of delayed Establish a high-level committee at state level to review S Done Project Monthly reports to the decisions/ actions on work performance by all parties and resolve issues in Monitoring PMT on project pre-construction implementation of works Team (PMT) progress. activities due to Development of a Contract Management Manual with S Within one PWD Manual developed and weak inter- clear description of all processes, procedures and departmental year of in use systems for project implementation, which could be implementation coordination. adopted for all PWD roads in the future. of the project

IBRD 40699

INDIA MIZORAM STATE ROADS II– REGIONAL TRANSPORT CONNECTIVITY PROJECT

PROJECT ROADS PHASE 1 93°E PROJECT ROADS PHASE 2 PROJECT ROAD UPGRADING WITHIN BANGLADESH ASSAM PROPOSED ROAD ALIGNMENT OPTIONS WITHIN BANGLADESH* NATIONAL HIGHWAYS MAIN ROADS INDIA: BANGLADESH: MANIPUR TOWNS TOWNS Bilkhawthlir DISTRICT HEADQUARTERS DISTRICT HEADQUARTERS DIVISION CAPITALS DIVISION HEADQUARTERS Kanghmun Kolasib DISTRICT BOUNDARIES UPAZILA BOUNDARIES Bairabi STATE BOUNDARIES DISTRICT BOUNDARIES KOLASIB

INTERNATIONAL BOUNDARIES INDIA Kawnpui 24°N Darlawn Khawkawn 24°N *The project road alignment in Bangladesh will be decided at the findings of the detail feasibility study. Tuidam Mamit 92°E 92°E Ngopa Lengpui AIZAWL AIZAWL TRIPURA Tuilutkawn Seling MAMIT Lallen CHAMPHAI

Kanghmun MIZORAM Champhai DIGHINALA BAGAICHHARI Sialsuk Logang SERCHHIP Pulkziug PANCHHARI COMILLA Serchhip Biate KHAGRACHHARI Buarpui Dighinala Keitum

KHAGRACHHARI N. Vanlaiphai LUNGLEI MATIRANGA Khaghrachari Haulawng Feni LANGADU 23°N Ramgar MAHALCHHARI Gulshankhali 23°N RAMGARH Laigadu FENI Baghachattar Kukichara Bazar Thingsai Gauspur Chotoharina Lunglei Leite MANIKCHHARI NANNERCHAR Noakhali Thegamukh Lungsen BANGLADESH BARKAL MIRSHARAI NOAKHALI FATIKCHHARI LAKSHMICHHARI RANGAMATI Barkal Sangau Fatikchhari Rangamati Juraichhari KAWKHALI JURAICHHARI RANGAMATI Chotoharina Chawngte Sitakund CHHIMTUIPUI MYANMAR SITAKUNDA Kaptai HATHAZARI Chitmoron KAPTAI Lawngtlai Hathazari Raozan SANDWIP RANGUNIA RAOZAN Belaichhari Saiha Rangunia Rajasthali LAWNGTLAI BELAICHHARI KOTWALI BOALKHALI RAJASTHALI Shermun CHITTAGONG PATIYA Patya Tuipang Ichanagar Rowangachari Chandanaish Zawngling ANWARA CHANDANAISH Bandarbon GSDPM CHITTAGONG Tawngkalawng Map Design Unit SATKANIA This map was produced by the BANSHKHALI Map Design Unit of The World Bank. The boundaries, colors, Banskhali Lohagara denominations and any other 22°N LOHAGARA information shown on this map do 0 20 40 Miles not imply, on the part of The World Bank Group, any judgment BANDARBAN on the legal status of any 0 20 40 Kilometers territory, or any endorsement or KUTUBDIA 92°E 93°E acceptance of such boundaries. JANUARY 2014