Completion Report

Project Number: 23251 Loan Number: 1274 January 2008

India: National Highways Project

CURRENCY EQUIVALENTS

Currency Unit – Indian rupees (Re/Rs)

At Appraisal At Project Completion (31 October 1993) (as of 10 February 2003)

Rs1.00 = $0.032 $0.021 $1.00 = Rs31.13 Rs47.75

ABBREVIATIONS

ADB BME BOT EA EIRR HDM IDC IEE km MOST NH NHAI NHDP PCR PIU PU PWD ROW TA VOC

– – – – – – – – – – – – – – – – – – – –

Asian Development Bank benefit monitoring and evaluation build-operate-transfer executing agency economic internal rate of return highway development and management interest during construction initial environmental examination kilometer Ministry of Surface Transport national highway National Highways Authority of India National Highway Development Project project completion review project implementation unit (at construction sites) project unit (in the project implementation cell of MOST) Public Works Department right-of-way technical assistance vehicle operating cost

NOTES

(i) The fiscal year (FY) of the Government ends on 31 March. “FY” before a calendar year denotes the year in which the fiscal year ends. For example, FY2000 begins on 1 April 1999 and ends on 31 March 2000.

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

Vice President L. Jin, Operations 1 Director General K. Senga, South Asia Department Director T. Kondo, India Resident Mission (INRM) Team leader A. K. Motwani, Project Implementation Officer (Transport), INRM Team member M. Gomes, Assistant Project Analyst, INRM

CONTENTS

Page

BASIC DATA ii MAP vi

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 3 D. Disbursements 4 E. Project Schedule 4 F. Implementation Arrangements 5 G. Conditions and Covenants 6 H. Related Technical Assistance 7 I. Consultant Recruitment and Procurement 8 J. Performance of Consultants, Contractors, and Suppliers 9 K. Performance of the Borrower and the Executing Agency 10 L. Performance of the Asian Development Bank 11

III. EVALUATION OF PERFORMANCE 11 A. Relevance 11 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 12 D. Preliminary Assessment of Sustainability 12 E. Impact 13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14 A. Overall Assessment 14 B. Lessons 14 C. Recommendations 15

APPENDIXES 1. Project Framework 16 2. Project Costs: Appraisal vs Actual 18 3. Average Annual Exchange Rate 19 4. Summary of Contracts Funded by the Asian Development Bank 20 5. Projected and Actual Disbursements of Loan Proceeds 21 6. Project Implementation Schedule 22 7. Chronology of Major Events during Project Processing and Implementation 23 8. Organization Chart of the National Highways Authority of India 26 9. Status of Compliance with Major Loan Covenants 27 10. Technical Assistance Completion Reports 32 11. Economic Reevaluation 35 12. Quantitative Assessment of Overall Project Performance 48

BASIC DATA

A. Loan Identification

1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan (on approval) 7. Project Completion Report Number

India 1274-IND National Highways Project Government of India Ministry of Surface Transport (Roads Wing)1 $245.0 million PCR: IND-1019

B. Loan Data

1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

09 Aug 1993 19 Aug 1993 25 Oct 1993 28 Oct 1993 29 Nov 1993 22 Mar 1995 20 Jun 1995 04 May 1995 None 31 Dec 1999 10 Feb 2003 2 Pool-based variable lending rate system for US dollar loans 25 5

8. Disbursements a. Dates Initial Disbursement

15 August 1995

Final Disbursement

17 December 2002

Time Interval

84 months

Effective Date

04 May 1995

Original Closing Date

31 December 1999

Time Interval

56 months

1 In accordance with the Loan Agreement, the responsibility for the administration of the Project was transferred to the National Highways Authority of India (NHAI) after it became operational, while the Ministry of Surface Transport retained the responsibility for overall coordination.

iii

b. Amount ($)

Categorya Original

Allocation Last Revised

Allocation Net Amount

Available Amount

Disbursed Undisbursed

Balanceb

01 174,200,000 194,318,637 194,318,637 191,487,107 2,831,530 02 13,800,000 11,364,000 11,364,000 11,068,346 295,654 03 1,000,000 1,189,000 1,189,000 1,188,722 278 04 41.400,000 28,128,363 28,128,363 28,128,363 05 14,600,000

Total 245,000,000 235,000,000 235,000,000 231,872,538 3,127,462 a 01 – Civil Works, 02 – Consulting Services, 03 – Incremental Administrative Expenses, 04 – Interest Charge, 05 –

Unallocated. b An undisbursed loan amount of $3,127,461.69 was canceled at loan closing on 10 February 2003. A previous

cancellation of $10,000,000 was made on 10 October 2002. 9. Local Costs (Financed)

Appraisal Actual - Amount ($ million) 99.20 99.29 - Percentage of Local Cost 60.9 58.3 - Percentage of Total Cost 32.1 32.8 C. Project Data

1. Project Cost ($ million) Cost Appraisal Estimate Actual

Foreign Exchange Cost 145.80 138.98 Local Currency Cost 163.00 163.81 Total 308.80 302.79

2. Financing Plan ($ million)

Appraisal Estimates Actual Cost Foreign Local Total Foreign Local Total Implementation Costs Borrower-Financed 0.00 63.80 63.80 6.40 64.52 70.92 ADB-Financed 105.80 99.20 205.00 104.45 99.29 203.74 Total 105.80 163.00 268.80 110.85 163.81 274.66IDC Costs Borrower-Financed 0.00 0.00 0.00 ADB-Financed 40.00 0.00 40.00 28.13 0.00 28.13 Grand Total 145.80 163.00 308.80 138.98 163.81 302.79 ADB = Asian Development Bank, IDC = interest during construction.

iv

3. Cost Breakdown, by Project Component ($ million)

Appraisal Estimate Actuala

Project Component Foreign Local Total Foreign Local Total A. Base Cost 1. Right-of-Way 0.00 0.30 0.30 0.00 0.50 0.50

2. Civil Works 83.70 125.60 209.30 104.76 157.14 261.90 3. Construction Supervision 7.70 6.30 14.00 6.09 4.98 11.07 4. Incremental Operation 0.00 1.00 1.00 0.00 1.19 1.19

Subtotal (A) 91.40 133.20 224.60 110.85 163.81 274.66 B. Contingencies 1. Physical 4.90 7.00 11.90 0.00 0.00 0.00 2. Price 9.50 22.80 32.30 0.00 0.00 0.00 Subtotal (B) 14.40 29.80 44.20 0.00 0.00 0.00 C. Interest and Other Charges during

Construction 40.00 0.00 40.00 28.13 0.00 28.13

Total (A+B+C) 145.80 163.00 308.80 138.98 163.81 302.79 a Includes cost of additional works and price escalation. 4. Project Schedule

Item Appraisal Estimate Actual Consultant Contracts Contracts Signed Contract – Package I October 1994 31 May 1996 Contract – Package II October 1994 26 June 1996 Contract – Package III October 1994 17 June 1996 Civil Works Contracts Contracts Signed

Contract I (contract was terminated) November 1994 19 August 1996a Contract I (new contract) November 1994 27 August 1997 Contract II November 1994 24 July 1997 Contract III November 1994 14 October 1996 Contract IV November 1994 16 September 1996 Contract V November 1994 10 December 1997 Completion of Work Contract I October 1998 March 2001 Contract II October 1998 October 2001 Contract III October 1998 October 2001 Contract IV October 1998 January 2001 Contract V October 1998 June 2002 Other Milestones:

1. 24 May 1999: Approval of first extension of loan closing date to 31 December 2001. 2. 13 December 2001: Approval of second extension of loan closing date to 31 December 2002. 3. 10 October 2002: Approval of partial cancellation of $10,000,000. 4. 10 February 2003: Closing of loan accounts.

a Rescinded on 9 June 1997 because of nonperformance of contractor.

v

5. Project Performance Report Ratings a

Ratings

Implementation Period

Development Objectives

Implementation Progress

From 1 Jan 1995 to 31 Dec 1995 Satisfactory Satisfactory From 1 Jan 1996 to 31 Dec 1996 Satisfactory Satisfactory From 1 Jan 1997 to 31 Dec 1997 Satisfactory Satisfactory From 1 Jan 1998 to 31 Dec 1998 Satisfactory Unsatisfactory From 1 Jan 1999 to 31 Dec 1999 Satisfactory Partly Satisfactory From 1 Jan 2000 to 31 Dec 2000 Satisfactory Partly Satisfactory From 1 Jan 2001 to 31 Dec 2001 Satisfactory Satisfactory From 1 Jan 2002 to 31 Dec 2002 Satisfactory Satisfactory a Ratings in the project performance report are arrived at by a method different from that for project completion report

ratings.

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Membersa

Fact-Finding 21 Apr–4 May 1993 2 20 a, b Appraisal 9–19 Aug 1993 3 22 a, b, e Review Mission 1b 12–16 Jun 1995 2 4 a, g Review Mission 2b 11–21 Sep 1995 3 15 a, d, g Review Mission 3b 21 Nov–1 Dec 1995 3 10 a, g, h Review Mission 4b 11–29 Mar 1996 2 12 a, g Review Mission 5b 14–23 Jan 1998 3 15 a, e, g Review Mission 6 16–24 Feb 1999 2 18 a, c Disbursement Mission 1b 1–24 and 28–29 Jul, 4 Aug 1999 1 10 d Midterm Review Mission 29 Aug–10 Sep 1999 3 39 a, g, h Review Mission 7c 25–26 Nov 1999 3 6 g Review Mission 8 7–9 Feb 2000 2 6 f, g Review Mission 9 27–28 Mar 2000 3 6 g, j Disbursement Mission 2 24 Aug–1 Sep 2000 2 18 d, f Review Mission 10 17–19 Oct 2000 1 3 g Review Mission 11 20–24 Nov 2000 2 10 g Review Mission 12 26 Jul, 31 Jul–2 Aug 2001 2 8 g Review Mission 13 2–6 Sep 2001 2 10 g Review Mission 14 27 Feb–1 Mar 2002 2 6 f, g Disbursement Mission 3 5–9 and 20 Aug 2002 2 7 d, f Project Completion Review Mission 3–30 Aug 2007 3 55 f, h, i

a a - engineer, b - economist, c - procurement consultant or specialist, d - control officer, e - programs officer, f – analyst, g – implementation specialist, h - manager or director, and i = staff consultant

b The mission covered other projects also c The review was carried out in conjunction with a Country Portfolio Review

B a y o f B e n g a l

A r a b i a n

S e a

I N D I A N O C E A N

Wagha/Attari

Ambala

Jallandhar

DELHI

AgraJaisalmer

Bikaner

JaipurLucknow

Varanasi

Patna

Barhi

Dispur

Agartala

Sadiya

Kolkata

Bhubaneswar

Asansol

Haldia

Porbander

KandlaAhmadabad

Udaipur

Gandhinagar

Mumbai

Ankola

Panjim

Mangalore Chennai

Visakhapatnam

Vijayawada

EdapallyMadurai

Dindigul

Kanyakumari

Pondicherry

Bengaluru

Salem

Tiruchchirappali

Hyderabad

Biaora

Raipur

Jabalpur

Jessaimer

Kolhapur

Satara

Pune

Surat

Vadodara

Manor

Hubli

Jorhat

Karnal

Panipat

Rohtak

DELHI

Gurgaon

Achrol

Kotputli

Behror

DausaJaipur

Mathura Barakar

Panagarh

Kharagpur

Moregram

Krishnanagar

Bangao

Barwa Adda

Ranchi

Raniganj

Nandigama

Eluru

Kakin

Guntur

Agra

Barhi

Kolkata

Vijayawada

Hyderabad

Ballabgarn

Hapur

NH-9 : 48 km - Widening (to two lanes)and strengthening Nandigama-Vijayawada Road

NH-5 : 71.60 km - Widening (to four lanes)and strengthening Vijayawada-Eluru Road and

Eluru bypass

NH-2 : 41.23 km - Widening (to four lanes)and strengthening Raniganj-Panagarh RoadNH-2 : 42.69 km - Widening (to four lanes)

and strengthening Barwa Adda-Barakar Road

NH-8 : 125.87 km - Widening (to four lanes)and strengthening Gurgaon-Kotputli Road

UTTARANCHAL

UTTARANCHAL

R A J A S T H A N

RAJASTHAN

G U J A R A T

M A D H Y AP R A D E S H

UTTAR PRADESH

PUNJAB

HIMACHALPRADESH

B I H A R

B I H A R

JHARKHAND

JHARKHAND

CHHATTISGARH

WEST BENGAL

WEST BENGAL

SIKKIM

A S S A M

MEGHALAYA

ARUNACHAL PRADESH

MIZORAMTRIPURA

NAGALAND

MANIPUR

O R I S S A

M A H A R A S H T R A

A N D H R AP R A D E S H

A N D H R AP R A D E S H

KARNATAKA

TAMIL NADU

KERALA

GOA

HARYANA

HARYANA

BANGLADESH

Project States

National Capital

City/Town

Other Town

Project Road

National Highway

River

State Boundary

International Boundary

Boundaries are not necessarily authoritative.

INDIANATIONAL HIGHWAYS PROJECT

(as completed)

0 100 200 300

Kilometers

N

07-3123 HR

90 00'Eo

90 00'Eo

70 00'Eo

70 00'Eo

25 00'No

25 00'No

10 00'No

10 00'No

I. PROJECT DESCRIPTION 1. The National Highways Project was developed to assist the Government of India in (i) carrying out needed road improvements in its major transport corridors; (ii) improving its institutional capability to upgrade and maintain its national highways by establishing the National Highways Authority of India (NHAI) and transferring the administration of the Project from the Ministry of Surface Transport1 (MOST) to NHAI; and (iii) increasing industrial employment. 2. The objectives of the Project were to (i) assist the Government in its efforts to improve the national highway system, particularly in five states; 2 (ii) lower transport costs in the project areas, and facilitate more efficient movement of goods and passengers; (iii) increase employment in the industry sector; (iv) upgrade the Government’s institutional and implementation arrangements and construction supervision capabilities through a combination of international and domestic consultants working with the Executing Agency; and (v) improve road transport operations. 3. At appraisal, the Project had two components: (i) the improvement of five national highway (NH) sections, totaling about 330 kilometers (km), in the five states; and (ii) consulting services for construction supervision of the civil works. The civil works improvements involved the strengthening and widening to four lanes of about 234 km highway and the strengthening of about 96 kms of two lane highway with asphalt concrete pavement, except for the highway sections of NH2 in Bihar and West Bengal, which were to be provided with a cement concrete pavement3 to enable them to sustain exceptionally heavy truck traffic. No project framework was included in the appraisal document but one was put together on the basis of that document (see Appendix 1) to allow the achievements of the Project to be compared with the appraisal estimates. 4. In conjunction with the Project, at the Government’s request three advisory technical assistance (TA) projects were provided, namely: (i) Road Safety, (ii) Environmental Management of Road Projects, and (iii) Technical Standards for Highway Concrete Structures. 5. The Government of India was the Borrower, and MOST was the Executing Agency (EA).4 An ADB loan5 of $245 million from ADB’s ordinary capital resources financed the entire foreign currency cost of the Project and part of the local currency costs.

1 Since renamed the Ministry of Shipping, Road Transport and Highways. 2 Andhra Pradesh, Bihar, West Bengal, Haryana, Rajasthan. Bihar state was bifurcated in 2002 and the section of

the road under the Project now lies in Jharkhand. However, to avoid confusion, the section of road is still referred to here as being in Bihar to enable comparison with the appraisal report.

3 The choice between the two pavements was, however, to be finally decided during detailed engineering after further review of traffic volumes and axle-load patterns.

4 It was agreed at appraisal that when the National Highways Authority of India (NHAI) became functional it would take over MOST’s project responsibilities, except for overall coordination, which would remain with MOST.

5 ADB. 1993. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grant to the Government of India for the National Highways Project. Manila (Loan No. 1274-IND for $245 million, approved on 29 November 1993). Advance procurement action for prequalification of contractors, issue of tender documents, and evaluation of tenders was approved on 17 May 1993.

2

II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 6. The Project was and still is consistent with the Government’s overall development objectives and ADB’s strategy in the road subsector. The Government’s development strategy was to generate employment, develop the countryside, increase productivity, and promote export-oriented growth through industrial activities. Since these objectives required, among other things, an appropriate transport network, the transport development strategy was directed at improving infrastructure to support economic and social development, industrial production, and export-oriented growth. ADB’s strategy in the infrastructure sector was to assist projects that would increase operational efficiency and the capacity to unleash industrial development and export-oriented growth. In the road subsector ADB has assisted with the development of the national and state highway systems, which carry a high proportion of the country’s freight and passenger traffic, in line with the Government’s objectives. The Project supported vital improvements in transport infrastructure and in the Government’s development strategy for the sector, and was therefore highly relevant to the needs of the transport sector in India. 7. To formulate the Project, ADB screened, in December 1991, 1,520 km of priority national highway sections that had been selected by the Government after investigating traffic and other needs. In March 1992 ADB approved a TA for feasibility studies of 820 km of high-priority national highway sections that were included in the Government’s Eighth Development Plan (1992/93–1996/97) and covered 14 subprojects in 10 states. As all of these sections were found to be economically feasible, the Government and ADB agreed to select those with the highest economic return, capacity utilization, degree of industrialization, and degree of project preparation, with available land for the right-of-way (ROW), and without environmental problems. The scope of the Project was finalized during the Fact-Finding Mission in April/May 1993 and the appraisal mission took place in August 1993. The Project was based on detailed engineering reports, supplemented by reports on the environment, economic evaluation, and land acquisition, as well as by discussions with the Government. 8. The scope of the Project underwent a major change during implementation: sections of road (NH5) originally envisaged for strengthening under contract package V were improved to full four-lane carriageway. The road sections were from km 13 to km 53, from km 69.0 to km 75.0, and along the 17 km Eluru bypass. NHAI requested the change in February 1999 to accommodate increased traffic and to provide a homogeneous carriageway in the Golden Quadrilateral, of which NH5 formed part. 6 In view of the major change in scope, NHAI conducted an initial environmental examination (IEE) and an initial social assessment, at ADB’s request. ADB found the reports generally satisfactory and in line with its requirements, as it did the short resettlement plan submitted by NHAI (para. 53). A major change in scope was approved by ADB in May 1999. The widening of the sections to four lanes under contract

6 The maximum average daily traffic on the sections recorded in January 1998 was 13,400 vehicles against the

appraisal estimate of around 11,500 vehicles. Heavy vehicles (trucks and buses) accounted for up to 66%. The widening to four lanes was justified by the high growth in traffic. An economic evaluation at the time of the proposal found that the economic internal rate of return (EIRR) for the NH5 sections widened to four lanes ranged from 35% to 41%, compared with 25–31% for a two-lane proposal. Similarly, the EIRR for a four-lane Eluru bypass was 20%, compared with 17% for a two-lane bypass. The Golden Quadrilateral, the first phase of the National Highway Development Project (NHDP), consisted of about 6,000 km of four- or six-lane national highways connecting Delhi, Mumbai, Chennai, and Kolkata.

3

package V made the Project more effective by increasing the level of service and reducing congestion. B. Project Outputs 9. The civil works for the road improvements were implemented as envisaged at appraisal, except for delays (paras. 17–18) and a major change in the scope of the Project (para. 8). It was envisaged at appraisal that about 330 km of road would be improved. The improvements involved the strengthening and widening to four lanes of about 234 km and the strengthening of about 96 km of two-lane highway. Actual works were divided into six sections under five civil works contracts, namely: (i) 125.87 km of NH8 from Gurgaon to Kotputli (contract I), (ii) 41.23 km of NH2 from Raniganj to Panagarh (contract II), (iii) 42.69 km of NH2 from Barwa Adda to Barakar (contract III), (iv) 48.00 km of NH9 from Nandigama to Vijayawada (contract IV), and (v) 71.60 km of NH5 from Vijayawada to Eluru (contract V). During detailed engineering, asphalt concrete pavement was chosen over cement concrete pavement for contracts II and III after analysis (footnote 3). 10. As originally planned, contract V was to entail the strengthening of the pavements of the two-lane carriageway of NH5. A major change in scope, however, led to the widening of the sections of NH5 from km 13 to km 53, from km 69.0 to km 75.0, and along the 17 km Eluru bypass from two to four lanes (para. 8). These works were implemented with loan savings. C. Project Costs 11. At appraisal, the project cost was estimated at $308.8 million (Rs9,612.95 million)—$145.8 million of this (about 47%) in foreign exchange cost (including $40.0 million for interest during construction [IDC]) and $163.0 million (about 53%) in local currency cost (including taxes and duties). The ADB loan at appraisal of $245 million from ordinary capital resources would finance 79.3% of the project cost (the entire foreign exchange cost and 60.9% of local currency costs) and cover the civil works, consulting services for construction supervision, IDC, and incremental administration cost. The Borrower would fund the remaining $63.8 million. The appraisal estimate provided for physical contingencies and for price escalation on the foreign exchange and local currency costs, and included a calculation of IDC. 12. The actual project cost at completion was about $302.79 million (Rs13,335.30 million)—$138.98 million (about 45.9%) in foreign exchange cost and $163.81 million (54.1%) in local currency cost. ADB financed $231.87 million equivalent, or about 76.6% of the project cost, and the Government funded the remaining $70.92 million. 13. The estimated cost of the civil works contracts (contracts I–V) at appraisal was $209.30 million excluding physical and price contingencies ($250.49 million including contingencies). The cost at completion was about $261.90 million. 7 The completion cost included the additional works carried out to improve the NH5 sections from two lanes to four lanes and to construct the four-lane Eluru bypass under contract V (paras. 8 and 10). The major change in scope increased the cost of contract V to $69 million (Rs3,156 million) from the original $32 million (Rs1,472 million). The lower-than-anticipated procurement cost of the civil works packages and the gradual depreciation of the rupee relative to the dollar resulted in loan

7 The final bill for some civil works contracts is being reviewed and arbitration proceedings are under way.

4

savings,8 which were canceled from the loan (para. 15). The consulting services for construction supervision cost $11.07 million, less than the $14.0 million (excluding physical and price contingencies) estimated at appraisal, despite an increase in supervision necessitated by delays in implementation. The lower cost was due in part to the depreciation of the rupee against the dollar and in part to the overestimation of the costs of consulting services at appraisal. 14. Details of the actual costs for each component of the Project, compared with the estimates at appraisal, are shown in Appendix 2. For cost comparison, the local currency costs incurred by the EA were converted into dollars at the rate prevailing during the transactions. The average rates of exchange used are in Appendix 3. A summary of contracts financed by ADB is given in Appendix 4. D. Disbursements 15. No disbursement schedule was included in the appraisal document. However, on the basis of the implementation schedule prepared at the time of appraisal, the projected disbursements were developed and are shown in Appendix 5, along with the actual disbursements that took place during implementation. The loan was disbursed more slowly than envisaged at appraisal because of project implementation delays due to several reasons (para. 18). Surplus funds of $10.0 million were canceled from the loan on 10 October 2002 as requested by the Borrower through the Ministry of Finance. Disbursements from the loan account were completed on 17 December 2002. The undisbursed balance of $3,127,461.69 was canceled on 10 February 2003, and the loan was closed. The loan amount was thus reduced to $231,872,538.31. The Borrower informed ADB on 6 January 2003 that it intended to prepay the entire loan, and it did so on 18 February 2003.9 E. Project Schedule 16. ADB approved the loan on 29 November 1993, and the Loan Agreement was signed on 22 March 1995 and took effect on 4 May 1995. The delay in loan signing and effectiveness was largely a result of the status of project preparedness. The technical designs and contract documentation for the five civil works contracts were prepared in February 1994 by national consultants selected by MOST.10 The quality and consistency of the technical designs were reviewed in detail before bids for the civil works were invited. The final design reports and the bid documents, originally scheduled to be completed by December 1993, were completed in 1995. Although advance procurement action was approved on 17 May 1993, it was never taken up and did not start until December 1994. 17. The loan was originally set to close on 31 December 1999, but the closing date was extended twice at the request of the Borrower, to 31 December 2002. At appraisal it was envisaged that the Project would be implemented over 5 years starting in 1994, and that the civil works component would be completed by October 1998. Delay in the preparation of the final design reports and bid documents and the corresponding delay in the procurement activities, however, pushed back the awarding of the civil works contracts to 1996–1997 and the actual completion of the civil works component to 2001–2002. The delay was also due to the major change in scope for contract V on NH5 (para. 18; footnote 16). The actual implementation 8 The rupee depreciated by about 53% from appraisal in 1993, when the exchange rate was Rs31.13:$1, to the end

of implementation in 2002, when the rate was Rs47.53:$1. 9 The outstanding loan amount of $216,031,052.13 was prepaid. 10 Earlier in the preparation process for the Project, ADB had assisted these national consultants by providing

international specialists in transport economics and pavement engineering under TA 1678-IND: Third Road Project.

5

schedule is compared with the schedule at appraisal in Appendix 6, and a chronology of the main implementation events is set out in Appendix 7. 18. Delays in project implementation compared with the schedule at appraisal occurred for several reasons, including the following: (i) delays in the preparation of the final design reports and bid documents, and, hence, in the start of the prequalification;11 (ii) the late handover of project implementation duties from MOST to NHAI;12 (iii) delays in the award of civil works contracts due to nine cases of litigation;13 (iv) the slow start on the civil works contracts that were awarded in 1996;14 (v) design deficiencies15 identified by the supervision consultants during implementation; (vi) delays in land acquisition; (vii) late approval of the change in scope of contract V;16 and (viii) delays in the removal of encumbrances such as telephone lines, electric poles, and other obstructions. The delays in the award of civil works contracts compared with appraisal ranged from 6 months to 2 years. For all these reasons, the civil works were substantially delayed. By 15 January 1998, when 70% of the loan period had elapsed, only 2% of the civil works contracts were complete. 19. The delays in project implementation prompted the Department of Economic Affairs (DEA) on behalf of the Borrower to seek, on 10 May 1999, an extension of the loan period from 31 December 1999 to 31 December 2001 to allow the civil works contracts to be completed by the end of 2001. ADB approved the loan extension on 24 May 1999. On 26 November 2001, DEA again requested ADB to extend the loan closing date from 31 December 2001 to 31 December 2002. This second request came about solely as a result of the major change in scope (para. 8) that had been requested and approved under contract V on NH5 (Vijayawada–Eluru). 17 All the other contracts had already been substantially completed. 18 The second extension was therefore solely to complete contract V. ADB approved the loan extension on 13 December 2001 and contract V was substantially completed in June 2002. F. Implementation Arrangements 20. The implementation arrangements were as envisaged at appraisal. The Borrower was the Government of India and the EA was MOST. At first, MOST was responsible for (i) pre-construction activities; (ii) the implementation of the civil works; (iii) the hiring of consultants for supervision; and (iv) overall coordination of the Project. But when NHAI was formed and became operational in March 1995 it took over the responsibility for the administration of the Project from MOST, as envisaged at appraisal. MOST, however, retained the responsibility for overall project coordination. The present organization structure of NHAI is shown in Appendix 8.

11 Advance procurement action was approved in May 1993 but made little headway until December 1994. 12 NHAI was not established until March 1995. 13 Litigation by losing bidders on contracts II and V delayed the award of contracts. The last contract to be awarded

(contract V) was signed in December 1997. 14 Civil works contracts III and IV were awarded in 1996. At the start, these were slowed by delayed mobilization, the

contractors’ poor organization, and untimely rains. Contract III also suffered from local strikes and delays in obtaining permission to operate a quarry.

15 For example, survey reference points could not be located in the field; survey data were inaccurate; junction details were insufficient; and drainage details, cross-sections, and profiles of the existing carriageway were inadequate.

16 Although the change in scope was approved by ADB in May 1999, it was not approved by the Government until September 2000.

17 Although ADB had approved for the four-laning of contract V in May 1999 the work did not start until September 2000 because of lengthy delays in government approval despite the efforts of MOST and NHAI.

18 Contract I was substantially complete on 20 March 2001; contracts II and III, in October 2001; and contract IV, on 4 January 2001.

6

21. NHAI established a central project unit at its headquarters in New Delhi and three project implementation units (PIUs) in Gurgaon, Vijayawada, and Durgapur. The Gurgaon PIU was responsible for the civil works from Guragon to Kotputli on NH8; the Vijayawada PIU, for civil works on the sections of road from Vijayawada to Eluru on NH5, and from Vijayawada to Namdigama on NH9; and the Durgapur PIU, for the civil works on the sections of road from Barwa Adda to Barakar on NH2 in Bihar, and from Raniganj to Panagarh on NH2 in West Bengal.19 22. Project directors were appointed to the PIUs as envisaged at appraisal; however, the PIUs were not adequately staffed at the start of implementation. 23. The project directors of the PIUs were not delegated enough authority to make decisions. As a result, they had to refer all decisions (even relatively small variation orders) to the NHAI headquarters in New Delhi and then to MOST for approval. Meanwhile, project implementation was delayed. ADB brought this matter to the attention of NHAI and requested that the project directors be given more authority, to prevent further delays. In February 2000 the NHAI approved the delegation of authority to the project directors. G. Conditions and Covenants 24. Details of compliance with the major covenants under the loan are presented in Appendix 9. The Government and the EA generally complied with the standard loan covenants, with some exceptions. In all, 13 major loan covenants were complied with, 2 were partly complied with, and 3 were not complied with. During project implementation, there was partial compliance with the covenants related to (i) the use of weigh-in-motion equipment procured under ADB- and World Bank—financed road projects to complement axle-load enforcement, and (ii) suitable efforts to encourage the use of multi-axle vehicles. Since project completion, however, the situation has changed significantly. The use of electronic weighbridges for axle-load enforcement has been increasing. In November 2005, the Supreme Court of India passed a judgment banning the overloading of trucks to prevent premature damage to roads, and ordered vehicle owners to off-load excess cargo at their risk and cost, besides paying the penalty, before their trucks could be allowed to continue their journey. Nonetheless, enforcement needs to be strengthened further. 25. The stipulated expansion of the ADB-financed Pavement Management System for National Highways (TA 1402-IND) from the two states of Karnataka and Uttar Pradesh to other states by FY1995–1996 did not take place, but the outputs of the Project were not affected. After NHAI gradually took over the development and maintenance of select national highways, a similar loan covenant was made a part of the Surat Manor Tollway Project20 and was complied with. 26. The covenants related to the submission of the following were also not complied with: (i) a project completion report, not later than 3 months after the physical completion of the Project; and (ii) a benefit monitoring and evaluation (BME) report. Although several requests were made during 2000-2001, NHAI did not submit the project completion and BME reports on the basis that the supervision consultants had been demobilized and the loan had been prepaid

19 The Durgapur PIU had two offices—one in Dhanbad for the Bihar component, and the other in Durgapur for the

West Bengal component. 20 ADB. 2000. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to India

for Surat Manor Tollway Project. Manila (Loan 1747-IND, for 180 million, approved on 27 July).

7

on 10 February 2003. However, it submitted contract completion reports for two of the five contracts. 27. Audited accounts were not always submitted on time. The audited project accounts for FY1998–1999 were submitted 5.5 months late, and the audited financial statements and audited project accounts for FY1999–2000, almost 3 months late. NHAI has since appointed a firm to carry out internal auditing and strengthen its internal controls. NHAI has also considerably improved its accounting policies and practices and has installed a computerized accounting system at its headquarters and most of the PIUs. H. Related Technical Assistance 28. The Project had three associated TA projects for (i) road safety, (ii) environmental management of road projects; and (iii) technical standards for highway concrete structures.21 The EA for all these TA projects was MOST. Although two of the three were completed in 1995 and the third was completed in 1997, no TA completion reports (TCRs) were prepared at that time.22 Since two of the TA projects were completed 12 years ago and the third TA, 10 years ago, their full impact is difficult to assess. TCRs for the three TA projects detailing their major impact and outputs have nonetheless been compiled from available documents (see Appendix 10). 29. The road safety TA, signed on 13 June 1995, met its objective of improving the knowledge, capability, and training of personnel (primarily from MOST and from selected public works departments [PWDs] of the states) in accident analysis, traffic engineering, and the design of low-cost measures to counter road accidents. The TA had two main outputs: (i) a report on accident data collection and identification of black spots, and (ii) a highway safety manual. The systematic “black-spot” identification scheme could not be put into operation, but the TA, overall, is rated successful. 30. Signed on 26 April 1995, the environmental management of road projects TA fulfilled its objective of strengthening the capability of MOST and the state PWDs to carry out the environmental assessment of road projects and to ensure that such projects are planned, designed, and implemented according to sound environmental practices, ADB’s environmental guidelines, and the Government’s relevant regulations. In-house training for MOST and PWD staff and overseas training in Thailand were also part of the TA. The TA consultants advised on the organization structure of the environment units in MOST and the PWDs and assisted in the establishment of a documentation center in MOST. IEE as well as environmental impact assessment and environmental management plan guidelines were also produced, as was a manual for use on road construction sites to control environmental impact. The TA is rated successful. 31. The technical standards for highway concrete structures TA was signed on 21 November 1994. It met its objectives of assisting MOST in (i) reviewing concrete structural works specifications and developing changes to reflect current international practice, and (ii) preparing manuals for the use of MOST, consultants, and contractor personnel in the construction and supervision of concrete structural works, in particular bridges. The TA has led 21 TA 2001-IND: Road Safety, for $210,000, approved on 29 November 1993; TA 2002-IND: Environmental

Management of Road Projects, for $240,000, approved on 29 November 1993; and TA 2003-IND Technical Standards for Highway Concrete Structures, for $350,000, approved on 29 November 1993.

22 ADB’s Project Administration Instructions (PAI) 6.08, para. 3, states: “A TCR is prepared within six months to one year of TA completion.”

8

to numerous recommendations on design standards and procedures, several of which have been incorporated by the technical committee of the Indian Road Congress into its technical guidelines. The TA is rated successful. I. Consultant Recruitment and Procurement

1. Consultant Recruitment 32. Consultant recruitment was as envisaged at appraisal and conformed to ADB’s Guidelines on the Use of Consultants. Three consultant supervision packages were awarded as envisaged at appraised. The packages were related to the civil works contracts, as follows: (i) construction supervision package I for civil works contract I, (ii) construction supervision package II for civil works contracts II and III, and (iii) construction supervision package III for civil works contracts IV and V. 33. Although advance procurement was approved on 17 May 1993, the start of consultant recruitment was delayed (para. 16). But once started, recruitment was expeditious and met with no problems. Letters of invitation were issued to consultants on 17 April 1995 and proposals were received until 19 June 1995. NHAI evaluated the proposals for the three consultant supervision packages and submitted its evaluation to ADB on 20 September 1995. ADB approved the rankings of the consultants on 27 October 1995. Financial and contract negotiations with the consultants took place between November 1995 and January 1996, and the results were submitted to ADB on 9 March 1996. ADB approved the award of contracts on 19 April 1996. The consultant contracts were signed on 31 May 1996 for package I, 26 June 1996 for package II, and 17 June 1996 for package III. The consultants for package 1 were mobilized on 1 July 1996 for a contract period of 46 months; those for package 2, on 26 July 1996, also for 46 months; and the consultants for package 3, on 12 July 1996, for 42 months. Because of delays in the implementation of the civil works contracts (para. 18), the duration of the consultant supervision packages had to be extended. Package I was extended from 46 months to 63 months; package II, from 46 months to 63 months; and package III, from 42 months to 71 months.

2. Procurement 34. Project goods and services under ADB financing were procured according to ADB’s Procurement Guidelines, as envisaged at appraisal. The procurement of the five contract packages followed international competitive bidding procedures. Although advance procurement was approved on 17 May 1993, procurement did not start until the prequalification advertisement was published on 23 December 1994. The results of the prequalification23 of the civil works contractors were sent to ADB on 17 May 1995 and 25 May 1995 and were approved by ADB on 20 June 1995. The sale of bids to the prequalified contractors took place between 18 September 1995 and 16 December 1995. 35. Bids for all contracts were received on 5 January 1996 and the bids were opened the same day in the presence of the bidders. Contract I was originally awarded to a joint venture on 19 August 1996, but as the contractor failed to perform, that contract was rescinded in May 199724 and a new one, with a 42-month completion period from 2 September 1997, was

23 NHAI recommended the prequalification of 44 firms or joint ventures out of the 84 that applied. 24The contractor had proceeded to subcontract out minor works but had made no attempt to undertake any major

construction. Between August 1996 and March 1997 the contractor had completed only 0.84% of the contract. In

9

awarded to another joint venture on 27 August 1997. A year passed between the time the first contract was revoked and a new contractor was appointed. The other civil works contracts were awarded as follows: on 24 July 1997 for contract II, 14 October 1996 for contract III, 16 September 1996 for contract IV, and 10 December 1997 for contract V. The completion period for these contracts was 42 months from the issue of the commencement order. J. Performance of Consultants, Contractors, and Suppliers

1. Consultants 36. To expedite project implementation and improve performance over that on previous ADB-funded road projects, three international consultants recruited for the Project acted for the first time as Engineer under the terms of the Fédération Internationale des Ingénieurs-Conseils (FIDIC),25 working in cooperation with the NHAI project director. As Engineer, the consultants were empowered to make certain decisions on technical and contractual issues on behalf of the Employer. However, limited authority was delegated to them. They did not function very smoothly at first, as their role and responsibilities were not very clearly defined with regard to (i) the issue of working drawings, (ii) the issue of variation orders, and (iii) the review of the extensions of time. But during project implementation, coordination between NHAI and the consultants improved and the consultants were able to perform their duties as Engineer effectively. ADB also approved a TA 26 for capacity building in contract supervision and management. All the consultants generally performed satisfactorily and according to their terms of reference. They produced comprehensive monthly progress reports, and contract completion reports for two of the five civil works contracts.

2. Contractors 37. The performance of the civil works contractors varied. Although some performed poorly at an early stage, notably the contractors for contract IV, 27 their performance improved significantly during implementation, and three of the five contracts were completed more or less according to the contract schedule set at contract award. Some implementation problems were common to all the civil works contractors. All contractors, except those for contract II were deficient in construction planning, programming, and site supervisory staff. They lacked proper understanding of the value and importance of a construction schedule prepared by a specialist planning and programming engineer. The main constraints, which varied by contractor, were insufficient resources (equipment, materials, and skilled labor), combined with weak site management, planning, and administration. All contractors also had cash flow problems. Continuous supervision, review, and monitoring by the supervision consultants, NHAI, and ADB and necessary corrective actions by the contractors were helpful in resolving issues and improving the contractors’ performance. Traffic management and compliance with safety norms by the contractors was poor at the start but also improved later on, with prompting from ADB review missions.

March 1997, at a joint meeting among the EA, the consultants, and the contractor, the foreign joint venture partner denied having signed any joint venture agreement and immediately pulled out.

25 The International Federation of Consulting Engineers. 26 TA 3361-IND: Capacity Building for Contract Supervision and Management in the National Highways Authority of

India, for $600,000, approved on 22 December 1999. 27 On contract IV, the progress was extremely slow and only 1.6% of the work was completed in the first 14 months of

contract implementation.

10

38. Some of the implementation delays, however, cannot be attributed to the contractors. Deficiencies in survey, design, and drawings brought out by the construction supervision consultants under several contracts had to be rectified. Similarly, some agencies were slow in shifting utilities, such as electric poles and cables, and cutting trees from the ROW. 39. With significant improvements in the contractors’ performance (para. 37), three of the five contracts were completed more or less according to the contract schedule set at the contract award stage. All contracts had an original contract period of 42 months. While contract II was completed as originally scheduled, contract I was completed in 44 months, 2 months behind schedule; contract III was completed in 48 months, i.e., with a 6-month delay; and contract IV was completed with a delay of 8 months. Contract V was completed within 55 months; the contract period had been extended to accommodate the widening to four lanes of the entire Vijaywada–Eluru section of NH5 and the Eluru bypass, a late addition to the scope of work. 40. Suitable corrective actions by the contractors during implementation enabled the satisfactory completion of the contracts. The overall performance of each contractor at contract completion has been evaluated, taking into account contract management, construction planning, and resource availability (equipment, staff, and materials) during the contract period and any delays in contract completion. Overall, performance was satisfactory for all contracts except for contract IV, on which the performance was only partly satisfactory. K. Performance of the Borrower and the Executing Agency 41. The Government of India was the Borrower and MOST was the EA for the Project. As envisaged, NHAI was established and began operating in February 1995 and, as the Implementing Agency, had day-to-day responsibility for the administration of the Project. Because the Project was NHAI’s first, it was in effect a learning experience for the agency. At the start, its project directors were not delegated adequate authority to approve extensions of time, variation order approvals, etc., and had to refer almost all decisions, even minor ones, to NHAI headquarters and to MOST for approval. (In 2000 the project directors were delegated more authority to implement the Project.) Moreover, although ADB had approved in May 1999 the widening to four lanes of the entire stretch of road from Vijayawada to Eluru and the Eluru bypass, the work did not start until September 2000 because of lengthy delays in approval by the Government. The loan closing date had to be extended a second time as a result. Civil works were partially delayed by the late completion of land acquisition and removal of encumbrances in the ROW, e.g., telephone poles, electricity cables, and other utilities (para. 38). The final bill for some of the civil works contracts is still being reviewed and arbitration proceedings are underway. The EA also did not undertake BME and complete a project completion report as stipulated in the loan covenants (para. 26). Without these documents it is extremely difficult to determine if the project benefits envisaged at appraisal have been realized. On the other hand, implementing the Project strengthened NHAI’s institutional, project management, and contract management capabilities. Continuous supervision, review and monitoring by NHAI and MOST in conjunction with supervision consultants and necessary corrective actions by the contractor were helpful in resolving issues and improving contractor’s performance. NHAI has emerged as a successful implementation agency of MOST for the development and maintenance of the national highways—it now implements more than $1 billion worth of projects each year—and has gradually reduced MOST’s dependence on the state PWDs. The result is better and more efficient implementation of large highway development projects. Overall, the performance of the Borrower and the EA was only partly satisfactory.

11

L. Performance of the Asian Development Bank 42. The Project was administered and supervised from ADB headquarters before the transfer of those functions to the India Resident Mission (INRM) on 15 October 1999. A succession of five ADB project officers supervised the implementation of the Project.28 ADB approved in a timely manner the documents and evaluation reports prepared and submitted by the EA pertaining to civil works procurement, the engagement of consultants, and the change in scope under contract V. ADB conducted 14 review missions, three disbursement missions, and a midterm review mission. The missions included visits to the project sites and also to the EA’s headquarters in New Delhi, where coordination meetings were held. ADB was closely involved in identifying potential problems and critical activities, and in resolving issues related to the Project. The role of the ADB missions in advising on technical issues and on matters of loan administration was recognized by the EA. Overall, the performance of ADB was satisfactory.

III. EVALUATION OF PERFORMANCE A. Relevance 43. The relevance of the Project is considered high, as the Project was and still is consistent with the Government’s overall development objectives and ADB’s strategy for the road subsector. ADB’s country strategy at the time of appraisal combined infrastructure investments with assistance in implementing reforms to strengthen growth. The Government’s development strategy, as set out in the Eighth Five Year Plan for 1992–1997, was to achieve macroeconomic stability and rapid, sustainable economic growth over the long term. ADB’s transport sector strategy supported the Government’s efforts to develop and maintain an efficient and dynamic multimodal transport system. ADB focused on roads, railways, and intermediate and minor ports, and supported policy reforms aimed at implementing transport strategy efficiently and economically and at removing critical bottlenecks and capacity constraints on high-density corridors. The Project continues to be relevant to the announcement in 1998 by the Government of its major program to upgrade 13,000 km of national highways to four-lane standard (National Highway Development Project [NHDP] I and II). The NHDP has since been expanded to other sections of the national highway network (NHDP III–VII). A policy decision was made in 2005 to employ public-private partnerships in developing NHDP III–VII, primarily through build-operate-transfer (BOT) arrangements. NHDP V consists of the widening to six lanes of 6,500 km of national highway, including the Golden Quadrilateral. B. Effectiveness in Achieving Outcome 44. Overall, the Project was effective. It achieved its primary objective of assisting the Government in improving the national highway system and lowering transport costs in the project areas to facilitate more efficient movement of goods and passengers. Road user benefits were attained through significant reductions in vehicle operating costs (VOCs). No specific level of reduction of VOC was set as a target at appraisal, but it has been conservatively estimated that VOCs have been reduced by about 30% for passenger cars and by about 35% for trucks and buses. Travel times along the improved roads, although not measured at appraisal, have been reduced significantly. It has been estimated that the road improvements have reduced trip times on the project roads by 30–50%. The outcome of the Project as envisaged at appraisal was further enhanced through the incorporation of additional works for the widening from two to

28 Three were based in Manila. The fourth and fifth project officers, based in INRM, handled project implementation

after it was handed over to INRM on 15 October 1999.

12

four lanes of the sections of NH5 from km 13 to km 53 and from km 69.0 to km 75.0, as well as the 17 km bypass around Eluru town (contract V covering Vijayawada to Eluru). 45. Passenger and freight traffic volumes have been lower than the appraisal estimates. At appraisal, the forecast growth was 6–12% per year on average throughout the evaluation period (until 2018), depending on vehicle type, project area, and year. Actual traffic growth from 2001 to 2006 averaged around 6–7% yearly.29 46. NHAI was established and made operational under the Project in February 1995. Over the years since then, it has strengthened its institutional, project management, and contract management capabilities and has been implementing projects valued at more than $1 billion yearly. As envisaged at appraisal, capacity building at the national and state levels was accomplished through the associated TA projects for road safety, environment management for road projects, and technical standards for highway concrete structures. 47. As benefit monitoring and evaluation was not undertaken by NHAI, the industrial employment brought about by the Project and the construction-related local employment generated could not be estimated. However, information obtained by the PCR Mission through observation of the project areas and discussions with local residents along the project roads indicates that economic activity has increased significantly and several new small businesses have been established. C. Efficiency in Achieving Outcome and Outputs 48. The Project was highly efficient.30 Efficiency was rated through a recalculation of the economic internal rate of return (EIRR) for the project road sections and for the Project as a whole, on the basis of updated data collected. The EIRR for the Project as a whole was 37.2% at appraisal and the recalculated EIRR is 25.3%. These figures compare favorably with the 12% economic opportunity cost of capital. The difference between the reevaluation and appraisal figures are mainly due to (i) revisions in the economic costs derived from actual costs, (ii) the longer construction periods caused by delays in implementation, and (iii) differences in traffic growth between appraisal and reevaluation. Appendix 11 shows the recalculated EIRR for each of the project road sections evaluated at appraisal and the EIRR for the Project as a whole, as well as the supporting assumptions. D. Preliminary Assessment of Sustainability 49. Overall, the Project is likely to be sustainable. The project facilities must be maintained to sustain their economic life. NHAI has been contracting out the maintenance of the completed highway stretches to the private sector. As most of the civil works were completed in 2001, periodic maintenance of the road sections is due. While it has been completed or is now being undertaken for road stretches under contract packages I, II, and V, the periodic maintenance of the stretch of road under contract package III is expected to be undertaken in early 2008. The improved stretch of road under contract package IV was further widened to four lanes by NHAI through a concessionaire under a BOT contract. The concessionaire is responsible for maintenance including periodic overlays as part of the concession. Periodic maintenance is 29 Although traffic growth between Barwa Adda and Barakar on NH2 averaged around 17% per year from 2001 to

2006. 30 According to the guidelines of the Operations Evaluation Department (OED), a project with an estimated EIRR of

more than 18% is normally rated highly efficient. A project with an EIRR of 12–18% is deemed efficient, one with an EIRR of 6% to less than 12% is less efficient, and one with an EIRR of less than 6% is inefficient.

13

ongoing. The stretches of road that were strengthened and widened under the Project were generally found to be in good condition. Under NHDP V (para. 43), the stretches of road under contract packages I, II, III, and V will be widened further to six lanes by 2012 through BOT contracts. Widening will further ensure their sustainability, as the concessionaires will be expected to maintain the roads and undertake periodic overlays. 50. The PCR Mission noted, however, the large increase in heavy commercial vehicles along the project roads and that overloading would contribute to the deterioration of the project roads. Vehicle load limit needs to be strictly enforced to protect the road assets created under the Project. In November 2005, the Supreme Court of India passed a judgment banning the overloading of trucks to prevent premature damage to roads, and ordered vehicle owners to off-load excess cargo at their risk and cost, aside from paying the penalty, to enable their vehicles to continue their journey. This order needs to be strictly enforced to ensure that the project roads do not deteriorate further. Finding no vehicle axle-load stations on the project roads, the PCR Mission pointed out to NHAI officials the need to control axle load to prevent undue deterioration of roads. E. Impact

1. Environmental Impact 51. During appraisal, an IEE was undertaken as part of the feasibility study for each of the highway sections under the Project. The results indicated that the Project would follow existing road alignments, and the project roads would not pass through or be in the vicinity of any environmentally sensitive areas (e.g., forests, archaeological or historical sites, national parks, wildlife reserves, or sanctuaries). Hence, the Project would not have any significant adverse environmental impact and no environmental impact study or full environmental monitoring program was therefore required. While reviewing a change in scope under one of the five civil works contracts in 1999 (para. 8), ADB requested NHAI to conduct an IEE and an initial social assessment. ADB reviewed the reports and found them generally satisfactory and in line with its requirements. The EA and the contractors took all precautions during implementation to prevent any adverse environmental impact during design and construction and to minimize environmental problems. On the other hand, the Project has had positive environmental impact since completion by improving drainage along several highway sections and also traffic management. The PCR Mission observed no noise, air pollution, or soil erosion problems.

2. Socioeconomic Impact 52. At appraisal the Project was expected to contribute to a number of nonquantifiable benefits such as easier access to social services and markets, mobility of people, and employment opportunities. The PCR Mission, in discussions with NHAI officials and local residents, noted a significant increase in economic activity since appraisal. The number of small industries, restaurants, and shops has increased, and so has truck traffic transporting both industrial products and agricultural produce. Small shopkeepers along the project roads, several of whom had set up shop only after the roads were improved, were earning higher incomes because of the increase in traffic along the roads. Many more families owned small household appliances (such as television sets and radios). The Project has therefore increased employment opportunities and improved accessibility for local residents with the significant increase in the number of passenger buses in most of the project areas.

14

3. Resettlement Impact 53. At appraisal, the project improvements (on a total of 330 km), including the widening to four lanes of about 234 km of the total road length, were generally within the existing ROW and required minimal land acquisition. Also no relocation of people due to minor realignments was expected. The Project was approved in 1993, i.e., before the formulation of ADB’s Involuntary Resettlement Policy (1995). Therefore, no resettlement framework or resettlement plan had to be prepared. While reviewing a change in scope under one of the five civil works contracts in 1999 (para. 8), ADB requested NHAI to prepare a short resettlement plan (SRP).31 Most of the road improvements were within the ROW, land acquisition was minimized, and the resettlement impact was insignificant. ADB found the SRP acceptable.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 54. The Project is considered successful, on the basis of a review and quantitative assessment of its relevance, effectiveness, efficiency, and sustainability. It is highly relevant and consistent with the Government’s overall development objectives and ADB’s development strategy for the road subsector, and has succeeded in improving the national highway system and lowering transport costs and travel time. The reevaluated EIRR for the Project as a whole is 25.3%. Appendix 12 contains a quantitative assessment of project performance to determine the project rating. B. Lessons 55. The Project showed that a contractor’s ability to commit resources to a contract is crucial to performance. Prequalification documents require bidders to demonstrate their technical and financial capacity, and bid documents require them to commit technical and financial resources for the implementation of the works if awarded the contract. However, there are no effective mechanisms to ensure that bidders who prequalify and are awarded the contract indeed provide the required equipment, working capital, and management staff in the project sites as stipulated in the bid documents. In the Project, managerial and planning capacity was inadequate for some contracts, available equipment was old, and spare parts were unavailable. Some contractors, notably those for contract IV, performed poorly in the early stages, but with corrective actions significant improvements were made during implementation and three of the five contracts were completed more or less within the contract schedule set at contract award. For the contracts that had to be extended, the services of the construction supervision consultants also had to be increased. Similar problems have been observed in other completed and ongoing ADB projects in India and in other countries.32 The provisions in the bid documents must be made more rigorous and stringent to ensure that the contractors provide the committed technical and financial resources for project implementation and that the projects are completed on time.

31 In addition, an initial social assessment and an initial environmental examination were also undertaken. 32 ADB. 2003. Project Completion Report on the Sixth Road Improvement Project in the Lao People’s Democratic

Republic. Manila (Loan 1234-LAO [SF], for $26 million approved on 1 June 1993); ADB 2006. Project Completion Report on the Phnom Penh to Ho Chi Minh City Highway Project in Cambodia and Viet Nam. Manila (Loan 1659-CAM), for $40 million approved on 15 December 1998; and Loan 1660-VIE, for $100 million approved on 15 December 1998) and ADB. 2007. Project Completion Report on the Southwest Road Network Development Project in Bangladesh. Manila (Loan 1708-BAN [SF], for $115 million approved on 16 November 1999).

15

56. In the case of the Project, implementation was delayed at the start primarily by inadequate project readiness. The lessons were incorporated by ADB in its subsequent loans to NHAI. 57. The absence of detailed field investigations during the design stage caused delays and necessary changes in the original design. To avoid such delays, the quality of the design can be improved through detailed review and thorough field investigations. 58. Although ADB had approved the additional works under contract V in May 1999, the approval by the Government was considerably delayed and work did not start until September 2000. The Government needs to streamline the procedures for speedy clearance by its Public Investment Board and Cabinet Committee on Economic Affairs. C. Recommendations

1. Project-Related

a. Future Monitoring and Follow-Up Action 59. No further monitoring or follow-up action by ADB is necessary.

b. Covenants 60. Since project completion, the system for axle-load control has improved considerably (para. 24). Nonetheless, enforcement needs to be further strengthened. This is extremely important because of the high percentage of trucks on the project roads. Strict enforcement need to be undertaken to avoid damage to the road pavement and reduce maintenance costs.

c. Timing of Project Performance Evaluation Report Preparation 61. A project performance evaluation should be undertaken in 2012 to determine if the Project is still meeting its objectives.

2. General 62. A project performance monitoring system should be developed during project processing as a tool for monitoring project impact.

16 A

ppendix 1

PROJECT FRAMEWORK

Design Summary Appraisal Performance Indicators/Targets Project Achievements

Key Issues and

Recommenda- tions

Impact Reduce transport cost and promote economic growth, particularly in the industry sector.

• Reduction in freight and passenger transport

cost.

• Reduction in transport constraints.

• Operating costs of both freight and passenger

transport have been reduced, leading to increased competitiveness and economic growth.

• The increase in road capacity has led to better traffic management and shorter travel times.

Outcome Improve the national highway system to facilitate more efficient movement of goods and passengers. Improve the institutional capability to upgrade and maintain the national highways by establishing NHAI.. Enhance the capacity of road sector institutions through three TA projects. Increase industrial employment.

• Improvement and rehabilitation of selected

stretches of important national highways where the existing road infrastructure could not carry traffic economically.

• More efficient distribution of goods and

services, including industrial and agricultural inputs and outputs.

• Formation and staffing of NHAI. • On-the-job training by consultants in

construction and contract management. • Capacity building in road safety,

environmental management of road projects, and technical standards for highway concrete structures.

• Increase in industrial employment and

economic and industrial development.

• Selected sections of NH2, NH5, NH8, and NH9 have

been improved. • Industrial and agricultural produce is distributed

more efficiently as road capacity has increased and vehicle operating costs have gone down.

• NHAI was established and made operational in

February 1995. Its capacity in project management and contract management has been strengthened.

• Capacity has been enhanced at the national and

state levels through TA for road safety, environmental management for road projects, and technical standards for highway concrete structures.

• The improved national highway corridor has

enhanced opportunities for further economic and industrial development along the corridor, leading to increased employment.

• Observations and discussions with local residents by

the PCR Mission indicate an increase in employment as several new small businesses have been established.

A

ppendix 1 17

Design Summary Appraisal Performance Indicators/Targets Project Achievements

Key Issues and

Recommenda- tions

Output Road improvement

Improvement of the five national highway

sections, totaling 330 km in Haryana, Rajasthan, Bihar, West Bengal and Andhra Pradesh. The improvements included the widening to four lanes of about 234 km of the total length and the strengthening of pavements.

Improvement of five national highways sections, totaling 330 km in Haryana, Rajasthan, Bihar, West Bengal, and Andhra Pradesh. The improvements included the widening to four lanes of about 282 km of the total length and the strengthening of pavements.

Additional works for the widening to four lanes of two lane sections from km 13 to km 53 and from km 69 to km 75, and the Eluru bypass on NH5, using loan savings, were incorporated.

Inputs • Detailed engineering and preparation

of tender documents • Procurement of civil works and

recruitment of supervision consultants • Road improvement • Construction supervision

Project Cost

• Civil Works, consulting services and other cost - $308.8 million

Financing Plan

• ADB Financing: $245 million • Government resources: $63.8 million • Technical Assistance: $800,000 (three

separate TA projects)

Project Cost on Completion

• Civil works, consulting services, and other costs: $302.79 million

Financing Plan

• ADB Financing: $231.87 million • Government: $70.92 million • Technical Assistance: $0.71 million (three

separate TA projects)

After loan savings were used for additional works, $13.13 million of the loan was canceled.

ADB = Asian Development Bank, km = kilometer, NH = national highway, NHAI = National Highways Authority of India, PCR = project completion review, TA = technical assistance. Note: There was no project framework in the appraisal document. This project framework, based on the appraisal document, was prepared to allow the achievements of the Project to be compared with the appraisal estimates.

18 Appendix 2

APPRAISAL AND ACTUAL PROJECT COSTS

1.

2.

e. Contract V NH5 Vijayawada-Eluru

3. Construction Supervision4. Incremental Administration

1. Physical2. Price

C. Interest and Charges during Construction 40 0 40 1,245.20 28.13 0 28.13 1,252.41

09.5 22.8 32.3 1,005.50 0 0 0

11.9 370.45 0 0

302.79 13,335.30Total 145.8 163 308.8 9,612.95 138.98 163.81

0 0Subtotal (B) 14.4 29.8 44.2 1,375.95 0 0

B. Contingencies

4.9 7

274.66 12,082.89Subtotal (A) 91.4 133.2 224.6 6,991.80 110.85 163.81

0 1.19 1.19 51.551 1 31.14

3,156.00

7.7 6.3 14 435.82 6.09 4.98 11.07 459.05

76012.03 18.08 30.11 937.32 27.76 41.63 69.39

498.39 7.08 10.61 17.69d. Contract IV NH9 Nandigama-Vijayawada 6.4 9.61 16.01

2,170.00c. Contract III NH2 Banwa Adda-Bararkar 16.91 25.36 42.27 1,315.86 18.22 27.34 45.56 1,990.00

1,245.51 19.67 29.51 49.18b. Contract II NH2 Raniganj-Panagarh 16 24.01 40.01

11,551.00

a. Contract I NH8 Gurgaon–Kotputli 32.36 48.54 80.9 2,518.42 32.03 48.05 80.08 3,475.00

21.29

Civil Worksa 83.7 125.6 209.3 6,515.50 104.76 157.14 261.9

Right-of-Way 0.3 0.3 9.34 0.5 0.5

Total TotalA. Base Cost

($ million) (Rs million) Project Component Foreign Local Total Total Foreign Local

($ million) (Rs million)Appraisal Estimate Actual

NH = national highways a. The final bill for some of the civil works contracts are being reviewed and arbitration proceedings are underway. Sources: (i) Asian Development Bank’s reports and report and recommendation to the President, (ii) National Highways Authority of India, and (iii) ADB’s Loan

Financial Information System.

Appendix 3 19

AVERAGE ANNUAL EXCHANGE RATE

Year Indian Rupee for every

United States Dollar

1995 31.40

1996 33.46

1997 35.50

1998 37.16

1999 39.36

2000 43.33

2001 45.61

2002 47.53

2003 48.27

2004 45.33

2005 44.11

2006 45.33

2007a 42.22 a The 2007 exchange rate is based on the rate from 1 January to 22

August 2007. Sources: Reserve Bank of India and Office of the Economic Advisor.

20 Appendix 4

Category Contract Contractor/ Consultant Description/Nature of Works

Currency of

Contract

Contract Amount b $ Equivalent

A. 01 - Civil Works 1 a Birla-GTM Enterprise Improvement of NH8 from KM 37 in Haryana to KM 163 in Rajasthan Rs 16,677,145 393,700

I BSC-RBM-PATI (JV) Improvement of NH8 from Gurgaon in Haryana (KM 36.63) to Rajasthan (KM 162.5) Rs 2,108,449,982 48,858,229

RM 22,696,952 5,976,004 $ 4,035,305 4,035,305

II BSC-RBM-PATI (JV)Improvement of NH2 from KM 474 to KM 515 in West Bengal Rs 1,232,185,133 28,317,477

RM 16,056,445 4,218,105 $ 2,506,973 2,506,973

III BSC-RBM-PATI (JV) Improvement of NH2 from KM 399 to KM 441 in Bihar Rs 1,077,608,685 25,155,922 RM 15,108,456 3,983,713 $ 2,614,794 2,614,431

IV Bridge & Roof Co. Improvement of NH9 from KM 217 to KM 265 in Andhra Pradesh Rs 570,217,506 13,269,070

V Madhucon Binapur (JV) Strengthening of NH5 KM 3.4 to KM 75 in Andhra Pradesh Rs 2,152,007,313 47,216,630 $ 3,423,158 3,423,158

V Various c ROB at Bakhtarnagar and Harishpur in West Bengal Rs 36,914,699 758,469 IV Various d ROB on Vijayawada-Vishakapatnam Section Rs 35,581,857 759,921

Subtotal - Category (01) 191,487,107

B. 02 - Consulting Services I Snowy Mountains Engg. Contract 1: Rajasthan/Haryana Component A$ 2,442,029 1,566,206

Rs 69,198,490 1,616,941 II Symonds Travers Morgan Contract II: Bihar/West Bengal L 1,107,934 1,742,468

Rs 90,088,981 2,102,827 III Kampsax International JV Contract Package III: Andhra Pradesh Component DKr 7,452,428 1,037,590

L 330,626 535,425 Rs 106,487,665 2,466,888

Subtotal - Category (02) 11,068,345

C. Incremental Administrative Expenditure Rs 51,524,914 1,188,722 Total 203,744,174

03 - Incremental Administrative Expenditure

d On section of contract package V.Source: Asian Development Bank.

SUMMARY OF CONTRACTS FUNDED BY THE ASIAN DEVELOPMENT BANK

A$ = Australian dollars, DKr = Danish kroner, L = pounds sterling, RM = ringgit, Rs = Indian rupees, $ = United States dollar.KM = kilometer, NH = national highways, ROB = Road Bridge over Rail Track.a Rescinded on 9 June 1997 due to nonperformance of contractors.b Contract amount funded by the Asian Development Bank.c On section of contract package II.

Appendix 5 21

PROJECTED AND ACTUAL DISBURSEMENTS OF LOAN PROCEEDS ($ million)

Year Appraisal a Actual

1994

1995 36.75 0.06

1996 49.00 3.70

1997 61.25 19.29

1998 73.50 28.01

1999 24.50 48.88

2000 65.93

2001 50.16

2002 15.84

Total 245.00 231.87

a No disbursement schedule was included in the appraisal document. The disbursement projections at appraisal were developed on the basis of the implementation schedule at appraisal.

Source: Asian Development Bank Loan Financial Information System.

Figure A5: Disbursement Details

0

10

20

30

40

50

60

70

80

1994 1995 1996 1997 1998 1999 2000 2001 2002

Year

$ M

illio

n

AppraisalEstimate

Actual

22 A

ppendix 6

Activity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

A. Loan Processing

Processing

Loan Signing * ++

Loan Effective * ++

B. Implementation

Supervision Consultancy

Shortlisting, Evaluation, and negotiation

Contract Signed * ++

Services

Civil Works

Prequalification

Contract Award * ++ ++ ++ ++

Implementation

C. Technical Assistance

Environment GuidelinesImplementation

Road SafetyImplementation

Highway StructuresImplementation

Proposed Schedule at Appraisal *Actual ++Sources: (I) Asian Development Bank's report and recommendation to the President and (ii) National Highways Authority of India.

2000 2001

PROJECT IMPLEMENTATION SCHEDULE

20021993 1994 1995 1996 1997 1998 1999

Appendix 7 23

CHRONOLOGY OF MAJOR EVENTS DURING PROJECT PROCESSING AND IMPLEMENTATION

Date Event 1993 21 April–4 May Fact-Finding Mission 9–19 August Appraisal Mission 25–28 October Loan negotiations 29 November Board approval

1994 29 September Draft prequalification documents for civil works contracts sent to Asian

Development Bank (ADB). 22 November Proposed short list of supervision consultants sent to ADB. 5 December ADB issues comments on draft prequalification documents. 21 December ADB issues no-objection to proposed shortlist of supervision consultants.

1995 2 January Invitation notice for prequalification of contractors for civil works contracts

issued. 12 January ADB, at the Government’s request, extends the validity for loan signing to

28 March 1995. 10 February The National Highways of India (NHAI) is made operational, upon the

assumption of office of its chairman. 22 February Last date for submission of prequalification documents is extended from

3 March to 3 April 1995, at the request of some contractors and to improve the participation of international contractors.

22 March Loan Agreement signed. 17 April Invitations for proposals issued to shortlisted firms. 4 May Loan declared effective. 17 and 25 May NHAI submits, for ADB’s approval, the evaluation report for

prequalification of contractors. 12–16 June Review Missiona 1 20 June ADB’s no objection to NHAI’s prequalification evaluation 6 September Bids invited for 5 civil works contracts with 5 January 1996 as bid closing

date. 20 September NHAI submits the report on evaluation of technical proposals for

supervision consultants, for ADB approval 11–21 September Review Missiona 2 27 October ADB approved the ranking of supervision consultants on the basis of

Executing Agency’s (EA’s) evaluation report. 21 November–1 December

Review Missiona 3.

1996 05 January Bids for all five civil work contracts received and opened. 9 March NHAI submits the minutes of contract negotiations with the first-ranked

supervision consultants for all three contract packages to ADB. 22 March NHAI submitted draft contract for supervision consultancy services. 11–29 March Review Missiona 4 19 April ADB approves draft contracts with supervision consultants. 31 May Contract with Snowy Mountains Engineering Corporation Ltd., supervision

consultant for package I, is signed and notice to begin services is issued.

24 Appendix 7 Date Event 17 June Contract with Kampsax International A/S-Acer Freemen Fox Joint Venture,

supervision consultant for package III, is signed and notice to proceed is issued on 18 June 96.

21 June ADB approves award of contract for civil works contract II. 26 June Contract with Symonds Travers Morgan Joint Venture, supervision

consultant for package II, is signed and notice to proceed is issued. 28 June ADB approves the award of contract for civil works contract V. 26 July ADB approves the award of contract for civil works contract IV. 19 August 16 September 14 October

Contract for civil works contract I is awarded. Contract for civil works contract IV is awarded. Contract for civil works contract III is awarded.

1997

9 July NHAI informs ADB about the revocation of the contract for civil works contract I with the joint venture of Birla GTM–Enterprise Ltd. India (BGE) and Enterprise Jean Lefebvre, France (EJL) (BGEL).

17 July 24 July 27 August

ADB approves NHAI’s proposal to award the balance of works under civil works contract I. Contract for civil works contract II is awarded. Contract for civil works contract I (balance of works) is awarded.

10 December Contract for civil works contract V is awarded.

1998 14–23 January Review Missiona 5 1999 8 February NHAI requests ADB’s approval for widening to four lanes of entire stretch

from Vijaywada to Eluru and Eluru bypass as additional works under civil works contract V.

16–24 February Review Mission 6. 24 May ADB approves the major change in project scope (widening to four lanes

of entire stretch from Vijaywada to Eluru and Eluru bypass) as additional works under civil works contract V, using loan savings.

24 June AT the Government’s request, ADB approves the extension of the loan closing date from 31 December 1999 to 31 December 2001.

11–24 and 28–29 July, 4 August

Disbursement Missiona 1

29 August–10 September

Midterm Review Mission

15 October Project implementation delegated to India Resident Mission. 25–26 November Review Mission 7, as part of the Country Portfolio Review.

2000 7–9 February Review Mission 8. 27–28 March Review Mission 9. 22 May The Government approves the widening to four lanes of the entire stretch

from VIjaywada to Eluru and the Eluru bypass under civil works contract V. 24 August–1 September Disbursement Mission 2 17–19 October Review Mission 10 20–24 November Review Mission 11

2001 26 July, 31July–2 August Review Mission 12 2–6 September Review Mission 13

Appendix 7 25

Date Event 13 December ADB approves the extension of the loan closing date to

31 December 2002, at the Government’s request. 2002 27 February–1 March Review Mission 14 29 June Works under civil works contract V substantially completed. 5–9 and 20 August Disbursement Mission 3 8 November ADB approves cancellation of $10.0 million effective 10 October, at the

Government’s request. 2003 10 February Undisbursed loan balance of $3,127,461.69 canceled. 2007 14 and 17August PCR Mission. The Mission conducted field visits and held discussions with

NHAI field officials. a The Review Mission covered other projects also Source: Asian Development Bank records.

26 A

ppendix 8

Member (Admin)

Member (Finance)

Member (Technical)

Member (Technical)

Member (Technical)

CMUs PIUs of PC Division

PIUs of DM, MC, DK and CK Divisions

PIUs of NS and EW Divisions

PIUs under NHDP

Phase III

BOT = build operate and transfer; F&A = finance and accounts;CGM = chief general manager; GM = general manager;CK = Chennai-Kolkata Section of GQ; GQ = Golden Quadrilateral;CM = corridor management; LA and EM = land acquisition and estate management;CMU = corridor management unit; MC = Mumbai-Chennai section of GQ;CO = commerical operations; Mgr = manager;CVO = chief vigilance officer; NHDP = National Highways Development Project;DGM = deputy general manager; P and IS = planning and information systems;DK = Delhi-Kolkata section of GQ; PC = port connectivity;DM = Delhi-Mumbai section of GQ; PIU = project implementation unit;EW = East-West corridor; PSQ = planning, standardisation and quality assurance; Env = environment; Tech = technical.

Source: NHAI website.

CGM (PSQ) / DGM (PSQ)

CGM (PC) / GM (PC) /

DGM (PC) / Mgr (PC)

GM (F and A) / DGM (F and A) / Mgr

(F and A)

CGM/GM/DGM/Mgr of

NS and EW Divisions

Chairman

ORGANIZATIONAL CHART OF NATIONAL HIGHWAYS AUTHORITY OF INDIA

GM (Env) / DGM (Env) /

Mgr (Env)

CGM/GM/DGM/Mgr of DM, MC, DK and CK Divisions

(GQ)

CVO / Mgr (Vig)

GM (LA and EM) / Mgr (LA and

EM)

CGM (CM) / GM (CM) /

DGM (CM) / Mgr (CO) / Mgr (CM)

GM (Admin) / Mgr

(Admin)

CGM (P and IS) / DGM (P and IS) / Mgr (P and IS) /

Mgr (T)

CGM/(BOT/GM (BOT Mgr (BOT)

(NHDP Phase III)

Appendix 9 27

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

Covenant Reference in

Loan Agreement Status of Compliance Particular Covenants 1. The Borrower shall cause the PU and PIUs to

maintain records and accounts adequate to identify the goods and services financed out of the proceeds of the loan, to disclose the use thereof in the Project, to record the Progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, the Project related operations and financial condition of the agencies of the Borrower responsible for the carrying out of the Project and operation of the Project facilities, or any part thereof.

Article IV, Section 4.06 (a)

Complied with.

2. The Borrower shall (i) maintain, or cause to be

maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to the Bank; (iii) furnish to the Bank, as soon as available but in any event not later than nine (9) months after the end of each related fiscal year, unaudited copies of such accounts and financial statements, and not later than twelve (12) months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto, all in the English language; and (iv) furnish to the Bank such other information concerning such accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request.

Article IV, Section 4.06 (b)

Complied with, but late. Some audited accounts were not always submitted on time. The audited project accounts for financial year (FY) 1998–1999 were submitted with a 5.5 months delay, and the audited financial statements and audited project accounts for FY1999–2000 were submitted almost 3 months late.

3. The Borrower shall furnish to ADB monthly progress reports on the carrying out of the Project and on the operation and management of the Project facilities.

Article IV, Section 4.07(b)

Complied with.

4. Promptly after physical completion of each highway section to be constructed under the Project and promptly after completion of the Project, but in any event not later than three (3) months thereafter or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall cause the Project Executing Agency to prepare and furnish to the Bank a report, in such a form and

Article IV, Section 4.07(c)

Not complied with. Although several requests were made to NHAI for the submission of the project completion and BME reports during the period 2000–2004, those were not prepared by NHAI on the basis that the supervision consultants had

28 Appendix 9

Covenant Reference in

Loan Agreement Status of Compliance in such detail as the Bank shall reasonably request, on the execution and initial operation of such highway sections and the Project respectively.

been demobilized and the loan had been prepaid on 10 February 2003.

5. Procurement Issuance by the Project Executing Agency of the Notice to Proceed to each supervision consultant following signing of the related consultants contract, shall be a condition to the Bank’s approval of the award of the related civil works contract.

Schedule 4,

para. 7

Complied with.

6. Project Implementation and Other Matters Project Executing Agency MOST shall be the Project Executing Agency and shall have overall responsibility for the implementation of the Project, and the Borrower shall cause the Apex Management Committee of MOST, headed by the Secretary of MOST to facilitate implementation of the Project.

Schedule 6, para. 1(a)

Complied with.

7. Role of NHA The Borrower shall cause NHA to become fully operational by no later than 31 October 1994. Prior to this date the Borrower shall keep ADB informed of the implementation status of NHAI, and will provide it with a timetable according to which NHAI will be formed and staffed. Immediately after NHAI has become operational, the Project Executing Agency shall transfer to it, as a minimum, the day-to-day responsibility for administration of the Project.

Schedule 6,

para. 2

Complied with, but late. NHAI was not established and fully operational until March 1995.

8. Project Unit and Project Implementation Units The Borrower shall, prior to the Bank’s approval of the award of the first civil works contract, establish a separate Project Unit (PU) within the existing Project Implementation Cell (PIC) of MOST to monitor implementation of the project.

Schedule 6, para. 3

Complied with.

9. For day-to-day administration of the civil works contracts and the consultants contract, the Executing Agency shall, prior to the Bank’s approval of the award of each civil works contract, cause to be set up a Project Implementation Unit (PIU), which shall be located at the contract site.

Schedule 6, para. 4

Complied with.

Appendix 9 29

Covenant Reference in

Loan Agreement Status of Compliance 10. Land Acquisition

Ensure that all necessary land, properties, buildings, rights-of-way, and other rights and privileges required for the construction or improvement of highway sections under the Project are acquired or otherwise made available, free from any impediment, on a timely basis.

Schedule 6,

para. 5

Complied with, but late. Land acquisition and the clearance of encumbrances took longer than envisaged and caused some delays to the civil works contractors.

11. Environmental Protection The Borrower shall ensure that such problems

as drainage and erosion, and the related prevention of damage to the natural environment receive due attention in the design, construction, operation and maintenance of the Project facilities. In the selection of road alignment and local sources for excavation of construction materials, the Project Executing Agency, through its consultants and contractors, shall take all necessary steps to prevent adverse consequences to agricultural land and the natural environment. The Project Executing Agency shall adhere to the Bank’s “Environmental Guidelines for Selected Infrastructure Projects” and “Environmental Assessment Requirements and Environmental Review Procedures.”

Schedule 6, para. 6

Complied with.

12. Mid-Term Review To enable the Borrower and the Bank to make appropriate adjustments to the Project, if required, a Mid-Term Review shall be carried out by Bank staff, senior officials of MOST, the Ministry of Finance, and the State Governments concerned. To be undertaken around the middle of 1996.

Schedule 6,

para. 7

Complied with, but late. The Midterm Review was held from 29 August to 10 September 1999 in view of the delay in the award of the civil works contracts.

13. Benefit Monitoring and Evaluation The Borrower shall carry out Benefit Monitoring and Evaluation (BME), by compiling and analyzing the necessary traffic data for the highway sections to be constructed or improved under the Project, to ensure that the Project facilities are managed efficiently and that Project benefits are maximized.

Schedule 6,

para. 8

Not complied with. No BME was undertaken by the Borrower as originally agreed at appraisal. Although several requests were made to NHAI for the submission of the project completion and BME reports during the period 2000–2004, those were not prepared by NHAI on the basis that the supervision consultants had been demobilized and the loan had been prepaid on 10 February 2003.

30 Appendix 9

Covenant Reference in

Loan Agreement Status of Compliance

14. Maintenance The Borrower shall ensure that, upon completion of the Project, the highway sections constructed or improved under the Project are maintained in a satisfactory manner, and shall cause the Project Executing Agency to carry out the maintenance of such highway sections with funds to be provided by the Borrower.

Schedule 6,

para. 9

Complied with. Periodic maintenance is currently ongoing and was observed during the PCR Mission for contracts I, II, IV, and V. Periodic maintenance is to take place on contract III in early 2008. Maintenance on contract IV is undertaken by the BOT concessionaire. Maintenance on the other contracts is undertaken through maintenance contracts with the private sector.

15. The Borrower shall expand the ADB-financed Pavement Management System for National Highways (TA 1402-IND) from the present two sample states (Karnataka and Uttar Pradesh) to other states by FY 1995/96.

Schedule 6, para. 10

Not complied with. Although MOST proposed a highway management system for the national highway network, it was not implemented.

16. Investment Priorities, Resource Allocation and Transport Planning To obtain more recent empirical traffic data and to be able to prepare more accurate projections, the Borrower will update the statistics on freight and passenger movements and will, taking into account traffic projections for other transport modes, prepare a 20-year master plan for road development, including expressways.

Schedule 6, para. 11

Complied with. A Road Development Plan Vision: 2021 was finalized and published in 2001.

17. Road Subsector Taxes The Borrower shall keep the Bank informed on the status and outcome of the ongoing efforts to encourage the use of multi-axle vehicles, and shall accommodate the Bank’s comments, prior to the formulation of an action plan.

Schedule 6,

para. 12

Partly complied with. Efforts were made by the Government to encourage the use of multi-axle vehicles. Ministry of Finance had implemented a working group’s recommendation regarding the lowering of excise duty on multi-axle vehicles. The percentage of multi-axle vehicle has slowly been increasing.

Appendix 9 31

Covenant Reference in

Loan Agreement Status of Compliance 18.

Axle-Loan Enforcement From FY1994/95 the Borrower shall cause the weigh-in-motion equipment currently being procured under Bank and World Bank-financed road projects to be utilized as a complement for axle load enforcement, particularly on national highways.

Schedule 6, para. 13

Partly complied with. Equipment procured was used for statistical purposes only. However, since project completion, the situation has changed significantly. The use of electronic weighbridges for axle load enforcement has been increasing. In November 2005, the Supreme Court of India passed a judgment banning the overloading of trucks to prevent premature damage to roads, and mandated that excess cargo should be off-loaded at the risk and cost of vehicle owners before the truck would be permitted to continue its journey, even after payment of penalty. Nonetheless, enforcement needs to be further strengthened.

32 Appendix 10

TECHNICAL ASSISTANCE COMPLETION REPORT Division: INRM

Technical Assistance (TA) No. and Name TA 2001-IND: Road Safety

Amount Approved: $210,000

Executing Agency: Ministry of Surface Transport (MOST)

Source of Funding: TASF TA Amount Undisbursed $2,622.60

TA Amount Utilized $207,377.40

Date Closing Date Approval 29 November 1993

Signing 13 June 1995

Fielding of Consultants July 1995

Original September 1994

Actual December 1997

Description The objective of the TA was to improve the knowledge, capability, and training of personnel (primarily from MOST and from selected Public Works Departments of the states) in accident analysis, traffic engineering, and the design of low-cost road accident countermeasures, and to prepare a highway safety manual to be used by design engineers. The TA formed a part of a government-wide coordinated program designed to counter the serious and growing road safety problem in India. Expected Impact, Outcome, and Outputs The TA was expected to assist the national consultants (engaged by MOST) in establishing a methodology for black-spot identification and to use international experience in road geometric design and traffic engineering/management countermeasures. The TA was also to hold training and short courses for staff of MOST and state agencies to cover accident investigations, problem diagnosis, and accident countermeasures, specifically low-cost measures. By providing on-the-job training it was envisaged that an effective black-spot treatment program would be undertaken. The TA was expected to increase the knowledge of domestic highway engineers of safety-conscious design and also to prepare a highway safety manual to be used by design engineers. Evaluation of Inputs and Conduct of Activities The consultants signed a contract on 13 June 1995 and their work was completed by July 1997. MOST and Asian Development Bank (ADB) rated the consultants’ work as satisfactory. The TA received limited international input of about 9 months, which was not sufficient to cover the work. MOST independently recruited a firm of national consultants to collect accident data for 18 types of 100-kilometer stretches of national highway. The international consultants were also tasked to assist the national consultants in establishing the methodology for black-spot identification. This task, however, could not be fully undertaken because of limited resources. The limited inputs have been used satisfactorily. Evaluation of Outputs and Achievement of Outcome The main outputs from the TA were a series of reports including a final report on accident data collection and identification of black spots. A highway safety manual was also produced. In addition, the consultants provided brief monthly progress statements. There was training undertaken through a series of seminars and practical, on-the-job training for MOST officers and selected staff from relevant agencies. The training included a short course covering accident investigations, problem diagnosis, traffic engineering and management solutions, and the design of low-cost accident countermeasures. The TA successfully assisted the Karnataka police with on-the-job training and the establishment of a database on accidents along national highway (NH) 4 and NH7. It was expected that this knowledge would be disseminated to other states. This, however, has not occurred. A Microcomputer Accident Analysis Package software was installed in the Karnataka police offices for the database. This database was further expanded to cover another 300 km of national highways in Karnataka. The TA, however, was not successful in assisting the national consultants in identifying black spots using a computer-based system. The data collection suffered delays and the database was incomplete. The TA also could not finish the pilot study to improve the capacity of the national consultants to carry out a safety audit on six road sections. The final report was 12 months delayed. This delay was due to delays in data collection and other activities by the national consultants engaged separately by MOST. Overall Assessment and Rating The TA is rated successful. Major Lessons Learned The TA was successful but did not disseminate the knowledge to other states as originally envisaged. The lack of safety education for drivers and road users is one of the main causes of road accidents in India. In this regard, notwithstanding the impact of seminars and consultants’ reports under ADB TA, an enormous need for systematically undertaking such education remains. Concerned agencies lack the capacity and resources to undertake systematic data collection and compile reliable statistics on accidents, road conditions, and black spots. A decade has elapsed since the completion of the TA. Although road safety now receives far more attention, it continues to be an area of major concern. Recommendations and Follow-Up Actions The Government needs to focus on institutionalizing road safety and develop adequate capacity to address road safety issues. Prepared by Anil K. Motwani Designation Project Implementation Officer

(Transport), INRM

Appendix 10 33

TECHNICAL ASSISTANCE COMPLETION REPORT Division: INRM Technical Assistance (TA) No. and Name TA 2002-IND: Environmental Management of Road Projects

Amount Approved: $240,000

Executing Agency: Ministry of Surface Transport (MOST)

Source of Funding: TASF TA Amount Undisbursed $55,334.76

TA Amount Utilized $184,665.24

Date Closing Date Approval 29 November 1993

Signing 26 April 1995

Fielding of Consultants 4 May 1995

Original August 1994

Actual December 1995

Description The main objective of this advisory TA was to strengthen the capability of the MOST and the public works departments to carry out environmental assessment of road projects and to ensure that road projects in India are planned, designed, and implemented in accordance with sound environmental practices, ADB’s environmental guidelines and the Government’s relevant regulations. Expected Impact, Outcome, and Outputs The TA had seven components: (i) preparing environmental guidelines for all major road construction and improvement projects for use by MOST and the PWDs in their planning, design, and implementation activities; (ii) reviewing the currently used planning techniques, design standards, and construction and supervision practices, and suggesting measures to ensure the incorporation of environmental safeguards throughout the project cycle, consisting of planning, design, implementation, and supervision; (iii) preparing specifications in manual form for use by contractors, as a requirement of the contract under which they are implementing the works; (iv) providing in-house/on-the-job training in environmental matters to MOST and PWD project staff; (v) organizing in-house training in the environmental impact assessment of road projects for MOST and PWD staff; (vi) organizing formal training for about five selected MOST/PWD staff for about 1 month; and (vii) assisting MOST in obtaining suitable reference documents and creating a documentation center for environmental assessment and management of road projects. Evaluation of Inputs and Conduct of Activities The consultants signed a contract in April 1995. Two international specialists—a highway engineer with experience in environmental impact assessment and an environmental management specialist—did the study. The consultants’ work was completed by October 1995. MOST and ADB rated the consultants’ work satisfactory. Evaluation of Outputs and Achievement of Outcome The TA produced several outputs, including the inception report in June 1995, a draft final report at the start of August 1995, and the final report submitted in October 1995 after the receipt of comments on the draft final report on 5 October. In addition, the consultants provided brief monthly progress reports at the end of each month during the TA. The TA consultants also conducted in-house training from 17 to 22 July 1995 for MOST and PWD staff (16 staff participated). Six engineers selected by MOST also underwent a 4-week course in environmental impact assessment at the Asian Institute of Technology in Bangkok, Thailand, from 22 July 1995. The TA consultants studied several components to improve environmental management. Apart from reviewing environmental guidelines and making recommendations for improvement, the consultants advised on the organizational structure of the environment units in MOST and PWDs and assisted in the establishment of a documentation center in MOST. The consultants also drafted guidelines for initial environmental examination, environmental impact assessment, and environmental management planning; amendments to the construction documents with special conditions for consideration by the Government; and a manual for use on road construction sites to control environmental impact. Overall Assessment and Rating The TA is rated successful and produced comprehensive documentation. It has assisted MOST and the PWDs in more effectively implementing environmental procedures. Major Lessons Learned The TA provided the Government with many useful guidelines and valuable assistance in understanding the principles of environmental assessment procedures. The TA structure should be used again for further work to ensure continuing improvements. Recommendations and Follow-Up Actions An environmental and social development unit has since been established at National Highways Authority of India, and environmental management systems are being strengthened. The systems for environmental management of road projects at the state level are also being further strengthened through ADB-funded projects. Prepared by Anil K. Motwani Designation Project Implementation Officer

(Transport), INRM

34 Appendix 10

TECHNICAL ASSISTANCE COMPLETION REPORT Division: INRM Technical Assistance (TA) No. and Name TA 2003-IND: Technical Standards for Highway Concrete Structures

Amount Approved: $350,000

Executing Agency: Ministry of Surface Transport (MOST)

Source of Funding: TASF TA Amount Undisbursed $36,337.04

TA Amount Utilized $313,662.96

Date Closing Date Approval 29 November 1993

Signing 21 November 1994

Fielding of Consultants December 1994

Original January 1995

Actual February 1996

Description The TA was to provide assistance to MOST in (i) reviewing existing concrete structural works specifications and developing revisions in these specifications to reflect current international practice; and (ii) preparing manuals for use by MOST, consultants, and contractor personnel in the construction and supervision of concrete structural works, in particular bridges. Expected Impact, Outcome, and Outputs The TA had seven components: (i) reviewing existing publications, specifications, standards, and codes of practice; (ii) discussing structural standards and codes of practice with senior officials of MOST, national consultants, and contractors; (iii) inspecting a representative range of structures to assess existing construction practices; (iv) proposing revised specifications; (v) preparing a manual of concrete practice and a series of on-the-job manuals for use by consultants and contractor personnel; (vi) proposing changes in the existing India Roads Congress (IRC) standards and codes of practice for the design of highway concrete structures; and (vii) reviewing the types of contracts typically used for highway structures and proposing prequalification documents for bidders. Evaluation of Inputs and Conduct of Activities The consultants signed a contract in November 1994 and completed their work by November 1995. Both MOST and the ADB rated the consultant’s work satisfactory. Evaluation of Outputs and Achievement of Outcome The TA produced several outputs, including the inception report, an interim report, a draft final report, and a final report incorporating the comments on the draft final report. In addition, the consultants provided brief monthly progress reports detailing actual progress compared with the work program and problems encountered. The TA also produced a report on revised specifications for concrete roads and bridges, a manual of concrete practice, “man-on-the job” manuals, and a report on proposed changes in design criteria and codes of practice for concrete road bridges. Overall Assessment and Rating The TA is rated successful and produced comprehensive documentation. It has assisted MOST in reviewing and improving the technical standards for highway concrete structures. Major Lessons Learned The TA provided MOST with valuable assistance in determining the ways in which the technical standards for highway concrete structures can be improved. Recommendations and Follow-Up Actions The TA produced comprehensive documentation and recommendations for improving concrete technical standards. Several of these have been incorporated by IRC. No follow-up actions are necessary. Prepared by Anil K. Motwani Designation Project Implementation Officer

(Transport), INRM

Appendix 12

35Appendix 11 35

ECONOMIC REEVALUATION

A. General

1. The methodology used in the economic reevaluation was the same as that used in the appraisal. The with- and without-Project situations were compared to determine the effects of widening and strengthening the project roads. The project road sections evaluated were: (i) Gurgaon–Haryana/Rajasthan Border on national highway (NH) 8; (ii) Rajasthan/Haryana Border–Kotputli on NH8; (iii) Raniganj–Panagarh on NH2; (iv) Barwa Adda–Barakar on NH2; (v) Nandigama–Vijayawada on NH9; and (vi) Vijayawada–Eluru on NH5. These sections were identical to those evaluated at appraisal. These road sections were combined into five civil works packages. Sections (i) and (ii) constituted civil works contract I; section (iii), civil works contract II; section (iv), civil works contract III; section (v), civil works contract IV; and section (vi), civil works contract V. The total length of road rehabilitated under the Project was 331 kilometers (km). The main economic benefits consisted of savings in vehicle operating costs (VOCs).

2. The assumptions in the appraisal report were modified, where necessary, on the basis of updated information. The reevaluated economic internal rate of return (EIRR) considered the economic costs and benefits over the construction period, plus 20 years of operation, as at appraisal. All costs and benefits were expressed in 2006 constant prices. The methodology for calculating the EIRR used the Highway Development and Management Model (HDM-4), as at appraisal.

B. Economic Costs

1. Construction Costs

3. The economic construction costs were derived from the financial costs of civil works, land acquisition, and consulting services. All financial costs were converted to economic costs by deducting taxes and duties and by differentiating local currency costs into indirect foreign exchange and local currency costs. A standard conversion factor (SCF) of 0.901 was applied to the local currency costs of those items that were non-tradable. As at appraisal, no residual value was assumed at the end of the project life.

2. Maintenance Costs

4. Incremental maintenance costs were calculated as the difference between the costs of routine and periodic maintenance with and without the Project, in 2006 prices. The maintenance unit costs were obtained from the National Highways Authority of India (NHAI).

5. Maintenance costs were calculated for the with- and without-Project cases. In the without-Project case, essential routine maintenance (i.e., pothole patching, shoulder maintenance, cleaning culverts, etc.) would be required to keep the road open to traffic. In the with-Project case both routine and periodic maintenance would be necessary. Routine maintenance costs were calculated on a per km per year basis. At appraisal it was assumed that a periodic overlay would be undertaken after 10 years of operation with a strengthening layer and after a further 5 years the pavement would then be resurfaced again in the with-Project case. The economic reevaluation, in

1 The SCF of 0.90 is consistent with the SCF for other recent road projects in India, e.g., Madhya Pradesh State Roads

Sector Development Program and National Highways Sector II Project.

36 Appendix 11

line with NHAI practice, applied an overlay every 5 years after project opening.2 Similarly, in the without-Project situation it would have been necessary to undertake a periodic overlay every 5 years to keep the road operational.

C. Economic Benefits

1. General

6. The estimated economic benefits were based on a comparison of the with-Project and without-Project cases. Without the Project, the roads would generally have been in either poor or fair condition, and would accommodate only low vehicle speeds, and therefore would have caused high VOCs. With the Project, on the other hand, the roads would be in good condition. With the improved surface condition, higher vehicle speeds would then be possible, and these would, in turn, reduce VOCs. The VOC savings were calculated for normal traffic only.3

2. Traffic Forecasts

7. Updated traffic count data for each section of the project roads was obtained from NHAI. The data had been collected for the year the project roads opened to traffic and for subsequent years after opening. The traffic data were collected from survey stations at various locations along the project road sections. The survey traffic data were then processed to obtain the annual average daily traffic, taking into account daily and monthly variation factors. The total traffic volumes and vehicle composition for selected years along the project roads from 2001 to 2006, where available, are shown in Table A11.1. The traffic data collected at some locations appeared a little strange. For example, traffic on the Vijayawada–Eluru section of road shows a decline in volume in 2003–2006. Also, the number of cars between 2005 and 2006 declined by about 50%. Similarly, on the Raniganj–Panagarh section of the project roads, total traffic—specifically truck and motorcycle traffic—declined between 2001 and 2006. The traffic data were therefore adjusted for consistency. The traffic forecasts, which are based on the traffic data provided, are reasonably conservative, as explained in the following paragraphs.

8. At appraisal, the traffic forecast was made from traffic counts that had been undertaken from 1993 to the opening of the project roads in 1999 and then for a 20-year period of operation until 2018. Traffic growth at appraisal was calculated for the project roads for three representative vehicle categories commonly used on the project roads, namely: (i) cars, jeeps, and vans; (ii) buses; and (iii) trucks. Motorcycles, scooters, and auto-rickshaws (three-wheelers, and nonmotorized vehicles such as bicycles and animal-drawn carts) were considered only in relation to highway capacity calculations. The economic reevaluation applied the same methodology as that used at appraisal. Traffic growth was based on an examination of historical growth rates, growth in net state domestic product (NSDP),4 per capita income growth, population growth, and the appropriate income elasticity of demand (which varied from 1.5 to 2.5, depending on the vehicle category and the forecast year). The traffic forecast at appraisal used a set of growth rates for each state through which the project road passed, i.e., Andhra Pradesh, Haryana, Rajasthan, Bihar, and West Bengal. These traffic forecast growth rates varied depending on the vehicle 2 This is current practice. As was observed by the Project Completion Review Mission, the majority of the project roads

are now having periodic maintenance undertaken. 3 Normal traffic refers to projected traffic on the roads under the with- and without-Project scenarios. The economic

evaluation did not include generated traffic, as this was not included in the appraisal estimate. Generated traffic, i.e., traffic that did not travel before but now because of the road improvement finds a benefit in doing so, is difficult to estimate with any degree of accuracy. By concentrating on normal traffic, as at appraisal, the economic evaluation was more conservative.

4 Gross domestic product less consumption of fixed capital.

Appendix 12

37Appendix 11 37

category and the year, and ranged from 5.1% to 13.2% from 1993 to 1994, and from 4.8% to 11.2% per year from 1995 to 2004, declining to 4.6% to 10.9% per year from 2005 to 2018.

9. Future traffic growth rates for the economic reevaluation were based on past and future expectations of growth in NSDP, population growth, real income per capita growth,5 and the transport elasticity of demand for different vehicle categories. NSDP growth per year between 2001 and 2005 was on average 6.1% for Andhra Pradesh, 6.9% for Jharkaland (the former part of Bihar that one of the project road sections now runs through), 7% for Haryana, 8.3% for Rajasthan, and 7.2% for West Bengal. It is expected that over the remainder of the planning period of the analysis the NSDP growth rates will vary between 5% to 8% per year. The income elasticity of transport demand, as at appraisal, for passenger vehicles was considered to fall between 1.5 and 2.0.6 For freight vehicles the growth in future traffic is normally assumed to be in line with the growth in net domestic product. A summary of the traffic growth rates for passenger and freight traffic for the project road is shown in Table A11.2 for the major vehicle categories. As at appraisal, “standard” growth rates were adopted. These growth rates are conservative compared with the appraisal forecasts, considering some of the high historical growth rates between 2001 and 2006. Also, as noted above, some of the traffic data collected look strange for some sections of road as they decline and traffic shows large increases or declines from year to year. Because of this, the growth rates adopted are significantly lower than those estimated at appraisal.

5 Per capita income growth over the last 5 years has varied by state and ranges from 2% per year in Rajasthan to 5.6%

per year in Jharkaland. In Andhra Pradesh per capita income has grown by 2.6% per year; Haryana, 3.3% per year; and West Bengal, 4.3% per year. Future expectations of per capita income growth are expected to range between 3% and 6% per year over the evaluation period. (Source: Planning Commission, India)

6 At appraisal, the income elasticity of transport demand was between 2.1 and 2.5 for two-wheel vehicles, i.e., motorcycles. Motorcycles, as at appraisal, were not considered in the economic reevaluation.

38 Appendix 11

Table A11.1: Traffic Volume Comparison, 2001–2006 (Total Motorized Traffic AADT)

Road Section Vehicle

Type 2001 2002 2003 2004 2005 2006

Nandigama-Vijayawada NH9

Car Bus

Truck Motorcycle

Total

2,678 2,099 2,954 1,605 9,336

3,240 1,453 5,071 1,966

11,730

3,5032,8094,1052,304

12,721

Vijayawada–Eluru NH5

Car Bus

Truck Motorcycle

Total

1,947 865

3,476 2,106 8,394

2,1981,1126,0073,880

13,197

5,201 1,376 4,137 5,838

16,552

2,5631,2134,6282,831

11,235

Barwa Adda–Barakar NH2

Car Bus

Truck Motorcycle

Total

1,772 158

3,749 1,651 7,330

3,836516

5,9983,462

13,812

4,491552

7,0304,138

16,211

Raniganj–Panargarh NH2

Car Bus

Truck Motorcycle

Total

3,477 1,412 9,052 4,963

18,904

1,966 978

7,823 1,963

12,730

3,517836

7,9411,083

13,377 Gurgaon–Rajasthan Border NH8

Car Bus

Truck Motorcycle

Total

5,743 1,184 7,531 2,706

17,164

6,3801,4038,1933,229

19,205

6,762 1,501 8,807 3,503

20,573

8,7161,0579,6854,506

23,964 Rajasthan Border–Kotputli NH8

Car Bus

Truck Motorcycle

Total

2,903 587

6,904 1,018

11,412

3,558694

8,1541,492

13,898

4,073742

9,2731,631

15,719AADT = annual average daily traffic, NH = national highway. Source: National Highways Authority of India.

Appendix 12

39Appendix 11 39

Table A11.2: Traffic Growth Rates

(%)

State /National Highway Vehicle Type 2007—2011 2012—2016 2017 onward

Andhra Pradesh NH5 and NH9

Car Bus

Truck Motorcycle

5.5 5.0 6.5 6.8

5.5 5.0 6.5 6.2

5.0 4.5 6.0 5.7

Haryana NH8

Car Bus

Truck Motorcycle

6.6 5.5 7.0 8.3

6.6 5.5 7.0 7.6

6.0 5.0 6.5 6.9

Rajasthan NH8

Car Bus

Truck Motorcycle

7.0 6.0 8.0 8.8

7.0 6.0 8.0 8.1

6.3 5.5 7.4 7.4

Bihar (section of road in Jharkhand) NH2

Car Bus

Truck Motorcycle

10.0 8.0 6.9

12.5

10.0 8.0 6.9

11.5

9.0 7.5 6.5

10.5

West Bengal NH2

Car Bus

Truck Motorcycle

8.6 6.9 7.2

10.8

8.6 6.9 7.2 9.9

7.7 6.5 6.5 9.0

Source: Asian Development Bank estimates.

3. Vehicle Operating Cost Savings

10. The economic VOCs were updated by the Project Completion Review (PCR) Mission on the basis of data obtained from NHAI. The data were used in the HDM-4 model to calculate the VOCs. The costs were updated to 2006 economic prices by excluding taxes and duties and were calculated for three representative vehicle types: (i) car/utility, (iii) medium-sized bus, and (iii) medium-sized truck. The rate of road deterioration used in the economic analysis was based on the levels of surface roughness that existed before the Project was implemented, i.e., the without-Project case, compared with the roughness values in the with-Project case, and the VOC savings due to the road improvement were calculated. The road roughness level, as measured by the International Roughness Index (IRI),7 after the improvement of the project road, was set to IRI 2.5 m/km at the year of opening. This IRI value was verified by the PCR Mission through visits to the project road sites. The existing surface roughness on the project roads now is around IRI 2.5 m/km–3.0 m/km. On the project roads before their operation, i.e., the without-Project situation, the roughness values used at appraisal ranged from IRI 3.0 m/km to IRI 7.0 m/km. 7 The IRI is measured in meters per kilometer.

40 Appendix 11

D. Results of Economic Analysis

11. The EIRR for each of the project road sections that was evaluated at appraisal was calculated on the basis of the stream of estimated costs and benefits over the construction period, plus 20 years of use, as at appraisal. The results of the economic reevaluation compared with the appraisal results are summarized in Table A11.3. The stream of costs and benefits for each of the project road sections is shown in detail in Tables A11.4 to A11.9. The recalculated EIRR for the Project as a whole, as shown in Table A11.10, was 25.3%. This EIRR compares favorably with the opportunity cost of capital of 12% for the acceptance of economic feasibility. The EIRR calculated at appraisal was 37.2%. The difference in the EIRR calculated by the PCR Mission and that at appraisal is due to (i) revised economic costs derived from actual costs, (ii) longer construction periods caused by delays in implementation, and (iii) differences in traffic volumes and traffic growth at appraisal and reevaluation.

Table A11.3: Economic Internal Rate of Return (EIRR) at Appraisal and PCR Mission Economic Reevaluation

(%)

Project Highway Section Appraisal

(%)

Economic Reevaluation

(%) Gurgaon–Haryana / Rajasthan Border (NH8) 40.3 34.0 Haryana / Rajasthan Border–Kotputli (NH8) 39.4 29.6 Bawa Adda–Barakar (NH2) 36.9 19.4 Raniganj–Panagarh (NH2) 34.8 22.2 Nandigama–Vijayawada (NH9) 42.6 25.2 Vijayawada–Eluru (NH5) 28.8 20.1 Overall Project 37.2 25.3

Source: Asian Development Bank estimates.

Appendix 12

41Appendix 11 41

Table A11.4: Economic Evaluation of NH8 Gurgaon–Haryana/Rajasthan Border

(Rs million)

Capital Incremental Maintenance VOC Net

Year Costa Cost Savings Benefit

1996 6.40 (6.40) 1997 172.80 (172.80) 1998 237.70 (237.70 1999 484.50 (484.50) 2000 682.60 (682.60) 2001 315.80 (315.80) 2002 5.29 579.80 574.51 2003 5.29 773.03 767.74 2004 5.29 1,020.68 1,015.39 2005 5.29 1,354.66 1,349.37 2006 142.96 5.29 1,604.23 1,455.98 2007 (71.48) 5.29 2,041.37 2,107.56 2008 5.29 911.20 905.91 2009 5.29 1,222.79 1,217.50 2010 5.29 1,593.99 1,588.70 2011 142.96 5.29 2,092.51 1,944.26 2012 5.29 2,895.94 2,890.65 2013 (71.48) 5.29 3,150.41 3,216.60 2014 5.29 1,412.13 1,406.84 2015 5.29 1,891.69 1,886.40 2016 142.96 5.29 2,500.54 2,352.29 2017 5.29 3,875.91 3,870.62 2018 5.29 4,578.59 4,573.30 2019 (71.48) 5.29 4,792.19 4,858.38 2020 5.29 2237.54 2,232.25 2021 142.96 5.29 3267.91 3,119.66

EIRR 34.0%

( ) = negative, EIRR = economic internal rate of return, VOC = vehicle operating cost. a Costs were incurred between 1996 and 2001. A negative value under capital cost indicates a periodic

maintenance cost saving that was incurred in the “without-Project” case. Positive values under the capital cost (after the initial construction period) indicate periodic treatment in the “with-Project” case.

Source: Asian Development Bank calculations.

42 Appendix 11

Table A11.5: Economic Evaluation of NH8 Rajasthan Border–Kotputli

(Rs million)

Capital Incremental Maintenance VOC Net

Year Costa Cost Savings Benefit 1996 5.00 (5.00) 1997 135.30 (135.30) 1998 186.20 (186.20) 1999 379.50 (379.50) 2000 534.70 (534.70) 2001 247.40 (247.40) 2002 4.37 352.01 347.64 2003 4.37 461.35 456.98 2004 4.37 597.88 593.51 2005 4.37 774.75 770.38 2006 118.05 4.37 948.38 825.96 2007 (59.03) 4.37 1,261.55 1,316.21 2008 4.37 560.46 556.09 2009 4.37 757.07 752.70 2010 4.37 985.04 980.67 2011 118.05 4.37 1,286.17 1,163.75 2012 4.37 1,821.15 1,816.78 2013 (59.03) 4.37 2,039.50 2,094.16 2014 4.37 907.76 903.39 2015 4.37 1,222.25 1,217.88 2016 118.05 4.37 1,623.52 1,501.10 2017 4.37 2,557.70 2,553.33 2018 4.37 3,066.48 3,062.11 2019 (59.03) 4.37 3,230.66 3,285.32 2020 4.37 1,481.99 1,477.62 2021 118.05 4.37 2,090.44 1,968.02

EIRR 29.6%

( ) = negative, EIRR = economic internal rate of return, VOC = vehicle operating cost. a Capital costs were incurred between 1996 and 2001. A negative value under capital cost indicates a periodic

maintenance cost saving that was incurred in the “without-Project” case. Positive values under the capital cost (after the initial construction period) indicate periodic treatment in the “with-Project” case.

Source: Asian Development Bank calculations.

Appendix 12

43Appendix 11 43

Table A11.6: Economic Evaluation of NH2 Barwa Adda–Barakar

(Rs million)

Capital Incremental Maintenance VOC Net

Year Costa Cost Savings Benefit 1996 145.00 (145.00) 1997 90.80 (90.80) 1998 300.40 (300.40) 1999 341.40 (341.40) 2000 485.30 (485.30) 2001 441.00 (441.00) 2002 61.40 3.20 343.49 278.89 2003 (43.23) 3.20 577.93 617.96 2004 3.20 213.21 210.01 2005 3.20 278.62 275.42 2006 86.46 3.20 354.54 264.88 2007 3.20 562.40 559.20 2008 3.20 735.38 732.18 2009 (43.23) 3.20 868.35 908.38 2010 3.20 344.80 341.60 2011 86.46 3.20 453.77 364.11 2012 3.20 697.35 694.15 2013 3.20 912.14 908.94 2014 3.20 1,181.17 1,177.97 2015 (43.23) 3.20 1,366.70 1,406.73 2016 86.46 3.20 543.47 453.81 2017 3.20 874.18 870.98 2018 3.20 1,143.90 1,140.70 2019 3.20 1,475.67 1,472.47 2020 3.20 1,867.82 1,864.62 2021 (43.23) 3.20 2,152.98 2,193.01

EIRR 19.4%

( ) = negative, EIRR = economic internal rate of return, VOC = vehicle operating cost. a Capital costs were incurred between 1996 and 2002. A negative value under capital cost indicates a periodic

maintenance cost saving that was incurred in the “without-Project” case. Positive values under the capital cost (after the initial construction period) indicate periodic treatment in the “with-Project” case.

Source: Asian Development Bank calculations.

44 Appendix 11

Table A11.7: Economic Evaluation of NH2 Raniganj–Panagarh

(Rs million)

Capital Incremental Maintenance VOC Net

Year Costa Cost Savings Benefit 1996 0.00 1997 193.80 (193.80) 1998 263.20 (263.20) 1999 403.10 (403.10) 2000 528.90 (528.90) 2001 390.90 (390.90) 2002 317.20 3.15 353.13 32.78 2003 3.15 443.46 440.31 2004 3.15 545.82 542.67 2005 3.15 667.70 664.55 2006 85.05 3.15 725.45 637.25 2007 (42.52) 3.15 923.64 963.01 2008 3.15 404.85 401.70 2009 3.15 544.94 541.79 2010 3.15 704.41 701.26 2011 85.05 3.15 911.83 823.63 2012 3.15 1,292.74 1,289.59 2013 (42.52) 3.15 1,455.45 1,494.82 2014 3.15 636.70 633.55 2015 3.15 845.68 842.53 2016 85.05 3.15 1,107.08 1,018.88 2017 3.15 1,707.22 1,704.07 2018 3.15 2,081.19 2,078.04 2019 (42.52) 3.15 2,249.28 2,288.65 2020 3.15 1,004.34 1,001.19 2021 85.05 3.15 1,379.90 1,291.70

EIRR 22.2%

( ) = negative, EIRR = economic internal rate of return, VOC = vehicle operating cost. a Capital costs were incurred between 1997 and 2002. A negative value under capital cost indicates a periodic

maintenance cost saving that was incurred in the “without-Project” case. Positive values under the capital cost (after the initial construction period) indicate periodic treatment in the “with-Project” case.

Source: Asian Development Bank calculations.

Appendix 12

45Appendix 11 45

Table A11.8: Economic Evaluation of NH9 Nandigama–Vijayawada

(Rs million)

Capital Incremental Maintenance VOC Net

Year Costa Cost Savings Benefit 1996 7.00 (7.00)1997 82.50 (82.50)1998 123.60 (123.60)1999 256.40 (256.40)2000 196.20 (196.20)2001 112.80 (112.80)2002 21.30 3.60 167.99 143.092003 3.60 209.76 206.162004 3.60 258.73 255.132005 3.60 316.91 216.112006 97.20 3.60 463.30 459.702007 3.60 577.51 622.512008 (48.6) 3.60 257.88 254.282009 3.60 326.35 322.752010 3.60 398.56 297.762011 97.20 3.60 542.43 538.832012 3.60 672.71 669.112013 3.60 837.05 882.052014 (48.6) 3.60 373.17 369.572015 3.60 463.12 362.322016 97.20 3.60 644.78 641.182017 3.60 798.24 794.642018 3.60 978.94 975.342019 3.60 1,189.68 1,234.682020 (48.6) 3.60 519.00 418.202021 97.20 3.60 737.04 737.04

EIRR 25.2%

( ) = negative, EIRR = economic internal rate of return, VOC = vehicle operating cost. a Capital costs were incurred between 1996 and 2002. A negative value under capital cost indicates a periodic

maintenance cost saving that was incurred in the “without-Project” case. Positive values under the capital cost (after the initial construction period) indicate periodic treatment in the “with-Project” case.

Source: Asian Development Bank calculations.

46 Appendix 11

Table A11.9: Economic Evaluation of NH5 Vijayawada–Eluru

(Rs million)

Capital Incremental Maintenance VOC Net

Year Costa Cost Savings Benefit 1996 10.50 (10.50) 1997 101.30 (101.30) 1998 159.00 (159.00) 1999 458.40 (458.40) 2000 873.10 (873.10) 2001 904.20 (904.20) 2002 610.60 (610.60) 2003 5.35 483.85 478.50 2004 5.35 612.37 607.02 2005 5.35 772.06 766.71 2006 5.35 980.23 830.30 2007 144.58 5.35 1,334.10 1,401.04 2008 (72.29) 5.35 561.63 556.28 2009 5.35 742.35 737.00 2010 5.35 931.71 926.36 2011 5.35 1,164.74 1,014.81 2012 144.58 5.35 1,676.52 1,671.17 2013 5.35 1,953.21 2,020.15 2014 (72.29) 5.35 821.98 816.63 2015 5.35 1,043.10 1,037.75 2016 5.35 1,306.37 1,156.44 2017 144.58 5.35 1,905.94 1,900.59 2018 5.35 2,414.15 2,408.80 2019 5.35 2,795.59 2,862.53 2020 (72.29) 5.35 1,179.49 1,174.14 2021 5.35 1,533.61 1,383.68 2022 144.58 5.35 2354.06 2,354.06

EIRR 20.1%

( ) = negative, EIRR = economic internal rate of return, VOC = vehicle operating cost. a Capital costs were incurred between 1996 and 2002. A negative value under capital cost indicates a periodic

maintenance cost saving that was incurred in the “without-Project” case. Positive values under the capital cost (after the initial construction period) indicate periodic treatment in the “with-Project” case.

Source: Asian Development Bank calculations.

Appendix 12

47Appendix 11 47

Table A11.10: Economic Evaluation of the Project

(Rs million)

Capital Incremental Maintenance VOC Net

Year Costa Cost Savings Benefit 1996 173.90 (173.90)1997 776.50 (776.50)1998 1,270.10 (1,270.10)1999 2,323.30 (2,323.30)2000 3,300.80 (3,300.80)2001 2,412.10 (2,412.10)2002 1,010.50 19.61 1,796.42 766.312003 (43.23) 24.96 2,949.38 2,967.652004 24.96 3,248.69 3,223.732005 24.96 4,164.70 4,139.742006 529.72 24.96 5,076.13 4,521.452007 (28.45) 24.96 6,700.58 6,704.072008 (120.89 24.96 3,431.40 3,527.332009 (43.23) 24.96 4,461.85 4,480.122010 24.96 4,958.49 4,933.532011 529.72 24.96 6,451.46 5,896.782012 144.58 24.96 9,056.42 8,886.882013 (173.03) 24.96 10,347.75 10,495.822014 (120.89) 24.96 5,332.92 5,428.852015 (43.23) 24.96 6,832.55 6,850.822016 529.72 24.96 7,725.75 7,171.072017 144.58 24.96 11,719.18 11,549.642018 24.96 14,263.27 14,238.312019 (173.03) 24.96 15,733.08 15,881.152020 (120.89) 24.96 8,290.18 8,386.112021 400.03 24.96 11,161.88 10,736.89

EIRR 25.3%

( ) = negative, EIRR = economic internal rate of return, VOC = vehicle operating cost. a Capital costs were incurred between 1996 and 2002. A negative value under capital cost indicates a periodic

maintenance cost saving that was incurred in the “without-Project” case. Positive values under the capital cost (after the initial construction period) indicate periodic treatment in the “with-Project” case.

Source: Asian Development Bank calculations.

48 Appendix 12

QUANTITATIVE ASSESSMENT OF OVERALL PROJECT PERFORMANCE

Table A12.1: Overall Rating

Criteria Assessment Rating (0–3)Weight

(%) Weighted

Rating Relevance Highly Relevant 3 20 0.60 Effectiveness Effective 2 30 0.60 Efficiency Highly Efficient 3 30 0.90 Sustainability Likely 2 20 0.40

Overall Rating

Successful

2.50

Relevance: - Project objectives and outputs were relevant to strategic objectives of the Government and Asian Development Bank.

Effectiveness: - Project achieved its outcome. Efficiency: - Project achieved objectives in an efficient manner. Sustainability: - Project benefits and development impact are sustainable.

Table A12: 2: Rating System

Rating Value Relevance Effectiveness Efficiency Sustainability

3 Highly Relevant Highly Effective Highly Efficient Most Likely 2 Relevant Effective Efficient Likely 1 Partly Relevant Less Effective Less Efficient Less Likely 0 Irrelevant Ineffective Inefficient Unlikely

Ratings: Greater than 2.7 = Highly Successful

Between 1.6 and less than 2.7 = Successful Between 0.8 and less than 1.6 = Partly Successful Less than 0.8 = Unsuccessful

Source: Asian Development Bank assessment.