Completion Report

Project Number: 29250 Loan Number: 1747 September 2007

India: Surat-Manor Tollway Project

CURRENCY EQUIVALENTS

Currency Unit – rupee/s (Re/Rs)

At Appraisal At Project Completion 15 May 2000 13 January 2006

Re1.00 = $0.022 $0.023 $1.00 = Rs43.97 Rs44.32

ABBREVIATIONS

ADB – Asian Development Bank AIDS – acquired immunodeficiency syndrome AP – affected persons BOT – build-operate-transfer CCEA – cabinet committee on economic affairs DRC – district resettlement committee EIRR – economic internal rate of return EPA – environmental protection authority EW – east-west FIRR – financial internal rate of return GQ – golden quadrangle HIV – human immunodeficiency virus IDC – interest during construction LCV – light commercial vehicle LIBOR – London interbank offered rate MAV – multi-axle vehicle NGO – non-government organization NH – national highway NHAI – National Highways Authority of India NHDP – National Highways Development Project NS – north-south NSDP – net state domestic product OCR – ordinary capital resources O&M – operations and maintenance PCU – passenger car unit PIB – public investment board PIU – project implementation unit PPP – public-private partnership PPR – project performance report ROW – right-of-way RAP – resettlement action plan RRP – report and recommendation of the President SAFHI – South Asian Foundation for Human Initiatives SHG – self-help group SIEE – summary initial environmental examination TA – technical assistance VOC – vehicle operating cost

NOTES

(i) The fiscal year (FY) of the Government and its agencies ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends

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

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

CONTENTS Page

BASIC DATA ii MAP vi I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1

B. Project Output 2 C. Project Cost 3 D. Disbursement 3

E. Project Schedule 4 F. Implementation Arrangements 4 G. Conditions and Covenants 5 H. Consultant Recruitment and Procurement 5

I. Performance of Consultants, Contractors, and Suppliers 6 J. Performance of the Borrower and the Executing Agency 6 K. Performance of the Asian Development Bank 7 III. EVALUATION OF PERFORMANCE 7 A. Relevance 7 B. Effectiveness in Achievement of Outcome 8

C. Efficiency in Achievement of Outputs and Outcome 9 D. Preliminary Assessment of Sustainability 9 E. Environmental, Social, and Other Impacts 10

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13

A. Overall Assessment 13 B. Lessons Learned 13 C. Recommendations 14

APPENDIXES 1. Project Framework 16 2. Chronology of Main Events During Project Processing and Implementation 18 3. Details of Project Output 21 4. Project Cost 23 5. Annual Average Exchange Rates and Indian Wholesale Price Indices 25 6. Projected and Actual Disbursements of Loan Proceeds 26 7. Project Implementation Schedule 27 8. Project Implementation Structure 28 9. Status of Compliance with Major Loan Covenants 29 10. Economic Reevaluation 33 11. Financial Reevaluation 40 12. Land Acquisition, Resettlement and Social Impacts 42

BASIC DATA A. Loan Identification

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

First Cancellation Second Cancellation Amount of Loan (net of cancellation))

7. Project Completion Report Number

India 1747 Surat–Manor Tollway Project National Highways Authority of India (NHAI) NHAI $180.0 million $15.0 million (13 December 2004) $15.25 million (13 January 2006) $149.75 million PCR: IND 994

B. Loan Data

1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Initial Loan Agreement

Date of Amended and Restated Loan Agreement

5. Date of Loan Effectiveness – In Loan Agreement – Actual

– For Amended and Restated Loan 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)

Amended and Restated Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

8. Terms of Relending (if any)

27 July 1998 7 August 1998 28 January 1999 29 January 1999 27 July 2000 5 October 2000 4 July 2002 a 3 January 2001 8 November 2000 25 July 2002 30 September 2004 30 September 2005 1 6-month variable ordinary capital resources (OCR) rate 25 5 London interbank offered rate (LIBOR)-based 25 5 Not applicable

a This loan was transformed from a US dollar pool-based loan to a LIBOR-based loan. An amount of $20,360,375.60 was disbursed under the initial loan and the balance was transformed to a LIBOR-based loan.

iii

9. Disbursements

a. Dates Initial Disbursement

12 December 2000

Final Disbursement

13 January 2006

Time Interval

61 months

Effective Date

8 November 2000

Original Closing Date

30 September 2004

Time Interval

47 months

b. Amount ($ million) Category or Subloan

Original

Allocation

Last Revised

Allocation

Amount

Canceled

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance 1. Civil Works 114.00 140.00 8.76 131.24 131.24 0.00 2. Consulting Services 20.00 12.00 4.90 7.10 7.10 0.00 3. Interest and

Commitment Charges 17.00 13.00 1.59 11.41 11.41 0.00

4. Unallocated 29.00 0.00 0.00 0.00 0.00 0.00 Total 180.00 165.00 15.25 149.75 149.75 0.00

10. Local Costs (Financed) - Amount ($) 0 - Percent of Local Cost 0 - Percent of Total Cost 0 C. Project Data

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

Foreign Exchange Cost 180.00 158.26 Local Currency Cost 100.00 88.53 Total 280.00 246.79

2. Financing Plan ($ million) Appraisal Estimate Actual Cost Foreign Local Total Foreign Local Total Implementation Costs Borrower-Financed 0.00 100.00 100.00 8.52 88.52 97.04 ADB-Financed 162.60 0.00 162.60 138.34 0.00 138.34 Other External Financing 0.00 0.00 0.00 0.00 0.00 0.00 Total 162.60 100.00 262.60 146.86 88.52 235.38IDC Costs Borrower-Financed 0.00 0.00 0.00 0.00 0.00 0.00 ADB-Financed 17.40 0.00 17.40 11.41 0.00 11.41 Other External Financing 0.00 0.00 0.00 0.00 0.00 0.00 Total 17.40 0.00 17.40 11.41 0.00 11.41ADB = Asian Development Bank, IDC = interest during construction.

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3. Cost Breakdown by Project Component ($ million)

Appraisal Estimate Actual Cost a Component Foreign Local Total Foreign Local Total

A. Base Cost Right-of-Way Civil Works

Section I Section II Section III

Consulting Services Construction Supervision

Private Participation and Tolling Project Management

(Subtotal A)

B. Contingencies Physical Contingency Price Contingency

(Subtotal B)

0.00

51.3028.6034.10

10.0010.00

0.00134.00

13.5015.1028.60

12.00

29.2017.3020.00

2.502.001.00

84.00

7.508.50

16.00

12.00

80.5045.9054.10

12.5012.00

1.00218.00

21.0023.6044.60

0.00

63.2436.6136.79

7.682.540.00

146.86

0.000.000.00

7.72

36.3521.0421.14

0.000.002.27

88.52

0.000.000.00

7.72

99.5957.6557.93

7.682.542.27

235.38

0.000.000.00

C. Interest During Construction (Total A + B + C)

17.40180.00

0.00100.00

17.40280.00

11.41158.27

0.0088.52

11.41246.79

a Includes cost of additional works and price escalation. 4. Project Schedule

Item Appraisal Estimate a Actual Preconstruction

Right-of-Way Clearance Jan 2000 Apr 2001 b Prequalification for ICB c (advance action) Mar 1999 Jun 1999 Award of Civil Works Contract Feb 2000 Oct 2000 Recruitment of Supervision Consultants Feb 2000 Nov 2000

Construction

Civil Works Commencement of Works (all sections) Mar 2000 Nov 2000 Completion of Works

Section 1 Sep 2003 Jun 2005 Section 2 Sep 2003 Feb 2004 Section 3 Sep 2003 Dec 2003

Supervision

Commencement of Services Mar 2000 Nov 2000 Completion of Services Dec 2003 Jun 2005

a The schedule for contract award in the appraisal estimate is earlier than the Board approval date of 27 July 2000, as the schedule for contract awards were not fully updated before Board consideration. b The right-of-way clearance was undertaken in a timely manner and the site handed over to the contractors in

accordance with the handing over schedule commencing November 2000. c international competitive bidding.

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5. Project Performance Report Ratings a

Ratings Implementation Period

Development Objectives

Implementation Progress

From 30 Aug 2000 to 29 Nov 2000 S S From 30 Nov 2000 to 31 Dec 2000 S HS From 1 Jan 2001 to 27 Feb 2001 S S From 1 Mar 2001 to 31 May 2001 S HS From 1 Jun 2001 to 31 Dec 2001 S S From 1 Jan 2002 to 30 Jun 2002 S S From 1 Jul 2002 to 31 Dec 2002 S S From 1 Jan 2003 to 30 Jun 2003 S S From 1 Jul 2003 to 31 Dec 2003 S S From 1 Jan 2004 to 30 Jun 2004 S S From 1 Jul 2004 to 31 Dec 2004 S S From 1 Jan 2005 to 30 Jun 2005 S S From 1 Jul 2005 to 30 Sep 2005 S S a The methodology for ratings in the project performance report is different from that for project completion report

ratings. D. Data on Asian Development Bank Missions

Name of Missiona

Date

No. of Persons

No. of Person-Days

Specialization of Members b

Fact-Finding 4–20 May 98 5 80 b,d,e,g,j Appraisal 27 Jul–7 Aug 98 5 60 b,c,d,e,j Project-Specific Contact/Consultation 14–23 Dec 98 2 20 b,h Resettlement Action Plan 23–30 Nov 99 1 8 h Inception 31 May–20 Jun

01 3 25 h,k

Special Project Administration 11–17 Oct 01 3 14 h,j Review Mission 1 25 Jan–2 Feb 02 2 16 h,j Review Mission 2 25–28 Feb and 7

Mar 03 2 10 h,j

Review Mission 3 27–30 Oct 03 4 14 h,i,j,k Project Procurement-Related Audit 18 Oct–12 Nov

04 6 150 e,l

Review Mission 4 29–30 Nov 04 2 4 j,k Review Mission 5 18 Feb 05 1 1 j Project Completion Review b 7–8 Jun 07 1 2 j a a - engineer, b - financial analyst, c - counsel, d - economist, e - procurement consultant or specialist, f - control

officer, g - programs officer. h - project specialist, i - resettlement specialist or consultant, j - project officer, k - project analyst, l - others.

A R A B I A N S E A

Gulf of Cambay

Narmada River

NH-8

NH-8A

NH

-8C

NH-8

NH-8

NH-3

NH-4

B

NH17

NH-4

Ahmedabad

GANDHINAGAR Chidoda

Himatnagar

Dongarpur

Modasa

Mahsana

Sarkhej

Nadiad

Dholka

Khambha

Dohad

Godhra

Vadodara

Udaipur

Bharuch

Surat

Ankleshwar

Manor

Valsad

Nasik

Malegaon

Kalyan

Panvel

Thana

Mandvi

Pune

MUMBAI

to Kandla Portto

Jaip

ur/

Delh

i

to Panaji

to In

dore

to Bangalore/Chennai

R A J A S T H A N

G U J A R A T

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

M A H A R A S H T R A

State Capital

City/Town

Project Highway

National Highway

Paved Provincial Road

Railway

River

State Boundary

Boundaries are not necessarily authoritative.

INDIASURAT-MANOR

TOLLWAY PROJECT(as completed)

0 50 100

Kilometers

N

07-2780 HR

75 00'Eo

75 00'Eo

73 00'Eo

73 00'Eo

20 00'No20 00'No

24 00'No 24 00'No

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I. PROJECT DESCRIPTION

1. The national highway network in India has been in urgent need of capacity enhancement and rehabilitation. Large traffic volumes traveling primarily on a two-lane national highway network inflict heavy social and economic cost on the country. To address the capacity constraints on the national highway network, the Government of India, in 1998, formulated a structured program—National Highway Development Project (NHDP) for widening to four lanes (I) a 5,846-kilometer (km) heavily trafficked corridor connecting the major metropolitan cities Delhi, Mumbai, Chennai, and Kolkata, known as the golden quadrilateral (GQ); and (ii) the north-south (NS) corridor connecting Srinagar to Kanyakumari (4,000 km) and the east-west (EW) corridor connecting Silchar to Porbandar (3,300 km). Implementation of the NHDP has been entrusted to the National Highways Authority of India (NHAI). 2. The western transport corridor1 connecting Delhi, Mumbai, Bangalore, and Chennai on the GQ is the busiest corridor in India, particularly the section between Ahmedabad and Mumbai, where it passes through an industrial belt with connections to several major and minor ports on the west coast. The section between Ahmedabad and Mumbai is 528 km, of which 348 km had been or was being widened to four-lane standard. The section of 176 km between Surat and Manor remained a severe bottleneck for the efficient movement of goods and passengers between the industrial heartland of Gujarat and the port of Mumbai on the west coast of India. 3. The objectives of the Project were to remove the severe capacity constraints and improve road safety on critical sections of National Highway 8 (NH 8) from Surat to Manor. The components funded under the Project include (i) widening to four-lane standard (including strengthening the existing two lanes) 176 km of NH 8 between Surat and Manor, (ii) consulting services for construction supervision of road improvements, and (iii) consulting services for development of private participation and toll operations. During implementation of the Project, a component on consulting services to carry out a road safety audit on selected national highway and expressway corridors was included. The completed project was to be operated and maintained by the private sector through a toll concession. The project framework comprising appraisal targets and the achievements of the Project is in Appendix 1.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

4. The main events of project processing and implementation are presented chronologically in Appendix 2. A. Relevance of Design and Formulation

5. The Project is highly relevant and consistent with the Government’s NHDP and the Asian Development Bank’s (ADB) country strategy and program, and was the first ADB assistance to the Government for implementing the NHDP. Subsequent to this Project, from 2001 to 2004, ADB approved one loan each year to assist the Government in implementing the NHDP. The implementation of works on the GQ, of which the Project forms a part, is 95.35% complete.2 The works on the NS and EW corridors are 16.8% complete and 69.15% is under implementation.

1 The western transport corridor constitutes National Highway 8 (NH 8), NH 4, and some sections of NH 79, NH 76,

NH 7, and NH 46. 2 Implementation progress up to 31 May 2007, based on NHAI’s monthly progress report.

2

6. The feasibility study and the detailed design for the Project had been undertaken by NHAI through its own resources, and project formulation did not require any project preparatory technical assistance from ADB. Although the project design had incorporated several innovative technical features, it had not incorporated a higher degree of design standards to enhance road safety, such as flyovers, underpasses, overpasses at all major junctions and longer sections of service roads, as this was one of the earliest projects under the NHDP. During implementation of the Project, approval of a major change in scope allowed additional works to enhance road safety and facilitate uninterrupted traffic flow on the project corridor, utilizing some of the loan savings. The additional works such as flyovers, underpasses, overpasses, and additional service roads have significantly enhanced road safety and have resulted in uninterrupted traffic flow on the project corridor. The additional works were integral to the original works and would have been difficult to implement at a later stage. With the implementation of the Project, the entire NH 8 from Delhi to Mumbai was upgraded to a minimum of four-lane standards and the capacity constraints and critical bottlenecks were removed. 7. With substantial progress on the implementation of works on GQ and EW-NS corridors (NHDP I and II), the government expanded the NHDP program to NHDP III–VII for improvements to the other sections of the national highway network. The Government made a policy decision in 2005 that NHDP III–VII would be developed through the public-private partnership (PPP) mechanism, primarily through build-operate-transfer (BOT) and through annuity for less viable sections. NHDP V consists of widening to six lanes 6,500 km of the national highway including the GQ. The section between Surat and Manor completed under the Project is being taken up for widening to six lanes as part of NHDP V. The feasibility study conducted in 1998 envisaged the requirement of six lanes by 2007 and had recommended widening in a phased manner. B. Project Outputs

8. At appraisal the Project envisaged (i) road improvement by widening to four lanes (including strengthening the pavement of existing two lanes) about 180 km of NH 8 between Surat and Manor; construction of 42 bridges, and construction of toll plazas and bus bays at various locations; and (ii) capacity building for private participation and toll operations by creating an enabling environment for private participation. 9. Apart from the envisaged road improvement works, additional works constituting flyovers, underpasses, overpasses, and additional service roads were approved and implemented through a major change in the project scope. The additional works implemented by using loan savings have significantly enhanced road safety and have resulted in uninterrupted traffic flow on the project corridor. The incorporation of additional works contributed to the extension of contract periods and project implementation. 10. A toll system study and a comprehensive operation and maintenance (O&M) concession study were carried out under the Project. Additionally, a road safety audit for about 2,800 km of the national highway and expressway sections was carried out. The toll system study proposed improvement to the toll collection system, and a pricing strategy and a communication strategy to increase toll collection. The comprehensive O&M concession study developed a framework and administrative manual for the corridor management unit and O&M concession documents in various formats. The road safety audit study suggested location-specific, short-term and long-term safety improvement measures for 2,800 km of national highway and expressway sections and suggested improvements in the Indian road safety guidelines and codes.

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11. There was a significant delay in the process of selecting consultants and awarding contracts. Timely initiation and completion of the studies would have made the study outputs more relevant. 12. The details of the project output are in Appendix 3. C. Project Costs

13. At appraisal, the total project cost was estimated at $280 million equivalent comprising $180 million (64.3% of total cost) in foreign exchange and $100 million equivalent (35.7%) in local cost. The ADB loan of $180 million was to finance the entire foreign currency cost of the project. The total contract value for all the civil works contracts at the time of award was Rs5.658 billion ($130 million equivalent) compared with an appraisal estimate of Rs6.707 billion ($180.5 million equivalent). The lower-than-estimated cost arose from (i) the increased competition between contractors, thus driving rates down; (ii) a decline in the value of the Indian rupee against the US dollar; and (iii) overestimation of the cost at appraisal. Additional works on the project road to improve road safety and remove capacity constraints at an estimated cost of $66.8 million and ADB financing of $44.5 million were approved, utilizing some of the loan surplus and implementing the works as part of the Project. 14. The cost for consulting services and the resultant category allocation of $20 million under the Project had been overestimated. The total cost for consulting services upon completion of the Project was $10.2 million. The cost to the Executing Agency on account of interest during construction (IDC) was significantly lower than the appraisal estimate because the loan was transformed from a pool-based to a London interbank offered rate (LIBOR)-based loan. The project cost at completion3 inclusive of additional works, and physical and price variations was Rs11.377 billion ($246.8 million equivalent) as against the appraisal estimate of Rs10.405 billion ($280 million equivalent). During implementation, at the request of the Borrower on two occasions, a total loan amount of $30.25 million was cancelled4. Although the total completion cost for all components in local currency was higher by about 9.3% than the cost estimated at appraisal, the loan cancellation of $30.25 million was on account of the devaluation of the local currency with respect to the dollar. The estimated costs of the Project at appraisal, the cost at contract awards, and actual completion costs are detailed in Appendix 4. The annual average exchange rates and Indian wholesale price indices used are in Appendix 5. D. Disbursements

15. The loan approved by ADB on 27 July 2000 was provided from ADB’s ordinary capital resources, determined in accordance with ADB’s pool-based variable lending rate for US dollar loans. The Borrower was NHAI. The amended and restated loan agreement to switch from pool-based to LIBOR-based loan was signed on 4 July 2002 and made effective on 25 July 2002. 16. Disbursements totaled $149.749 million out of the original loan amount of $180 million, and $30.251 million was cancelled at two stages as loan savings. Although $17.4 million was earmarked for the IDC component, only $11.41 million was capitalized. The initial disbursements were made on 12 December 2000, and the final disbursement took place on 13 January 2006. The report and recommendation to the President (RRP) did not include any

3 The contractor for civil works contract package 1 submitted 42 claims, 40 of which NHAI referred to the existing

Arbitration Tribunal for adjudication. 4 $15 million effective on 13 December 2004 and $15.25 million effective on 13 January 2006.

4

disbursement schedule. Annual disbursement projections made by NHAI and ADB each year and the actual disbursements are in Appendix 6. E. Project Schedule

17. At appraisal the Project was envisaged to be completed by March 2004 and the loan’s original closing date was 30 September 2004. The schedule for contract award and the subsequent milestones were, however, not fully updated before Board consideration, as the appraisal estimate indicates contract award before the date of Board consideration. 18. The feasibility study, detailed design, and preparation of bid documents had been undertaken by NHAI with its own resources. With ADB approval, NHAI undertook advance action on procuring civil works and recruiting construction supervision consultants, and was in readiness to award the contracts upon Board approval. NHAI also undertook implementation of preconstruction activities such as acquisition of land, shifting of utilities, and tree cutting; and fulfilled the conditions for contract award related to completion of those activities and awarded all the contracts soon after Board approval. Project readiness and quality of the Project at entry are rated as excellent. 19. The civil works were carried out under three contract packages. The original contract period for contract packages 1, 2, and 3 were 36 months, 30 months, and 36 months, respectively. During implementation, additional works to enhance road safety on the project corridor and utilizing some of the loan savings were approved and included as part of the three civil works contract packages as variations. Suitable extensions were given to the contractors for implementing the additional works under the contract. The civil works contracts for contract packages 2 and 3 were completed within the original loan closing date, but for contract package 1, the loan closing date was extended by 1 year to 30 September 2005, to accommodate completion of the works. 20. The extension of the loan closing date was primarily caused by (i) the delay in the approval of additional works by the public investment board (PIB) and the cabinet committee on economic affairs (CCEA); (ii) significant additional works included under contract packages 1 and 2 as variations to the original contract; (iii) inadequate participation of the lead partner of the joint-venture contractor for contract package 1, leading to delays in completing the works (para. 31). 21. Overall, project implementation is considered satisfactory. The project implementation schedule as envisaged at appraisal and actual is in Appendix 7. F. Implementation Arrangements

22. The implementation arrangements envisaged at appraisal were adhered to and were found to be adequate. The project implementation unit (PIU) was staffed with experienced personnel, both at management level at NHAI’s headquarters and at the project site. Overall responsibility for project implementation was with Member (Administration) 5 , NHAI at headquarters, who was assisted by adequate and experienced staff. The PIU in the field was headed by a project director of the level of Chief General Manager/General Manager and was assisted by a Deputy General Manager and three Managers, each responsible for one contract package. The PIU in the field was delegated with sufficient administrative authority for effective

5 Member (Administration) is a full-time member on the NHAI Board.

5

and timely decision making on project implementation issues. The PIUs had undertaken advance action for shifting utilities, cutting trees, land acquisition, and resettlement so that the site was handed over to the contractor in accordance with the handing over schedule in the contract agreement. Periodic reviews were conducted by Member, NHAI to monitor implementation progress and resolve any outstanding issues. The project implementation structure is in Appendix 8. G. Conditions and Covenants

23. There were no particular conditions for effectiveness of the loan agreement. No covenants were modified, suspended, or waived during project implementation. NHAI complied with 12 major loan covenants and substantially complied with 1 major loan covenant. The details of compliance with major loan covenants are in Appendix 9. 24. Fully recognizing the role of the road sector in fostering economic development and growth, the Government initiated major policy reforms and an investment program during the implementation of the Project. The initiatives of the Government―such as progressive increases in cess on diesel and petrol for road funding, establishing a central road fund for developing and maintaining roads, finalizing a model concession agreement for road development and maintenance through BOT and annuity concessions, policy decision to undertake projects under NHDP through public-private partnership using BOT and annuity concessions, O&M through private sector contracts―far exceed the intent of the related loan covenants under the Project. H. Consultant Recruitment and Procurement

1. Consultants 25. At appraisal, it was envisaged that consultants would be engaged to provide consulting services (i) for construction supervision of road improvements; and (ii) to assist NHAI in promoting private participation, mobilize private financing for the development of national highways, and backstop services relating to O&M of the completed project facility (including the toll structure). NHAI made use of ADB approval of advance action to recruit construction supervision consultants and undertake timely action on the recruitment activities. The consultants for construction supervision were recruited and fielded soon after Board approval and effectiveness of the loan. 26. The outline terms of reference for consulting services for (i) a comprehensive O&M concession study, and (ii) a toll system study were further developed and included as part of the Western Transport Corridor Project6 together with consulting services for a road safety audit for the western transport corridor, with the understanding that loan proceeds of the Project will be used for these activities. With the assistance of ADB, NHAI further refined the terms of reference for the three studies. NHAI, with the approval of ADB expanded the scope of consulting services for the road safety audit to include other national highway and expressway sections. There was a considerable delay in engaging consultants for these studies because of (i) a delay in initiating the recruitment process; (ii) failure of negotiations with the first ranked firm and subsequent negotiation with the second ranked firm for the toll system study; and (iii) the

6 ADB. 2001. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to India

for the Western Transport Corridor Project. Manila (Loan 1839-IND, for $240 million, approved on 24 August).

6

need to reinvite proposals from consultants for consulting services for the road safety audit, as the technical proposals did not meet the minimum qualifying score of 750. 27. The consultants for all consulting services were recruited by NHAI in accordance with ADB’s Guidelines on the Use of Consultants.

2. Procurement 28. NHAI made use of advance procurement action approved by ADB for civil works procurement. Procurement was undertaken in accordance with ADB’s Guidelines for Procurement following international competitive bidding procedures. ADB approved NHAI’s evaluation report in January 2000, ahead of Board approval. NHAI fulfilled the condition for the award of civil works contracts on the acquisition of land, shifting of utilities, and tree cutting on a timely basis by undertaking advance action on those preconstruction activities. The contracts for the three civil works packages were awarded soon after Board approval. I. Performance of Consultants, Contractors, and Suppliers

29. Supervision of construction for all the three contract packages was undertaken by one consultant, which was a joint venture of a domestic and a foreign firm, with further association with a domestic and a foreign firm. The consultant was assigned the powers of the Engineer, in accordance with the Fédération International des Ingenieurs-Conseils (FIDIC) conditions of the contract, barring a few exceptions, for which it had to obtain prior approval from NHAI. The supervision consultant had a major responsibility for implementing the Project and the overall performance was satisfactory. 30. The performance of consultants engaged for various sector studies was varied. The quality of output of the consultants for the toll system study was partly satisfactory. The performance of the consultants for the comprehensive O&M concession study was satisfactory. The performance of the four consultants who undertook the road safety audits varied from satisfactory to partly satisfactory. 31. The performance of the contractors for the three civil works contract packages was varied. The contractors for contract packages 1 and 2 were joint-venture firms, with a foreign lead partner and a domestic partner. The participation of the foreign lead partners in executing the contracts for the two packages was not satisfactory, as they did not provide adequate financial resources, equipment, and key personnel. Implementation of the contracts suffered due to lack of adequate participation by the lead partner. The performance of the contractor for contract package 2 was initially slow, but improved significantly in the course of implementation. The performance of the contractor for contract package 1 is considered partly satisfactory and that of the contractor for package 2 satisfactory. The contractor for contract package 3 was a domestic contractor, and its performance is considered highly satisfactory. J. Performance of the Borrower and the Executing Agency

32. NHAI was both the Borrower and the Executing Agency. Its overall performance in both roles was satisfactory. NHAI undertook the project preparatory and preconstruction activities― feasibility studies, detailed project preparation, shifting of utilities, land acquisition, tree cutting, environmental clearance, procurement of civil works contracts, and engagement of supervision consultants―in a timely manner and achieved a high degree of project readiness by the time of Board approval. The NHAI project team exhibited strong project management and problem-

7

solving capabilities and the civil works under the Project were completed expeditiously. However, NHAI was delayed in initiating and awarding contracts for the sector studies. NHAI also took considerable time in deciding on contractual matters such as contract variation, extension of time, interest against delayed payments, and the release of performance security. 33. Although NHAI had initiated the process of seeking Government approval for additional works under the Project in October 2001, Government approval was considerably delayed. The PIB clearance was issued in December 2003 and the CCEA approval in October 2004. 34. Over several years, NHAI has strengthened its institutional, project management and implementation capabilities and has now been implementing projects valued at more than $1 billion each year. It has also operationalized the maintenance of highways through private sector participation, established and strengthened an environment and social development unit, developed a road database information system, developed a computerized project accounting and monitoring system, and developed standard procedures for project implementation. On the basis of a recent Government policy, NHAI has now been implementing projects through public-private partnership mechanisms. K. Performance of the Asian Development Bank

35. ADB was very closely involved in identifying potential problems, critical activities, and resolving issues related to the Project through regular review missions and frequent monitoring of project progress. ADB provided useful and timely advice on (i) incorporation of additional works related to road safety as part of the Project; and (ii) formulation of the terms of reference and review of consultants’ reports related to the toll system study, comprehensive O&M concession, and road safety audits. ADB approved expeditiously the documents and evaluation reports prepared and submitted by NHAI on civil works procurement, engagement of consultants, and incorporation of additional works related to road safety. Project administration was delegated to the India Resident Mission (INRM) on 1 January 2003. ADB’s overall performance was satisfactory.

III. EVALUATION OF PERFORMANCE

A. Relevance

36. At appraisal and completion, the Project is assessed as highly relevant and consistent with the Government’s NHDP and ADB’s country strategy and program for India. The intended outcomes under the Project were to (i) remove capacity constraints and improve road safety; and (ii) commercialize O&M of project roads through private toll collection. The project outcomes have been consistent with the Government’s development priorities and programs at appraisal and completion and the Government has intensified its focus on the development of road infrastructure and policy reforms. Since the NHDP was formulated in 1998, the Government has successfully implemented NHDP I and II, and expanded the scope of NHDP up to NHDP VII. The Government has undertaken several sector policy reform measures for financing, developing, and maintaining road infrastructure―it has created a central road fund, has been tolling four-lane sections of national highways, created an enabling environment for private sector participation in road development and maintenance, finalized model concession agreement for projects on BOT, annuity, and O&M formats. 37. The Project has also been consistent with ADB’s country strategy and program for India at appraisal and completion, as ADB has provided continuous assistance for implementing

8

NHDP I–II from 2000 to 2004 through a programmatic approach, which has helped NHAI in enhancing private sector participation in road development and commercialization of O&M. 38. Through a major change in scope, utilizing loan savings, the project design was further enhanced with the incorporation of additional works such as flyovers, underpasses, overpasses, additional service roads to improve road safety and address congestion in urban and built-up areas. These works were not envisaged at the time of project formulation and design as the Project was one of the earliest under NHDP. As NHAI gained experience in formulating and designing vast stretches under NHDP and from the other projects completed through ADB and World Bank assistance, the additional works were considered necessary to improve road safety and remove capacity constraints. The extent and nature of the additional works were also consistent with the standards being adopted in other parts of the western transport corridor, particularly those standards adopted on the subsequent ADB-funded Western Transport Corridor Project (footnote 6). Through the use of loan savings, the additional works were incorporated on time as part of the Project as they were integral to the original works and would have been difficult to implement at a later stage. 39. The section between Surat and Manor completed under the Project is being taken up for widening to six lanes as part of NHDP V. The feasibility study conducted in 1998 envisaged the need for six lanes by 2007 and had recommended the widening in a phased manner. B. Effectiveness in Achieving the Outcome

40. The Project is rated as effective. The intended outcomes were to (i) remove capacity constraints and improve road safety; and (ii) commercialize O&M of project roads through private toll collection. The outputs envisaged were (i) road improvement by widening to four lanes a 180 km stretch between Surat and Manor, including constructing 42 bridges, toll plazas, and bus bays at various locations; and (ii) enhanced capacity for private participation and toll operations with the creation of an enabling environment and a framework for private participation, preparation of model concession agreements, and a review of toll structure. 41. Apart from the road improvement works envisaged, additional road safety features were incorporated during the project implementation period (para. 38). The completed Project has been very effective in (i) removing capacity constraints through capacity enhancement of the highway; (ii) facilitating uninterrupted traffic flow and reducing travel time; (iii) reducing vehicle operating cost; and (iv) improving road safety on the stretch between Surat and Manor on NH 8. In urban areas, widening to six lanes and construction of flyovers, underpasses, overpasses, and service roads have reduced the congestion levels and decreased accidents through the separation of through traffic and local traffic. The additional works have enhanced the effectiveness of the Project in achieving the intended outcome. 42. During the last several years, the Government through its own initiative and multilateral assistance has undertaken major policy initiatives that have far exceeded the intended outcome and outputs by commercializing O&M through private toll collection and creating an enabling environment for private sector participation (para. 24). The Project has assisted NHAI in (i) preparing concession agreements for collecting toll and O&M under various formats; and (ii) undertaking a toll system study. Additionally, the Project also assisted NHAI in undertaking a road safety audit. 43. The intention was for NHAI to collect toll, operate, and maintain the completed project facility through a concession to the private sector developed under the Project. However, under

9

NHDP V, NHAI has now initiated the process of further widening to six lanes the completed project facility together with the adjoining stretches through a BOT concession to the private sector. The concession would include the responsibility for construction, toll collection, and O&M. The proposed concession would fully meet the intended outcome. Meanwhile, NHAI has been collecting toll, operating, and maintaining the completed project facilities through short-term contracts to the private sector. 44. The road safety audit for 2,800 km, including the highway section under the Project, has helped NHAI identify location-specific, short-term, and long-term safety measures and improvements in the Indian road safety guidelines and codes. NHAI is incorporating the identified safety measures during widening of the completed project facility to six lanes. C. Efficiency in Achieving the Outcome and Outputs

45. The Project is rated highly efficient. Economic reevaluation following the methodology used at appraisal was carried out. The economic internal rate of return (EIRR) at reevaluation was 32.2%, higher than the appraisal estimate of 25%. The higher savings in vehicle operating cost and higher projected traffic at project completion contributed to the higher EIRR at completion. 46. The Project’s financial internal rate of return (FIRR) was 9.6%, compared with the appraisal estimate of 14.2%. The lower FIRR at completion is due to concessional monthly passes for local residents and concessional toll rates for multiple entry. 47. The economic and financial reevaluation are based on recent traffic. The traffic projections at appraisal were revised to incorporate traffic and other economic data that had become available since appraisal. 48. Details of current and projected traffic, and the methodology adopted for economic and financial reevaluation are in Appendixes 10 and 11. D. Preliminary Assessment of Sustainability

49. The sustainability of the Project is rated as most likely. As envisaged during the feasibility study and appraisal, the highway would need to have six lanes to meet the traffic demand. The highway sections under contract packages 1, 2, and 3 would reach the four-lane highway capacity7 by 2010, 2007, and 2013, respectively. 50. The rules for collecting toll on four-lane national highways had been framed in 1997 under the National Highway Act. The Government has since been collecting toll on the four-lane national highways. The initial public resistance to the toll has now subsided and road users are now more willing to pay for better roads. 51. Under NHDP V, NHAI has initiated the widening to six lanes of the highway section completed under the Project, together with the adjoining sections. Bids would be invited from the private sector for a BOT concession. Under NHDP V, NHAI recently awarded concessions for six lanes on the adjacent highway section between Surat and Vadodara under two contracts,

7 The capacity of a four-lane highway is taken as 80,000 motorized passenger car unit (PCU), as separate service

roads have been provided for nonmotorized traffic traveling short distances.

10

where NHAI received a negative viability gap funding8 from the successful bidder. Given a similar traffic scenario on the Surat–Manor section completed under the Project, a negative viability gap funding from the concessionaire is a possibility. The private sector concession would ensure adequate maintenance of the highway in accordance with predetermined standards and its funding. In the meantime, NHAI has been collecting toll, operating, and maintaining the completed project facilities through short-term contracts to the private sector. E. Environmental, Social, and Other Impacts

1. Environmental Impacts 52. The Project was in environmental category B, and an initial environmental examination was conducted during feasibility and appraisal in accordance with ADB’s Environmental Guidelines for Selected Infrastructure Projects. The Project did not envisage any significant adverse environmental impacts. The summary initial environmental examination (SIEE) identified some moderate environmental impacts due to the Project: reduction of forestland, destruction of vegetation, obstruction to drainage, interference to existing traffic, destruction of utility lines, accident risk during construction, and increased noise from vehicular traffic. To address the potential impacts, an environmental mitigation and monitoring program was included in the SIEE. 53. NHAI sought the statutory environmental clearances from the Ministry of Environment and Forest and the state forest departments for the cutting of trees, diversion of some forest- land, and the implementation of the Project. As a section of the project stretch in Maharashtra passes through ecologically sensitive Dahanu Taluka, NHAI also obtained the statutory approval of the Dahanu Taluka Environment Protection Authority (EPA). The environmental and forest clearances were issued by the respective authorities, subject to compliance with stipulated conditions. While issuing approval for the section of the Project passing through Dahanu Taluka, the Dahanu Taluka EPA laid down the condition that 10 new trees should be planted in advance (pre-afforestation) for each tree to be cut in the forest as well as nonforest areas in that section. Pre-afforestation stipulated by Dahanu Taluka EPA was a novel concept to ensure compliance before the trees are cut. 54. An environmental monitoring cell was constituted for implementing the environmental mitigation and monitoring program. The Project was implemented in accordance with the environmental mitigation and monitoring plan under the loan agreement and the conditions of the environmental and forest clearance stipulated by the respective authorities. The project design incorporated the environmental mitigation measures, and construction supervision consultants monitored the mitigation measures during construction. Implementation of the environmental mitigation measures was closely monitored with particular attention to contract package 3, where a section of the highway passes through ecologically sensitive Dahanu Taluka. A 6-monthly monitoring report, with emphasis on the section under contract package 3, was submitted by NHAI to the regional office of the Ministry of Environment and Forest. 55. The potential moderate environmental impacts identified in the SIEE were addressed during implementation. The environmental and forest clearance stipulated pre-afforestation and compensatory afforestation. NHAI had deposited the cost of afforestation requested by the State forest department. Pre-afforestation for 113,513 trees outside the right-of-way and

8 The concessionaire paid a grant to NHAI for the concession to construct, maintain, operate, and collect toll on the

highway.

11

compensatory afforestation for 24,000 trees in the right-of-way were undertaken by the forest department of Maharashtra State for the highway corridor under contract package 3. In Gujarat, the forest department generally undertakes compulsory afforestation according to its state-wide plans. 56. Adequate drainage measures―bridges, culverts, stabilizing structures, and drains― have been incorporated in the project design and constructed to ensure that the drainage is efficient and there is no waterlogging. No labor camps were allowed to be constructed in the forest area and along the roadside plantation. Labor camps were constructed on barren and degraded land. When construction was completed, the camps were dismantled and the sites restored. Roadside utilities lines were shifted before starting construction works in those sections. Adequate road signs and barricades were provided and traffic was diverted in accordance with the approved arrangements. 57. The other critical environmental issues addressed and monitored during project implementation include utilization of bituminous waste, reconciliation of borrow areas and quarries, noise and air pollution, environmental quality at the construction and plant sites, labor and staff camp, traffic safety for road users, personal safety for workers, and median and road- side plantation. 58. The completed project has improved environmental quality along the project corridor by (i) reducing air and dust pollution in inhabited locations, particularly emissions due to construction of flyovers, underpasses, overpasses, service roads, and afforestation; (ii) reducing noise level with the planting of trees and shrubs in the right-of-way and median; and (iii) reducing erosion of the embankment with the use of vegetation, turfing, and other protection works.

2. Social Impacts 59. The rehabilitation and resettlement of project affected-persons was undertaken by NHAI in accordance with the resettlement action plan (RAP) for the Project. NHAI established a resettlement group at the PIU for implementing the RAP and approved the supervision consultants’ engagement of a nongovernment organization (NGO) for assistance. The South Asian Foundation for Human Initiatives (SAFHI), an NGO, was engaged to assist NHAI in implementing the RAP. 60. The verification survey in June–September 2002 indicated a significantly higher number of project-affected persons (3,245 entitled persons) than that recorded under the original survey, (1,498 entitled persons) listed in the RAP. The Project involved acquisition of government land, agricultural and nonagricultural private land, and displacement of some small-scale business enterprises and common property resources. The compensation and assistance to titleholders and non-titleholders were undertaken in accordance with a microplan. The microplan for the titleholders comprised (i) compensation for land, structures, and trees assessed by the competent authority; (ii) payment of the difference between the compensation paid by the competent authority and the replacement cost; (iii) transfer allowance for residential and commercial structures; (iv) assistance to offset loss of employment and income; and (v) assistance to offset loss of business and industry. The microplan for the non-titleholders comprised (i) cost of structures, and (ii) transfer allowance for residential and commercial structures.

12

61. The titleholders affected by the Project were 2,797, for whom the competent authority had assessed a compensation of Rs157.3 million. NHAI deposited the full amount with the respective competent authorities. Additional compensation of Rs45 million was assessed by the district resettlement committees. About 95% of the total amount including the additional compensation has been disbursed to the titleholders. The balance could not be disbursed due to difficulty in locating some of the entitled persons, presence of leaseholders, lack of documentation for land transfers that would allow compensation to current recognized titleholders, and land disputes in the family or absentee nonresident landlords whose compensation would have to await their visit to India. The competent authorities have sent postal letters to the entitled persons to collect their compensation. NHAI disbursed an assistance of Rs1.06 million to 278 non-titleholders. Some of the non-titleholders included in the microplan did not have to be displaced from the right-of-way for construction works, and therefore did not have to be compensated. 62. The NGO assisted NHAI in the income restoration of the affected persons (APs). The NGO coordinated and, wherever required, imparted training to interested persons and members of women’s self-help groups (SHG) to upgrade their skills. Training was given to members of 28 SHGs in the villages adjacent to the project corridor. The NGO coordinated the training with the Rural Technology Institute, Gujarat at Pardi, Valsad district to build capacity and upgrade the skills of 23 APs. The Mission of the Institute is to upgrade the technology and skills of artisans in the cottage and rural industry sector to improve their efficiency, productivity, and income. The NGO also provided training on basic computer applications. 63. NHAI relocated the common property resources such as hand pumps, dug wells, and temple in consultation with the affected persons. NHAI also provided assistance to some of the APs by providing alternate housing sites and relocating traders along the highway after land development. 64. During project implementation, several meetings with construction workers were conducted at different locations to increase their awareness of HIV/AIDS and general health and hygiene. 65. The influence area under contract package 3 of the Project is located in Thane district in Maharashtra. A high proportion of the population in Thane is of tribal origin. No tribal groups (indigenous people) were affected by activities associated with the Project as their settlements are at some distance from the highway. The construction activities had created significant employment opportunities for the local tribal residents. 66. Details of land acquisition, resettlement, and social impacts during project implementation are in Appendix 12.

3. Other Impacts 67. Reduction in vehicle operating cost, level of congestion, and travel time has resulted in reduced transport cost leading to increased competitiveness and economic growth. The improved highway corridor would provide opportunities for further economic, industrial, and tourism development along the corridor, leading to increased employment.

68. The Project generated direct employment opportunities for technical personnel, and skilled, semi-skilled, and unskilled labor. A total of 4,223,500 man-days of employment was generated by the Project.

13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

69. The Project is considered highly successful, based on a review of its relevance, effectiveness, efficiency, and sustainability. It has been highly relevant and consistent with the Government’s NHDP and ADB’s country strategy and program for India. It has been successful in reducing transport cost and promoting economic growth by removing capacity constraints, reducing travel time and vehicle operating cost, and improving road safety. The additional works incorporated during implementation, utilizing the loan savings, further improved road safety and facilitated uninterrupted traffic flows. The reevaluated EIRR and the FIRR for the Project are 32.2% and 9.6%, respectively. 70. The Project assisted the government in major policy initiatives during the last several years: in commercializing O&M through private toll collection and creating an enabling environment for private sector participation. B. Lessons Learned

71. The Project serves as a model for good quality and project readiness at entry. This was the result of (i) project preparation by NHAI through its own resources; (ii) deployment of a project team by NHAI at headquarters and the field office in the initial stage to supervise project preparation, and undertake procurement activities and preconstruction activities; and (iii) advance action on civil works procurement, recruitment of construction supervision consultants, and preconstruction activities such as shifting of utilities, cutting of trees, and land acquisition. NHAI fulfilled the conditions for contract award on preconstruction activities and awarded all the contracts soon after Board approval of the Project. 72. The total contract value for all the civil works contracts at the time of contract award was Rs5.658 billion ($130 million equivalent) compared with an appraisal estimate of Rs6.707 billion ($180.5 million equivalent), resulting in substantial loan savings. There were also substantial loan savings from the Western Transport Corridor Project (footnote 6). The lessons were incorporated by ADB in its subsequent loans through careful review of cost estimates and adoption of a sector loan modality, which allows inclusion of additional subprojects subject to compliance with the eligibility criteria. 73. The loan surplus allowed incorporation of additional works on the project road to improve road safety and remove capacity constraints at congested urban locations. These works were not envisaged at the time of project formulation and design, as the Project was one of the earliest under NHDP. From NHAI’s experience in formulating and designing vast stretches under NHDP and from projects completed through ADB and World Bank assistance, these additional works were considered necessary to improve road safety and remove capacity constraints. With the use of loan savings, the additional works were timely incorporated as part of the Project, as they were integral to the original works and would have been difficult to implement at a later stage. 74. Although NHAI had initiated the process of seeking Government approval for the additional works under the Project in October 2001, such approval was considerably delayed. The PIB clearance was issued in December 2003 and the CCEA approval in October 2004. The delay in the two clearances was one of the reasons for the delay in contract package 1 and the

14

claims made by the contractor. The Government needs to streamline the procedures for speedy PIB/CCEA clearance. 75. NHAI took considerable time in deciding on contractual matters such as contract variation, extension of time, interest against delayed payments, and release of performance security. Delegating certain contractual and financial authority at NHAI headquarters and in the field offices, and streamlining the procedure for contractual decisions would expedite project implementation. 76. The contractors for contract packages 1 and 2 were joint-venture firms, with a foreign lead partner and a domestic partner. The participation of the foreign lead partners in executing the contract for both packages was not satisfactory, as they did not provide adequate financial resources, equipment, and key personnel. Implementation of the contracts suffered due to lack of adequate participation by the lead partner. A similar problem with joint-venture contractors was also experienced in the Western Transport Corridor Project (footnote 6). The qualification requirements for the other partner and the contractual obligations of the lead partner have since been strengthened in the subsequent projects to avoid such situations. C. Recommendations

1. Project-Related

a. Future Monitoring

77. All project components have been successfully completed and no future project monitoring by ADB is required. b. Covenants 78. Compliance with 12 major loan covenants and substantial compliance with 1 major loan covenant have been achieved, and any specific monitoring of the loan covenants is not required.

c. Further Action or Follow-Up 79. NHAI should monitor the status of compensation payment to the remaining titleholders, to whom payment could not be disbursed due to difficulty in locating some of the entitled persons, presence of leaseholders, lack of documentation for land transfers that would allow compensation to current recognized titleholders, land disputes in the family, or absentee non- resident landlords whose compensation would have to await their visit to India.

d. Timing of the Project Performance Evaluation Report 80. The recommended time for fielding a project performance audit review (PPAR) mission is in 2012 after the completion of six lanes of the project highway.

2. General 81. Under NHDP V, NHAI has initiated the process of further widening to six lanes the completed project facility together with the adjoining stretches through a BOT concession to the private sector. The widening to six lanes of various sections under the Project should be in phases in the concession to the private sector, considering that (i) completion dates for various

15

sections under the Project differ, the most recent completion being June 2005 for contract package 1; (ii) the traffic volumes on various sections differ and would reach the highway’s capacity at different times; and (iii) different construction schedules for various sections would least disrupt the traffic flow. The recommendations of the road safety audit should be incorporated in widening to six lanes in the project facility. 82. The comprehensive O&M study has produced useful documents: (i) O&M concession documents in various formats, (ii) a corridor management unit administration manual, and (iii) a maintenance manual. NHAI should select a highway corridor and pilot the use of the documents. 83. The road safety audit study suggested location-specific, short-term, and long-term safety improvement measures for 2,800 km of the national highway and expressway sections and suggested improvements in the Indian road safety guidelines and codes. NHAI should implement the appropriate recommendations of the road safety audit.

16 Appendix 1

PROJECT FRAMEWORK

Design Summary

Appraisal Performance Indicators/Targets

Project Achievement Key Issues and Recommendations

1. Impact Reduce transport cost and promote economic growth

• Increased

competitiveness of Indian industry and agriculture

• Increased gross domestic product

• Improved social indicators

Reduction in vehicle operating cost and travel time has reduced transport cost leading to increased competitiveness and economic growth. The improved transport corridor will offer opportunities for further economic and industrial development along the corridor, leading to increased employment.

2. Outcome • Remove capacity

constraints and improve road safety on National Highway 8.

• Commercialize

operation and maintenance of project road through private toll concession.

• Efficient movement

of freight and passengers:

- Increased capacity of project highway from 45,000 PCUs to 80,000 PCUs

- Travel time reduced by 34%.

- Vehicle operating costs reduced by 15%

• Decreased congestion in urban areas

• Reduced accidents by separating through and local traffic in urban areas

• Efficient management and administration of tollway facility

• Fully funded maintenance program

• Generation of funds for NHAI from commercialization

The capacity of the project corridor has increased to 80,000 PCUs. Travel time on the project corridor has been reduced from 4 hours to 2.5 hours now (37.5%). The vehicle operating cost has been reduced by 20 to 28% for various vehicle categories. In urban areas, widening to six lanes and construction of flyovers, underpasses, overpasses, and service roads have reduced congestion levels and accidents through the separation of through traffic and local traffic. NHAI has been collecting toll, operating, and maintaining the toll facilities through short- term contracts to the private sector. NHAI has now initiated the process of further widening to six lanes the completed project facility together with the adjoining stretches through a build-operate-transfer concession to the private sector. The concession would cover the responsibility for construction, toll collection, operation, and maintenance

NHAI has initiated the process of widening to six lanes the project highway, as sections 1, 2, and 3 would reach four-lane highway capacity by 2010, 2007, and 2013, respectively.

Appendix 1 17

Design Summary

Appraisal Performance Indicators/Targets

Project Achievement Key Issues and Recommend-

ations 3. Outputs • Road

improvement • Building

capacity for private participation and toll operations

• Widening to four

lanes (including pavement strengthening of existing two lanes) of about 180 km of National Highway 8 between Surat (Km 263) and Manor (Km 442)

• Construction of 42 bridges including 15 major multispan bridges

• Toll plazas and bus bays at various locations

• All physical work completed by December 2003

• Creation of an enabling environment for private participation including

- Preparation of a private participation framework

- Preparation of model concession agreements

- Review of toll structure

Widening to four lanes (including pavement strengthening of existing two lanes) of 175.6 km of National Highway 8 between Surat (Km 263.4) and Manor (Km 439) is implemented. In urban sections, 42.06 km of the abovementioned road stretch was widened to a six-lane carriageway width. 42 bridges, 3 flyovers, and 12 underpasses were constructed. 3 toll plazas and a number of bus bays have been constructed at various locations. The physical works including the additional works under contract packages 1, 2, and 3 were completed by June 2005, February 2004, and December 2003, respectively. The Government has established a favorable enabling framework and environment for private sector participation and developed a model concession agreement for build-operate-transfer and annuity projects. In addition to an inflation-linked toll structure, Government has created a central road fund for developing and maintaining highways and has been progressively increasing the road cess.

Additional works to enhance road safety and facilitate uninterrupted traffic flow on the project corridor were incorporated during implementation, utilizing some loan savings.

4. Inputs • Detailed

engineering and preparation of tender documents

• Procurement of civil works and recruitment of consultants

• Road improvements

• Construction Supervision

Project Costs - Civil works and

consulting services $280 million

Financing Plan - ADB financing $180

million - Government $100

million

Project Costs on Completion - Civil works and consulting services

$246.8 million Financing Plan - ADB financing $149.75 million - Government $97.05 million

After utilizing loan savings of about $44.5 million, a loan amount of $30.25 million was cancelled.

Km = kilometer, NHAI = National Highways Authority of India, PCUs = passenger car units

Appendix 2

18

CHRONOLOGY OF MAIN EVENTS DURING PROJECT PROCESSING AND IMPLEMENTATION

Date Event 1998 4-20 May Fact-Finding Mission 4 Jun ADB approved advance procurement action for civil works and for

recruitment of supervision consultants. 22 Jun Management Review Meeting 27 Jul–7 Aug Appraisal Mission 9 Sep Staff Review Committee Meeting 14–23 Dec Project-Specific Contact/Consultation Mission was fielded for finalizing the

resettlement plan and to follow up preconstruction activities of the Project. 1999 28–29 Jan Loan negotiations 23–30 Nov Resettlement Action Plan Mission was fielded to review and update the

resettlement action plan as well as to review and discuss poverty assessment.

2000 13 Jun Board circulation of report and recommendation of the President. 27 Jul Board approval 5 Oct Loan and Guarantee Agreements signed 6 Oct Award of civil works contract package 3, valued at Rs1.688 billion. 16 Oct Award of civil works contract package 2, valued at Rs1.620 billion. 19 Oct Award of civil works contract package 1, valued at Rs2.349 billion. 8 Nov Loan was declared effective. 14 Nov Award of consulting services contract for construction supervision for civil

works, valued at Euro2.5 million and Rs221.1 million. 12 Dec First disbursement under the loan 2001 31 May–20 Jun Inception Mission. The Mission discussed with NHAI the start-up activities

for smooth project implementation and finalized the project administration manual.

11–17 Oct Special Project Administration Mission. The Mission reviewed with NHAI, the status of progress in implementing the Project, particularly progress on the civil works contracts.

31 Oct NHAI proposed additional works related to road safety, utilizing loan savings, and requested ADB approval.

18 Dec ADB approved a major change in scope: utilization of loan savings to finance the construction of additional road safety features.

2002 10 Jan ADB communicated to NHAI its approval for utilizing loan savings from the

Project on additional works related to road safety,. 25 Jan–2 Feb Review Mission (1). The Mission reviewed (i) the progress in

implementation, and (ii) performance of the contractors for packages 1 and 2 to determine the most appropriate contractual arrangements to carry out the additional works.

Appendix 2

19

Date Event 5 Feb NHAI requested ADB approval to utilize loan proceeds for consulting

services to conduct road safety audits for selected national highways. 14 Feb ADB approved the utilization of loan proceeds for consulting services for

road safety audits for selected national highways. 4 Jul Amended and Restated Loan Agreement for transformation from a Pool-

Based Loan to a LIBOR-Based Loan was signed. 25 Jul Amended and Restated Loan Agreement was declared effective. 2003 1 Jan Delegation of project administration to INRM 23–28 Feb and 7 Mar

Review Mission (2). The Mission reviewed the progress of project implementation and agreed on an action plan to accelerate implementation progress.

27–30 Oct Review Mission (3). The Mission reviewed project implementation and updated the action plan agreed upon during the last review mission.

16 Dec Completion of civil works contract package 3 2004 7 Feb Completion of civil works contract package 2 10 Sep Extension of loan closing date by 12 months or until 30 Sep 2005 30 Sep Original loan closing date 18 Oct–12 Nov Project Procurement-Related Audit Mission. The Mission was fielded as

part of ADB’s proactive efforts to address potential control weakness that may allow fraud or corruption in ADB-financed projects.

22 Nov Contract for the toll system study, valued at Rs19.778 million and $0.332 million, was awarded.

29–30 Nov Review Mission (4). The Mission reviewed the implementation of civil works contract package 1 and agreed on an action plan for completing the works.

13 Dec First partial cancellation of loan amount of $15.0 million and corresponding reallocation of loan proceeds.

2005 15 Feb Contract for road safety audit of selected national highway and

expressway sections― package B, valued at Rs5.59 million and Euro0.219 million―was awarded.

16 Feb Contract for road safety audit of selected national highway and expressway sections ―package C, valued at Rs6.872 million and ₤0.153 million―was awarded.

18 Feb Review Mission (5). The Mission reviewed and updated the action plan for completing civil works contract package 1 by June 2005.

14 Mar Contract for the comprehensive operation and maintenance concession study―valued at Rs14.98 million and C$0.544 million―was awarded.

5 May Contract for road safety audit of selected national highway and expressway sections―package A, valued at Rs6.84 million and A$0.38 million―was awarded

2 Jun Completion of civil works contract package 1 5 Jul Contract for the road safety audit of selected national highway and

expressway sections―package D, valued at Rs8.73 million and $0.151 million―was awarded.

Appendix 2

20

Date Event 2006 13 January Second and final partial cancellation of loan amount of $15.25 million and

loan closure 11 July 2007

Final report for comprehensive operation and maintenance concession study submitted

7–8 June

Project Completion Review Mission. The Mission conducted a field visit and held discussions with NHAI field officials.

ADB = Asian Development Bank, NHAI = National Highways Authority of India Source: Asian Development Bank record

Appendix 3 21

DETAILS OF PROJECT OUTPUT A. Details of Project Component Financed under the Loan 1. Widening to four-lane standard (including strengthening of existing two lanes) of 176 kilometers (kms) of National Highway 8 (NH 8) between Surat and Manor involved the following major works. Particulars Scope under Original

Work Scope of

Additional Works Overall Scope on

Completion i. Widening to 4

lanes 133.543 km

0.00 133.543 km

ii Widening to six lanes (excluding service road)

42.057 km 0.00 42.057 km

iii Service road 70.005 km (including 4.734 km deleted

subsequently)

25.85 km 91.121 km

iv. Bridges 42 0 42 v. Flyovers 1

2 3

vi. Underpasses 0 12 12 vii. Covered drain 67.642 km (including

2.955 km deleted subsequently)

22.5 km 87.187 km

viii. Median drain 18.355 km

0.00 18.355 km

ix. Toe drain 21.844 km

0.00 21.844 km

x. Metal beam crash barrier

30,059 (m) 49,967 m 80,026 m

xi. Toll plazas 3 0 3 km = kilometer, m = meter Source: Project completion report of supervision consultant. B. Consulting Services for Construction Supervision of Road Improvements

2. The construction supervision consultant engaged under the Project was the Engineer for the civil works contracts and supervised works under the contract.

22 Appendix 3

C. Consulting Services for Toll System Study

3. The study report (i) evaluated the current toll collection system and proposed improvements, (ii) proposed a pricing strategy to address the issues of regulating traffic flows, and (iii) proposed a communication strategy to encourage users to switch to toll roads by creating awareness of the economic and financial benefits.

D. Consulting Services for Comprehensive Operation and Maintenance Concession

Study 4. The outputs of the study were (i) a report on the framework for a corridor management unit (CMU), (ii) a CMU administration manual, (iii) a strategic options report, and (iv) a concession document for operation and maintenance. E. Consulting Services for Road Safety Audit

5. The study (i) undertook a safety audit of 2,800 km of national highway and expressway sections; (ii) suggested improvements in the Indian road safety guidelines/codes; (iii) suggested location-specific safety improvement measures; (iv) suggested checklists for conducting a road safety audit on Indian roads; and (v) prioritized the proposed improvements into short-term, medium-term, and long-term.

Appraisal Estimate(Rs million) ($ million) (Rs million) ($ million) (Rs million)

Foreign Local Total Total Total Total Total Total

A. Base Cost

Right-of-Way 0.00 12.00 12.00 445.92 10.29 445.92 7.72 349.7Civil Works c

Section I 51.30 29.20 80.50 2,991.38 54.21 2,348.80 99.59 4,554.50 Section II 28.60 17.30 45.90 1,705.64 37.40 1,620.50 57.65 2,657.50 Section III 34.10 20.00 54.10 2,010.36 38.97 1,688.50 57.93 2,720.00

Consulting Services

Construction Supervision 10.00 2.50 12.50 464.50 7.80 337.80 7.68 352.40 Private Particiation and Tolling Operationsd 10.00 2.00 12.00 445.92 3.02 138.67 2.54 117.00

Project Management 0.00 1.00 1.00 37.16 1.56 67.50 2.27 102.80

Subtotal (A) 134.00 84.00 218.00 8,100.88 153.24 6,647.69 235.38 10,853.90

B. Contingencies

Physical Contingency 13.50 7.50 21.00 780.36 14.31 620.00 0.00 0.00 Price Contingency 15.10 8.50 23.60 876.98 16.39 710.00 0.00 0.00

Subtotal (B) 28.60 16.00 44.60 1,657.34 30.69 1,330.00 0.00 0.00

C. Interest During Construction 17.40 0.00 17.40 646.58 17.40 753.94 11.41 522.67

Total 180.00 100.00 280.00 10,404.80 201.33 8,731.64 246.79 11,376.57

a Contracted cost for civil works and consulting services. Other costs adjusted for contracted cost and exchange rate.b Includes cost of additional works and price escalation.c Break-up of completion cost of civil works is on page 24.d Includes consulting services for toll system study, opearation and maintenance concession study, and road safety audits.

Sources: (i) Asian Development Bank's report and recommendation to the President and (ii) National Highways Authority of India.

23

Item

Appraisal Estimate

Appendix 4

PROJECT COST

($ million)

Estimate based on Contracted Cost a Cost at Completion b

Table A4.1: Cost Breakdown by Project Components

24

Contract PackagesAdditonal

Works Total Additonal Works Total

Contract Package 1 2,544.5 1,214.0 3,758.5 523.0 273.0 796.0 4,554.5Contract Package 2 1,588.8 497.6 2,086.4 432.0 139.1 571.1 2,657.5Contract Package 3 2,018.3 329.0 2,347.3 340.8 31.9 372.7 2,720.0

Total 6,151.6 2,040.6 8,192.2 1,295.8 444.0 1,739.8 9,932.0Sources: (i) Project completion report of supervision consultant and (ii) National Highways Authority of India.

Original Works including

(Rs million)

Appendix 4

Table 4.2: Break-up of Completion Cost of Civil Works Contracts

Civil Works Price Escalation Total Cost at CompletionOriginal Works

including

PROJECT COST

Appendix 5 25

ANNUAL AVERAGE EXCHANGE RATES AND INDIAN WHOLESALE PRICE INDEX

Year Indian Rupee per

United States Dollar

Indian Wholesale Price Index

1994 31.36 100.0

1995 31.40 112.5

1996 33.46 121.6

1997 35.50 127.2

1998 37.16 132.8

1999 39.36 140.7

2000 43.33 145.3

2001 45.61 155.7

2002 47.53 161.3

2003 48.27 166.8

2004 45.33 175.9

2005 44.11 187.3

2006 45.33 195.6

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

26 Appendix 6

Year%

2000 0.0 0.0 7.7 7.7 52001 38.0 20.0 12.0 19.7 132002 30.1 31.9 33.2 52.9 352003 40.0 51.8 46.0 98.9 662004 37.0 37.3 29.1 128.0 852005 27.0 23.8 21.6 149.6 1002006 0.1 149.7 100

ADB = Asian Development Bank, NHAI = National Highways Authority of India.Source: LFIS

a. Projections as made in ADB's annual loan financial information system (LFIS)

($ million)

NHAI's ProjectionsCumula-

tive

PROJECTED AND ACTUAL DISBURSEMENTS OF LOAN PROCEEDS

ActualADB's Projections a

For theYear

For the Year For the Year

Figure A6: Disbursement Details

0.0

10.0

20.0

30.0

40.0

50.0

60.0

2000 2001 2002 2003 2004 2005 2006Years

$ M

illion

ADB Projection NHAI Projection Actual

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

Preconstruction

Right-of-Way Clearance a

Prequalification for ICB

ICB Tender and Award of Civil Works Contracts b

Recruitment of Supervision Consultant

ConstructionCivil Works c

Section 1

Section 2

Section 3

Supervision

Proposed Schedule at AppraisalActual

a The right-of-way clearance was undertaken in a timely manner and the site handed over to the contractors in accordance with the handing over schedule commencing November 2000.b Asian Development Bank approved to the award of civil works contract was accorded in January 2000. The contracts were awarded in October 2000 upon Board approval.C Appraisal schedule for sections 1, 2, and 3.Sources: (i) Asian Development Bank's report and recommendation to the President and (ii) National Highways Authority of India.

27

PROJECT IMPLEMENTATION SCHEDULE

20051998 1999 2000 2001 2002 2003 2004

Appendix 7

28

NHAI (Headquarters)Member (Administration) General Manager

Deputy General ManagerManager

SupervisionConsultant(Engineer)

Manager ContractorPackage 1

Manager ContractorPackage 2

Manager ContractorPackage 3

NHAI = National Highways Authority of India

PROJECT IMPLEMENTATION STRUCTURE

(Contract Package 1)

(Contract Package 2)

(Contract Package 3)

Manager

General Manager(Project Director)

Deputy General

NHAI(Headquarters)

Appendix 8

Chairman

Chief General Manager /

NHAI Field Office

Appendix 9 29

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

Covenant Reference in Loan

Agreement

Status of Compliance

1. The Project Implementation Unit (PIU)established within the Borrower for the Projectshall be responsible for handling all Project implementation matters. The PIU shall beheaded by a General Manager who shall beresponsible for Project management. TheBorrower shall ensure that the General Manageris delegated with sufficient administrativeauthority to enable effective review and monitoring of the progress of the Project andspeedy resolution of any problems arising duringProject implementation. The Borrower shallensure that the PIU is adequately staffed byexperienced personnel at management levelduring Project Implementation both at theBorrower’s headquarters and at the Project site.

2. The Borrower shall ensure that upon completion

of the Project highway, the operation andmaintenance of the Project highway iscommercialized through a toll concession to beawarded to the private sector underarrangements satisfactory to ADB. The Borrowershall submit the terms and conditions of theproposed concession to ADB for review andcomment prior to inviting bids from the privatesector. The Borrower shall ensure that thecompleted project highway is operated andmaintained in accordance with soundengineering and safety standards under theconcession.

3. By 31 December 2000, the Borrower shall

develop and implement a highway maintenancemanagement system for the national highwaynetwork vested in NHAI, which shall be used toprepare annual maintenance budgets on thebasis of physical measurement of goods,maintenance standards and recorded trafficvolumes and axle-loading. The Borrower shalltake into account these maintenance plans in allocating funding for annual maintenancebudgets as from its financial year 2001/02.

Schedule 6, para 1

Schedule 6, para 2

Schedule 6, para 3

Complied with. A PIU headed by a Chief General Manager/General Manager was established within NHAI for project management and implementation. The Chief General Manager/General Manager, PIU was delegated sufficient administrative authority to enable effective review, monitoring and speedy resolution of problems. The PIU was adequately staffed by experienced personnel at management level, both at NHAI headquarters and at the project site. Complied with. Upon completion of the Project, NHAI has been tolling, operating and maintaining the Project highway through various short term contracts to the private sector. NHAI has initiated the process of further six laning of the completed project facility together with the adjoining stretches through a build-operate-transfer concession to the private sector. The concession would be based on model concession agreement of the Government of India and would include the responsibility of construction, tolling, operation and maintenance. The model concession agreement has been prepared after prior consultation with various stakeholders including ADB. Complied with. The maintenance of national highway network vested with NHAI is being undertaken through various mechanisms. The maintenance of national highway sections improved under construction contracts is being undertaken by NHAI through maintenance contracts to the private sector. These contracts include maintenance standards, items of maintenance works and

30 Appendix 9

Covenant Reference in Loan

Agreement

Status of Compliance

4. The Borrower shall discuss the findings and

recommendations of the TA study with ADB and shall take into consideration ADB’s views thereon in implementing any recommendation.

5. The Borrower shall review its accounting

policies and practices, and by 31 March 2001, shall adopt standards that are appropriate to its operations and consistent with international practice.

Schedule 6, para 4

Schedule 6, para 5

payments are made based on physical measurement. Annual maintenance budgets are prepared based on the maintenance contracts. With the recent policy of Government of India to implement national highway development project – phase III to VII through build-operate-transfer and annuity contracts, responsibility of maintenance vests with the concessionaire and the cost of maintenance included in the contracts. Complied with. Substantially complied with. NHAI has considerably improved its accounting policies and practices and has installed a computerized accounting system called 'Project Finance Management System' at its headquarters and at most of the project implementation units. However, the auditors have pointed out that its accounting for Capital Works in Progress, Capital Grants and related matters is not in accordance with the generally accepted accounting practices. This issue is pending resolution as the Government of India has not yet taken a decision to transfer the ownership of the assets being constructed by NHAI. Except for this, the standards are appropriate to its operations and consistent with generally accepted accounting practice (GAAP) for India. Consistency with international practice is not required as Indian GAAP is more relevant to NHAI operations.

Appendix 9 31

Covenant Reference in Loan

Agreement

Status of Compliance

6. The Borrower shall periodically review its toll structure by taking into accounts (i) vehicle operating cost savings and time savings; and (ii) cost recovery, so as to ensure its long-term financial viability.

7. The Borrower shall continue to actively

encourage the enabling environment for private financing of national highways and with the support provided under TA 2986-IND. By 31 December 2000, the Borrower shall develop a private sector participation framework, acceptable to ADB, in relation to a model privately financed highway project based on the findings of this TA.

8. The Borrower shall ensure that all

environmental mitigation measures identified in the summary initial environmental evaluation (IEE) report are incorporated into the project detailed design and are followed during construction, operation and maintenance of the project highway. The Borrower shall also ensure that the project is designed and constructed in accordance with ADB’s “Environmental Guidelines for Selected Infrastructure Projects”.

9. The Borrower shall implement the

Resettlement Action Plan agreed upon with ADB in consultation with state authorities concerned and with persons affected by the Project in accordance with ADB’s policy on involuntary resettlement. The Borrower shall ensure that persons who will be relocated as a consequence of the Project are consulted and fairly compensated such that their living standards are not adversely affected by the Project.

Schedule 6, para 6

Schedule 6, para 7

Schedule 6, para 8

Schedule 6, para 9

Complied with. The Government of India has levied a cess on diesel and petrol for funding the development and maintenance of highways. The cess is deposited in the Central Road Fund and allocated in accordance with the criteria laid down by Ministry of Shipping, Road Transport and Highways. Since its introduction, the amount of cess has been progressively increased by the Government. In addition, the toll rates are adjusted for inflation periodically. Complied with. The framework for private sector participation has been adequately developed and NHAI has been undertaking a number of highway projects through private sector participation. Government of India has taken a policy decision to implement the national highway development project – phase III to VII through public private partnership. Complied with. The environmental mitigation measures identified in the IEE have been incorporated in the detailed design and have been followed during construction, maintenance and operation. The IEE is based on ADB’s Environmental Guidelines for Selected Infrastructure Projects Complied with. NHAI has implemented the agreed resettlement action plan with the assistance of a non government organization and in consultation with the state government and project affected persons.

32 Appendix 9

Covenant Reference in Loan

Agreement

Status of Compliance

10. The Borrower and ADB shall review the overall progress of the Project annually. The Borrower and ADB shall agree on appropriate measures in addressing any problems encountered in Project implementation, including any changes in implementation arrangements.

11. The Borrower shall make available on a timely

basis all land and rights in land, free from encumbrances, for toll plazas and for other purposes required under the Project.

12. During Project implementation, the Borrower,

through the PIU, shall carry out benefit monitoring and evaluation (BME) activities under the Project. The PIU shall include its BME activities in its quarterly progress reports on Project implementation and in the Project completion report before submitting them to ADB. The PIU shall use key indicators agreed upon between the Borrower and ADB as the baseline data in the BME activities.

13. The Borrower shall (i) have its accounts and

financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied by independent auditors whose qualification, experience and terms of reference are acceptable to ADB; (ii) furnish to ADB, as soon as available but in any event not later than 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 (including the auditors’ opinion on the use of Loan proceeds and compliance with covenants of the Loan Agreement), all in the English language; and (iii) furnish to ADB such further information concerning such accounts and financial statements, and the audit thereof, as ADB shall from time to time reasonably request.

Schedule 6, para 10

Schedule 6, para 11

Schedule 6, para 12

Article IV, Section 4.07(a)

Complied with. Regular review missions were undertaken and problems resolved in consultation with NHAI. A major change in scope was approved to include additional works related to road safety and facilitation of uninterrupted traffic movement. Complied with. NHAI made available the land and rights in land, free from encumbrances, for the Project in accordance with the site handing over schedule. Complied with. A benefit monitoring and evaluation report containing key indicators was submitted in 2002. The project benefits were included by NHAI in their project completion report. Complied with. The accounts of NHAI are audited annually by comptroller and auditor general of India. To strengthen its internal control, NHAI has appointed a firm for internal auditing. NHAI submitted certified copy of its audited accounts and financial statement for each fiscal year to ADB. However, the submissions were delayed by 1-3 months from the stipulated period of 12 months after the end of each related fiscal year.

Appendix 10 33

ECONOMIC REEVALUATION

A. General Assumptions 1. The methodology adopted for economic reevaluation was similar to that used at appraisal, involving comparison of with- and without-project scenarios. The without-project situation was the two-lane alignment with minimum improvement, which would have seen growing traffic congestion as practical capacities were exceeded. In the with-project scenario, the new four-lane road would improve traffic flow conditions, permit higher speeds, and result in shorter travel times and lower vehicle operating costs (VOCs). Reduction in VOCs is considered the main benefit of the road improvement works. Benefits accruing due to time savings were not considered in the analysis as they were omitted even at the appraisal stage so as to obtain conservative estimates. The economic life of the road was considered to be 20 years with a 15% salvage value at the end of the evaluation period. All economic costs and benefits are in constant 2007 prices. The year-wise wholesale price index (WPI) published by the Government of India was used to convert costs to 2007 prices. B. Traffic Characteristics 2. Past traffic data at three locations on the project road were analyzed to estimate the traffic growth trends (Table A10.1). The data came from traffic surveys conducted at the feasibility stage (1997), during construction (2002–2004), and after construction (2006). The average annual growth rates of traffic on all three sections1 are low (around 4%–5% on sections I and II and 2.6% on Section III). The growth of cars is high (5%–6%) on all three sections. The growth of trucks on Section II is much higher than on the two other sections, primarily due to the industrial town of Vapi. Buses have shown little or no growth on the project road.

Table A10.1: Past Traffic Growth on Project Road (1997–2006)

Vehicle Type Section I (%) Section II (%) Section III (%) Car 5.0 6.1 5.3 Bus 0.2 1.9 Negative

Truck 2.8 5.1 1.8 All Traffic 4.3 4.8 2.6

Sources: Supervision consultants’ project completion report and feasibility study for 6-laning of NH8 Surat-Dahisar, Oct 2006 conducted by NHAI’s consultants. 3. Traffic volume at completion was slightly lower than that forecast at appraisal. The average annual daily traffic (AADT) of motorized vehicles was projected to reach 28,000 vehicles per day by 2007. In comparison, the actual traffic in 2006 was around 25,600 vehicles per day. Traffic characteristics on the three sections vary considerably (Table A10.2). As is typical of national highways, more than 90% of the traffic is motorized and freight vehicles dominate the entire corridor. Among freight vehicles, the share of light commercial vehicles (LCV) is small (8%–15%) compared with the long-haul heavy trucks (2-axle and multi-axle). Even though 2-axle trucks constitute a large percentage, there is a visible shift toward multi-axle vehicles (MAVs). This is evident from the marginal decline in the growth rate of 2-axle trucks and a significant increase in the growth rate of multi-axle trucks. Section III has the highest share of freight vehicles (71%). Section II has the highest traffic volume (more than 34,000

1 The sections correspond to civil works contract packages 1, 2 and 3

34 Appendix 10

vehicles per day), and also the highest traffic growth rate (4.8%) per annum. Buses constitute a very small percentage (2–3%) as the corridor is well-served by rail.

Table A10.2: Traffic Characteristics on Project Road

Item

Section I (80 km)

Section II (37.5 km)

Section III (57 km)

1. Traffic Survey Location Sisodara Pardi Charoti 2. AAGR of Total Traffic (1997–2006) 4.3% 4.8% 2.6% 3. ADT - October 2006 27,225 34,349 19,388 4. Vehicle Composition - 2006 a. Freight Vehicles 56.5% 53.8% 71.6% - LCV 7.6% 9.6% 14.6% - 2-axle truck 28.3% 22.1% 28.9% - MAV 20.6% 22.0% 28.0% b. Passenger Vehicles 40.1% 44.2% 28.4% - 2-wheeler 19.4% 17.5% 4.8% - Car/Jeep/Van/Autorickshaw 18.1% 23.9% 21.6% - Bus 2.6% 2.8% 2.0% ADT = average daily traffic, AAGR = average annual growth rate, LCV = light commercial vehicle, km = kilometer, MAV = multi-axle vehicle. Sources: Supervision consultants’ project completion report and feasibility study for 6-laning of NH8 Surat-Dahisar, Oct 2006 conducted by NHAI’s consultants.

C. Traffic Forecast 4. During the project completion review (PCR) mission, the traffic forecast was revised to incorporate traffic and other economic data that had become available since appraisal. Assumptions underlying the traffic forecast at appraisal were reviewed and updated as needed. At appraisal, the traffic forecast was based on the prospective growth of the economy in terms of (i) the net state domestic product (NSDP) of Gujarat and Maharashtra (ii) estimated transport demand elasticities and (iii) changing truck composition viz. increasing shares of LCVs and MAVs. 1. Analysis of NSDP of Gujarat and Maharashtra

5. The past trend of average annual growth rates of NSDP in constant (1993–1994) prices, and the Planning Commission’s growth targets for the 11th Plan are summarized in Table A10.3. The upsurge in growth rates during 2000–2004 was a result of the economy recovering from the slowdown experienced in the previous period. With the 10th Plan efforts helping to accelerate the recovery process and the 11th Plan strategies aiming to keep the economy on its higher growth path, it is quite possible that long-term growth rates in these two states would also stabilize at levels higher than in the past (1995–2005).

Appendix 10 35

Table A10.3: NSDP Annual Growth Rates for Gujarat and Maharashtra

Period Gujarat (%) Maharashtra (%) Past 1995–2004 5.44 4.67 1995–2000 3.34 4.14 2000–2004a 10.65 7.25 Future 2007–2012 (11th Plan) 11.2 9.1

a State NSDP data available up to fiscal year 2004–2005 Source: Supervision consultants’ project completion report

6. Although both Gujarat and Maharashtra achieved higher growth rates in the recent past (2000–2004), their performance over a longer period (1995–2004) was much lower. Accordingly, the NSDP growth rates that may be safely assumed, based on the improved economic outlook and past performance, are presented in Table A10.4. Gujarat is expected to perform better than Maharashtra, considering their performance in recent years. The most plausible future trend will be higher growth rates in the initial years and a tapering off in later years.

Table A10.4: Projected Annual NSDP Growth Rates (%)

Period Gujarat (Sections I and II) Maharashtra

(Section III)

At Appraisal 1996–2001 5.6 6.5 2001–2010 5.2 6.0 2011–2020 5.05 5.75 At PCR 2006–2012 7.5 6.8 2012–2017 7.0 6.0 2017–2025 6.5 6.0 PCR = project completion report Source: Supervision consultants’ project completion report

2. Income Elasticity of Transport Demand

7. Transport demand elasticities were estimated for Gujarat and Maharashtra by regressing NSDP and registered vehicles data. The e-values obtained are summarized in Table A10.5. As data for Maharashtra was only up to 2002, and the values obtained for cars and trucks were on the high side, it was decided to adopt Gujarat values for cars and trucks. Bus elasticity, however, was increased, keeping in mind the recent growth of long-distance bus travel with the advent of Volvo buses. The e-values adopted for the project road are also in Table A10.5. They are close to the values adopted during appraisal.

36 Appendix 10

Table A10.5: Elasticity Values for Gujarat and Maharashtra

Source: Supervision consultants’ project completion report

3. Traffic Growth Rates

8. The projected NSDP growth rates and the future transport demand elasticities translate into projected traffic growth rates, as shown in Table A10.6. The projected growth rates are higher than at appraisal as the economy is expected to grow at a rate higher than that anticipated during appraisal.

Table A10.6: Projected Traffic Growth Rates (%) by Vehicle Type Period Gujarat (Sections I and II) Maharashtra (Section III)

Car/ Jeep/

Auto Rickshaw

Bus (Standard ,

Mini)

Truck (LCV, HCV,

MAV)

Car/ Jeep/ Auto

Rickshaw

Bus (Standard ,

Mini)

Truck (LCV, HCV,

MAV) At Appraisal 2006–2010 7.0 5.4 5.2 8.1 6.3 6.0 2011–2015 6.8 5.3 5.0 7.8 6.0 5.7 2016–2021 6.8 5.3 5.0 7.8 6.0 5.7 At PCR 2006–2012 9.8 8.3 7.8 9.1 7.7 7.3 2012–2017 8.4 7.0 7.1 7.8 7.2 6.6 2017–2025 7.2 6.5 6.5 6.6 6.0 6.0 HCV = heavy commercial vehicle, LCV = light commercial vehicle, MAV = multi-axle vehicle, PCR = project completion report Source: Supervision consultants’ project completion report 9. The base year traffic for economic reevaluation was the latest available traffic data after project completion, i.e., October 2006. The projected traffic on the project road sections was estimated by applying the traffic growth rates to the base year (2006) traffic, presented in Table A10.7.

State / Period Car Bus Truck

Past Gujarat (1995–2004) 1.39 0.84 1.06 Maharashtra (1995–2002) 2.40 1.14 1.78 At Appraisal 2006–2020 1.35 1.05 1.00 Future Projection 2006–2012 1.30 1.10 1.04 2012–2017 1.20 1.10 1.02 2017–2025 1.10 1.00 1.00

Appendix 10 37

Table A10.7: Base Year ADT on Project Road Sections, 2006

Project Road Section

Location Motor Cycle/

Scooter

Car/Jeep/ Auto

Rickshaw

Bus LCV 2-axle

Truck

MAV Total Motorized

Total Non-

Motorized

Total Traffic

Section I

Km 288.2 near Sisodra 5,278 4,920 711 2,081 7,695 5,619

26,304

921

27,225 Section II

Km 346.4 near Pardi 6,015 8,217 973 3,307 7,596 7,573

33,681

668

34,349

Section III

Km 413.6 near Charoti 935 4,178 382 2,832 5,596 5,421

19,344

44

19,388 Km = kilometer, LCV = light commercial vehicle, MAV = multi-axle vehicle Source: Feasibility Study for 6-Laning of NH8 Surat to Dahisar under NHDP Phase V D. Costs

10. On completion, the cost of civil works, land acquisition for right-of-way, shifting of utilities, construction supervision, and project management was Rs10.737 billion. For the analysis for the PCR, the costs incurred during the construction period (2000–July 2005) were brought forward to the 2007 level using factors based on year-wise WPI. The financial cost in 2007 prices worked out to Rs12.880 billion.

11. Economic costs were estimated from the financial costs of civil works (including variations and additional works), land acquisition for right-of-way, shifting of utilities, construction supervision, and project management. The cost was divided into tradable and nontradable components. The financial cost of the foreign component was expressed in border prices, while that of the local component was converted into economic cost by deducting taxes and duties and applying the standard conversion factor of 0.9. The economic cost was Rs12.199 billion. A salvage value of 15% at the end of the analysis period of 20 years, in 2025, was considered. The incremental maintenance cost (annual and periodic maintenance) in the with-project situation has been considered.

E. Benefits

12. The major benefits of widening the project road from two lanes to four lanes are increased capacity, higher speeds, lower VOCs, and shortened travel time. However, benefits arising from time savings were not considered in the analysis so as to obtain conservative estimates. Unit VOCs for five motorized vehicle categories (car/jeep/van, bus, LCV, heavy commercial vehicle, and MAV) were calculated using HDM-4 (Table A10.8). Road roughness data available for the project road sections were also used in the model. The three project road sections will reach four-lane capacity2 in different years: Section I (Surat–Atul) in 2010, Section II (Atul–Kajali) in 2007, and Section III (Kajali–Manor) in 2013. Traffic has been frozen in the years when capacity is reached. Benefit streams were calculated for a period of 20 years starting in 2006.

_______________ 2 Capacity of four-lane is taken as 80,000 motorised passenger car units (PCUs) as separate service roads have

been provided for non-motorised traffic.

38 Appendix 10

Table A10.8: Unit Vehicle Operating Costsa by Vehicle Type, 2006 (Rs per vehicle-km)

Item Car Bus LCV HCV MAV Without Project 6.57 11.54 6.13 15.51 22.34 With Project 4.93 8.33 4.74 12.16 17.88 VOC Savings 1.64 3.21 1.39 3.35 4.46 LCV = light commercial vehicle, HCV = heavy commercial vehicle, MAV = multi-axle vehicle, VOC = vehicle operating cost a Weighted average of VOCs on project road sections Source: Supervision consultants’ project completion report 13. Economic reevaluation was carried out for the project road as a whole. The economic internal rate of return (EIRR) estimated at appraisal was 25%. In the PCR it was recalculated as 32.22%. Despite the increase in the completion cost over the appraisal estimate, the higher savings in VOCs and higher projected traffic at PCR have contributed to raise the EIRR over the appraisal estimate. The cost-benefit stream and the EIRR for the project road are shown in Table A9.

Year Capital Cost Total Benefit Net Benefits Capital Cost Total VOC NetIncremental VOC Incremental Cost Savings Benefits

O&M w/Project Savings O&M w/Project1999 1,219.2 1,219.2 (1,219.2)2000 2,032.1 2,032.1 (2,032.1) 850.7 850.7 (850.7)2001 2,032.1 2,032.1 (2,032.1) 2,696.4 2,696.4 (2,696.4)2002 2,032.1 2,032.1 (2,032.1) 2,288.7 2,288.7 (2,288.7)2003 812.8 9.3 822.1 1,284.9 462.8 3,980.0 3,980.0 (3,980.0)2004 (141.4) (141.4) 2,755.0 2,896.4 1,504.8 1,504.8 (1,504.8)2005 9.3 9.3 2,953.7 2,944.4 878.1 878.1 (878.1)2006 465.0 465.0 3,121.2 2,656.2 0.79 0.8 4,474.6 4,473.82007 9.3 9.3 3,298.4 3,289.1 0.79 0.8 7,679.0 7,678.22008 9.3 9.3 3,298.4 3,289.1 0.79 0.8 9,069.7 9,068.92009 (141.4) (141.4) 3,298.4 3,439.8 0.79 0.8 10,105.5 10,104.72010 9.3 9.3 3,298.4 3,289.1 11.06 11.1 10,847.8 10,836.82011 1,066.8 1,066.8 3,298.4 2,231.6 0.79 0.8 10,271.5 10,270.82012 9.3 9.3 3,298.4 3,289.1 0.79 0.8 12,574.9 12,574.12013 9.3 9.3 3,298.4 3,289.1 0.79 0.8 13,518.4 13,517.72014 (141.4) (141.4) 3,298.4 3,439.8 0.79 0.8 13,736.3 13,735.52015 9.3 9.3 3,298.4 3,289.1 11.06 11.1 12,034.1 12,023.12016 465.0 465.0 3,298.4 2,833.4 0.79 0.8 11,424.0 11,423.22017 9.3 9.3 3,298.4 3,289.1 0.79 0.8 13,064.2 13,063.52018 9.3 9.3 3,298.4 3,289.1 0.79 0.8 13,459.3 13,458.52019 (141.4) (141.4) 3,298.4 3,439.8 0.79 0.8 12,605.8 12,605.02020 9.3 9.3 3,298.4 3,289.1 11.06 11.1 9,930.6 9,919.52021 465.0 465.0 3,298.4 2,833.4 0.79 0.8 10,276.3 10,275.52022 (1,036.3) 9.3 (1,027.0) 3,298.4 4,325.4 0.79 0.8 11,951.5 11,950.72023 0.79 0.8 11,912.7 11,911.92024 0.79 0.8 9,391.4 9,390.62025 (1,829.8) 11.06 (1,818.8) 4,718.0 6,536.8

Economic Internal Rate of Return 25% 32.22%

O&M = operation and maintenance, VOC = vehicle operating cost.Source: (i) Asian Development Bank's report and recommendation to the President and (ii) Supervision consultants' project completion report

39Appendix 10

At Appraisal At Project Completion

Table A10.9: Economic Internal Rate of Return(Rs million)

40 Appendix 11

FINANCIAL REEVALUATION A. General 1. The financial internal rate of return (FIRR) of the Project was recalculated based on the actual costs and revenues expected from toll collections over a period of 20 years. Both costs and revenues are expressed in 2007 prices. B. Costs

2. The cost of the Project comprised capital cost, operation and maintenance cost, and toll collection cost. Capital cost included cost of civil works (including variations and additional works), land acquisition, shifting of utilities, construction supervision, and project management. The financial cost of implementing the Project was Rs10.737 billion. All costs during the construction period (2000–July 2005) were brought forward to the 2007 level using year-wise wholesale price index (WPI) factors. Thus the cost in 2007 prices was Rs12.880 billion. A salvage value of 15%, at the end of the analysis period in 2025 was considered. Maintenance cost included annual routine maintenance and periodic maintenance every 5 years. The cost of collecting toll for the three toll plazas at Boriach, Bhagwada, and Charoti was estimated as Rs26.68 million per annum, based on the staff strength of 130 persons per toll plaza and 14% of staff cost as overhead.

C. Revenue

3. Since its completion, the project road has been operated as a toll facility. The current (2007) toll rates, as per the National Highways Authority of India’s Scheduled Rate of User Fee, are presented in Table A11.1.

Table A11.1: Scheduled Rate of User Fee for a Four-Lane Stretch of NH 8 from Surat to Manor Vehicle Type Car/Jeep/ Van Light Commercial

Vehicle (LCV) Truck Bus HCM/EME

1. Boriach Toll Plaza - Single-Entry Ticket (Rs) 25 50 100 100 220 - Multiple-Entry Ticket (Rs) 38 75 150 150 330 2. Bhagwada Toll Plaza - Single-Entry Ticket (Rs) 30 55 115 115 250 - Multiple-Entry Ticket (Rs) 45 83 173 173 375 3. Charoti Toll Plaza - Single-Entry Ticket (Rs) 25 50 100 100 220 - Multiple-Entry Ticket (Rs) 38 75 150 150 330 4. Concessions for Local Residents - Within a 10 km radius Rs150/month - - 10 – 20 km radius Rs300/month Rs15 per entry Rs25 per

entry Rs1,000/ Montha -

HCM/EME = heavy construction machinery/earth-moving equipment a For school buses Source: Supervision consultants’ project completion report 4. The revenue from toll operations is based on the traffic forecasts (as described in Appendix 10), revenue-generating traffic, scheduled rate of user fee, and recent toll collection trends. The revenue-generating traffic was subdivided into single-entry tickets, multiple-entry tickets, and monthly passes and their percentage shares were used to estimate revenue-generating traffic. The toll rates were indexed every 5 years at the WPI rate of 5% per annum.

5. The recalculated FIRR for the Project is 9.6%. The net cash flow streams are presented in Table A11.2.

Year Total TotalCapital Maintenance Operation Toll Capital Maintenance Operation Total NetCost Cost Cost Revenue Net Benefit Cost Cost Cost Revenue Revenue

1999 1,351.4 (1,351.4)2000 2,252.3 (2,252.3) 898.2 (898.2)2001 2,252.3 (2,252.3) 2,847.1 (2,847.1)2002 2,252.3 (2,252.3) 2,416.6 (2,416.6)2003 900.9 7.8 83.3 832.7 (159.2) 4,202.5 (4,202.5)2004 15.6 178.3 1,783.2 1,589.4 1,589.0 (1,589.0)2005 15.6 190.9 1,909.4 1,702.9 927.2 (927.2)2006 15.6 201.4 2,014.4 1,797.4 13.2 26.7 1,147.0 1,107.22007 522.0 212.5 2,125.3 1,390.8 13.2 26.7 1,236.6 1,196.72008 15.6 217.4 2,174.2 1,941.2 13.2 26.7 1,294.4 1,254.62009 15.6 217.4 2,174.2 1,941.2 13.2 26.7 1,356.8 1,316.92010 15.6 217.4 2,174.2 1,941.2 73.7 26.7 1,423.9 1,323.52011 15.6 217.4 2,174.2 1,941.2 13.2 26.7 1,866.2 1,826.32012 1,190.6 217.4 2,174.2 766.1 13.2 26.7 1,915.5 1,875.62013 15.6 217.4 2,174.2 1,941.2 13.2 26.7 1,963.5 1,923.72014 15.6 217.4 2,174.2 1,941.2 13.2 26.7 1,963.5 1,923.72015 15.6 217.4 2,174.2 1,941.2 73.7 26.7 1,963.5 1,863.12016 15.6 217.4 2,174.2 1,941.2 13.2 26.7 2,510.1 2,470.22017 522.0 217.4 2,174.2 1,434.8 13.2 26.7 2,510.1 2,470.22018 15.6 217.4 2,174.2 1,941.2 13.2 26.7 2,510.1 2,470.22019 15.6 217.4 2,174.2 1,941.2 13.2 26.7 2,510.1 2,470.22020 15.6 217.4 2,174.2 1,941.2 73.7 26.7 2,510.1 2,409.72021 15.6 217.4 2,174.2 1,941.2 13.2 26.7 3,208.8 3,169.02022 (1,137.0) 522.0 217.4 2,174.2 2,571.8 13.2 26.7 3,208.8 3,169.02023 13.2 26.7 3,208.8 3,169.02024 13.2 26.7 3,208.8 3,169.02025 (1,932.1) 73.7 26.7 3,208.8 5,040.5

Financial Internal Rate of Return 14.2% 9.6%Source: (i) Asian Development Bank's report and recommendation to the President and (ii) Supervision consultants' project completion report

41Table A11.2: Financial Internal Rate of Return Calculation

(Rs million)Appendix 11

At Appraisal At Project Completion

Appendix 12

42

LAND ACQUISITION, RESETTLEMENT, AND SOCIAL IMPACTS A. Background 1. The Project comprises widening to four-lane standard (including the strengthening of the existing two lanes) about 180 km of National Highway 8 (NH 8) between Surat and Manor. The resettlement action plan (RAP) for the Project was based on the Asian Development Bank’s (ADB) policy paper on involuntary resettlement, approved in November 1995; on an indicative socioeconomic survey based on a 25% sample along the project corridor in March–April 1998; and a full census of the Project-affected persons in January–February 1999. The RAP identified (i) the extent and nature of losses of affected persons (APs), (ii) the policies and legal frameworks applicable to the RAP, (iii) provisions made for compensation payments and relocation, and (iv) accountabilities in implementing the RAP. The RAP was discussed extensively with APs and the National Highways Authority of India (NHAI) and was formally accepted by NHAI for implementation. The cutoff date for eligibility for entitlements under the RAP was 8 February 1999. 2. The RAP lists a total of 1,498 persons affected (entitled persons) by the Project. The RAP stated that 3,896 persons, 107 houses (wholly or partially), and 223 shops (wholly or partially) would be affected by the Project and estimated the budget including resettlement costs and the services of the implementing agency at Rs550 million. The RAP was expected to acquire 105.46 hectares (ha). 3. Schedule 6, para.9, of the Loan Agreement stipulates that the Borrower shall implement the RAP agreed upon with ADB, in consultation with the state authorities concerned and with persons affected by the Project in accordance with ADB’s policy on involuntary resettlement. The Borrower shall ensure that persons who will be relocated as a consequence of the Project are consulted and fairly compensated such that their living standards are not adversely affected. B. Implementation of RAP 4. A project implementation unit (PIU) headed by the Chief General Manager/General Manager and staffed with the Deputy General Manager and Managers was set up before the start of civil works in November 2000. The Deputy General Manager and Managers assigned to each section under the Project were responsible for the land acquisition and resettlement activities. NHAI confirmed to the ADB Inception Mission in June 2001 that it was fully complying with the RAP. It had initiated the process of land acquisition and was processing the proposals for notification under Section 3(A) of the National Highways Act. Following the advice of the Inception Mission and a subsequent ADB Mission, NHAI approved the engagement by the supervision consultants of a nongovernment organization (NGO) to assist in implementing the RAP, and established a resettlement group at the PIU. The terms of reference for the NGO were approved by ADB, and the South Asian Foundation for Human Initiatives (SAFHI), an NGO, was engaged by the supervision consultants in April 2002. The planning, implementing, and monitoring activities associated with the RAP were supervised by the PIU in the field with the assistance of the NGO. 5. During implementation of the RAP, the NGO assisted NHAI in updating and verifying the list of APs, marking structures, displaying the updated list of entitled persons in public places, preparing microplans for titleholders and non-titleholders, counseling the APs, preparing and issuing identity cards for non-titleholders, guiding the APs in opening bank accounts, relocating common property resources, informing APs regarding district-level committees and redress of

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their grievances through the grievance committee, assisting APs in relocation and rehabilitation, training APs for income restoration, and monitoring RAP implementation. The NGO submitted monthly and quarterly monitoring reports to NHAI and ADB during the implementation period. 6. The verification survey in June–September 2002 indicated a significantly higher number of APs than in the original survey. Entitled persons numbered 3,245 against 1,498 listed in the RAP. The Project involved acquisition of government land, agricultural and nonagricultural private land, and displacement of some small-scale business enterprises and common property resources. The compensation and assistance to the titleholders and non-titleholders were undertaken in accordance with the microplan. The microplan for the titleholders comprised (i) compensation for land, structures, and trees assessed by the competent authority; (ii) payment of the difference between the compensation paid by the competent authority and the replacement cost; (iii) transfer allowance for residential and commercial structures; (iv) assistance to offset the loss of employment and income; and (v) assistance to offset the loss of business and industry. The microplan for the non-titleholders comprised (i) cost of structures, and (ii) transfer allowance for residential and commercial structures.

1. Compensation and Assistance to Titleholders 7. Land acquisition was undertaken in four districts (Surat, Navsari, Valsad, and Thane) by the competent authorities concerned, under National Highways Act 1956. During implementation, 119.4 ha of private land (90 ha agricultural land and 29.4 ha nonagricultural) and 102.5 ha of government land was acquired. In accordance with the RAP, four district resettlement committees (DRCs)―one for each district―were constituted and regular meetings were conducted. The titleholders were paid replacement cost based on the following principles.

a. Compensation by Competent Authority 8. Land acquired and other assets lost were assessed and compensated by the respective competent authorities under the National Highways Act.

b. Additional Compensation and Interest Decided by DRC

(i) The DRCs reviewed the compensation rate determined by the competent authority and decided on additional compensation rate for the land, as required.

(ii) Thirty percent of the compensation rate for land determined by the DRC was further added.

(iii) If in calculating the value of structures the competent authority had deducted depreciation and the cost of salvageable material, the amount deducted was restored.

(iv) An interest of 9% per annum on the additional compensation to be paid from the month in which NHAI took possession of the land to the month of payment of the additional amount was added.

c. Other Assistance Included in the Microplan

(i) Transfer allowance for residential and commercial structures, (ii) Assistance to offset the loss of employment and income (iii) Assistance to offset the loss of business and industry

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44

9. The titleholders affected by the Project numbered 2,797, for whom the competent authority had assessed a compensation of Rs157.3 million. Additional compensation of Rs45 million was assessed by the DRCs. NHAI deposited the full amount with the respective competent authorities. About 95% of the total amount has been disbursed to the titleholders. The balance could not be disbursed due to difficulty in locating some of the entitled persons, presence of leaseholders, lack of documentation for land transfers that would allow compensation to current recognized titleholders, land disputes in the family, or absentee non- resident landlords whose compensation would have to await their visit to India. The competent authorities have mailed letters to the entitled persons, asking them to collect their compensation. 10. In Surat district, the DRC made an upward revision to the basic compensation rate for agricultural and nonagricultural land determined by the competent authority before applying an increase of 30%. In Thane district, the compensation rate assessed by the competent authority was higher than that assessed by the NGO. Hence, there was no need for determining additional compensation. The NGO assisted the APs in redressing their grievances.

2. Assistance to Non-Titleholders 11. In accordance with the RAP, the NGO prepared for the non-titleholders a microplan comprising (i) cost of structures, and (ii) transfer allowance for residential and commercial structures. The microplan was approved by NHAI and the disbursements were made through the NGO. 12. NHAI disbursed an assistance of Rs1.06 million to 278 non-titleholders. Some of the non-titleholders included in the microplan did not have to be displaced from the right-of-way (ROW) for construction works under the Project. Those non-titleholders did not remove their structures from the ROW and therefore did not have to be compensated.

3. Income Restoration 13. The NGO assisted NHAI in income restoration for the APs. The main focus of the income restoration scheme was to ensure that the APs are restored to their previous living standards. Priority was given to the vulnerable groups to ensure that the families are able to reconstruct their livelihood support system. The NGO coordinated and, wherever required, handled training for interested APs and women’s self-help groups (SHGs) to upgrade their skills. 14. The NGO deputized two experienced women professionals to provide training to members of women’s SHGs. The training was given to members of 28 women’s SHGs in the villages adjacent to the project corridor. The NGO coordinated the training for 23 APs with the Rural Technology Institute, Gujarat at Pardi, Valsad district, to build their capacity and upgrade their skills. The mission of the Institute is to upgrade technology and the skills of artisans in the cottage and rural industrial sector to improve their efficiency, productivity, and income. The NGO also gave APs training on basic computer applications.

4. Relocation of Common Property Resources 15. With the assistance of the NGO, NHAI relocated common property resources such as hand pumps, dug wells, and temple in consultation with the APs. NHAI spent Rs215,381 for relocating eight common property resources.

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5. Road Safety Campaign 16. During project implementation, the NGO prepared a proposal for a road safety campaign on the project corridor and submitted it to NHAI for approval. In December 2005, NHAI awarded a contract for consulting services for a plan to implement a road safety (public education) campaign for 28 months for the entire Delhi–Mumbai national highway corridor, which also covers the Surat–Manor section improved under the Project.

6. Other Social Measures 17. NHAI also assisted some APs by providing an alternate housing site and relocating traders along the highway after land development. 18. During project implementation, several meetings with construction workers were conducted at different locations to increase their awareness of HIV/AIDs and general health and hygiene. The project sites were regularly visited to confirm the contractor’s compliance with labor laws. Compliance was found to be satisfactory. 19. The influence area under Section III of the Project is located in Thane district in Maharashtra, covering the Talukas of Palghar and Dahanu. A high proportion of the population in Thane is of tribal origin, with significant numbers of landless laborers. The socioeconomic survey conducted for the Project revealed that about 42% of the APs in Section III are illiterate, over 25% are cultivators, 40% engaged in business activities, and 15% were in the Government service. Overall, the APs along the entire alignment are farmers, homeowners with residences and structures (shops), and wayside vendors who sell their wares along the highway during the day and return to their nearby dwelling places at night. No tribal groups were affected by activities associated with the Project as their settlements are at some distance from the highway. The construction activities had created significant employment opportunities for the local tribal residents.

7. Cost of Land Acquisition and Resettlement 20. A total expenditure of Rs204 million for land acquisition and resettlement was incurred during implementation against the original budget of Rs550 million indicated in the RAP. C. Issues during Implementation 21. The Surat–Manor Tollway Project was the first Project undertaken by NHAI based on ADB’s policy paper on involuntary resettlement. NHAI did not have much familiarity with ADB’s policy during the project preparatory stages and at the beginning of the Project. ADB staff played a major role in familiarizing NHAI with procedures in implementing the RAP. The resettlement activities were delayed significantly in the initial stages of project implementation. The reasons for the delays are highlighted below:

(i) delayed engagement of the NGO; (ii) verification and updating of the list of APs, who have significantly increased in

number; (iii) weak capacity of the NGO; (iv) delays in assessing and paying compensation by the competent authority, even

though NHAI had deposited the money in advance with the competent authority; and

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(v) delays in disbursement due to difficulty in locating some of the entitled persons, land disputes in the family, presence of leaseholders, lack of documentation for land transfers that would allow compensation to current recognized titleholders, and absentee nonresident landlords whose compensation would have to await their visit to India.

22. ADB staff provided continuous guidance and advice to NHAI and the NGO on the implementation of the RAP. During project implementation, the PIU at NHAI significantly enhanced the staff’s capacity to implement the RAP and to address resettlement issues. D. Conclusions and Lessons 23. Despite initial delays in implementing the RAP―because the Project is NHAI’s first project based on ADB’s resettlement policy―and the delay in engaging an NGO, overall the RAP has been adequately implemented. 24. From the project implementation, several lessons, both positive and negative, can be drawn.

(i) The engagement of a reputable agency to assist NHAI in implementing the RAP was required; however, the capacity of the NGO and other similar agencies was limited. Significant ADB staff time was utilized in building the necessary capacity in the NGO to implement the RAP.

(ii) The DRCs appear to have worked well in determining the gap between the compensation assessed by the competent authority and the replacement value.

(iii) The training of women’s SHGs by the NGO professionals during implementation of the RAP is considered a good example and can be a model for replication in other projects.