PPA: IND 22008

PROJECT PERFORMANCE AUDIT REPORT

ON THE

ROAD IMPROVEMENT PROJECT (Loan 918-IND)

IN

INDIA

March 2002

CURRENCY EQUIVALENTS Currency Unit Indian rupee/s (Re/Rs) At Appraisal September 1988 Re1.00 $1.00 = = $0.07 Rs14.51 At Completion March 1999 $0.02 Rs42.43 ABBREVIATIONS ADB AP EA EIRR km m MOST NGO NH NHAI OEM PCR PPAR PWD TA TNRDC UP VOC Asian Development Bank Andhra Pradesh Executing Agency economic internal rate of return kilometer meter Ministry of Surface Transport nongovernment organization national highway National Highways Authority of India Operations Evaluation Mission project completion report project performance audit report Public Works/Highway Department technical assistance Tamil Nadu Road Development Company Uttar Pradesh vehicle operating cost At Evaluation December 2001 $0.02 Rs48.20

NOTES (i) (ii) The fiscal year (FY) of the Government of India and the state governments ends on 31 March. In this report, $ refers to US dollars.

Operations Evaluation Department, PE-588

CONTENTS Page BASIC DATA EXECUTIVE SUMMARY MAP I. BACKGROUND A. B. C. D. E. F. II. A. B. C. D. E. III. A. B. C. D. IV. A. B. C. V. A. B. C. D. E. F. G. VI. A. B. C. APPENDIXES Rationale Formulation Purpose and Outputs Cost, Financing, and Executing Arrangements Completion and Self-Evaluation Operations Evaluation Department Evaluation Formulation and Design Achievement of Outputs Cost and Scheduling Procurement and Construction Organization and Management Operational Performance Performance of the Operating Entity Economic Reevaluation Sustainability Socioeconomic Impacts Environmental Impact Impact on Institutions and Policy Relevance Efficacy Efficiency Sustainability Institutional Development and Other Impacts Overall Project Rating Assessment of ADB and Borrower Performance Key Issues for the Future Lessons Identified Follow-up Actions ii iii v 1 1 1 2 2 3 4 4 4 5 5 5 6 7 7 9 10 10 11 11 11 11 12 12 12 12 12 13 13 13 13 13 14 14 15

PLANNING AND IMPLEMENTATION PERFORMANCE

ACHIEVEMENT OF PROJECT PURPOSE

ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

OVERALL ASSESSMENT

ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

BASIC DATA
PROJECT PREPARATION/INSTITUTION BUILDING TA No. TA Name Type 955 1058 1059 Road Improvement Pavement Management Expressway System Planning PPTA ADTA ADTA Personmonths 13 22 18 Amount ($) 75,000 490,000 260,000 Approval Date 24 Feb 1988 3 Jan 1989 3 Jan 1989

KEY PROJECT DATA ($ million) Total Project Cost Foreign Exchange Cost Local Currency Cost ADB Loan Amount/Utilization ADB Loan Amount/Cancellation KEY DATES Fact-Finding Appraisal Loan Negotiations Board Approval Loan Agreement Loan Effectiveness First Disbursement Project Completion Loan Closing Months (effectiveness to completion) KEY PERFORMANCE INDICATORS (%) Economic Rate of Return Entire Project BallabhgarhMathura VisakhapatnamAnakapalle HyderabadRamagundam Chennai (Madras)Cuddalore AnkolaHubli BORROWER EXECUTING AGENCIES

At Appraisal September 1988 253.5 87.0 166.5 198.0 Expected

At Completion March 1999 233.6 87.3 146.3 172.8 25.2 Actual 6-28 Jun 1988 18 Jul4 Aug 1988 1214 Oct 1988 10 Nov 1988 27 Dec 1988 10 Apr 1989 30 Oct 1990 Mar 1998 16 Feb 1999 109 PCR 22.4 29.6 23.3 17.8 20.6 13.6 PPAR 20.7 28.8 19.9 15.2 18.5 10.8

27 Mar 1989 Dec 1993 31 Dec 1994 58 Appraisal 35.8 34.1 59.5 25.4 26.2 24.1

India Ministry of Surface Transport; national highway departments of the states of Andhra Pradesh, Haryana, and Uttar Pradesh; Roads and Building Department of the state of Andhra Pradesh; Public Works Department of the state of Karnataka; and Highways and Rural Works Department of the state of Tamil Nadu. No. of Missions 1 1 1 17 2 1 1 Person-days 92 68 4 282 12 28 45

MISSION DATA 1 Type of Mission Fact-Finding Appraisal Project Administration Inception Review Special Project Administration Project Completion 2 Operations Evaluation

ADTA = advisory technical assistance, PCR = project completion report, PPAR = project performance audit report, PPTA = project preparatory technical assistance, TA = technical assistance.

Some of the review missions covered both the Project and 1041-IND: Second Road Project, for $250 million, approved on 30 October 1990, which was implemented in parallel. The mission comprised Caroline D. Heider, Senior Evaluation Specialist, and Ravinder Khera, Staff Consultant.

EXECUTIVE SUMMARY The Asian Development Bank approved the first loan to the road sector in India in 1988 to assist the Government in improving selected national and state highways. The objective was to facilitate faster, cheaper, and more efficient transport services in the project areas, and thereby contribute to their industrial development. Five separate road sections in five states were selected (a total of 665 kilometers); two were to be expanded to four lanes to meet standards for national highways, while the other three were to be improved to state highway standards. The estimated cost was $253.5 million. Implementation took place from April 1989 to March 1998, more than four years longer than expected. The delay was attributable to (i) inaccurate cost estimates in the feasibility studies (construction cost in local currency was underestimated to the extent that bids were 20 percent above the allocated resources); (ii) inadequate preparation, such as obtaining right-ofway and clearing land, which in the case of one road section caused extended legal proceedings; and (iii) slow performance of contractors. The actual project cost was $233.6 million. The 8 percent saving in dollar terms materialized because cost escalation was more than offset by the devaluation of the Indian rupee. ADB financed $172.8 million of the actual project cost; $25.2 million of the loan was canceled. The Project was generally implemented as planned, except for the following adjustments: (i) extending one state highway to link with a national highway, (ii) changing concrete to bitumen surfacing for parts of one national highway, and (iii) not proceeding with some realignments of one state highway due to environmental concerns. The riding quality is on average good and surface roughness is well within the designed level. The pavement conditions are satisfactory, except for a few isolated portions where excessive bleeding of bitumen, rutting, and surface cracking were observed. The approaches to some bridges are not smooth, and the quality and maintenance of drainage is generally inadequate. But overall the project roads are in satisfactory or very good condition. The road influence areas experienced economic growth in various sectors such as agriculture, industry, and tourism. Additional developments along road corridors included education centers and religious establishments. Road improvements contributed to these developments by facilitating short-distance travel (as compared with rail travel), and improving connections to markets thus increasing incentives for economic activities. However, not all of these developments can be attributed directly to the Project, as the existing roads were upgraded to increase capacity (by widening) and improve surface quality (by resurfacing). While widening of the roads was anticipated to help separate fast- and slow-moving traffic (such as bullock and camel carts), the change is not substantial. The Project was accompanied by two technical assistance (TA) grants to address institutional issues such as the need for planning tools for state highways and pavement maintenance (management). These TAs did not create requisite capacities and few traces of sustained outcomes can be found. The planning tools for state highways were considered to be studies rather than an effort to build capacity, and the pavement management system required too much data to be kept updated. In addition, decision makers did not use the study results to allocate maintenance funds or prioritize maintenance works. Both TAs are rated unsuccessful.

iv As the first loan to India's road sector, the Project provided learning experiences that have been incorporated into more recent projects and procedures. For instance, project preparation is more closely supervised with the help of international consultants to check feasibility studies; and supervision consultants are hired in the role of engineer with powers and responsibilities defined by international standardsthey no longer play the role of often-ignored advisers. However, some of issues remain to be addressed, most prominently those of road safety, and identification of priorities for and costing of road maintenance works. The Government is experimenting with performance maintenance contracts, which will require realistic costing and monitoring. For road safety, the Governments education campaigns need to be expanded and law enforcement ensured. The Project has been relevant to the Governments strategy for the road transport sector and complements some of the road sections that are being upgraded under a current program. Project objectives were attained, albeit with serious delays, and the economic rate of return for the Project as a whole is 20.7 percent in spite of these delays. Only one road section has a rate of return below the cut-off rate of 12 percent. While maintenance funds have fallen short of the standard rates applicable, sustainability of the roads still seems assured. Based on these factors, the Project is rated successful.

I. A. Rationale

BACKGROUND

1. In 1988 India already had an extensive transport network, which comprised rail, road, air, and water modes of transportation. The extent of the network as a whole and the road network in particular were considered adequate but in poor condition. Only 30 percent of roads had a cement concrete or bituminous pavement. While 90 percent of the state highways were paved, almost all had a width of less than 6 meters (m). Thirty percent of the entire road network had single-lane roads (3.7 m), and many of the roads had high degrees of road roughness. These conditions resulted in constraints in terms of capacity, efficiency, transport time, road safety, and transport cost, affecting freight and passengers transported on the road network. In the late 1980s, road transport accounted for 50 percent of freight and 80 percent of passengers. In addition to these constraints, the road sector was expected to gain in importance over railways because of (i) a change in commodity mix, (ii) the distances freight was being transported, and (iii) liberalization of the road sector. With the increasing importance of the road network combined with its poor condition, the Government decided to invest in selected sections of the network. The road sections included in the Project1 were justified on the basis of the increasing industrial activities in the road influence areas, which required an adequate transportation system to spur economic growth. B. Formulation

2. The Project was prepared in 1988 under a feasibility study supported by technical assistance (TA).2 Domestic consultants, hired by the public works departments (PWDs) of the respective state governments, prepared feasibility studies for a number of subprojects from which specific road sections were selected (para. 4). One exception to hiring consultants was in Tamil Nadu where the Highway and Rural Works Department of the state government completed a feasibility study of the ChennaiCuddalore road in less than six months. The study for the VisakhapatnamAnakapalle road in Andhra Pradesh (AP) was completed in less than two months. In other cases, the detailed design was prepared in parallel with and completed at the same time as the feasibility study. The Ministry of Surface Transport (MOST)3 scrutinized some of the feasibility studies and missions of the Asian Development Bank (ADB) commented on the studies. However, this limited time frame combined with the inexperience of domestic consultants and state PWDs adversely affected the quality of feasibility studies, detailed designs, and overall planning. For instance, aspects pertaining to the actual status of land, existing obstructions and trees, environmental and social concerns, construction costs, traffic data, and economic criteria were not adequately addressed. As such, the quality of the Project at entry was inadequate. Based on the lessons learned, the feasibility and detailed design for the subsequent project4 was scrutinized by dedicated international consultants on behalf of MOST with better results.

1 2 3

Loan 918-IND: Road Improvement Project, for $198 million, approved on 10 November 1988. TA 955-IND: Road Improvement, for $75,000, approved on 24 February 1988. The ministry has been subdivided and the part responsible for road transport renamed the Ministry of Road Transport and Highways. Loan 1041-IND: Second Road Project, for $250 million, approved on 30 October 1990.

2 C. Purpose and Outputs

3. According to the appraisal report, the Project is designed to improve selected national and state highway sections that constitute important infrastructure support facilities for industrial activities in five States, mainly by strengthening existing pavements and widening carriageways wherever needed for present and projected traffic. These improvements were expected to reduce transport constraints and facilitate faster, cheaper, and more efficient transport services in the project areas. 4. The planned project outputs were (see the map on page v) (i) four-laning and strengthening national highway 2 (NH 2) from Ballabhgarh to Mathura (111 kilometers [km], of which 9 km were four lanes at the time of appraisal) in Haryana and Uttar Pradesh (UP); four-laning and strengthening NH 5 from Anakapalle to Visakhapatnam (40 km), and improving the existing Anakapalle bypass (6 km) AP; improving the HyderabadRamagundam road (216 km) in AP; improving the AnkolaHubli road (132 km) in Karnataka; improving the Chennai (Madras)Cuddalore road (160 km) of the East Coast Road in Tamil Nadu; and providing equipment for quality control, pavement evaluation, and road maintenance for the PWDs of the five states concerned with the Project.

(ii) (iii) (iv) (v) (vi)

5. The project scope was not changed significantly during implementation, although modifications were made to a number of the outputs (para. 14). 6. Two TAs accompanied the Project. The aim of the first5 was to build state capacity to improve the use of maintenance funds by introducing a computerized pavement management system. This TA provided inputs for developing the computerized system and for training staff. The second TA6 aimed to (i) increase MOST's capacity to plan, manage, and operate expressways; (ii) develop an analytical system for assessing the likely diversion of traffic to specific expressway segments, including an assessment of the impact of toll rates; and (iii) develop an economic evaluation model for establishing traffic benchmarks for alternative options of improving traffic corridors. D. Cost, Financing, and Executing Arrangements

7. The total project cost was estimated at $253.5 million, with a foreign exchange component of $87.0 million (34.3 percent of the total) and a local currency component of $166.5 million equivalent (65.7 percent). The ADB loan of $198.0 million was to finance 78.1 percent of the total project cost, while the Government was to fund the remaining 21.9 percent. The actual project cost at completion was $233.6 million. ADB funded 74 percent, or $172.8 million; of this,

TA 1058-IND: Pavement Management System for State Roads in Andhra Pradesh and Tamil Nadu, for $610,000, approved on 3 January 1989. TA 1059-IND: Expressway System Planning Study, for $270,000, approved on 3 January 1989.

3 $85.6 million financed local currency costs. The balance of $25.2 million was canceled. The 8 percent cost underrun was attributable to underused contingencies.7 Appendix 1 provides a summary of estimated and actual project costs. The Project was the first loan to MOST. Since approval of the loan in late 1988 and the associated TAs in early 1989, the road sector in India has received five loans and 21 TAs. 8. MOST, the overall Executing Agency (EA), established a project implementation cell at the central level within the department responsible for roads and highways; it was headed by a chief engineer. MOST was also responsible for the national highway components of the Project (BallabhgarhMathura and VisakhapatnamAnakapalle) for which it appointed chief engineers in Haryana, UP, and AP, for procurement and distribution of the equipment, and for the TAs. State highway components were executed by the (i) Roads and Buildings Department of AP (HyderabadRamagundam), (ii) Highway and Rural Works Department of Tamil Nadu (ChennaiCuddalore), and (iii) PWD of Karnataka (AnkolaHubli). Each of the state departments established a project implementation unit to supervise construction. The units were headed by a project director of the rank of superintendent engineer (senior highway engineer) nominated by each state for its stretch of the project road. The directors were assisted by resident engineer(s) who worked alongside the consultants (para. 18) hired to assist in implementing the Project. The chief engineers from the states had administrative functions. E. Completion and Self-Evaluation

9. The project completion report (PCR) was prepared by the Infrastructure, Energy, and Financial Sectors Department (West) and circulated to the Board of Directors in 1999. The PCR observed delays in bidding, contract award, and construction, which were largely attributed to the performance of the EAs, particularly at the state level, and noted conflicts between the supervision consultants and the EAs. Environmental problems were noted in the PCR, as some trees had to be cut along the ChennaiCuddalore section, where, according to the PCR, minor realignments were introduced to improve the geometric design. Nongovernment organizations (NGOs) protested the cutting of trees, taking the case through the legal system. Eventually, implementation resumed and the PCR commented that the issue could have been managed better. The PCR noted that (i) the Project was built as planned, except for minor variations to some of the components for which detailed descriptions were provided; and (ii) the quality of the roads was as per design with no major pavement defects. The PCR also reported that the TAs were implemented as planned and produced satisfactory results, but provided limited information on capacities built and the potential for outcomes being sustained. The economic internal rate of return (EIRR) was estimated for each component and resulted in rates lower than appraised due to increases in construction costs, delays, and lower than expected traffic counts. Nonetheless, none of the components had an EIRR of less than 12 percent and the Project as a whole achieved an EIRR of 22.4 percent. The Project was rated generally successful. 10. The PCR adequately reflected the achievements and shortfalls of the Project, although its assessment of the results of the TAs was too optimistic (paras. 36 and 37). The PCR identified important lessons learned, some of which have been put into practice. For instance, construction supervision consultants are now used as engineers in their capacity defined by

In Indian rupee terms, the cost was underestimated at design; this resulted in lengthy negotiations with contractors, and affected the rate of return of project components. In dollar terms, these cost increases were offset by the devaluation of the Indian rupee against the US dollar.

4 international standards rather than advisers (para. 18).8 Project experience also demonstrated the need for public participation and involvement of NGOs to avoid disruptions in implementation.9 F. Operations Evaluation Department Evaluation

11. This project performance audit report (PPAR) assesses the Projects relevance, efficacy, efficiency, sustainability, and institutional and other development impacts. The PPAR represents the findings of the Operations Evaluation Mission (OEM) that visited the Project in December 2001. The PPAR is based on discussions with officials working for the EAs and other relevant offices, people living in selected villages situated along the project roads, staff of multilateral and bilateral agencies involved in the transport sector and of ADB, the analysis of documentation, and visits to sites. The OEM inspected the entire length of the project roads. Comments were sought from stakeholders from the Government, EAs, and within ADB and reflected in the final PPAR. II. A. PLANNING AND IMPLEMENTATION PERFORMANCE

Formulation and Design

12. At the time of appraisal, the rationale for the Project was, at least in part, based on the aim to contribute to the industrialization and economic growth of India, which were shared aims of the Government and ADB. Road sections were to be selected to overcome transport capacity shortcomings along certain routes and to support ongoing industrialization in the road influence area. In addition to these criteria, ADB financing was to be provided to a number of states to provide equal access to external funding. The actual selection of roads was influenced by the submission of feasibility studies by the states (para. 2) before the deadline for proposing road sections for ADB financing. At the time, ADB did not have a country operational strategy or a road sector strategy. The individual road sections did not form a coherent whole under the umbrella of the loan, but were selected for equity rather than economic reasons. The involvement of a large number of EAs (necessary because each section fell under the responsibility of different agencies and because of the geographic distance it involved) had several effects. First, the impact of the Project as a whole is dispersed across several parts of India without creating synergy effects, and second, coordination and supervision by MOST and ADB was more time-consuming and costly than if the road stretch had been contiguous. Recent ADB loans each cover one continuous stretch of road rather than a mix of different sections. 13. Still, each of the road sections can be justified in its own context. The Ballabhgarh Matura and the VisakhapatnamAnakapalle roads became part of the golden quadrilateral and thus made a small contribution to the Prime Ministers National Highway Development Project.10 The AnkolaHubli road links with the MumbaiChennai connection (NH 4) of the golden quadrilateral, parts of which are presently being upgraded with ADB assistance,11 providing an additional link to other parts of Karnataka. The ChennaiCuddalore road is an important link to
8 9

Loan No. 1274: National Highways Project, for $245 million, approved on 29 November 1993. ADB helped prepare environmental guidelines through TA 2002-IND: Environmental Management of Road Projects, for $240,000, approved on 29 November 1993. 10 This project, estimated to cost Rs580 billion, comprises (i) the golden quadrilateral of 5,851 km connecting Delhi, Kolkata, Chennai, and Mumbai (estimated cost of Rs250 billion) for completion by end 2003, (ii) 7,300 km of North South (KashmirKanayakumari) and EastWest (SilcharPorbandar) corridors (estimated cost of Rs290 billion) for completion by end 2007, and (iii) port connectivity and link roads (estimated cost of Rs40 billion). 11 Loan 1839-IND: Western Transport Corridor Project, for $240 million, approved on 20 September 2001.

5 developments along the coast, and the PondicherryCuddalore section of this road has been integrated into the national highway system. The HyderabadRamagundam road does not feature among the core network of state highways identified by the state government in cooperation with the World Bank. However, it links with NH 16, an extension decided during project implementation (para. 14), and with a state highway upgraded with World Bank assistance. B. Achievement of Outputs

14. Project outputs (para. 4) generally were produced as planned with the following modifications. The HyderabadRamagundam road was extended by 10.5 km to link with NH 16, parts of the BallabhgarhMathura road were finished with bituminous concrete rather than concrete, and some realignments on the ChennaiCuddalore road could not be implemented for environmental reasons. The PCR documents and explains these deviations from original plans. Bridges and culverts were strengthened as per design, although in some cases the approaches to the bridges are not smooth. Drainage facilities are generally inadequate, either lacking or overgrown, and poorly maintained. Hard shoulders were provided at varying width, and not always with a hard surface. Service roads were built in few locations. Their use for other purposes (e.g., repair shops) minimizes their utility for easing traffic congestion in town areas. Equipment was provided with certain modifications in numbers and distribution to the five states. In addition to the original specifications, asphalt content gauges were procured and distributed. Appendix 2 provides details on the road improvements financed under the Project. C. Cost and Scheduling

15. In dollar terms, the actual project cost was 8 percent lower than estimated at appraisal, although the cost of civil works and right-of-way exceeded original estimates by 16 and 47 percent (Appendix 1). These increases were well within the limits of project contingencies. The cost overrun was more pronounced in local currency because of higher base prices, price escalation, and exchange rate movements of foreign costs to local contractors, but were off-set by the devaluation of the rupee. The underestimated costs of works affected the schedule for awarding contracts. Since bids exceeded estimated costs by more than 20 percent, government and ADB approvals had to be sought to revise allocations. Combined with lack of experience with ADB procedures, inexperience of state EAs in managing contracts, and environmental and right-of-way issues that were not resolved during project design, these factors resulted in major delays of more than four years for the Project as a whole. Some road sections were completed with less delay. The causes for the delays and solutions to mitigate them are documented in the Project Administration Study,12 summarized in Appendix 3. D. Procurement and Construction

16. ADBs Guidelines for Procurement were followed. However, being the first road project in India, the EAs, especially at the state level, were not conversant with international standards and ADB guidelines. Long delays, therefore, occurred at each stage of the procurement cycle (i.e., prequalification, preparation of bid documents including design and specifications, evaluation of bids, and award of contracts). On the government side, the multitude of

12

ADBs Project Administration Strategy Study in was carried out by the Indian Resident Mission in 1997-1998 to identify issues involved in implementation delays, their causes, and solutions to mitigate them. The study included most of the project roads, as well as project roads under the Second Road Project (footnote 4) and ADB-financed projects in the power and port sectors.

6 government agencies involved resulted in lack of ownership and too many approval stages during construction and the procurement of equipment. 17. Six contractors were engaged for the five road components comprising 15 contract packages. The contractor for BallabhgarhMathura did not have adequate concrete paving trains, matching concrete placer, and concrete batching plants to cater for simultaneous work in both states (Haryana and UP), and did not augment available resources in spite of being requested to do so from the start. This resulted in reduction of the original scope of concrete pavement works in the UP stretch of NH 2 (para. 14) to avoid further delay in completing works. Although in all cases the quality of work was found to be satisfactory, the fact that all the project roads were inordinately delayed, even with reduced scope, points to an unsatisfactory performance of the contractors. On analysis, the various contributing reasons were (i) insufficient importance given to prequalification of contractors,13 (ii) unsatisfactory site management (in some cases due to the presence of consultants, contractors did not even have qualified engineers at the site), (iii) inadequate financial management, (iv) poor performance of contractors plant and equipment, (v) inability to procure materials and deploy adequate resources when required, and (vi) the subcontracting of works to inexperienced and unsupervised subcontractors. This poor performance resulted in termination of one contract package (replaced with the contract award to another contractor) and recommendations to terminate another. 18. The construction supervision consultants were to ensure that construction quality was consistent with the specifications, while the day-to-day construction supervision/inspection rested with the PWDs. Under this arrangement, the role of domestic and international consultants was advisory and the intended benefits from engaging them could not be fully utilized. MOST lacked experience in implementing conditions of contract as stipulated by the Federation Internationale des Ingenieurs Conseils, and in many instances ignored the advice of the consultants. This was corrected under the National Highways Project (footnote 8) as the use of advisory consultants was dropped and the supervisory consultants were engaged as "the engineer" under the international federation's conditions of contract. Notwithstanding the limitations, the performance of the domestic consultants was generally satisfactory. They were able to (i) monitor the Project, prepare detailed monthly reports highlighting problems resulting in implementation delays, recommend ways to accelerate progress, and update cost estimates; (ii) provide key input to redesign pavement in some cases; (iii) assist in the planning and construction management of civil works; (iv) advise state PWDs on the contractors claims; and (v) certify the quality and quantity of the civil works. Each domestic consultant had an international consulting firm as an associate, with limited inputs pertaining to project management. The firm provided concrete (rigid) pavement and bituminous (flexible) pavement expertise, as well as materials and contract administration support. The international consultants also updated contractors and domestic consultants on current knowledge on technical aspects of construction work. E. Organization and Management

19. During implementation, the concept of administration and management of projects of this magnitude and geographic spread was not well established. It was and continues to be a learning exercise. However, being the first project of its kind, lessons were learned and many
13

Some of the prequalified domestic contractors did not have sufficient resources to allocate for the contracts awarded. One of them was simultaneously involved in six road projects pertaining to the World Bank and the Project and thus had resources thinly deployed on each.

7 adopted through constant interaction of the ADB review missions, resident mission staff, and consultants. The project implementation cell within MOST (para. 8), established at the suggestion of ADB, coordinated with various agencies. However, MOST had difficulty complying with covenants concerning land acquisition, separate accounting, and timely submission of audited financial statements.14 The multitude of agencies involved in project implementation affected ownership and coordination, causing delays in acquiring land and securing right-ofway. In addition, other agencies such as the revenue department and those providing services such as electricity, telephone, and water supply, do not give priority to implementing externally aided road projects, but their cooperation is essential for procuring land and for identifying pipes and underground cables that would affect road works. Some of these activities continued for up to two years beyond the original scheduled completion of the Project itself, e.g., Hyderabad Ramagundam road. Having learned the lesson, the Government amended the land acquisition act applicable to national highways, and state governments are considering similar changes to state legislation. 20. ADB conducted a total of 19 review and special administration missions comprising 294 person-days. These missions reviewed other loans including TAs that MOST was implementing simultaneously. This appears to have been an effective use of ADB staff time and resources. Active ADB intervention helped the EAs, which were not familiar with ADB procedures, avoid even more delays in engagement of consultants and procurement, and helped the Project to move forward in spite of implementation problems. Site visits were conducted and problems were dealt with as they arose. ADB recommendations on technical aspects of the asphalt pavement resulted in substantial savings in long-term maintenance costs and were instrumental in bringing about a change of specifications after due deliberations by experts. The new specifications reduce the quantity of tack coat,15 prevent early bleeding of pavement,16 enable longer life of pavement, and lead to maintenance cost savings. III. A. ACHIEVEMENT OF PROJECT PURPOSE

Operational Performance 1. Traffic Carried

21. Based on the OEMs observations, the volume of traffic is slightly higher than at project completion and the composition of traffic has more or less stayed the same. At appraisal the mix of slow and fast-moving traffic on the road and its impact on traveling speed and road safety was identified as a problem. The Project was intended to help segregate traffic, in particular nonmotorized vehicles from motorized vehicles. However, such segregation has not happened on any of the project roads. The roads are used by motorized vehicles, including tractors; by nonmotorized vehicles, including bicycles and bullock carts; and by herders who drive their cattle, buffalo, and goats along the road. The only notable stretch where some segregation takes places is along the ChennaiPondicherry route where about one third of the road

14

Issues of separate accounting and of submitting audited financial statements were resolved during project implementation. 15 Tack coat is the primer applied to substrates, concrete slabs, or stabilized base courses to provide good adhesion for the next layer. Cutback bitumen or bitumen emulsions are generally used as tack coat. 16 Bleeding is migration of bitumen to the surface of the pavement.

8 shoulders have been resurfaced with concrete pavement blocks.17 The different color (light gray) and rougher surface discourages use by motorized vehicles, except for emergency situations, while bicycles and pedestrians were observed to stay mostly on the shoulders. 22. Road improvements have not necessarily contributed to improving road safety. The number of road accidents, injuries, and fatalities in the five states increased between 1985 and 1998, often doubling; but the fatality rate (number of fatalities per 1,000 registered vehicles) actually dropped by more than 50 percent in most of the states (Appendix 4).18 On project roads that were expanded to four lanes, traffic moves in both directions on both sides of the median at intersections and in town areas. In a number of areas, the median has been broken to allow traffic, including tractors, to cross the road in places that were not designed for this. In many instances, the middle line and markings for the shoulder are missing, road signs are absent, and no reflectors are installed, the absence of which adds to inappropriate safety standards. However, most of the accidents have to be attributed to irresponsible driving, due to a lack of driving skills, inattention, and fatigue. These and other shortcomings in road safety in general are discussed in another evaluation.19 2. Technical Standards and Current Conditions

23. In general, the project roads are in satisfactory or very good condition. The riding quality is on average good and surface roughness is well within the designed level (estimated at 2,0003,000 millimeters/km). Overall, pavement conditions are satisfactory, except for a few isolated portions where excessive bleeding of bitumen, rutting, and surface cracking were observed. Potholes were generally filled, except in very few areas where maintenance needs to be undertaken. The OEM was not able to establish conditions of the ChennaiCuddalore road as built under the loan, because since January 2001 a public-private concessionaire, the Tamil Nadu Road Development Company Limited (TNRDC), has been operating and maintaining the road. TNRDC has resurfaced more than 80 percent of the road, with plans to complete remaining stretches within a few months. These works may not have been necessary from the technical point of view; according to the PCR resurfacing should have been due after eight and not six years. Nevertheless, the resurfacing was considered necessary to provide better service to customers, who otherwise might be unwilling to pay a toll. In many cases, drainage systems are overgrown or do not exist. Only along the AnkolaHubli road are there stretches of drains with a hard surface. Along the same road, a stretch of some 24 km suffered serious damage (bituminous bleeding and rutting along a mountainous bending road stretch), possibly due to overloaded vehicles. The condition of the roads stands out positively in comparison with adjacent roads, including some of the national highways they connect with. Appendix 5 provides details on each of the road sections.

17

Under the Project, earthen shoulders were provided on this road section. Since the beginning of 2001, the road has been contracted to a concessionaire who decided to repave parts of the shoulders, choosing pavement blocks as a technically viable option apparently not more costly than bitumen for around one third of the road stretch. The remaining sections are about one third bitumen and one third earthen shoulders. 18 At appraisal, traffic accident statistics were provided for the five states as a whole and not for the project roads as such. 19 ADB. 2001. Technical Assistance Performance Audit Report on Selected Technical Assistance in Road Safety. Manila.

9 3. Maintenance

24. After the defect liability period of one year for which the contractor was responsible for maintenance, no major maintenance was required on the project roads, and regular maintenance has been satisfactory. Maintenance allocations varied from Rs5,000 per km for the HyderabadRamagundam road to about Rs20,000 per km for the AnkolaHubli road (both are two-lane roads). For the maintenance of the UP stretch of the BallabhgarhMathura road, the National Highways Authority of India (NHAI) sanctioned Rs64 million for 20012002 to improve road safety, bridges, and approaches to bridges over railway lines. These varying allocations were made on the basis of norms and available funds rather than of actual requirements determined using methods such as the pavement management system (para. 36). B. Performance of the Operating Entity 1. Finance

25. At appraisal the road sector generated $5.3 billion per annum from taxes, fees, and tolls. Only tolls and part of the fuel tax were contributed to the Central Road Fund, which was a dedicated fund for road maintenance. An increase in contributions to the fund by increasing the fuel tax share, which was decreed in 1988, was expected to yield a total annual funding level of $229 million equivalent at current exchange rates, 36 percent of which would be allocated to the center and 64 percent for state expenditure. The total road sector expenditure at appraisal was estimated at $1.9 billion equivalent at current exchange rates, funded from the general budget, tolls, and the Central Road Fund. In 2000, the fund was revamped by establishing the Dedicated Road Fund, again increasing its resource base by adding a new excise duty. The new fund is expected to generate $1.3 billion equivalent per year at the then current exchange rate. This fund is largely used for capital investments in the road sector, although funds can also be used for maintenance. 26. Expenditure for road maintenance is allocated from the central and state budgets, but allocations reportedly fall short of requirements by around 40 percent. However, these requirements are established on the basis of standard costing rates, which have been used for more than 20 years without verification of how much they reflect actual maintenance costs. As discussed in para. 23, the project roads are in good condition, implying that funds were available and adequate for maintaining them, even though below standard costing rates. 2. Institutions

27. The institutional framework for managing the sector has evolved since project appraisal. MOST was restructured and part of it now forms the Ministry of Road Transport and Highways, which is entirely focused on road transport and highways at the national level. It is responsible for two of the previous state highway sections, namely the AnkolaHubli and Pondicherry Cuddalore stretches, as they are being reclassified from state to national highways. In addition, NHAI was established to be dedicated to national highways. It plays a major role in building and managing specific national highways, in particular those under the Prime Ministers National Highway Development Project (para. 13), which places the BallabhgarhMathura and VisakhapatnamAnakapalle roads under its authority. The ChennaiPondicherry road has been contracted out to TNRDC (para. 23). Of all the project roads, only the HyderabadRamagundam road continues with the state government of AP.

10 28. These institutions are increasingly moving to using maintenance performance contracts, which require the private contractor to maintain the road at specified standards. NHAI is introducing the corridor management concept, which will affect the BallabhgarhMathura and VisakhapatnamAnakapalle roads. The concessionaire will collect tolls on these roads, while being responsible for maintaining the roads at an agreed standard. An eight-year operational maintenance contract is being finalized for the UP portion of the BallabhgarhMathura road. The concession given to TNRDC for the ChennaiPondicherry route requires the concessionaire to maintain the roads at specified standards, while giving it the right to toll the road and retain toll revenue. TNRDC expects to break even after 15 years.20 TNRDC issued a six-year maintenance contract with performance standards and penalties if these standards are not met. A similar contract is being tried for a World Bank project in AP, and, if institutionalized, may apply to the HyderabadRamagundam road over the longer term. Under this contract, Rs25,000/km are allocated for ordinary maintenance, while periodic maintenance (i.e., resurfacing) is planned based on actual requirements. Because these concessions are in the experimental phase, their effectiveness in keeping roads well maintained cannot be assessed. C. Economic Reevaluation

29. The EIRR has been reestimated following the same methodology as used at project completion, and updating traffic counts, traffic growth projections, and vehicle operating costs. All benefits and costs are expressed in 2001 constant prices. The EIRR has decreased in comparison with estimates at appraisal and completion because of (i) changes in maintenance cost (revised standards in publications of the Indian Road Congress), (ii) changes in traffic growth rates, and (iii) an increase in construction cost and extended implementation period. 30. The additional cost for upgrading the ChennaiCuddalore road (para. 23) has not been included in the EIRR calculation, because requisite data could not be obtained. The EIRR for this road section and for the Project as a whole is therefore higher than it should be. The low rate of return for the AnkolaHubli road is explained by lower than expected traffic flows. The EIRRs for each section and the Project as a whole are provided in Table 1. The detailed EIRR calculation is in Appendix 6. Table 1: Comparison of Economic Rates of Return
(%) Road Section BallabhgarhMathura VisakhapatnamAnakapalle HyderabadRamagundam ChennaiCuddalore AnkolaHubli Entire Project Appraisal 34.1 59.5 25.4 26.2 24.1 35.8 Completion 29.6 23.3 17.8 20.6 13.6 22.4 Evaluation 28.8 19.9 15.2 18.5 10.8 20.7

D.

Sustainability

31. The Project is sustainable from a technical point of view. Financially, the new performance maintenance contracts will have to prove whether arrangements other than purely

20

The portion of the ADB loan for this road section was not passed on to the concessionaire, but made as a government contribution.

11 government-financed maintenance of roads are effective, although the Government will likely keep maintaining roads at whatever standards can be afforded. IV. A. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

Socioeconomic Impacts

32. The OEM collected data to assess socioeconomic developments in the road influence area. Baseline information in the appraisal report was limited to basic information on industrial establishments and their output, and some indicators for agriculture production and tourism. Data collected by the OEM indicates that most industrial and agriculture activities expanded in terms of number of establishments, output, and/or yields. In addition, the OEM noted a number of other activities that developed in the road influence area, such as tourism sites, education centers, and religious establishments. In many cases, the project roads contributed to the expansion of economic activities and facilitated travel over shorter distances (rather than rail transportation). However, not all of these developments can be attributed to transportation alone. Also, the appraisal report did not contain baseline data for social services or poverty indicators. The OEM, therefore, did not collect information on these indicators as the project impact (change as a result of the Project) could not be established. Appendix 7 summarizes the observed development impacts. 33. Transportation service charges were not recorded at the time of project appraisal or completion. However, generally, the prices of transportation has been increasing and little evidence is available to indicate that vehicle operating cost savings are being passed on to users of transportation services. B. Environmental Impact

34. Originally the Project did not anticipate any direct environmental impact. However, during implementation major problems arose along the ChennaiCuddalore section, where tree cutting took place and resulted in protests of NGOs, which filed petitions against these practices. Court orders were issued to suspend works until the Ministry of Environment and Forests provided an environmental clearance, which was done in February 1994. However, the clearance was revoked a year later when conditions attached to the clearance were not complied with. As a result, ADB suspended loan disbursements between April 1996 and November 1997, when eventually all conditions were met. These problems resulted in delays in project implementation and changes in the alignment and construction standards of the road section (para. 14). Without evidence on the preproject situation, the extent of environmental damage is difficult to reconstruct. The PCR reported that some trees were cut, while according to other sources as many as 5,000 trees were felled. Previously cleared road stretches are not denuded of vegetation, although current vegetation is just about 10 years old (instead of previous mature trees) and set back at a reasonable distance of about 5 m from the shoulder. The current concessionaire is realigning the road in several sections (as foreseen under the Project). The local population apparently accepts this, even though tree cutting is involved. C. Impact on Institutions and Policy

35. As the first assistance to the road sector in India, the Project was the starting point of an extended policy dialogue that has continued since its approval. Achievements in institutional and policy reform are documented in the report and recommendation of the President of a

12 recently approved loan (footnote 11). In addition, the Project generated lessons (para. 19) that have been incorporated in design and implementation over the past years. 36. The more explicit institutional goals pursued with the help of the two TAs (footnotes 5 and 6), namely introducing a pavement management system and an expressway management system were not attained. The pavement management system was piloted only in Tamil Nadu instead of two states. The basic data was collected and input into a computerized system installed at a computer unit of the Highway Research Station. A second round of data was collected in 1996, but not processed on the computer. Presently, the program is not installed or used, although staff present at the computer unit were well aware of the program and had operating manuals and input data at hand. Reasons given for not utilizing the program were its time-consuming and costly requirements for data, and because results generated with the program were not used in decision making. ADB and the World Bank have made similar attempts in several states, but progress in finding acceptance of a pavement management system is slow. Appendix 8 provides details on the TA. 37. The TA for developing an expressway management system generated some reports and an economic model that was used/referred to in a number of ADB reports. However, a system for prioritizing the selection of highways is not in place other than using traffic counts and data on capacity utilization. The choice of the golden quadrilateral, and the north-south and east-west corridors (para. 13) was based on the need to connect main centers across the country, thereby providing transport axis. The entire stretch will be four lanes regardless of whether some sections warrant two, four, or six lanes. For the economic assessment of individual road investments, the World Banks highway development model is in common use. More details on the TA are in Appendix 9. V. A. Relevance OVERALL ASSESSMENT

38. The Project contributed to the Governments efforts to improve the road network in the country and facilitated, to some extent, the shift from rail to road transport. Several sections complement the core network now being upgraded under the Prime Ministers National Highway Development Project. The Project is rated relevant. B. Efficacy

39. The Project's objective was attained as transport constraints were eased and vehicle operating cost savings realized. Therefore, the Project is rated highly efficacious. C. Efficiency

40. The EIRR for the Project as a whole is 20.7 percent in spite of the major implementation delay. However, one road section falls below the 12 percent cut-off rate. The Project is rated efficient. D. Sustainability

41. The project roads have been relatively well maintained in spite of constraints on maintenance funds. New arrangements for performance maintenance contracts could be a

13 suitable way to ensure the sustainability of investments in the project roads. The Projects sustainability is rated likely. E. Institutional Development and Other Impacts

42. Institutional development impacts were incidental in that the EAs learned from the mistakes made during project implementation. Planned institutional development impacts to be brought about with the help of the two TAs did not materialize. Other economic changes that took place in the road influence areas can be attributed only in part to the Project. Both TAs are rated unsuccessful, and overall the Project is rated as having modest institutional and other development impacts. F. 43. G. Overall Project Rating Based on the above criteria, the Project is rated successful. Assessment of ADB and Borrower Performance

44. The Project, being the first to the road sector in India, was a learning experience for the EAs, which could have handled some situations more efficiently and effectively. For instance, land acquisition, right-of-way, and environmental issues could have been dealt with in advance to avoid delays. Lessons have been learned from the experience with the Project (para. 49) and changes introduced in procedures. ADB supervised the Project adequately (para. 20), although more care could have been exercised in selecting road sections to be included in the Project and in anticipating environmental issues. VI. A. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

Key Issues for the Future

45. The ambitious Government plans (para. 13) for expanding the national highway system raise some key issues that concern the project roads and the network as a whole. While some are currently being tackled, they require further attention. 46. To finance the recurrent cost of road maintenance, the Government is introducing a toll system and performance maintenance contracts (para. 28). However, the cost per km of road maintenance varies considerably and calls for a more systematic way of assessing the need for and cost of road maintenance works. The Government would be well advised to analyze current practices to avoid issuing contracts that may increase rather than rationalize maintenance costs. Otherwise, the current questionable practice of budgeting for road maintenance (para. 26) would be extended to a different contractual arrangement without reaping benefits that a performance contract could bring about. In addition, mechanisms have to be put into place for monitoring the performance of maintenance contractors to ensure that performance standards are met. 47. Capacity for identifying the need for and costing of road maintenance works must still be developed. Such a system would be helpful to the Government for maintenance works undertaken by its own departments as well as for costing the performance maintenance contracts. Such a system was planned under one of the TAs (footnote 5), but expectations were not met. To be more successful in building requisite capacity, the existing decision-making processes (including inherent political pressures) must be understood, and systems identified

14 that will improve decisions made. To manage political influences, decision makers need to be (i) involved in designing management tools, and (ii) trained to understand how these systems can support the decision-making process. The design of management systems should consider from the outset how much labor/time can be spent on data collection and processing, and optimize resource inputs versus expected outcomes. 48. In addition, the following issues should be considered in future road projects: (i) Truck/bus terminals for parking and vehicle repairs should form a part of the project scope to improve traffic flow and to avoid excessive traffic congestion as witnessed at the HaryanaUP border (BallabhgarhMathura road). Construction costs should be estimated on the basis of market prices rather than the PWD's schedule of rates, and should be checked rigorously for accuracy. Hard shoulders should be built as specified. Road safety measures should be implemented on an urgent basis. These should include extensive training and awareness building of drivers (in particular professional drivers) and stricter law enforcement.

(ii) (iii) (iv)

B.

Lessons Identified

49. Being the first project of its kind in India, the experiences gained have been well utilized for ongoing ADB and World Bank-funded road projects. The lessons include (i) more detailed and systematic project preparation and checking by supervision consultants before commencement of works, as done under one of ADBs more recent projects (footnote 8); contract award only after land acquisition, removal of obstructions, and necessary clearances from various government department and ministries to ensure good start-up; effective use of construction supervision consultants as the engineer according to internationally agreed standards (para. 18) and not as advisors; and involvement of NGOs in environmental concerns (para. 10).

(ii)

(iii) (iv)

50. A major technical issue that was adjusted during implementation and adopted for other projects entailed reducing the quantity of tack coat application. This resulted in cost savings in construction and maintenance, and helped avoid excessive bleeding of bitumen, leading to longer road life. C. 51. Follow-up Actions No immediate follow-up actions to the Project are necessary.

15

APPENDIXES

Number

Title

Page

Cited on (page, para.) 3, 7 5, 14 5, 15 8, 22 8, 23 10, 30 11, 32 12, 36

1 2 3 4 5 6 7 8

Summary of Project Cost Road Improvements Financed under the Project Summary of the Project Administration Study Traffic Accidents Road Conditions at Appraisal and Evaluation Economic Analysis Socioeconomic Development Impacts Pavement Management System for State Roads in Andhra Pradesh and Tamil Nadu (TA No. 1058-IND) Expressway System Planning (TA No. 1059IND)

16 17 19 22 23 24 33 38

40

12, 37

16 Appendix 1 SUMMARY OF PROJECT COST ($000 Current Prices)

Appraisal Estimate Component FX 0 44.79 1.00 0 0 LC 5.69 Total 5.69 FX as % of total 0% 28% Actual FX 0 LC 8.38 Total 8.38 FX as % of total 0% 31% Percentage Change FX 0 28% 14% 0 0 LC 47% 11% 0 4% 28% Total 47% 16% 14% 1% -28%

Right-Of-Way Civil Works Equipment Consulting Services Incremental Operation and Administration Contingencies Subtotal Interest During Construction Total

115.36 160.15 0 3.92 8.36

57.34 128.15 185.49 0.86 0.20 0 0 3.77 6.04

1.00 100% 3.92 8.36 0% 0%

0.86 100% 3.97 6.04 5% 0%

10.31 56.10 30.90 87.00

33.17 43.48 166.50 222.60

24% 25%

0 29%

100% 100% 100% 4% 6% 0% 12% 0 12% 8% 6% 8%

58.40 146.34 204.74 28.90 0

0 30.90 100% 166.50 253.50 34%

28.90 100% 37%

87.30 146.34 233.64

FX = foreign exchange, LC = local currency, TA = technical assistance. Source: ADB appraisal reports and Project completion report.

17 Appendix 2, page 1 ROAD IMPROVEMENTS FINANCED UNDER THE PROJECT

Planned At Project Appraisal 1988 All national highway (NH) sections except the Anakapalle bypass (6 kilometers [km]) will be widened from two to four lanes and the existing pavement will be strengthened. Evaluation Observations 2001 About 152 km of NH stretches have been four laned, (i) 111 km from Ballabgarh to Mathura as part of the NH 2 in the states of Uttar Pradesh and Haryana, and (ii) 41 km from Visakhapatnam to Anakapalle as a part of NH 5 in Andhra Pradesh. In addition, a 6 km stretch of Anakapalle bypass was strengthened. Strengthening and widening of other project roads including the Anakapalle bypass has been carried out as originally envisaged. However, 10.5 km was added as a part of the Project on the HyderabadKarimnagar Ramagundam road to link with NH 16. The total length of state highways as built under the Project are HyderabadRamagundam 225 km, AnkolaHubli 132 km, and ChennaiCuddalore 160 km. Changes to the horizontal and vertical alignments have generally been made in line with design specifications. However, along the ChennaiCuddalore road, realignment of some stretches would have been desirable, as the existing alignment contained seven right-angled curves, which are more prone to accidents. However, realigning these stretches was not possible due to local protests and resultant environmental conditions set by the Ministry of Environment and Forests. 50 minor and major bridges have been constructed on the project roads. These include six bridges on Ankola Hubli road, which were originally envisaged for widening but due to their bad condition were reconstructed as part of the project works. A total of 1,114 culverts were constructed or widened. These include box culverts, pipe culverts, and slab culverts. Three railway overbridges (ROBs) were widened from two to four lanes on VisakhapatnamAnakapalle road. These ROBs were, however, outside the scope of the Project. While the structures were designed as per standards, the approaches to some of the bridges and the existing ROBs are not smooth, especially on the AnkolaHubli, HyderabadRamagundam roads for bridges, and BallabhgarhMathura road for existing ROBs. One of the existing ROBs at Mathura is an accident-prone spot with a major intersection on the ROB itself; though not constructed as a part of the Project.

The Anakapalle bypass and all state highways will be improved to two-lane standard, with widening of the carriageway wherever necessary.

The present vertical and horizontal alignments are generally satisfactory. However, minor changes will be made at certain locations to improve sight distances and increase design speed.

All weak bridges and culverts on the project roads will be strengthened or reconstructed as necessary and, where warranted, overbridges will be constructed at railway crossings. The design of these structures will be based on the Indian Roads Congress class AA single-lane/Class A double-lane loading.

18 Appendix 2, page 2
Planned At Project Appraisal 1988 Drainage facilities alongside the roads will be improved, and in low-lying areas, the road embankment will be suitably raised. Evaluation Observations 2001 In most of the low-lying areas where new construction was planned, road embankments have been raised. On the resurfaced stretches passing through paddy fields, the aspect of proper drainage has not been addressed (as in the PondicherryCuddalore road). The drainage facility along the project roads is generally wanting: in most places the drains are overgrown, invisible, or nonexistent. Where constructed with a hard surface, they are not well maintained/cleaned, thus prone to clogging. Hard shoulders of varying width have been provided on VisakhapatnamAnakapalle, BallabhgarhMathura, and HyderabadRamagundam roads with changed specifications [from mix seal surface to 40 millimeter (mm) bituminous concrete]. On the AnkolaHubli road, 18.5 km length has been provided with hard shoulders of superior specifications against doublecoat surface dressing on 225 mm thick waterbound macadam originally designed. The balance length of the road has however, been provided with soft shoulders. On the ChennaiCuddalore road, only 8 km are bituminous concrete shoulders, while the balance of the road either had earthen shoulders or no shoulders at all. The VisakhapatnamAnakapalle road has been provided with about 7.5 km of service roads in selected congested/builtup areas. Though about 22.5 km of service roads have been provided on the NH 2 stretch between Ballabhgarh and Mathura, this is highly inadequate with insufficient provision for proper crossings from one side to the other. The border of Uttar Pradesh and Haryana is a traffic bottleneck with numerous trucks awaiting toll formalities resulting in clogging of the highway, as parked trucks take up one lane in each direction. Instead, parking facilities for trucks would have been more appropriate, but were not foreseen in the design. On the ChennaiCuddalore road, due to lack of availability of land in the highly congested area between km 11.8 and 22, service roads could not be provided. In fact the project road is abutting the shops and other built up structures in this stretch. However, at Marakanam a 2.25 km bypass has been provided. For the BallabhgarhMathura stretch of NH 2, the rigid (concrete) pavement construction on the additional two lanes was reduced by about 27 km. The section was constructed as flexible (bituminous) pavement. On the HyderabadRamagundam road, about 1 km of bituminous surface was changed to concrete pavement to guard against seepage from an adjacent reservoir.

Hard shoulders, 1.5 meters (m) wide, will be provided on each side of the roads throughout their length, with suitable bituminous surfacing of the entire width of the shoulders within town areas.

In the case of NHs passing through town areas with many crossroads, parallel service roads will be provided to limit the number of access points. The geometric standards followed will be in accordance with the relevant Indian Roads Congress standards applicable to national and state highways.

The pavement will be of a flexible (bituminous) type, except in the case of the additional two lanes for the BallabhgarhMathura section of NH 2, which will be a rigid cement pavement.

Sources: Loan 918-IND: Road Improvement Project. Appraisal Report, October 1988; and Operations Evaluation Mission observations made during site visits and based on project documentation.

19 Appendix 3, page 1 SUMMARY OF THE PROJECT ADMINISTRATION STUDY

Issues A. Quality at Project Entry Lack of project ownership - Inadequate involvement in project design - Lack of coordination between Government agencies - Inadequate consultation with the project-affected people Causes Solutions

1. 2. 3.

4. 5.

6. B. Start up delays Delays in establishing project implementation units (PIUs) 1. 2. 3.

No dedicated team responsible for project 1. design Lack of scrutiny at any specified level and responsibility thereof Different priorities and lack of urgency of concerned departments at center and 2. states Lack of interaction with project-affected people 3. Lack of adequate interaction with and within the state, Government departments, and agencies Lack of consultation with Nongovernment organizations (NGOs)

Core team is to be formed within Ministry of Surface Transport (MOST) and Executing Agency (EA) and assigned responsibility for processing of the project. An "empowered committee" comprising major departments under the of the secretary, MOST, to resolve the bottlenecks. Core team and empowered committee are to be assisted by state project management units.

Government budgetary rules do not allow Instructions already exist for the setting funding of PIUs before loan approval up of the PIU from the Ministry of Key personnel not properly identified in Finance. Needs to be enforced by EAs. advance Lack of urgency on part of Government/EA in timely establishment (serious thought given after contract approval) Lack of coordination between the EAs and Environmental and forest clearance is Government approving agencies completed prior to loan negotiations. Unfamiliarity with the ADB loan requirements Complicated Government procedures Government procedures do not allow budget allocation before loan approval Complicated Government procedures including legal problems Land acquisition is to be completed prior to contract award.

Environmental and forest clearances

1. 2. 3.

C.

Land acquisition

1. 2.

Recruitment of consultants Project Budgeting

1. 2.

Government selection and approval A transparent and clear set of guidelines procedures not clearly defined consistent with Asian Development Bank Poor selection and negotiations(rates fixed (ADB) guidelines to be developed. by the Government ) Streamline the procedures allowing faster flow of funds. Discuss with the state finance department for ADB road projects by Department of Economics Affairs (DEA).

Current procedures for reimbursement of Delays due to budgetary expenditure require three months before EAs process and funds receive funds. transfer 1. Lack of ownership of central Government Diversion of funds funded projects by states 2. State priorities prevail due to local pressures

20 Appendix 3, page 2
Issues D. Causes Solutions

Project Design/Construction Supervision Consultant Deficiencies in project design and drawings Inadequacies in project scope of work, e.g., tree planting and landscaping, road safety, traffic management and important linkages. Insufficient and inaccurate site data Quality of consulting Role of consultants and delegation of powers Contract management skills

1. 2. 3.

Lack of adequate attention to details at the 1. planning stage Insufficient budget provision for carrying 2. out detailed investigation Inappropriate methods of survey 3.

Need to have comprehensive terms of reference. Carry out detailed survey/soil investigation carried out for ADBfunded projects. State Project Management Unit (PMU) are to provide funds for required quality investigations and survey.

1.

Role of consultants not clearly appreciated/understood Domestic Consultants: 1. Inadequate contract management skills 2. Exposure to such projects mostly nonexistent

Consultants are now being allowed to act as "engineer" as per internationally agreed standards. Consulting firms are to assign personnel with relevant experience in international contract management. Current policies require substantial procurement activities prior to loan negotiations. Use two-stage approval for highway projects with detailed project preparation and investment.

E.

Procurement Delays Lack of advance procurement planning 1. 2. Inadequacy in survey, soil investigation, 1. detailed design and drawings Lack of preparedness for the award of major contract 2.

Delays in award of contract Unfamiliarity with ADBs Lack of proper understanding of procedures procedures and by personnel involved (project staff, finance international procurement department officials, and approving authority) Evaluation process 1. Noncompliance of standard bidding document issued by the Government of India 2. Lack of proper guidelines in evaluation of proposals resulting in time-consuming procedures 3. Interference by unauthorized personnel in the bidding process Lack of authority Contract packaging Insufficient delegation of procurement and financial authority at project level 1. Discourages participation of large international contractors who are better equipped to deliver the project in time 2. Difficulty in supervising a number of small contracts 1. Poor assessment of contractors' capability during prequalification, lack of verification, and lack of appropriate prequalification criterion 2. Lack of awareness of contractors track record

Upgrade skills and familiarize project personnel with ADB policies and procedures. 1. The Government issued standard bidding documents, which are mandatory. Advise project management units to ensure compliance with the guidelines issued by the Government on the time frame for each activity in the procurement cycle.

2.

Enhance delegation keeping in view rise in market prices Contract packaging are to encourage participation by international bidders.

Prequalifications of contractor

Proper verification of credentials submitted by bidders is essential at the time of prequalification.

21 Appendix 3, page 3
Issues F. Contract administration Weak project management Deficiencies in project management setup Lack of proper planning of works at site Lack of financial management and cash flow 1. 2. 3. 4. 5. 6. Lack of continuity due to frequent changes Monthly, weekly, and daily planning procedures not in place in most cases Invisible activities having bearing on the main activity neglected in planning Postponing timely actions Shortage of cash flow at site delayed release of funds by the EAs This is compounded by unwarranted deductions and delays in settlement of variations/claims With the establishment of dedicated PIUs and the role of consultant as "engineer" as per Federation International des Ingenieurs-Conseil (FIDIC), projects should now be well managed. Further changes in attitude towards consultants and their role as "engineer" is essential. The latter and the PIU should work in tandem: (i) to ensure proper monitoring of the contractors advance planning, (ii) adequate cash flow is maintained at site by keeping the deductions strictly as per contract, and (iii) mechanism to be in place for settlement of variation orders/claims of the contractor. Causes Solutions

Slow progress of project implementation Implementing procedures and monitoring

1. 2. 3.

Absence of practical work program/adherence Lack of advance actions for critical activities Lack of effective monitoring tools and lack of familiarity of key project staff on these techniques Generally slow in mobilization of plant and equipment Mismatch of equipment and human resources Lack of compliance by the EAs to meet contractual obligations Inappropriate intervention from finance and audit in the interpretation of technical matters

1.

Insufficient resource mobilization by contractor

1. 2.

Lack of respect for the contractual agreements

1. 2.

Work program has to be prepared using latest computer software and monitoring needs to be done at appropriate level. 2. State PMUs to convene monthly review meetings to monitor the progress. Meetings to monitor the progress of work. Mobilization of plant, equipment, and staffing or human resources to be tied up prior to award of contract and advance payments to be linked with proper mobilization 1. Owner's obligations to be provided strictly as per contract. 2. Instruct state finance departments. That contracts in projects financed by ADB be executed under the specified conditions of contract and in the event of conflict with EA's local procedures, the specified conditions of contract will prevail. 1. To attract/retain good quality staff, project personnel to be given appropriate incentives. Selection procedures to be streamlined so that project directors are in place for the duration of the project and are selected on the basis of appropriate skills and experience. Need to develop a training program. Ensure transfer of skills from international consultants to project directors and other key staff.

G. Staffing

Inappropriate staffing

1. 2. 3.

Lack of incentive for field staff resulting in poor selection Lack of continuity due to Government policy on postings and transfers Lack of relevant experience of project director on ADB projects

2.

Unfamiliarity with contract conditions

Decision makers, project directors, and other 1. key personnel on execution are mostly 2. unfamiliar with international contract conditions and their interpretations

22 Appendix 4 ROAD TRAFFIC ACCIDENTS

State Item Haryana Number of Accidents 1985 11,306 2,571 1998 27,599 7,983 Increase (percent) 144.1 210.5 Number of Injured 1985 9,509 3,608 1998 31,735 7,893 Increase (percent) 233.7 114.5 Number of Fatalities 1985 3,509 985 1998 8,886 2,769 Increase (percent) 153.2 181.1 b Fatality Rate 1985 6.4 4.7 1998 3.0 2.2 Decrease (percent) (53.4) (53.7) a For Karnataka the latest accident data available is for 1996. b Number of fatalities per 1,000 registered vehicles. Andhra Pradesh Karnataka
a

Tamil Nadu 24,530 46,723 90.5 20,786 42,495 104.4 5,080 9,801 92.9 10.4 2.4 (76.8)

Uttar Pradesh 13,685 17,631 28.8 8,120 14,193 74.8 4,811 9,201 91.3 6.1 2.9 (52.5)

14,700 30,899 110.2 16,527 43,531 163.4 2,695 5,814 115.7 4.0 2.6 (35.4)

Source: Road Safety Cell, Government of India. 2000. Statistics of Road Accidents in India (1991-1998), Delhi; and Transport Research Cell, Ministry of Road Transport and Highways, Government of India. 1999. Motor Transport Statistics. Delhi.

23 Appendix 5 ROAD CONDITIONS AT APPRAISAL AND EVALUATION

At Project Appraisal Conditions in 1988 The project roads are at present deficient in several respects, the main deficiencies being inadequate pavement strength, poor riding quality of the surface, and narrow width of carriageway on several stretches. Evaluation Observations Conditions in 2001 The project roads are generally in satisfactory to very good condition, except for a few portions. However, some few stretches are affected by excessive loading of single-axle trucks and thus may warrant overlays before they would be due if no overloading took place. Riding quality is average to good and stands out compared with the adjacent roads including some of the National Highways (NHs) they lead to. Some stretches have excessive bleeding of bitumen. This is more pronounced in stretches with horizontal curves. Hard shoulders are affected by heavy vehicles, which use shoulders as regular carriageways, although shoulders are not designed for this purpose. Riding quality is mostly good except for the bleeding portions and certain embankment stretches of the widened portions of Anakapalle bypass. Riding surface is generally good. In some isolated portions rutting has taken place due to excessive bleeding of bitumen. Approaches to the rail overbridge at Kosi and some of the major road junctions were recently repaired as a part of special maintenance.

The project road between Visakhapatnam and Anakapalle (NH 5) in Andhra Pradesh has a two-lane bituminous pavement in far too bad condition requiring rehabilitation and widening of the carriageway to four lanes over 40 kilometer (km) of the 46 km section because of heavy traffic.

The section of NH 2 between Ballabhgarh and Mathura (111 km) in Haryana and Uttar Pradesh has a four-lane carriageway over 9 km and a two-lane carriageway over 102 km; both sections have bituminous pavement in fair condition. Because of heavy traffic, the four-laning needs to be extended over the remaining 102 km section and the existing pavements require strengthening. The HyderabadRamagundam road (216 km) in Andhra Pradesh has a bituminous pavement in bad condition and about 25 percent of the road has a pavement width less than 5.5 meter (m). Improvements are needed to upgrade and strengthen the road to two-lane standard, and bypasses are needed at Siddipet and Karimnagar towns due to heavy traffic congestion there.

This project road shows signs of excessive bleeding in many stretches resulting in rutting. The carriageway has developed cracks in about 25 percent of the road length and shows signs of pavement settlement. Shoulders are deteriorating in many stretches due to inadequate crust thickness. Potholes were unattended at a few places on the road. Bridge approaches are not smooth. Culverts in some reaches are not flush with the road surface and traffic cannot pass over these smoothly. The riding surface of AnkolaHubli road is fairly good except a few portions in hilly stretches between km 48 and km 64, where the surface has developed undulations, depressions, and serious rutting. These stretches are in urgent need of major repair. This project road has been overlaid to about 85 percent of the length between Chennai and Pondicherry. This resurfacing is undertaken by the concessionaire and was considered necessary to justify road tolls that are introduced. Details on the technical condition of the road before resurfacing were not available to the Operations Evaluation Mission. The few sections of the old pavement that were visible show signs of a large number of repaired potholes, although it cannot be said whether these stretches are representative of the road condition before overlaying started. Between Pondicherry and Cuddalore, the original project road is in fair condition, showing cracks and some potholes at a few locations.

In Karnataka State, the AnkolaHubli road (132 km) has a two-lane bituminous pavement in fair to bad conditions which requires strengthening.

The project road along the east cost in Tamil Nadu between Chennai (Madras) and Cuddalore (160 km) has mostly a substandard alignment and the pavement is in bad condition, particularly over the single-lane stretches, which constitute more than one half of the road length. Realignment, widening, and strengthening of the pavement are required.

Sources: Loan 918-IND: Road Improvement Project. Appraisal Report, October 1988; and Operations Evaluation Mission observations made during site visits.

24 Appendix 6, page 1 ECONOMIC ANALYSIS A. General Assumptions 1. The economic analysis of benefits and costs of the Project follows the same approach as used at appraisal and completion. The economic life of the Project is assumed to be 20 years from completion. No residual value of the road is assumed at the end of the Projects economic life, as was done at appraisal and completion. 2. Benefits are derived from vehicle operating cost (VOC) savings. The costs included in the calculation are the project economic cost and maintenance cost. Savings are estimated by comparing costs and benefits that would arise without the Project and those with the Project. The valuation is expressed in Indian rupees (Rs) at constant 2001 prices. 3. Not included in the economic evaluation are other benefits such as time savings and other development impacts that are described in detail in Section IV, Achievement of Other Development Impacts of the project performance audit report. B. Costs

4. Costs considered in the reevaluation include the project economic cost (construction and other costs, excluding taxes and adjusted by the standard conversion factor of 0.9), in 2001 prices, and incremental maintenance costs, which are based on actual maintenance expenditure during the years of operation (19992001) and on standards published by the Indian Road Congress. Periodic maintenance is assumed on average every five years for bituminous pavements, but costs have been included in annual maintenance as per new guidelines of the Ministry of Road Transport and Highways. No maintenance cost savings result, because the widened carriageways increase the amount of road surface that needs maintaining. C. Benefits

5. VOCs used at project completion were updated to reflect changes in the consumer price index, road roughness, and level of road congestion or travel speed. Otherwise the same model was used as at project completion. VOC savings are calculated by comparing the VOCs for with and without situations as shown in Table A6.1.

25 Appendix 6, page 2 Table A6.1: Vehicle Operating Cost Savings

(Rs per vehicle-km) Project Road Section BallabhgarhMathura Year 2001 2008 2015 2001 2008 2015 2001 2008 2015 2001 2008 2015 2001 2008 2015 WOP 2.63 3.62 4.70 3.57 4.54 5.26 3.27 3.70 4.05 3.33 3.76 4.07 3.25 3.68 4.01 Car WP 2.20 2.60 3.65 2.21 2.53 3.23 2.22 2.41 2.60 2.27 2.49 2.65 2.21 2.41 2.60 S(%) 16.14 27.97 22.31 37.96 44.21 38.49 32.11 34.93 35.89 31.63 33.75 34.80 31.99 34.55 35.16 WOP 8.33 10.83 13.30 9.96 11.90 13.44 7.41 7.72 8.06 7.45 7.76 8.00 7.40 7.70 8.51 Bus WP 6.61 7.78 10.66 7.54 8.37 9.99 6.86 6.97 7.11 6.89 7.01 7.08 6.86 6.97 7.50 S(%) 20.62 28.09 19.79 24.29 29.63 25.71 7.45 9.64 11.80 7.50 9.63 11.57 7.38 9.46 11.86 WOP 7.59 8.62 9.80 8.95 10.03 10.94 7.13 7.52 7.93 7.17 7.58 7.87 7.11 7.50 8.40 Truck WP 5.81 6.42 7.97 6.07 6.56 7.54 6.35 6.49 6.68 6.39 6.55 6.66 6.34 6.49 7.08 S(%) 23.45 25.52 18.61 32.17 34.63 31.03 10.94 13.72 15.76 10.97 13.58 15.37 10.85 13.47 15.67

Visakhapatnam-Anakapalle

HyderabadRamagundam

ChennaiCuddalore

AnkolaHubli

S(%) = Vehicle operating costs savings (percent, WOP = without project, WP = with project Source: Operations Evaluation Mission.

6. Comparing the current VOC savings with those estimated at project completion shows that VOC savings have remained almost the same. Minor variations are due to an increase in congestion and the usual deterioration of the road surface. D. Traffic Growth

7. Traffic was counted at two to six counting stations along different project roads for a consecutive period of three days for 24 hours each day. The counts were adjusted by seasonal and weekday factors to represent typical annual average daily traffic. The results of the traffic count are in Table A6.2. They represent an increase of 3 to 7 percent for passenger traffic (cars and buses) and 3 to 5 percent for goods (truck) traffic over the estimated traffic for the year 2001 at project completion. The variance is on account of different categories of roads. Table A6.2: Traffic Count
(Annual Average Daily Traffic) Type of Vehicle Cars Two Wheelers Minibus Bus LGVa Truck 2-Axle Truck 3-Axle Multi-Axle Trucks Tractor Tractor with trailer Nonmotorized Total Ballabhgarh Mathura 7,745 4,046 309 1,012 844 3,781 1,750 129 117 828 927 21,487 Visakhapatnam Hyderabad Anakapalle Ramagundam 5,033 1,385 10,127 1,543 0 8 1,885 466 538 174 3,560 958 538 225 29 7 14 33 60 123 5,248 1,042 27,032 5,964 Ankola Hubli 727 1,085 91 271 167 1,465 120 3 13 28 293 4,263 Chennai Cuddalore 3,453 56 33 3,555 18 9,748 1 32 20 52 2,774 19,743

a LGV = light goods vehicles. Source: Operations Evaluation Mission

26 Appendix 6, page 3 8. Projections for traffic growth were revised to reflect trends shown in the updated traffic count data, net state domestic product, population growth rates, and income elasticity of transport demand. The revised traffic growth rates for each vehicle type are shown in Table A6.3. Table A6.3: Annual Traffic Growth Rates
(percent) Road section Type of Vehicle At Appraisal 1995- 2005 2004 2013 7.8 7.2 6.3 6.0 6.7 6.3 9.2 8.4 7.9 7.1 6.3 5.9 8.6 8.1 9.1 8.3 6.6 5.9 5.2 4.9 8.7 8.3 7.5 6.9 7.8 7.0 6.2 5.8 7.9 7.5 8.9 8.2 8.3 7.5 6.6 6.2 6.7 6.3 9.5 8.7 Up to 2000 6.8 5.0 5.3 6.8 6.8 5.0 5.3 6.8 6.8 5.0 5.3 6.8 6.8 5.0 5.3 6.8 6.8 5.0 5.3 6.8 At PCR 20012005 7.5 5.5 5.2 7.5 7.5 5.5 5.2 7.5 7.5 5.5 5.2 7.5 7.5 5.5 5.2 7.5 7.5 5.5 5.2 7.5 20062020 6.8 5.3 4.0 6.8 6.8 5.3 4.0 6.8 6.8 5.3 4.0 6.8 6.8 5.3 4.0 6.8 6.8 5.3 4.0 6.8 20022006 10.01 8.51 7.17 10.26 6.8 5.0 5.3 6.8 7.4 5.3 5.5 7.4 7.7 5.6 5.2 7.7 7.5 5.5 5.8 7.7 At PPAR 20072011 9.48 9.14 7.30 9.25 7.5 5.5 6.2 7.5 7.1 5.3 5.2 7.1 7.1 5.5 4.4 7.1 7.2 5.5 5.3 7.6 20122017 8.33 7.81 5.10 8.47 6.8 5.3 4.0 6.8 6.6 5.0 5.0 6.6 7.0 5.3 4.2 7.0 6.8 5.3 5.2 7.5

BallabhgarhMathura

Visakhapatnam Anakapalle

Hyderabad Ramagundam

AnkolaHubli

ChennaiCuddalore

Cars Buses Trucks Others Cars Buses Trucks Others Cars Buses Trucks Others Cars Buses Trucks Others Cars Buses Trucks Others

Source: OEM estimates.

E.

Economic Evaluation

9. The economic internal rate of return for each project component is summarized in Table A6.4, comparing estimates at appraisal, completion, and evaluation. Detailed cost and benefit streams for each component and for the Project as a whole are in Tables A6.5-A6.10. Table A6.4: Comparison of Economic Rates of Return
(percent) Road Section BallabhgarhMathura VisakhapatnamAnakapalle HyderabadRamagundam ChennaiCuddalore AnkolaHubli Entire Project Source: OEM estimates. Appraisal 34.1 59.5 25.4 26.2 24.1 35.8 Completion 29.6 23.3 17.8 20.6 13.6 22.4 Evaluation 28.8 19.9 15.2 18.5 10.8 20.7

10. The results show the Economic Internal Rate of Return (EIRR) decreased in comparison with estimates at appraisal and completion because of (i) change in maintenance cost (higher revised standards in publications of the Indian Road Congress), (ii) changes in traffic growth rates, and (iii) increase in construction cost and extended implementation period.

27 Appendix 6, page 4 11. The additional cost for upgrading the ChennaiCuddalore road was not included in the EIRR calculation, because requisite data could not be obtained. The EIRR for this road section and for the Project as a whole is therefore higher than it should be. F. Sensitivity Analysis

12. Reducing benefits by 30 percent results in an EIRR of 16.4 percent for the entire Project. A decrease in benefits of 53 percent would be required for the EIRR to reach the cut-off rate of 12 percent. Given the consistent growth in traffic such a situation is not likely to occur.
Table A6.5: Economic Benefit and Cost Streams, BallabhgarhMathura (Rs million) Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EIRR Project Cost 82.89 159.17 82.88 161.22 153.79 372.10 483.52 303.81 21.95 21.95 25.77 45.83 74.45 74.45 74.45 74.45 74.45 74.45 74.45 74.45 74.45 74.45 74.45 74.45 74.45 74.45 74.45 74.45 342.21 601.17 752.46 887.21 1,026.92 1,189.07 1,295.09 1,422.73 1,556.23 1,717.05 1,882.03 1,994.62 2,192.30 2,297.79 2,358.27 2,459.87 2,607.14 2,649.54 2,390.15 2,513.62 Maintenance Cost VOC Savings Net Benefits (82.89) (159.17) (82.88) (161.22) (153.79) (372.10) (483.52) 16.45 579.22 726.69 841.38 952.47 1,114.62 1,220.64 1,348.28 1,481.78 1,642.60 1,807.58 1,920.17 2,117.85 2,223.34 2,283.82 2,385.42 2,532.69 2,575.09 2,315.70 2,439.17 28.8%

EIRR = economic internal rate of return, VOC = vehicle operating cost. Source: OEM estimates.

28 Appendix 6, page 5
Table A6.6: Economic Benefit and Cost Streams, VisakhapatnamAnakapalle (Rs million) Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EIRR
EIRR = economic internal rate of return, VOC = vehicle operating cost. Source: OEM estimates.

Project Cost 60.18 74.87 95.69 349.52 399.27 232.34 288.74 72.42 59.49

Maintenance Cost

VOC Savings

Net Benefits (60.18) (74.87) (95.69) (349.52) (399.27) (232.34) (288.74) (72.42)

210.43 0.78 2.07 2.41 37.80 37.80 37.80 37.80 37.80 37.80 37.80 37.80 37.80 37.80 37.80 37.80 37.80 37.80 37.80 37.80 411.58 472.37 474.90 545.41 625.39 716.72 794.24 864.86 940.01 1,018.80 1,103.50 1,193.47 1,280.56 1,368.01 1,453.25 1,549.98 1,576.82 1,598.03 1,614.17

150.94 410.80 470.30 472.49 507.61 587.59 678.92 756.44 827.06 902.21 981.00 1,065.70 1,155.67 1,242.76 1,330.21 1,415.45 1,512.18 1,539.02 1,560.23 1,576.37 19.9%

29 Appendix 6, page 6
Table A6.7: Economic Benefit and Cost Streams, HyderabadRamagundam (Rs million) Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EIRR
EIRR = economic internal rate of return, VOC = vehicle operating cost. Source: OEM estimates.

Project Cost 2.45 18.89 112.17 83.29 160.64 251.84 303.20 489.28 260.22

Maintenance Cost

VOC Savings

Net Benefits (2.45) (18.89) (112.17) (83.29) (160.64) (251.84) (303.20) (489.28)

207.35 3.67 9.79 11.42 95.19 95.19 95.19 95.19 95.19 95.19 95.19 95.19 95.19 95.19 95.19 95.19 95.19 95.19 95.19 95.19 229.09 250.50 280.69 310.41 342.84 381.25 418.91 458.81 502.31 549.71 601.14 655.21 713.72 773.64 837.85 909.37 966.35 1026.94 1082.36

(52.87) 225.42 240.71 269.27 215.22 247.65 286.06 323.72 363.62 407.12 454.52 505.95 560.02 618.53 678.45 742.66 814.18 871.16 931.75 987.17 15.2%

30 Appendix 6, page 7
Table A6.8: Economic Benefit and Cost Streams, ChennaiCuddalore (Rs million) Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EIRR
EIRR = economic internal rate of return, VOC = vehicle operating cost. Source: OEM estimates.

Project Cost 36.09 119.06 197.57 191.61 135.71 184.41 198.01 96.24 59.79

Maintenance Cost

VOC Savings

Net Benefits (36.09) (119.06) (197.57) (191.61) (135.71) (184.41) (198.01) (96.24)

188.53 0.36 0.73 0.73 68.92 68.92 68.92 68.92 68.92 68.92 68.92 68.92 68.92 68.92 68.92 68.92 68.92 68.92 68.92 68.92 294.50 329.28 366.62 403.33 443.48 487.73 534.57 585.32 639.14 697.47 712.79 834.83 913.80 935.87 1,022.75 1,082.99 1,147.04 1,216.38 1,306.37

128.74 294.14 328.55 365.89 334.41 374.56 418.81 465.65 516.40 570.22 628.55 643.87 765.91 844.88 866.95 953.83 1,014.07 1,078.12 1,147.46 1,237.45 18.5%

31 Appendix 6, page 8
Table A6.9: Economic Benefit and Cost Streams, AnkolaHubli (Rs million) Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EIRR
EIRR = economic internal rate of return, VOC = vehicle operating cost. Source: OEM estimates.

Project Cost

Maintenance Cost

VOC Savings

Net Benefits

130.73 249.02 258.14 252.33 42.38 87.94 3.02 3.08 3.03 3.43 3.50 57.03 57.03 57.03 57.03 57.03 57.03 57.03 57.03 57.03 57.03 57.03 57.03 57.03 57.03 57.03 57.03 77.15 84.70 92.93 104.68 115.28 127.99 140.46 154.17 168.74 184.61 200.83 222.79 237.19 257.30 284.00 307.42 332.00 355.33 377.80 399.13 421.88 439.68

(130.73) (249.02) (258.14) (252.33) 34.77 (6.26) 89.85 101.65 111.85 124.49 83.43 97.14 111.71 127.58 143.80 165.76 180.16 200.27 226.97 250.39 274.97 298.30 320.77 342.10 364.85 382.66 10.8%

32 Appendix 6, page 9
Table A6.10: Economic Benefit and Cost Streams, Entire Project (Rs Million) Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EIRR
EIRR = economic internal rate of return, VOC = vehicle operating cost. Source: OEM estimates.

Project Cost 98.72 295.71 695.33 956.32 1,114.98 1,074.71 1,204.43 1,229.40 683.31

Maintenance Cost

VOC Savings

Net Benefits (98.72) (295.71) (695.33) (956.32) (1,114.98) (1,074.71)

77.15 3.02 25.03 29.79 41.78 63.89 333.39 333.39 333.39 333.39 333.39 333.39 333.39 333.39 333.39 333.39 333.39 333.39 333.39 333.39 333.39 333.39 84.70 1,041.45 1,641.02 1,919.89 2,137.41 2,426.53 2,754.95 3,049.53 3,355.00 3,666.05 4,021.31 4,385.20 4,669.35 5,159.81 5,513.29 5,767.79 6,129.05 6,527.28 6,738.88 6,653.38 6,956.20

(1,127.28) (1,147.72) 333.11 1,611.23 1,878.10 2,073.52 2,093.14 2,421.56 2,716.14 3,021.67 3,332.66 3,687.91 4,051.81 4,335.96 4,826.42 5,179.90 5,434.40 5,795.66 6,193.89 6,405.49 6,319.99 6,622.81 20.7%

33 Appendix 7, page 1 SOCIOECONOMIC DEVELOPMENT IMPACTS

Baseline Situation 1988 1. BallabhgarhMathura Motorcycle, scooters, tractors, diesel engines, refrigerators, deep-freezers, and compressors (Faridabad). Footwear, steel pipes and tubes, switch gear, metal containers, electric fans and motors, process control instruments Evaluation Observations 2001

The number of working factories in 1988 was 1,527, which increased to 3,078 in 1999. The major factories are rubber, plastic and petroleum products, chemicals and chemical products, nonmetallic mineral products, machinery, and machine tools. Most of these products are moved by road. Transportation of industrial products by road increased 15 times from 1988 to 1999, while the capacity of the railway transportation system has not increased in the corridor for the last 15 years. The road improvement has given impetus for modal shift. The production capacity of Mathura refinery increased to 9.7 million t in 1998. Currently, 42 percent of the petroleum product is being transported by road.

Mathura refinery with an annual production of 7.5 million metric tons (t) of refined petroleum products, of which 20 percent are transported by road Sugar mills with production capacity of around 440,000 t a year, flour mills, and other smaller plants producing pipes, steel forgings, petrochemical products, gas cylinders, containers, and fire fighting equipment (Mathura)

The production capacity of sugar mills has increased to 639,000 t per year. The number of flour mills has increased significantly from the baseline situation (from 94 in 1988 to 178 in 2001). The entire production has been transported through the project road.

Wheat (2.5 million t per year) Sugar cane (1.1 million t per year) Bajra, gram, and rapeseed Agra as major tourist attraction

Wheat production (3.7 million t) in 1998 Sugar cane (4.3 million t) in 1998 Bajra, gram, and rapeseed transportation have no significant impact on the project road. Agra and Mathura are the major tourist centers. Annual tourist traffic flow is 500,000. The tourist traffic flow has increased significantly.

2. VisakhapatnamAnakapalle Steel, expected production mid 1989 at an annual level of 6.0 million t by 1998, of which 4.4 million t would be moved by road The Visakhapatnam Steel Plant was established in 1991 with a production capacity of 10 million t (pig iron, steel structure, bar and rods, ammonium sulphate, benenzone, toluene xylene solvents, naphthalene, anthrocene, phenol, hard pitch, road tar, etc.). The roads share for carrying byproducts of steel is 3.2 million t of the installed capacity. The steel plant and its allied industries generated employment for 30,000 in 2001 compared with 16,300 in 1991.

34 Appendix 7, page 2
Baseline Situation 1988 Petroleum, with an annual production of 4.0 million t of refined oil products, of which 1.5 million t are transported by road Evaluation Observations 2001 Hindustan Petroleum Corporation Ltd had a crude oil processing unit with a production capacity of 4.5 million t. (not 4.0 million t, as mentioned in the baseline situation), increased its production capacity to 7.2 million t in 1999. Of the total production, 4.7 million t is being transported by road. Coromondal Fertilizers, a private sector fertilizer production company more than doubled its production from 0.7 million t to 1.6 million t in 2001. Of the total production of 2001, 75 percent (1.2 million t) is transported by road. The Hindustan Zinc Ltd, Public Sector Undertaking producing zinc, lead, sulphuric acid, silicon, etc., with an aggregate production and input raw material of 200,000 t in the baseline situation increased production over threefold to 656,000 t in 2001. Of the total input and output value of 2001, 92 percent (603, 520 t) is being transported by road. The movement of cement increased to 1.25 million t in 2001 from 0.5 million t in 1988. The aggregate demand of road transport of other medium chemical and other allied industries increased to 1.75 million t in 19992000 from 0.5 million t in 1988. In 19992000 the percent of cropped area of paddy decreased (34.98 percent.). Yield per hectare increased from 916 to 1,386 kilogram. In 19992000 the percent of cropped area of bajra decreased (5.94 percent). Yield per hectare increased from 549 to 924 kilogram. In 19992000 the percent of cropped area of groundnut decreased (6.93 percent). Yield per hectare increased from 885 to 1,256 kilogram. In 19992000 the percent of cropped area of pulse increased (16.42 percent).

Fertilizer with a total production of 0.7 million t per year, half is transported by road

Steel and engineering factories, and zinc galvanizing plant with 200,000 t of inputs and outputs moving by road.

Cement, 0.5 million t moved on roads

Several medium-sized industries with a combined annual road transport demand of 0.5 million t. Paddy 38 percent of cropped area

Bajra 23 percent of cropped area

Groundnuts 11 percent of cropped area

Pulses 11 percent of cropped area

Sugarcane accounts for almost three quarters of total output

In 19992000 the percent of cropped area of sugarcane increased (13.86 percent). Yield per hectare increased from 40,521 to 55,357 kg.

35 Appendix 7, page 3
Baseline Situation 1988 3. HyderabadRamagundam Cotton spinning mills, medium-sized steel rolling plants, auto parts manufacturing, ceramic tile factories, and chemical plants Evaluation Observations 2001

Apart from the industries mentioned in the baseline situation, new additions are (i) two sugar mills, (ii) one Hindustan Petroleum Corporation Ltd. factory, and (iii) 140 rice mills. In the baseline situation, there were only 10, 5, 20, 4, and 7 of cotton spinning mills, medium-sized steel rolling plants, auto parts manufacturing, ceramic tiles factories, and chemical plants which have increased to 25, 9, 35, 7, and 12 in 1999-2000 respectively. In 1988 the aggregate employment of the above-mentioned factories was 45,000; this increased to 79,000 persons in 1999-2000. Newly added sugar factories, Hindustan Petroleum Corporation factory, and rice mills have provided employment for 20,000 people. The cement factory at Basant Nagar near Ramagundam, which had annual production of 850,000 t in 1988 increased its production to 1.35 million t per year in 2001. Basant Nagar is the new residential township which has come up as cement Factory Township. Consultation with the officials of cement factory revealed that due to nonavailability of wagons when they are actually required does not auger well for the railway systems. Hence the improved road provides a direct link to the other states like Maharashtra, Madhya Pradesh, and the transportation of the cement production is dependent on the project road. Seventy-five percent of the current production and 67 percent of the input raw material are being transported on the project road. The capacity enhancement of the current production from the baseline situation has created an additional employment for 29,000 people. Coal production increased marginally, from 6.0 million t annual production in 1988 to 7.8 million t in 2000. The transportation of coal by road reduced significantly because of the subsidy being provided by railways and better carrying capacity of railways for coal (railways introduced the 14 t coal wagon). The fertilizer industry did not make significant contribution. The transportation of fertilizer is heavily dependent on the railway system, as the railway system is cheaper for the industry (railway subsidizes the transportation of fertilizer).

Cement, with annual production of 850,000 t of which 50 percent moves by road.

Coal, 6.0 million t annual production, with 1.8 million t transported by road

Fertilizer, with 450,000 t production per year

36 Appendix 7, page 4
Baseline Situation 1988 Paddy, 43 percent of cropped area, 57 percent of total tonnage of food and nonfood crops Evaluation Observations 2001 Paddy, 38 percent of the cropped area. Due to the increase in the kilogram/hectare yield it has become 63 percent of the total tonnage of the food crop and non food crop production in 19992000. The cropped area of barley increased 29 percent in 19992000. In terms of production it increased to 29 percent of the total tonnage. The area for maize has marginally increased (21 percent).

Barley, 21 percent of cropped area, 22 percent of total tonnage of food and nonfood crops

Maize, 19 percent of cropped area 4. AnkolaHubli Mineral resources particularly iron and manganese ores and quartz, and major granite quarries Ferro manganese 1,550 t Caustic soda 32,200 t Liquid chlorine 8,400 t Hydrochloric acid 62,000 t Paper 100,000 t Plywood 1.6 million square meters Cotton yarn 5,100 t Paddy 314,00 mt, 27 percent of total agriculture production Barley 26 percent of total agriculture production Sugarcane 23 percent of total agriculture production Groundnuts 11 percent of total agriculture production

Government statistics do not provide a history of production of these major industries mentioned in the baseline situation.

Agricultural Activities: Not much improvement is noted from the baseline situation. Agricultural activity is predominantly rain fed and subsistence in nature. In the baseline situation only 8 percent of the total cultivable land was irrigated and it improved marginally (12 percent) in 1999. Paddy, sugarcane, and the groundnuts are still the major agricultural crops. The tribal population (45 percent of the total population) dominates the area. There is no major shift in terms of cropping intensity and cropping pattern from the baseline situation. In Hubli and Kalghatgi taluka groundnut, sugarcane, and ragi are the main crops after rice.

5. ChennaiCuddalore Oil and natural gas fields, drilling onand offshore, produce 200 t of crude per day. Crude is trucked from the production center at Narimanam to the refinery in Chennai. Construction of a local refinery is expected by 1990/91, after which 60 percent of the refinery output will be bound for Chennai, trucked along the project road. The local refinery is not yet functional. Forecasted oil transportation is not achieved. Road utilization has increased for transporting oil, (superior kerosene 37 t, high-speed diesel 53 t). Production output of oil has increased from 60 t (and not 200 t) in 1988 to 90 t in 1999. With the increase in oil production transportation on the project road also increased (as ascertained through the origin-destination survey and the traffic volume survey). In addition, some ancillary industries (rubber, plastic and petroleum products) which existed at Appraisal, but perhaps not considered, have grown from 4,998 to 6,880 in 1999 in the influence zone of the area. Consequently, labor absorption by all these

37 Appendix 7, page 5
Baseline Situation 1988 Evaluation Observations 2001 industries increased from 15,245 to 25,654 in 2001. Discussions with officials and local people revealed that the improved road coupled with industrial development policy of the state have created the impetus for development of the area. Salt production has increased to 4.58 million t per year. The majority of salt production is being transported by the railway system. Hence the project road has marginal influence on the salt industry except the local transportation. As mentioned in the baseline situation analysis, different types of industries, like steel rolling mills, paper, ceramic industries, etc., are the predominant industrial activities and are growing due to improvement of the project road. In Cuddalore, the pharmaceutical industries, and in Pondichery, the metal and mineral, and other industries are the major beneficiaries of the project road. The turnaround time of cargoes from Pondichery and Cuddalore have reduced by almost 45 minuets to the transportation hub in Chennai. The cargo capacity of Cuddalore port has increased substantially during the last decade to cope with the transport of goods produced by the industrial estates located in Pondicherry and Cuddalore. The major industrial shift observed in the corridor is on handloom and power loom industries in the small-scale industry sector. Predominant industries in this sector are cotton textiles, hosiery and readymade garments (8,722 in 1988 to 22,917 in 1999), silk and synthetic fiber (810 in 1988 to 2,645 in 1999), chemical and chemical products (9,703 in 1988 to16205 in 1999), paper and paper products (2,120 in 1988 to 19,246 in 1999), etc. All the units are located in road influence area. The goods produced are mainly transported by the road system only. The railway located in this area is meter gauge with limited transportation capacity. The railway also does not provide any subsidy to carry these goods unlike food and agricultural products. Agriculture is subsistence in nature and depends on vagaries of nature (calamities like, excessive rainfalls, salinity ingression, cyclone, etc.). Major agricultural production is paddy, etc. The agricultural activity vis-vis road development is unlikely to create any positive or negative impact in the corridor in the future, as in the past.

Salt 1.7 million t per year

Steel rolling mills and plants producing yarn, cotton, and polyester cloths, trailers, chemicals, iron castings, paper, ceramic tiles, fishnets, cement pipes and fittings, asbestos pipes, and sago and glucose.

Smaller industries in the area produce welding and cutting machines, and paints, plastics and polyurethane. Polyvinylchloride pipes, textiles, plastic papers, tins and steel products; sulphuric acid 40,000 and 16,800 t (in two locations); aluminum fluoride 7,500 t; color pigments 1,200 t; oloium acid 5,000 t

Paddy 1.7 million t, Sugarcane 0.5 million t, Smaller quantities of groundnuts, millet, and maize

38 Appendix 8, page 1 PAVEMENT MANAGEMENT SYSTEM FOR STATE ROADS IN ANDHRA PRADESH AND TAMIL NADU (TA 1058-IND)
Planned Objectives and Scope Objective To enhance the operational efficiency and capability of the highway departments in the states of Andhra Pradesh and Tamil Nadu for improving and maintaining of roads in a costeffective manner utilizing available funds Outputs To achieve the objective, a computerized pavement management system that is both readily understood by staff in the two highway departments, at headquarters and operational levels, and easily maintained within the resources that can be made available will be established in each of these states 1. Detailed specifications for the system, after reviewing existing systems and practices Maintenance review report Report on pavement management system implementation Research on road inventory data, road condition surveys, road design standards, data on pavement deterioration under various maintenance regimes, and costs of intervention levels Delivered System establishes the cost of various maintenance activities and prepares optimal maintenance program The computerized system was installed at the facilities of the Highway Research Station. The computer program had been removed from the current facilities, as computers were being upgraded. Also, the last data collection took place in 1996. This data had not been entered into the computer. The main reason for not using the program was that the results were not used in the decisionmaking process and that the data requirements (collection and feeding into the computer) were too time-consuming. Available, but was not reviewed in detail by the Operations Evaluation Mission. The data requirements of the computerized system were timeconsuming and costly. The software may have been less user-friendly than one would expect from todays version, although the Operations Evaluation Mission was not able to verify this because of the lack of an operating system. Staff in one of the states was aware of the computer program. Basic data was collected for roads in Tamil Nadu but could not be located for Andhra Pradesh. Reported Results at Completion Evaluation Observations Decisions for improving and maintaining roads continue to be based on standard norms established for estimating maintenance requirements. Priorities are based on observed requirements (ocular inspection of roads) and on demands from influential interest groups.

2. 3.

Inception report Computer program

4.

Manuals and documentation for the computerized system Training aids

Field evaluation unit manual Computer operators manual

5.

39 Appendix 8, page 2
Planned Objectives and Scope 6. Monitoring and control system to monitor information flow (quality control on data inputs) Trained staff in both departments Three seminars were conducted for staff from the two states plus staff from other states that were interested High-ranking state government officials became convinced of the computer systems ability to predict maintenance strategies at various funding levels and to demonstrate the consequences (accelerated road deterioration) of underspending on maintenance Pavement maintenance management report, Tamil Nadu Seminars were apparently conducted, although staff attending these courses was not traced. The limited or nonexisting institutionalization of the system indicates that ownership and acceptance of the system as a useful tool are lacking. Reported Results at Completion Evaluation Observations

7.

8.

Maintenance program for the year after the system is installed (test case system and data inputs) Final report on all work carried out

9.

Final report Report on economic studies

Sources: Loan 918-IND: Road Improvement Project, Appraisal Report. Appendix 23, October 1988; TA 1058-IND: Pavement Management System, approved on 3 January 1989; Project Completion Report: IND 198-99, Road Improvement Project, August 1999; and additional reports submitted on project completion. Evaluation observations are based on discussions at the Ministry of Road Transport and Highways, the National Highways Authority of India, the Public Works Departments in Andhra Pradesh and Tamil Nadu, the Highway Research Station in Hyderabad, and the World Bank.

40 Appendix 9 EXPRESSWAY SYSTEM PLANNING (TA 1059-IND)

Planned Objectives and Scope Objective: To assist the Ministry of Surface Transport in establishing a system that aids decision making on improving traffic corridors, including improving the financial viability of options Reported Results at Completion Evaluation Observations The Government adopted the national highways development program under which 6,000 km of national highways that form the golden quadrilateral will be upgraded and expanded. This will be complemented by the north-south and east-west corridors, comprising a total of 7,300 km. These road sections were selected as they connect major urban centers and link all parts of the country. However, a standard of four lanes was adopted for the entire upgrading program regardless of whether traffic flows warranted two, four, or six lanes. Equally, no system exists to prioritize upgrading of other national highways.

Outputs 1. Analysis system for assessment of likely traffic diversions to specific expressway segments Technical paper on planning The outcome of the technical assistance is methodology for development of referred to as a study that, according to some high density traffic highway corridors sources, was updated. It has not been perceived or used as a system in the sense of providing a Traffic flows and analysis tool that can be used in decision making, and Analysis system for assessing likely upgraded or modified as required. traffic diversions for specific expressway segments Economic evaluation model Supplemental computer tables from benchmark methodology report It appears that the economic model was used for some time at least by Asian Development Bank in preparing economic analyses. The economic evaluation model currently in use in India is the World Bank highway development model.

2. Economic evaluation methodology for establishing traffic benchmarks by traffic corridor to determine the need for a complementary expressway 3. Locations for additional traffic surveys identified, data collected, and interpreted 4. Study on financial viability of expressways, toll facilities under alternative toll rate scenarios, and impact on traffic diversion -

Financial feasibility investigation of proposed toll expressway for National Highway (HN) 1 and NH 2 (two reports) Benefit -cost analysis of various capacity augmentation alternatives (DelhiAmbala Route, test case)

Whatever investigations were made at the time of implementing the technical assistance may have been used in later analyses. However, the Operations Evaluation Mission was not in the position to trace the use made to the test case.

5. Study on alternative toll collection systems 6. Advice on location and design of toll facilities.

Toll system and interchange options Toll systems and some toll plazas are being and recommended organizational introduced on some of the national and state structure highways. However, the Operations Evaluation Mission could not ascertain whether and to what extent decisions had been influenced by the technical assistance. No system of this nature is in place.

7. System for management and operation of expressways, including staffing, materials and equipment, and investment costs.
Sources:

Loan 918-IND: Road Improvement Project, Appraisal Report. Appendix 24, October 1988; TA 1059-IND: Expressway System Planning, approved on 3 January 1989; Project Completion Report: IND 198-99, Road Improvement Project, August 1999; and additional reports submitted on project completion. Evaluation observations are based on discussions at the Ministry of Road Transport and Highways, the National Highways Authority of India, and with the World Bank.