Completion Report. Project Number: Loan Number: 1747 September India: Surat-Manor Tollway Project

Transcription

1 Completion Report Project Number: Loan Number: 1747 September 2007 India: Surat-Manor Tollway Project

2 CURRENCY EQUIVALENTS Currency Unit rupee/s (Re/Rs) At Appraisal At Project Completion 15 May January 2006 Re1.00 = $0.022 $0.023 $1.00 = Rs43.97 Rs44.32 ABBREVIATIONS ADB Asian Development Bank AIDS acquired immunodeficiency syndrome AP affected persons BOT build-operate-transfer CCEA cabinet committee on economic affairs DRC district resettlement committee EIRR economic internal rate of return EPA environmental protection authority EW east-west FIRR financial internal rate of return GQ golden quadrangle HIV human immunodeficiency virus IDC interest during construction LCV light commercial vehicle LIBOR London interbank offered rate MAV multi-axle vehicle NGO non-government organization NH national highway NHAI National Highways Authority of India NHDP National Highways Development Project NS north-south NSDP net state domestic product OCR ordinary capital resources O&M operations and maintenance PCU passenger car unit PIB public investment board PIU project implementation unit PPP public-private partnership PPR project performance report ROW right-of-way RAP resettlement action plan RRP report and recommendation of the President SAFHI South Asian Foundation for Human Initiatives SHG self-help group SIEE summary initial environmental examination TA technical assistance VOC vehicle operating cost

3 NOTES (i) (ii) The fiscal year (FY) of the Government and its agencies ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends In this report, "$" refers to US dollars.

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

5 CONTENTS Page BASIC DATA MAP ii vi I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Output 2 C. Project Cost 3 D. Disbursement 3 E. Project Schedule 4 F. Implementation Arrangements 4 G. Conditions and Covenants 5 H. Consultant Recruitment and Procurement 5 I. Performance of Consultants, Contractors, and Suppliers 6 J. Performance of the Borrower and the Executing Agency 6 K. Performance of the Asian Development Bank 7 III. EVALUATION OF PERFORMANCE 7 A. Relevance 7 B. Effectiveness in Achievement of Outcome 8 C. Efficiency in Achievement of Outputs and Outcome 9 D. Preliminary Assessment of Sustainability 9 E. Environmental, Social, and Other Impacts 10 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons Learned 13 C. Recommendations 14 APPENDIXES 1. Project Framework Chronology of Main Events During Project Processing and Implementation Details of Project Output Project Cost Annual Average Exchange Rates and Indian Wholesale Price Indices Projected and Actual Disbursements of Loan Proceeds Project Implementation Schedule Project Implementation Structure Status of Compliance with Major Loan Covenants Economic Reevaluation Financial Reevaluation Land Acquisition, Resettlement and Social Impacts 42

6 A. Loan Identification BASIC DATA 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan (on approval) First Cancellation Second Cancellation Amount of Loan (net of cancellation)) 7. Project Completion Report Number India 1747 Surat Manor Tollway Project National Highways Authority of India (NHAI) NHAI $180.0 million $15.0 million (13 December 2004) $15.25 million (13 January 2006) $ million PCR: IND 994 B. Loan Data 1. Appraisal Date Started Date Completed 2. Loan Negotiations Date Started Date Completed 3. Date of Board Approval 4. Date of Initial Loan Agreement Date of Amended and Restated Loan Agreement 5. Date of Loan Effectiveness In Loan Agreement Actual For Amended and Restated Loan 6. Closing Date In Loan Agreement Actual Number of Extensions 7. Terms of Loan Interest Rate Maturity (number of years) Grace Period (number of years) Amended and Restated Loan Interest Rate Maturity (number of years) Grace Period (number of years) 8. Terms of Relending (if any) 27 July August January January July October July 2002 a 3 January November July September September month variable ordinary capital resources (OCR) rate 25 5 London interbank offered rate (LIBOR)-based 25 5 Not applicable a This loan was transformed from a US dollar pool-based loan to a LIBOR-based loan. An amount of $20,360, was disbursed under the initial loan and the balance was transformed to a LIBOR-based loan.

7 iii 9. Disbursements a. Dates Initial Disbursement 12 December 2000 Effective Date 8 November 2000 Final Disbursement 13 January 2006 Original Closing Date 30 September 2004 Time Interval 61 months Time Interval 47 months b. Amount ($ million) Category or Subloan Original Allocation Last Revised Allocation Amount Canceled Net Amount Available Amount Disbursed Undisbursed Balance 1. Civil Works Consulting Services Interest and Commitment Charges 4. Unallocated Total Local Costs (Financed) - Amount ($) 0 - Percent of Local Cost 0 - Percent of Total Cost 0 C. Project Data 1. Project Cost ($ million) Cost Appraisal Estimate Actual Foreign Exchange Cost Local Currency Cost Total Financing Plan ($ million) Appraisal Estimate Actual Cost Foreign Local Total Foreign Local Total Implementation Costs Borrower-Financed ADB-Financed Other External Financing Total IDC Costs Borrower-Financed ADB-Financed Other External Financing Total ADB = Asian Development Bank, IDC = interest during construction.

8 iv 3. Cost Breakdown by Project Component ($ million) Appraisal Estimate Actual Cost a Component Foreign Local Total Foreign Local Total A. Base Cost Right-of-Way Civil Works Section I Section II Section III Consulting Services Construction Supervision Private Participation and Tolling Project Management (Subtotal A) B. Contingencies Physical Contingency Price Contingency (Subtotal B) C. Interest During Construction (Total A + B + C) a Includes cost of additional works and price escalation Project Schedule Item Appraisal Estimate a Actual Preconstruction Right-of-Way Clearance Jan 2000 Apr 2001 b Prequalification for ICB c (advance action) Mar 1999 Jun 1999 Award of Civil Works Contract Feb 2000 Oct 2000 Recruitment of Supervision Consultants Feb 2000 Nov 2000 Construction Civil Works Commencement of Works (all sections) Mar 2000 Nov 2000 Completion of Works Section 1 Sep 2003 Jun 2005 Section 2 Sep 2003 Feb 2004 Section 3 Sep 2003 Dec 2003 Supervision Commencement of Services Mar 2000 Nov 2000 Completion of Services Dec 2003 Jun 2005 a b c The schedule for contract award in the appraisal estimate is earlier than the Board approval date of 27 July 2000, as the schedule for contract awards were not fully updated before Board consideration. The right-of-way clearance was undertaken in a timely manner and the site handed over to the contractors in accordance with the handing over schedule commencing November international competitive bidding.

9 v 5. Project Performance Report Ratings a Ratings Implementation Period Development Objectives Implementation Progress From 30 Aug 2000 to 29 Nov 2000 S S From 30 Nov 2000 to 31 Dec 2000 S HS From 1 Jan 2001 to 27 Feb 2001 S S From 1 Mar 2001 to 31 May 2001 S HS From 1 Jun 2001 to 31 Dec 2001 S S From 1 Jan 2002 to 30 Jun 2002 S S From 1 Jul 2002 to 31 Dec 2002 S S From 1 Jan 2003 to 30 Jun 2003 S S From 1 Jul 2003 to 31 Dec 2003 S S From 1 Jan 2004 to 30 Jun 2004 S S From 1 Jul 2004 to 31 Dec 2004 S S From 1 Jan 2005 to 30 Jun 2005 S S From 1 Jul 2005 to 30 Sep 2005 S S a The methodology for ratings in the project performance report is different from that for project completion report ratings. D. Data on Asian Development Bank Missions Name of Mission a Date No. of Persons No. of Person-Days Specialization of Members b Fact-Finding 4 20 May b,d,e,g,j Appraisal 27 Jul 7 Aug b,c,d,e,j Project-Specific Contact/Consultation Dec b,h Resettlement Action Plan Nov h Inception 31 May 20 Jun 3 25 h,k 01 Special Project Administration Oct h,j Review Mission 1 25 Jan 2 Feb h,j Review Mission Feb and h,j Mar 03 Review Mission Oct h,i,j,k Project Procurement-Related Audit 18 Oct 12 Nov e,l 04 Review Mission Nov j,k Review Mission 5 18 Feb j Project Completion Review b 7 8 Jun j a a - engineer, b - financial analyst, c - counsel, d - economist, e - procurement consultant or specialist, f - control officer, g - programs officer. h - project specialist, i - resettlement specialist or consultant, j - project officer, k - project analyst, l - others.

10 73 o 00'E Udaipur 75 o 00'E 24 o 00'N to Jaipur/Delhi INDIA SURAT-MANOR TOLLWAY PROJECT (as completed) 24 o 00'N Dongarpur Mahsana Himatnagar R A J A S T H A N G U J A R A T GANDHINAGAR NH-8 Chidoda Modasa N to Kandla Port Sarkhej Dholka NH-8A NH-8C Ahmedabad Nadiad Godhra Dohad Kilometers NH-8 Khambha Vadodara M A D H Y A P R A D E S H Bharuch Narmada River Surat Ankleshwar to Indore Gulf of Cambay NH-8 Valsad Malegaon NH-3 M A H A R A S H T R A 20 o 00'N Nasik State Capital 20 o 00'N Manor City/Town Project Highway National Highway A R A B I A N S E A Mandvi Paved Provincial Road Railway MUMBAI NH-4B Kalyan Thana Panvel River State Boundary Boundaries are not necessarily authoritative. NH17 NH-4 to Panaji Pune to Bangalore/Chennai 73 o 00'E 75 o 00'E HR

11 1 I. PROJECT DESCRIPTION 1. The national highway network in India has been in urgent need of capacity enhancement and rehabilitation. Large traffic volumes traveling primarily on a two-lane national highway network inflict heavy social and economic cost on the country. To address the capacity constraints on the national highway network, the Government of India, in 1998, formulated a structured program National Highway Development Project (NHDP) for widening to four lanes (I) a 5,846-kilometer (km) heavily trafficked corridor connecting the major metropolitan cities Delhi, Mumbai, Chennai, and Kolkata, known as the golden quadrilateral (GQ); and (ii) the north-south (NS) corridor connecting Srinagar to Kanyakumari (4,000 km) and the east-west (EW) corridor connecting Silchar to Porbandar (3,300 km). Implementation of the NHDP has been entrusted to the National Highways Authority of India (NHAI). 2. The western transport corridor 1 connecting Delhi, Mumbai, Bangalore, and Chennai on the GQ is the busiest corridor in India, particularly the section between Ahmedabad and Mumbai, where it passes through an industrial belt with connections to several major and minor ports on the west coast. The section between Ahmedabad and Mumbai is 528 km, of which 348 km had been or was being widened to four-lane standard. The section of 176 km between Surat and Manor remained a severe bottleneck for the efficient movement of goods and passengers between the industrial heartland of Gujarat and the port of Mumbai on the west coast of India. 3. The objectives of the Project were to remove the severe capacity constraints and improve road safety on critical sections of National Highway 8 (NH 8) from Surat to Manor. The components funded under the Project include (i) widening to four-lane standard (including strengthening the existing two lanes) 176 km of NH 8 between Surat and Manor, (ii) consulting services for construction supervision of road improvements, and (iii) consulting services for development of private participation and toll operations. During implementation of the Project, a component on consulting services to carry out a road safety audit on selected national highway and expressway corridors was included. The completed project was to be operated and maintained by the private sector through a toll concession. The project framework comprising appraisal targets and the achievements of the Project is in Appendix 1. II. EVALUATION OF DESIGN AND IMPLEMENTATION 4. The main events of project processing and implementation are presented chronologically in Appendix 2. A. Relevance of Design and Formulation 5. The Project is highly relevant and consistent with the Government s NHDP and the Asian Development Bank s (ADB) country strategy and program, and was the first ADB assistance to the Government for implementing the NHDP. Subsequent to this Project, from 2001 to 2004, ADB approved one loan each year to assist the Government in implementing the NHDP. The implementation of works on the GQ, of which the Project forms a part, is 95.35% complete. 2 The works on the NS and EW corridors are 16.8% complete and 69.15% is under implementation. 1 The western transport corridor constitutes National Highway 8 (NH 8), NH 4, and some sections of NH 79, NH 76, NH 7, and NH Implementation progress up to 31 May 2007, based on NHAI s monthly progress report.

12 2 6. The feasibility study and the detailed design for the Project had been undertaken by NHAI through its own resources, and project formulation did not require any project preparatory technical assistance from ADB. Although the project design had incorporated several innovative technical features, it had not incorporated a higher degree of design standards to enhance road safety, such as flyovers, underpasses, overpasses at all major junctions and longer sections of service roads, as this was one of the earliest projects under the NHDP. During implementation of the Project, approval of a major change in scope allowed additional works to enhance road safety and facilitate uninterrupted traffic flow on the project corridor, utilizing some of the loan savings. The additional works such as flyovers, underpasses, overpasses, and additional service roads have significantly enhanced road safety and have resulted in uninterrupted traffic flow on the project corridor. The additional works were integral to the original works and would have been difficult to implement at a later stage. With the implementation of the Project, the entire NH 8 from Delhi to Mumbai was upgraded to a minimum of four-lane standards and the capacity constraints and critical bottlenecks were removed. 7. With substantial progress on the implementation of works on GQ and EW-NS corridors (NHDP I and II), the government expanded the NHDP program to NHDP III VII for improvements to the other sections of the national highway network. The Government made a policy decision in 2005 that NHDP III VII would be developed through the public-private partnership (PPP) mechanism, primarily through build-operate-transfer (BOT) and through annuity for less viable sections. NHDP V consists of widening to six lanes 6,500 km of the national highway including the GQ. The section between Surat and Manor completed under the Project is being taken up for widening to six lanes as part of NHDP V. The feasibility study conducted in 1998 envisaged the requirement of six lanes by 2007 and had recommended widening in a phased manner. B. Project Outputs 8. At appraisal the Project envisaged (i) road improvement by widening to four lanes (including strengthening the pavement of existing two lanes) about 180 km of NH 8 between Surat and Manor; construction of 42 bridges, and construction of toll plazas and bus bays at various locations; and (ii) capacity building for private participation and toll operations by creating an enabling environment for private participation. 9. Apart from the envisaged road improvement works, additional works constituting flyovers, underpasses, overpasses, and additional service roads were approved and implemented through a major change in the project scope. The additional works implemented by using loan savings have significantly enhanced road safety and have resulted in uninterrupted traffic flow on the project corridor. The incorporation of additional works contributed to the extension of contract periods and project implementation. 10. A toll system study and a comprehensive operation and maintenance (O&M) concession study were carried out under the Project. Additionally, a road safety audit for about 2,800 km of the national highway and expressway sections was carried out. The toll system study proposed improvement to the toll collection system, and a pricing strategy and a communication strategy to increase toll collection. The comprehensive O&M concession study developed a framework and administrative manual for the corridor management unit and O&M concession documents in various formats. The road safety audit study suggested location-specific, short-term and longterm safety improvement measures for 2,800 km of national highway and expressway sections and suggested improvements in the Indian road safety guidelines and codes.

13 3 11. There was a significant delay in the process of selecting consultants and awarding contracts. Timely initiation and completion of the studies would have made the study outputs more relevant. 12. The details of the project output are in Appendix 3. C. Project Costs 13. At appraisal, the total project cost was estimated at $280 million equivalent comprising $180 million (64.3% of total cost) in foreign exchange and $100 million equivalent (35.7%) in local cost. The ADB loan of $180 million was to finance the entire foreign currency cost of the project. The total contract value for all the civil works contracts at the time of award was Rs5.658 billion ($130 million equivalent) compared with an appraisal estimate of Rs6.707 billion ($180.5 million equivalent). The lower-than-estimated cost arose from (i) the increased competition between contractors, thus driving rates down; (ii) a decline in the value of the Indian rupee against the US dollar; and (iii) overestimation of the cost at appraisal. Additional works on the project road to improve road safety and remove capacity constraints at an estimated cost of $66.8 million and ADB financing of $44.5 million were approved, utilizing some of the loan surplus and implementing the works as part of the Project. 14. The cost for consulting services and the resultant category allocation of $20 million under the Project had been overestimated. The total cost for consulting services upon completion of the Project was $10.2 million. The cost to the Executing Agency on account of interest during construction (IDC) was significantly lower than the appraisal estimate because the loan was transformed from a pool-based to a London interbank offered rate (LIBOR)-based loan. The project cost at completion 3 inclusive of additional works, and physical and price variations was Rs billion ($246.8 million equivalent) as against the appraisal estimate of Rs billion ($280 million equivalent). During implementation, at the request of the Borrower on two occasions, a total loan amount of $30.25 million was cancelled 4. Although the total completion cost for all components in local currency was higher by about 9.3% than the cost estimated at appraisal, the loan cancellation of $30.25 million was on account of the devaluation of the local currency with respect to the dollar. The estimated costs of the Project at appraisal, the cost at contract awards, and actual completion costs are detailed in Appendix 4. The annual average exchange rates and Indian wholesale price indices used are in Appendix 5. D. Disbursements 15. The loan approved by ADB on 27 July 2000 was provided from ADB s ordinary capital resources, determined in accordance with ADB s pool-based variable lending rate for US dollar loans. The Borrower was NHAI. The amended and restated loan agreement to switch from poolbased to LIBOR-based loan was signed on 4 July 2002 and made effective on 25 July Disbursements totaled $ million out of the original loan amount of $180 million, and $ million was cancelled at two stages as loan savings. Although $17.4 million was earmarked for the IDC component, only $11.41 million was capitalized. The initial disbursements were made on 12 December 2000, and the final disbursement took place on 13 January The report and recommendation to the President (RRP) did not include any 3 The contractor for civil works contract package 1 submitted 42 claims, 40 of which NHAI referred to the existing Arbitration Tribunal for adjudication. 4 $15 million effective on 13 December 2004 and $15.25 million effective on 13 January 2006.

14 4 disbursement schedule. Annual disbursement projections made by NHAI and ADB each year and the actual disbursements are in Appendix 6. E. Project Schedule 17. At appraisal the Project was envisaged to be completed by March 2004 and the loan s original closing date was 30 September The schedule for contract award and the subsequent milestones were, however, not fully updated before Board consideration, as the appraisal estimate indicates contract award before the date of Board consideration. 18. The feasibility study, detailed design, and preparation of bid documents had been undertaken by NHAI with its own resources. With ADB approval, NHAI undertook advance action on procuring civil works and recruiting construction supervision consultants, and was in readiness to award the contracts upon Board approval. NHAI also undertook implementation of preconstruction activities such as acquisition of land, shifting of utilities, and tree cutting; and fulfilled the conditions for contract award related to completion of those activities and awarded all the contracts soon after Board approval. Project readiness and quality of the Project at entry are rated as excellent. 19. The civil works were carried out under three contract packages. The original contract period for contract packages 1, 2, and 3 were 36 months, 30 months, and 36 months, respectively. During implementation, additional works to enhance road safety on the project corridor and utilizing some of the loan savings were approved and included as part of the three civil works contract packages as variations. Suitable extensions were given to the contractors for implementing the additional works under the contract. The civil works contracts for contract packages 2 and 3 were completed within the original loan closing date, but for contract package 1, the loan closing date was extended by 1 year to 30 September 2005, to accommodate completion of the works. 20. The extension of the loan closing date was primarily caused by (i) the delay in the approval of additional works by the public investment board (PIB) and the cabinet committee on economic affairs (CCEA); (ii) significant additional works included under contract packages 1 and 2 as variations to the original contract; (iii) inadequate participation of the lead partner of the joint-venture contractor for contract package 1, leading to delays in completing the works (para. 31). 21. Overall, project implementation is considered satisfactory. The project implementation schedule as envisaged at appraisal and actual is in Appendix 7. F. Implementation Arrangements 22. The implementation arrangements envisaged at appraisal were adhered to and were found to be adequate. The project implementation unit (PIU) was staffed with experienced personnel, both at management level at NHAI s headquarters and at the project site. Overall responsibility for project implementation was with Member (Administration) 5, NHAI at headquarters, who was assisted by adequate and experienced staff. The PIU in the field was headed by a project director of the level of Chief General Manager/General Manager and was assisted by a Deputy General Manager and three Managers, each responsible for one contract package. The PIU in the field was delegated with sufficient administrative authority for effective 5 Member (Administration) is a full-time member on the NHAI Board.

15 5 and timely decision making on project implementation issues. The PIUs had undertaken advance action for shifting utilities, cutting trees, land acquisition, and resettlement so that the site was handed over to the contractor in accordance with the handing over schedule in the contract agreement. Periodic reviews were conducted by Member, NHAI to monitor implementation progress and resolve any outstanding issues. The project implementation structure is in Appendix 8. G. Conditions and Covenants 23. There were no particular conditions for effectiveness of the loan agreement. No covenants were modified, suspended, or waived during project implementation. NHAI complied with 12 major loan covenants and substantially complied with 1 major loan covenant. The details of compliance with major loan covenants are in Appendix Fully recognizing the role of the road sector in fostering economic development and growth, the Government initiated major policy reforms and an investment program during the implementation of the Project. The initiatives of the Government such as progressive increases in cess on diesel and petrol for road funding, establishing a central road fund for developing and maintaining roads, finalizing a model concession agreement for road development and maintenance through BOT and annuity concessions, policy decision to undertake projects under NHDP through public-private partnership using BOT and annuity concessions, O&M through private sector contracts far exceed the intent of the related loan covenants under the Project. H. Consultant Recruitment and Procurement 1. Consultants 25. At appraisal, it was envisaged that consultants would be engaged to provide consulting services (i) for construction supervision of road improvements; and (ii) to assist NHAI in promoting private participation, mobilize private financing for the development of national highways, and backstop services relating to O&M of the completed project facility (including the toll structure). NHAI made use of ADB approval of advance action to recruit construction supervision consultants and undertake timely action on the recruitment activities. The consultants for construction supervision were recruited and fielded soon after Board approval and effectiveness of the loan. 26. The outline terms of reference for consulting services for (i) a comprehensive O&M concession study, and (ii) a toll system study were further developed and included as part of the Western Transport Corridor Project 6 together with consulting services for a road safety audit for the western transport corridor, with the understanding that loan proceeds of the Project will be used for these activities. With the assistance of ADB, NHAI further refined the terms of reference for the three studies. NHAI, with the approval of ADB expanded the scope of consulting services for the road safety audit to include other national highway and expressway sections. There was a considerable delay in engaging consultants for these studies because of (i) a delay in initiating the recruitment process; (ii) failure of negotiations with the first ranked firm and subsequent negotiation with the second ranked firm for the toll system study; and (iii) the 6 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to India for the Western Transport Corridor Project. Manila (Loan 1839-IND, for $240 million, approved on 24 August).

16 6 need to reinvite proposals from consultants for consulting services for the road safety audit, as the technical proposals did not meet the minimum qualifying score of The consultants for all consulting services were recruited by NHAI in accordance with ADB s Guidelines on the Use of Consultants. 2. Procurement 28. NHAI made use of advance procurement action approved by ADB for civil works procurement. Procurement was undertaken in accordance with ADB s Guidelines for Procurement following international competitive bidding procedures. ADB approved NHAI s evaluation report in January 2000, ahead of Board approval. NHAI fulfilled the condition for the award of civil works contracts on the acquisition of land, shifting of utilities, and tree cutting on a timely basis by undertaking advance action on those preconstruction activities. The contracts for the three civil works packages were awarded soon after Board approval. I. Performance of Consultants, Contractors, and Suppliers 29. Supervision of construction for all the three contract packages was undertaken by one consultant, which was a joint venture of a domestic and a foreign firm, with further association with a domestic and a foreign firm. The consultant was assigned the powers of the Engineer, in accordance with the Fédération International des Ingenieurs-Conseils (FIDIC) conditions of the contract, barring a few exceptions, for which it had to obtain prior approval from NHAI. The supervision consultant had a major responsibility for implementing the Project and the overall performance was satisfactory. 30. The performance of consultants engaged for various sector studies was varied. The quality of output of the consultants for the toll system study was partly satisfactory. The performance of the consultants for the comprehensive O&M concession study was satisfactory. The performance of the four consultants who undertook the road safety audits varied from satisfactory to partly satisfactory. 31. The performance of the contractors for the three civil works contract packages was varied. The contractors for contract packages 1 and 2 were joint-venture firms, with a foreign lead partner and a domestic partner. The participation of the foreign lead partners in executing the contracts for the two packages was not satisfactory, as they did not provide adequate financial resources, equipment, and key personnel. Implementation of the contracts suffered due to lack of adequate participation by the lead partner. The performance of the contractor for contract package 2 was initially slow, but improved significantly in the course of implementation. The performance of the contractor for contract package 1 is considered partly satisfactory and that of the contractor for package 2 satisfactory. The contractor for contract package 3 was a domestic contractor, and its performance is considered highly satisfactory. J. Performance of the Borrower and the Executing Agency 32. NHAI was both the Borrower and the Executing Agency. Its overall performance in both roles was satisfactory. NHAI undertook the project preparatory and preconstruction activities feasibility studies, detailed project preparation, shifting of utilities, land acquisition, tree cutting, environmental clearance, procurement of civil works contracts, and engagement of supervision consultants in a timely manner and achieved a high degree of project readiness by the time of Board approval. The NHAI project team exhibited strong project management and problem-

17 7 solving capabilities and the civil works under the Project were completed expeditiously. However, NHAI was delayed in initiating and awarding contracts for the sector studies. NHAI also took considerable time in deciding on contractual matters such as contract variation, extension of time, interest against delayed payments, and the release of performance security. 33. Although NHAI had initiated the process of seeking Government approval for additional works under the Project in October 2001, Government approval was considerably delayed. The PIB clearance was issued in December 2003 and the CCEA approval in October Over several years, NHAI has strengthened its institutional, project management and implementation capabilities and has now been implementing projects valued at more than $1 billion each year. It has also operationalized the maintenance of highways through private sector participation, established and strengthened an environment and social development unit, developed a road database information system, developed a computerized project accounting and monitoring system, and developed standard procedures for project implementation. On the basis of a recent Government policy, NHAI has now been implementing projects through publicprivate partnership mechanisms. K. Performance of the Asian Development Bank 35. ADB was very closely involved in identifying potential problems, critical activities, and resolving issues related to the Project through regular review missions and frequent monitoring of project progress. ADB provided useful and timely advice on (i) incorporation of additional works related to road safety as part of the Project; and (ii) formulation of the terms of reference and review of consultants reports related to the toll system study, comprehensive O&M concession, and road safety audits. ADB approved expeditiously the documents and evaluation reports prepared and submitted by NHAI on civil works procurement, engagement of consultants, and incorporation of additional works related to road safety. Project administration was delegated to the India Resident Mission (INRM) on 1 January ADB s overall performance was satisfactory. III. EVALUATION OF PERFORMANCE A. Relevance 36. At appraisal and completion, the Project is assessed as highly relevant and consistent with the Government s NHDP and ADB s country strategy and program for India. The intended outcomes under the Project were to (i) remove capacity constraints and improve road safety; and (ii) commercialize O&M of project roads through private toll collection. The project outcomes have been consistent with the Government s development priorities and programs at appraisal and completion and the Government has intensified its focus on the development of road infrastructure and policy reforms. Since the NHDP was formulated in 1998, the Government has successfully implemented NHDP I and II, and expanded the scope of NHDP up to NHDP VII. The Government has undertaken several sector policy reform measures for financing, developing, and maintaining road infrastructure it has created a central road fund, has been tolling four-lane sections of national highways, created an enabling environment for private sector participation in road development and maintenance, finalized model concession agreement for projects on BOT, annuity, and O&M formats. 37. The Project has also been consistent with ADB s country strategy and program for India at appraisal and completion, as ADB has provided continuous assistance for implementing

18 8 NHDP I II from 2000 to 2004 through a programmatic approach, which has helped NHAI in enhancing private sector participation in road development and commercialization of O&M. 38. Through a major change in scope, utilizing loan savings, the project design was further enhanced with the incorporation of additional works such as flyovers, underpasses, overpasses, additional service roads to improve road safety and address congestion in urban and built-up areas. These works were not envisaged at the time of project formulation and design as the Project was one of the earliest under NHDP. As NHAI gained experience in formulating and designing vast stretches under NHDP and from the other projects completed through ADB and World Bank assistance, the additional works were considered necessary to improve road safety and remove capacity constraints. The extent and nature of the additional works were also consistent with the standards being adopted in other parts of the western transport corridor, particularly those standards adopted on the subsequent ADB-funded Western Transport Corridor Project (footnote 6). Through the use of loan savings, the additional works were incorporated on time as part of the Project as they were integral to the original works and would have been difficult to implement at a later stage. 39. The section between Surat and Manor completed under the Project is being taken up for widening to six lanes as part of NHDP V. The feasibility study conducted in 1998 envisaged the need for six lanes by 2007 and had recommended the widening in a phased manner. B. Effectiveness in Achieving the Outcome 40. The Project is rated as effective. The intended outcomes were to (i) remove capacity constraints and improve road safety; and (ii) commercialize O&M of project roads through private toll collection. The outputs envisaged were (i) road improvement by widening to four lanes a 180 km stretch between Surat and Manor, including constructing 42 bridges, toll plazas, and bus bays at various locations; and (ii) enhanced capacity for private participation and toll operations with the creation of an enabling environment and a framework for private participation, preparation of model concession agreements, and a review of toll structure. 41. Apart from the road improvement works envisaged, additional road safety features were incorporated during the project implementation period (para. 38). The completed Project has been very effective in (i) removing capacity constraints through capacity enhancement of the highway; (ii) facilitating uninterrupted traffic flow and reducing travel time; (iii) reducing vehicle operating cost; and (iv) improving road safety on the stretch between Surat and Manor on NH 8. In urban areas, widening to six lanes and construction of flyovers, underpasses, overpasses, and service roads have reduced the congestion levels and decreased accidents through the separation of through traffic and local traffic. The additional works have enhanced the effectiveness of the Project in achieving the intended outcome. 42. During the last several years, the Government through its own initiative and multilateral assistance has undertaken major policy initiatives that have far exceeded the intended outcome and outputs by commercializing O&M through private toll collection and creating an enabling environment for private sector participation (para. 24). The Project has assisted NHAI in (i) preparing concession agreements for collecting toll and O&M under various formats; and (ii) undertaking a toll system study. Additionally, the Project also assisted NHAI in undertaking a road safety audit. 43. The intention was for NHAI to collect toll, operate, and maintain the completed project facility through a concession to the private sector developed under the Project. However, under

19 9 NHDP V, NHAI has now initiated the process of further widening to six lanes the completed project facility together with the adjoining stretches through a BOT concession to the private sector. The concession would include the responsibility for construction, toll collection, and O&M. The proposed concession would fully meet the intended outcome. Meanwhile, NHAI has been collecting toll, operating, and maintaining the completed project facilities through short-term contracts to the private sector. 44. The road safety audit for 2,800 km, including the highway section under the Project, has helped NHAI identify location-specific, short-term, and long-term safety measures and improvements in the Indian road safety guidelines and codes. NHAI is incorporating the identified safety measures during widening of the completed project facility to six lanes. C. Efficiency in Achieving the Outcome and Outputs 45. The Project is rated highly efficient. Economic reevaluation following the methodology used at appraisal was carried out. The economic internal rate of return (EIRR) at reevaluation was 32.2%, higher than the appraisal estimate of 25%. The higher savings in vehicle operating cost and higher projected traffic at project completion contributed to the higher EIRR at completion. 46. The Project s financial internal rate of return (FIRR) was 9.6%, compared with the appraisal estimate of 14.2%. The lower FIRR at completion is due to concessional monthly passes for local residents and concessional toll rates for multiple entry. 47. The economic and financial reevaluation are based on recent traffic. The traffic projections at appraisal were revised to incorporate traffic and other economic data that had become available since appraisal. 48. Details of current and projected traffic, and the methodology adopted for economic and financial reevaluation are in Appendixes 10 and 11. D. Preliminary Assessment of Sustainability 49. The sustainability of the Project is rated as most likely. As envisaged during the feasibility study and appraisal, the highway would need to have six lanes to meet the traffic demand. The highway sections under contract packages 1, 2, and 3 would reach the four-lane highway capacity 7 by 2010, 2007, and 2013, respectively. 50. The rules for collecting toll on four-lane national highways had been framed in 1997 under the National Highway Act. The Government has since been collecting toll on the four-lane national highways. The initial public resistance to the toll has now subsided and road users are now more willing to pay for better roads. 51. Under NHDP V, NHAI has initiated the widening to six lanes of the highway section completed under the Project, together with the adjoining sections. Bids would be invited from the private sector for a BOT concession. Under NHDP V, NHAI recently awarded concessions for six lanes on the adjacent highway section between Surat and Vadodara under two contracts, 7 The capacity of a four-lane highway is taken as 80,000 motorized passenger car unit (PCU), as separate service roads have been provided for nonmotorized traffic traveling short distances.

20 10 where NHAI received a negative viability gap funding 8 from the successful bidder. Given a similar traffic scenario on the Surat Manor section completed under the Project, a negative viability gap funding from the concessionaire is a possibility. The private sector concession would ensure adequate maintenance of the highway in accordance with predetermined standards and its funding. In the meantime, NHAI has been collecting toll, operating, and maintaining the completed project facilities through short-term contracts to the private sector. E. Environmental, Social, and Other Impacts 1. Environmental Impacts 52. The Project was in environmental category B, and an initial environmental examination was conducted during feasibility and appraisal in accordance with ADB s Environmental Guidelines for Selected Infrastructure Projects. The Project did not envisage any significant adverse environmental impacts. The summary initial environmental examination (SIEE) identified some moderate environmental impacts due to the Project: reduction of forestland, destruction of vegetation, obstruction to drainage, interference to existing traffic, destruction of utility lines, accident risk during construction, and increased noise from vehicular traffic. To address the potential impacts, an environmental mitigation and monitoring program was included in the SIEE. 53. NHAI sought the statutory environmental clearances from the Ministry of Environment and Forest and the state forest departments for the cutting of trees, diversion of some forestland, and the implementation of the Project. As a section of the project stretch in Maharashtra passes through ecologically sensitive Dahanu Taluka, NHAI also obtained the statutory approval of the Dahanu Taluka Environment Protection Authority (EPA). The environmental and forest clearances were issued by the respective authorities, subject to compliance with stipulated conditions. While issuing approval for the section of the Project passing through Dahanu Taluka, the Dahanu Taluka EPA laid down the condition that 10 new trees should be planted in advance (pre-afforestation) for each tree to be cut in the forest as well as nonforest areas in that section. Pre-afforestation stipulated by Dahanu Taluka EPA was a novel concept to ensure compliance before the trees are cut. 54. An environmental monitoring cell was constituted for implementing the environmental mitigation and monitoring program. The Project was implemented in accordance with the environmental mitigation and monitoring plan under the loan agreement and the conditions of the environmental and forest clearance stipulated by the respective authorities. The project design incorporated the environmental mitigation measures, and construction supervision consultants monitored the mitigation measures during construction. Implementation of the environmental mitigation measures was closely monitored with particular attention to contract package 3, where a section of the highway passes through ecologically sensitive Dahanu Taluka. A 6-monthly monitoring report, with emphasis on the section under contract package 3, was submitted by NHAI to the regional office of the Ministry of Environment and Forest. 55. The potential moderate environmental impacts identified in the SIEE were addressed during implementation. The environmental and forest clearance stipulated pre-afforestation and compensatory afforestation. NHAI had deposited the cost of afforestation requested by the State forest department. Pre-afforestation for 113,513 trees outside the right-of-way and 8 The concessionaire paid a grant to NHAI for the concession to construct, maintain, operate, and collect toll on the highway.

21 11 compensatory afforestation for 24,000 trees in the right-of-way were undertaken by the forest department of Maharashtra State for the highway corridor under contract package 3. In Gujarat, the forest department generally undertakes compulsory afforestation according to its state-wide plans. 56. Adequate drainage measures bridges, culverts, stabilizing structures, and drains have been incorporated in the project design and constructed to ensure that the drainage is efficient and there is no waterlogging. No labor camps were allowed to be constructed in the forest area and along the roadside plantation. Labor camps were constructed on barren and degraded land. When construction was completed, the camps were dismantled and the sites restored. Roadside utilities lines were shifted before starting construction works in those sections. Adequate road signs and barricades were provided and traffic was diverted in accordance with the approved arrangements. 57. The other critical environmental issues addressed and monitored during project implementation include utilization of bituminous waste, reconciliation of borrow areas and quarries, noise and air pollution, environmental quality at the construction and plant sites, labor and staff camp, traffic safety for road users, personal safety for workers, and median and roadside plantation. 58. The completed project has improved environmental quality along the project corridor by (i) reducing air and dust pollution in inhabited locations, particularly emissions due to construction of flyovers, underpasses, overpasses, service roads, and afforestation; (ii) reducing noise level with the planting of trees and shrubs in the right-of-way and median; and (iii) reducing erosion of the embankment with the use of vegetation, turfing, and other protection works. 2. Social Impacts 59. The rehabilitation and resettlement of project affected-persons was undertaken by NHAI in accordance with the resettlement action plan (RAP) for the Project. NHAI established a resettlement group at the PIU for implementing the RAP and approved the supervision consultants engagement of a nongovernment organization (NGO) for assistance. The South Asian Foundation for Human Initiatives (SAFHI), an NGO, was engaged to assist NHAI in implementing the RAP. 60. The verification survey in June September 2002 indicated a significantly higher number of project-affected persons (3,245 entitled persons) than that recorded under the original survey, (1,498 entitled persons) listed in the RAP. The Project involved acquisition of government land, agricultural and nonagricultural private land, and displacement of some small-scale business enterprises and common property resources. The compensation and assistance to titleholders and non-titleholders were undertaken in accordance with a microplan. The microplan for the titleholders comprised (i) compensation for land, structures, and trees assessed by the competent authority; (ii) payment of the difference between the compensation paid by the competent authority and the replacement cost; (iii) transfer allowance for residential and commercial structures; (iv) assistance to offset loss of employment and income; and (v) assistance to offset loss of business and industry. The microplan for the non-titleholders comprised (i) cost of structures, and (ii) transfer allowance for residential and commercial structures.

22 The titleholders affected by the Project were 2,797, for whom the competent authority had assessed a compensation of Rs157.3 million. NHAI deposited the full amount with the respective competent authorities. Additional compensation of Rs45 million was assessed by the district resettlement committees. About 95% of the total amount including the additional compensation has been disbursed to the titleholders. The balance could not be disbursed due to difficulty in locating some of the entitled persons, presence of leaseholders, lack of documentation for land transfers that would allow compensation to current recognized titleholders, and land disputes in the family or absentee nonresident landlords whose compensation would have to await their visit to India. The competent authorities have sent postal letters to the entitled persons to collect their compensation. NHAI disbursed an assistance of Rs1.06 million to 278 non-titleholders. Some of the non-titleholders included in the microplan did not have to be displaced from the right-of-way for construction works, and therefore did not have to be compensated. 62. The NGO assisted NHAI in the income restoration of the affected persons (APs). The NGO coordinated and, wherever required, imparted training to interested persons and members of women s self-help groups (SHG) to upgrade their skills. Training was given to members of 28 SHGs in the villages adjacent to the project corridor. The NGO coordinated the training with the Rural Technology Institute, Gujarat at Pardi, Valsad district to build capacity and upgrade the skills of 23 APs. The Mission of the Institute is to upgrade the technology and skills of artisans in the cottage and rural industry sector to improve their efficiency, productivity, and income. The NGO also provided training on basic computer applications. 63. NHAI relocated the common property resources such as hand pumps, dug wells, and temple in consultation with the affected persons. NHAI also provided assistance to some of the APs by providing alternate housing sites and relocating traders along the highway after land development. 64. During project implementation, several meetings with construction workers were conducted at different locations to increase their awareness of HIV/AIDS and general health and hygiene. 65. The influence area under contract package 3 of the Project is located in Thane district in Maharashtra. A high proportion of the population in Thane is of tribal origin. No tribal groups (indigenous people) were affected by activities associated with the Project as their settlements are at some distance from the highway. The construction activities had created significant employment opportunities for the local tribal residents. 66. Details of land acquisition, resettlement, and social impacts during project implementation are in Appendix Other Impacts 67. Reduction in vehicle operating cost, level of congestion, and travel time has resulted in reduced transport cost leading to increased competitiveness and economic growth. The improved highway corridor would provide opportunities for further economic, industrial, and tourism development along the corridor, leading to increased employment. 68. The Project generated direct employment opportunities for technical personnel, and skilled, semi-skilled, and unskilled labor. A total of 4,223,500 man-days of employment was generated by the Project.