ASIAN DEVELOPMENT BANK RRP:IND 29250

REPORT AND RECOMMENDATION

OF THE

PRESIDENT

TO THE

BOARD OF DIRECTORS

ON A

PROPOSED LOAN

TO THE

NATIONAL HIGHWAYS AUTHORITY OF INDIA

FOR THE

SURAT–MANOR TOLLWAY PROJECT

IN

INDIA

June 2000

CURRENCY EQUIVALENTS(as of 15 May 2000)

Currency Unit – Rupee/s (Re/Rs)

Re1.00 = $0.022$1.00 = Rs43.97

In this report, an exchange rate of $1.00 = Rs42 is used.

ABBREVIATIONS

ADB – Asian Development BankEIRR – economic internal rate of returnFIRR – financial internal rate of returnJBIC – Japan Bank for International Cooperationkm – kilometerMOST – Ministry of Surface TransportNHAI – National Highways Authority of IndiaNH – national highwayPAP – project-affected personPIU – project implementation unitRAP – Resettlement Action PlanTA – technical assistanceVOC – vehicle operating cost

NOTES

(i) The fiscal year (FY) of the Government ends on 31 March. FY beforea calendar year denotes the year in which the fiscal year ends. Forexample, FY1998 begins on 1 April 1997 and ends on 31 March1998.

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

CONTENTS

Page

LOAN AND PROJECT SUMMARY ii

MAP vi

I. THE PROPOSAL 1

II. INTRODUCTION 1

III. BACKGROUND 1

A. Sector Description 1B. Government Policies and Plans 6C. External Assistance to the Sector 7D. Lessons Learned 7E. ADB’s Sector Strategy 8F. Policy Dialogue 9

IV. THE PROPOSED PROJECT 11

A. Rationale 11B. Objectives and Scope 12C. Cost Estimates 13D. Financing Plan 13E. Implementation Arrangements 14F. The Executing Agency 15G. Social and Environmental Impacts 16

V. PROJECT JUSTIFICATION 18

A. Financial and Economic Analyses 18B. Poverty Impact 19C. Risks 19

VI. ASSURANCES 20

A. Specific Assurances 20B. Condition of Award of Civil Works Contract 21

VII. RECOMMENDATION 21

APPENDIXES 22

LOAN AND PROJECT SUMMARY

Borrower National Highways Authority of India (NHAI)

Guarantor India

Project Description The Project will improve to four-lane standard(construction of two lanes and pavementstrengthening of the existing two lanes) about 180kilometers (km) of National Highway Number 8(NH8) in the states of Gujarat (largely) andMaharashtra. The Project will remove a criticalbottleneck in the movement of freight andpassengers from the industrial and agriculturalareas of Gujarat to the ports, including Mumbai onthe west coast of India.

Classification Economic growth

Environmental Assessment Category B

An initial environmental examination wasundertaken and the summary is a core appendix.

Rationale A large portion of the national highway network inIndia is in urgent need of improvement. Largetraffic volumes to a mainly two-lane nationalhighway network inflict heavy social and economiccosts on the country. The western transportcorridor, the NH8 and NH4, which connects Delhi,Mumbai, Bangalore, and Chennai, is the busiestcorridor in India, particularly in the section betweenAhmedabad and Mumbai where it passes throughan industrial belt with connections to several majorand minor ports on the west coast. The sectionbetween Ahmedabad and Mumbai is 528 km, ofwhich 348 km has been or is being widened tofour-lane standard. There remains a section ofabout 180 km (between Surat and Manor), which isnow a severe bottleneck for the efficientmovement of goods and passengers between theindustrial heartland of Gujarat and the port ofMumbai on the west coast of India.

The Asian Development Bank’s (ADB) involvementwith the Project will provide an opportunity toadvance policy dialogue with the Government onroad sector reform issues. The commercializationof the completed project facility through a private

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sector operation and maintenance toll concessionwill represent a significant step in increasingprivate participation in national highwaydevelopment. Efforts to introduce private financingfor highway development, particularly for longinterurban stretches, which have long paybackperiods and higher risks, are continuing with ADBassistance under the Project and separatelythrough technical assistance.

Objectives and Scope The objectives of the Project are to removecapacity constraints and improve road safety oncritical sections of the western transport corridorfrom Delhi to Mumbai. The completed projecthighway will be operated and maintained by theprivate sector through a toll concession. Thecommercialization of the operation andmaintenance of the Project represents a significantstep in increasing private participation in nationalhighway development in India and will have ademonstration effect on the management of othernational highway sections.

The Project will comprise (i) widening to four lanes(including the strengthening of the existing two-lane pavements) about 180 km of NH8 betweenSurat and Manor, and (ii) provision of consultingservices for construction supervision and for thedevelopment of private participation and tolloperations.

Cost Estimates

($ million)

ItemForeign

ExchangeLocal

CurrencyTotalCost

Base Cost 134.0 84.0 218.0Contingencies 28.6 16.0 44.6Interest during Construction 17.4 0.0 17.4

Total 180.0 100.0 280.0

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Financing Plan

($ million)

SourceForeign

ExchangeLocal

CurrencyTotalCost Percentage

ADB 180.0 0.0 180.0 64NHAI 0.0 100.0 100.0 36

Total 180.0 100.0 280.0 100 ADB = Asian Development Bank; NHAI = National Highways Authority of India.

Loan Amount and Terms $180 million from ADB’s ordinary capital resources,with a repayment period of 25 years including agrace period of 5 years and with interest at ADB’spool-based variable lending rate for US dollarloans.

Period of Utilization Until 30 September 2004

Executing Agency NHAI

Implementation Arrangements The Project will be implemented by a separateproject implementation unit within NHAI.

Procurement The civil works contract packages will be procuredin accordance with ADB’s Guidelines forProcurement following international competitivebidding procedures.

Consulting Services International and domestic consultants will berequired for construction supervision and to assistwith the process of encouraging privateparticipation in the financing of highways andexpressways. The consultants will be recruited inaccordance with ADB’s Guidelines on the Use ofConsultants and other arrangements satisfactoryto ADB on the engagement of domesticconsultants.

Estimated Project Completion Date 31 March 2004

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Project Benefits and Beneficiaries The main quantifiable benefit accruing from theProject consists of savings in vehicle operatingcosts, which will lead to a reduction in transportcosts. The economic internal rate of return of theProject is estimated at 25 percent, while thefinancial internal rate of return is estimated at 14percent. The Project will also improve road safetyand reduce travel time between Ahmedabad andMumbai. Operation and maintenance of thecompleted project facility by the private sectorthrough a toll concession will bring efficienciesfrom entrepreneurial skills and superiormanagement practices. The direct beneficiaries ofthe Project are road users, transport operators,and importers and exporters who will benefit fromlower transport costs, faster travel time, andimproved safety. The Project’s influence area hasa population of about 14 million, of which 30-50percent, depending on district, are poor. Thepeople in the project influence area will benefitfrom increased agriculture-related activities, likehorticulture, poultry, and dairy farming, as theproduce will now be able to reach markets atreduced cost and time. The Government of Gujarathas began a program of improving rural roads thatwill provide the rural population in about 1,000villages with access to the project road andthereby to markets and employment opportunities.A road safety campaign and activities to improveroad safety, particularly among school children, willbe carried out along the project road as part of theresettlement activities.

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I. THE PROPOSAL

1. I submit for your approval the following Report and Recommendation on a proposedloan to the National Highways Authority of India (NHAI) for the Surat-Manor Tollway Project.

II. INTRODUCTION

2. A large portion of the national highway network in India is in urgent need ofimprovement. Large traffic volumes on a mainly two-lane national highway network inflict heavysocial and economic costs, and adversely affect all levels of society and all sectors of thenational economy. During the 1998 Country Programming Mission, the Government requestedAsian Development Bank (ADB) assistance in developing the national highway network alongthe high-density western transport corridor that connects the cities of Delhi, Mumbai,Bangalore, and Chennai. The feasibility study for the proposed Surat-Manor Tollway Projectwas prepared by domestic consultants funded by the Government. The ADB Fact-FindingMission1 visited India from 4 to 20 May 1998, to formulate the Project on the basis ofdiscussions with the Government, other agencies active in the road sector, and the projectfeasibility report. The Appraisal Mission completed the review and analysis of all aspects of theProject and the sector from 27 July to 7 August 1998. Loan negotiations with representativesof the Government and NHAI were held in Manila from 28-29 January 1999. The project dataand sector analysis were updated by a Project-Specific Contact Mission in December 1999 andthrough regular contact with NHAI officials. The project framework is shown in Appendix 1.

III. BACKGROUND

A. Sector Description

3. India has an extensive and diversified transport system, comprising about 3,290,000kilometers (km) of roads, 62,570 km of rail, 12 major and 139 minor ports, four majorinternational airports, 86 domestic airports, and about 14,500 km of navigable inlandwaterways. The modal mix between road and rail transport has been continuously shiftingaway from rail to road because of underfunding of the Government-owned rail system; theroad transport industry is largely private sector operated. Consequently, road transport is nowthe dominant mode, accounting for 60 percent of freight movement and 80 percent ofpassenger traffic, with rail transport accounting for much of the remaining. The generally poortransport infrastructure is inflicting severe economic costs on the country in terms of hightransport and inventory costs. A profile of transport in India is given in Appendix 2.

4. Responsibility for transport is shared by the Government and the private sector. Thecentral Government administers the roads, railways, airports and civil aviation, major ports, andnational inland waterways, and owns the major shipping corporations. The state and unionterritory governments are responsible for intermediate and minor ports, other inlandwaterways, state highways and other state roads, and urban and intercity passenger transport.The private sector dominates the trucking industry, coastal shipping, and the majority of inlandwater transport.

1 The project processing team comprised T. Kandiah, Senior Financial Analyst/Mission Leader; N. Patel, Senior

Implementation/Programs Officer, India Resident Mission (INRM); S. Nanwani, Senior Counsel; A. Akanda,Senior Project Specialist; M. Minc, Project Economist; M. Alam, Project Officer, INRM; and P. Vallely, staffconsultant.

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5. Transport planning, coordination, and policy setting at the central Government level arehandled by six central ministries, with the Planning Commission having an overall coordinationrole. The Ministry of Surface Transport (MOST) is vested with duties relating to thedevelopment and maintenance of national highways, and rules and regulations relating to roadtransport, major ports, inland water transport, and shipping. In addition, MOST performs acoordinating role for state roads and issues guidelines on highway planning, design, andconstruction. Since March 1995, NHAI has taken over the functions relating to thedevelopment of national highways and expressways on the primary arterial road transportcorridors (referred to as the golden quadrangle) previously handled by MOST. All railwayplanning and operations are under the Ministry of Railways. The monitoring and coordinationof the rural roads program is vested with the Ministry of Agriculture. Airports and civil aviationare the responsibility of the Ministry of Civil Aviation and Tourism.

1. Vehicle Fleet and Industry

6. The vehicle population has grown more than 100-fold since 1950, from 300,000 to 33.6million in 1996. Buses and trucks accounted for 1 percent and 5 percent, respectively, carsand jeeps for 12 percent, and motorcycles and scooters (two-wheelers) 68 percent; theremaining vehicles were mostly autorickshaws (three-wheelers) and agricultural tractors. From1981 to 1996, the overall growth of the fleet was 13 percent per annum, with the number ofcars and jeeps growing at 9 percent, trucks at 8 percent, and buses at 7 percent; two-wheelershave become increasingly popular and have increased by 16 percent per annum.

7. Shortly after independence in 1947, the Government of India declared that onlyindigenous firms operating according to an approved plan could undertake motor vehiclemanufacturing. This led to the establishment of a vehicle manufacturing industry basicallyusing domestic capital but with some foreign technical collaboration. From 1982, the licensingsystem controlling association with foreign firms in the manufacturing of light vehicles andtrucks has gradually been liberalized to encourage the production of more fuel-efficient, safer,and better quality vehicles at reasonable prices. In 1996/1997, 3.1 million motor vehicles weremanufactured in India (an increase of 114 percent per annum over the 1992/1993 level, due tothe unprecedented increase in manufacturing of two and three-wheeler vehicles from 1.1million to 2.6 million during the same period), of which 85 percent comprised two- and three-wheelers; 10 percent, cars and jeeps; and 5 percent, commercial vehicles.

8. The commercial vehicle fleet in the country is not utilized optimally because of (i) thehigh proportion of overaged vehicles; (ii) absence of assured loads owing to individual truckowners being lone operators; and (iii) poor loading/unloading facilities at the terminals leadingto abnormal delay and detention. To overcome these constraints, it is necessary to provideloading/unloading facilities, parking areas, and space for transport operators offices served bythe banks and post offices in the outskirts of the cities. The setting up of such facilities by thestate governments would facilitate the formation of cooperatives of small truck operators. Animportant feature of the fleet is that the bulk of the traffic is moved on two-axle rigid trucks.These vehicles are generally overloaded and cause excessive damage to the highways. It is,therefore, necessary to modernize the truck fleet by introducing multi-axle vehicles. In April1998, the Government reduced the central excise duty on multi-axle vehicles and chassis from17.25 percent to 10 percent. Other fiscal and monetary incentives are being considered by theGovernment to encourage the introduction of three-axle rigid trucks.

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9. Passenger services through road transport are provided by the public and privatesectors in the country. However, over the years, the share of the public sector in the total fleetof buses has declined. While in 1980/1981, the public sector held 45.5 percent of the totalnumber of buses in the country, in 1995/1996 its share came down to 24.7 percent.

2. Road Network

10. The road network in India is divided into three categories: (i) the primary system ofnational highways serving interstate long-distance traffic, (ii) the secondary system consistingof state highways and major district roads carrying mainly intrastate traffic, and (iii) the tertiarysystem comprising district and rural roads. The national and state highways perform the mainmobility function in the country’s transportation system. The district and rural roads providemuch needed accessibility to meet social needs and to transport agricultural produce tomarkets. The road network in India grew by 7.5 times from 400,000 km in 1951 to 3,290,000km in 1998. Despite the extensive length of the road network, its quality and capacity aregrossly inadequate for the present and increasing future demand for freight transport andpassenger traffic. Road traffic grew at about 9 percent per year from 1951 to 1995, and isexpected to continue to grow at about 8 percent per year to 2001. By 2001, freight traffic isexpected to be 800 billion ton-km, and passenger traffic about 3,000 billion passenger-km. Thevehicle fleet is expected to grow from 27 million in 1995 to 54 million by 2001. Congestion onthe country’s national road network is a severe constraint to economic development and posesserious road safety problems.

11. The national highway network of 49,585 km carries about 40 percent of total roadtraffic. About 20 percent of the national highway network is still of single-lane standard. In1985, MOST identified four primary arterial national highway (NH) corridors, comprising NH8(Delhi-Jaipur-Ahmedabad-Mumbai), NH4 (Mumbai-Bangalore-Chennai), NH5 (Calcutta-Chennai), and NH2 (Delhi-Calcutta); they provide the major interurban links and carry the bulkof the freight and passenger traffic. These corridors have traffic volumes of more than 20,000passenger car units per day on mainly two-lane roads. Vehicles on these links travel at lowspeeds and have high operating costs. They inflict heavy social and economic costs, andadversely affect all levels of society and all sectors of the national economy. There is an urgentneed to augment their capacity through a combination of four-lane and/or interurbanexpressways. Details of the road network are shown in Appendix 3.

3. Organization and Administration

12. The responsibility for development and maintenance of the national highways rests withthe central Government, while all other roads are the responsibility of the state governmentsconcerned. MOST has overall responsibility for planning, budgeting, and standardizing theroad network. The execution of works on national highways was previously shared by MOSTand the public works departments of the respective state governments under an agencysystem. Because of this arrangement, the execution of works was uncoordinated andineffective, and a single autonomous agency with responsibility for the development,maintenance, and management of the entire national highway and expressway network wasconsidered necessary.

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13. In 1988, under an act of Parliament, NHAI was created and given the responsibility forthe construction and maintenance of national highways and expressways. The functionsrelating to externally aided projects, implementation of private participation, and thedevelopment of wayside amenities along the highways were also assigned to NHAI. ADB,through policy dialogue, played a key role in the establishment of NHAI, which was staffed andbecame operational in March 1995. While NHAI is still dependent on Government budgetarysupport for its development program, it is expected to develop into a self-financing andcommercially managed agency through revenues from toll charges on highways after theyhave been upgraded and on expressways when constructed.

4. Revenues and Expenditures

14. Funds for the development and maintenance of national highways are provided by thecentral Government on a yearly allocation basis, while the respective state governmentsprovide funds for state highways, and district and rural roads. Transport investments haveaccounted for about 13 percent of total public sector spending under the Government’sSeventh (FY1985-FY1990) and Eighth (FY1992-FY1997) Five-Year Plan periods. Expenditureon roads increased from Rs63,350 million under the Seventh Plan to Rs160,930 million underthe Eighth Plan (an increase of 250 percent), although the road sector’s share of totaltransport investment remained at about 22 percent under both plan periods. Under the NinthFive-Year Plan (FY1997-FY2002), the transport budget allocation increased by about threetimes from the Eighth Plan to Rs2,000,000 million, of which Rs400,000 million is to be spent onroads.

15. The road sector generates substantial revenues primarily through motor vehicle tax andtaxes on fuel and spares. Revenue from these sources go to the consolidated fund andexpenditure for road development and maintenance is then allocated out of the consolidatedfund through the annual budgetary process. In FY1997, road sector revenue was Rs172,650million, of which Rs44,220 million (about 26 percent of the road sector revenue) was spent onthe development and maintenance of the road network. Since substantial resources arerequired to develop the network, the Government is considering various mechanisms to raiseadditional resources for road development and maintenance. Currently, a small amount(equivalent to 3.5 paise2 per liter) out of the proceeds of customs and excise duties levied onmotor fuel is set aside in a dedicated fund for expenditure on all roads in India. The option ofincreasing the dedicated surcharge on motor fuel and the creation of a formal road fund formaintenance is being discussed by the Government. A direct revenue source for thedevelopment of national highways will come from the tolling of national highways that areimproved to four-lane standard. In addition, the Government’s budget for FY1999 proposed alevy of Re1 per liter of petrol to fund national highway maintenance and development. ADBand the World Bank are in dialogue with the Government about ensuring that the levy onpetrol, about Rs8,200 million in FY1999, is deposited in a professionally managed anddedicated fund for road development and maintenance. In April 2000, the Governmentannounced that a bill will be introduced in Parliament for the creation of a dedicated road fundusing the petrol levy and an additional levy on diesel.

2 100 paise = Re1.

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5. Road Safety

16. The number and severity of road accidents in the country have been increasingsteadily. The 1995 fatality rate of 2.4 per 1,000 vehicles3 has doubled since 1982. Roadfatalities on the country’s national highways account for 34 percent of the total. The sharpincrease in the volume of traffic, the growth of vehicle population, particularly heavy andoverloaded commercial vehicles and overcrowded buses, have aggravated the problem. In1993, under ADB technical assistance (TA)4 a system for the identification of black spots onnational highways was devised, and an accident investigation and prevention manual forhighway engineers was prepared. Following this, the Road Safety Cell was established inMOST to collect, analyze, and interpret road accident statistics. This initiative is beingcontinued through an ongoing World Bank-administered TA that will (i) produce acomprehensive road safety manual covering the planning, design, construction, andmaintenance aspects; (ii) review the Indian Road Congress norms related to road safety andrecommend improvements; and (iii) draw up safety guidelines for traffic operations during roadconstruction. The Government is also addressing road safety issues through public informationcampaigns and road safety education programs conducted by the road safety councils in therespective states. For the first time, the Government’s Ninth Five-Year Plan has a dedicatedbudget provision for road safety, including specific allocations for engineering improvements,traffic control, wayside amenities, and highway patrolling schemes. India was among thecountries included in the ADB regional TA on road safety.5 The TA assessed regional initiativesin road safety and recognized that significant institutional progress has been made in Indiawith the inclusion of road safety as a priority area for activity within the New Delhi regionalinfrastructure.

6. Maintenance

17. Over the years, maintenance of the national highway network has not receivedadequate attention because of a lack of fund allocation and proper management systems toaccurately predict maintenance strategies, determine optimal interventions, and supportbudgetary requests. In the Ninth Five-Year Plan, the budget allocation for national highwaymaintenance was doubled from the previous plan period. The maintenance shortfall, whichwas up to 48 percent in FY1993, was reduced to about 40 percent in FY1998. The levy of Re1per liter of petrol from FY1999 (para. 15) will provide adequate budget allocation formaintenance. ADB has provided TA6 to develop maintenance management systems in twostates, Tamil Nadu and Karnataka, which were to serve as models for the development ofsimilar systems in other states, and for national highways. MOST is currently developing anintegrated highway management system that will generate highway improvement andmaintenance options based on a complete inventory of highway length and conditions. Theintegrated national highway management system, when completed, will provide the basis forfully funded annual maintenance programs. This is expected by FY2002.

3 Fatality rates for Japan, United States, and Western Europe range between 0.2 and 0.6. Among ADB’s

developing member countries, the People’s Republic of China’s fatality rate is 4.9; Pakistan, 3.3; Sri Lanka,2.0; and Malaysia 0.7.

4 TA 2001-IND: Road Safety, for $210,000, approved on 29 November 1993.5 TA 5620-REG: Regional Initiatives in Road Safety, for $600,000, approved on 4 January 1995.6 TA 1058-IND: Pavement Management, for $490,000, approved on 3 January 1989; and TA 1402-IND:

Pavement Management for National Highways, for $760,000, approved on 30 October 1990.

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7. Environmental Issues

18. ADB has been working with the Government to address environmental issues relatingto the road sector such as the prevention of environmental degradation during the constructionand operation of highways, and urban traffic pollution controls. An ADB TA7 on environmentalmanagement prepared environmental guidelines for highway projects; these are now beingused on all highway improvement and reconstruction projects in India. The guidelines ensurethat ADB’s environmental standards are being complied with. Under ADB’s Second RoadProject,8 a study on traffic pollution control measures in urban areas was carried out.Consequently, the Central Pollution Board updated its regulation for mass emissions, andenforcement of these regulations became more stringent. Recently, the Governmentintroduced several anti-pollution measures. Leaded fuel will be gradually phased out ofmetropolitan cities beginning from the end of 1998 with the introduction of unleaded fuel.Commercial vehicles over 15 years have been banned from Delhi center from December 1998.

B. Government Policies and Plans

19. The Government’s strategy for the road sector under its Ninth Five-Year Plan (FY1997-FY2002) is to improve the quality of the national highway network to provide safe, efficient,and economic carriage of goods and people. The road network also needs to be expandedand strengthened to improve accessibility of the hinterland, especially the rural areas and tofacilitate the integration of isolated parts of the country. The Government’s medium-termstrategy for managing the national highway network is to upgrade all priority arterial nationalhighways to a four-lane standard. The emphasis will be on the high-density quadrilateralcorridors connecting Delhi, Mumbai, Chennai, and Calcutta. The program to improve thesehigh-density corridors by widening the existing two-lane sections to four lanes is estimated tocost Rs220,000 million ($5,500 million). In December 1998 the Government announced theNational Highway Development Project as national priority, which includes the quadrilateralcorridors as well as north-south and east-west corridors.

20. National expressways (multilane facilities on largely new alignments) will be constructedas corridor elements where the demand and available resources make this practicable. In thelong run, constructing the expressways is the only way to substantially increase the capacity ofthese heavily used corridors. In 1991, a study on expressway planning, prepared with ADBassistance,9 envisaged an expressway network of about 10,000 km, to be established by 2015through a phased construction program. At Rs50-60 million per km, this program will costabout Rs600 billion ($15 billion).

21. Budgetary constraints and the size of the total highway and expressway program havecompelled the Government to seek private sector participation in the development of highwaysand expressways. Private participation will not only reduce the burden of financing thesehighways and expressways, but will also bring the managerial expertise of the private sectorinto the financing, construction, operation, and maintenance of highways and expressways. Itis expected that the private sector’s involvement will shorten project implementation, andencourage greater efficiency in the construction and operation of highways and expressways.

7 TA 2002-IND: Environmental Management of Road Projects, for $240,000, approved on 29 November 1993.8 Loan 1041-IND: Second Road Project, for $250 million, approved on 30 October 1990.9 TA 1059-IND: Expressway System Planning Project, for $260,000, approved on 3 January 1989.

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C. External Assistance to the Sector

22. Since 1988, ADB has extended three loans totaling $693 million, one TA loan for $12.7million and 16 TAs amounting to $7.325 million to the road sector in India. Apart from ADB, theWorld Bank and the Japan Bank for International Cooperation (JBIC)10 are also involved in theroad sector. The World Bank has provided financing for eight projects amounting to about$1,500 million for construction and rehabilitation of rural roads, improvement of state highways,and widening national highways to four lanes. JBIC has provided five loans amounting to $263million equivalent to upgrade NH2 and NH5 to four lanes and to construct a bridge across theYamuna River at Allahabad-Naini. The World Bank is currently processing loans of $275million for state highway development in Haryana, and $425 million for the improvement ofnational highways to four-lane standard. ADB’s assistance to the road sector is wellcoordinated with the World Bank and JBIC through regular consultation. Details of externalassistance to the road sector in India are given in Appendix 4.

D. Lessons Learned

23. ADB’s first loan project11 to improve highways in the states of Andhra Pradesh,Haryana, Karnataka, Tamil Nadu, and Uttar Pradesh was completed in March 1998, while thesecond loan project12 to improve highways in the states of Andhra Pradesh, Karnataka, Kerala,Orissa, Rajasthan, Uttar Pradesh, and West Bengal was completed in December 1999. Bothprojects, which were implemented by the respective state public works departments,experienced long delays. Because of lengthy Government procedures and the differencesbetween the Government and ADB’s procedures at that time, there were delays in therecruitment of supervision consultants and the procurement of civil works. The large number ofcivil works contract packages, about 16 under each project, further delayed the procurementprocess and made project monitoring difficult.

24. ADB’s third project13 to improve national highways in the states of Andhra Pradesh,Bihar, Haryana, Rajasthan, and West Bengal was designed to overcome the problemsexperienced by the state public works departments in the earlier projects by making aespecially created project unit within MOST responsible for project implementation. Projectimplementation responsibility was to be transferred to NHAI, at a later date, once it becamefully functional. The number of civil works contract packages was reduced to five and madesufficiently large to attract the more experienced and better capitalized contractors. Despitethese measures the third project also experienced start-up delays. The lack of Governmentbudgetary allocation meant that NHAI only became fully functional in March 1995. In addition,the award of civil works contracts was delayed because of litigation by some unsuccessfulbidders. When the contracts were eventually awarded, the project sites were not cleared ofutilities and trees for the contractors to commence work immediately. After these initial delays,construction work is now progressing with completion expected in June 2001. The TA loan14 forthe engineering design of an expressway lapsed without loan signing in June 1995, because

10 The work was initially supported by the Overseas Economic Cooperation Fund of Japan, which was merged

with the Export-Import Bank on 1 October 1999 to form the Japan Bank for International Cooperation.11 Loan 0918-IND: Road Improvement Project, for $198 million, approved on 10 November 1988.12 Loan 1041-IND: Second Road Project, for $250 million, approved on 30 October 1990.13 Loan 1274-IND: National Highways Project, for $245 million, approved on 29 November 1993.14 Loan 1279-IND: Bombay-Vadodara Expressway Technical Assistance Project, for $12.7 million, approved on 2

December 1993.

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the Government was having difficulty with the funding for land acquisition for the ensuingproject.

25. Of the 16 TAs, seven (totaling $3.025 million) were for project preparation and nine(totaling $4.3 million) were advisory in the areas of pavement management, expresswayplanning, construction standards, environmental management, road safety, facilitation ofprivate participation, and construction management. Apart from the TA15 for facilitating privateparticipation in the financing, construction, and operation of highways and expressways, whichis being implemented, all the other TAs have been completed.

26. Careful attention has been paid to overcome the shortcomings of previous ADBprojects in the road sector through the following project implementation arrangements: (i) start-up delays will be reduced by approving advance action for the procurement of the civil workscontracts and the recruitment of supervision consultants; (ii) land acquisition (for the tollplazas) and the clearance of trees and utilities from the right-of way will be a condition forcontract award; (iii) ambiguities in the tender documents, which led to court actions underADB’s third project, will be removed through the use of the Government’s standard biddingdocuments to ensure consistency in the bid evaluation process; (iv) the prequalification criteriawill be tightened and the contract package size made large enough to attract contractors withinternational experience; (v) the project management arrangements within NHAI will bestrengthened; and (vi) acceptance by NHAI of the role of the supervision consultants as“engineer” in accordance with international best practice in contract management.

E. ADB’s Sector Strategy

27. ADB’s sector strategy is to reduce road infrastructure bottlenecks on the key transportcorridors to support India’s efforts to achieve higher sustainable economic growth. ADB’sapproach is to promote efficiency in the delivery and maintenance of road infrastructurethrough appropriate policy measures and maximizing, where feasible, private participation inthe financing, construction, and operation of highways and expressways. The sector strategysupports ADB’s operational strategy for India. The focus of ADB’s assistance to the roadsector is on the western transport corridor, comprising NH8 (Delhi-Jaipur-Ahmedabad-Mumbai)and NH4 (Mumbai-Bangalore-Chennai). The other five major road transport corridors (Delhi-Calcutta, Mumbai-Nagpur-Calcutta, Delhi-Nagpur-Bangalore, Calcutta-Chennai, and Chennai-Madurai) are being developed with assistance from the World Bank and JBIC.

28. ADB’s involvement in the Project will, in addition to reducing a key infrastructurebottleneck, enhance efficiency in public sector operations and introduce private participation.This will be achieved by (i) assisting the transition of NHAI into a fully autonomous andcommercially managed institution by providing long-term funds required for highwaydevelopment, and promoting cost recovery through toll operations; and (ii) developing a modelfor the commercialization of operation and maintenance of national highways through a privatetoll concession. Efforts to encourage full private participation in the financing, construction,operation, and maintenance of national highways and expressways through various public-private partnership schemes (such as build, operate, and transfer; concessions; and leases)

15 TA 2986-IND: Western Transport Corridor—Facilitating Private Participation Project, for $1.0 million, approved

on 9 February 1998.

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are being pursued separately through an ADB TA.16 ADB will continue to assist NHAI with itsmedium-term strategy to complete widening the western transport corridor to four lanes, bymaximizing private participation for the financially attractive sectors and providing long-termfunds to develop the less viable sections. About 60 percent (1,675 km) of the western transportcorridor (NH8 and NH4) is still a two-lane facility, and needs to be upgraded to four-lanestandard.

F. Policy Dialogue

29. ADB has, since 1988, conducted policy dialogue with the Government on various majorroad sector issues. ADB’s involvement in the road sector has resulted in (i) increased attentionto road maintenance; (ii) improved design, construction, and contract management standards,now at international practice levels; (iii) improved road safety and environmental impactawareness; (iv) the establishment of NHAI as a single autonomous agency responsible for thedevelopment, maintenance, and management of the entire national highway and expresswaynetwork; and (v) initiatives to increase private participation. The policy impacts of ADB’sinvolvement in the road sector in India are detailed in Appendix 5. ADB review missions havecontinued to closely monitor the status of various road sector reform issues that areGovernment assurances under ADB’s ongoing projects. Involvement with the proposed Projectwill provide ADB with the opportunity to continue this process and to advance policy dialogueon the following issues.

1. Institutional Development of NHAI

30. Although NHAI was legally constituted in 1988, it only began operation in March 1995.ADB played a significant role in ensuring the initial budget allocation for NHAI, which allowed itto be staffed and operational. NHAI is expected to take over entire responsibility for thedevelopment, maintenance, and management of the national highway network in a phasedmanner. However, initially, NHAI is to focus on (i) developing national highways on the fourhighest density corridors (NH8, NH4, NH5, and NH2), (ii) implementing national highwayprojects funded by multilateral and bilateral agencies, and (iii) facilitating private investment inthe development of national highways and expressways.

31. NHAI is still dependent on Government budgetary support for the management of thenational highway and expressway network. In the medium to long term it needs to build up itsrevenue base from the tolling of upgraded (to four lanes) national highways and newlyconstructed expressways. Once a reliable and stable stream of revenue from operations isestablished, NHAI will be able to augment its resource mobilization by borrowing directly fromdomestic and international capital markets. Initially, it will need the longer maturities providedby loans from multilateral agencies. The proposed ADB loan will be the first direct borrowing byNHAI. It will encourage prudent financial management, provide the discipline of meeting debt–service requirements, and ensure full cost recovery through direct user charges. ADB willcontinue to maintain an active role in the development of NHAI as an institution through policydialogue during project implementation.

16 TA 2986-IND: Western Transport Corridor–Facilitating Private Participation, for $1.0 million, approved on 9

February 1998.

10

2. Private Participation in the Financing of Highways and Expressways

32. In 1991, an ADB TA for private participation in expressway financing, construction, andoperation17 identified constraints to the development of expressways through private financing.The major recommendations of the study were that (i) an appropriately organized and fundedNHAI should be responsible, as an apex agency, for overseeing private participation; (ii)Government incentives and guarantees are needed to attract the private sector; and (iii) theland acquisition process should be accelerated. Following this study, the National HighwaysAct was amended in 1995 to permit private participation in the development of highways andexpressways. Private enterprises can now develop new and existing roads, levy tolls, andregulate traffic on these routes. In addition, the Government also issued broad guidelines forprivate investment in national highway projects. These guidelines provide the generalframework for private participation and specifically provide for (i) Government funding forproject preparation work, including land acquisition; (ii) simplification of the land acquisitionprocess; (iii) various incentives, guarantees, and fiscal concessions to the private sector; (iv)foreign direct investment of up to 74 percent of project cost; (v) NHAI participation in equity ofup to 30 percent; and (vi) Government grant financing of up to 40 percent of the project cost toenhance viability. Several state governments (Gujarat, Madhya Pradesh, Maharashtra, andTamil Nadu) have since introduced amendments to state legislation to allow privateparticipation in the financing of state highways, bridges, bypasses, and rail overpasses. As aresult, 11 smaller build, operate, and transfer concessions (for urban bypasses, bridges, andrail overpasses) have been awarded; two are complete and operational.

33. Private financing of longer stretches of interurban highways and expressways are moredifficult to develop, typically because of (i) high capital cost and long payback periods, (ii)noncaptive traffic with alternative free routes, (iii) land acquisition requirements, (iv) lack ofGovernment incentives and fair risk allocation, and (v) lack of a long-term domestic debtmarket.18 It is necessary to create the right environment and identify the right projectconfiguration so that private funding in the public interest can happen on a sustainable basis.ADB is supporting this objective through TA19 to facilitate private participation in the financing,construction, operation, and maintenance of national highways and expressways bydeveloping the enabling environment for private participation and preparing a model public-private partnership highway project for implementation. The TA will develop a transparent andfair private participation framework, (including a model concession agreement andmechanisms for tariff setting and adjustment) in relation to a specific project that meets withinternational best practice to attract private investment.

17 TA 1403-IND: Private Sector Participation in Expressway Financing, Construction and Operation, for $500,000,

approved on 30 October 1990.18 ADB is assisting with the development of the domestic capital market through Loan 1408-IND: Capital Market

Development Program, for $250 million, approved on 28 November 1995. ADB support for private sectorparticipation in infrastructure under Loans 1480/1481/1482-IND: Private Sector Infrastructure Facility Project,for $300 million, approved on 7 November 1996 are intended for smaller scale projects such as bridges andurban bypasses.

19 TA 2986-IND: Western Transport Corridor–Facilitating Private Participation, for $1.0 million, approved on 14February 1998.

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3. Commercialization of Highway Operation and Maintenance

34. Private financing of highway improvement and expressway construction is beingpursued as a longer term objective because of the higher risks involved and the reluctance ofthe private sector to assume such risks without the appropriate enabling environment. TheGovernment however recognizes that private sector involvement in the operation andmaintenance of highways will bring immediate efficiencies associated with private sectorentrepreneurial skills and management practices. An 85 km stretch of the national highwaybetween Jaipur and Kotputli20 has been let as an operating concession (with toll collectionresponsibility only) to the private sector on a short-term (two-year) lease. Tolling operationscommenced on 30 March 1998. The success of this experiment is vital for the development ofhighway infrastructure as it establishes the willingness of road users to pay direct charges forbetter facilities and services. Longer term concessions that include maintenance responsibilityneed to be developed, and the arrangements for the operation of the completed project facilitywill provide such a model for use on other improved national highways.

IV. THE PROPOSED PROJECT

A. Rationale

35. The western transport corridor, comprising NH8 and NH4, which connects Delhi,Mumbai, Bangalore, and Chennai, is the busiest corridor in India, particularly in the sectionbetween Ahmedabad and Mumbai where it passes through an industrial belt with connectionsto several major and minor ports on the west coast. The section between Ahmedabad andMumbai is 528 km of which 348 km has been or is being widened to four-lane standard. Thereremains a section of about 180 km (between Surat and Manor), which is now a severebottleneck for the efficient movement of goods and passengers between the industrialheartland of Gujarat and the ports (including Mumbai) on the west coast of India.

36. Because of the scale of the overall highway improvement program and the high costsinvolved, the Government is conscious of the need to mobilize private financing to develop thehighway system. While the private sector has come forward and taken up projects withrelatively short payback periods, such as those for bridges and bypasses, so far, they have notbeen willing to take on the larger capital costs and higher risks associated with financing longstretches of interurban highways until the right environment, incentives, and long-term debtmarket is developed. While these requirements are being addressed separately, privateparticipation will be introduced through the commercialization of the operation andmaintenance of the completed project facility. The Project will be publicly funded but privatelyoperated and maintained under a toll concession. The project operation and maintenanceconcession to the private sector will serve as a model for use on other highway sections thatare improved to four-lane standard. ADB’s involvement with the Project will provide anopportunity to advance policy dialogue with the Government on road sector reform issues,including the commercialization of operation and maintenance.

20 Improved to four lanes under ADB’s Second Road Project, Achrol-Kotpuli, and by the Government, Jaipur-

Achrol.

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B. Objectives and Scope

37. The objectives of the Project are to remove capacity constraints and improve roadsafety on critical sections of the western transport corridor connecting Delhi to Mumbai. Thecompleted project highway will be operated and maintained by the private sector through a tollconcession. The commercialization of operation and maintenance of the project highwayrepresents a significant step in increasing private participation in national highwaydevelopment in India.

38. The Project will comprise (i) the widening to four lanes (including the strengthening ofthe existing two-lane pavement) of about 180 km on NH8 between Surat and Manor, (ii)consulting services for construction supervision of road improvement, and (iii) consultingservices for the development of private participation and toll operations.

39. The Project will widen the existing two-lane single carriageway highway to a four-lanedivided highway. In the urban areas, the Project will provide a six-lane divided highway withservice roads. The geometric design of the highway is based on a design speed of 100 km/hr,although for limited sections this had to be reduced to 80 km/hr. The traffic loading on thepavement was derived from traffic projections and field investigation work conducted duringthe feasibility study for the Project. The proposed design is based on the concept of stagedconstruction, with an initial pavement life of 10 years, which is extended to 20 years throughoverlay of the pavement after the tenth year. Safety issues were addressed in the designthrough geometric standards, road stripping, road signing, and the use of service roads inurban areas. Four toll plazas—barrier-type open toll collection system—will be constructed atlocations that will avoid disruption to local traffic between urban centers and ensure that long-haul traffic is captured because alternative routes involve significant time and distancepenalties. The design of the highway pavement is in accordance with international designguidelines. A further design review will be carried out by the supervision consultants in relationto updated traffic and loading factors prior to the commencement of road improvement. Atechnical description of the scope of works is given in Appendix 6.

40. Consulting services will be provided for construction supervision of the highwayimprovement. Consulting services will also be provided to assist NHAI in its efforts to improvethe enabling environment to promote private participation in the development of nationalhighways and for backstop services relating to toll operations. The identification anddevelopment of the demonstration process for private participation requires a broad range ofstudies covering project feasibility, financing modalities, legal framework, risk allocation, andinstitutional reform. While the thrust of this effort is being provided through an ongoing ADBTA,21 which is focused on developing a demonstration project, it will be necessary tosupplement this effort through other studies and institutional reform measures to ensure thatprivate participation in highways (construction, maintenance, and operation) is sustainable. Asmore sections of the national highway are tolled after being improved to four-lane standard,there will be a need to review and restructure the toll rates and to set up proper regulatorymechanisms. Assistance will also be required in preparing the operation and maintenanceconcession agreement for the completed project highway. The scope of these studies and thedetailed terms of reference for the consulting services will be agreed upon with ADB prior toundertaking them.

21 TA 2986-IND: Western Transport Corridor–Facilitating Private Participation Project, for $1.0 million, approved

on 9 February 1998.

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C. Cost Estimates

41. The total cost of the Project is estimated at $280 million equivalent, of which the foreignexchange cost is estimated at $180 million representing about 64 percent of the total cost. Thelocal currency cost, including taxes and duties, is estimated at $100 million equivalentrepresenting about 36 percent of the total cost. The project cost estimates are summarized inTable 1 and detailed in Appendix 7.

Table 1: Summary of Cost Estimates($ million)

ItemForeign

ExchangeLocal

CurrencyTotalCost

A. Base CostsRight-of-Way 0.0 12.0 12.0Civil Works 114.0 66.5 180.5Consulting Services 20.0 4.5 24.5Project Management 0.0 1.0 1.0

Subtotal 134.0 84.0 218.0

B. Contingencies 28.6 16.0 44.6

C. Interest During Construction 17.4 0.0 17.4

TotalPercent

180.064

100.036

280.0100

D. Financing Plan

42. It is proposed that ADB provide a loan of $180 million from its ordinary capitalresources to finance the entire foreign exchange cost of the Project (representing 64 percentof the total cost). The local currency cost amounting to $100 million equivalent (representing36 percent of the total cost) will be met by NHAI from its own resources.

43. The proposed ADB loan will have a repayment period of 25 years including a graceperiod of 5 years, with interest determined in accordance with ADB’s pool-based variablelending rate for US dollar loans. The Borrower will be NHAI, and India will be the Guarantor.The financing plan for the Project is given in Table 2. Commercial cofinancing for the Projectwas explored by the Mission. Without the private participation framework, which is beingdeveloped separately under an ADB TA, long-term commercial cofinancing on a projectfinancing basis was not feasible because of the high risks and long payback period involved.

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Table 2: Financing Plan($ million)

SourceForeign

ExchangeLocal

CurrencyTotalCost Percentage

ADB 180.0 0.0 180.0 64

NHAI 0.0 100.0 100.0 36

Total 180.0 100.0 280.0 100

ADB = Asian Development Bank; NHAI = National Highways Authority of India.

E. Implementation Arrangements

1. Project Management

44. NHAI will be the Executing Agency for the Project. NHAI has adequate experiencegained from the implementation of ADB’s third project in the road subsector.22 The Project willbe implemented by an especially created project implementation unit (PIU) within NHAI. ThePIU will be staffed with experienced personnel both at the management level at NHAI’sheadquarters and at the project site. The PIU will be delegated sufficient administrativeauthority for effective and timely decision making on project implementation matters. Operationand maintenance of the completed project highway will be commercialized through a tollconcession to be awarded to the private sector.

2. Implementation Schedule

45. The Project will be implemented over 70 months, inclusive of preconstruction activities.It is expected to be completed by March 2004. A summary project implementation schedule isgiven in Appendix 8. The implementation schedule allows for land acquisition and resettlementactivities, and the clearance of all utilities and trees from the right-of-way. These are to beundertaken prior to the award of the civil works contracts. An outline of the arrangements forthe operation and maintenance of the completed project facility is given in Appendix 9.Consultants will assist NHAI in drawing up the operation and maintenance concessionagreement and the tender documents for the selection of the operator.

3. Procurement

46. Procurement of civil works for three contract packages has been undertaken inaccordance with ADB’s Guidelines for Procurement following international competitive biddingprocedures. The contractors were selected from prequalified bidders. ADB has approved

22 Loan 1274-IND: National Highways Project, for $245 million, approved on 29 November 1993.

15

award of contract subject to the conditions in para. 79. Based on the experience of ADB’searlier road projects, the contract packages were made sufficiently large to attract capablecontractors with international experience. At NHAI’s request, ADB approved advanceprocurement action for the civil works procurement on the understanding that such approvalwould not commit ADB to finance the Project. Advance procurement action would allow NHAIto commence work on preconstruction activities and will shorten the implementation period. Alist of contract packages and the mode of procurement are given in Appendix 10.

4. Consulting Services

47. International consultants working with domestic consultants will assist NHAI withconstruction supervision of highway improvement to be carried out under the Project. Theoutline terms of reference and the person-month requirements for the construction supervisionservices have been agreed with NHAI and are given in Appendix 11. Consulting services willalso be required to assist NHAI in its efforts to promote private participation and mobilizeprivate financing for the development of national highways and for backstop services relatingto the operation and maintenance of the completed project facility (including the toll structure).The terms of reference for these services will be subject to prior ADB approval. Theconsultants will be recruited by NHAI in accordance with ADB’s Guidelines on the Use ofConsultants and other arrangements satisfactory to ADB on the engagement of domesticconsultants. At NHAI’s request, ADB approved advance action for the recruitment ofconstruction supervision consultants on the understanding that such approval would notcommit ADB to finance the Project. ADB has approved NHAI’s evaluation ranking for thesupervision consultants.

5. Project Supervision

48. A project inception mission will be fielded soon after approval of the proposed loan toinitiate the project implementation process. In addition, NHAI and ADB will review the overallprogress of the Project annually. Should the results of such reviews indicate seriousimplementation problems, NHAI and ADB will agree on appropriate measures, includingchanges to implementation arrangements, to ensure that the project objectives are met.

6. Progress Reports and Project Benefit Monitoring

49. To monitor the execution of the Project, NHAI will submit to ADB quarterly progressreports on project implementation. Within three months of the physical completion of theProject, NHAI will prepare and furnish to ADB a project completion report covering details ofproject implementation costs and benefit monitoring and evaluation activities. NHAI will, withthe assistance of the supervision consultants, undertake project performance monitoring andevaluation in accordance with ADB’s Project Performance Management System Handbook.The performance indicators to be measured have been agreed to by NHAI.

F. The Executing Agency

50. NHAI was set up under an act of Parliament as a corporate body having perpetualsuccession and a common seal. NHAI is managed by a board consisting of a chairperson, fivefull-time members, and four part-time members, all appointed by the central Government. Theorganization chart of NHAI is shown in Appendix 12.

16

51. NHAI is entrusted with the responsibility to develop, operate, and maintain the nationalhighway network and other facilities vested in it by MOST. NHAI’s immediate mandate is toexecute national highway improvement projects funded by multilateral and bilateral agenciesand to promote private participation in the financing, operation, and maintenance of nationalhighways. To carry out these activities, NHAI has established separate divisions to implementpublicly funded projects and to conduct project development activities, including theidentification and formulation of projects, prefeasibility studies, land acquisition, andpreliminary clearances for private participation.

52. NHAI is a relatively new institution and over time is expected to take on the entireresponsibility for planning, designing, financing, and managing the national highway network.In preparation for this, capacity building is being addressed through TA funded by theGovernment of Japan and administered by the World Bank. The TA will review, identify, andrecommend (i) an effective organizational structure, (ii) skills requirement and a humanresource development plan, (iii) opportunities for outsourcing of activities, (iv) procedures forprocurement and contract management, and (v) a management information system, includingfinancial management and accounting systems. NHAI has agreed to keep ADB informed of theprogress of the study and to provide ADB with the opportunity to comment on developmentsthereon through policy dialogue.

53. NHAI prepares its financial statements using commercial accounting principles andpractices. Its accounting policies are being developed, with the assistance of consultants, toaccurately reflect the nature of its operations and assets. The financial statements of NHAI areaudited annually by the Government’s auditor general. NHAI became operational in March1995 with a capital grant of Rs7,000 million as its initial capital base. It will be dependent oncapital grants from the Government for its highway development program until such time as itestablishes a reliable revenue source from its tolling operations. The Government has alsogiven NHAI the option of raising funds from the domestic capital market through the issuanceof bonds; it plans to do so when conditions are right. Revenue from the tolling of the completedproject facility is expected to be sufficient to meet NHAI’s repayment obligations under theproposed ADB loan. The financial statements of NHAI are presented in Appendix 13.

G. Social and Environmental Impacts

54. The project highway passes through the districts of Surat and Valsad in the state ofGujarat and the district of Thane in the state of Maharashtra. The project influence area has apopulation of about 14 million of which nearly 60 percent are engaged in agriculture, with theremaining largely in the service sector. Major agricultural market places are located at Chikali,Dharampur, Ganderi, Navsari, Pardi, and Valsad. Industries are located at Atul and Vapi wherethere are about 1,500, mostly small-scale industries specializing in the production andprocessing of chemicals, petrochemicals, pharmaceuticals, fertilizer, and electronics. TheProject will improve the transport linkages between the agricultural and industrial areas and theports of Mumbai and Kandla. The Project will result in the direct employment of about 4,200person-days per km (skilled and unskilled labor) during the construction period. When theproject facility is completed, there will be small-scale business and employment opportunitiesthrough the provision of the various services (such as service stations, repair shops,restaurants, and motels) required by vehicle operators and travelers. Road users will benefitfrom the advantages of increased comfort, safety, and reduced travel time.

17

55. A detailed social analysis was carried out during the project feasibility study inaccordance with ADB’s guidelines. Participatory processes were applied, with project-affectedpersons (PAPs), local community leaders, village panchayat heads, state officials, and asample of persons in the project influence area consulted about the proposed highwayimprovements. The communities were all supportive of the Project owing to the significanteconomic benefits that would be generated with improvement to the highway. The socialimpact analysis indicated that the adverse impacts of the Project would be minimal. As theProject will be operated as an open toll system, nonmotorized23 and local traffic will not berequired to pay any tolls. Nonmotorized traffic, largely found in built-up areas, will continue tohave access to the improved highway. Service roads will be provided in urban areas toseparate through traffic and improve road safety.

56. As the Government already owns the right-of-way required to widen the highway to fourlanes, land acquisition will only be required at one of the toll plazas and minor strip acquisitionof agricultural lands at a few points along the alignment. A resettlement action plan (RAP) hasbeen prepared and accepted by NHAI, and will be implemented in consultation with stateauthorities and the PAPs in accordance with ADB’s policy on involuntary resettlement. TheRAP is based on a full census of the PAPs through a socioeconomic survey carried out inMarch-April 1998 and updated in February 1999. The RAP identifies 3,896 PAPs and totalland acquisition of 107 ha. The PAPs are primarily vendors and petty shopkeepers whosebusinesses will not be affected as they will be allowed to relocate their activities to the edge ofthe widened lanes. There is virtually no displacement except at the toll plaza in Section II,where the Project will require the rebuilding of a girls’ hostel at a school that will lose part of itscourtyard, and a dhaba (wayside guest/eating house) that will be relocated to adjoining privatelands. The residents of the hostel will not be moved until the new hostel is constructed. Thenorthern part of the alignment runs through degraded forestlands in which there are somesettlements of tribal origin. However, within the project zone of influence, there are onlyitinerant casual laborers with no clear settlement patterns who will stand to gain fromconstruction-related employment opportunities, particularly as the RAP provides for preferentialemployment for qualified PAPs. The funds for compensation have been placed with NHAI,which will implement the RAP with the assistance of a competent implementing agency. Allcompensation will be made at current market (replacement) rates. The total expenditure for theRAP is estimated at Rs550.0 million. A summary of the RAP is presented in Appendix 14.

57. The environmental category of the Project is B. An initial environmental examinationwas conducted during the feasibility study based on ADB’s Environmental Guidelines forSelected Infrastructure Projects, and its summary is presented in Appendix 15. The findingsindicate that the Project will not cause any significant adverse environmental impacts as theproposed highway improvements will not involve realignment or major earth works. There willbe no disturbance to cultural or heritage areas, protected areas, wetlands, or otherenvironmentally sensitive areas. Construction-related environmental impacts will be minimizedby adopting good construction site management and engineering practices. Air quality andnoise levels along the improved project road are expected to improve because of thesmoothness of the traffic flow. The State Forest Department and the Office of the DistrictCollector will be involved in the plans for tree felling and compensatory afforestation, anddisbursal of compensation, respectively.

23 Bicycles, rickshaws, animal-drawn vehicles, and handcarts.

18

V. PROJECT JUSTIFICATION

A. Financial and Economic Analyses

1. Financial Analysis

58. The completed project highway will be operated as a toll concession. The financialinternal rate of return (FIRR) of the Project was calculated on the basis of the project capitalcosts, operation and maintenance costs, and net revenues from the toll operations over anassumed 20-year period. The toll rate and structure for interurban highways were establishedby NHAI after detailed vehicle operating cost (VOC) savings studies and cost–recoveryconsiderations. Willingness-to-pay surveys carried out on the project highway indicate thatroad users are prepared to pay the proposed tolls for better service and facilities. The FIRR ofthe Project is estimated to be 14 percent, which is above NHAI’s weighted average cost ofcapital of 10 percent. This means that the estimated revenues from the Project will result in fullcost recovery, and provide NHAI with surplus funds to develop other less viable sections of thenational highway network. Details of the FIRR calculation, including the assumptions used aregiven in Appendix 16.

2. Economic Analysis

59. The economic evaluation of the Project is based on the comparison of the with- andwithout-project situations. Without the Project, the existing two-lane road will become evenmore heavily congested and vehicle speeds will fall to lower levels. Conflicts between fast- andslow-moving vehicles will lead to an increasing number of accidents. Accelerated pavementdeterioration through increased use raises road maintenance costs. It is expected that theexisting two-lane facility will reach capacity in 2001. With the Project, the highway will bewidened to four lanes, which will increase capacity, resulting in VOC savings, and shortentravel time. The option to widen the project highway to six lanes was also investigated duringthe feasibility study, but the four-lane option was found to be the least-cost solution.

60. Economic evaluations were carried out for the three project analysis sections, as wellas for the Project as a whole; the analysis sections are homogeneous in terms of traffic flows.For estimation of the economic internal rate of return (EIRR), benefit streams were calculatedfor 20 years, which is the estimated economic life of the improvements under the Project.Costs and benefits were estimated net of duties and taxes, and are expressed in constant1998 prices. Improvement costs include provision for civil works by contract, acquisition ofright-of-way, and construction supervision. The base EIRR for the Project is estimated at 25percent, while the EIRRs for the analysis sections vary between 22 and 27 percent. Details ofthe traffic analysis and projections are given in Appendix 17, while the EIRR calculation isgiven in Appendix 18.

61. The reduction of VOCs resulting from the highway improvement will initially benefitvehicle owners and road transport operators. The VOC savings for light commercial vehiclesare likely to be partially passed on to road users, as there is free competition betweenoperators of such vehicles. As bus transport is carried out under fixed tariff regulations,savings might also be passed on to the passengers if tariffs are revised on the basis of thereduced transport cost. The portion retained by private cars will be widely distributed within the

19

road transport sector. The Project will also benefit importers and exporters by decreasing theinland transport costs from and to Mumbai and Nava Sheva ports. Shippers will benefit fromthe reduction of travel delays and thereby inventory and storage costs. This could also result inthe promotion of exports by making them more competitive in the global market.

62. Besides VOC savings, the Project is expected to contribute a number ofnonquantifiable benefits including the provision of more reliable transport services. This willenable the more efficient distribution of goods and services, including industrial andagricultural inputs and outputs; provide easier access to social services and markets; andincrease the mobility of people and their employment opportunities. Specifically, the Surat,Valsad, and Thane districts, which are in the area of influence of the project highway, areagricultural producers with important markets.24 These markets are connected to NH8 throughan existing network of feeder roads.

B. Poverty Impact

63. Improvement of the project road will bring significant benefits to the national economyas well as social and economic benefits to the 14 million people living in the project influencearea. Improved access will help reduce poverty by: (i) increasing labor mobility, particularly todistant markets; (ii) increased employment opportunities offered by acceleratedindustrialization; (iii) reducing loss of perishables, thereby allowing for increased farmgateprices; (iv) improving access to rural areas by health, school, veterinary, and rural developmentworkers; (v) providing greater opportunities for tribal members, mostly itinerant casual workers,to access income and employment opportunities; and (vi) generating transport-associatedsmall businesses such as service stations, wayside foodstalls, and guesthouses.

64. In Gujarat, the project road passes through the Dhangs and Valsad Districts. In bothDhangs and Valsad the incidence of poverty is high at about 50 percent compared with theGujarat state average of 30 percent. The government of Gujarat is placing special emphasison reducing poverty in Dhangs and Valsad by greatly increasing allocations for village housingand infrastructure. The state will spend about $2.5 billion during the Ninth Plan period on ruraldevelopment and social sector programs. Of this, $336 million has been allocated forimproving rural roads and providing access to about 1,000 villages. In Maharashtra, theincidence of poverty was estimated at 44 percent in 1993/1994. High incidence of rural poverty(51 percent) and extreme interregional inequalities characterize poverty in the state. In thecoastal Maharashtra Region, in which the Thane District is located, the incidence of poverty isabout 15 percent.

C. Risks

65. The potential delays in project implementation have been minimized through measuressuch as advance procurement action, improved tender documentation, and strengthenedproject management arrangements. The prequalification criteria and packaging of the civilworks contracts will ensure that experienced contractors are selected. The operation andmaintenance of the completed project facility through a toll concession managed by the privatesector will ensure efficient management of the facility and full funding for maintenance. Theoperation and maintenance concession will have mechanisms for periodic performance 24 The markets include Palghar, Talsari, and Vasai in Thane District; Dharampur, Nasvari, and Valsad in Valsad

District; and Bardoli, Mangral, and Surat in Surat District.

20

reviews, and extensions to the concession period will depend on performance of the operator.The basic assumptions on costs and benefits for the FIRR and EIRR calculations weresubjected to sensitivity tests under various adverse scenarios. The results indicate that theproject FIRR and EIRR are fairly robust in relation to changes in the basic assumptions.Sensitivity tests were also carried out to determine the impact of real currency depreciation onthe foreign debt repayment capacity of the Project. The results indicate that with assumptionsof a real currency depreciation of 30 percent upon completion of the Project and a realcurrency depreciation of 5 percent per annum over the life of the Project, the debt servicecoverage ratios of the Project remain comfortable.

VI. ASSURANCES

66. The Government and NHAI have given the following assurances, in addition to thestandard assurances, which have been incorporated in the legal documents

A. Specific Assurances

67. Commercialization of Operation and Maintenance of Project Highway. NHAI willensure that upon completion of the project highway, the operation and maintenance iscommercialized through a toll concession to be awarded to the private sector underarrangements satisfactory to ADB. NHAI will submit the terms and conditions of the proposedconcession to ADB for review and comment prior to inviting bids from the private sector. NHAIwill ensure that the completed project highway is operated and maintained in accordance withsound engineering and safety standards under the concession.

68. National Highway Maintenance Management System. By 31 December 2000, NHAIwill develop and implement a highway maintenance management system for the nationalhighway network vested in NHAI, which will be used to prepare annual maintenance budgetson the basis of the physical measurement of roads, maintenance standards, and recordedtraffic volumes and axle-loading. NHAI will take these maintenance plans into account whenallocating funding for annual maintenance budgets as of FY2002.

69. Capacity Building within NHAI. NHAI will discuss the findings and recommendationsof the ongoing capacity–building TA study with ADB and will take into consideration ADB’sviews when implementing any recommendation.

70. Accounting Standards. NHAI will review its accounting policies and practices, and by31 March 2001, will adopt standards that are appropriate to its operations and consistent withinternational practice.

71. Toll Review. NHAI will periodically review its toll structure by taking into account (i)VOC savings and time savings; and (ii) cost recovery to ensure its long-term financial viability.

72. Private Participation in the Financing of Highway Development. NHAI will continueto actively encourage the enabling environment for private financing of national highways andwith support provided by TA 2986.25 By 31 December 2000, NHAI will develop a private sector

25 TA 2986-IND: Western Transport Corridor-Facilitating Private Participation Project, for $1.0 million, approved on

9 February 1998.

21

participation framework, acceptable to ADB, in relation to a model privately financed highwayproject based on the findings of this TA.

73. Environment. NHAI will ensure that all environmental mitigation measures identified inthe summary initial environmental evaluation report are incorporated into the detailed projectdesign and are followed during construction, operation, and maintenance of the projecthighway. NHAI will also ensure that the Project is designed and constructed in accordance withADB’s Environmental Guidelines for Selected Infrastructure Projects.

74. Resettlement Plan. NHAI will implement the RAP agreed upon with ADB inconsultation with state authorities concerned and with persons affected by the Project inaccordance with ADB’s policy on involuntary resettlement. NHAI will ensure that persons whowill be relocated as a consequence of the Project are consulted and fairly compensated suchthat their living standards are not adversely affected by the Project.

75. Benefit Monitoring and Evaluation. During project implementation, NHAI, through thePIU, will carry out benefit monitoring and evaluation activities under the Project and will includethese activities in its quarterly progress reports on project implementation and in the projectcompletion report before submitting them to ADB. The PIU will use key indicators agreed uponby NHAI and ADB as the baseline data in these activities.

76. Land Acquisition. NHAI will make available on a timely basis all land and rights in land,free from encumbrances, for toll plazas and other purposes required under the Project.

B. Condition of Award of Civil Works Contract

77. NHAI will not award any civil works contract until after (i) acquiring or making availableon a timely basis the land and rights in land, free from any encumbrances, required for theexecution of the contract; and (ii) clearing, on a timely basis, the utilities, trees, and any otherobstruction from the land to be used for construction activities relating to the contract.

VII. RECOMMENDATION

78. I am satisfied that the proposed loan would comply with the Articles of Agreement ofADB and recommend that the Board approve the loan of $180,000,000 from ADB’s ordinarycapital resources to the National Highways Authority of India, to be guaranteed by India, forthe Surat-Manor Tollway Project, with a term of 25 years, including a grace period of 5 years,and with interest to be determined in accordance with ADB’s pool-based variable lending ratesystem for US dollar loans, and such other terms and conditions as are substantially inaccordance with those set forth in the draft Loan and Guarantee Agreements presented to theBoard.

TADAO CHINO President

23 June 2000

22

APPENDIXES

Number Title PageCited on

(page, para.)

1 Project Framework 23 1,2

2 Transport Profile 24 1,3

3 National Highway Network 25 3,11

4 External Assistance to the Road Sector 26 7,22

5 Policy Impact of ADB’s Involvement in theRoad Sector

27 9,29

6 Detailed Description of Road Improvement 30 12,39

7 Project Cost Estimates 32 13,41

8 Summary Implementation Schedule 33 14,45

9 Outline of Operation and MaintenanceArrangement

34 14,45

10 List of Contract Packages and Mode ofProcurement

37 14,46

11 Summary Terms of Reference for ConstructionSupervision

38 15,47

12 Organization Chart of the National HighwaysAuthority of India

41 15,50

13 Financial Statements of the National HighwaysAuthority of India

42 16,53

14 Summary Resettlement Action Plan 45 17,56

15 Summary Initial Environmental Examination 49 17,57

16 Financial Analysis 55 18,58

17 Traffic Analysis and Projections 58 18,60

18 Economic Analysis 62 18,60SUPPLEMENTARY APPENDIX

(available on request) A Resettlement Plan

PROJECT FRAMEWORK

Design Summary Project Targets Risks / Assumptions

Goal

PurposeEfficient movement of freight and passengers: Government economic data Increase capacity of Project highway from 45,000 passenger car Project completion report units (PCUs) to 45,000 PCUs - by supervision consultant Reduce travel time by 34 percent - by ADB after loan closing Reduce vehicle operating costs by 15 percent Economic internal rate of returnDecrease congestion in urban areas analysisReduce accidents by separating through and local traffic in Benefit monitoring and evaluationurban areas - with assistance from supervision

consultants

Award of concession contract Concession agreement is technically soundFully funded maintenance program Financial internal rate of return and commercially viable.Generation of funds for National Highways Authority of India analysis Concession is either extended/renewed such (NHAI) from commercialization. Audited NHAI financial statements that commercialization is ongoing.

Sources and uses of cash are clearlyidentified in NHAI's accounts.

OutputsRoad improvement Monthly progress reports No delay in procurement activity

Physical inspection by review missions

Project completion report

All physical work completed by December 2003Creation of enabling environment for private participation including - preparation of private participation framework - preparation of model concession agreement - review of toll structure

Inputs

1. Project costs- Civil works and consulting services $280 million Audited project accounts

2. Procurement of civil works andrecruitment of consultants. Financing Plan ADB review and approval of procurement,

3. Road improvements - ADB financing $180 million recruitment of consultants, and disburse-4. Construction supervision - Government $100 million ments.

Project Monitoring Mechanisms

Remove capacity constraints andimprove road safety on NationalHighway 8

Commercialize operation and maintenance of project road through private toll concession

Efficient management and administration of tollway facility

Four-laning (including pavement strengthening of existing two lanes) of about180 km of National Highway 8 between Surat (Km 263) and Manor (Km 442)

Reduce transport cost and promoteeconomic growth.

Increase competitiveness of Indian industry and agriculture.Increase gross domestic product.Improve social indicators.

Decrease in congestion will result in lowerpollution and noise caused by changes in vehiclespeed

Traffic forecast and vehicle mix on projecthighway remain valid

Separation of traffic will reduce movementconflicts

Capacity building in privateparticipation and toll operations

Construction of 42 bridges including 15 major multispan bridges

Service roads in urban areas.Toll plazas and bus bays at various locations

Continued Government support in the form ofprivate participation policies and incentives

Development of long-term domestic debt marketto support private financing needs of highwaydevelopment

Detailed engineering andpreparation of tender documents.

Early clearance of utilities and trees from projecthighway

Good progress by civil works contractors

Availability of counterpart funds for capital costs

Appendix 1

23

24

Appendix 2

TRANSPORT PROFILE

Item 1950/1951 1960/1961 1970/1971 1980/1981 1990/1991 1991/1992 1995/1996

RailwaysRoute length kms 53,596 56,247 59,790 61,240 62,367 62,458 62,915Electrified route length kms 388 748 3,706 5,345 9,968 10,653 12,306Freight traffic million ton 93 156 197 220 341 360 406Net tonne (kms) billion ton kms 44 88 127 158 243 257 274Passengers millions 1,284 1,594 2,431 3,613 3,858 4,049 4,018Passenger kms millions 66,517 77,665 118,120 208,558 295,644 314,564 341,999

RoadsTotal length 000 kms 400 525 915 1,485 2,350 2,486 3,289National highways 000 kms 22 24 24 32 34 34 34Percentage of village percent NA NA NA 29 46 47 86with 1000 + population connectedwith all-weather roadsSurfaced length 000 kms. 156 234 398 684 1,113 1,160 1,462

Road TransportNo. of goods vehicles In '000 82 168 343 554 1,356 1,514 1,785No. of passenger buses In '000 34 57 94 162 331 358 450

Major PortsNo. of major ports numbers 5 9 10 10 11 11 11Traffic handled tons 19 33 56 80 152 157 215

Minor PortsTraffic handled tons NA NA 7 7 11 13 24

Civil AviationDomestic airlinesIndian airlinesAvailable tonne kms million NA 113 208 663 927 1,090 1,046Revenue tonne kms million NA 83 161 420 699 761 723No. of airports and civil enclaves numbers NA NA NA 84 117 117 120

Inland Water TransportLength of navigable waterways kms 14,544 14,544 14,544 14,544 14,544 14,544 14,544

PipelinesLength kms NA NA NA NA 9,945 10,260 12,367

B.T. = billion ton; NA = not calculated.

25

Appendix 3

Category 1951 1998

National Highways 20 49.6

State Highways 60 118.8

Other Roads 320 3,121.6

Total 400 3,290.0

Category of Road National StateHighways Percentage Highways Percentage

Below Standard 1,446 2.9 25,945 21.8

Single Lane

Single Lane 6,700 13.5 80,674 67.9

Double Lane 39,595 79.9 10,555 8.9

Multilane 1,844 3.7 1,639 1.4

Total 49,585 100.0 118,813 100.0

Source: Government of India. Ninth Five-Year Plan (1997-2002), Delhi.

(surfaced)

(length in kms)

Table A3.1: Road Network, 1998

NATIONAL HIGHWAY NETWORK

Table A3.2: National and State Highways, 1998

(length in '000 km)

Growth(percentage per annum)

5.2

4.2

20.7

17.5

26Appendix 4

A. Asian Development Bank

DateTA No. Technical Assistance Project Name Type Amount Approved0955 Road Improvement PP 75,000 24 Feb 19881058 Pavement Management A&O 490,000 3 Jan 19891059 Expressway System Planning A&O 260,000 3 Jan 19891325 Vadodara-Bombay Expressway PP 600,000 15 Jun 19901402 Pavement Management for National Highways A&O 760,000 30 Oct 19901403 Private Sector Participation in Expressway

Financing, Construction and Operation A&O 500,000 30 Oct 19901404 Road Construction Industry A&O 340,000 30 Oct 19901325 Vadodara-Bombay Expressway (Supplementary) PP 250,000 19 Mar 19911678 Third Road PP 250,000 26 Mar 19921942 Faridabad-Noida-Ghaziabad Expressway PP 550,000 27 Aug 19931951 Bombay-Vadodara Expressway TA Project

Environmental Impact Assessment PP 90,000 10 Sep 19932001 Road Safety A&O 210,000 29 Nov 19932002 Environmental Management of Road Projects A&O 240,000 29 Nov 19932003 Technical Standards of Highway Concrete Structures A&O 350,000 29 Nov 19932986 Western Transport Corridor-Facilitating Private Participation PP 1,000,000 9 Feb 19983142 North-South Corridor Development in West Bengal PP 1,000,000 23 Dec 19983361 Capacity Building for Contract Supervision and

Management in the National Highways A&O 600,000 22 Dec 1999Loan Date No. Ordinary Capital Resources Project Amount Approved

0918 Road Improvement 198.00 10 Nov 19881041 Second Road 250.00 30 Oct 19901274 National Highways 245.00 29 Nov 19931279 Bombay-Vadodara Expressway Technical Assistance (Lapsed) 2 Dec 1993

B. Other Funding Sources

Project Loan $Region/ Length Amount Equivalent

State Name (km) (Y million) (million)

1. Japan Bank for International Cooperation

Uttar Pradesh (NH2) Mathura-Agra (four-laning) 51 4,855 43.3Uttar Pradesh (NH27) Allahabad-Naini Bridge (over Jamuna Bridge) 5 10,037 89.6Andhra Pradesh (NH5) Chilakaluripet-Vijayawada (four-laning) 83 11,360 101.4Orissa (NH5) Jagatput-Chandikhol (four-laning) 33 5,836 52.1Uttar Pradesh (NH24) Ghaziabad-Hapur (four-laning and Hapur bypass) 33 4,827 43.0

DateIBRD IDA Approved

2. The World Bank Group

Countrywide Roads 72.11 1 Jun 1961Bihar Bihar Rural Roads 35.00 1 Nov 1980Countrywide National Highway 200.00 1 May 1985Gujarat Gujarat Rural Roads 119.60 1 Feb 1987Countrywide State Roads 80.00 1 Oct 1988Countrywide State Roads 170.00 1 Oct 1988Countrywide Second National Highways 153.00 1 May 1992Countrywide Second National Highways 153.00 1 May 1992Countrywide State Road Infrastructure Development Technical Assistance 51.50 1 Dec 1996Andhra Pradesh State Highways 350.00 1 Jun 1997

A&O = advisory and operational; IBRD = International Bank for Reconstruction and Development; IDA = International Development Agency;

PP = project preparatory.

Amount ($ million)

EXTERNAL ASSISTANCE TO THE ROAD SECTOR

POLICY IMPACT OF ASIAN DEVELOPMENT BANK’S INVOLVEMENT IN THE ROAD SECTOR

Issue Intervention Impact Status

1. Axle-Load Control i. Excessive pavement

damage ii. High maintenance costs iii. Obsolete road transport

fleet technology

Asian Development Bank (ADB)axle-load survey on highwaysselected for loan project1

Study on road user charges1

Procured portable weigh station equipment under ADBfinancing. Two sets of equipment were provided for each ofthe state governments of Andra Pradesh, Haryana,Karnataka, Tamil Nadu, and Uttar Pradesh.Heavy fines for overloading incorporated in the Motor VehicleAct of 1988 and Central Motor Rules of 1989

Enforcement of maximum axle loads ongoing.Excessive heavy loads reduced sinceapproval of legislationMinistry of Surface Transport (MOST)proposing fiscal policy reform for vehicletaxes. Ministry of Finance (MOF) has reducedexcise duty on multi-axle vehicles

World Bank study on Vehicle FleetModernization

Identified that tax structure requires bias toward multi-axlevehiclesFleet study recommended:1. Enforcement of axle load limits2. Upgrading of truck technology3. Promotion of multi-axle trucks through tax incentivesAppropriate distribution of road taxation to reflect relativedamage caused by each truck category

Government has commissionedcomprehensive study on Trucking Operationsin India – Problems and Potential. The termsof reference for this study reflects issuesidentified by both ADB and World Bank

2. Maintenance i. Poor maintenance

planning ii. Underfunded maintenance

ADB technical assistance (TA) forPavement Management System2 forState and District Roads in twostatesADB TA for Pavement ManagementSystem for National Highways3 aspilot project in two states

TA established pavement management systems in AndraPradesh and Tamil Nadu.Government appreciation of consequences of differentmaintenance funding strategies.National Highways TA:1. Developed computerized pavement management

system for national highway system2. Implement pilot system in Karnataka and Uttar Pradesh

States.Maintenance funding changing from norms based to needsbased.

MOST extending pilot scheme nationwide asGIS based system to cover highway planning,design, and maintenance that will allowdifferent investment scenarios to be studied

National Highways Authority of India (NHAI) todevelop maintenance management system fornational highways by December 2000

3. Expressway Planning i. Highway capacity

restrictions ii. Conflict between local and

long distance traffic

ADB TA to study expresswayplanning4

TA developed:1. Network of 10,000 km to be implemented by 2015 as

phased construction. Cost estimated as Rs600 billion($15 billion)

2. Revised indigenous highway design standards todevelop standards for use on expressways

3. Models to predict both potential expressway traffic anddiversion of traffic from other highways

4. Estimates of financial viability of various toll regimes5. Management and operations institutional framework

together with staffing, equipment, and facilities

Expressway system on hold while criticalbottlenecks eased through 4-laning

1 Loan 918-IND: Road Improvement Project, for $198 million, approved on 10 November 1988.2 TA 1058-IND: Pavement Management, for $490,000, approved on 3 January 1989.3 TA 1402-IND: Pavement Management for National Highways, for $760,000, approved on 30 October 1990.4 TA 1059-IND: Expressway System Planning, for $260,000, approved on 3 January 1989.

Appendix 5, page 1

27

POLICY IMPACT OF ASIAN DEVELOPMENT BANK’S INVOLVEMENT IN THE ROAD SECTOR

Issue Intervention Impact Status

4. Road Sector Planning i. Planning process being

hampered by serious datagaps in road transportdatabase

ii. Restrictions on freemovement of goods andtraffic

ADB study to address gaps in datafor planning including road user costdata5

ADB study on interstate octroi andentry duties6

ADB data study:1. Updated vehicle operating cost (VOC) for use in

economic evaluation of projects2. Developed computer-based model to allow cost data to

be updated annually3. Prepared table to use in economic analysesGovernment has completed study on passenger and freightmovement and origin-destination (OD) surveys of bothnational and interstate traffic

Priority allocation for upgrading work based onrational assessment of predicted needsGovernment has proposed removal of octroiduty barriers at state borders on NationalHighways (octroi duties are state prerogative);some have been removed, others have yet tobe

5. Road Safety i. Rapid rise in accidents,

increase of 8% per annumover the 10 years to 1995

ii. Accident “black spots”with particularly highaccident rates

ADB TA to address safety issues7 TA completed the following:1. Collection of accident data in terms of accident rates for

individual sections of major highways2. Identification of traffic accident black spots for priority

action to reduce accidents through introduction of safetyfeatures

3. Training in safe highway design and low cost accidentcountermeasures

Higher awareness of safety issuesUse of safety features in highway designMOST has undertaken a research study intoroad safety9th Five Year Plan contains separate provisionfor road safety works

6. Development of RoadConstruction Industry

i. Deterioration ofconstruction work in termsof quality

ii. Time and cost overruns

ADB TA to address constructionstandards8

ADB TA to address factorshampering growth and developmentof construction industry9

Use of international consultants forconstruction supervision10

Revision of India Roads Congress standardsApplication of international standards to constructionConstruction industry TA proposed:1. Revised prequalification and bid documents together

with evaluation criteria2. Introduction of international construction methods in

terms of both modernization of construction plant andproject management through both strengthening of localcapacity and introduction of international contractors

3. Rationalization of import duties on constructionequipment to allow import of machinery to optimizeconstruction practice in terms of quality and productionrates

Revised documentation adoptedSize of contract packages increased to attractinternational contractorsOngoing use of international consultants forconstruction supervisionMOST preparing proposals for dutyrationalization

5 Loan 918-IND: Road Improvement Project, for $198 million, approved on 10 November 1988.6 Loan 1041-IND: Second Road Project, for $250 million, approved on 30 October 1990.7 TA 2001-IND: Road Safety, for $210,000, approved on 29 November 1993.8 TA 2003-IND: Technical Standards of Highway Concrete Structures, for $350,000, approved on 29 November 1993.9 TA 1404-IND: Road Construction Industry, for $340,000, approved on 30 October 1990.10 Loan 1041-IND: Second Road Project, for $250 million, approved on 30 October 1990.

Appendix 5, page 2

28

POLICY IMPACT OF ASIAN DEVELOPMENT BANK’S INVOLVEMENT IN THE ROAD SECTOR

Issue Intervention Impact Status

7. Environmental i. Environmental

degradation duringconstruction/operation ofhighways

ii. Urban traffic pollution

TA on Environmental Managementof Road Projects11

ADB study on traffic pollutioncontrol measures in major urbanareas12

TA prepared environmental guidelines appropriate to projectsin India covering new highways and upgrading

Central Pollutions Board (CPCB) preparing/updatingregulations for mass emissions on an ongoing basis;regulations are becoming increasingly stringent

Appreciation of need to plan for environmentalimpacts

ADB’s environmental standards beingcomplied withLeaded fuel to be phased out of metropolitanareas by end 1998.; vehicles over 15 years oldto be banned from Delhi

8. Institutional Strengthening i. Implementation delays ii. Protracted procurement

and cumbersome contractadministration

ADB proposed a national authorityfor construction and operation ofnational highways13

Establishment of NHAI as autonomous agency responsiblefor highway and expressway development

NHAI now operational and has assumedfunctions of MOST, except planning andcoordination

9. Private Financing of HighwaysBudget constraints tohighway construction

ADB TA to address use of privatesector financing for expressways14

Private sector funding TA proposed:1. NHAI be responsible for private sector participation2. Government incentives and guarantees be provided3. Land acquisition be simplified and processing

acceleratedThe Government has responded by1. Amending legislation to allow private sector funding up

to 74 percent and NHAI equity up to 30 percent2. Issuing guidelines on simplifying land acquisition and on

providing incentives, guarantees, and fiscal concessionsto the private sector

Privatization of small projects under build-operate-transfer introducedAwaiting development of suitable financialframework to allow larger projects to beconsidered

ADB TA to address privateparticipation in Western Corridor15

Private sector participation TA will develop:1. Strategy for development of Western Corridor through

public and private funding2. Private participation policy framework that complies with

international best practiceA project using public-private partnership for a tollway in theWestern Corridor

Ongoing

10. Commercialization ofOperation and Maintenance

Capacity constraint to NHAI ADB proposal for completed projectfacility to be operated andmaintained under a toll concessionby the private sector16

ADB’s proposal is to gain1. Efficient management and administration of tollway

facility2. Fully funded maintenance program3. Generation of funds for NHAI from commercialization

Ongoing

11 TA 2002-IND: Environmental Management for National Highways, for $240,000, approved on 29 November 1993.12 Loan 1041-IND: Second Road Project, for $250 million, approved on 30 October 1990.13 Loan 918-IND: Road Improvement Project, for $245 million, approved on 10 November 1988.14 TA 1403-IND: Private Sector Participation in Expressway Financing, Construction and Operation, for $500,000, approved on 30 October 1990.15 TA 2986-IND: Western Transport Corridor-Facilitating Private Participation Project, for $1.0 million, approved on 9 February 1998.16 Proposed Surat-Manor Tollway Project.

Appendix 5, page 3

29

Appendix 6, page 1

DETAILED DESCRIPTION OF ROAD IMPROVEMENT

The detailed description of the road improvement is as follows:

(i) Approximately 175.6 kilometers (km) of a new two-lane carriageway will be builtand the existing two-lane carriageway commencing at km 263.4 near Surat inGujarat State and ending at km 439.0 near Manor in Maharashtra State will berebuilt. The terrain varies from flat to gently rolling with short sections of hillyterrain toward the end of the project highway. The alignment passes throughmixed rural and urban development; the area around Vapi at km 364 isparticularly heavily developed.

(ii) Of the total 175.6 km, approximately 26 km will be constructed as 6-lane dividedhighway through urban areas.

(iii) The design speed for the highway is 100 km per hour (km/hr). Due to constraintsin the right-of-way (ROW), the design speed had to be reduced to 80 km/hr and60 km/hr for about 43 percent and 17 percent of the road length. The verticalsight distance on the existing carriageway at km 378 will be improved.

(iv) New carriageway will consist of two 3.5 meter (m) wide lanes in the rural areasand three 3.5 m wide lanes in the urban areas. In rural areas the carriageway willinclude a 3.5 m paved outer shoulder and will be separated by a 5 m widemedian from the existing carriageway. In urban areas the median will typically be1.2 m wide but will vary from 5 m wide to 1.2 m wide.

(v) The existing carriageway consists of two 3.5 m wide lanes. In rural areas, this isto be widened by the addition of a 3.5 m paved outer shoulder. In urban areas,there will be three 3.5 m lanes and no outer shoulder.

(vi) The pavement for the new carriageway will consist of 450 millimeters (mm) ofgranular subbase (GSB), 350 mm of wet mix macadam (WMM), 160 mm ofdense bituminous macadam (DBM), and 50 mm of asphaltic concrete (AC). Thepavement will be continuous across the outer shoulder.

(vii) Reconstruction work for the pavement for the existing carriageway will consist ofa leveling course and an overlay. The leveling course is required to correct minordefects in the pavement surface and to reverse a crown camber to a fall to theouter edge of the pavement. The leveling course will consist of a layer of bitumenmacadam (BM) of varying thickness but with a minimum thickness of 40 mm. Theoverlay will vary, depending on the condition of the existing pavement, but willconsist of 50, 65, or 80 mm of DBM and 50 mm of AC.

(viii) Road junctions will be at-grade except for the major junction at km 364.5 in Vapi.A flyover will be constructed here to create a grade-separated junction. Pavingwill be continuous between National Highway 8 and joining roads.

(ix) Service roads will be constructed in urban areas on one or both sides of thehighway but within the ROW. These service roads will consist of two 2.75 m widelanes with 1.5 m wide shoulders.

30

Appendix 6, page 2

(x) The pavement for the service roads will consist of 350 mm GSB, 300 mm WMM,80 mm DBM, and 50 mm AC.

(xi) Typically the highway will be constructed on a low embankment, although minorcuts will be required in rolling terrain. Excavation will be in common material.Embankment slopes will be 2 horizontal:1 vertical (2H:1V).

(xii) Existing culverts and syphons will be extended across the new carriageway andthe new outer shoulder for the existing carriageway. Head walls and parapets willbe dismantled and reconstructed.

(xiii) There are 42 bridges in the Project, of which 15 have been classified as major,i.e., they have total spans exceeding 60 m. All major bridges are multispanbridges such that no single span exceeds 42 m. New bridges will be required atall existing locations to carry the new carriageway. Work required on existingbridges vary from minor repairs to complete reconstruction.

(xiv) Truck facilities will be constructed at km 298.0, km 313.7, km 371.0, km 393.0,and km 417.8.

(xv) Toll plazas will be constructed at km 296.7, km 344.5, km 377.5, and km 433.7.

(xvi) Bus bays will be constructed at km 302.5, km 317.8, km 333.0, km 337.1, km342.0, km 389.2, and km 394.0.

(xvii) Connections will be made to the existing Gujarat State Government checkpointsat km 375.8 and the existing Maharashtra State Government checkpoints at km381.6.

(xviii) Traffic signs, kilometer posts, and road markings are included.

31

Appendix 7

Foreign Local TotalItem Exchange Currency Cost

A. Base Cost a

Right-of-Way 0.0 12.0 12.0 Civil Works

Section I 51.3 29.2 80.5 Section II 28.6 17.3 45.9 Section III 34.1 20.0 54.1

Consulting ServicesConstruction Supervision 10.0 2.5 12.5

Private Participation and 10.0 2.0 12.0 Tolling Operations

Project Management 0.0 1.0 1.0

Subtotal (A) 134.0 84.0 218.0

B. ContingenciesPhysical b 13.5 7.5 21.0

Price c 15.1 8.5 23.6

Subtotal (B) 28.6 16.0 44.6

C. Interest During Construction 17.4 0.0 17.4

Total 180.0 100.0 280.0

a In March 2000 prices, inclusive of taxes and duties.b At 10 percent of base costs, excluding right-of-way costs at 2 percent.c At 3.2 percent annually of foreign exchange and local currency costs.

Source: Feasibility Study and Mission.

PROJECT COST ESTIMATES($ million)

32

Activity

Preconstruction

Right-of-Way Clearance

Prequalification for ICB (Advance Action)

ICB Tender (Advance Action) C

Recruitment of SupervisionConsultants (Advance Action)

Construction

Civil Works

Ancilliaries

Supervision

C = contract award; ICB = international competitive bidding

2003Q1 Q2 Q3 Q4

2002Q1 Q2 Q3 Q4

1998 1999 2000Q1Q3 Q4

2001Q1 Q2 Q3 Q4

SUMMARY IMPLEMENTATION SCHEDULE

Q1 Q2 Q3 Q4 Q2 Q3 Q4Q1 Q2

33A

ppendix 8

Appendix 9, page 1

OUTLINE OF OPERATION AND MAINTENANCE ARRANGEMENT

1. This appendix provides an outline of the proposed operation and maintenancearrangements for the Project. A variant of private participation in infrastructure development isfor the facility to be financed and built by the public sector, leaving the private sector to operateand maintain the facility through a concession.

A. Concept

2. An operation and maintenance concession is an agreement between a governmentdepartment or state enterprise, and a private enterprise whereby, in return for an agreed fee,the private enterprise will

(i) collect toll charges on a highway used by the public, and

(ii) maintain the tollway facilities. The maintenance requirement will include allmaintenance of the highway and bridges in addition to the toll collection facilities.

3. The terms of the concession are set out in a concession agreement, which will, amongother items, set out the extent of the concessionaire’s rights and duties and the fee to bereceived for performing these duties. Payment of the fee may be defined in terms of apercentage of the toll revenue or a fixed periodic amount.

4. Under a concession agreement, ownership of all assets will remain with theGovernment. During the concession period the concessionaire is only granted the right to collecttolls from users of the assets.

B. Why Use an Operation and Maintenance Concession?

5. An operation and maintenance concession can be justified for a number of reasons:

(i) Budget constraints may restrict funding of maintenance activities. By includingmaintenance work in the toll concession the maintenance will be funded out oftoll revenues without requiring funds to flow through the Government’s budgetingprocess.

(ii) An experienced private concessionaire will be able to operate the system at alower cost to the Government than for the Government to operate the systemdirectly.

(iii) A private operation will bring efficiencies to the operation as it will be able tooperate outside of public sector regulations for work practices, management, andfunding.

C. Scope of Work for the Concession

6. The scope of work will normally consist of two major components:

(i) supply and installation of toll collection equipment; and(ii) operation and maintenance services for all toll, roadway, bridges, and drainage

assets.

34

Appendix 9, page 2

7. The civil and structural works for the toll plazas will be constructed by the owner andhanded over for use by the concessionaire at the start of the concession. The concessionairewill be responsible for the design of the toll collection systems in terms of both equipment andsoftware. The concessionaire will then supply and install the entire system in the facilitiesprovided.

8. The operation of the system will largely consist of the day-to-day operation of the tollcollection facilities at the toll plazas. The concessionaire will be required to provide all staff andto manage all monetary transactions from the collection of toll payments to depositing monies ina bank.

9. The objective of the maintenance strategy must be to minimize the life-cycle costs of allcomponents of the tollway consistent with achieving specified performance standards. Theseperformance standards will be set out in the concession agreement. Performance standards canbe defined in terms of measurable indicators, such as limits on highway pavement roughnessand deflections, or in terms of detailed work process specifications for any maintenance activity.The use of performance standards based on measurable indicators is preferred, as the ownerrequires significantly fewer resources to monitor conformance.

10. The maintenance strategy will be proposed by the concessionaire but will be required totake into account the differing needs of both routine and periodic maintenance and the differentmaintenance needs of the toll, road, and bridge components.

D. Legal Authority for Granting a Toll Concession

11. Because publicly owned assets are involved, the legal authority must exist that will allowfor a concession to be issued. For the Surat-Manor Tollway, enabling legislation is already inplace1 that identifies the National Highways Authority of India (NHAI) as authorized to grant tollconcessions for national highways.

E. Concessionaire Selection Criteria

12. The following criteria may be used in prequalifying potential bidders for the concession:

(i) technical, financial, commercial, and management track record of similarprojects,

(ii) willingness to proceed on the basis of the Government’s requirements, as set outin the prequalification documents; and

(iii) avoidance of arrangements that may be considered to constitute a conflict ofinterest.

13. The concession period is established in the concession agreement. The length of theconcession period needs to be long enough to allow the concessionaire to recover anyinvestment but not so long that the concessionaire looses the incentive to perform optimally.The concession term will have renewable options and conditions.

1 National Highways Act as amended in 1995.

35

Appendix 9, page 3

14. Circumstances under which the concession may be terminated will be written into theconcession agreement.

F. Obligations and Control of the Concessionaire

15. The obligations of the concessionaire will be set out in the concession document. Theseobligations will relate to (i) legal liabilities, (ii) risks to be shouldered by the concessionaire, and(iii) services to be provided.

16. Control of the concessionaire will be through performance targets. The variables to bemeasured against targets include

(i) vehicle throughput at the toll plazas;

(ii) fraud, whereby toll revenue collected is fraudulently misplaced or payment of thetoll is fraudulently avoided;

(iii) waiting time at toll plaza;

(iv) revenue leakage, whereby potential revenue is lost through the use of alternativeroutes or use of other legitimate means of avoiding the payment of tolls;

(v) time for detection and intervention of incidents affecting safety and use of thetollway; and

(vi) maintenance standards.

G. Toll Structure

17. The toll structure will be prescribed by NHAI and will be based on the national tollstructure. The toll structure would be reviewed annually and adjusted for inflation in accordancewith the wholesale price index.

36

Appendix 10

LIST OF CONTRACT PACKAGES AND MODE OF PROCUREMENT

ContractNumber Contract Details

ApproximateValue

($ million)Procurement

Mode

1 Civil Works (Section I Km 263.4 toKm 343)

80.5 ICB

2 Civil Works (Section II Km 343 to Km 381.6)

45.9 ICB

3 Civil Works (Section III Km 381.6 toKm 439)

54.1 ICB

4 Consulting Services (constructionsupervision)

12.5 InternationalRecruitment

Various Consulting Services (private participation,toll operations)

12.0 InternationalRecruitment

ICB = international competitive bidding; Km = kilometer chainage.

37

Appendix 11, page 1

SUMMARY TERMS OF REFERENCE FOR CONSTRUCTION SUPERVISION

A. Objectives and Scope

1. Objectives

1. The objectives of the consulting services are to assist the National HighwaysAuthority of India to implement the Project as follows:

(i) to ensure high standards of quality assurance in the execution of work andcompletion of work within the stipulated time limit; and

(ii) to promote technology transfer through joint ventures between internationaland local firms.

2. Scope

2. The scope of the consulting services includes the following activities:

3. The consultant will be responsible for the supervision of all construction work. As theengineer, the consultant will administer the construction contracts for Packages I, II, and IIIand ensure that the contractual clauses for both quality and quantity of work are respectedand the works are constructed in accordance with the provisions of the constructioncontracts. The consultant will be required to nominate an engineer’s representative who willbe a full-time resident on the Project.

4. The supervision consultant will make all necessary measurements and control thequality of works. The consultant will make all engineering decisions required for thesuccessful and timely implementation of the construction contracts, and have all the powersthat are defined as those of engineer with the exception of the following, for which priorapproval of the employer must be sought:

(i) issuing the order to commence the works;

(ii) issuing/approving variation orders that have financial implications; except inan emergency situation as reasonably determined by the supervisionconsultant;

(iii) issuing/approving significant variations in quantities (more than 15 percent ofBill of Quantities), that attract refixation of rates;

(iv) issuing/approving/sanction of additional items, sums or costs, and variation ofrates and prices;

(v) approving subletting of any part of the works; and

(vi) approving any extension of contractual time limits.

38

Appendix 11, page 2

5. The supervision consultant will undertake a review of the construction contracts toidentify any defects or omissions that compromise the completeness or consistency of thedesign. In addition, the consultant will review the pavement design for traffic loading andupdate the design to reflect changes in the assumed traffic at the commencement ofconstruction and actual traffic. This part of the review will be based on traffic and axle-loadsurveys to be performed by the consultant. This review will be carried out immediately afterthe services commence and will be completed within three months. On completion of thereview, the supervision consultant will prepare a report on this review, setting out all findingsand recommendations for correcting any defects or omissions identified. Notwithstandingthese, the supervision consultant will immediately inform the employer of any defect oromission that may have a substantial impact on the Project at the time the defect or omissionis uncovered. The consultant will submit four copies of the review report to the employer andtwo copies to ADB.

6. In addition to or as an expansion of the activities and responsibilities required of theengineer as detailed in the construction contracts, the responsibilities of the supervisionconsultant will include the following:

(i) Ensure that the construction methods as proposed by the contractor forcarrying out the works are satisfactory, with particular reference to thetechnical requirements of sound environmental standards on the basis ofADB’s Environmental Guidelines for Selected Infrastructure DevelopmentProject (Highways & Roads); inspection of contractor’s constructionequipment; and safety of the works, property, personnel, and general public.The schedule of mitigation measures for adverse environmental impacts to bemonitored by the consultant will be provided.

(ii) Undertake project performance monitoring and evaluation of the Project inaccordance with ADB’s Project Performance Management System (PPMS)Handbook. Performance indicators to be measured will be provided.

(iii) Prepare and issue the following reports, the format and content for each reportis to be acceptable to the employer: an inception report, a brief monthlyprogress report, a detailed quarterly report, a detailed contract completionreport.

7. The supervision consultant will process interim and final payments to thecontractor(s).

8. The supervision consultant will, if so required by the employer, provide any of thefollowing services as additional services: (i) prepare reports, including technical appraisals,additional contract documentation, and/or reviewing and commenting on the contractor’sproposals, as may be required for any additional work required for the successful completionof the Project; and (ii) provision of any other specialist services as may be required from timeto time.

9. All additional services, other than minor extras that do not materially affect the scopeof work, will be authorized by the employer at the rates established in the constructionsupervision contract, or, when services require the use of specialists not listed in thecontract, as mutually agreed upon.

39

Appendix 11, page 3

B. Timing of Services

10. It is anticipated that the consulting services defined under the terms of reference willbe for 52.5 months. The actual commencement date will be confirmed during negotiationsand will be dependent upon progress in awarding the contract with the contractor(s) forconstruction of the Project.

11. The period of services has been derived on the basis of the consulting servicescommencing 1.5 months prior to commencement of construction and extending three monthsbeyond substantial completion. It is estimated that about 520 person-months of internationalconsultants and about 1,400 person-months of domestic consultants will be required tocomplete the tasks.

40

Appendix 12

ADB = Asian Development Bank; Inf. Tech. = Information Technology;JBIC = Japan Bank for International Cooperation; PI = Private Investment.

General

Manager

(ADB)

ADMINISTRATION)

General

Manager

(East)

General

Manager

(World Bank)

General

Manager

(PI-I)

General

Manager

(PI-II)

General

Manager

(JBIC)

General

Manager

(West)

General

Manager

(Finance)

General

Manager

(Administration

General

Manager

(Inf. Tech)

General

Manager

(Technical)

INF. TECH)

ORGANIZATION CHART OF THENATIONAL HIGHWAYS AUTHORITY OF INDIA

NHAICHAIRPERSON

MEMBER

(FINANCE AND

MEMBER

(TECHNICAL)

MEMBER

(PRIVATE INVESTMENT)

(CORPORATE

FINANCE AND

MEMBER

41

Appendix 13, page 1

FINANCIAL STATEMENTS OF THE NATIONAL HIGHWAYS AUTHORITY OF INDIA

1. The National Highways Authority of India (NHAI) became operational in February1995 with a Government grant of Rs7,000 million, which formed its initial equity base. Ofthis, Rs2,000 million was paid in FY1997 and Rs3,000 million in FY1998.

A. Mandate

2. NHAI’s immediate mandate is to develop the quadrilateral transport corridorcomprising National Highway 2 (NH2) (Delhi-Calcutta); NH5 and NH6 (Calcutta-Chennai);NH4, NH7 and NH46 (Chennai-Mumbai); and NH8 (Mumbai-Delhi). These corridors are tobe developed by upgrading the national highways to four-lane standards and constructingnew expressways, where feasible. The development will be funded by the private sectorthrough build-operate-transfer (BOT) projects for commercially viable sections (bridges andbypasses), multilateral and bilateral development agencies, and the Government. TheGovernment will provide capital grants of up to 40 percent of capital costs for the projects.NHAI’s longer-term revenue source will come from the tolling of improved (four-lane)highways and newly constructed facilities. NHAI will also receive dividends from its equityinvestment in BOT projects (NHAI is allowed to participate with up to 30 percent of totalequity).

3. During its initial years of operation, NHAI will cover its operating expenses throughinterest income earned on its equity base. NHAI’s revenue will be built up over time as theprojects are completed and toll operations commence.

B. Bases and Assumptions Used in the Financial Projections

4. The financial projections of NHAI are based on the projects being implemented andprojects currently in the pipeline for implementation. These projects will be funded bymultilateral and bilateral agencies, Government grants, NHAI’s own resources, and theprivate sector through BOT projects.

5. The financial projections have been prepared in current prices.

6. The completed projects will be operated as toll facilities. Toll revenue from thesefacilities has been estimated at Rs0.3 per km per passenger car unit. The toll revenuecollection commenced in 1999 when the first project under the tolling scheme was scompleted (NH8 between Jaipur and Kotpuli in Rajasthan). NHAI also receives amanagement fee of 3 percent of construction cost for the supervision of projects.

7. The number of currently approved staff positions is expected to grow at 10 percentper annum with the increase in NHAI’s operations and responsibilities. Salary levels areassumed to increase at 20 percent each year. Operation and maintenance expensesinclude project preparation, project implementation, and road maintenance expenses.Annual routine maintenance and periodic maintenance is assumed at 40 percent of tollrevenue. Depreciation of fixed assets is provided on a straight-line basis at the followingrates: equipment, computers, and motor vehicles, 25 percent; furniture and fixtures; 10percent; and roads; 10 percent.

42

Appendix 13, page 2

8. The highway development costs include project preparation work, land acquisition,and the removal of utilities and construction. It is assumed that the Project will beimplemented over 30 months.

9. The Government will provide capital grants to cover 35 percent of the capital cost ofthe projects undertaken by NHAI. The ADB loan for the Project is assumed to be the onlyborrowing during the projection period.

10. NHAI has applied for an exemption from the payment of corporate tax on its income(at the rate of 35 percent) because of the nature of its operations. It is assumed that NHAIwill not have to pay corporate tax.

43

44

Appendix 13, page 3

Actual Actual Actual1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

RevenueToll Operations 0.0 0.0 0.5 258.0 300.0 898.0 1,335.0 1,791.0 7,952.0 9,699.0Management Fee 4.1 9.6 54.2 72.0 426.0 1,487.0 1,244.0 1,165.0 1,165.0 1,165.0

Total Revenue 4.1 9.6 54.7 330.0 726.0 2,385.0 2,579.0 2,956.0 9,117.0 10,864.0

ExpensesSalaries and Administration 14.7 21.9 65.5 58.0 87.0 194.0 227.0 260.0 58.9 71.7Operation & Maintenance 0.0 0.0 0.0 281.0 670.0 1,937.0 2,022.0 1,997.0 4,280.0 4,812.0Depreciation 1.9 2.4 3.9 151.0 168.0 358.0 740.0 863.0 863.0 862.0

Total Expenses 16.6 24.3 69.4 490.0 925.0 2,489.0 2,989.0 3,120.0 5,201.9 5,745.7

Operating Income (12.5) (14.7) (14.7) (160.0) (199.0) (104.0) (410.0) (164.0) 3915.1 5118.3

Interest Income 0.8 19.9 448.8 244.0 271.0 506.0 660.0 533.0 429.0 539.0Interest Expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 483.0 473.0

Net Income Before Tax (11.7) 5.2 434.1 84.0 72.0 402.0 250.0 369.0 3,861.1 5,184.3Taxation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Income After Tax (11.7) 5.2 434.1 84.0 72.0 402.0 250.0 369.0 3,861.1 5,184.3

Source of FundsNet Income After Tax (11.7) 5.2 434.1 84.0 72.0 402.0 250.0 369.0 3861.1 5184.3Depreciation 1.9 2.4 3.8 151.0 168.0 358.0 740.0 863.0 863.0 862.0Internally Generated Funds (9.8) 7.6 437.9 235.0 240.0 760.0 990.0 1232.0 4724.1 6046.3Government Grants 215.0 2260.4 5374.0 8600.0 14000.0 5700.0 3000.0 2000.0 1158.2 419.0Borrowings 0.0 0.0 0.0 1134.0 1890.0 1890.0 1890.0 756.0 0.0 0.0

Total Sources of Funds 205.2 2268.0 5811.9 9969.0 16130.0 8350.0 5880.0 3988.0 5882.3 6465.3

Application of FundsFixed Assets 10.7 10.1 2.0 2.0 2.0 160.0 2.0 2.0 2.0 2.0Highway Development 0.0 339.3 208.0 11639.0 13881.0 5604.0 3770.0 3267.0 3309.0 1197.0Debt Repayment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 611.0 615.0Working Capital (0.3) (93.3) 238.6 6.0 6.0 6.0 6.0 6.0 6.0 6.0

Total Application of Funds 10.4 256.1 448.6 11647.0 13889.0 5770.0 3778.0 3275.0 3928.0 1820.0

Net Cash Flow 194.8 2011.9 5363.3 (1678.0) 2241.0 2580.0 2102.0 713.0 1954.3 4645.3Opening Cash Balance 0.0 194.8 2206.7 7570.0 5892.0 8133.0 10713.0 12815.0 13528.0 15482.3Closing Cash Balance 194.8 2206.7 7570.0 5892.0 8133.0 10713.0 12815.0 13528.0 15482.3 20127.6

Projected

Table A13: Income Statement and Cash Flow AnalysisYear Ended 31 March

(Rs million)

Appendix 14, page 1

SUMMARY RESETTLEMENT ACTION PLAN

A. The Project

1. The western transport corridor, comprising National Highway 8 (NH8) and NH4, whichconnects Delhi, Mumbai, Bangalore, and Chennai, is the busiest corridor in India, particularly inthe section between Ahmedabad and Mumbai where it passes through an industrial belt withconnections to several major and minor ports on the west coast. The section betweenAhmedabad and Mumbai is 528 kilometers (km), of which 348 km has been or is being widenedto four-lane standard. There remains a section of about 180 km between Surat and Manor,which is now a severe bottleneck for the efficient movement of goods and passengers betweenthe industrial heartland of Gujarat and the port of Mumbai on the west coast of India.

2. The Surat-Manor Tollway Project will improve to four-lane standard (construction of twolanes and pavement strengthening of the existing two lanes) about 180 km of NH8 in the statesof Gujarat and Maharashtra. The objectives of the Project are to remove capacity constraintsand improve road safety on critical sections of the western transport corridor from Delhi toMumbai. The completed Project will be operated and maintained by the private sector through atoll concession.

B. The Project Area

3. The area in which the Project lies is primarily agricultural, with one major concentrationof industrialization. The Surat-Manor stretch of NH8 is characterized by a variety of land usepatterns and settlements. The project alignment begins just after the city of Surat and hasagricultural areas (planted to cotton, groundnut, paddy, wheat, sugarcane) and orchards (mostlymangoes and chiku) on either side. The middle stretch of the project alignment between Valsadand Vapi is strictly industrial, primarily chemical industries. From Vapi to Bhilad, there areorchard lands and agricultural fields. From Bhilad to Charoti the land use is mixed, withagricultural fields interspersed between commercial establishments. From Charoti to Manor, thelands comprise mostly degraded forest, with a few agricultural fields.

C. Land Acquisition Policy Framework

4. The Land Acquisition Act of 1894, with amendments governs land acquisition in Indiaoverall. The act sets parameters for identifying and compensating for acquired lands. Although anational resettlement and rehabilitation policy is currently being formulated, resettlement actionplans have been developed and applied in India by the central and state governments on aproject-specific basis. In the roads sector, land acquisition is governed by the NationalHighways Act of 1956, which incorporates provisions of the 1894 act, but is considered toprovide distinct legal coverage.

5. The Resettlement Action Plan (RAP) for the Project is based on ADB’s policy paper oninvoluntary resettlement, approved in November 1995, and on the basis of a full census ofproject-affected persons (PAPs) carried out by the consultants during January/February 1999,which followed a sample survey carried out during March/April 1998. The objective of the RAPis to minimize the adverse impacts of the construction and improvement of the road on thePAPs. The RAP identifies (i) the extent and nature of losses of the PAPs; (ii) the policies andlegal frameworks applicable to the RAP; (iii) provisions made for compensation payments andrelocation; and (iv) accountability in implementation of the RAP. The RAP has been discussed

45

Appendix 14, page 2

extensively with the PAPs and the National Highways Authority of India (NHAI), which hasformally accepted the RAP for implementation.

6. The basic principles on which the RAP has been developed include (i) avoidance ofinvoluntary resettlement wherever feasible; (ii) minimization of resettlement where populationdisplacement is unavoidable; and (iii) ensuring that displaced people receive assistance so thatthey are at least as well-off as they would have been in the absence of a development project.On the basis of rules and regulations at the state and national levels as well as policies andpractices for resettlement planning and management in externally financed projects,compensation for the PAPs will be provided in the form of land, cash, or both.

D. Project Impact

7. In all, 3,896 persons, 107 houses (wholly or partially), and 223 shops (wholly or partially)will be affected by the Project, which runs for 180 km along three NH8 sections. In section I, theProject will require land acquisition of about 52 hectares (ha) at one toll plaza site, rest areas,and small strips of land (ribbon type) on the entire stretch. Agricultural lands owned by privateindividuals surround the land required for the toll plaza at Palsana. Ten houses will be fullyaffected, while 30 houses and 88 shops will be partially affected; in this area, 1,798 personshave been identified as PAPs.

8. In section II, the Project will require land acquisition of 36 ha at two toll plaza sites, restareas, and small strips of land (ribbon type) along the entire stretch. The land required for onetoll plaza at Bhilad belongs to the Government. The toll plaza site at Valsad involves landacquisition of about 928,000 m2 on both sides of the alignment. On one side, a school will lose18,500 m2 of land including a girl’s hostel. An orchard and two wayside guesthouses, a waysiderestaurant, an orchard, and an automobile workshop will require acquisition. Nineteen houseswill be fully affected, while 38 houses and 87 shops will be partially affected; 1,201 personshave been identified as PAPs, including employees in the wayside guesthouses.

9. In section III, the Project will require land acquisition of 19 ha at one toll plaza site andsmall strips of land (ribbon type) along the entire stretch of the section. The land required forone toll plaza at Palghar belongs to the Government. Along the entire stretch, three houses willbe fully affected, while seven houses and 48 shops will be partially affected. 897 persons havebeen identified as PAPs. A wayside guesthouse (hotel) and its employees will lose incomeduring the construction period, which has been taken into account in the RAP entitlementmatrix.

E. Entitlements

10. A detailed entitlement matrix was developed setting out the losses, compensation,entitlements, and accountabilities associated with impacts under the Project. Land lossessuffered by the PAPs have been categorized under two heads: (i) PAPs losing a part of theirhouses, and (ii) PAPs losing entire houses. Provision has also been made for loss of orchardlands and private factory lands. It should be noted that not all PAPs are entitled persons. Forexample, a head of family of several people may be an entitled person, who will receive benefitson behalf of the family members. In general, compensation at market rates will be paid topersons losing lands. Compensation for loss of structures has been computed at currentconstruction (replacement) cost levels. Income losses will also be compensated. The cut-offdate for eligibility for entitlements is 8 February 1999, the date of completion of the census andsocioeconomic survey.

46

Appendix 14, page 3

F. Organizational Arrangements

11. NHAI is the Executing Agency for the Project. The project implementation unit of NHAIwill supervise all planning, implementing, and monitoring activities associated with the RAP. TheUnit will be headed by a project director/general manager, assisted by four deputy generalmanagers, and include a resettlement group accountable to the project director/generalmanager, comprising a resettlement officer and a database operator, who will assist inmaintaining and continuously updating the resettlement database. The database will includerelevant information on individual households, PAPs, and entitled persons for disbursement ofentitlements, review and monitoring, and subsequent evaluation by an external consultant.

12. The resettlement officer will be responsible for the coordination of all activities relating tothe implementation of the RAP. The resettlement officer will be academically and professionallyqualified; appropriately experienced in administrative activities, such as land acquisitionprocesses; familiar with social issues; and have worked with nongovernment organizations andcommunity organizations.

G. Implementation of the RAP

13. NHAI will engage a reputable implementing agency with experience and appropriateskills in dealing with people and communities at the grassroots level. The main task of theagency will be to assist NHAI with land acquisition and resettlement matters, particularly indisbursing compensation packages as prescribed in the entitlement matrix. The agency will playan important role in ensuring that legitimate grievances of the PAPs are redressed andvulnerable groups among the PAPs are given special attention.

14. The implementation of the RAP, including land acquisition, will be completed within 12months from the commencement of the Project.

H. Grievance Redress

15. PAPs who have grievances at any stage of implementation of the RAP may submit theirappeals to the district collector through the respective panchayat leaders, local member of thelegislative assembly, or member of the municipal corporation. To expedite land acquisitionproceedings, mitigate grievances, and recommend appropriate market rates, districtresettlement committees will be constituted as appropriate. The district collector will look into theproblems in consultation with members of the district resettlement committees. Except for civilsuits, all grievances are required to be settled within three months of the lodging ofcomplaints/grievances. The implementing agency will provide advice and guidance at all stagesof the process.

I. Information Campaign and Road Safety Activities

16. Although the PAPs have been made aware of the Project and its impacts throughextensive consultations, a supplementary information campaign will be conducted by NHAI withthe help of the implementing agency and nongovernment offices. The purpose is to keep peoplefully informed of project benefits and to respond to concerns about (i) the need for landacquisition; (ii) the need for eviction of squatters and vacation of encroachments; (iii) the likelyconsequences of the Project on community livelihoods; and (iv) the resettlement policy andentitlement packages, including the entitlement matrix. A brochure in the local languageoutlining these aspects will be produced for distribution in the project area.

47

Appendix 14, page 4

17. The number and severity of road accidents in India have increased steadily. The 1995national fatality rate of 24 per 10,000 vehicles is among the highest in Asia. The high rate ofaccidents along the project alignment was a common complaint brought up in the focus groupdiscussions conducted during the consultative process for the RAP. The residents expressedserious concerns about road safety measures; while many accidents involved vehicle collisions,pedestrians—especially children—represented most of the fatalities along the project alignment.

18. The RAP identities specific activities that the resettlement group will provide advice on orimplement to improve road safety along the project road. The activities—driver awareness,safety education, first aid, training for road wardens—will be essential for reducing accidentslikely to be caused by an increasing volume of vehicles moving at higher speeds on improvedroads. The activities are expected to benefit the PAPs as well as the general public, includingthe drivers themselves.

J. Budget

19. The budget, which includes resettlement costs and services of the implementing agency,is estimated at Rs550 million.

K. Monitoring and Evaluation

20. Monitoring will be continuous throughout the implementation of the RAP. Theimplementing agency will submit regular monthly progress reports to NHAI, which will thensubmit them to ADB. Resettlement planning and implementation activities will be evaluated oncompletion of the RAP, with baseline data collected for further evaluation by an independentagency after one year.

48

Appendix 15, page 1

SUMMARY INITIAL ENVIRONMENTAL EXAMINATION

A. Introduction

1. The summary initial environmental examination is based on a review of the initialenvironmental examination prepared by the project feasibility consultants and informationgathered by the Asian Development Bank (ADB) Fact-Finding Mission. The purpose of thestudy was to identify environmental issues that face significant impact due to widening andstrengthening of the highway; assess impacts related to project location, construction, andoperation; and suggest suitable mitigation measures.

B. Description of the Project

2. The Project comprises strengthening and widening of National Highway (NH) 8between Surat and Manor (the project road) from kilometer (km) 263.4 to km 439.0. Theproject road passes through Palsana taluka1 of Surat District, Navasari, Chikhli, Gandevi,Valsad, Pardi, and Umbergaon talukas of Valsad District in Gujarat State and Dahanu,Palghar, and Talasari talukas of Thane District in Maharashtra State.

C. Description of the Environment

1. Physical Environment

3. There are three types of terrain: western ghat in the east, coastal plains in the west,and a rolling land between the western ghat and coastal plains. The existing alignment ofthe road is located in the rolling terrain. The area comprises hard rocks, mostly of basalticnature, with a deep layer of sediments of recent and subrecent origin covering theunderlying rocks. The rock formation forms part of Deccan Trap. The soil in the project areais composed mostly of residual soil, marine-estuarine clay of tropepts-aquepts, and orthids-aquepts, although patches of loamy soil of brown color also exists. The project road crossessome rainfed rivers. These are Baleshwar Khadi, Mindhola, Purna, Ambica, Dholdhara,Kaveri, Auranga, and Wanki–Khadi having an average discharge of 24,200 cubic meter(m3)/sec; Damanganga, Kolak, and Par having an average discharge of 15,000 m3/sec; andVadoli nallah, Gulzari nallah, Suseri river, and Surya river with an average discharge of1,100 m3/sec.

4. The region is located in a tropical monsoon climate regime. As per IndianMeteorological Department data (1931-1960), atmospheric pressure is normal throughoutthe year and during winter it is comparatively higher. The temperature is uniformly higherthroughout the year and average maximum temperature is 33.6oC and minimumtemperature is 16o C. Relative humidity is 53 percent. Generally the highest rainfall occurs inthe month of July. The predominant wind direction is southwesterly during the months ofMay to August. The air quality monitoring and testing have been carried out in Navasari,Chikhli, Vapi, Bhilad, and Manor over a 24-hour period using High Volume Sampler forsampling of suspended particulate matter, sulfur dioxide, nitrogen oxide, carbon monoxide,hydrocarbon, and lead. It shows that the concentration of these pollutants is within thespecified limits of Central Pollution Control Board. Water quality monitoring was carried out

1 Taluka refers to subdistrict.

49

Appendix 15, page 2

at the Mindhola, Purna, Ambica, Kaveri, Kharera, Auranga Damanganga, Kolak, Par, andSurya river crossings. Results show that the temperature of river water ranges from 24o-28oC, pH value ranges from 6 to 8, dissolved oxygen varies between 7.4 and 10.1,biochemical oxygen demand ranges from 0.3 to 5.12. Concentration of dissolved solids iswithin safe limits for aquatic life. Monitoring of noise level was carried out at Navasari,Chikhli, Bhilad, Vapi, and Manor over a 24-hour period. Results show that along the right-of-way of NH8, noise level is between 68 and 83 decibels, which is slightly above the specifiedlimit of Central Pollution Control Board for industrial and commercial areas.

2. Ecological Resources

5. In the state of Gujarat, the existing project road between km 263.4 and km 381.6passes protected forests. Within Maharashtra State, the project road passes throughreserve forest. The widening of the project road will be within the existing right-of-way,which is approximately 5 meters wide on each side. No adverse impact on the forestecosystem is expected. The species of vegetation found along the existing roadside are notrare, endangered, or endemic species.

3. Human and Economic Development and Quality of Life Values

6. The distribution of population, literacy levels, and percentage of agricultural workersin the talukas through which the project road passes is given in Table A15.1.

Table A15.1: Population, Literacy Level, and Agricultural Workers Distribution

State Taluka PopulationLiteracy

Level (%)Percentage of

Agriculture Workers(%)

Gujarat Palsana 85,822 46 69Navasari 4,33,601 63 42Gandevi 2,17,552 65.8 43.06Chikhli 2,60,787 54.78 72.7Pardi 2,72,219 60.43 21.9Umbergaon 1,86,222 31.17 59Valsad 3,29,933 66.38 43.8

Maharashtra Dahanu 2,37,461 27 20Palghar 3,35,073 50.6 23

Taluka = subdistrict.Source: India, Government of. 1991. Census of India, 1991, Delhi.

Educational facilities, medical facilities, adult literacy center, and potable water facilities areavailable in the project area. There are no archaeological and prehistoric sites in the vicinityof the project road.

50

Appendix 15, page 3

D. Screening of Potential Environmental Impacts and Mitigation Measures

7. The upgrading of the project road will have a positive impact on air quality, noiselevel, and economic and employment opportunities. The analysis shows thatimplementation of the project will improve the quality of air in the region as the vehicles onthe project road will be able to travel at higher speeds with less emissions. Furthermore,widening of road will allow the traffic to flow more smoothly. As a result, it is expected thattraffic noise will become more a component of ambient noise, which is less offensive thanfrequent, erratic increases in noise of short duration.

8. There will be some impacts, though not significant, on forestland, surface drainage,land acquisition, vegetation, sanitation and waste disposal, and illegal timber cutting. Theorder of impact and their mitigation measures are listed in Table A15.2.

9. The proposed mitigation measures will be included in the contract bid documents asrequirements to be met and in the terms of reference of the supervision consultants asconditions to be monitored. The Environment Unit of the Ministry of Transport will beresponsible for overall environmental monitoring work and will consult with other authoritiessuch as the respective state agencies. Including the Forest Department. Table A15.3 showsthe monitoring program.

E. Institutional Requirement and Environmental Monitoring Program

10. The responsibility for implementation of the required mitigation measures andmonitoring of the program of implementation are delegated to the project-promotinginstitution, which in the present context is the National Highways Authority of India.

F. Findings and Recommendations

11. On the positive side, the road widening and strengthening is likely to have significantlong-term benefits for inhabitants living in settlements near the road and all road users. Forlocal residents, these benefits include increased economic and employment opportunities,improved access to services and facilities and reliability of transport services for the freighttraffic, and improvement of the regional air quality. For the road users, the benefits are interms of reduction in travel time, vehicle operating costs, traffic congestion, road accidentsand saving on fuel.

12. The road upgrading project will have few direct adverse impacts on the physical,biological, and socioeconomic environments. Adverse impacts on the biologicalenvironment include reduction of vegetation on the existing road embankment. Onsocioeconomic aspects, negative impacts include possible disruption of utility lines, accidentrisks during construction, risk of transmission of communicable disease through contact ofresidents with road workers and drivers of freight trucks, and disruption of communitycohesion and social fabric. The majority of the mitigation measures can be addressedthrough techniques like engineering design, site planning, project scheduling, preparation oftender document, and supervision by the construction engineer. There are two specificareas where involvement of the State Forest Department and Office of the District Collectoris required. These are the plan for tree felling and compensatory afforestation, and the planfor land acquisition and disbursal of compensation, respectively.

51

Appendix 15, page 4

Table A15.2: Environmental Impacts and Mitigation MeasuresAttributes Order of Impact Mitigation Measures

A. Impacts from Project LocationObstruction to surface drainage Mild Provide surface drains all along the road.Reduction of forestlandNumber of trees to be felled – 1,527On left side – 788On right side – 739

Moderate Provide compensatory afforestation onequivalent land.

Severance of home from work place Mild Provide adequate underpasses at required sitesnear the settlements.

B. Impacts from Construction CampsLand acquisition Mild Acquire barren or degraded land for campsites.Destruction of vegetation Moderate Establish sites away from protected forests,

reserved forests, and roadside plantation.Sanitation & waste disposal Mild Install lavatories and segregate biodegradable

wastes and other wastes for separate disposal.Poaching & illegal timber cutting Mild Supply kerosene stoves to construction camps.C. Impacts from Road ConstructionIncreased siltation/erosion in rivers Mild Construct culverts and bridges during dry

season; construct soil stabilization structures.Obstruction to drainage Moderate Avoid water clogging and allow water to flow

through channel.Erosion of road embankment Mild Provide lined drains at risky locations.Destruction of vegetation on the right-of-way

Moderate Use compensatory afforestation plan androadside plantation, and avoid disturbance awayfrom right-of-way.

Alteration of subsoil water table Mild Control withdrawal from local wells.Disfiguring landscape by highEmbankments & deep cuts

Mild Cut & fill in gentle slope sections and roadsideplantation.

Air-dust-fume-smoke-noise pollutionin habitations

Mild Avoid such sites & use pollution controllableequipment with warning devices.

Creation of mosquito breedinghabitats

Mild Avoid creation of roadside water pools.

Interference to existing traffic Moderate Provide warning signs for traffic diversion.Destruction of utility lines Moderate Avoid moving heavy vehicles over or near utility

lines; raise power lines to retain vertical curvesof roads.

Accident risks during construction Moderate Introduce emergency plan to contain damage.Poaching & illegal timber fellingby construction workers

Moderate Prohibit these under terms of employment.

D. Impacts from Operation of the Project RoadAir pollution from increased vehiculartraffic

Moderate Control emission from vehicles; and plant treescapable of absorbing hydrocarbon alongroadsides.

Increased noise from vehicular traffic Moderate Lay vegetative sound barriers.Roadside litter Mild Provide roadside deposit facilities & campaign

for disposal only at service stations.Induced roadside development ofcommercial, industrial, and residentialinfrastructure

Mild As this is a limited-access road, suchdevelopment is unlikely should be controllednear the exits.

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Appendix 15, page 5

G. Conclusions

13. The widening of the project road will have a positive impact on the region byimproving regional transport links, decreasing transport costs, improving environmentalquality, and increasing economic opportunities for local residents. Although there will belimited adverse impacts of a moderate nature, they could be mitigated to acceptable levelsif the recommended measures are implemented. Based on the initial environmentalexamination conducted and information gathered, it can be concluded that it is notnecessary to conduct a full-scale environmental impact assessment for the proposedProject.

Table A15.3: Mitigation and Monitoring Program

Mitigation Strategy EffectivenessIndicator

Means ofVerification

Time Scale

1. Impacts due to ProjectLocation

a. Provide surface drains allalong the road.

Minimal damage toroadside drainage

Observation of degree ofdamage to surfacedrainage

Construction anddesign phases

b. Provide compensatoryafforestation on equivalentland.

Minimal damage offorest land, roadsideecology, vegetation

DocumentationObservation

Construction phase

c. Provide adequateunderpasses at required sitesnear the settlements.

Minimal degree ofseverance of homefrom work place

Documentation Construction anddesign phases

2. Impacts from theConstruction Camp

a. Acquire barren land anddegraded land forcampsites.

Minimal damage toprime and sensitiveland

Documentation Construction andtender documentpreparation phases

b. Locate campsite away fromforest areas and roadsideplantation.

Minimal damage tovegetation anddisturbance of ecology

Documentation Construction andtender documentpreparation phases

c. Provide for lavatory andseparate disposal ofbiodegradable wastes andother wastes.

Minimal effect onenvironmental healthand hygiene

ObservationDocumentation

Tender documentpreparation andconstruction phases

d. Conduct a healthassessment programperiodically.

Minimal effect onhealth of localpopulation due totransmission ofcommunicablediseases.

Observation of degree ofhealth awarenessDocumentation

Construction phase

e. Supply kerosene stoves toconstruction camp.

Minimal damage tovegetation/timber

Observation of degree ofpoaching and illegaltimber cutting

Tender documentpreparation andconstruction phases

f. Abolish the camp after theconstruction work.

Minimal impact onsocial & cultural life oflocal population

Documentation Tender documentpreparation andconstruction phases

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Appendix 15, page 6

Mitigation Strategy EffectivenessIndicator

Means ofVerification

Time Scale

3. Constructiona. Incorporate bridges, culverts,

and soil stabilizationstructures in the designdocument.

Minimal impact forsiltation/erosion inriver along thealignment

Design document Design andconstruction phases

b. Take steps to avoid waterclogging and allow water toflow through the channel.

Minimal impact ondrainage system

Design documentObservation of migrationof water channel towardnatural drainage channel

Design andconstruction phases

c. Provide system forcontrolling drainage withstabilizing structure.

Minimal soilslippage/land slides

Design document Design andconstruction phases

d. Control excavation bybackfilling with wastematerials from cut sectionareas.

Minimal impact onborrow and quarryarea

Monitoring Design, construction,and tender documentpreparation phases

e. Provide lined drains at riskylocations.

Minimal impact due toerosion of roadembankment

Design document Design andconstruction phases

f. Control withdrawal fromlocal wells.

Minimal impact onsub-soil water table

Observation Construction phase

g. Provide a gentle slope in cutand fill sections, androadside plantation.

Minimal damage oflandscape by highembankments anddeep cuts

Design documentObservation

Design andconstruction phases

h. Avoid habitation sites anduse pollution controllableequipment with warningdevices.

Minimal impact onhabitation, air qualitydust fumes, smokeand noise.

Observation andmonitoring

Design andconstruction phases

i. Avoid creation of roadsidewater pools.

Minimal creation ofmosquito breeding

Observation Design, construction,and postconstructionphases

j. Provide warning signs fortraffic diversion.

Minimal impact onexisting traffic system

Observation anddocumentation

Construction phase

k. Avoid moving heavyvehicles over or near utilitylines, raise power lines toretain vertical curves ofroads.

Minimal damage toutility lines

Observation anddocumentation

Construction phase

4. Impacts due to Operationof the Highway

a. Control emission fromvehicles and roadsideplantation with trees capableof absorbing hydrocarbon.

Moderate impact onair quality

Monitoring Postconstructionphase

b. Lay vegetative soundbarriers.

Minimal impact onnearby habitation

Monitoring Postconstructionphase

c. Provide roadside depositfacilities and campaign fordisposal only at servicestation

Minimal impact onroadside litter

Monitoring Postconstructionphase

d. Introduce contingency planfor accidental spills.

Minimal impact onroad users, nearbyhabitation, waterbodies, and vegetation

Observation; monitoring Construction phase

54

Appendix 16, page 1

FINANCIAL ANALYSIS

A. General

1. The financial internal rate of return (FIRR) of the Project was calculated on the basisof incremental costs and benefits resulting from the Project over an assumed period of 20years. Costs and benefits are expressed in 1998 constant prices.

B. Costs

2. The financial costs consist of capital costs, operation and maintenance costs, andtoll franchise costs.

3. The capital costs comprise the cost of land, resettlement, construction, andsupervision, and include taxes and duties and physical contingencies but exclude pricecontingencies and interest during construction. The capital costs will be incurred over a 48-month construction period. The constructed highway facility is expected to have a salvagevalue of 15 percent at the end of the 20-year period.

4. Operation and maintenance costs include annual routine maintenance, periodicmaintenance (resurfacing) to be carried out every fifth year, and the cost associated withthe operation of the toll plazas.

5. A fee of 10 percent of gross revenue to be paid to the toll franchise operator hasbeen assumed.

C. Revenue

6. The completed project facility comprising a four-lane, 176-kilometer national highwaywill be tolled under a 20-year concession. The revenue from toll operations, net of theoperator franchise fee and corporate tax, has been calculated on the basis of tollable trafficdetermined from traffic counts and growth forecast (as described in Appendix 17) andestablished toll rates (Table A16.1).

Table A16.1: Toll Rate per Type of Vehicle

Vehicle Type Toll Rate (Rs/km)

Car 0.40

LCV 0.70

Bus, HCV, MAV 1.40

Oversized vehicle 3.00HCV = heavy cargo vehicle; LCV = light commercial vehicle; MAV = multi-axle vehicle.

55

Appendix 16, page 2

7. The toll rates for national highways were developed by the National HighwaysAuthority of India (NHAI) using vehicle operating cost savings as the main indicator of whatroad users would be prepared to pay for improved highway facilities. The data from vehicleoperation cost savings was tested through willingness-to-pay surveys on various nationalhighway sections throughout the country, including the project highway, before the toll rateswere established.

8. No real increase in the toll rate has been assumed in the FIRR calculation althoughthe toll rate will be reviewed annually for adjustment in line with the consumer price index.

9. Advertising revenue estimated at 1 percent of the toll revenue has been included.

D. FIRR of the Project

10. Based on the above bases and assumptions, the FIRR of the Project was calculatedat 14.2 percent, which is above NHAI’s weighted average cost of capital in real terms of10.8 percent. NHAI’s weighted average cost of capital was estimated on the basis of thefollowing assumptions: (i) long–term debt cost of 14 percent, (ii) equity cost of 20 percent,(iii) debt/equity structure of 70:30, and (iv) domestic inflation of 5 percent. Details of theFIRR calculation are shown in Table A16.2.

11. NHAI has applied for an exemption from payment of corporate tax at the rate of 35percent. Entrepreneurs operating road infrastructure facilities are entitled to a five-year taxholiday and a 30 percent tax exemption on profits for the next five years. The FIRR of theProject on an after-tax basis was calculated at 12.3 percent.

12. Several tests were carried out to determine the sensitivity of the FIRR to changes inthe initial assumptions and the results, which are shown in Table A16.3, indicate that theFIRR is fairly robust in relation to changes in the basic assumptions.

56

57

Appendix 16, page 3

TollCapital Maintenance Operation Toll Net

Year Cost Cost Cost Revenue Benefit

1999 1,351.35 (1,351.35)2000 2,252.25 (2,252.25)2001 2,252.25 (2,252.25)2002 2,252.25 (2,252.25)2003 900.90 7.78 83.27 832.71 (159.24)2004 15.55 178.32 1,783.23 1,589.362005 15.55 190.94 1,909.41 1,702.922006 15.55 201.44 2,014.43 1,797.442007 521.99 212.53 2,125.30 1,390.782008 15.55 217.42 2,174.17 1,941.202009 15.55 217.42 2,174.17 1,941.202010 15.55 217.42 2,174.17 1,941.202011 15.55 217.42 2,174.17 1,941.202012 1,190.63 217.42 2,174.17 766.122013 15.55 217.42 2,174.17 1,941.202014 15.55 217.42 2,174.17 1,941.202015 15.55 217.42 2,174.17 1,941.202016 15.55 217.42 2,174.17 1,941.202017 521.99 217.42 2,174.17 1,434.762018 15.55 217.42 2,174.17 1,941.202019 15.55 217.42 2,174.17 1,941.202020 15.55 217.42 2,174.17 1,941.202021 15.55 217.42 2,174.17 1,941.202022 (1,137.00) 521.99 217.42 2,174.17 2,571.76

FIRR = 14.2%

FIRR = Financial Internal Rate of Return.

Assumption FIRR (%)

1. Base Case 14.22. Project Cost Increased by 15% 12.53. Project Revenue Decreased by 15% 12.24. Project Start Up Delayed by 1 year 12.85. Combination of (2) and (3) 10.5

FIRR = Financial Internal Rate of Return.

Table A16.3: Sensitivity Analysis

Table A16.2: Financial Internal Rate of Return Calculation(Rs million)

Appendix 17, page 1

TRAFFIC ANALYSIS AND PROJECTIONS

A. Surveys

1. To analyze existing travel behavior and to forecast future travel patterns for the projectroad, which were inputs for the economic and financial evaluation, and for the pavement design,the following traffic surveys were carried out: (i) classified traffic volume counts; (ii) origin-destination (O-D) survey; (iii) axle-load survey; (iv) turning movement survey; (v) speed anddelay survey; and (vi) willingness-to-pay/stated preference survey. The seven-day (24-hour, bothdirections) manual classified traffic volume surveys were carried out at three locations, Nasvari(km 293.3), Pandi (km 346.2), and Charoti (km 425.0) to obtain the traffic volume, hourly, anddaily variation and traffic composition characteristics. The three-day continuous O-D surveyswere carried out at two locations (Udwada and Charoti) to (i) study the travel pattern along theproject road; (ii) identify toll plaza locations; and (iii) assess the need for bypasses around majortowns along the corridor. The O-D surveys were limited to only cars in the passenger vehiclecategory and trucks (light commercial vehicle [LCV], 2-axle/3-axle rigid, multi-axle vehicle [MAV])in the freight vehicle category. Information collected during the interviews included origin anddestination of the trip, trip length, trip purpose, trip time, number of passengers, and commoditytype and pay load. The axle-load survey was carried out in one location to obtain statistical dataon axle-loading patterns for pavement design purposes.

2. The purpose of the turning movement surveys was to obtain information on directionalmovement characteristics at major intersections along the project road. The information wasnecessary for taking decisions regarding the type of improvement scheme such as, at-gradeintersections with or without provisions of traffic signals, grade-separation, and interchanges.The speed and delay surveys were conducted using the moving car observer method, whereininformation on journey time, number of vehicles met from the opposite direction, and number ofvehicles overtaken and overtaking test car and mid-block delays were recorded.

B. Traffic Characteristics

3. For analysis purposes the traffic volumes for motorized vehicles have beendeveloped for three sections. For section I, the average daily traffic volume (AADT) is 15,583vehicles per day; for section II, 16,546; and for section III, 14,693. Regarding vehiclecomposition, for section I, passenger cars constitute about 18 percent of the traffic stream,buses 5 percent, LCVs 10 percent, and 2-axle/3-axle rigid trucks 64 percent. For section II,passenger cars constitute about 24 percent of the traffic stream, buses 5 percent, LCVs 10percent, and 2-axle/3-axle rigid trucks 56 percent. For section III, passenger cars constituteabout 17 percent of the traffic stream, buses 3 percent, LCVs 10 percent, and 2-axle/3-axle rigidtrucks account 67 percent.

4. On average, the O-D data analysis shows that about 49 percent of vehicular tripstraverse the full 176 km of the project road, about 42 percent of trips either originate or terminatealong the project road, and about 9 percent of total trips are internal, i.e., originate and terminatewithin the length of the project road. The maximum through traffic has been observed for MAVs(73 percent), followed by heavy cargo vehicles (HCVs) (57 percent) and LCV (36 percent); whileminimum through traffic (28 percent) has been observed for passenger vehicles (cars). Themajor concentration of traffic, about 27 percent of origin and destinations, is from and toMumbai, the gateway of India for import and export movements through two major ports(Mumbai and Jawaharlal Nehru at Nava-Sheva). This is followed by Vapi with about 12 percentof total origin and destinations, Ahmedabad with about 7 percent, and Surat with about 6percent. The survey also indicates that 25 percent of LCV and HCV travel average 250 to 500

58

Appendix 17, page 2

km. Additionally, 30 percent of MAV at the survey location of Udwada has a lead range of 1,500km, while the average lead range at the survey location of Charoti is between 250 and 500 km.This variation may be attributed to the fact that a large number of MAVs are traveling betweenVapi, which is a major industrial center, and Mumbai carrying petrochemicals.

C. Commodity Analysis

5. The O-D survey data has been analyzed to identify the commodity movementcharacteristics along the project road. The data shows that the major commodity types comprisemachinery, chemicals and pharmaceuticals, foodgrains and cash crops, and manufacturedgoods. Shares of different commodities varied. At the Pardi survey location, manufacturedgoods1 accounted for 35 percent of total commodity types, other manufactured goods2 26percent, chemicals and pharmaceuticals 13 percent, foodgrains3 and cash crops4 9 percent, andpetroleum products 8 percent. At the Charoti survey location manufactured goods accounted for44 percent of total commodity types, other manufacturing goods 17 percent, chemicals andpharmaceuticals 12 percent, foodgrains 9 percent, and petroleum products 8 percent.

D. Traffic Forecast

6. The traffic forecast was based on past traffic demand and economic variables,particularly the perspective growth of the economy in terms of (i) net state domestic product(NSDP) for Gujarat and Maharashtra; (ii) estimated transport demand elasticities; and (iii)changes in the structure of the vehicle fleet including productivity and changing intermodalshare of passenger and freight demand. It also takes into account the findings of thewillingness-to-pay survey.

1. Analysis of NSDP for Gujarat and Maharashtra

7. The past trend in average annual growth rates of NSDP at constant prices issummarized in Table A17.1.

Table A17.1: NSDP Annual Growth Rates (%) for Gujarat and Maharashtra

Period Gujarat Maharashtra

1981-1991 5.24 6.04

1991-1996 5.42 7.35

1981-1996 5.30 6.47

1 Manufactured goods include iron and steel, cement, fertilizer, sugar, textiles, and machinery.2 Other manufactured goods include tires and tubes, salt, electronic and electrical goods, drums and

containers, auto vehicles, and beverages.3 Foodgrains include wheat and wheat products, rice and paddy, gram and pulse, and coarse grains.4 Cash crops include jute, tea, oil seed, cotton, and tobacco.

59

Appendix 17, page 3

8. The data in Table A17.1 indicates that there was an upsurge in economic growth during1991-1996 as compared with the past decade (1981-1991), especially in the state ofMaharashtra. The long-term trend, for 1981-1996, shows a 5.3 percent annual growth rate in theNSDP for Gujarat and 6.5 percent for Maharashtra. In light of the past trend, analyzing growthrates of NSDP in real terms for different periods, it can be safely assumed that the annualgrowth rate of over 5.2 percent in Gujarat State and 6.0 percent for Maharashtra will besustained on a long-term basis. This however assumes that a favorable environment foreconomic reforms in India will continue. The most plausible future trend will be higher growthrates in the initial years and tapering of the growth rate in later years as shown in Table A17.2.

Table A17.2: Projected Annual NSDP Growth Rates (%)

Period Gujarat (Sections I and II) Maharashtra (Section III)

1996-2001 5.60 6.50

2001-2010 5.20 6.00

2011-2020 5.05 5.75 NSDP = net state domestic product.

2. Income Elasticities of Transport Demand

9. Transport demand elasticities in relation to income were derived from the onessuggested for road improvement projects in India.5 The income elasticity for transport demandfor passenger and freight vehicles tends to decline over time, irrespective of the growth in percapita income. In the case of cargo vehicles, it is brought to unity after 2005. The elasticities forpassenger cars and buses traffic have been moderated taking into account local conditions, andthat this will be a toll facility. The moderation factors were estimated at 0.75 for passengercars and 0.70 for buses, to be applied to the income elasticities for passenger vehicles. Theseare a consequence of the project corridor being rail oriented for passenger traffic. The valuesadopted for the project road are presented in Table A17.3.

Table A17.3: Income Elasticities for Transport Demand

Vehicle Type Up to2000

2001-2005 2006-2020

Passenger Vehicles

Car, Jeep & Van 1.50 1.50 1.35

Buses 1.10 1.10 1.05

Freight Vehicles

Truck 1.50 1.30 1.00

5 Income elasticities of transport demand utilized in the preparation of Loan 1274-IND: National Highways

Project, for $245 million, approved in November 1993, and for the preparation of World Bank projects.

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Appendix 17, page 4

3. Traffic Growth Rates

10. Based on the income elasticities for transport demand, traffic growth rates weredetermined for the six different motorized vehicle types, and for five periods of time (TableA17.4).

Table A17.4: Traffic Growth Rates (%) Per Vehicle Type

Vehicle Type Gujarat ( Sect ions I and II)

Up to2000

2001-2005

2006-2010

2011-2015

2016-2021

Car/Pickup 8.4 7.8 7.0 6.8 6.8

Bus 6.4 5.9 5.4 5.3 5.3

Trucks (LCV,HCV,MAV) 8.4 6.8 5.2 5.0 5.0

Vehicle Type Maharashtra (Sect ion III)

Up to2000

2001-2005

2006-2010

2011-2015

2016-2021

Car/Pickup 9.7 9.0 8.1 7.8 7.8

Bus 7.4 6.8 6.3 6.0 6.0

Trucks (LCV,HCV,MAV) 9.7 7.8 6.0 5.7 5.7

HCV = heavy cargo vehicle; LCV = light commercial vehicle; MAV = multi-axle vehicle.

11. Applying the growth rates to the base year AADT (1997), traffic projections areobtained for each year of the Project’s life. The AADT for motorized traffic will double toabout 28,000 vehicles per day by 2007, and will exceed 50,000 by 2020. These figures arebased on normal traffic. The improved facility is expected to attract generated6 traffic thatbased on the perceived transport costs savings, will materialize in an additional 4 percent ofcars/utilities vehicles, 6 percent of buses, and 7 percent of trucks, of the normal traffic. Theexistence of diverted traffic, from or to the project road, was analyzed. However, since thereare no alternate routes serving the Surat-Mumbai corridor, there is no likelihood of anytraffic diversion.

6 Generated traffic is traffic that did not exist before the road improvement, but will be attracted as a result of

the reduction in perceived transport cost on the project road. As opposed to normal traffic that existedbefore the road improvement and would continue to grow with or without the Project.

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Appendix 18, page 1

ECONOMIC ANALYSISA. General

1. The economic evaluation of the Project was carried out for the with- and without-project scenarios. In the without-project scenario, the existing two-lane alignment would beused until the practical capacities were exceeded, which is expected to occur in 2001. Thiswould produce an increasing level of traffic congestion with a mixture of slow- and fast-moving vehicles. In the with-project scenario, the new four-lane alignment would allowimproved traffic flow conditions, higher vehicle speeds, and shorter travel time translatinginto lower vehicle operating costs (VOCs). A six-lane scenario was also preliminaryconsidered as an alternative for the Project. After comparing these two mutually exclusiveoptions it was found that the six-lane scenario had higher initial capital costs and that it willhave spare capacity until 2008. Therefore the four-lane alignment proved to be the one withthe least cost and, as a result, the one adopted for the Project.

B. Costs

2. The economic costs of implementing the Project were estimated from the financialcosts of civil works, physical contingencies, land acquisition for the right-of-way, andconstruction supervision. Price escalation provisions, interest during construction, and taxesand duties were deducted from the financial costs to derive the economic costs. Goods andservices were divided into tradable and nontradable groups. The financial costs of thetradables were expressed in border prices plus transport and handling costs, while thefinancial costs of nontradables were converted into economic costs by using the standardconversion factor of 0.9.1 Financial operation and maintenance (O&M) costs were alsoadjusted by the same approach to obtain economic costs. The pavement road surface willhave routine and periodic maintenance during the operation of the Project. IncrementalO&M costs were calculated as the difference between O&M requirements for the new four-lane alignment and the ones that the existing two-lane alignment would require. Alleconomic costs were estimated in constant 1998 prices. A salvage value of 15 percent wasintroduced in 2021, at the end of the project life cycle.

C. Benefits

3. The widening to a four-lane alignment will increase the capacity, offer lower VOCs,and reduce travel time. The improvement will also attract generated2 traffic to the road.Benefits of generated traffic were calculated as half of the VOC savings per vehicle unit.Benefits accrued due to time savings were not considered for the analysis, in order toobtain conservative estimates. VOCs were calculated3 based on vehicle and roadcharacteristics for six different vehicle types (cars, utility vehicles/minibuses, buses, lightcommercial vehicles, heavy commercial vehicles, and multi-axle vehicles). VOCs for thewith- and without-project cases are shown in Table A18.1. It is expected that the existingtwo-lane alignment will reach capacity in 2001. Benefits will not increase after 2007 sincethe four-lane alignment is expected to reach capacity in that year.

1 SCF= 0.9 utilized in recent foreign-assisted road improvement projects.2 Generated traffic is traffic that did not exist before the road improvement, but will be attracted as a result of

the Project. As opposed to normal traffic that existed before the road improvement and would continue togrow with or without the Project.

3 VOCs were calculated using the Highway Design and Maintenance model (HDM-Manager), developed bythe World Bank and used worldwide as best practice.

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Appendix 18, page 2

Table A18.1: Vehicle Operating Costs by Vehicle Type(Rs/vehicle-km)

Vehicle Type Car Utility Bus LCV HCV MAV

Without Project 3.74 6.05 7.85 7.14 8.81 11.87

With Project 2.98 4.37 6.04 5.14 7.05 10.45

VOC Savings 0.76 1.68 1.81 2.00 1.76 1.42HCV = heavy cargo vehicle; LCV = light commercial vehicle; MAV = multi-axle vehicle;VOC = vehicle operating cost.

4. Economic evaluations were carried out for the project analysis sections, as well asfor the Project as a whole; the national highway analysis sections are homogeneous interms of traffic flows. For estimation of the economic internal rate of returns (EIRRs), benefitstreams were calculated for a period of 20 years starting in 2002, which covers theeconomic life of the improvements under the Project. Costs and benefits was estimated netof duties and taxes, and are expressed in constant 1998 prices in the project area. Theannual benefit and cost streams for the Project are presented in Table A18.2. The baseEIRR for the Project is 25 percent, while the EIRRs for the analysis sections vary between22 and 27 percent.

5. The sensitivity of the EIRRs was analyzed for changes in the underlying cost andbenefit parameters (Table A18.3). The results of this analysis show with that the adverseassumption of a 15 percent increase in project costs, the EIRR would decrease to 22percent. If benefits only materialized to 85 percent of the original estimates, due to anoverestimation of traffic growth, the EIRR would decrease to 22 percent. In the mostadverse situation of a simultaneous increase in project cost by 15 percent and a reductionof benefits by 15 percent, the overall EIRR will be 19 percent. The switching value4 for costwas determined to be 129 percent, and switching value for benefits 55 percent. Thescenario of a possible delay in Project implementation by one year was also considered,and in that case, the EIRR would decline to 21 percent.

Table A18.3. Sensitivity Analysis

ScenarioEIRR(%)

NPV(Rs million)

SwitchingValue (%)

Base Case 25 7,768Increase Costs by 15 percent 22 6,831 129Reduce Benefits 15 percent 22 5,666 (55)Increase Costs by 15 percent andReduce Benefits by 15 percent

19 4,651

Delay in Project Completion by 1 year 21 5,847EIRR = economic internal rate of return; NPV = net present value.

4 The switching value shows the percentage increase in a cost variable (or decline in a benefit variable)

required for the net present value to become zero, which is the same as the EIRR reducing to the cut-offlevel of 12 percent.

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Appendix 18, page 3

Table A18.2: Economic Internal Rate of Return Calculation(Rs million)

Year Capital

CostsIncremental

O&Mw/ Project

TotalBenefits

VOCSavings

Net Benefits

1999 1,219.2 1,219.2 (1,219.2)2000 2,032.1 2,032.1 (2,032.1)2001 2,032.1 2,032.1 (2,032.1)2002 2,032.1 2,032.1 (2,032.1)2003 812.8 9.3 822.1 1,284.9 462.82004 (141.4) (141.4) 2,755.0 2,896.42005 9.3 9.3 2,953.7 2,944.42006 465.0 465.0 3,121.2 2,656.22007 9.3 9.3 3,298.4 3,289.12008 9.3 9.3 3,298.4 3,289.12009 (141.4) (141.4) 3,298.4 3,439.72010 9.3 9.3 3,298.4 3,289.12011 1,066.8 1,066.8 3,298.4 2,231.52012 9.3 9.3 3,298.4 3,289.12013 9.3 9.3 3,298.4 3,289.12014 (141.4) (141.4) 3,298.4 3,439.72015 9.3 9.3 3,298.4 3,289.12016 465.0 465.0 3,298.4 2,833.32017 9.3 9.3 3,298.4 3,289.12018 9.3 9.3 3,298.4 3,289.12019 (141.4) (141.4) 3,298.4 3,439.72020 9.3 9.3 3,298.4 3,289.12021 465.0 465.0 3,298.4 2,833.32022 (1,036.3) 9.3 (1,027.1) 3,298.4 4,325.5

EIRR= 25%

NPV= 7,768

EIRR = economic internal rate of return; NPV = net present value; O&M = operation and maintenance;VOC = vehicle operating cost.

64