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Completion Report

Project Number: 23241 Loan Number: 1556 & 1557-IND November 2011

India: Mumbai and Chennai Ports Project

CURRENCY EQUIVALENTS

Currency Unit – Indian rupees (Re/Rs)

At Appraisal At Loan Closure (1 September 1997) (11 September 2002)

Rs1.00 = $0.02753 $0.02063 $1.00 = Rs36.33 Rs48.47

ABBREVIATIONS

ADB BOT CHPT EIRR FIRR JNPT MBPT MOST MOT O&M PCR PIO TA TAMP TCR TEU

– – – – – – – – – – – – – – – –

Asian Development Bank build-operate-transfer Chennai Port Trust economic internal rate of return financial internal rate of return Jawaharlal Nehru Port Trust Mumbai Port Trust Ministry of Surface Transport marine oil terminal operation & maintenance project completion review Project Implementation Office technical assistance Tariff Authority for Major Ports technical assistance completion report twenty-foot equivalent unit

NOTES

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

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

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Vice President X. Zhao, Operations 1 Director General S. H. Rahman, South Asia Department (SARD) Director H. Kim, Country Director, India Resident Mission, SARD Team leader A. K. Motwani, Senior Project Officer (Transport), India Resident

Mission, SARD Team members M. Gomes, Project Analyst, India Resident Mission, SARD

M. Sharma, Senior Project Assistant, India Resident Mission, SARD P. Sahu, Associate Project Analyst, India Resident Mission, SARD

CONTENTS

Page

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 2 D. Disbursements 3 E. Project Schedule 4 F. Implementation Arrangements 4 G. Conditions and Covenants 5 H. Related Technical Assistance 5 I. Consultant Recruitment and Procurement 6 J. Performance of Consultants, Contractors, and Suppliers 7 K. Performance of the Borrower and the Executing Agency 7 L. Performance of the Asian Development Bank 7

III. EVALUATION OF PERFORMANCE 7 A. Relevance 7 B. Effectiveness in Achieving Outcome 8 C. Efficiency in Achieving Outcome and Outputs 8 D. Preliminary Assessment of Sustainability 9 E. Impact 9

IV. OVERALL ASSESSMENT 10

APPENDIXES 1. Chronology of Major Events in Project and TA Processing and Implementation 11 2. Project Framework 13 3. Average Annual Exchange Rate 16 4. Summary of Contracts Funded by the Asian Development Bank 17 5. Project Costs (Estimate and Actual) 19 6. Projected and Actual Disbursements of Loan Proceeds 20 7. Project Implementation Schedule 21 8. Status of Compliance with Major Loan Covenants 23 9. Operational Efficiency and Handling Costs at Mumbai and Chennai Ports 30 10. Economic Reevaluation 31 11. Financial Reevaluation 39 12. Quantitative Assessment of Overall Project Performance 44

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BASIC DATA

A. Loan Identification 1. Country India

2. Loan Numbers 1556 & 1557-IND

3. Project Title Mumbai Port Project (Loan 1556-IND) and

Chennai Port Project (Loan 1557-IND)

4. borrowers a. Mumbai Port Project

b. Chennai Port Project Mumbai Port Trust Chennai Port Trust

5. Executing Agency a. Mumbai Port Project

b. Chennai Port Project Mumbai Port Trust Chennai Port Trust

6. Amount of Loan a. Mumbai Port Project

Original Loan Amount $97.8 million Cancellation on Closure $54.383 million (1 June 2001) Net Loan Amount $43.417 million

b. Chennai Port Project

Original Loan Amount $15.2 million First Partial Cancellation $6.7 million (10 Jan 2000) Cancellation on Closure $3.988 million (11 Sep 2002) Net Loan Amount $4.512 million

7. Project Completion Report Number 1275

B. Loan Data 1. Appraisala – Date Started 5 December 1994 – Date Completed 16 December 1994

2. Loan Negotiations – Date Started 27 August 1997 – Date Completed 29 August 1997

3. Date of Board Approval 29 September 1997

4. Date of Loan Agreement 25 September 1998

a Further processing was delayed due to several factors, including concerns relating to disbursement readiness and

inadequate progress on policy reforms. Reappraisal was undertaken from 26 May to 11 June 1997 to formulate the project and its policy agenda.

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5. Date of Loan Effectiveness (a) Mumbai Port Project – In Loan Agreement 24 December 1998 –Actual 6 January 1999 – Number of Extensions One (b) Chennai Port Project – In Loan Agreement 24 December 1998 – Actual 23 February 1999 – Number of Extensions Three

6. Closing Dates (a) Mumbai Port Project – In Loan Agreement 30 September 2003 – Actualb 1 June 2001 – Number of Extensions None (b) Chennai Port Project – In Loan Agreement 30 March 2003 – Actualc 11 September 2002 – Number of Extensions None

7. Terms of Loan – Interest Rate pool-based variable lending rate system for US

dollar loans – Maturity (number of years) 25 – Grace Period (number of years) 5

8. Disbursements a. Dates (i) Loan 1556-IND: Mumbai Port Project

Initial Disbursement 4 February 1999

Effective Date 6 January 1999

Final Disbursement

1 June 2001

Original Closing Dateb 30 September 2003

Time Interval

28 months

Time Interval 56 months

(ii) Loan 1557-IND: Chennai Port Project

Initial Disbursement 1 June 1999

Effective Date

23 February 1999

Final Disbursement

1 June 2002

Original Closing Datec 30 March 2003

Time Interval

36 months

Time Interval 49 months

b The loan was closed on 1 June 2001 during the implementation period and the undisbursed amount was canceled. Mumbai Port Trust decided to complete the project through its own funds.

c The loan was closed on 11 September 2002 during the implementation period and the undisbursed amount was canceled. Chennai Port Trust decided to complete the project through its own funds.

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b. Amount ($ million)

Category Original Allocation

Partial Cancellations

Last Revised

Allocation Amount

Disbursed Undisbursed Balance

A. Loan 1556-IND: Mumbai Port Projecta 1. Civil Works 61.40 0.00 61.40 37.03 24.37

1A. Submarine Pipelines 35.70 0.00 35.70 35.51 0.19 1B. Others 25.70 0.00 25.70 1.52 24.18

2. Equipment 3.70 0.00 3.70 0.00 3.70 3. Consulting Services 7.00 0.00 7.00 3.07 3.93

4. Interest and Commitment Charges

12.00

0.00

12.00

3.32

8.68

5. Unallocated 13.70 0.00 13.70 0.00 13.70

Subtotal (A) 97.80 0.00 97.80 43.42 54.38

B. Loan 1557-IND: Chennai Port Projectb 1. Civil Works 12.00 5.00 7.00 4.01 2.99 2. Interest and Commitment Charges

1.50

0.00

1.50

0.50

1.00

3. Unallocated 1.70 1.70 0.00 0.00 0.00 Subtotal (B) 15.20 6.70 8.50 4.51 3.99

Total (A+B) 113.00 6.70 106.30 47.93 58.37 a An undisbursed loan amount of $54.38 million was canceled at loan closing on 1 June 2001. b An undisbursed loan amount of $3.99 million was canceled at loan closing on 11 September 2002. A partial cancellation of $6.7 million was made on 10 January 2000.

Source: Asian Development Bank 9. Local Cost (Financed) None

C. Project Data

1. Project Cost ($ million) Cost Appraisal Estimate Actual Foreign Exchange Cost 150.50 128.59 Local Currency Cost 94.50 106.99 Total 245.00 235.58

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2. Financing Plan ($ million)

Appraisal Estimate Actuala Source Foreign Local Total Foreign Local Total Mumbai Port Project

ADB 97.80 0.00 97.80 43.42 0.00 43.42 MPBT 0.00 55.30 55.30 28.50 45.26 73.76

Subtotal 97.80 55.30 153.10 71.92 45.26 117.18 Chennai Port Project

ADB 15.20 0.00 15.20 4.51 0.00 4.51 CHPT 9.50 30.40 39.90 5.90 11.44 17.34 Private Sector 28.00 8.80 36.80 46.26 50.29 96.55

Subtotal 52.70 39.20 91.90 56.67 61.73 118.40 Total Project

ADB 113.00 0.00 113.00 47.93 0.00 47.93 MBPT + CHPT 9.50 85.70 95.20 34.40 56.70 91.10 Private Sector 28.00 8.80 36.80 46.26 50.29 96.55

Total 150.50 94.50 245.00 128.59 106.99 235.58

ADB = Asian Development Bank, CHPT = Chennai Port Trust, MBPT = Mumbai Port Trust a The project was closed during implementation and the undisbursed amount was canceled. The project was completed by MBPT and CHPT through their own funds.

3. Cost Breakdown by Project Component ($ million)

Project Component Appraisal Estimate Actual Foreign Local Total Foreign Local Total

I. Mumbai Port Project A. Base Cost 72.10 43.90 116.00 68.60 45.26 113.86 B. Contingencies 13.70 11.40 25.10 0.00 0.00 0.00 C. Interest during Construction 12.00 0.00 12.00 3.32 0.00 3.32

Subtotal 97.80 55.30 153.10 71.92 45.26 117.18 II. Chennai Port Project A. Base Cost 45.00 34.70 79.70 56.17 61.73 117.90 B. Contingencies 6.20 4.50 10.70 0.00 0.00 0.00 C. Interest during Construction 1.50 0.00 1.50 0.50 0.00 0.50

Subtotal 52.70 39.20 91.90 56.67 61.73 118.40

Total (I + II) 150.50 94.50 245.00 128.59 106.99 235.58

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4. Project Schedule

Item Appraisal Estimate Actual Loan 1556-IND: Mumbai Port Project Consulting Services Design and Supervision Jan 1997–Mar 2003 Apr 1997–Dec 2004 Replacement of Submarine Pipeline Jul 1997–Jun 2000 Feb 1998–Jan 2000 Bund Jetty Piping and Electric works Jan 1998–June 2003 Jun 1998–Dec 2004 Firefighting Facilities Jan 1998–Mar 2003 Jun 1998–Dec 2004 Loading Arms Apr 1998–Mar 2003 Apr 2000–Dec 2004 Replacement of Pipelines—Manifold Terminal Jun 1998–Sep 2000 Jul 2001–Jun 2004 Loan 1557-IND: Chennai Port Project Design and Supervision Jan 1997–Sep 2002 Jan 1997–Dec 2002 West Quay Modernization Oct 1997–Dec 1999 Feb 1998–Dec 2002 North Quay Modernization Apr 1998–June 2000 Feb 1998–Dec 2002 Extension of South Quay III Oct 1998–Dec 2000 Feb 1998–Nov 2002 Modernization of East Quay Berths Oct 1998–Sep 2001 Feb 1998–Dec 2002

5. Project Performance Report Ratingsa

Implementation Period

Ratings

Development Objectives

Implementation Progress

(i) Mumbai Port Project From 1 December 1998 to 31 December 2000 S S From 1 January to 1 June 2001 N/A N/A (ii) Chennai Port Project From 1 October 1998 to 31 January 2000 S S From 1 February 2000 to 31 December 2000 PS S From 1 January 2001 to 28 February 2002 N/A N/A From 1 March 2002 to 11 September 2002 S S N/A = not available, PS = partly satisfactory, S = satisfactory a Ratings in the project performance report are arrived at by a method different from that for project completion report ratings.

D. Data on Asian Development Bank Missions Name of Mission Date No. of

PersonsNo. of

Person-DaysSpecialization of

Membersa

Fact-Finding 7–28 Jul 1994 5 85 a,b,d,f Appraisal 5–16 Dec 1994 3 36 a,d,e Reconnaissance Mission 13–21 Feb 1997 Reappraisal Mission 26 May–11 Jun 1997 6 60 a,c,d Inception Mission 29 Oct–6 Nov 1998 2 12 b,g Review Mission 1 12–21 Apr 1999 1 9 b Review Mission 2 8–17 Nov 1999 1 10 b Review Mission 3b 3–7 Dec 2001 1 5 a a a = engineer, b = economist, c = programs officer, d = financial analyst, e = counsel, f = environment specialist. b The mission reviewed Loan 1557-IND: Chennai Port Project and Ennore Port component under Loan 1181-IND: Coal Ports Project.

Source: Asian Development Bank’s back-to-office reports

I. PROJECT DESCRIPTION 1. The objectives of the project were to rehabilitate and reconstruct deteriorating port facilities by (i) modernizing outdated liquid cargo-handling systems and eliminating the possibility of failure of the oil pipelines at Mumbai Port; and (ii) expanding the existing port facilities to increase cargo-handling capacity for containers and other general cargo at Chennai Port. It would also substantially eliminate the environmental risks associated with the existing operations at Mumbai Port by replacing the submerged oil pipeline with state-of-the-art technology and modern oil-handling equipment and safety features. The over 40-year-old pipelines had been causing serious damage to the environment due to frequent leakages. The project also intended to initiate private sector participation in container terminal operations at Chennai Port, in line with government policy. 2. The investment components under the Project were:

i. Mumbai Port. Replacement of submarine oil pipelines; modernization of the three existing oil berths and related pipelines, facilities and safety equipment; and consulting services.

ii. Chennai Port. Extension of the container berth, expansion of the container yard and upgrading of existing berths; provision of cargo-handling equipment; rehabilitation of existing berths and dredging at inner harbor; and provision of safety equipment.

3. A private sector party, to be selected by Chennai Port Trust (CHPT) using competitive bidding procedures, was to provide the container-handling equipment and to operate the container terminal, including the container berths financed by the Asian Development Bank (ADB). 4. In conjunction with the project, an advisory technical assistance (TA) was provided to operationalize the government's recent port policy reform initiative in the following areas: (i) enhancement of port commercialization and introduction of corporatization policy; (ii) issuance of policies and guidelines for private sector participation; and (iii) implementation of cost-based tariffs in major ports through the establishment of the Tariff Authority for Major Ports (TAMP).1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 5. A chronology of the main events of project processing and implementation are in Appendix 1. A. Relevance of Design and Formulation 6. The project was and is still highly relevant and consistent with the Government of India’s overall development objectives. The upgraded components at these two ports were the logical next step to complement the facilities created with earlier ADB assistance. The Ports Development Project financed modernization of the container handling capacity in Chennai Port, while the Second Ports Project financed construction of a new oil berth at Pir Pau in Mumbai

1 ADB. 1997. Technical Assistance to India for Enhancement of Inda Ports Policy Implementation. Manila (TA 2880-IND, for $1.588 million, approved on 29 September 1997).

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Port.2 As Mumbai Port's marine oil terminal could fail to function at any time, with disastrous environmental and economic consequences, modernization of the facility was as a matter of urgency. The project’s implementation has averted the risk of environmental damage to the harbor from a possible failure of one of the old submarine pipelines. The implementation of the project at Chennai Port has helped turn it into a “clean cargo” port after the coal and hazardous cargo handling was moved to ADB-financed Ennore Port, about 20 kilometers (km) north of Chennai.3 7. Subsequent to this project, ADB has not been involved in the port subsector, as it considered that development of port infrastructure could be adequately undertaken through public-private partnerships. B. Project Outputs 8. At appraisal, the outputs envisaged under the Mumbai Port project were (i) replacement of seven submarine pipelines by five new lines between Pir Pau and Butcher Island; (ii) thorough upgrading of the three oil berths, including repair of damaged structures and modernization of firefighting, safety, and transfer facilities; (iii) replacement of loading arms and support; and (iv) replacement of the onshore service pipeline system. 9. At appraisal, the outputs envisaged under the Chennai Port project were (i) rehabilitation of the inner harbor; (ii) civil works for the extension of the container berth, expansion of the container yard, and upgrading of existing berths; and (iii) cargo-handling equipment.4 10. At an advanced stage of implementation, Mumbai Port Trust (MBPT) and CHPT decided to close the loan and undertake the completion of the project through their own funds. The undisbursed amount was canceled during implementation and the disbursed amount was prepaid by MBPT and CHPT. The borrowers had decided to cancel and prepay the loan because of (i) the reduction of interest rates in domestic financial markets; (ii) exchange rate movements; and (iii) their improved financial position. 11. Subsequent to loan cancellation and prepayment, components of the Chennai Port project were progressively completed by December 2002 and for the Mumbai Port project by December 2004. 12. The achievements against the targets, indicators, and outputs envisaged at appraisal in the project framework are in Appendix 2. C. Project Costs 13. At appraisal, the project cost was estimated at $245 million—$150.5 million (about 61%) in foreign exchange cost (including $13.5 million for interest during construction) and $94.5 million (about 39%) in local currency cost. ADB provided two loans totaling $113 million (46% of

2 ADB. 1987. Report and Recommendation of the President to the Board of Directors: Proposed Loan to India for Ports Development. Manila (Loan 842-IND, for $87.6 million, approved on 24 September 1987); ADB. 1990. Report and Recommendation of the President to the Board of Directors: Proposed Loan to India for Second Ports. Manila (Loan 1016-IND, for $129 Million, approved on 29 March 1990).

3 ADB. 1992. Report and Recommendation of the President to the Board of Directors: Proposed Loan to India for Coal Ports. Manila. (Loan 1181-IND, for $285 million, approved on 27 October 1992).

4 Cargo-handling equipment will be provided separately by a private sector party (which will also operate the container terminal) selected by Chennai Port Trust using competitive bidding procedures.

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the project cost) from ordinary capital resources to finance all the foreign exchange cost, except that for civil works and cargo-handling equipment at CHPT. 14. The cost for the Mumbai Port project was estimated at Rs5377 million ($153.1 million equivalent). The loan amount was $97.8 million and MBPT was to finance the remaining $55.3 million. 15. The cost for the Chennai Port project was estimated at Rs3244 million ($91.9 million equivalent). The loan amount was $15.2 million. A private sector party, to be selected by CHPT, was to finance the foreign exchange cost of $28 million and local currency cost of $8.8 million equivalent for the cargo-handling equipment; CHPT was to finance the remaining $39.9 million. 16. The overall completion cost of Rs5313 million ($117.2 million equivalent) for the Mumbai Port project was comparable with the appraisal estimate of Rs5377 million ($153.1 million equivalent). The equivalent cost in dollars was much lower than the appraisal estimate due to the depreciation of the rupee. 17. The overall completion cost of Rs5583 million ($118.4 million equivalent) for the Chennai Port project was significantly higher than the appraisal estimate of Rs3244 million ($91.9 million equivalent). This was due to significantly higher investments made by the private sector operator for the equipment and buildings under the concession for operation of container terminal awarded to them by CHPT. The bids for ADB-funded components were quite low compared with the appraisal estimates of $29.6 million (Rs1045 million) and the cumulative contract amounts were therefore lower at Rs740 million ($$15.8 million equivalent) During implementation $6.7 million, out of a total loan amount of $15.2 million, was canceled at CHPT’s request, due to a lower contract value and the depreciation of the rupee. 18. Of the overall completion cost of $235.58 million, $96.55 million was funded by the private sector, $73.76 million by MBPT, $17.34 million by CHPT, and $47.93 million by ADB. ADB funding was reduced due to loan cancellation during implementation (para. 10). The cancellation of the loan during implementation and subsequent prepayment (paras. 21 and 22) helped MBPT and CHPT reduce the project’s interest cost. 19. The average rates of exchange used are in Appendix 3. A summary of contracts financed by ADB is in Appendix 4. The estimated cost of the project at appraisal and the actual completion costs are in Appendix 5. D. Disbursements 20. A disbursement schedule was included under the project framework at appraisal. The disbursement for the two loans during implementation in comparison with the appraisal estimate is in Appendix 6. 21. A total of $43.42 million was disbursed under the Mumbai Port project. The undisbursed amount of $54.4 million was canceled and the loan was closed on 1 June 2001. The outstanding loan amount of $43.42 million was prepaid by MBPT during December 2001 to February 2002 together with a prepayment premium and interest. 22. A total of $6.5 million was canceled on 10 January 2000 under the Chennai Port project due to a lower bid price and the depreciation of the rupee. CHPT did not submit any reimbursement claims in 2001 because it was contemplating premature cancellation and

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prepayment of the loan and intending to finance the project through its own funds. A total of $4.51 million was disbursed under the Chennai Port project. The undisbursed $3.99 million was canceled and the loan was closed on 11 September 2002. CHPT prepaid the outstanding loan amount of $4.51 million in October 2002 together with a prepayment premium and interest. E. Project Schedule 23. The project was initially appraised in 1994–95, but was subsequently put on hold as the government did not make the required up-front policy decisions. After these had been made in 1996, the project was re-appraised in 1997 as the Mumbai and Chennai Ports project. ADB approved the loans on 29 September 1997, and both loan agreements were signed on 25 September 1998. The loan for the Mumbai Port project became effective on 6 January 1999 and for the Chennai Port project on 23 February 1999. The delay in loan signing and effectiveness was largely a result of the status of project preparedness. During the 1-year waiting period, MBPT, through advanced action approved in 1995, had employed the design and supervision consultants for rehabilitation of submarine pipelines, who assisted MBPT in the preparation of bid documents and invitation of bids. Two bids were received for the first contract package on the rehabilitation of submarine pipelines, and the contract was awarded in February 1999. CHPT initiated the prequalification of contractors for the contract packages on the rehabilitation of its inner harbor, and the contracts were awarded in October 1999. 24. The loan closing dates for the Mumbai and Chennai Ports Project were 30 September 2003 and 31 March 2003 respectively. The estimated project completion dates were 31 March 2003 and 30 September 2002, respectively. 25. During the implementation period, MBPT decided to undertake the Mumbai Port project through its own funds and the loan was canceled (para. 21). At the time of the loan cancellation, a major contract for replacement of submarine pipelines had already been completed and the new pipelines had been commissioned. The contract for modernization of marine oil terminal (MOT) berths had just been awarded and the contract for marine loading arms was being awarded. The contracts for replacement of onshore pipelines were completed in June 2004 and that for modernization of MOT berths and loading arms in December 2004. These were beyond the estimated project completion date of March 2003. 26. Similarly, CHPT also decided to cancel the loan for the Chennai Port project and undertake it through its own funds (para. 22). As compared to the completion date of 30 September 2002 for the ADB-funded contracts, these were completed by December 2002. The concession for providing equipment and for the operation of the container terminal was awarded to the private sector in December 2001 and the investments for augmentation of equipment and facilities continued until 2005. 27. The actual implementation of each component compared to the appraisal estimate is in Appendix 7. F. Implementation Arrangements 28. The implementation arrangements during implementation were as envisaged at appraisal. The borrowers were MBPT for the Mumbai Port project and CHPT for the Chennai Port project. The Government of India guaranteed the loans under a guarantee agreement with ADB. MBPT and CHPT were the executing agencies responsible for the respective loans.

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29. The Project Implementation Office (PIO) for the Mumbai Ports project, as required under the loan agreement, was established on 1 July 1997 and was headed by a deputy chief engineer. Although the PIO was not fully staffed during the initial period, it was operational and its staff was augmented subsequently. 30. The PIO for the Chennai Ports project, as required under the loan agreement, was established with the redeployment of existing staff. The PIO was headed by a chief engineer/project director and was fully operational. The PIO staff was further augmented during the implementation period. G. Conditions and Covenants 31. The details of compliance with the major covenants under the loan are in Appendix 8. The government and the executing agency generally complied with the loan covenants. 32. MBPT and CHPT complied with the loan covenants related to setting up the PIO, implementation of technical assistance, and submission of audited financial statements. There were initial delays in complying with the loan covenants for commercialization of the ports and private sector participation in the port sector. The Government of India has since undertaken major policy initiatives on commercialization of ports and public-private partnerships in the development and operation of ports. MBPT and CHPT have awarded several concessions to the private sector for augmentation, development, and operation of port infrastructure and facilities.

H. Related Technical Assistance 33. The project had associated advisory technical assistance (TA) to assist the government with the (i) enhancement of port commercialization and introduction of corporatization policy; (ii) issuance of policies and guidelines for private sector participation; and (iii) implementation of cost-based tariffs in major ports through the establishment of the Tariff Authority for Major Ports (TAMP). The executing agency for the TA was the Ministry of Surface Transport (MOST). MBPT, CHPT, the Jawaharlal Nehru Port Trust (JNPT), and TAMP were the implementing agencies. The consultants were fielded in September 1998 and the TA was completed in September 2001. The TA completion report (TCR) was circulated in September 2001. 34. The TA delivered seven volumes of reports and responded to a number of issues relating to corporatization of Ennore and JNPT ports, commercialization of terminals at Mumbai, and strategies for TAMP, and provided hands-on assistance and advice on valuation of leases, setting of prices, and the invitation and evaluation of bids for privatization. A study tour for government officials to Sri Lanka, Malaysia, and Singapore was conducted to visit privatized ports in these countries. Several seminars on commercialization, privatization, corporatization, and tariff setting were held. The TCR assessed that the TA was successfully implemented, within budget and without any major problems. The successful implementation was attributed to consultants’ good performance, satisfactory cooperation of officials and staff from the major ports, and ADB’s professional approach in supervising and monitoring the work. The TA achieved its objectives and was rated generally successful.

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I. Consultant Recruitment and Procurement

1. Consultant Recruitment 35. Consultant recruitment conformed to ADB’s Guidelines on the Use of Consultants. As envisaged at appraisal, 1 consultant was recruited for design and supervision of the Mumbai Port project. 36. At the government’s request, ADB had approved advance procurement action and retroactive financing for the recruitment of consultants for detailed engineering and construction supervision and procurement of materials for submarine pipelines for the Mumbai Port project. The amount of retroactive financing was limited to $6.9 million and was applicable from 22 April 1997, when the contract for the first consulting services for detailed engineering and construction supervision was signed. As envisaged at appraisal, CHPT undertook the detailed engineering and construction supervision for the Chennai Port project.

2. Procurement 37. Project goods and services under ADB financing were procured according to ADB’s Procurement Guidelines as envisaged at appraisal. Although advance procurement and retroactive financing was approved for the submarine pipeline component for the Mumbai Port project (para. 36), the initiation of procurement was delayed due to slow decision making and the contract was not awarded until 10 February 1999. 38. At appraisal, construction works for the Mumbai Port project were envisaged to be packaged as six contracts. During implementation, three of these contracts, for (i) modernization of the three existing berths, (ii) related pipelines and facilities, and (iii) safety equipment, were combined into a single contract, with individual berths as components, since the modernization works were to be taken up in a sequential order. During implementation, work was carried out under four contracts, for (i) replacement of seven pipelines by five new lines between Pir Pau and Butcher Island; (ii) thorough upgrading of the three oil berths, including repair of damaged structures and modernization of firefighting, safety, and transfer facilities; (iii) replacement of loading arms and support; and (iv) replacement of the onshore service pipeline system. 39. The procurement activities for modernization of oil berths took longer and were delayed considerably, as compared to the estimate at appraisal due to slow decision making and procedural delays. Accordingly, the procurement and contract award for the related activities of (i) replacement of loading arms and support; and (ii) onshore service pipeline system were deferred so as to match with the progress of modernization of oil berths. 40. At appraisal, the Chennai Port project was envisaged to be implemented through four ADB-funded contracts, for (i) west quay modernization; (ii) north quay modernization; (iii) extension of south quay III; and (iv) modernization of the east quay berth. During implementation, these contracts were combined into two, for (i) modernization of the west and north quays; and (ii) extension of south quay III and modernization of the east quay. The contract award for modernization of the west and north quays was delayed by 10–16 months due to slow decision making and procedural delays, as compared to the appraisal estimates.

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J. Performance of Consultants, Contractors, and Suppliers

1. Consultants 41. MBPT engaged one international consultant for detailed design, preparation of tender document, evaluation of tenders, construction supervision, and supervision of installation of equipment for the Mumbai Port project. No issues were reported on the performance of the consultant during ADB reviews. The performance of consultant is rated satisfactory.

2. Contractors 42. Overall, the performance of the civil works contractors is rated satisfactory. The contractor for submarine pipelines for the Mumbai Port project completed the works in 17 months as against the appraisal estimate of 24 months. The other contracts were also completed within the time period estimated at appraisal. The execution of contracts for the Chennai Port project was delayed by 6–24 months, due to technical problems encountered during construction, as compared to the appraisal estimates. K. Performance of the Borrower and the Executing Agency 43. MBPT and CHPT were the borrowers and the executing agency for the project. The PIOs were set up by the executing agencies in a timely manner. The procurement activities were, however, delayed, resulting in delayed contract awards. The executing agencies complied with the loan covenants during project implementation. The executing agencies have been able to improve operational efficiency and reduce handling costs, resulting in the achievement of project outcomes (para. 48). Satisfactory cooperation of the officials and staff from MOST (i.e., the executing agency for the TA) contributed to successful implementation of the TA. L. Performance of the Asian Development Bank 44. The project was administered and supervised from ADB headquarters before the transfer of those functions to the India resident mission on 15 September 2001. The Mumbai Port project had been canceled and prepaid before the project’s delegation to the resident mission. ADB conducted an inception mission in November 1998 and subsequently conducted three review missions in April 1999, November 1999, and December 2001. Overall, ADB’s performance was rated satisfactory.

III. EVALUATION OF PERFORMANCE A. Relevance 45. The project is considered highly relevant, as it was and is still consistent with the government’s overall development objectives. The upgraded components at the two ports under the project were the logical next step to complement the facilities created with earlier ADB assistance (para. 6). The implementation of the project has averted the risk of environmental damage to the harbor from a possible failure of one of the old submarine pipelines in Mumbai Port. The implementation of the project at Chennai Port has helped turn it into a clean cargo port since the coal and hazardous cargo was moved to ADB-financed Ennore Port, about 20 km north of Chennai.

8

46. The government and the Port Trusts have furthered the commercialization of ports and enhancement of private sector participation and this has since become the government's major policy initiative in development, capacity augmentation, and operation of ports. B. Effectiveness in Achieving Outcome 47. Overall, the project was effective. It achieved its primary objective of helping the government rehabilitate and reconstruct deteriorating port facilities by (i) modernizing outdated liquid cargo-handling systems and eliminating the possibility of failure of the oil pipelines at Mumbai Port; and (ii) expanding the existing port facilities to increase cargo-handling capacity for containers and other general cargo at Chennai Port. C. Efficiency in Achieving Outcome and Outputs 48. The project has resulted in the intended direct benefits of (i) cost savings through reduction in vehicle turnaround time, which includes ship waiting and service time; and (ii) avoidance of diversion to other facilities. Handling costs at these ports have also been reduced. A comparison of the operational efficiency parameters and handling costs5 at Mumbai Port and Chennai Port for FY2001 and 2005 are in Appendix 9. An economic and financial reevaluation of the project has been carried out; details are in Appendixes 10 and 11. Overall, the project is likely to be efficient.6 49. For the Mumbai Port project, the imminent danger of oil spills caused by 40-year-old pipelines was reduced. The old pipes had been causing serious damage to the environment due to frequent leakages. The reevaluation considered that the B1 pipeline, which was completely eroded, would have broken down by 2002 without the project. Accordingly, the handling rate would have come down and caused a reduction in capacity by 1.1 million tons. Another important contribution is savings in non-pumping time at berth. This has resulted in better utilization of facilities, saving non-working time and reducing ship time at berth. However, the refining capacity expansion projected at loan appraisal did not take place and as a consequence the traffic mix has changed toward products rather than crude, warranting a revised traffic forecast. The revised forecast, based on consultations with MBPT officials and a review of past reports, indicates that the berths will handle 5.4 million tons of crude in 2022, increasing from 2.45 million tons in 2011, and 9 million tons of products in 2022, increasing from 7.71 million tons in 2011. The revised total projected traffic (crude and products) of 14.4 million tons by 2022 is far lower than the traffic of 20.3 million tons projected and considered at appraisal for 2003 and beyond. Economic reevaluation has been carried out and the economic internal rate of return (EIRR) has been evaluated at 15.1% compared with an appraisal estimate of 18%. The financial internal rate of return (FIRR) at reevaluation is 4.9% compared with an appraisal estimate of 8.3%. 50. For the Chennai Port project, economic and financial reevaluations have been carried out separately for the inner harbor component and the container terminal component. As envisaged at appraisal, CHPT awarded a concession to the private sector in December 2001 for providing container-handling equipment and for operation of the container terminal. At appraisal, the capacity of the expanded container terminal at Chennai Port was estimated at 550,000 5 Sajikumar. 2007. Indian Ports: Post Liberalization Performance .The ICFAI Journal of Infrastructure, Volume V, No. 2. p. 42–57.

6 According to the guidelines of the Operations Evaluation Department (OED), a project with an estimated EIRR of more than 18% is normally rated highly efficient. A project with an EIRR of 12–18% is deemed efficient, one with an EIRR of 6% to less than 12% is less efficient, and one with an EIRR of less than 6% is inefficient.

9

twenty-foot equivalent unit (TEU), which was expected to be reached by 2008. However, the traffic growth has more than doubled between 2005 and 2010. The annual average compound growth rate (AACGR) was 6.1% between 1997 and 2002 (prior to the project) and increased to 13.3% between 2003 and 2011 (after the project). This necessitated further investments for capacity enhancement by the private sector concessionaire; consequently, the container traffic handled at the container terminal (CT-1) in 2011 reached 1.15 million TEU.7 With 885 meters (m) of quay, CT-1 has exceeded its maximum economic capacity of 1.0 Million TEU. As the traffic forecast for containers indicates that adequate potential exists for both container terminals, the traffic at CT-1 is limited to 1.0 million TEU per annum for the reevaluation period. The EIRR for the container terminal has been reevaluated at 22.3% compared with an appraisal estimate of 19.8%. The FIRR at reevaluation is 32.3% compared with an appraisal estimate of 16%. 51. Owing to capacity constraints, the break-bulk traffic at Chennai Port’s inner harbor stagnated at around 1.3 million tons per annum from 1995 until 2004. Subsequent to the modernization and capacity enhancement of the inner harbor under the project, break-bulk traffic increased to 2.1 million tons in 2005 and to 3.16 million tons in 2011. However, such growth is not sustainable. With the development of two container terminals and the enhanced potential of containerization, a growth rate of 2% per annum for the break-bulk cargo at the inner harbor is considered appropriate. Accordingly, it is projected that the break-bulk cargo will increase from 3.1 million in 2011 to 3.93 million tons by 2022. The actual and projected cargo traffic is much lower than the appraisal estimates. This is due to faster than envisaged containerization of cargo, which would otherwise have been transmitted as break-bulk cargo. At appraisal, it was estimated that an increased capacity of 5.7 million tons, after rededication of three coal berths, would be reached in 2009. The EIRR for the inner harbor component has been reevaluated at 22.3% compared with an appraisal estimate of 13.8%. The FIRR at reevaluation is 3.8% compared with an appraisal estimate of 8.4%. D. Preliminary Assessment of Sustainability 52. The project’s sustainability is rated likely. The government and the port trusts still need to address adequate port infrastructure and connectivity, high cost, labor inefficiencies, and obsolete equipment, to be on par with international counterparts. In order to meet the capacity constraints, expansion projects are being planned and implemented. The financial performance of the ports has improved. The government has undertaken major policy initiatives for public-private partnership in port development and operations. E. Impact

1. Environmental Impact 53. The environment was the secondary objective under the project’s classification. The project did not require a detailed environmental impact assessment. MBPT obtained environmental clearances from the Ministry of Environment and Forests between 1994 and 2001. The project has been able to introduce environmental improvements at Mumbai and Chennai ports. The replacement of 40-year-old dilapidated submarine oil pipelines at Mumbai Port, which was operating beyond its useful life, has resulting in the avoidance of leakages and possible rupture. Through the modernization of oil jetties and loading and unloading facilities 7 A second container terminal (CT-2) has been operated by a different operator at Chennai Port since 2010 and it handled 337,000 TEU In 2011. The extension of south quay III, developed for handling general cargo under the inner harbor development, has become part of CT-2.

10

and the improvement of safety-related facilities, the project has also reduced the risk of accidents from oil tankers and ships carrying hazardous and toxic chemicals, and has improved operating conditions. 54. At Chennai Port, the project, together with the coal ports project, has helped shift coal cargo to the newly constructed Ennore Port and convert Chennai Port into a clean port. The coal cargo at Chennai Port, which is located in the center of the city, used to contribute substantially to air pollution in the city of Chennai. The project’s positive environmental impacts far outweigh the negative impacts, which were primarily short-term and reversible and related to construction activities.

2. Resettlement Impact 55. The project was to be implemented within the existing secured boundary of the respective ports without any land acquisition or resettlement. No resettlement impacts were reported during implementation of the project.

IV. OVERALL ASSESSMENT 56. The project is considered successful, on the basis of a review and quantitative assessment of its relevance, effectiveness, efficiency, and sustainability. The project is highly relevant and consistent with the government’s overall development objectives and strategy for the port subsector, as it succeeded in (i) modernizing outdated liquid cargo-handling systems at Mumbai Port; and (ii) expanding the existing port facilities to increase the cargo-handling capacity for containers and other general cargo at Chennai Port. The project has achieved the intended direct benefits of (i) cost savings through reduction in vehicle turnaround time, which includes ship waiting time and ship service time; and (ii) avoidance of diversion to other facilities. There has also been a reduction in the handling cost at these ports. Appendix 12 contains a quantitative assessment of project performance to determine the project rating.

Appendix 1 11

CHRONOLOGY OF MAIN EVENTS IN PROJECT AND TA PROCESSING AND IMPLEMENTATION

Date Event 1994

7–28 Jul Fact-finding mission 18 Oct Management review meeting 5–16 Dec Appraisal mission to firm up the project’s design and scope, cost

estimates, financing, and implementation arrangements. The policy changes and the government’s intended reforms in the ports sector were also discussed. However, further processing was delayed due to several factors, including concerns relating to the disbursement readiness of the project and inadequate progress on policy reforms.

1997 13–21 Feb Reconnaissance mission 26 May–11 Jun Re-appraisal mission to formulate the project and its policy agenda 18 July Staff review committee meeting 27–29 August Loan negotiations 8 Sep Board circulation 29 Sep Board approval:

Loan 1556-IND: Mumbai Port Project for $97.8 million Loan 1557-IND: Chennai Port Project for $15.2 million TA 2880-IND: Enhancement of India Ports Policy Implementation for $1.588 million

12 Dec TA signing 1998 25 Sep Loan signing 29 Oct–6 Nov Inception mission 1999 6 Jan Mumbai Ports project declared effective. 13 Jan ADB approval for contract for replacement of submarine pipelines from the

marine oil terminal, Jawahar Dweep-Pirpau, to Hyundai Heavy Industries Company under the Mumbai Port project.

23 Feb Chennai Ports project declared effective 12–21 Apr Review mission 1 20 Aug ADB approval for contracts for (i) integrated scheme of extension of south

quay III and modernization of east quay berth, and (ii) modernization of west quay berths and north quay berth to Afcons Infrastructure Ltd. under the Chennai Port project.

8–17 Nov Review mission 2 2000 10 Jan Partial cancellation of $6.7 million under the ports project, and reduction of

loan amount to $8.5 million. 26 Jun ADB approval for contract for modernization of the marine oil terminal at

berths J1 to J3 at Jewahar Dweep to Afcons Infrastructure Ltd. under the Mumbai Port project.

12 Appendix 1

Date Event 2001 1 Jun Cancellation of undisbursed amount of $54.38 million and loan closing for

Mumbai Port project, as Mumbai Port Trust decided to finance the remaining part of the project from its own resources due to its improved financial position and the reduction of interest rates in the Indian money market.

15 Sep Administration of the Mumbai and Chennai ports project delegated to the Indian resident mission.

3–7 Dec Review mission 3, for Chennai Port project. 2002 11 Sep Cancellation of undisbursed amount of $3.99 million and loan closing for

Chennai Port project, as Chennai Port Trust decided to finance the remaining part of the project from its own resources due to its improved financial position and the reduction of interest rates in the Indian money market.

Source: Asian Development Bank records

Appendix 2 13

PROJECT FRAMEWORK

Design Summary Indicators/Targets Project Achievements Goals Economic growth of India, by the growth of hinterland of Mumbai Port Trust (MBPT) and Chennai Port Trust (CHPT) and through reduced total sea transport costs (construction, maintenance, port tariffs, and ship costs) by improving performance and increasing the capacity of major ports Enhance performance and capacity of major ports to better serve the nations trade, thereby promoting exports and lowering the cost of imports

Reduced total sea transport costs in the hinterland of Mumbai and Chennai ports Increase in port capacity and traffic

Port handling cost has been reduced and operational efficiency has improved (Appendix 8). The port capacity and traffic at the oil terminal at Mumbai Port and the container terminal at Chennai Port has already increased.

Immediate Objectives Mumbai Submerged oil pipelines replaced and oil jetties modernized Chennai Container terminal expanded and operated by PSP Inner harbor rehabilitated and upgraded

Project components constructed and performing satisfactorily, and can be maintained economically Minimized risk hazards of oil transportation from sea to shore of MPBT Provision of container-handing equipment delivered and operated by private sector party at Chennai by September 2002 Expanded container-handling capacity facilitating higher throughputs at reduced transportation costs

Project components have been constructed and are handling current traffic. 40-year-old oil submarine pipelines have been replaced and the risk of oil leakages and failure of pipelines has been averted. Concession to the private sector for providing container-handling equipment and operations awarded in December 2001. Container handling capacity has been augmented and current traffic has exceeded appraisal projections. Port handling cost has been reduced.

Design Summary Indicators/Targets Project Achievements To provide assistance in strengthening the government’s policy framework for corporatization, privatization, and tariff planning

Declaration of improved port, privatization policy, and guidelines. Corporation Act (or similar legislation), and tariff guidelines

Proactive policy initiatives to achieve port privatization have been undertaken by the government and various ports, and a model concession agreement has been finalized. The Tariff Authority for Major Ports, an independent statutory authority constituted in April 1997, has been formulating guidelines from time to time.

Outputs: Mumbai Ports Component: (i) Consulting Services for Design

and Supervision Replacement of Submarine Pipelines (ii) Replacement of Submarine

Pipelines MOT Berths Modernization (iii) Contract C–III: Bund, Jetty, Piping,

and Electric Works (iv) Contract C–IV: Firefighting

Facilities (v) Contract C–V: Loading Arms (v) Contract C–VI: Extension

Pipelines from P. P. Manifolds to Refineries (to be done by oil industry)

(vi) Contract C–II: Replacement of Pipelines from P. P. Mainfold to Wadala Marketing Terminal

Completion of works in accordance with the implementation schedule

Works under the project have been successfully completed (Appendix 7).

14 Appendix 2

Design Summary Indicators/Targets Project Achievements Chennai Ports Component: (i) Consulting Services for Design

and Supervision Container Terminal (ii) Mobilization and Dredging (iii) Civil Works (iv) Equipment (v) Mechanical and Electrical Works Inner Harbor (vi) West Quay Modernization (vii) North Quay Modernization (viii) Capital Dredging in Front of

Quays (ix) Extension of South Quay III (x) Modernization of East Quay Berth

Inputs Project Funding Bank’s OCR 46% PSP 15% MBPT 23% CHPT 16% 100%

Loan declared effective in Q1 1998 Completion of disbursements by 2003

The Mumbai Port project was declared effective in January 1999 and the Chennai Port project in February 1999. The loans were canceled and prepaid during implementation and the project was completed by MBPT and CHPT through their own funds.

CHPT = Chennai Port Trust, MBPT=Mumbai Port Trust, MOT = marine oil terminal, OCR = ordinary capital resources, PSP = private sector participation, Q1 = first quarter Sources: Asian Development Bank records and ADB project completion review mission

Appendix 2 15

16 Appendix 3

ANNUAL AVERAGE EXCHANGE RATES

Year Indian Rupee for

every US Dollar 1997 35.50

1998 37.16 1999 39.36 2000 43.33 2001 45.61 2002 47.53 2003 48.27 2004 45.95 2005 44.93 2006 44.27 2007 45.28

Source: Reserve Bank of India

A

ppendix 4 17

LOAN 1556-IND: MUMBAI PORT PROJECT—SUMMARY OF CONTRACTS FUNDED BY THE ASIAN DEVELOPMENT BANK Category Contractor /

Consultant Description / Nature of Works Currency

of Contract

Contract Amount

Contract Amount ($ Equivalenta)

ADB Financing Percentage (%)

Disbursementb Disbursement c ($ Equivalent)

A. 01A - Civil Works - Submarine Pipeline

Hyundai Heavy Industries Co.

Replacement of submarine pipelines from MOT, Jawahar Dweep-Pir Pau, Mumbai

Rs 2,434,850,974 55,864,490 69.00 1,500,438,991 35,511,160

01B - Civil Works

Afcons Infrastructure Ltd.

Modernization of MOT at Berths J1–J3 at Jawahar Dweep

Rs 1,445,252,205 30,830,822 49.00 70,776,834 1,517,514

B. 03 - Consulting

Kvaerner R. J. Brown Pte Ltd.

Detailed design, engineering and construction supervision for replacement of sub. pipelines from MOT at Jawahar Dweep-Pir Pau

S$ 5,229,264 3,059,480 100.00 3,690,359 2,163,013

Rs 17,267,174 384,552

Kvaerner R.

J. Brown Pte Ltd.

Detailed design, engineering and construction supervision for modernization of MOT berths J1-J3

S$ 4,111,752 2,405,659 100.00 767,892 448,046

Rs

3,194,872

74,007

Kvaerner E&C Singapore Pvt. Ltd.

Detailed design, engineering and construction supervision

S$ 505,657 346,823 100.00

C. 04 - Interest and Commitment

$ 3,318,981 3,318,981 100.00 3,318,981 3,318,981

95,826,255 43,417,273

Rs = Indian rupees, S$ = Singapore dollars, $ = US dollars, MOT = marine oil terminal a At the prevailing exchange rate on the date of award. b Amount disbursed till loan cancellation in June 2001. c Amount disbursed till loan cancellation in June 2001 at the exchange rate prevailing at the time of respective disbursement. Source: Asian Development Bank loan and grant financial information services

18 A

ppendix 4

LOAN 1557-IND: CHENNAI PORT PROJECT SUMMARY OF CONTRACTS FUNDED BY THE ASIAN DEVELOPMENT BANK

Category

Contractor

Description / Nature of Works

Currency of Contract

Contract Amount

Contract Amount ($ Equivalent a)

ADB Financing Percentage (%)

Disbursementb Disbursement ($ Equivalent b)

A.

01 - Civil Works


Integration scheme of extension of south quay III and modernization of east quay berths

Rs

357,068,480

7,436,594

40.00

109,664,587

2,383,080


Modernization of west quay berths and north quay berths

Rs 382,705,527 7,890,826 40.00 74,416,167 1,625,661

B. 02 - Interest and Commitment Charge

$ 502,836 502,836 502,836 502,836

15,830,256 4,511,577 Rs = Indian rupees, $ = US dollars

a At the prevailing exchange rate on the date of award. b Amount disbursed till loan cancellation in September 2002. c Amount disbursed till loan cancellation in September 2002 at the exchange rate prevailing at the time of respective disbursement. Source: Asian Development Bank loan and grant financial information services

Appendix 5 19

Project Costs (Estimate and Actual)

Appraisal Cost Estimate Total

Appraisal Cost

Estimate Actual Costs at

Completion

Foreign ($

Million) (Rs

Million) ($ Million) (Rs Million)

Description Local Total Total I. MUMBAI PORT Replacement of MOT Submarine Pipelines and Upgrading of Berths 1–3

A. Base Cost 1 Pipework (Submarine Pipelines) 35.7 16.1 51.8 1,813.0 62.3 2,755.3 2 Loading Arms Supply and Erection 6.1 7.5 13.6 476.0 2.8 129.73 3 Pipework (JD Man to MOT Berths)

11.5 12.4 23.9 836.5 40.9 1,915.2 Firefighting Equipment New Pipe Trestle and Berths

4 Onshore Service Pipeline Systems 11.8 7.9 19.7 689.5 7.9 366.5 5 Detailed Engineering and Supervisiona 7.0 0.0 7.0 245.0 Subtotal 72.1 43.9 116.0 4,060.0 113.9 5,166.7 B. Contingencies 1 Physical Contingencies 6.4 3.8 10.2 362.0 0.0 0.0 2 Price Contingencies 7.3 7.6 14.9 529.0 0.0 0.0 Subtotal 13.7 11.4 25.1 891.0 0.0 0.0 C. Interest During Construction 12.0 0.0 12.0 426.0 3.3 146.5 Total (A+B+C) 97.8 55.3 153.1 5,377.0 117.2 5,313.2 II. CHENNAI PORT Extension of Container Terminal and Modernization of Inner Harbor Berths

A. Base Cost 1 Extension of Berths, Quay Furnishings, Slope

Protection Works, and Dredging 7.8 4.1 11.9 422.0 5.1 234.3

2 Equipment, Mechanical and Electrical Works 24.6 8.4 33.0 1,170.0 60.9 2,879.0 3 Buildings and Miscellaneous Civil Works,

Rehabilitation of Existing Berths, Yard Paving and Container Freight Station

0.6 4.3 4.9 170.0 35.7 1,688.0

4 Modernization of West Quay, North Quay, and Dredging 6.2 9.3 15.5 545.0 6.5 306.7

5 Extension of South Quay III and Modernization of East Quay Berth 5.6 8.5 14.1 500.0 9.7 452.3

6 Construction of Electrical Substation 0.1 0.1 0.2 5.0 0.0 0.0 Subtotal 44.9 34.7 79.6 2,812.0 117.9 5,560.3

B. Contingencies 1 Physical Contingencies 4.0 2.8 6.8 241.0 0.0 0 2 Price Contingencies 2.2 1.7 3.9 138.0 0.0 0 Subtotal 6.2 4.5 10.7 379.0 0.0 0.0 C. Interest During Construction 1.5 0.0 1.5 53.0 0.5 22.9 Total (A+B+C) 52.7 39.2 91.9 3,244.0 118.4 5,583.2 Grand Total (I & II) 150.5 94.5 245 8,621.0 235.6 10,896.4 MOT = marine oil terminal a Actual cost of detailed engineering and supervision is incorporated under components 1 to 4. Sources: Report and recommendation of the President, and ADB project completion review mission

20 Appendix 6

PROJECTED AND ACTUAL DISBURSEMENTS OF LOAN PROCEEDS ($ million)

Projected Actual - MBPTa Actual - CHPT b Actual

Calendar Year

For the

Year Cumulative

For the

Year Cumulative

For the

Year Cumulative

For the

Year Cumulative

1998 1.00 1.00 -

1999 17.00 18.00

8.46 8.46

0.70 0.70

9.16 9.16

2000 28.00 46.00 31.43 39.89

1.59 2.29

33.02 42.18

2001 34.00 80.00

3.52 43.41

2.00 4.29

5.52 47.70

2002 17.00 97.00

0.16 4.45

0.16 47.86

2003 16.00 113.00

CHPT = Chennai Port Trust, MBPT = Mumbai Port Trust a The Mumbai Port project was canceled during implementation on 1 June 2011, and was completed by MBPT through

its own resources. b CHPT did not submit all the reimbursement claims in 2001 as it was contemplating premature cancellation,

prepayment, and completion of the Chennai Port project through its own funds. The Chennai Port Project was canceled during implementation on 11 September 2002.

Source: Asian Development Bank loan and grant financial information services

CHPT = Chennai Port Trust, MBPT = Mumbai Port Trust

05

10152025303540

1998 1999 2000 2001 2002 2003

$ M

illio

n

Year

Figure A6: Disbursement Details

Overall Projections

Actual - MBPT & CHPT

Appendix 7 21

22 Appendix 7

Appendix 8 23

LOAN 1556-IND:MUMBAI PORTS PROJECT — STATUS OF COMPLIANCE WITH MAJOR LOAN COVENTANTS

Srl. Covenant Reference in

Loan/Project Agreements

Status of Compliance

Project Coordination and Implementation 1. The borrower shall ensure that the PIO

is always adequately staffed and headed by a project director to whom adequate power are delegated for the effective implementation of the project. The borrower shall, in consultation with the Bank, expand and strengthen the PIO, as required, during project implementations.

Schedule (Sch) 6, para 1 of Loan Agreement (LA)

Complied with.

Land and Marine Access 2. The borrower shall take, or cause to

be taken, all necessary actions to acquire all lands, rights in land, rights of way, and riparian and maritime rights as may be necessary for timely and successful implementation of Part A of the project.

Sch 6, para. 2 of LA

Complied with. No additional land of rights were required as the works were to be implemented within the existing secured boundary of the Port.

Technical Assistance 3. The borrower shall facilitate

implementation of the technical assistance (TA) by, among other things, providing technical and logistic support for commercialization, privatization and corporatization components of the TA and carry out such recommendations of the TA agreed by the Bank and the Guarantor.


Complied with. The TA was successfully implemented and was rated as generally successful.

Commercialization 4. Within nine months of completion of

the TA, the borrower shall, in consultation with Ministry of Surface Transport (MOST), submit an action plan for commercialization of MBPT on the basis of the agreed recommendations of the TA.


The TA played a catalytic role in the commercialization of MBPT. Government of India has since initiated major policy measures for commercialization of ports and private sector participation in port development and operations. MBPT's initiated several actions on commercialization and privatization of MBPT including leasing out cargo berths for container handling to the private sector.

24 Appendix 8

Srl. Covenant Reference in Loan/Project Agreements


5. The borrower shall monitor the progress of implementation of the action plan mentioned above for a period of three years of its acceptance by the Bank and, without prejudice to the generality of Section 4.06 (a), submit six-monthly progress reports to the Bank and MOST during such three-year period.

Sch 6, para 5 of LA Measures on commercialization of Mumbai Port are being continued by MBPT.

Midterm Review 6. The borrower and the Bank, in

consultation with MOST, shall carry out a comprehensive midterm review of project implementation during the first quarter of 2000. The midterm review shall focus on any major deviations from the project design, implementation of cost overruns, loan reallocations, if any.

Sch 6, para 6 of LA The midterm review was deferred and could not be carried out due to premature loan cancellation.

Private Sector Participation 7. By June 1998, the borrower shall have

invited, through a competitive bidding process, tenders for leasing of the MBPT container terminal to a private sector entity.

Sch 6 para 7 of LA

MBPT has leased out container terminal to a private sector entity.

8. By 31 July 1998, the borrower shall complete a feasibility study for construction of a chemical berth on a build-own-transfer or such similar basis. The feasibility study will be submitted to the Bank for review and comments.

Sch 6, para 8 of LA

ADB received the final feasibility report on 4 November 1999.

Benefit Monitoring and Evaluation 9. The borrower shall undertake benefits

monitoring and evaluation of the project in accordance with performance indicators and targets agreed with the Bank to ensure that project facilities are efficiently operated and project benefits maximized.

Sch 6, para 9 of LA

Loan canceled and prepaid before the completion of the project. The overall operational efficiency at the port has improved and the handling cost has reduced (refer Appendix 8).

Financial 10. MBPT shall ensure that the amount of its

accounts receivable at no time exceeds the amount of its last three months' billings.

Sch 6, para 10 of LA

Complied with.

11. Except as the Bank may otherwise agree and in accordance with para 11 (c) of LA, MBPT shall ensure that it continues to produce for each of its fiscal year, funds


Complied with.

Appendix 8 25



from its internal sources equivalent to not less than 20% of MBPT annual expenditures incurred for that year.

12. Except as the Bank may otherwise

agree, for each of the fiscal years after the fiscal year ending 2002, MBPT shall maintain a debt service ratio of not less than 1.2.


Complied with.

Environment 13. The borrower shall make available

sufficient equipment (such as firefighting tugs, oil-reception facilities and oil separators) to ensure safety and pollution control on Jawahar Deep.


Complied with.

Matching Facilities 14. The borrower shall cooperate with the

Guarantor in its endeavor to ensure that MPNG shall, through OCC, coordinate the timely construction of Matching Facilities.


Complied with.

Records and Reports 15. The borrower shall maintain, or cause

to be maintained, records and accounts adequate to identify the goods, services and other items of expenditure financed out of the proceeds of the loan.

Art IV, Sec 4.05 Complied with.

16. The borrower shall furnish to the Bank and MOST quarterly reports on the execution of the project and on the operation and maintenance of the project facilities.

Art IV, Sec 4.06 (b) Complied with.

17. Promptly after physical completion of the project, but in any event not later than four months thereafter, the borrower shall prepare and furnish to the Bank a report, in such form and in such detail as the Bank shall reasonably request, on the execution and initial operation of the project, including its cost, the performance of the borrower of its obligations under the Loan Agreement and the accomplishment of the purposes of the Loan

Art IV, Sec 4.06 (c) The loan was canceled and prepaid during implementation. MBPT has provided the requisite data and information for the preparation of this completion report.

18. The borrower shall (i) have its accounts and financial statements


26 Appendix 8



audited annually (ii) furnish to the Bank, as soon as available but in any event, not later to than nine months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the reports of the auditors related thereto on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement; and (iii) furnish to the Bank such further information concerning such accounts and financial statements, and the audit thereof, as the Bank shall from time to time reasonably request.

Appendix 8 27

LOAN 1557-IND:CHENNAI PORTS PROJECT — STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS



Project Coordination and Implementation1. The borrower shall ensure that the PIO

is always adequately staffed and headed by a project director to whom adequate power are delegated for the effective implementation of the project. The borrower shall, in consultation with the Bank, expand and strengthen the PIO, as required, during project implementations.

Schedule (Sch) 5, para 1 of Loan Agreement (LA)

Complied with.

Land and Marine Access 2. The borrower shall take, or cause to

be taken, all necessary actions to acquire all lands, rights in land, rights of way, and riparian and maritime rights as may be necessary for timely and successful implementation of Part A of the project.


Complied with. No additional land of rights were required as the works were to be implemented within the existing secured boundary of the port.

Technical Assistance 3. The borrower shall facilitate

implementation of the technical assistance (TA) by, among other things, providing technical and logistic support for commercialization, privatization and corporatization components of the TA and carry out such recommendations of the TA agreed by the Bank and the Guarantor.


Complied with. The TA was successfully implemented and was rated as generally successful.

Commercialization 4. Within nine months of completion of

the TA, the borrower shall, in consultation with Ministry of Surface Transport (MOST), submit an action plan for commercialization of CHPT on the basis of the agreed recommendation of the TA.


The TA played a catalytic role in the commercialization of CHPT. Government of India has since initiated major policy measures for commercialization of ports and private sector participation in port development and operations. CHPT's initiated several actions on commercialization and privatization of CHPT including award of concession for providing container handling equipment and operations to the private sector.

28 Appendix 8



5. The borrower shall monitor the progress

of implementation of the action plan mentioned for a period of three years of its acceptance by the Bank and, without prejudice to the generality of Section 4.06 (a), submit six-monthly progress reports to the Bank and MOST during scuh three-year period.

Sch 5, para 5 of LA CHPT has awarded the concession for installation of equipment and operation of container terminal to the private sector. CHPT has further awarded the concession for construction and operation of 2nd container terminal to the private sector.

Midterm Review 6. The borrower and the Bank, in

consultation with MOST, shall carry out a comprehensive midterm review of Proejct implementation during the first quarter of 2000. The midterm review shall focus on any major deviations from the project design, implementation of cost overruns, loan reallocations, if any.

Sch 5, para 6 of LA The midterm review was deferred and could not be fielded due to premature loan cancellation.

Private Sector Participation 7. Prior to September 1998, the borrower

shall complete the tendering process for leasing of the CHPT container terminal to a private sector entity. The borrower shall provide the Bank a copy of the draft tender documents for review and comments, and a copy of the bid evaluation report.

Sch 5, para 7 of LA CHPT awarded the concession for providing container handling equipment and operation on BOT basis through competitive bidding process to the private sector. The container terminal was handed over to the concessionaire on 3 December 2001.

Benefit Monitoring and Evaluation 8. The borrower shall undertake benefits

monitoring and evaluation of the project in accordance with performance indicators and targets agreed with the Bank to ensure that project facilities are efficiently operated and project benefits maximized.

Sch 5, para 8 of LA Loan canceled and prepaid in 2002, before the completion of the project. The operational efficiency at port has improved and the handling cost has reduced (Refer Appendix 8).

Financial 9. CHPT shall ensure that the amount of its

accounts receivable at no time exceeds the amount of its last three months' billings.

Sch 5, para 9 of LA Complied with.

10. Except as the Bank may otherwise agree and in accordance with para 10 (c) of Schedule 5, CHPT shall ensure that it continues to produce for each of its fiscal year, funds from its internal sources equivalent to not less than 20% of CHPT


Appendix 8 29



annual expenditures incurred for that year.

11. Except as the Bank may otherwise agree, for each of the fiscal years after the fiscal year ending 2002, CHPT shall maintain a debt service ratio of not less than 1.2


Records and Reports 12. The borrower shall maintain, or cause

to be maintained, records and accounts adequate to identify the goods, services and other items of expenditure financed out of the proceeds of the loan.


13. The borrower shall furnish to the Bank and MOST quarterly reports on the execution of the project and on the operation and maintenance of the project facilities.

Art IV, Sec 4.06 (b) Complied with.

14. Promptly after physical completion of the project, but in any event not later than four months thereafter, the borrower shall prepare and furnish to the Bank a report, in such form and in such detail as the Bank shall reasonably request, on the execution and initial operation of the project, including its cost, the performance of the borrower of its obligations under the Loan Agreement and the accomplishment of the purposes of the Loan.

Art IV, Sec 4.06 (c) The loan was canceled and prepaid during implementation. CHPT has provided the requisite data and information for the preparation of this completion report.

15. The borrower shall (i) have its accounts and financial statements audited annually (ii) furnish to the Bank, as soon as available but in any event, not later to than nine months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the reports of the auditors related thereto on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement and (iii) furnish to the Bank such further information concerning such accounts and financial statements, and the audit thereof, as the Bank shall from time to time reasonably request.


Operational Efficiency and Handling Cost at Mumbai and Chennai Ports

Port

Operational Efficiency Handling Costs

Average Turnover Time (no. of days)

Average Pre-berthing Time (no.

of days)

Idle time to Total Time at Port (in

%)

Average Output per Ship Berth

Days (tons) Per Ton Handling

Costs (Rs) FY 2001 FY 2005 FY 2001 FY 2005 FY 2001 FY 2005 FY 2001 FY 2005 FY 2002 FY 2005 Chennai 5.80 3.80 2.40 0.93 33.10 28.00 6,977 9,697 88.43 77.48Mumbai 5.20 4.21 1.26 0.81 30.56 24.81 4,213 6,191 266.80 216.85Source: Sajikumar. 2007. Indian Ports: Post Liberalization Performance .The ICFAI Journal of Infrastructure ,Volume V, No. 2. p. 42–57.

30 Appendix 9

Appendix 10 31

ECONOMIC REEVALUATION

A. General 1. The economic reevaluation for the project components has been conducted in accordance with ADB’s guideline1 . A benefit period of 20 years has been considered for all the project components. The economic costs are derived from financial costs by excluding taxes and duties and financing charges and applying a standard conversion factor of 0.8.

1. Mumbai Port Project 2. The project component encompasses modernization of the marine oil terminal (MOT)—Jawahar Deep (JD) berths 1, 2, and 3 and their associated facilities; replacement of the outdated submarine pipeline between the berths and Pir Pav manifold, and construction of an onshore pipeline connecting Pir Pav manifold with the marketing and storage terminals located at Sewere and Vadala. The investment has resulted in higher capacity and productivity. 2. Chennai Port Project 3. Container terminal component of the project involves extending the existing berth by 285m and modernizing all other support facilities and related container-handling equipment. Chennai Port Trust (CHPT) invested in berth extension, and the private sector concessionaire developed all other associated facilities and equipment. In order to accommodate increased traffic, the private sector concessionaire made further investments for capacity enhancement and these have been considered in the economic reevaluation. The container terminal development has resulted in capacity enhancement and higher productivity. 4. Inner harbor component includes modernization of the east and west quays, rehabilitation of the north quay, and extension of the south quay III. The increased berth capacity has resulted in enhanced general cargo handling capacity and higher productivity. B. Revised Traffic Forecast

5. The MOT handles imported crude for the refineries, the costal movement of crude for the Oil and Natural Gas Commission, and the export of products from the refineries and import of products for marketing in the hinterland by the refining companies. The refining capacity expansion projected at loan appraisal did not take place and as a consequence the traffic mix has changed more toward products rather than crude, warranting a revised traffic forecast. The revised forecast, based on consultations with Mumbai Port Trust (MBPT) officials and review of past reports, indicates that the berths (JD-1, JD-2, and JD-3) will handle 5.4 million tons of crude in 2022, increasing from 2.45 million tons in 2011, and 9 million tons of products in 2022, increasing from 7.71 million tons handled in 2011. The revised total projected traffic (crude and products) of 14.4 million tons by 2022 is far lower than the traffic of 20.3 million tons projected and considered at appraisal for 2003 and beyond. 6. At appraisal the capacity of the expanded container terminal at Chennai Port was estimated at 550,000 twenty-foot equivalent unit (TEU), which was expected to be reached by 2008. However, the traffic growth has more than doubled between 2005 and 2010. The annual average compound growth rate was 6.1% between 1997 and 2002 (prior to the project) and increased to 13.3% between 2003 and 2011 (after the project). The private 1 ADB.1997.Guideline for Economic Analysis of Projects. Manila

32 Appendix 10

sector concessionaire therefore had to make further investments for capacity enhancement and consequently the container traffic handled at the container terminal (CT-1) in 2011 reached 1.15 million TEU2. With 885m of quay, CT-1 has exceeded its maximum economic capacity of 1.0 million TEU. As the traffic forecast for containers indicates that adequate potential exists for both the container terminals, the traffic at CT-1 is limited to 1.0 million TEU per annum for the reevaluation period. 7. Owing to capacity constraints, the break-bulk traffic at Chennai Port stagnated at around 1.3 million tons per annum between 1995 and 2004. Subsequent to the modernization and capacity enhancement of the inner harbor, break-bulk traffic increased to 2.1 million tons in 2005 and to 3.16 million tons in 2011. However, such growth is not sustainable. With the development of two container terminals and the enhanced potential of containerization, a growth rate of 2% per annum for the break-bulk cargo at the inner harbor is considered appropriate. Accordingly, it is projected that the break-bulk cargo will increase from 3.1 million in 2011 to 3.93 million tons by 2022. The actual and projected capacity is much lower than the appraisal estimates. At appraisal, it was estimated that after rededication of the three coal berths in the Jawahar docks an increased capacity of 5.7 million tons would be reached in 2009. 8. The following table summarizes the traffic forecast adopted for the reevaluation.

Table A10.1: Revised Traffic Forecast

Mumbai Port Project—MOT (million tons)

Chennai Port Project—CT-1

Chennai Port Project—Inner Harbor

Crude Product Total Container (million TEU)

Break-Bulk Cargo (million tons)

Actual 2005 4.89 6.87 11.76 0.52 2.10 2010 2.98 7.51 10.49 1.12 2.63 2011 2.45 7.71 10.16 1.15 3.16

Forecast 2012 3.40 7.00 10.40 1.00 3.22 2017 5.40 8.50 13.90 1.00 3.56 2022 5.40 9.00 14.40 1.00 3.93

MOT = marine oil terminal, TEU = twenty-foot equivalent unit Source: Staff consultants’ estimates C. Benefits 9. The economic benefits quantified by comparing the “with” and “without” project scenarios are savings in ship-time cost and diversion cost, and vary for each of the project component. 10. While the MOT of the Mumbai Port project and the container terminal of the Chennai Port project enjoy the benefits of savings in ship time cost only, the inner harbor component of the Chennai Port project also received a marginal benefit from savings in diversion cost in 2011. In order to estimate the savings in ship-time cost, ship time at berth and in queue are estimated based on the handling rate, number of , and berth occupancy in the “with” and 2 A second container terminal (CT-2) has been operated by a different operator at Chennai Port since 2010 and it handled 337,000 TEU In 2011. The extension of south quay III, developed for handling general cargo under the inner harbor development, has become part of CT-2.

Appendix 10 33

“without” project scenarios. The estimated ship-time cost per day is based on Drewry’s Ship Operating Costs Annual Review and Forecast �2009-2010 (July 2009) and has been updated to 2011 price levels. 3 The total ship-time cost includes ship operating cost, amortized capital cost, and fuel cost. Relationships between parcel size and deadweight tonnage, and between deadweight tonnage and gross register tonnage, are established to forecast vessel characteristics that determine ship operating cost. 11. When the traffic exceeds throughput capacity, diversion of excess traffic to neighboring terminals becomes imminent, as the waiting time will be more than the service time. Therefore the capacity of the project in “with” and “without” scenarios is assessed and the savings in diversion cost is estimated. 12. The MOT reevaluation considered that the B1 pipeline, which was completely eroded, would have broken down without the project by 2002. Accordingly, the handling rate would have come down and caused a capacity reduction of 1.1 million tons. The impact of such a reduction on the handling rate has been assessed and the number of days that the crude tankers have worked at berth has been taken into account. Another important contribution of the project is savings in non-pumping time at berth. The project has demonstrated a reduction in the overall non-pumping hours from 13.5 hours to 9.7 hours per ship call for crude and for POL from 19.4 hours to 13.3 hours. This has resulted in better utilization of facilities by saving non-working time that has reduced ship time at berth. As recommended by UNCTAD, the E2/E2/n model has been applied to estimate the waiting time of ships, and, accordingly, the savings in ship time cost is estimated to increase from Rs346.8 million to Rs1,150.5 million in 2022.4 13. The capacity of the container terminal at Chennai Port in the “without” project scenario is estimated at 250,000 TEU. Therefore, traffic beyond 250,000 TEU would have diverted to berths in Jawahar Deep, where three coal-handling berths would have been available after coal cargo was shifted to nearby Ennore Port. Since quay cranes were not available at Jawahar Deep, vessels would have had to use their own derricks for handling containers. All this would have resulted in low productivity. In the “with” project scenario, the private operator has responded to the growing market by increasing capacity. Since the launch of the private-sector operated terminal in 2002, capacity increased to 600,000 TEU in 2005, and with the current 885-m quay and ten quay cranes, the current capacity of the terminal is 1.0 million TEU. The average handling rate achieved between 2003 and 2011 is 44 TEU per hour of ship time at berth. For the analysis, it is considered to be 45 TEU per vessel hour at berth. Berth occupancy has been estimated using these productivity levels for “with” and “without” project scenarios. As recommended by UNCTAD, the average waiting time of vessels has been estimated using the E2/E2/n model. For the “with” and “without” project scenarios, the ship-time cost per day is estimated at $29,125 for an average vessel size of 30,000 deadweight tonnage and $21,758 for an average vessel size of 17,000 deadweight tonnage. The estimated ship-time saving has been quantified in monetary terms to demonstrate the economic benefit. The economic benefit of the project is estimated at Rs152.7 million in 2003, increasing to Rs1,969.4 million by 2022. 14. In 2000, before the project, the capacity of nine berths at the inner harbor’s Ambedkar Dock to handle break-bulk cargo was estimated at 1.4 million tons. With the modernization of the berths, the capacity has increased to 3.05 million tons. However, in 2009, south quay berth-III was handed over to a concessionaire as a part of container terminal-2 for operation, thereby reducing the capacity to handle break-bulk cargo to 2.7 million tons. Owing to the shift of coal cargo to nearby Ennore Port from 2012 onward, six berths in the Jawahar Deep would be available for handling break-bulk and other cargo,

3 Moore Stephens.2010. Future Operating Costs Report. London, UK: Moore Stephens LLP. 4 UNCTAD. 1985. Port Development—A Handbook for Planners in Developing Countries. New York: 2nd ed.

34 Appendix 10

thereby increasing the capacity to 4.2 million tons. With these changes in available capacity, a marginal benefit from savings in diversion cost in 2011 would be seen. The handling rate estimated in the “with” project scenario is estimated at 1,800 tons per day and in the “without” project scenario at 850 tons per day. Accordingly, berth occupancy has been estimated and savings in shiptime assessed as per the M/E2/n model recommended by UNCTAD. The estimated economic benefit decreases from Rs242.2 million in 2005 to Rs153.9 million by 2022 due to the shift of coal cargo to nearby Ennore Port from 2012. D. Economic Reevaluation

15. The reevaluated economic internal rate of return (EIRR) for the three project components is summarized in Table A10.2. All three components yield an EIRR of over 12 percent The EIRR for MOT, Mumbai Port project, is lower compared to the appraisal estimate, as the actual traffic and future traffic forecast is lower than the traffic forecast considered at appraisal. Tables A10.2 and A10.3 set out the EIRR for the three project components.

Table A10.2: Results of Economic Reevaluation—EIRR (%) Project At PCR At Appraisal

Mumbai Port Project 15.1 18.0 Chennai Port Project—Container Terminal 23.1 19.8 Chennai Port Project—Inner Harbor 22.5 13.8

PCR = project completion report Source: Staff consultants’ estimates E. Sensitivity Analysis 16. Sensitivity analysis was carried out to test the impact of an increase in costs, a decrease in benefits, and a combination of the two scenarios. As indicated in the table below, all three project components yielded an EIRR of over 12 percent, even under the worst-case scenario of a 10-percent increase in costs combined with a 10-percent decrease in benefits.

Table A10.3: Sensitivity Analysis of Project Components—EIRR (%) Sensitivity At PCR At Appraisal

Mumbai Port Project - Case 1: Base scenario 15.1 18.0 - Case 2: 10% increase in costs 13.9 16.4 - Case 3: 10% decrease in benefits 13.7 16.4 - Case 4: Combination of cases 2 and 3 12.5 15.0 Chennai Port Project—Container Terminal - Case 1: Base scenario 22.3 19.8 - Case 2: 10% increase in costs 19.8 18.4 - Case 3: 10% decrease in benefits 19.5 18.4 - Case 4: Combination of cases 2 and 3 18.5 17.1 Chennai Port Project—Inner Harbor - Case 1: Base scenario 22.5 13.8 - Case 2: 10% increase in costs 20.9 13.4 - Case 3: 10% decrease in benefits 20.7 13.4 - Case 4: Combination of cases 2 and 3 19.2 12.4

PCR = project completion report Source: Staff consultants’ estimates

Appendix 10 35

17. All three project components are not only economically viable but have also withstood the test of sensitivity to cost increase and benefit decrease.

36 Appendix 10

Table A10.1: ECONOMIC EVALUATION FOR MARINE OIL TERMINAL COMPONENT OF MUMBAI PORT PROJECT

(Rs million )

( ) = negative, EIRR = economic internal rate of return, O&M = operation and maintenance Source: Staff consultants’ estimates

Appendix 10 37

Table A10.2: ECONOMIC EVALUATION FOR INNER HARBOR COMPONENT OF CHENNAI PORT PROJECT

(Rs million )

38 Appendix 10

Table A10.3: ECONOMIC EVALUATION FOR CONTAINER TERMINAL COMPONENT OF CHENNAI PORT PROJECT

(Rs million )

Appendix 11 39

FINANCIAL REEVALUATION A. General 1. The financial reevaluation for the project components has been conducted in accordance with ADB’s guidelines1. B. Capital Cost 2. The financial reevaluation is based on completion cost, excluding interest during construction, depreciation, and financing charges. The datum to deflate the cost outflow and revenue inflow of various project components is the year of first expenditure for the related project components. C. Operation & Maintenance Costs 3. The actual expenditures incurred for operation and maintenance (O&M) for the Mumbai Port project component and the container terminal component of the Chennai Port project were collected from the respective ports. International norms for O&M costs were adopted for the inner harbor component of the Chennai Port project as the Chennai Port Trust (CHPT) had difficulty in providing actual O&M costs. D. Revenue 4. Actual revenue accrued was collected up to 2011 and the future revenue stream was estimated by suitably factoring the tariffs and rate in 2011; the type of revenue accrued varied for each project component. Cargo- and vessel-related charges were considered for the marine oil terminal (MOT) under the Mumbai Port project. New revenue generated by the MOT because of oil transportation through the onshore pipeline between Pir Pav manifold and the Sewere and Vadala marketing and storage terminal was not considered at appraisal. The financial reevaluation for the container terminal component includes container handling charges and berth hire charges. However, the financial reevaluation of the inner harbor component takes into account only berth hire charges and wharfage revenue. Revenue attributable to the project is estimated incrementally by comparing the revenue for the “with” and “without” project scenarios. E. Financial Reevaluation 5. The reevaluated financial internal rate of return (FIRR) is summarized in Table A11.1, along with the “at appraisal” estimate for the three project components.

Tabel A11.1—FIRR (%)

Project Component At PCR At Appraisal Marine Oil Terminal of Mumbai Port 4.9 8.3 Container Terminal of Chennai Port 32.2 16.0 Inner Harbor of Chennai Port 3.8 8.4

PCR = project completion report Source: Staff consultants’ estimates, and report and recommendation of the President 6. The reevaluated FIRR is lower than the appraisal estimate, except for the container terminal component. Tables A11.1 to A11.3 provide the detailed estimate. The main reasons for the lower FIRR are construction delays, prolonged payment due to arbitration, and increased O&M costs. The tariff is also not commensurate with the capital expenditure. 1 ADB.2005.Guideline for Financial Management and Analysis of Projects. Manila

40 Appendix 11

Port Trusts had considerable difficulty providing accurate activity-based expenditures due to the lack of an appropriate computer-based accounting system. 7. A sensitivity analysis was carried out to test the impact of an increase in costs, a decrease in benefits, and a combination of the two. Results of the reevaluation and at appraisal are summarized in Table A11.2.

Table A11.2: Sensitivity Analysis of Project Components—

(FIRR %) Sensitivity At PCR At appraisal

Mumbai Port Project - Case 1: Base scenario 4.9 8.3 - Case 2: 10% increase in costs 4.0 7.5 - Case 3: 10% decrease in benefits 3.9 7.4 - Case 4: Combination of cases 2 and 3 3.1 6.7 Chennai Port Project—Container terminal - Case 1: Base scenario 32.3 16.0 - Case 2: 10% increase in costs 28.4 16.0 - Case 3: 10% decrease in benefits 28.0 14.9 - Case 4: Combination of cases 2 and 3 24.4 13.8 Chennai Port Project—Inner harbor - Case 1: Base scenario 3.8 8.4 - Case 2: 10% increase in costs 3.2 7.4 - Case 3: 10% decrease in benefits 3.1 7.3 - Case 4: Combination of cases 2 and 3 2.5 5.7

PCR = project completion report Source: Staff consultants’ estimates, and report and recommendation of the President

Appendix 11 41

Table A11.1: FINANCIAL EVALUATION FOR MARINE OIL TERMINAL COMPONENT OF MUMBAI PORT PROJECT

(Rs million)

Fiscal Year Outflow Inflow Net Capital O&M Total Revenue

1998 19.90 19.90 (19.90)

1999 35.02 35.02 (35.02)

2000 1478.20 1478.20 (1478.20)

2001 727.19 727.19 (727.19)

2002 513.71 9.87 523.58 92.52 (431.06)

2003 684.29 13.43 697.72 163.20 (534.52)

2004 426.31 4.40 430.72 122.53 (308.19)

2005 212.14 7.73 219.87 132.98 (86.89)

2006 47.79 14.33 62.12 234.41 172.30

2007 2.78 12.84 15.61 312.74 297.13

2008 16.62 16.62 361.75 345.13

2009 16.32 16.32 226.72 210.39

2010 26.02 26.02 250.51 224.49

2011 25.83 25.83 285.88 260.05

2012 38.60 38.60 374.05 335.45

2013 47.04 47.04 442.76 395.73

2014 49.85 49.85 476.78 426.93

2015 52.66 52.66 501.42 448.76

2016 55.47 55.47 535.95 480.47

2017 58.29 58.29 570.83 512.54

2018 58.29 58.29 573.73 515.44

2019 61.10 61.10 610.41 549.31

2020 61.10 61.10 615.63 554.53

2021 61.10 61.10 620.77 559.67

2022 (203.05) 61.10 (141.94) 625.83 767.77

FIRR 4.91% ( ) = negative, FIRR = financial internal rate of return, O&M = operation and maintenance Source: Staff consultants’ estimates

42 Appendix 11

Table A11.2 : FINANCIAL EVALUATION FOR INNER HARBOR COMPONENT OF CHENNAI PORT PROJECT

(Rs million)

Fiscal Year Outflow Inflow Net

Capital Cost O&M Total Revenue Benefits

2000 44.56 44.56 (44.56)

2001 182.52 182.52 (182.52)

2002 231.81 231.81 (231.81)

2003 100.03 100.03 (100.03)

2004 8.44 8.44 (8.44)

2005 5.41 5.67 11.09 6.28 (4.80)

2006 (0.46) 5.73 5.27 10.49 5.22

2007 0.11 5.72 5.83 46.44 40.60

2008 0.02 5.72 5.75 44.70 38.96

2009 18.74 5.72 24.46 33.65 9.19

2010 5.16 5.91 11.07 34.32 23.24

2011 (1.98) 5.94 3.96 61.69 57.73

2012 5.94 5.94 39.40 33.46

2013 5.94 5.94 41.76 35.81

2014 5.94 5.94 44.16 38.22

2015 5.94 5.94 46.61 40.67

2016 5.94 5.94 49.12 43.17

2017 5.94 5.94 51.67 45.72

2018 5.94 5.94 54.27 48.33

2019 5.94 5.94 56.93 50.98

2020 5.94 5.94 59.63 53.69

2021 5.94 5.94 62.40 56.45

2022 5.94 5.94 65.21 59.27

2023 5.94 5.94 68.09 62.14

2024 (227.29) 5.94 (221.35) 71.02 292.37


Appendix 11 43

TABLE A11.3: FINANCIAL EVALUATION FOR CONTAINER TERMINAL COMPONENT OF CHENNAI PORT PROJECT

(Rs million)

Fiscal Year Outflow Inflow Net Capital Cost O&M Total Revenue Benefits

2000 41.08 41.08 (41.08)

2001 77.88 77.88 (77.88)

2002 1021.18 1021.18 (1021.18)

2003 1981.79 198.02 2179.80 842.12 (1337.68)

2004 590.87 233.40 824.26 989.00 164.73

2005 428.91 209.87 638.78 1273.74 634.96

2006 60.78 260.99 321.77 1331.65 1009.89

2007 121.20 312.48 433.68 1739.93 1306.26

2008 445.31 440.61 885.92 2404.95 1519.02

2009 140.17 437.71 577.88 2487.58 1909.70

2010 350.80 498.27 849.07 2289.41 1440.34

2011 4.83 508.83 513.66 2368.78 1855.12

2012 403.83 403.83 1964.54 1560.71

2013 384.60 384.60 1870.99 1486.39

2014 366.29 366.29 1781.90 1415.61

2015 348.84 348.84 1697.05 1348.20

2016 332.23 332.23 1616.23 1284.00

2017 316.41 316.41 1539.27 1222.86

2018 301.35 301.35 1465.97 1164.63

2019 287.00 287.00 1396.16 1109.17

2020 273.33 273.33 1329.68 1056.35

2021 260.31 260.31 1266.36 1006.05

2022 247.92 247.92 1206.06 958.14


44 Appendix 12

QUANTITATIVE ASSESSMENT OF OVERALL PROJECT PERFORMANCE

Table A12.1: Overall Rating

Criteria Assessment Rating (0–3) Weight (%) Weighted Rating

Relevance Highly Relevant 20 0.6 Effectiveness Effective 2 30.0 0.60 Efficiency Efficient 2 30.0 0.60 Sustainability Likely 2 20.0 0.40 Overall Rating Successful 2.2 Source: Asian Development Bank’s estimates

Relevance: - Project objectives and outputs were relevant to strategic objectives of the Government of India and ADB. Effectiveness: - Project achieved its outcome. Efficiency: - Project achieved objectives in an efficient manner. Sustainability: - Project benefits and development impacts are sustainable.

Table A12.2: Rating System

Rating Value Relevance Effectiveness Efficiency Sustainability 3 Highly Relevant Highly Effective Highly Effective Most Likely 2 Relevant Effective Efficient Likely 1 Partly Relevant Less Effective Less Efficient Less Likely 0 Irrelevant Ineffective Inefficient Unlikely

Source: Asian Development Bank’s estimates Ratings Highly Successful: Greater than or equal to 2.7 Successful: Between 1.6 and less than 2.7 Partly Successful: Between 0.8 and less than 1.6 Unsuccessful: Less than 0.8

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