Document ofThe World Bank

Report No: 20219-IN

PROJECT APPRAISAL DOCUMENT

ONA

PROPOSED LOAN

IN THE AMOUNT OF US$516.0 MILLION EQUIVALENT

TO THE

GOVERNMENT OF INDIA

FOR THE

THIRD NATIONAL HIGHWAYS PROJECT

MAY 12, 2000

Infrastructure Sector UnitSouth Asia Regional Office

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CURRENCY EQUIVALENTS

(Exchange Rate Effective April 14, 2000)

Currency Unit = Indian Rupee (INR)INR 1.00 = US$ 0.023US$ 1.00 = INR 43.5

FISCAL YEARApril 1 March 31

ABBREVIATIONS AND ACRONYMS

AADT Annual Average Daily TrafficADB Asian Development BankBPIP Borrower's Project Implementation PlanCAS Country Assistance StrategyEIA Environmental Impact AssessmentEMP Environmental Management PlanERR Economic Rate of ReturnGOI Government of IndiaHDM Highway Design and Maintenance ModelICB International Competitive BiddingINR Indian RupeeIRI International Roughness IndexMOST Ministry of Surface TransportNCB National Competitive BiddingNGO Non-Governmental OrganizationNHAI National Highways Authority of IndiaNPV Net Present ValueOECF Overseas Economic Cooperation Fund of Japan

(now Japan Bank for International Cooperation)PAP Project Affected PersonPWD State Public Works DepartnentPHRD Policy and Human Resource Development FundPPF Project Preparation FacilityRAP Resettlement Action PlanROW Right of WayR&R Resettlement and RehabilitationSOE Statement of ExpenditureTNHP Third National Highways ProjectVOC Vehicle Operating Cost

Vice President: Mieko NishimizulCountry Director: Edwin R. Lim

Acting Sector Director: Jonathan S. KamkwalalaTask Team Leader/Task Manager: Christopher J. Hoban

INDIATHIRD NATIONAL HIGHWAYS PROJECT

CONTENTS

A. Project Development Objective Page

1. Project development objective 22. Key performance indicators 2

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 22. Main sector issues and Government strategy 23. Sector issues to be addressed by the project and strategic choices 3

C. Project Description Summary

1. Project components 52. Key policy and institutional reforms supported by the project 63. Benefits and target population 74. Institutional and implementation arrangements 7

D. Project Rationale

1. Project alternatives considered and reasons for rejection 82. Major related projects financed by the Bank and other development agencies 93. Lessons learned and reflected in proposed project design 104. Indications of borrower commitment and ownership 105. Value added of Bank support in this project 11

E. Summary Project Analysis

1. Economic 112. Financial 123. Technical 124. Institutional 125. Environment 136. Social 157. Safeguard Policies 19

F. Sustainability and Risks

1. Sustainability 202. Critical risks 203. Possible controversial aspects 21

G. Main Loan Conditions

1. Effectiveness Condition 212. Other 21

H. Readiness for Implementation 22

I. Compliance with Bank Policies 22

Annexes

Annex 1: Project Design Summary 23Annex 2: Project Description by Component: 26

* Highway Upgrading* Corridor Management and Road Safety Works* Institutional Strengthening and Training

Annex 3: Estimated Project Costs 28Annex 4: Cost Benefit Analysis Summary 29Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 32Annex 6: Procurement and Disbursement Arrangements 33

* Table A : Project Cost by Procurement Arrangements- Table Al: Consultant Selection Arrangements- Table B: Thresholds for Procurement Methods and prior Review- Table C: Allocation of Loan Proceeds

Annex 7: Project Processing Schedule 43Annex 8: Documents in the Project File 44Annex 9: Statement of Loans and Credits 45Annex 10: Country at a Glance 49Annex 11: Environmental Assessment and Management Plan 51Annex 12: Institutional Strengthening and Corridor Management Action Plan Matrix 59

MAP(S)IBRD No. 30824

INDIA

THIRD NATIONAL HIGHWAYS PROJECT

Project Appraisal Document

South Asia Regional OfficeSASIN

Date: May 12, 2000 Team Leader: Christopher J. HobanCountry Manager/Director: Edwin Lim Sector Manager/Director: Jonathan S. KarnkwalalaProject ID: P009972 Sector(s): TH - HighwaysLending Instrument: Specific Investment Loan (SIL) Theme(s): Transport

Poverty Targeted Intervention: N

Project Financing Data1 Loan 2 Credit El Grant O Guarantee O Other (Specify)

For Loans/Credits/Others:Amount (US$m): 516.0

Proposed Terms: Variable Spread & Rate Single Currency Loan (VSCL)Grace period (years): 5 Years to maturity: 20Commitment fee: 0.75%Front end fee on Bank loan: 1.00%,Firancl P.tan: Source Locil fortgn to_-_GOVERNMENT 130.00 4.00 134.00IBRD 252.90 263.10 516.00

Total: 382.90 267.10 650.00

Borrower: GOVERNMENT OF INDIAResponsible agency: NATIONAL HIGHWAYS AUTHORITY OF INDIANHAIAddress: National Highways Authority of India, 1, Eastern Avenue, Maharani Bagh, New Delhi, 110065Contact Person: V.K. Sinha, Chief General Manager (World Bank Projects)Tel: 91-11-682-4974, 625-5841 Fax: 91-11-692-4383 Email: Nhai@Vsnl.Com

Estimated disbur ements ( Ba k FY/US$M):i FY i: 2001 2002 2003a 2004 2005 20

Annual 56.2 102.2 127.7 | 127.7 102.2 0.0 0.0Cumulative 56.2 158.4 286.1 413.8 516.0 516.0 516.0

Project implementation period: 5 yearsExpected effectiveness date: 10/01/2000 Expected closing date: 06/30/2006AMPAD F-'~ R,~ MW-,,2

A. Project Development Objective

1. Project development objective: (see Annex 1)

The project development objectives are (a) to reduce transport constraints on economic activity and reducetransport costs; and (b) to improve institutional capabilities to manage road programs, assets and service.

2. Key performance indicators: (see Annex 1)

The key performance indicators that measure the achievement of the project development objective include:(a) reduced travel time by about 15% on project roads by end of project; (b) vehicle operating costs onproject roads reduced by about 10% by end of project; (c) percentage of NHAI core network in poorcondition reduced from about 40% to not more than 20% by end of project; and (d) key components ofinstitutional strengthening action plan are adopted by end of project.

B. Strategic Context1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: 17241-IN Date of latest CAS discussion: 02/18/99

The project supports the Country Assistance Strategy sector goals of removing infrastructure bottlenecksand reducing road transport costs through increased focus on: (i) improving funding for road investmentand maintenance; (ii) institutional and financial performance of road sector; and (iii) an expanded role forthe private sector in road engineering, construction, maintenance, financing and operation.

The major project works will be implemented in the states of Uttar Pradesh and Bihar, which are two of themost populous and least developed states in India. This will improve the ability of these areas toparticipate in the economic development and modernization taking place to a larger extent elsewhere inIndia. While the project is not specifically targeted directly at the poor, the savings in vehicle operatingcosts will likely result in higher farngate prices for agricultural products, benefiting the rural farmers andfacilitating poverty reduction, which is the principle goal of the CAS. Additionally, the project will provideincreased accessibility to education, health services and employment opportunities, thereby contributingfurther to social development and poverty reduction.

2. Main sector issues and Government strategy:

India's 52,000 km of national highways account for about 1.6 percent of the total road network of 3.3million km but carry over 40 percent of the road traffic. All but 500 km of the national highways aretwo-lane roads or narrower, and a significant proportion is facing serious congestion. With the changingeconomy and distribution pattems, demand for road transport has been growing at about 8-10% annuallyduring the past decade, considerably more than the growth of demand for railways.

The govermment's strategy for the road sector in previous decades has focused on rapid expansion of ruralconnectivity at the expense of the core highway system, and has not provided adequately for maintenance.This has led to high transport costs, travel delays and accident rates. During this period, road programswere substantially under-funded, and both govermnent road departments and the construction industrybecame inefficient and reliant on outdated technology. Major areas of concem were

* Project implementation was severely hampered by inadequate designs, land acquisition problems,lack of site readiness, weak coordination between agencies, slow decision making, limitedcontractor capacity and poor supervision of quality.

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* Institutions became more concerned with procedures than results and with expenditures rather thantransport effectiveness. Lack of delegation and accountability reduced organizational performance,and lack of strategic planning and asset management led to inefficient investments andunder-utilization of existing road capacity.

This has begun to change in recent years, with increased allocations for construction and maintenance,renewed attention to the core highway network, increased emphasis on the role of the private sector, andgrowing awareness of the need for institutional change. Institutional responsibilities are also changing.National Highways have traditionally been the responsibility of the Ministry of Surface Transport(MOST), which in turn delegated considerable responsibilities to National Highway branches in the statePublic Works Departments (PWDs), but with close oversight and review from MOST. In 1995, theNational Highway Authority of India (NHAI) was established and began taking responsibility for majorworks programs on the national highway network, with a high degree of outsourcing of services, works andfinancing to the private sector. NHAI was initially made responsible for implementation ofexternally-aided projects financed by the Asian Development Bank and the Japan Overseas EconomicCooperation Fund, and preparation of the next World Bank national highway project.

In 1996 the India Infrastructure Report recommended an ambitious program for upgrading the arterialroad network by widening of 15,000 km to four lanes and initiating planning and construction ofexpressways. To meet this challenge, there have been major increases in preparation of feasibility studiesand engineering designs, with significant involvement of international expertise. Construction packageshave also increased in size and mechanization, attracting more participation of international firms and newtechnologies. During this period, additional road user charges were collected through fuel levies and tollson improved roads, and private financing was mobilized on a modest scale for selected bridges and shortbypasses with improved policies and regulations.

NHAI has now taken on full responsibility for the development and maintenance of the 6,000 km "goldenquadrilateral" between Delhi, Calcutta, Chennai and Mumbai, and development of the strategicallyimportant North-South and East-West corridors and accesses to key ports. It has prepared a time-boundimplementation plan for this National Highway Development Program with an estimated total cost of $12billion over ten years, based on a mixture of financing from government grants, fuel levies, tolls, bonds,private investments and international development banks. This plan assumes ongoing financial supportfrom the World Bank, and this project is envisaged as the first of a series to be taken up within a few years.

As part of this program, NHAI recognizes the need for considerable institutional strengthening, both todeliver this ambitious works program and to develop its capacity for operation and maintenance of the roadsystem in response to the needs of road users and other stakeholders.

3. Sector issues to be addressed by the project and strategic choices:

The key sector issues which the project will address are as follows:

Project implementation capacity. The project preparation process followed to date is already achievingsignificant improvements in the quality of survey and design, environmental assessment, publicconsultation, land acquisition and resettlement procedures, and contractor prequalification. Experience inother recent projects has shown considerable benefits in site readiness and reduction of subsequentimpediments, and contract management skills are improving in both NHAI and private industry.Significant challenges remain in the proposed major expansion of road construction, and further

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strengthening of project implementation capacity will be supported by the project.

Institutional issues are beginning to attract more attention, and will be an important component of theproject. There is growing awareness of the need for sound business management of the overall activities ofNHAI based on clearly defined outcome targets, performance measures, and accountability to "customers"who pay road user charges and have an interest in road transport impacts. This will be supported by fulldelegation of decision-making authority to NHAI once overall investment programs are defined. Proposalsare currently being reviewed by government and will be confirmed during negotiations.

Road operation and maintenance is an emerging area of responsibility for NHAI, which was previouslyconcemed primarily with construction. This provides an opportunity to introduce some importantinnovations in road management, to overcome substantial weaknesses in current practices. Theinstitutional development strategy provides for two pilot programs, supported by the project, to focus onlow-cost measures to reduce traffic delays and accidents and to improve the effectiveness of maintenancemanagement.

The Ministry of Surface Transport has continuing responsibilities for the remainder of the national highwaynetwork, and for overall planning, policy and regulatory issues. Capacity for these latter functions isgenerally limited in MOST, but they are important for improving overall efficiency of traffic flow (e.g. byreducing vehicle inspection delays at state borders), safety and effectiveness of transport services (e.g. easeof entry for private bus services; quality of regulation of vehicle safety and overloading), and efficientinvestments and pricing. Developing implementation capacity in these areas is also a medium-term concemunder the NHAI institutional development strategy, which will begin to be addressed under the project.

Strategic choices considered in project preparation include:

Mode choice. World Bank assistance for transport in India includes separate operations dealing withnational highways, state highways, rural roads, urban transport, railways and private infrastructureprovision. Overall priorities are based on a 1995 Bank study of Long Term Issues in the Transport Sector, which is to be updated in 2000/01. National highways are an important component of this assistancebecause of the substantial impact of this infrastructure bottleneck on economic activity, and the readinessof NHAI to implement reforms in the areas identified above.

Corridor choice. The major project works will be implemented on the Delhi-Calcutta National Highway inthe states of Uttar Pradesh and Bihar, which are two of the most populous and least developed states inIndia. This will improve the ability of these areas to participate in the economic development andmodernization taking place to a larger extent elsewhere in India. The route was identified as a high priorityin the early 1 990s in a study of possible expressway corridors in India. A pre-feasibility study of this routein 1995 further refined improvement options.

Expressways or highways. While the above studies proposed expressway development on some of thehigher traffic routes close to major cities, these were not taken further due to difficulties with landacquisition, lack of funds, and lack of viability for private financing. Instead, the government proposedwidening of two-lane highways to four lanes on existing alignments, with selective use of bypasses, serviceroads and short sections of expressway, to minimize new land requirements and negative environmental andsocial impacts. The pre-feasibility study results confirmed that this approach was economically sound andcould be implemented in a considerably shorter time frame. Nevertheless, there is still a need to plan anddevelop expressway corridors in the medium term, and the outlook for this approach is improved byemergence of much stronger land acquisition, resettlement and environmental policies and practices,

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increased funding for the sector, and more experience with toll roads.

Public or private finance. Private investments in the road sector have so far been very limited, focusingprimarily on bridges and small bypasses, and the few involving private finance have taken a long time tocome to fruition. The government is continuing to pursue these options, with improved incentives andguidelines for private participation and increased readiness to examine public-private financing options.NHAI is taking a leading role in these initiatives at the national level, with support from the World Bankand ADB. Nevertheless the bulk of investments will need to come from the public sector, and this projectfocuses on public investments by NHAI, while supporting their efforts to maximize private sectorinvolvement in financing, operation, maintenance, construction and engineering services. The project alsosupports increased revenue generation from road users through tolls and fuel levies, and leveraging theserevenues through bonds and other mechanisms.

Institution choice. The project fully supports the government's strategy of shifting responsibility fornational highway construction and operations from the Ministry of Surface Transport to the NationalHighway Authority of India, while strengthening the capacity of the Ministry for policy and planning. Thecurrent responsibilities of NHAI are still in a transitional stage, in which they have taken on majorchallenges for the highest-priority 14,000 km of the 62,000 km national network. NHAI has only recentlytaken responsibility for maintenance and operation of 6,000 km golden quadrilateral, and is still examiningits relationship with state Public Works Departments for maintenance management. The project supportsinnovation, learning and strengthening of these functions through the institutional strengthening andmaintenance management components.

C. Project Description Summary

1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed costbreakdown):

The project has three main components which are listed below:

, T .: . .... s , - ...... E v . , aank.................. % of .omponent io~ts ;: --- -% Of E - Bank-

13M 3.. _ -WE:Total 1;--' .-:: cingl.Highway upgrading of 475 km to Highways 610.84 94.0 481.84 93.4four lanes including works,supervision, land acquisition andresettlement, and environmentalmanagement.2. Corridor management and road Highways 24.00 3.7 19.20 3.7safety works3. Institutional strengthening and Institutional 10.00 1.5 9.80 1.9training Development

Total Project Costs 644.84 99.2 510.84 99.0Front-end fee 5.16 0.8 5.16 1.0

Total Financing Required 650.00 100.0 516.00 100.0

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2. Key policy and institutional reforms supported by the project:

Bank support for institutional development of NHAI began almost from its inception, providing assistancein its establishment and initial corporate plan. Many of the objectives established at that time are nowbeing realized. Both NHAI and MOST have demonstrated major improvements in project preparation,design, supervision, dispute resolution, environmental and social assessments, while NHAI has introducedsimplified procedures, increased delegations, and extensive capturing of private sector efficiencies.

Work on the next phase of institutional strengthening started in 1998 under a PHRD grant with a view toassisting the NHAI to effectively carry out its current and expected expanding responsibilities in themedium term. The institutional study included review of roles of NHAI and its parent ministry, review ofNHAI Act and the Board, strengthening of NHAI organization and operating arrangements. On completionof this study, NHAI developed its own draft strategy document for institutional strengthening in severalphases, based in part on a consultant's report. During appraisal, this was critically reviewed in a workshopinvolving about 20 key high-level stakeholders, with the following key conclusions:

* The challenge of delivering a major construction program creates the immediate needs of gearingup for unprecedented needs for improved project management, human resource development,quality assurance, information systems and management processes, especially for preconstructionactivities.

o Road operations and maintenance management are relatively new areas of responsibility for NHAI,which present some immediate challenges and potential for greatly improved efficiency ofutilization of road assets. This requires a good analysis of strategic options, pilot introduction ofnew methods and procedures, and stronger management and monitoring of traffic performanceoutcomes such as travel time and accident reductions. It was agreed that this needs to be taken upnow, in parallel with the current construction focus.

3 Business efficiency of NHAI could be enhanced with corporate performance indicators, improvedcommunications with extemal stakeholders, enhanced delegation of powers, improved planning andfinancial management, strong intemal delegations and revision of acts and regulations whichconstrain organizational effectiveness.

* Overall transport outcomes also rely on effectiveness of policy and regulatory measures, includingthose which cause transport delays, restrict competitive practices and inhibit effective control ofaccess points and overloading.

Specific actions under the institutional development strategy are supported by consultancy services andpilot programs described in Annex 2. In addition, the government has approved restructuring of the NHAIboard and given it full decision-making power for the overall National Highway Development Program.The institutional strengthening plan (Annex 12) includes later phases which will be taken up in proposedsubsequent Bank loans to NHAI.

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3. Benefits and target population:

The primary benefit of the project is a reduction in transport costs resulting from increased capacity,reduced bottlenecks, separation of local and through traffic in towns and improved pavements. This isdirectly linked to costs of goods and services, fares, ability to market local products and regional economicdevelopment. Moreover, the project brings efficiencies to the utilization of existing road corridors and roadassets, reduction in road accidents, a stronger road construction industry and greater participation ofstakeholders in policies and decision-making in the highway sector.

Transport is also important to social development and poverty reduction, providing increased accessibilityto education, health services and employment opportunities. Improved access also improves securityagainst economic shocks through access to alternative jobs and to health & emergency services. The targetpopulation is thus the users of the national highway, roadside communities and businesses, and the cities,towns and rural areas of Uttar Pradesh and Bihar which gain from accessibility improvements.

The transport industry in India is competitive, and is likely to pass on the benefits of vehicle operating costsavings through lower freight rates, higher quality of services, extended service coverage and higherfarimgate prices. Bus services that use the project roads are both publicly and privately operated. Theproject benefits to the privately operated bus services are likely to reach the bus users through lower faresand higher quality.

4. Institutional and implementation arrangements:

The project has been prepared and will be implemented by NHAI with extensive outsourcing to the privatesector and close coordination with the states of Uttar Pradesh and Bihar. Within NHAI, implementation ofthe major works components is under the direct responsibility of the Chief General Manager (World Bankproject), supported by four Project Directors on site in charge of specific construction packages. Highlevel State Project Steering Committees have been established in each of the two states to facilitate landacquisition, resettlement, utility shifting, forestry and other issues which may require NHAI-statecoordination. Responsibility for land acquisition and resettlement and financing of all project-related costswill, however, remain with NHAI. NHAI has taken on state engineers on deputation as well as specialistsin environment, land acquisition, social and financial management to assist with project implementation.

Policy and institutional components will involve the board and all branches of NHAI, and a road safetypolicy study will be implemented through the Ministry of Surface Transport.

Accounting and Intemal Control Arrangements:

NHAI has decentralized accounting arrangements. Field Units, also known as Project ImplementationUnits (PIU), prepare monthly trial balances which are sent to the Headquarters (HQ). All projects aresupervised by independent professional construction supervision consultants. The contractor's bills arechecked by the consultants in addition to ensuring quality control. Bills are also checked by PIU technicaland accounts staff before making payments to contractors.

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D. Project Rationale

1. Project alternatives considered and reasons for rejection:

The major works component of the project was prepared following extensive studies of 1,000 km ofNational Highway 2 from Agra in the state of Uttar Pradesh to Banva Adda near the border of Bihar andWest Bengal. Prior studies had identifed this priority corridor and undertaken a pre-feasibility assessmentof broad alternatives. Detailed feasibility and design were then undertaken for the full corridor, and thefollowing initial sections were chosen for financing under this project on the basis of implementationreadiness, mainly related to ease of land acquisition or need for further study and consultation on majorbypasses.

Package Length Traffic Proect Project Cost Cost EIRR %Lengkm pcu/day Affected Displaced Rs $m*

Families Families crore*

II-A 62 19,996 1,504 1,014 374 | 86.0 30.4%Sikandra-Pratappur I 0

II-C Fatehpur-Khaga 77 16,791 1,940 803 442 101.7 28.4%

111-A Khaga- Kokhraj 43 16,768 1,347 475 219 50.3 29.6%

III-C Handia -Varanasi 72 18,622 1,032 1,003 338 77.6 36.2%

IV-B Mohania - Sasaram 40 12,888 427 48 296 68.0 25.8%

IV-D Dehri - Aurangabad 45 15,586 212 143 285 65.4 28.2%

V-AC Aurangabad -Barwa 139 12,645 650 208 704 161.8 31.8%Adda

Total 477 7,112 3,694 2,657 610.8 30.7%

*costs for econornic analysis purposes include supervision, contingencies and resettlement, and are thus higher than construction costs quotedelsewhere in the appraisal documnent

Assessments and designs are also being completed for the remaining sections of this corridor and for thepriority link from Chennai to Madurai in Tamil Nadu, and it is envisaged that these will be taken up in twosubsequent World Bank assisted projects. In this process, other corridors are being taken up by NHAIunder its own financing and with private sector, ADB and JBIC assistance, while other lower-prioritycorridors and options were rejected.

Other transport sector options and expressway options are discussed earlier in section B3, and some ofthese are being taken up under separate Bank assistance at the state and local level. During feasibility anddesign, options for bypasses, service roads, grade separation and other details were considered in somedetail.

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2. Major related projects financed by the Bank and/or other development agencies (completed,ongoing and planned).

Latest SuperiisionSector Issue I Project (PSR) Ratings

.____________ _______ _ _____________________I (Bank-finaneed projects only}Implementation Development

Bank-financed Progress (IP) Objective (DO)

COMPLETEDConstruction/rehabilitation of rural Gujarat Rural Roads Project S Sroads (basic connectivity) (Cr 1757-IN)

Bihar Rural Roads Project (Cr U U1072-IN)

Four-laning and strengthening of First National Highway Project U UNational Highways for four states (Ln 2534-lN)(congestion reduction)Widening and strengthening of State States' Road Project (Ln U URoads 2994/Cr 1959-IN)CURRENTFour-laning and strengthening of Second National Highways S SNational Highways for six states Project (Ln 3470/ Cr 2365-IN)(congestion reduction)Technical Assistance to prepare State State Roads Infrastructure S SHighway projects (enhance institutional Development Technicalcapacity at state level) Assistance (Ln 4114-IN)Widen and strengthen State Roads Andhra Pradesh State Highway S S(upgrading state roads and institutions) Project (Ln 4192-IN)Widen and strengthen state roads in a ILFS Project (Ln 3992-lN; Cr. S Scommercial format - Vadodara-Halol & 2838-IN)Ahmedabad- MahesanaPLANNEDWidening and strengthening of State Proposed Gujarat, Haryana andHighways (upgrading and rehabilitating other State Highway Projectsthe state road network) (FY 2000-02)

Upgrading National Highways Proposed Fourth National(congestion reduction, institutions) Highways ProjectOther development agenciesADB: Strengthening and widening to First and Second Highwayfour lanes selected sections of National Projects, National HighwayHighways projectOECF: Four laning of National Proposed First NationalHighways; bridges Highway project; Bridge across

Yamuna at Delhi

IPIDO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

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3. Lessons learned and reflected in the project design:

To varying degrees all projects initiated before the mid-1990s have suffered from (a) poor quality at entry;(b) weak institutional capacities for project management, contract and consultant services administration;(c) inexperience in Bank's procurement methods; (d) inadequate inter-agency co-ordination; (e) inordinatedelays in handing over project sites; (f) weak contractor capabilities and inadequate consultant capacity; (g)excessive delays due to weak dispute resolution and decision mechanisms and also due to belated paymentsto contractors; and (h) lack of awareness and low degree of acceptance towards integration of environmentand social issues in technical design.

This has led to substantial changes in the project preparation process, leading to much more efficientimplementation experience for recent projects such as the Andhra Pradesh State Highway Project. In thecurrent project, key aspects of the preparation process have included:

* Substantial attention to institutional assessment and strengthening, and transfer of projectpreparation and implementation from the Ministry of Surface Transport and State Public WorksDepartments to the National Highways Authority of India.

* Much stronger engineering preparation using intemational consultants, largc constructionpackages, thorough contractor prequalification, with all major construction packages fally readyfor bid invitation prior to negotiations.

* Much stronger processes for environmental assessment, consultation, land acquisition andresettlement and government clearances. Full site readiness of substantial reaches of each package(sections to be handed over to the contractor on mobilization) will be a condition of contractaward.

* A construction industry working group involving govemment, World Bank and private sectorrepresentative has held several workshops to review factors constraining the efficiency of theconstruction industry and measures which would encourage increased international participation.Its recommendations are being taken up and supported by the project.

4. Indications of borrower commitment and ownership:

A recent presentation by NHAI to international financing institutions highlighted the commitment of thegovemment and NHAI to deliver on ambitious goals for upgrading the core network of national highwaysin India. This commitment was demonstrated in preconstruction planning, institutional strategy, staffing,financing, and high-level government attention to issues of empowering NlIAI and enabling the role of theprivate sector.

NHAI itself has demonstrated considerable improvements in institutional performance compared with itsparent ministry, readiness to appoint key staff to support project objectives along with a strongcommitrnent to maximum outsourcing of professional services. NHAI has already mobilised sevenconsultants, with a combined cost of about S7 million, for the feasibility studies and detailed engineering,environmental and social studies for seven packages of the selected National Highway corridors.Consultants have also been utilised for studies of institutional strengthening, corridor management anddevelopment of a framework for private sector financing of a pilot expressway corridor. Implementation ofthe findings of these studies is supported by the project.

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The government has also approved an additional levy of Rs 1.00 per litre on petrol to be exclusively usedby NHAI and Rs 1.00 per litre on diesel to be shared for rural development, railways, national highwaysystem and state roads. This will ensure regular flow of funds for project implementation. Amendment ofland acquisition and national highway acts to simplify land acquisition and allow collection of tolls for thefour-laned roads will encourage private sector participation in development and operations of nationalhighways.

5. Value added of Bank support in this project:

The most important contribution of the Bank in this sector is knowledge of effective institutions, policies,financing and implementation mechanisms in other parts of the world, and experience with analysis ofeconomic, social, environmental and poverty impacts of altemative approaches. This has helped focusattention on the strengths and weaknesses of current practices in the sector, and to mobilize technicalexpertise in examining new approaches. Many of the procedures which have been put in place duringproject preparation are now being adopted by NHAI for all of its project preparation activities, withsubstantial changes in procurement, engineering, environment, land acquisition, resettlement, constructionsupervision and dispute resolution practices.

Institutional development of NHAI, construction industry development and exchange of informationbetween central government, states and the private sector have been supported by relationships with theBank. Continued involvement of the Bank will facilitate institutional reform in sound businessmanagement, accountability and responsiveness to external stakeholders, improved management of roadassets and traffic flow efficiency and safety, and better planning, policy and regulatory capacity.

The Bank's financial participation is also important to the achievement of the major investment programsupported by this project, and helps to mobilize other financing.

E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)

1. Economic (see Annex 4):

* Cost benefit NPV=USS1686 million: ERR =31% (see Annex 4)O Cost effectivenessO Other (specify)

The Highway upgrading component including contingencies represents 95% of the total project cost.Benefits were determined from savings in road user costs due to improved pavement condition, reducedtraffic congestion, and increased separation of fast and slow moving traffic, and from savings in futuremaintenance costs arising from timely rehabilitation. The economic analysis was based on thewell-established Highway Design and Maintenance (HDM) model developed by the Bank, and similarmodels used by some consultants. Traffic volumes on the 7 selected packages ranged from 11,000 to20,000 vehicles per day, including 65 to 90 percent trucks and buses. Various investment alternatives wereexamined in terms of number of lanes, pavement type and strength, service roads and bypasses. For theselected alternatives, the analysis showed Economic Rates of Return (ERRs) of 26 to 36 percent with anoverall rate of return of 31 % and Net Present Value of US$ 1,686 million.

Economic analysis was not performed for the corridor management works and the institutionalstrengthening components. The corridor management works component includes maintenance works and

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program of minor improvements focusing on traffic efficiency and accident reductions. While thesecomponents were not formally evaluated, both international and domestic experiences suggest that theseworks will be highly economically viable.

2. Financial (see Annex 5):NPV=US$ million; FRR = % (see Annex 4)

NHAI was established under the National Highway Authority of India Act of Parliament 1988, and becameoperational in 1995. According to the Act, NHAI should act on business principles. The sources of NHAIfunding may include normal government budget, fuel levy, bonds, tolls, and loans. Levies on petrol anddiesel fuel are collected by Gol and passed through the central budget and the Ministry of SurfaceTransport to NHAI. The authority has few independent assets and little independent revenue.

During FY 1996/97 to 1998/99, almnost all NHAI budget was from the government general revenues.NHAI received $276m from the fuel levies in 1999/2000, and expects to receive S460m in 2000/2001.While NHAI recently started a BOT project and collects some tolls, it has not yet issued bonds. Forcarrying out the maintenance of national highways, NHAI receives maintenance grant from MoSTseparately. During the year 1998-99 NHAI received an amount of Rs. 27.4 millions towards maintenanceout of which NHAI incurred an expenditure of Rs. 23.3 millions.

Fiscal Impact:

The proposed loan is expected to have a peak annual expenditure of SI 61 million including counterpartfunds. The peak annual counterpart funding requirement of 534 million is less than 10 % of NHAI'sexpected annual expenditure, and hence will have only a modest impact on the authority's overall finances.

3. Technical:

Capacity and safety of the project roads will be substantially improved through widening from two lanes todivided carriageways with at least four lanes and paved shoulders. Bypasses, service roads, gradeseparated intersections, raised embankments and provision for pedestrians and local traffic are provided asrequired to meet local conditions. Preparation studies considered pavement alternatives of asphalt orcement concrete, and proposed a combination of the two, with additional provisions for strengtheningquality oversight for newly introduced construction methods.

Pilot programs have been designed to introduce new contracting methods and technologies for roadmaintenance and more effective management of the full transport service provided by the highways. Thiswill be based on substantially improved monitoring of road conditions, traffic flow, speeds and accidents.Substantial opportunities have been identified for making more effective use of available road assets.

4. Institutional:

4.1 Executing agencies:

Before establishment of NHAI, national highway construction and maintenance were implemented byspecial branches of the state Public Works Departments, acting as agents on behalf of the central Ministryof Surface Transport. This arrangement continues for the bulk of the national highway network which has

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not yet been handed over to the NHAI. Problems with this arrangement have included slowdecision-making, weak quality control, lack of delegation of authority and inefficient priority-setting andasset management. NHAI was established to introduce new institutional approaches in the sector, with astrong emphasis on out-sourcing to the private sector. Institutional assessments discussed in section C2have helped to identify options, develop strategies and assist in their implementation.

As NHAI is now beginning to take up responsibility for maintenance as well as construction, there are newopportunities to test alternative contracting arrangements and different relationships with the states. Theproject supports innovation, learning and benchmarking of existing and new approaches.

4.2 Project management:

The project preparation process was designed to test and strengthen the capacity of NHAI for projectmanagement. NHAI has mobilized a strong team in headquarters and on site to work closely withconsultants and local authorities during project preparation, and this will continue during theimplementation phase. Additional skills in land acquisition, environment and financial management are stillbeing built up.

4.3 Procurement issues:

A procurement plan has been prepared by the borrower for all project components, and agreed with theBank. Highway upgrading works have been prepared in large construction packages of $40 to $140million to attact competitive international bids, while corridor management works are in smaller packagesto strengthen institutional capacity to manage assets and operations at a decentralized level.

4.4 Financial management issues:

The accounting policy adopted by NHAI to treat certain percentage of the works as revenue income iscontrary to generally accepted accounting practices in situations where NHAI is the owner of the assets,and NHAI has agreed to review this policy. NHAI will award a consultancy contract for the design,development and implementation of computerized Financial Management System before the end of May2000.

For the year fiscal year 1999-2000, NHAI did not have any internal audit arrangements. NHAI has agreedto appoint professional internal auditors for a three year term at a time.

The annual accounts for the year ended 31st March 1998 were finalized in March 1999 and an audit reportthereon was issued in August 1999 nearly seventeen months after the close of the fiscal year. Accounts forthe year 1998-99 were compiled by September 1999 and the final audit report is awaited. NHAI has agreedto reach an understanding with C &AG for completing the annual audit within six months from the close ofthe fiscal year.

5. Environmental: Environmental Category: B (Partial Assessment)5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (includingconsultation and disclosure) and the significant issues and their treatment emerging from this analysis.

The proposed four laning of the highway is mostly confined to the existing right-of-way, and the potentialenvironmental impacts due to the construction of the selected sections are mostly construction related andare reversible. These impacts can be managed by development and implementation of good environmentalmanagement and mitigation plans. Therefore the project has been accorded EA category B.

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Most of the construction of the proposed highway is restricted to the existing right-of-way, except for someminor realignments and construction of bypasses. Civil works mainly consist of realigning, widening andstrengthening of the carriage way; replacing and/or installing culverts and improving cross-drainage;strengthening/rehabilitating existing bridges and construction of new bridges; improving vertical andhorizontal geometry; construction of service roads near urban areas and providing bypasses wherenecessary. The proposed widening of the carriageway and improvement of horizontal geometry would leadto a large number of tree loss along the right of way, and loss of green tunnels at someplace. The use ofconcrete for most of the pavement construction will result in large volume of material transport, setting upof crushers and concrete batch plants, transport and round-the-clock laying of concrete, etc. This will resultin increased pollution from dust, noise and air, increase in traffic and congestion in the area of construction.The construction will also require substantial amount of borrow material with associated impacts fromexcavation and transport of borrow materials. Additional impacts will result from spills of oil, fael,lubricants and bitumen, and operation of borrow areas, quarries and construction camps. The project mayalso lead to potential impacts of induced development specially along the bypasses.

The EIA adopted a reiterative approach in which potential environmental issues were examined insuccessive levels of detail and feedback from stakeholders and public consultation process wasincorporated. The EAs have received regulatory clearances by the responsible State level Forestry andEnvironment Departments of the Governments of Uttar Pradesh and Bihar and the Ministry of Environmentand Forests at the Center.

The proposed project will widen, rehabilitate and improve the carriage ways to four lane cross-section withpaved shoulders and berms. The highway rehabilitation activities will expand transport activity andimprove surface conditions, travel speeds, highway safety and drainage patterns. The Project will facilitatedevelopment, provide improved access and lead to a reduction in traffic congestion. Bypasses will beincorporated at appropriate places where not only will they reduce engineering constraints and improvetraffic flow, but also reduce the number of Project Affected Persons (PAPs), enhance road safety, reducecongestion, retain the continuity of existing townships, and reduce noise and air pollution impacts.

5.2 What are the main features of the EMP and are they adequate?

The Environmental Management Plan contains the measures incorporated in the design, construction andoperation of the project to mitigate the potential environmental impacts. The plan includes implementationschedule, monitoring program, estimated budget and institutional measures necessary to mitigate andmonitor the performance of the management plan. It includes cross references to contract clauses linkingthe mitigation measures to the contract documents. The plan covers replacement tree planting program;protection of grave sites, temples and mazhars; measures for effective restoration of borrow areas; noisemitigation measures at sensitive sites and locations; maintenance of irrigation and drainage channels;measures for siltation prevention; management of wastes from construction camps and equipment serviceareas; road safety; accommodation of non-motorized transport; guidance on the location of asphalt plantsand equipment etc. The Project will be implemented by Contractors working on behalf of the NHAI and itis expected that the mitigation measures will be strictly enforced and closely supervised by independentSupervising Consultants. Issues such as, steepness of slopes and barriers; signage, road markings andintersection layouts; roadside access, parking and bus stop arrangements; provisions for pedestrians,livestock and non-motorized traffic etc., raised during the public consultation process are also reflected inthe management plan.

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5.3 For Category A and B projects, timeline and status of EA:Date of receipt of final draft: March 2000

Detailed Environmental Impact Assessment of the entire 1400 km of India National Highway 2 corridorfrom Agra to Dhanbad has been carried out in five Packages (I - V). The proposed contract sections havebeen selected from Packages II, I1I, IV and V and a consolidated EIA for the project was prepared based onthe outcome of the detailed EIA studies of these packages. For each contract section, a detailedEnvironmental Management Plan (EMP) was also prepared. The detailed EIAs for Package II, III, IV andV are available in the project files.

5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EAreport on the environmental impacts and proposed environment management plan? Describe mechanismsof consultation that were used and which groups were consulted?

Public participation and community consultation has been undertaken as an integral part of the EA processat various stages of project preparation including environmental screening, and feasibility andenvironmental assessment. Altogether consultations were held at 46 locations, and included door-to-doorpersonal interviews, focus group discussions, stakeholder consultation and district-level public hearings.

The major issues identified by the public were dust, air and noise pollution due to the bad condition of theroad and the overloading of the trucks. Concern was also shown regarding the removal of roadside trees aswell as traffic congestion. At most locations, people were ready to trade temporary loss of trees for thewidening of the road and providing relief from congestion. People were also concerned about the loss ofwater bodies and need for better roadside drainage along the project corridor. There were suggestions forthe provision of roadside facilities, rest areas and truck stoppage lay-byes. Other concerns were on roadsafety for which suggestions were provided - safe passages, underpasses where required and service lanesto separate local from through traffic. Local communities were anxious about the impact on their religiousstructures and suggested their protection, relocation and enhancement.

The public feedback obtained was used as inputs in the design process and subsequently formed the basisfor design of mitigation measures for specific locations. To redress the environmental issues likely tosurface during the construction and operational phases of the project, regular public consultations isplanned to address public suggestions/complaints.

5.5 What mechanisms have been established to monitor and evaluate the impact of the project on theenvironment? Do the indicators reflect the objectives and results of the EMP?

For the EMP to be successfully implemented, the project will have to be properly supervised. Thissupervision will be entrusted to a Supervising Consultant with experience in environmental management.The Supervising Consultant will be staffed with one Environmental Specialist per each contract and will besupported by full time, Manager-Environment, at the NHAI Corporate Office. NHAI has agreed to createand staff the post of Manager-Environment well in advance of project implementation. TheManager-Environment will guide and assist NHAI to implement the environmental aspects of the projectand develop and strengthen this integrated approach for use in future projects.

6. Social:6.1 Summarize key social issues relevant to the project objectives, and specify the project's socialdevelopment outcomes.

The project involves resettlement, primarily of squatters and encroachers within an existing public Right of

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Way (ROW) along the project roads. A social impact assessment has been undertaken during projectpreparation, consisting of: (i) early screening and social impact assessment as part of project feasibilitystudies, (ii) public consultation, (iii) preparation of a project specific resettlement and rehabilitationentitlement framework consistent with Government and Bank policies, (iv) census and baselinesocio-economic survey of the potentially affected population; and (v) preparation of a time-boundResettlement Action Plan (RAP) in accordance with the Bank's Operational Directives 4.30 and 4.20.

A full census was undertaken to document the status of the potentially affected population within theproject impact area, their assets, and sources of livelihood. It provides the basis for establishing a cut-offdate for determining who may be entitled to relocation assistance or other benefits from the project. Adetailed socio-economic survey of a sample of the potentially affected population was also carried out todevelop the monitoring and evaluation parameters and to develop the data base which will be monitored.This survey also provides a baseline against which mitigation measures and support will be measured andincludes comprehensive examination of people's assets, incomes, important cultural or religious networksor sites, and other sources of support such as common property resources. Analysis of survey resultsexamined the needs and resources of different groups and individuals, including intra-household and genderanalysis.

Generally, only a narrow strip of several meters or less of land will be affected. Often, this means that onlya compound wall or a fence, yard, extending awning, or sign must be removed. In some cases, smallportions of roadside dwellings and businesses will be affected. In other cases it will be necessary to acquirean entire residential or commercial structure, to the extent that either resettlement or relocation arenecessary. In all cases, however, compensation and/or assistance will be provided depending on the statusand extent of the property taken.

Resettlement is required only where residential and/or commercial buildings must either be fully demolishedor made uninhabitable. Displaced residents or affected businesses of these buildings and other public andreligious buildings and structures need to be relocated. Rehabilitation will be required where resettlement,relocation, or other project impacts result in lost livelihood or income. In these cases, it will be necessary torestore the economic status of affected persons to at least pre-project levels or better.

Land acquisition is not a major issue in this project, as the works will stay largely within the existing roadright-of-way (ROW). However, a concerted effort by NHAI will be required to carry out the landacquisition according to the plan for the project, where the ROW to accommodate the proposed highwayimprovements in some alignments is not present, not sufficient, or not available. During projectimplementation land must be acquired to (i) extend the ROW (if confined to carriageway or too narrow), or(ii) reestablish the public ROW (if encumbered or unavailable). The additional land required by the projectamounts to about 365 ha. (see table below), and falls under two classifications: (a) public land owned bythe Departments of State Government and village level institutions, and (b) private land.

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Project-affected families and land for each contract package

Contract | Families Families Families Land to be Land to be LandDisplaced Displaced Impacted Acquired (Ha) Acquired (Ha)

I _ _ _ _ _ _ _ _ _ _ _ ~~~~~~~~~(Ha)

Squatters Others Agriculture Govt + Other+homestead Panchayat

II-A 879 135 1,504 17.54 18.12

_II C_ 401 402 1,940 28.18 21.79 16.49

111I-A 376 99 1;347 11 20 19

IlI-C 993 10 1,032 1.5 20.6

IV-B 25 23 427 ! 1.5 2.25

IV-D 84 59 212 10.40 10.46 _

V-A&C 60 148 650 53.52 122.82 _

TOTAL 2,818 876 7,112 L 132.64 215.04 16.49Includes by-passes for a length of 7 km (package V) and 3.15 km (package II)

Encroachers. tenants and titleholdersLand required for resettlement (residence and commercial plots) plus agriculture land for vulnerable groups

The Resettlement & Rehabilitation (R&R) policy for this project addresses the nature of entitlements to begiven to all squatters and vulnerable encroachers. Moreover, additional support will be extended under theproject R&R policy to achieve poverty reduction and equity. Following consultations, a framework hasbeen developed which distinguishes between compensation in cases of land acquisition or other losses ofprivate property, and rehabilitation and assistance given to squatters and vulnerable enroachers. A detailedResettlement Action Plan (RAP) which has been agreed with the Bank and approved by NHAI. Thesummary table above provides the information on the number of families displaced and affected by theproject.

The Socio-Economic Baseline Survey for 477 km project roads identified 7,112 project-affected familiesincluding 2,818 squatters within the ROW and the rest include encroachers, title holders and tenants. Atotal of 3,684 will need to be relocated (they will lose above 25% of their holding). The figures indicatethat approximately 15 families per km will be affected and that socio-economic impacts are likely to bemodest. No large scale movements of groups of people are envisaged. However, resettlement sites will bedeveloped if more than 25 families are willing to settle in cluster. The project will seek to facilitate people'sself-relocation by giving adequate resources and support, rather than developing clustered resettlementsites.

Vulnerable groups, in particular those at high risk of losing economic viability, are given targeted supportin the Resettlement Action Plan. This is in accordance with the policy framework adopted by the NHAI forthis project. The data collected is disaggregated by gender and contains information about socio-economicstatus. The census study revealed that a total of only 32 tribal families will be affected and are spread overa stretch of 477 km. Since impact on tribal community is not foreseen there is no requirement for separateIndigenous Development Plan in accordance with OD 4.20.

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For implementation of the Resettlement Action Plan, state level committees set up for the entire project,will provide guidance for land acquisition. The NHAI will have a social cell which will be responsible forthe implementation of the action plan. There will be an R&R officer at the Corporate office to co-ordinatethe resettlement activities of all the packages. In the field offices each contract will have R&R managersand district level non-government organisations will be responsible to implement the Resettlement ActionPlan. The district level committees will be set up to facilitate the acquisition proceedings and the grievanceredress committees will be established in each district. The organizational framework for theimplementation of the RAP was agreed to during appraisal, and includes the participation of NHAIofficials at different levels, participating NGOs, and representation by project-affected persons. SinceNHAI does not have the experience in undertaking resettlement programs, working with NGOs with moreexperience in rural development is necessary. NHAI have appointed key staff, shortlisted experiencedNGOs for providing implementation support and established the institutional mechanisms for collaboration.A training program is planned to develop appropriate skills where required.

Socio-economic impacts of the project will be monitored during implementation, based on two (a)Input/output indicators monitored monthly for follow-up the implementation; and (b) Impact indicatorsmonitored by an independent agency annually, mid-term and end-term during the project period. Thespecialist inputs to carry-out these tasks will be hired on contract by NHA1, separately from theinstitutional development assistance. Regular supervision and follow up by Bank specialists are planned.

Lack of awareness of and commitment to social development objectives constitute a substantial risk in theproject, since the main responsible agency lacks experience in these areas. In order to reduce this risk, aneffort has been made to build capacity during preparation and ensure that participation and consultationprocesses continue during the implementation of the RAP. The results of the consultation process will forman integral part of the action plans for environment and social impacts. To promote local capacitybuilding, efforts are being made to carry out the work in collaboration between the consultants and theproject authorities; to designate and train key personnel; and to involve local research institutes, NGOs, andothers. Careful monitoring and supervision will be required to ensure that this is implemented properly.

6.2 Participatory Approach: How are key stakeholders participating in the project?

Public and community consultation were undertaken as an integral part of the environmental and socialassessment process. The public participation and consultations were carried out throughout the projectpreparation stages at local and village levels. Additional consultation and hearings were carried out in theaffected districts by the local officials as part of the GOI (State and Center) environmental clearanceprocess. Social preparation of the project has included consultation with stakeholders at different levels,particularly with the people potentially affected by the project. At the local level, group discussions,participatory mapping of the resources and infrastructure, and other methods have been used. Throughcomprehensive screening and local consultation, the project preparation has minimized cases where landacquisition may be required, or where there may be other losses of assets or resources. These consultationshelped to finalize various issues like proposed location of bus stops and religious structures, realignmentsuggesting measures for economic rehabilitation and new rehabilitation sites. The process ensures that theaffected population and other stakeholders are informed, consulted and allowed to participate actively in thedevelopment process.

A number of workshops and consultation meetings have been held in the two states (Bihar and UP) withgovernment representatives, consultants, project affected people and environmental protection agencies tobuild consensus on project objectives, design and implementation arrangements and discuss impacts andrehabilitation or mitigation measures.

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6.3 How does the project involve consultations or collaboration with NGOs or other civil societyorganizations?

NGOs play a key role in resettlement implementation.

6.4 What institutional arrangements have been provided to ensure the project achieves its socialdevelopment outcomes?

Detailed arrangements in the Resettlement Action Plan include staff positions at NHAI headquarters and ateach project office, package-level NGOs, district-level committees and separate monitoring consultancy.

6.5 How will the project monitor performance in terms of social development outcomes?

Monitoring arrangements are built into the Resettlement Action Plan and include monthly progress reportsduring the early stages and consultancy services for independent annual, mid-term and end of projectreviews of overall impact.

7. Safeguard Policies7.1 Do any of the following safeguard policies apply to the project?

Po:icy AppikabiLi'y1 Environmental Assessment (OP 4.01. BP 4.01, GP 4.01) O Yes El NoLi Natural habitats (OP 4.04, BP 4.04. GP 4.04) O Yes L NoEl Forestry (OP 4.36, GP 4.36) C Yes El NoEl Pest Management (OP 4.09) LI Yes LI NoEl Cultural Property (OPN 11.03) Ei Yes C: NoEl Indigenous Peoples (OD 4.20) LI Yes Oi NoO Involuntary Resettlement (OD 4.30) X Yes LI NoEL Safety of Dams (OP 4.37, BP 4.37) Xi Yes LI NoEl Projects in Intemational Waters (OP 7.50, BP 7.50, GP 7.50) El Yes Oi NoEl Projects in Disputed Areas (OP 7.60, BP 7.60. GP 7.60) El Yes El No

7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.

For environment, detailed EMPs for each of the contract packages have been separately developed andNHAI will be responsible for their implementation. The implementation consists primarily of the mitigation/ management / avoidance of the negative impacts, the enhancement of various environmental componentsalong the project and the monitoring program during the design, construction and operation stages of theproject. An environmental budget has been included in each contract package. Supervising Consultantswith at least one Environmental Oficer per contract will supervise the implementation of the EMPs. Whilethe individual budgets vary based on the nature of the remedial measures that are to be adopted, the totalbudget for the EMPs will be Rs. 155 million. Comprehensive training and monitoring plans are included ineach EMP.

For resettlement, detailed Resettlement Action Plans have been developed and will be monitored closelyduring project supervision. Substantial up-front progress will be required prior to award of each contract.

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F. Sustainability and Risks

1. Sustainability:

Benefits of the project are likely to be sustained over time as the traffic volumes increase. Nevertheless, akey factor will be NHAI's capacity to maintain and efficiently operate the newly created road assets. Theproject will enhance this capacity through institutional strengthening, promotion of private sectorinvolvement, and assured funding mechanisms. Key issues are (a) clarifying roles of NHAI, MOST andthe states; (b) establishing an overall strategy for national highway spending; and (c) adequate funding formaintenance. The implementation of the recommendations of the Institutional Strengthening study andCorridor Management study will be critical forproject benefits to sustain over a period of time. Recentincreases in NHAI revenues from levies on petrol and diesel fuel are also an important step.

2. Critical Risks (reflecting assumptions in the fourth column of Annex 1):

From Outputs to ObjectiveContinued traffic congestion due to higher M Realistic traffic growth projections; six laningthan expected traffic growth or weak and service roads where warranted; pilotmanagement of traffic operations and corridor management program; reviewroadside developments legislation.

Infrastructure strengthened under the M Strengthened funding, monitoring managementproject is not maintained and contracting of maintenance including pilot

maintenance management units.

Government does not remain committed to M Full ownership through extensive consultation.implementing institutional reforms. Action Plan matrix with monitorable indicators.Responsibilities of NHAI and MOST not Consultancies designed to promote learningclearly defined. State National Highwayunits reluctant to accept structuralchanges.

Increased funding for NH sector is not N Funding has been steadily increasing from roadmaintained user charges; future trends depend on delivery of

quality road works and participation of keystakeholders in strategy and performancemonitoring.

Effective cooperation not established M Involvement of these stakeholder groups inbetween NHAI, police, local communities decisions on allocation and monitoring of minor

imporvement works

From Components to OutputsDelays in procurement and award of M All bid documents ready and bids invited bycontracts negotiations, and ready for award at loan

effectiveness. Full decision-making authoritydelegated to NHAI board.

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Delays in site readiness S Adequate staffing, high-level committees, earlyappointment of NGOs and monthly monitoringof action plans.

Unsatisfactory consultant/contractor M Strict prequalification criteria, supervision byperformance, construction delays, quality internationally experienced consultants, largeproblems or cost overmuns. construction packages.

Overall Risk Rating MRisk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)

3. Possible Controversial Aspects:

None

G. Main Loan Conditions

1. Effectiveness Condition

Standard conditions only

2. Other [classify according to covenant types used in the Legal Agreements.]

1. Establish and maintain state high-level Project Coordinating Committees in Uttar Pradesh and Bihar,consisting of Chief secretary, Revenue Secretary, Environment Secretary and Secretary PWD (or otheragreed high-level officials) in the two states of Uttar Pradesh and Bihar to coordinate the issues relatedto land acquisition, resettlement & rehabilitation, environment and shifting of utilities, supported bydistrict level committees and greivance cells for land acquisition and R&R.

2. NHAI will establish and maintain an Advisory Group of external stakeholders which will meet at leasttwice a year to review the overall program and strategy being implemented under the project.

3. NHAI will produce a quarterly report on implementation progress with agreed format presented in theBorrower's Implementation Plan; mid-term review report after 24 months; and social monitoringreports annually, at mid-term and project completion.

4. Annual report on condition of NHAI road network and projected future user costs and projected assetcondition which would be expected with forecast levels of maintenance (from road informnation systemconsultants).

5. Annual report on travel speeds and accidents on pilot road stretches for the Minor Improvementscomponent, and agreement with the Bank on expenditure program.

6. Implement resettlement action plan and environmental management plan.

7. Any other road works which might be proposed for implementation under the project, (e.g. because ofunforseen land acquisition or environmental constraints or to utilize cost savings) would be consideredfor financing only after completion of Environmental Management Plan and a Resettlement Action Plan

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satisfactory to the Bank.

H. Readiness for Implementation

0 1. a) The engineering design documents for the first year's activities are complete and ready for the startof project implementation.

E1 1. b) Not applicable.

1 2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.

Z 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.

El 4. The following items are lacking and are discussed under loan conditions (Section G):

1. Compliance with Bank Policies

Z 1. This project complies with all applicable Bank policies.n 2. The following exceptions to Bank policies are recommended for approval. The project complies with

all other applicable Bank policies.

Christer J. Hoban Jonathan S. Kamkwalala (,Edwi LimTeam Leader Sector Manager/Director 'Country ManagerlDirector

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Annex 1: Project Design SummaryINDIA: THIRD NATIONAL HIGHWAYS PROJECT

K.y Per-or-anc-Hierarchy of ObjectivQ Indiators Monitoring A& *luation Critical Assuptlons

Sector-related CAS Goal: Sector Indicators: Sector! country reports: (from Goal to Bank Mission)Remove infrastructure Increased traffic capacity on Policy directives of the Goverment remainsbottlenecks, improve key highway corridors Government committed to sector reformsinstitutional and financialperformance of public sector, More effective institutions Continued funding for theand increase private sector government's Nationalinvolvement in road Increased role of the private Highway Developmentengineering, construction, sector Programfinancing and operations

Increased delegation,independence and publicaccountability of the NationalHighway Authority of India

Project Development Outcome I Impact Project reports: (from Objective to Goal)Objective: Indicators:Reduce transport constraints . Quarterly progress reports; User cost-savings are passed.. . ~~Travel time reduced by 15% bsLin estimatesotsamg aeaseon economic activity and on project roads by end of baselie estimates on to consumerreduce transport costs project

Vehicle operating costs on updated analysis to re-assessproject roads reduced by 10% projected travel speeds andby end of project vehicle operating costs.

Improve institutional Percentage of NHAI core Annual reports on road Government remainscapabilities to manage road network in poor condition roughness and projectedprograms, assets and service reduced from about 40% to operating costs for the core

not more than 20% by end of NHAI network (Golden institutional reformsproject Quadrilateral)

Allocations for maintenancefunding are increasedannually in real terms to therequired amounts during thelife of the project

Output from each Output Indicators: Project reports: (from Outputs to Objective)component:Highway Upgrading 475 km of national highways Quarterly progress reports; Traffic congestion minimized

widened to four lanes, supervision mission reports; through sound management ofincluding planting of trees disbursement reports traffic operations and roadside(along full length); service developmentsroads (60 km) and satisfactorysafety audit completed. Infrastructure is maintained

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Corridor Management and - two pilot Corridor Traffic growth/diversionRoad Safety Works Management Units established estimates materialize

in NHAI and fully staffed andfunctional;- technical assistance for Adequate funding forcorridor management in placeand functional; Effective cooperation between- technical assistance for NHAI, police, localprogram of minor poliesimprovements in place and communitiesfunctional;- at least 3 pilot maintenancecontracts awarded and resultsevaluated;- at least 30 hazardouslocations identified and madesafer through spotimprovements.

Institutional Strengthening - Technical Assistance for Annual road condition survey Govenment remainsand Training institutional strengthening in committed to implementing

place and functioning; institteforins n- training program developed;- corporate strategy developed; Institutional responsibilities of- reporting of NHAI's NHAI and MOST are clearlyactivities and performance defined and maintainedincluding a road condition and

operational infornation Trained staff are placed insystem established,functioning and to be reported relevant positionsannually; Staff acceptance to structural- financial management angesstrengthened and improved; changes- a well functioningManagement InformationSystem in place andfunctioning;- a Road Safety Policy studycompleted;- a construction industry studycompleted;- NHAI and other staff trainedin:a) Quality managementb) Environmental and Socialmanagementc) Project monitoring andcontract administration

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Hier.archy of Objectives K ?erfor i i 8m ajceto - -ai OProject Components I Inputs: (budget for each Project reports: (from Components toSub-components: component) Outputs)Highway upgrading of about $610.8 million Quarterly progress reports; Timely procurement and475 kn of National Highways (Loan: $ 481.8 million) supervision mission reports; contract implementationto four lanes with service disbursement reports; siteroads where required visits Timely site readiness

including land acquisition,utility relocation

Full implementation of theresettlement Action Plan andEnvironmental ManagementPlan

Satisfactory contractorperformance

Corridor management and $ 24.0 million Annual surveys and action Timely and reliable surveys ofroad safety works (Loan: $19.2 million) plans; progress reports; site existing needs

visits

Institutional strengthening $10.0 million Progress reports; action plan Goverment remainsand training for NHAI and (Loan: $ 9.8 million) implementation; systems cornmitted to implementingother sector agencies developed, studies completed, institutional reforms and

pilot programs undertaken retains strong ownership of

action plans

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Annex 2: Project DescriptionINDIA: THIRD NATIONAL HIGHWAYS PROJECT

By Component:

Project Component 1 - US$610.80 millionHighway Upgrading

(a) civil works for widening and strengthening of about 475 km of national highway from two lanes tofour-six lane divided carriageway with service roads where required ($556 million), and environmentalmanagement including tree plantation ($2.5 million), for a combined total of $558.5 million

(b) supervision of civil works ($31 million).

(c) Land acquisition, resettlement and utility relocation ($11.4 million).(i) land acquisition and utility relocation ($6.1 million). This item will be financed entirely by

NHAI.(ii) Rehabilitation assistance ($4.6 m) will be paid to beneficiaries for each package through a

consultative process. Payments will be made from the project director's office, and the Bankshare ($3.4 m) will be reimbursed on the basis of Statements of Expenditure (SOE).

(iii) Resettlement implementation support, training and monitoring ($0.7 m) will be providedthrough: four supervision level NGO consultancy packages ($250k total); one or twomonitoring consultancies ($250k total); training of NHAI and NGO staff plus other R&Rimplementation expenses by SOE ($200k).

(d) NHAI project management costs (not Bank financed, $9.94 million).

Project Component 2 - US$24.00 millionCorridor Management and Road Safety Works.

(a) a program of maintenance works to introduce altemative contracting methods and strengthenmaintenance management practices under two Corridor Management Units ($18 million). This will beimplemented over three years. Priorities, design and implementation support will be provided by theconsultancy services listed under 3(c) below.

(b) a program of minor improvements specifically targeted at supporting improved methods for reducingtraffic delays and accidents ($6 million). Expenditures under this component will be limited to $25,000 peritem and subject to the following selection and monitoring criteria: (i) candidate improvements shoulddirectly address locations with significant delay and/or accident problems; (ii) selection should be made inconsultation with police and local authorities; (iii) impacts should be monitored after implementation.Route monitoring, identification of candidate improvements, preparation of designs and monitoring ofeffectiveness will be provided by the consultancy identified under 3(d).

Project Component 3 - US$ 10.00 millionInstitutional Strengthening and Training.

(a) Consultancy services to assist NHAI in developing and implementing an institutional strengtheningprogram including corporate strategy development, human resources, legislation, financial management,management information system, road financing, project management, quality management. ($1 million)

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(b) Consultancy services for a road information system, including collection and annual updating of roadwidth, traffic volume and road roughness data on the road network managed by NHAI, integration of thisinformation on a Geographic Information System, and development of executive-level annual reports onnetwork condition and predicted user costs using a life-cycle economic model such as HDM ($0.7 million).

(c) Consultancy services for development and strengthening of two pilot Corridor Management Units,including preparation of road maintenance works programs and bid documents; development of improvedprocedures and capabilities for corridor management; implementation support and monitoring ($2 million)

(d) Consultancy services for preparation of minor improvement proposals to reduce travel time delays andaccidents based on more detailed collection of data on travel times, accidents, road condition andbottlenecks, evaluation of altematives and assistance with implementation and monitoring ($ 0.4 million).

(e) Road safety policy study to be undertaken by the Ministry of Surface Transport ($0.4 million) throughappropriate agency.

(f) Other studies and technical assistance including pre-investment and sector studies and a follow-up tothe construction industry study ($2.0 million).

(g) Training and staff development programs for NHAI and other public, private and educationalorganizations with a role in achievement of NHAI objectives in the road sector, including environment andresettlement training ($2.6 million). This would be paid on an SOE basis according to a clearly definedand agreed training strategy and selection criteria.

(h) Goods in support of training and corridor management ($0.9 million). This would be utilized forcomputers, road design and data collection technology in support of training programs, and minorimprovement goods subject to a limit of $50,000 per item as indicated in para 2 (b).

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Annex 3: Estimated Project CostsINDIA: THIRD NATIONAL HIGHWAYS PROJECT

Highway upgrading 314.34 212.40 526.74Corridor management and road safety works 12.50 8.40 20.90Institutional strengthening and training 4.00 5.20 9.20

Total Baseline Cost 330.84 226.00 556.84Physical Contingencies 31.60 21.90 53.50Price Contingencies 20.40 14.10 34.50

Total Project Costs 382.84 262.00 644.84Front-end fee 5.16 5.16

Total Financing Required 382.84 267.16 650.00

Civil Works 349.50 233.00 582.50Goods 0.30 0.60 0.90Services 23.20 28.30 51.50Miscellaneous 9.94 0.00 9.94

Total Project Costs 382.94 261.90 644.84Front-end fee 5.16 5.16

Total Financing Required 382.94 267.06 650.00

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Annex 4: Cost Benefit Analysis Summary

INDIA: THIRD NATIONAL HIGHWAYS PROJECT

Economic analysis was conducted for each of the seven highway upgrading packages. The total cost of thecomponent including contingencies represents 95% of the total project cost. Economic analysis was notperformied for the corridor management works and the institutional strengthening components.

Economic analysis for the individual upgrading packages was prepared by the consultants appointed for thefeasibility studies. Details of the analysis are described in the relevant feasibility study reports, which areincluded in the project file. All analyses followed the conventional highway cost-benefit analysismethodology, and were based on well established highway project evaluation models, including HDM-3developed by the World Bank. To ensure consistency, NHAI re-evaluated all packages using HDM-3, withthe same input data from the consultant reports.

While economic analysis was not perfonned for the maintenance works included in the corridormanagement works component, both international and domestic experiences suggest that the proposedmaintenance works will be highly economically viable.

[For projects with benefits that are measured in monetary terms]

. - . - . t E*Qno Fihancial Anaysis.

Benefits: $ 2,094 m $ 2,324 mSavings in roaduser costs and roadmaintenance

Costs: $ 408 m $453 mRoad construction,land & resettlement,future maintenanceNet Benefits: $ 1,686 m $ 1,871 m

IRR: 31% 31%

Summary of Benefits and Costs:The unit construction costs were based on the Bill of Quantities developed by the consultants for the 475km of roads for which the preliminary engineering design was completed. Base costs include physicalcontingencies, supervision costs, and costs of land acquisition, R&R and utility relocation. The averagecost of US$ 1.2 million per kilometer includes substantial widening and shoulder reconstruction.Maintenance costs were based on the costs developed during the Road Maintenance Study.

The project benefits were evaluated using the HDM-3 Model. The model estimates the net reduction intotal transportation costs over the life of the project, taking account of savings in road user costs, primarilyvehicle operating costs and time savings, along with changes in construction and maintenance costs. Usercost savings depend mainly on changes in road roughness, traffic congestion and operating speeds.Existing traffic volumes range from 12,000 to 20,000 passenger car equivalents per day.

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Safety impacts are uncertain due to offsetting effects of improved road standards and expected highertraffic speeds, and were not considered in the analysis due to lack of data on both accident occurrence andcosts. From similar studies in other countries, it is estimated that their magnitude in economic terms islikely to be modest relative to other user costs.

The benefits of widening and paving the shoulders were included in the analysis through speed-flowequations based on lane and shoulder width. Speeds predicted by the HDM model were consistent withobservations of speeds on the roads. The effects of narrow roads, non-motorized traffic, pedestrians androadside activities were reflected in a "friction" factor affecting traffic speed. Alternative road widths wereconsidered in the analysis, before adopting the final pavement and shoulder widths.

Main Assumptions:* The base case without the project assumes that roads are maintained (potholes patched and reseals

every five years) but not improved over the 25-year evaluation period. In the with-project case, furtherpavement strengthening is provided through an overlay scheduled every 10 years.

* Roads are designed on the basis of current levels of truck overloading, recognizing the substantial lackof success in introducing improved load enforcement or truck fleet modernization in India.

- For the purpose of economic analysis, a project life of 20 years is assumed for asphalt roads, and 30years for concrete roads. A 20% scrap value is assumed for the end year of project life. A discountrate of 12% is used for the calculation of NPV. Where applicable, a 0.9 standard conversion factor isused for converting financial costs into economic costs.

* The base year traffic levels were updated from the latest traffic counts (all in recent years), and verifiedthrough field inspection. The traffic growth rates for each package were estimated based on thepredicted rates of population growth and per capita income in the project areas, and the assumedincome (total GDP) elasticities of traffic demand. The assumed elasticities were based on variousinternational empirical studies of traffic growth at similar stage of economic development.Specifically, elasticities for passenger vehicle traffic range from 1.8 to 2.0, and for freight vehicletraffic, 1.0 to 1.25.

- Generated traffic was also considered for the first year after project completion. A conservative priceelasticity of 0.2 was assumed to estimate the generated traffic. The road user benefits accrued to thegenerated traffic were calculated as 50% of the road user benefits accrued to normal traffic.

* VOCs per kilometer by type of vehicle were based on the Indian Road User Cost Study which wascompleted in 1991 and was updated to the 2000 price level using price indexes for individual inputs.Passenger value of time by type of vehicle was based on the per capita income level of the averagepassengers using that type of vehicle. Cargo time value was also based on the findings of Indian RoadUser Cost Study.

* The impact of road congestion was considered through the HDM-3 model. No disruption effect wasassumed for road traffic during the years of project implementation, as by design the highway wideningwork will take place aside the existing right-of-way.

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Sensitivity analysis I Switching values of critical items:

The major risks affecting economic analysis for the highway upgrading component are cost overruns due todelays in implementation and site readiness, and lower-than-expected traffic growth. The delays inimplementation and site readiness were reflected by assuming average one-year delay in opening of allworks, with a commensurate increase in costs and delay in the benefit stream. Lower traffic growth can becaused by macroeconomic problems and project implementation delays. Other risks associated with costoverruns, inadequate maintenance, or low traffic growth are assessed in terms of possible overall costincreases and benefit reductions in the following table:

Test ERR NPV ($ million)

Base Case 31 % 1,686

Opening delayed one year 30 % 1,616

Benefits decreased by 20 % 27 % 1,271

Cost increased by 20% 28 % 1,609

Benefits down 20% and costs up 20% 25 % 1,193

Switching values of critical items: the cost of highway upgrading works would have to increase by 430percent or the benefits to drop by 80 percent before the NPV would fall to zero.

Distribution of benefits: All income groups use the national highways, as travelers and as suppliers andconsumers of goods and services. Without the project, high transport costs would continue to affect pricesand availability of services to the communities served by the project, and would constrain economicdevelopment at all levels. With the project, transport costs will decrease, travel times will reduce, andservices such as electricity, health, education, and agricultural extension are more likely to becomeavailable in rural areas. The trucking industry in India is competitive, and is likely to pass on the benefitsof vehicle operating cost savings through lower freight rates, higher quality of services, and extendedservice coverage. Bus services that use the project roads are both publicly and privately operated. Theproject benefits to the privately operated bus services are likely to reach the bus users through lower faresand higher quality. Fares of the publicly operated bus services are not likely to be reduced, but the extentand schedules of bus services are likely to respond to changes in road capacity and quality.

If the difference between the present value of financial and economic flows is large and cannot be explained bytaxes and subsidies, a brief explanation of the difference is warranted, e.g. "The value of financial benefits is lessthan that of economic benefits because of controls on electricity tariffs."

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Annex 5: Financial Summary

INDIA: THIRD NATIONAL HIGHWAYS PROJECT

Years EndingJune 30

-- ~~~~~~' lE !_e n mm_Year I T-Y-e-a-r 2 Year 3 Year 4 Year 5 iYear 6 Year 7_

Total Financing RequiredProject CostsInvestment Costs 62.0 124.2 155.2 155.2 124.2 0.0 0.0

Recurrent Costs 2.4 4.8 6.0 6.0 4.8 0.0 0.0Total Project Costs 64.4 129.0 161.2 161.2 129.0 0.0 0.0

Front-end fee 5.2 0.0 0.0 0.0 0.0 0.0 0.0Total Financing 69.6 129.0 161.2 161.2 129.0 0.0 0.0

FinancingIBRD/IDA 56.2 102.2 127.7 127.7 102.2 0.0 0.0Government 13.4 26.8 33.5 33.5 26.8 0.0 0.0

Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0User FeeslBeneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total Project Financing 69.6 129.0 161.2 161.2 129.0 0.0 0.0

Main assumptions:

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Annex 6: Procurement and Disbursement Arrangements

INDIA: THIRD NATIONAL HIGHWAYS PROJECT

Procurement

A. Institutional Capacity

An assessment was carried out to determine the institutional capacity of the National HighwaysAuthority of India [NHAI] to undertake project procurement.

The NHAI carries out procurement of works and services in-house by the concerned divisionheaded by Member/Chief General Manager. The procurement procedure followed by NHAI so far is thesame as that followed by the Ministry of Surface Transport [MoST] who, so far, has the experience ofexecuting Bank-financed projects. NHAI has also undertaken the task of preparing a manual onprocurement by an outside consultant which is expected to be ready by October 2000.

NHAI has prior experience of execution of large externally aided projects under assistance fromthe Asian Development Bank [ADB] and also from the Overseas Economic Co-operation Fund [OECF,now renamed the Japan Bank for International Co-operation - JBIC]. Most of the senior staff of the NHAIare on deputation from MoST, or the State Public Works Department [PWDs], which have workedextensively on Bank-financed projects. NHAI has also an exclusive web-site under the nomenclature of'nhai.org' that gives procurement information on names of successful bidders, current bids, etc.

NHAI has also indicated that a proposal to fully delegate authority for award of all contractswithout any limitation of value is under active consideration of the govemnment.

NHAI has the institutional capacity to carry out project procurement for this project. However, inorder to update its knowledge on Bank's current procurement documentation and procedures, apart fromin-house procurement training at the National Institute of Training for Highway Engineers [NITHE], NHAIneeds to depute some of its key officers to outside training institutes offering procurement courses like theNational Institute of Financial Management, Faridabad, or the Administrative Staff College of India,Hyderabad.

The prior review thresholds in Paragraph D below are given after assessing NHAI's capacity forcarrying out project procurement.

B. Procurement Methods

All project activities financed under the Loan shall be procured in accordance with BankGuidelines for Procurement, January 1995, Revised January and August 1996, September 1997 andJanuary 1999, in respect of Goods and Works. Consulting services to be funded through the Bank's Loanwould be procured in conformity with the Bank's Guidelines for Selection and Employment of Consultantsby the World Bank Borrowers, January 1997, Revised September 1997, and January 1999. All civilworks, goods and services will be procured using India-specific Bank's Model Standard Pre-qualificationand Bidding Document. Specific procurement arrangements are summarized in Tables A and Al, and arebriefly described as under:

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B]. Works [US $ 582.5 Million]

- International Competitive Bidding [ICB]: US $556 Million Equivalent: The work relatingto widening and strengthening of 475 km. of national highways will be implemented in seven contractpackages of value, in the range of $40 to $140 million equivalent, for an aggregate value of about US $476million [excluding price escalation and contingencies] equivalent. The pre-qualification applications havebeen received by NHAI and the selection process of firms is likely to be over by the end of April 2000. Asan advance action, bidding documents are under preparation by NHAI and bids are expected to be invitedby the middle of June 2000. To induce participation by large contractors, bidders will be encouraged tooffer discounts for multiple package awards.

- National Competitive Bidding [NCB]: US $18 Million Equivalent: The work relating tocorridor maintenance shall be implemented in contract package sizes of US $1.5 million equivalent each,approximately, for a cumulative value of US $18 million equivalent.

- Direct ContractinglShop.ing/Force Account: US $8.5 Million Equivalent: The workrelating to minor improvement program and tree planting shall be on the basis of [i] lumpsum fixed pricecontract on the basis of three quotations [ii] direct contracting or [iii] as a last resort through force account,with the value of each contract being less than the equivalent of US $25,000 in all the three cases.

B2. Goods [US $0.9 Million Equivalent]

- Direct Contracting/Shopping : US $0.9 Million Equivalent: It is envisaged that there shallbe need for Direct Contracting or Shopping for items like computers, data collection, training aids such asaudio/video equipment, in support of training and corridor management estimated to cost less than theequivalent of US $25,000 per contract, subject to cumulative value of US $900,000 equivalent. Itemcontracts costing more than $ 25,000 would be procured under ICB procedures.

B3. Consultancy Services [US $40.80 Million Equivalent]

Arrangement in respect of procurement of consultancy services is as under:

S. No. Description of Services Estimated Cost Method of[US $ Million] Selection

[i] Supervision of Civil Works 31.0 QCBS[Four Packages]

[ii] Institutional Strengthening of NHAI 1.0 QCBS

[iii] Road Infonnation System 0.7 QCBS

[iv] Corridor Management ( Two packages) 1.5 QCBS(Two packages) 0.5 Least Cost

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[v] Minor Improvement Program (Two 0.4 QCBSpackages)

[vi] Road Safety Policy Study 0.4 Fixed BudgetSelection

[vii] Pre-investment and Sector Studies 1.0 QCBS1.0 FBS

[viii] Training- number packages below:

-US $100,000 for firms 1.6 Sole Source ORSOE for in-housetraining.*

Sole Source -- -US $50,000 for Individuals 1.0 Individual

[ix] R&R implementation through NGOs 0.7 QCBS

The Sole Source procurement could be used for institiutes like NITHE, CRRI and other governmenteducational / research institutions which are uniquely positioned to impart training.

For item [i/ above shortlisting is in progress.

C. Procurement Planning

NHAI has prepared a procurement plan for the identified packages under the project, which isbeing reviewed and approved by the Bank. Procurement of all packages would be undertaken inaccordance with this procurement plan.

D. Review of Procurement Decisions by the Bank [Refer Table BJ

Prior Review

- All ICB contracts [i.e., widening and/or strengthening civil works] of US $10 millionequivalent and above.

- All NCB civil works contracts [for conidor maintenance] valued US $5 million equivalentand above and first two contract, irrespective of value.

- Consultants' contracts with an estimated value of US $100,000 equivalent and above forfirms, and US $50,000 equivalent and above for individuals.

E. NCB Provisions

With reference to the procedures for undertaking procurement on the basis of NCB, all NCBcontracts shall be awarded in accordance with the provisions of Paragraphs 3.3 and 3.4 of the Guidelinesfor Procurement Under IBRD Loans and IDA Credits published by the Bank in January 1995 and revised

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in January and August 1996, September 1997 [the Guidelines]. In this regard, all NCB contracts to befinanced from the proceeds of the Loan shall follow the following procedures:

[i] Only the model bidding documents for NCB agreed with the Government of India TaskForce [and as amended from time to time], shall be used for bidding.

[ii] Invitations to bid shall be advertised in at least one widely circulated national dailynewspaper, at least 30 days prior to the deadline for the submission of bids.

[iii] No special preference will be accorded to any bidder when competing with foreign bidders,state-owned enterprises, small-scale enterprises or enterprises from any given State.

[iv] Except with the prior concurrence of the Bank, there shall be no negotiation of price withthe bidders, even with the lowest evaluated bidder.

[v] Except in cases of force majeure and/or situations beyond control of NHAI, extension ofbid validity shall not be allowed without the prior concurrence of the Bank [ i ] for the firstrequest for extension if it is longer than eight weeks; and [ ii ] for all subsequent requestsfor extension irrespective of the period.

[vi] Re-bidding shall not be carried out without the prior concurrence of the Bank. Thesystem of rejecting bids outside a pre-determined margin or " bracket " of prices shall notbe used.

[vii] Rate contracts entered into by DGS&D will not be acceptable as a substitute for NCBprocedures. Such contracts will be acceptable for any procurement under NationalShopping procedures.

F. Procurement Information

Procurement infonnation will be collected and recorded as follows:

[a] Prompt reporting of contract award information by the Project Management Units [PMU] forthe respective components.

[b] Comprehensive quarterly reports by PMUs indicating:[i] revised cost estimates for individual contracts and total cost;[ii] revised timings of procurement actions including advertising, bidding, contract award

and completion time for individual contracts; and[iii] compliance report by the borrower within three months of the Loan signing date.

G. Proposed Procurement Arrangements

The project elements, their estimated costs and proposed methods of procurement are summarizedin Table A. Figures in parenthesis are the respective amounts to be financed by the IDA/Bank.

Procurement methods (Table A)

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Table A: Project Costs by Procurement Arrangements(US$ million equivalent)

Procurement MethodIExpenditure Category ICB NCB Other N.B..F. Total Cost

1. Works 556.00 18.00 8.50 0.00 582.50(444.72) (14.40) (6.80) (0.00) (465.92)

2. Goods 0.00 0.00 0.90 0.00 0.90(0.00) (0.00) (0.72) (0.00) (0.72)

3. Services 0.00 0.00 40.80 0.00 40.80(0.00) (0.00) (40.80) (0.00) (40.80)

4. Miscellaneous 0.00 0.00 3.40 17.24 20.64(0.00) (0.00) (3.40) (0.00) (3.40)

5. Front-end fee 0.00 0.00 5.16 0.00 5.16(0.00) (0.00) (5.16) (0.00) (5.16)

Total 556.00 18.00 58.76 17.24 650.00(444.72) (14.40) (56.88) (0.00) (516.00)

" Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies

2 Includes civil works and goods to be procured through Direct Contracting, National Shopping, or ForceAccount, consulting services, services of contracted staff of the project management office, training, andtechnical assistance services.

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Table Al: Consultant Selection Arrangements (optional)(US$ million equivalent)

A. Firms 35.60 0.00 1.40 0.50 0.00 2.30 0.00 39.80(35.60) (0.00) (1.40) (0.50) (0.00) (2.30) (0.00) (39.80)

B. Individuals 0.00 0.00 0.00 0.00 0.00 1.00 0.00 1.00(0.00) (0.00) (0.00) (0.00) (0.00) (1.00) (0.00) (1.00)

Total 35.60 0.00 1.40 0.50 0.00 3.30 0.00 40.80(35.60) (0.00) (1.40) (0.50) (0.00) (3.30) (0.00) (40.80)

1\ Including contingencies

Note: QCBS = Quality- and Cost-Based SelectionQBS = Quality-based SelectionSFB = Selection under a Fixed BudgetLCS = Least-Cost SelectionCQ = Selection Based on Consultants' QualificationsOther = Selection of Individual Consultants [per Section V of Consultants' Guidelines], SingleSource Selection of Firms or SOE for In-house Training, etc.Selection of individual consultants(per Section V of Consultants Guidelines), Commercial Practices, etc.

N.B.F. = Not Bank-financedFigures in parenthesis are the amounts to be financed by the Bank Loan.

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Prior review thresholds (Table B)

Table B: Thresholds for Procurement Methods and Prior Review

Conttat Value contracts Subject toThreshold Procurement Prior Review

Expeniitw-e Categor i S$ thousans Method (uS ml1. Works US $10 Million and above ICB 7 contracts ($556.0 m)-Civil Works for Wideningand/or Strengthening

-Corridor MaintenanceFirst two contracts NCB First two irrespective ofirrespective of value value ($3 m)

2. Goods

3. Services

-Consulting Services For Firms US $100,000 Bank Guidelines and as at 10 numbers [US $35

and above Paragraph B3 above Million]

For Individual Consultants,US $50,000 and above

Total value of contracts subject to prior review: $594 m

Overall Procurement Risk Assessment

Frequency of procurement supervision missions proposed: One every 12 months (includes specialprocurement supervision for post-review/audits)

Thresholds generally differ by country and project. Consult OD 11.04 "Review of ProcurementDocumentation" and contact the Regional Procurement Adviser for guidance.

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Disbursement

Allocation of loan proceeds (Table C)

Table C: Allocation of Loan Proceeds

Zxpen477 re CateWORy Ni]Qunt rn tJ$$mIJJip Fbn1. Civil Works 452.92 80

2. Consultants 44.20 100

3. Goods 0.72 80

4. Unallocated 13.00

Total Project Costs 510.84

Front-end fee 5.16

Total 516.00

Disbursement, Financial Management and Audit

Basis of Accounting:

National Highway Authority of India (NHAI) was established under the National Highways Authority ofIndia Act, 1988. NHAI follows Commercial (Accrual) Accounting system. The detailed guidelines, Chartof Accounts, the accounting policies are contained in the Accounts Manual which was prepared by a firmof Chartered Accountants about four years back. In the past few years new developments have taken placerequinng NHAI to issue new guidelines from time to time. NHAI has plans to thoroughly revise the manualin the near future.

Accounting System:

Accounting in NHAI is decentralized. The basic accounting in NHAI takes place in 25 Field Units, alsoknown as Project Implementation Units (PIU), spread over the entire country. PIUs prepare monthly trialbalances which are sent to the Headquarters (HQ). The accounting process at PIUs is manual. At HQ anoff-the-shelf accounting package ("Ex") is used for accounting. The "Ex" package is inadequate to addressthe needs of Project and Contract accounting. The PIll trial balances are fed into the "Ex" system on anannual basis for preparation of annual financial statements. Though PIUs prepare trial balance everymonth, consolidated financial statements (balance sheet, profit & loss account) by HQ are prepared only atthe year end.

NHAI in the process of appointing consultants to design, develop, and implement a computerized integratedfnancial management system that would capture and process information regarding not only financial

aspects but also physical and procurement aspects.

Staffing:

NHAI has attracted qualified Chartered Accountants and a Cost Accountant. The Finance and Accountingdepartment is headed by Member - Finance who is on deputation from the Indian Administrative Service

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(IAS). He is supported by General Manager (Finance), Deputy General Manager (Accounts), and 3Managers. At the PIU, the accounting and finance function is looked after by an Accounts Officer. Most ofthe staff is on deputation from various government departments. NHAI also has a policy to recruit staffdirectly from the market either on a fixed term or regular basis.

Funds Flow System:

Currently, NHAI is largely dependent upon Gol for funds. Gol, through Ministry of Surface Transport(MoST), provides grant/equity funds to NHAI. It has also received a loan from GoI to supplement itsfinances. NHAI has several bank accounts in the commercial banks. Funds required by PIUs aretransferred by HQ on a quarterly basis. PIUs operate and maintain bank accounts in the commercial banks.Payments to contractors are decentralized and are made by PIUs. The project funds would be transferred toNHAI through MoST as grant/equity.

Budgeting System:

PlUs prepare annual budgets for revenue expenditure and capital expenditure which are then consolidatedat HQ level. Though the budget is monitored regularly by HQ on the basis of monthly trial balancesreceived from PIUs, NHAI does not prepare periodic statements giving details of actual vs. budgetedamounts.

Internal Controls:

All projects are supervised by independent professional construction supervision consultants. Thecontractor's bills are checked by the consultants in addition to ensuring quality control. Bills are alsochecked by PIU technical and accounts staff before making payments to contractors. Cheques are signedjointly by the Project Manager and the Accounts Officer. Monthly trial balances prepared by PIUs arereviewed by the HQ.

Costing:

NHAI has yet to introduce systematic Project Costing system. NHAI has a policy to load the project costwith 3% (of the civil works and supervision fees) standard overhead for extemally aided projects and 9%(of the civil works less supervision fees) for other projects. However, NHAI does not work out project-wiseunder or over absorption of overheads. The new computerized financial management system would addressthe project costing needs.

The accounting policy adopted by NHAI to treat certain percentage of the woks as revenue income iscontrary to generally accepted accounting practices in situations where NHAI is the owner of the assets.NHAI will have to review and revise this policy.

Inventory Management:

Since NHAI awards contracts on men and material basis (i.e. turnkey), it does not maintain any inventory.

Internal Audit

For the fiscal year 1998-99 NHAI had retained a Chartered Accountancy firm for conducting an intemalaudit. However, for the year 1999-2000, NHAI did not carry out intemal audit - the Accounts team from

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the HQ did review PIU accounting from time to time.

External Audit:

NHAI is audited annually by the Comptroller & Auditor General of India (CAG). The annual accounts forthe year ended 31st March 1998 were finalized in March 1999 and an audit report thereon was issued inAugust 1999 nearly seventeen months after the close of the fiscal year. Accounts for the year 1998-99 werecompiled by September 1999 and the final audit report is awaited.

LACI

NHAI field units do prepare monthly Trial Balances as mentioned earlier - though financial statements arenot prepared until the year end. NHAI also prepares annual budgets - though statements reflecting budgetvs. actual are not prepared. The basic systems to prepare Project Management Reports (PMR) do existthough would require fine tuning to generate timely and reliable reports. NHAI is in the process ofimplementing integrated financial management systems. In view of this, NHAI will prepare only selectedPMR reports in the first six months of the project thereafter it will prepare full PMRs. It is envisaged thatdisbursement in the first six months would be made in the traditional manner.

Areas Requiring Improvement

Immediate measures (to be implemented before September 30, 2000):

1. Separate Bank Account: NHAI to open a separate bank account for depositing the project fundsand from which project expenditures will be incurred.

2. Appointment of Internal Auditors : NHAI should appoint intemal auditors for a three year termat a time.

Short term measures (to be implemented before 31st December 2000):

1. Preparation of Quarterly Financial Statements: NHAI to prepare quarterly consolidatedfinancial statements.

2. Preparation of Budget vs. Actual Statement: NHAI to prepare quarterly statements comparingbudget provisions and actual expenditures.

3. Implementation of Computerized Integrated Financial Accounting Systems: To provideaccurate and timely information to the management of NHAI including PIU, NHAI should implementcomputerized integrated financial management systems both at PIU and HQ. The computerized systemshould reflect Component-wise and Category-wise expenditures, prepare project cost statements includingunder-over absorption of costs, and produce financial reports that show actual versus budgetedexpenditures for the current period and to date. It should also capture information regarding the method ofprocurement so that the limits of procurement laid down in the Procurement Schedule in the ProjectAgreement are properly monitored. In addition the system should facilitate matching of physical andfinancial progress.

4. External Audit: NHAI to initiate discussions with CAG on ways to streamline the audit process.

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Annex 7: Project Processing ScheduleINDIA: THIRD NATIONAL HIGHWAYS PROJECT

PrjetSche4ule PIgnned AcUa :

Time taken to prepare the project (months)First Bank mission (identification) 02/15/93 02/15/93Appraisal mission departure 12/15/99 01/15/2000Negotiations 04/10/2000 05/01/2000Planned Date of Effectiveness 07/24/2000 10/01/2000

Prepared by:

Christopher J. Hoban

Preparation assistance:

Consultants and India Country Office

Bank staff who worked on the project included:

Name SpecialityAnil Bhandari Transport SpecialistChristopher Hoban Highway EngineerA. K. Swaminathan Highway EngineerGuang Zhe Chen Economic AnalysisAlok Bansal Traffic AnalysisArun Mokashi Institutional ReformsAnil Somani Environmental SpecialistSonia Kapoor Environmental SpecialistReidar Kvam Social and Resefflement SpecialistMridula Singh Social and Resettlement SpecialistI. U. B. Reddy Social and Resetflement SpecialistArnab Bandopadhyaya Implementation ArrangementsN. Raman Procurement ArrangementsD. C. Mishra Procurement ArrangementsSanjay Vani Financial ManagementL. R. Kadiyali Highway EngineerAlberto Nogales Project CostsEmesto Corrales Program AssistantSangeeta Anand Workshop/CorrespondenceN. S. Srinivas Workshop/Correspondence

- 43 -

Annex 8: Documents in the Project File*INDIA: THIRD NATIONAL HIGHWAYS PROJECT

A. Project Implementation Plan

1. Third National Highways Project, Borrower's Project Implementation Plan, Main Report, version 1.0,February 2000

2. Third National Highways Project, Borrower's Project Implementation Plan, Appendices, version 1.0,February 2000

B. Bank Staff Assessments

C. Other

1. National Highway Authority of India (NHAI), Economic Analysis, February 20002. Institutional Strengthening of National Highway Authority of India (NHAI), December 19993. National Highway Authority of India (NHAI), Corporate Plan 96-97, September 19964. National Highway Authority of India (NHAI), Options Report, Medium Term Construction Priorities

for Expressways in India, December 19945. National Highway Authority of India (NHAI), Corporate Plan, Reference Documents,-April 19966. National Highway Authority of India (NHAI), Organization and Development Proposals, May 19957. National Highway Authority of India (NHAI), Organization and Development Phase 2 Report, May

19968. Development of Long Term Plan for Expressways, Executive Summary, October 19919. Development of Long term Plan for Expressways in India, Final Report, October 1991

10. Medium Term Construction Priorities for Expressways in India, 199611. Consolidated Environmental Impact Assessment (EIA), Report (Construction Packages II through V)12. Environmental Management Plan (EMP), Ccnstruction Package II, A and C, NHAI, March 200013. Environmental Management Plan (EMP), Construction Package Im, A and C, NHAI, March 200014. Environmental Management Plan (EMP), Construction Package IV, B and D, NHAI, March 200015. Environmental Management Plan (EMP), Construction Package V, A and C, NHAI, March 200016. Resettlement Action Plan, Package II, III, IV and V, NHAI, March 2000*Including electronic files

-44 -

Annex 9: Statement of Loans and Credits

INDIA: THIRD NATIONAL HIGHWAYS PROJECT

Difference between expectedand actual

Orginal Amount in US$ Millions disbursements'

Project ID FY Borrower Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'd

IN-PE-41264 1999 GOI WTRSHD MGMT HILLS II 85.00 50.00 0.00 134.38 0.00 0.00

IN-PE-45050 1999 GOVERNMENT OF INDtA RAJASTHAN DPEP 0.00 85.70 0.00 84.31 0.00 0.00

IN-PE-45051 1999 GOI 2ND NATL HIVIAIDS CO 0.00 191.00 0.00 188.45 0.00 0.00

IN-PE-49537 1999 GOI AP POWER APL I 210.00 0.00 0.00 199.83 11.83 0.00

IN-PE-50637 1999 GO] TN URBAN DEV 11 105.00 0.00 0.00 105.00 0.00 0.00

IN-PE-50646 1999 GOVERNMENT OF INDIA UP SODIC LANDS It 0.00 194.10 0.00 189.62 6.17 0.00

IN-PE-50651 1999 GOI MAHARASH HEALTH SYS 0.00 134.00 0.00 127.99 131.01 0.00

IN-PE-10496 1998 GO ORISSA HEALTH SYS o.00 76.40 0.00 72.55 1.99 0.00

IN-PE-10s61 1998 GO) NATLAGR TECHNOLOGY 96.80 100.00 0.00 189.78 14.20 0.00

IN-PE-35160 1999 GOVERNMENT OF INDIA HARYANA POWER APL-I 60.00 0.00 0.00 38.19 14.18 0.00

IN-PE-35169 1998 GOVERNMENT OF INDIA U.P. FORESTRY 0.00 52.94 0.00 44.86 4.44 0.00

IN-PE-35824 1998 GOI UP DIV AGRC SUPPORT 79.90 50.00 0.00 124.48 16.35 0.00

IN-PE-35827 1998 GOI WOMEN & CHILD DEVLPM 0.00 300.00 0.00 297.75 0.00 0.00

IN-PE-38021 1998 GOVERNMENT OF INDIA DPEP III (BIHAR) 0.00 152.00 0.00 136.06 23.92 0.00

IN-PE-49385 1998 GOVERNMENT OF INDIA AP ECON RESTRUCTURIN 301.30 241.90 0.00 469.19 5.45 0.00

IN-PE-49477 1998 CIL KERALA FORESTRY 0.00 39.00 0.00 34.77 -0.74 0.00

IN-PE-50638 1998 GOI UP BASIC ED II 0.00 59.40 0.00 29.75 -1.80 0.00

IN-PE-9979 1998 GO] COAL SECTOR REHAB 530.00 2.00 15.00 433.64 40.82 40.82

IN-PE-10473 1997 GOI TUBERCULOSIS CONTROL 0.00 142.40 0.00 126.88 53.54 0.00

IN-PE-10511 1997 GO] MALARIACONTROL 0.00 164.80 0.00 148.70 29.73 0.00

IN-PE-10531 1997 GOI REPRODUCTIVE HEALTH1 0.00 248.30 0.00 229.98 64.51 0.16

IN-PE-35158 1997 GOI AP IRRIGATION III 175.00 150.00 0.00 252.96 32.20 0.00

IN-PE-36062 1997 GOI ECODEVELOPMENT 0.00 28.00 0.00 21.98 4.13 0.00

IN-PE-43728 1997 GOT ENV CAPACITY BLDG TA 0.00 50.00 0.00 42.38 11.29 0.00

IN-PE-44449 1997 GOVT OF INDLA RURAL WOMEN'S DEV 0.00 19.50 0.00 16.86 7.12 0.00

IN-PE-45600 1997 GOI TA ST'S RDINFRA DEV 51.50 0.00 0.00 32.49 17.99 0.00

IN-PE-49301 1997 GOVTOF INDIA A.P. EMERG. CYCLONE 50.00 100.00 0.00 118.99 50.67 0.00

IN-PE-9995 1997 GOI STATE HIGHWAYS l(AP) 350.00 0.00 0.00 327.32 42.32 0.00

IN-PE-10480 1996 00I B SEWAGE DISPOSAL 167.00 25.00 0.00 119.89 95.74 0.00

IN-PE-10484 1996 GOI UP RURAL WATER 59.60 0.00 0.00 50.24 11.33 0.00

IN-PE-10485 1996 GOI HYDROLOGY PROJECT 0.00 142.00 0.00 93.33 54.34 0.00

IN-PE-10529 1996 IL&FS ORISSA WRCP 0.00 290.90 0.00 155.24 5.97 0.00

IN-PE-35170 1996 GOI ORISSA POWER SECTOR 350.00 0.00 0.00 322.28 102.28 0.00

IN-PE-35821 1996 GOI DISTRICT PRIM EDUC 2 0.00 425.20 0.00 296.10 11.50 0.00

IN-PE-35825 1996 GOI STATE HEALTH SYSII 0.00 350.00 0.00 259.15 116.27 0.00

IN-PE-39935 1996 GOI ILFS-INFRAS FINANCE 200.00 5.00 0.00 178.91 99.84 0.00

IN-PE-43310 1996 GOI COAL ENV&SOCIAL MIT. 0.00 63.00 0.00 44.70 15.58 0.00

IN-PE-10461 1995 GOVERNMENT OF INDIA MADRAS WATER SUP II 275.80 0.00 189.30 53.37 171.86 6.30

IN-PE-10463 1995 GOI INDUS POLLUTION PREV 143.00 25.00 1.72 142.89 90.05 88.33

IN-PE-10464 1995 GOI DISTRICT PRIMARY ED 0.00 260.30 0.00 123.72 42.05 0.00

IN-PE-10476 1995 GOVT OF INDIA TAMIL NADU WRCP 0.00 282.90 0.00 208.09 117.37 0.00

IN-PE-10489 1995 GOI AP 1ST REF. HEALTH S 0.00 133.00 0.00 63.06 12.17 0.00

IN-PE-10503 1995 GOt AGRIC HUMAN RES DEVT 0.00 59.50 0.00 33.18 28.00 0.00

IN-PE-10506 1995 GOI MP FORESTRY 0.00 58.00 0.00 15.79 9.67 0.00

IN-PE-10522 1995 GOI ASSAM RURAL INFRA 0.00 126.00 0.00 95.78 42.46 0.00

IN-PE-10563 1995 FINANCIAL SECTOR DEV 700.00 0.00 250.00 216.97 -233.03 0.00

IN-PE-10448 1994 FORESTRY RESEARCH ED 0.00 47.00 0.00 20.08 38.61 5.28

IN-PE-10449 1994 ANDHRA PRADESH FORESTRY 0.00 77.40 0.00 21.22 12.04 0.00

IN-PE-10455 1994 BLINDNESS CONTROL 0.00 117.80 0.00 80.26 40.27 0.00

IN-PE-10457 1994 POPULATION IX 0.00 88.60 0.00 49.48 21.70 0.00

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Difference betweenexpected

Orginal Amount in US$ Millions and actualdisbursements

Project ID FY Borrower Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'd

IN-PE-9870 1994 GOVT. OF INDIA CONTAINERTRANSPORT 94.00 0.00 0.00 67.92 63.93 -0.18

IN-PE-9964 1994 GOI WATER RES CONSOLID H 0.00 258.00 0.00 136.97 78.91 0.00

IN-PE-10407 1993 GOI ADP - RAJASTHAN 0.00 106.00 0.00 21.83 24.99 0.00

IN-PE-10408 1993 GOI BIHAR PLATEAU 0.00 117.00 0.00 48.54 55.32 0.00

IN-PE-10410 1993 GOI RENEWABLE RESOURCES 75.00 115.00 0.00 68.28 98.17 0.00

IN-PE-10416 1993 GOI PGC POWER SYSTEM 350.00 0.00 75.00 41.79 112.19 0.00

IN-PE-10418 1993 GOI KARNATAKA WS & ENV/S 0.00 92.00 0.00 26.93 26.50 0.00

IN-PE-10424 1993 GOI NATL LEPROSY ELIMINA 0.00 85.00 9.07 24.37 33.63 9.36

IN-PE-9955 1993 GOI UTTAR PRADESH BASIC 0.00 165.00 0.00 20.47 -5.30 -143.45

IN-PE-9959 1993 GOI RUBBER 0.00 92.00 36.58 22.87 57.04 16.27

IN-PE-9961 1993 GOI UP SODIC LANDS RECLA 0.00 54.70 0.00 12.76 8.33 0.00

IN-PE-9977 1993 GO & STATES ICDSII (BIHAR&MP) 0.00 194.00 0.00 118.76 91.36 101.67

IN-PE-10390 1992 GOI MAHARASHTRA FORESTRY 0.00 124.00 16.18 32.36 48.95 31.87

IN-PE-9921 1992 GOI SHRIMP & FISH CULTUR 0.00 85.00 48.51 15.83 63.78 15.17

IN-PE-9946 1992 GOI NAT. HIGHWAYS II 153.00 153.00 0.00 150.69 103.15 0.00

IN-PE-9963 1992 GOI POPULATION Vil 0.00 79.00 0.00 65.10 53.91 0.00

IN-PE-9877 1991 GOI DAM SAFETY 23.00 130.00 60.03 25.35 84.06 3.39

IN-PE-9988 1991 TECH EDUC II 0.00 307.10 51.37 72.53 131,94 68.41

IN-PES9982 1990 NOR REG TRANSM 485.00 0.00 0.00 173.96 173.95 0.00

Total: 5,169.90 7,364.84 752.76 7,998.18 2,791.80 243.40

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INDIASTATEMENT OF IFC's

Held and Disbursed Portfolio31-Jul-1999

In Millions US Dollars

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic0 IAAF 0.00 0.00 6.50 0.00 0.00 0.00 0.11 0.00

1964/75/79i90 MUSCO 0.00 0.00 1.08 0.00 0.00 0.00 1.08 0.001978/87/91/93 HDFC 40.00 0.00 2.29 0.00 40.00 0.00 2.29 0.001981 Nagarjuna Steel 0.00 0.00 0.01 0.00 0.00 0.00 0.07 0.001981/86/81/91/93196 ITW Signode 0.00 0.00 1.55 0.00 0.00 0.00 1.55 0.001981/86/89/94/92 TISCO 1.58 0.00 15.37 0.00 1.58 0.00 15.37 0.001981/90/93 M&M 0.17 0.00 6.49 0.67 0.17 0.00 6.49 0.671984i90/94 India Lease 0.44 0.00 0.86 0.00 0.44 0.00 0.86 0.001984/91 Bihar Sponge 12.21 0.00 0.68 0.00 12.21 0.00 0.68 0.001986 EXB-City Mills 0.48 0.00 0.00 0.00 0.48 0.00 0.00 0.001986 EXB-NB Footwear 0.19 0.00 0.00 0.00 0.19 0.00 0.00 0.001986 EXB-STG 0.34 0.00 0.00 0.00 0.34 0.00 0.00 0.001986 EXB-TAN 0.03 0.00 0.00 0.00 0.03 0.00 0.00 0.001986/92/93/94 GESCO 0.00 0.00 11.80 0.00 0.00 0.00 11.80 0.001986/93/94/95 India Equipment 0.33 0.00 0.00 0.80 0.33 0.00 0.00 0.801987 Hindustan 2.87 0.00 0.00 0.00 2.87 0.00 0.00 0.001987/88/90/93 Titan Watches 0.34 0.00 1.03 0.00 0.34 0.00 1.03 0.001988/90/92 Tata Telecom 0.00 0.00 0.10 0.00 0.00 0.00 0.10 0.001988/94 GKN Invel 0.00 0.00 1.40 0.00 0.00 0.00 1.40 0.001989 AEC 9.28 0.00 0.00 0.00 9.28 0.00 0.00 0.001989 UCAL 0.00 0.00 0.63 0.00 0.0( 0.00 0.63 0.001989/90/94 Tata Electric 24.87 0.00 0.00 0.00 24.87 0.00 0.00 0.001989/91 Gujarat State 2.17 0.00 0.00 0.00 2.17 0.00 0.00 0.001989/95 JSB India 0.00 0.00 1.21 0.00 0.00 0.00 1.21 0.001990 HOEL 0.00 0.00 0.28 0.00 0.00 0.00 0.28 0.001990 TDICI-VECAUS 11 0.00 0.00 1.23 0.00 0.00 0.00 1.23 0.001990/92 CESC 39.49 0.00 0.00 53.60 39.49 0.00 0.00 53.601990/93/94/'98 IL & FS 16.50 1.81 6.23 5.00 16.50 1.81 6.23 5.001990/94 ICICI-IFGL 0.00 0.00 0.30 0.00 0.00 0.00 0.30 0.001990/95 ICICI-SPIC Fine 0.00 0.00 1.88 0.00 0.00 0.00 1.88 0.001991/93 Triveni 0.00 0.00 1.11 0.00 0.00 0.00 1.11 0.001991/96 VARUN 0.00 0.00 1.35 0.00 0.00 0.00 1.35 0.001992 Indus VC Mgt Co 0.00 0.00 0.01 0.00 0.00 0.00 0.01 0.001992 IndusVCF 0.00 0.00 1.00 0.00 0.00 0.00 1.00 0.001992 Info Tech Fund 0.00 0.00 0.64 0.00 0.00 0.00 0.64 0.001992 SKF Bearings 1.90 0.00 0.00 0.00 1.90 0.00 0.00 0.001992/93 Arvind Mills 0.00 0.00 17.10 0.00 0.00 0.00 17.10 0.001992/94/97 [spat Industries 30.35 0.00 15.41 0.00 30.35 0.00 15.41 0.001992/95 IL&FS Venture 0.00 0.00 1.05 0.00 0.00 0.00 1.05 0.001992/96/97 NICCO-UCO 6.13 0.00 0.50 0.00 2.13 0.00 0.50 0.001993/94/96 Indo Rama 18.75 0.00 11.98 7.50 18.75 0.00 11.98 7.501993/97 20TH Century 11.66 0.00 0.80 0.44 11.66 0.00 0.80 0.441994 Centurion Growth 0.00 0.00 2.39 0.00 0.00 0.00 2.39 0.001994 Chowgule 12.63 0.00 4.58 19.38 12.63 0.00 4.58 19.381994 Crdcap Asset Mgt 0.00 0.00 0.32 0.00 0.0( 0.00 0.32 0.001994 DLF Cement 7.70 0.00 4.94 10.63 7.70 0.00 4.94 10.631994 Gujarat Ambuja 0.00 0.00 8.23 0.00 0.00 0.00 8.23 0.00

- 47 -

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic

1994 Taurus Starshare 0.00 0.00 7.17 0.00 0.00 0.00 7.17 0.001994/97 GVK 26.66 0.00 7.45 30.19 26.66 0.00 7.45 30.191994/98 Global Trust 5.00 5.00 3.19 0.00 5.00 5.00 3.19 0.001995 Centurion Bank 0.00 0.00 3.87 0.00 0.00 0.00 3.87 0.001995 EXIMBANK 15.91 0.00 0.00 0.00 15.91 0.00 0.00 0.001995 GE Capital 8.75 0.00 5.00 0.00 8.75 0.00 4.39 0.001995 Prism Cement 14.06 0.00 5.02 10.50 14.06 0.00 5.02 10.501995 Rain Calcining 19.25 0.00 5.46 0.00 19.25 0.00 5.46 0.001995 Sara Fund 0.00 0.00 6.06 0.00 0.00 0.00 2.60 0.001995/98 RPG Communicatns 0.00 0.00 11.25 0.00 0.00 0.00 11.25 0.001996 India Direct Fnd 0.00 0.00 7.47 0.00 0.00 0.00 4.52 0.001996 Indus II 0.00 0.00 5.00 0.00 0.00 0.00 3.00 0.001996 Indus Mauritius 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001996 United Riceland 10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001996/99 Moser Baer 20.05 0.00 10.14 0.00 2.30 0.00 10.14 0.001997 Asian Electronic 0.00 0.00 5.50 0.00 0.00 0.00 5.50 0.001997 CEAT 20.00 0.00 0.00 0.00 20.00 0.00 0.00 0.001997 Duncan Hospital 7.00 0.00 0.00 0.00 7.00 0.00 0.00 0.001997 EEPL 0.00 0.00 0.03 0.00 0.00 0.00 0.03 0.001997 Owens Coming 25.00 0.00 0.00 0.00 25.00 0.00 0.00 0.001997 SAPL 0.00 0.00 0.07 0.00 0.00 0.00 0.07 0.001997 SREI 15.00 0.00 3.00 0.00 14.00 0.00 3.00 0.001997 Walden-Mgt India 0.00 0.00 0.01 0.00 0.00 0.00 0.01 0.001997 WIV 0.00 0.00 5.00 0.00 0.00 0.00 1.63 0.001998 IDFC 0.00 0.00 15.46 0.00 0.00 0.00 15.46 0.00

Total Portfolio: 427.09 6.81 238.54 138.71 394.34 6.81 219.76 138.71

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic

Total Pending Commitment: 0.00 0.00 0.00 0.00

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Annex 10: Country at a Glance

INDIA: THIRD NATIONAL HIGHWAYS PROJECT

POVERTY and SOCfAL South Low- -- - .India Assi- Income Development diamond

1998Population, mid-year ('milhons) 979.7 1,305 3,536 Life expectancyGNP per capita (Atlas method, USS) 440 430 520GNP (Atlas method, US$ bilhlons) 427.4 560 1,842

Average annual growth, 1992-9.

Population (%) 1.7 1.9 1.7Labor force ) - 2,0 2,3 1.9 GNP Gross

per primaryMost recent estimate (latest year ava4labe, 1992-98) capita enrollment

Poverty (% of population below national poverty lne) 35Urban populationi(% of total popOetioro) 28 28 30Life expectancy at birth (years) 63 62 63Infant mortality (per 1,000 live birlhs) 70 75 68Child malnutrition (% of children under 5) 53 51 36 Access to safe waterAccess to safe water (I% of population) 8t 77 73Illiteracy (% of population age 15+) 44 47 31Grossprimaryenrollment (% of school-age populatin) 100 100 107 India Low-incomegroup

Male 109 110 112Femnale 90 90 102

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1978 19S8 1997 1998 _Economic ratios'

GDP (US$ billions) 134.6 289.7 407.9 419.7Gross domestic nvestmentlGDP 22.3 24,3 23.4 21.8 TradeExportsofgoodsandservices/G3P 6.2 6.3 11.1 11.3Gross domestic savngslGDP 21.1 21.4 19.9 19.1Gross national savingslGDP 21,9 21.2 21.9 20,7

Current account basancelGDP -0.1 -2.4 11.4 -1.0 DomesticInterest payments/GDP 0.3 07 08 11 omsInvestmentTotal debt/GDP 12.2 20.9 23.1 23.4Total debt service/exports 13.0 28.5 18.8 17.0Present value of debWGDP 18.7Present value of debt/oxports , 130,3

Indebtedness1978-88 198S-98 1997 1998 1998.02

(average annual growth)GOP 5.0 5.5 4.6 6.3 $ .2 India Low-income groupGNP per captta 2.S 3.7 2.9 4.3 4.4Exports of goods and services 4,2 11.9 6.2 4.5 7.0

STRUCTURE of the ECONOMY1978 1988 1997 1998 Growth of Investmnentand GDP(%)

(% of GDP) 30Agriculture 38.8 32.8 28.0 29.1Industry 24.2 26.8 27.1 25.7 2

Manufacturing 16.5 16.4 16.6 15.6Services 37.0 40.4 44.9 45.2 o

Private consumption 69.3 66.4 68.8 69.9 -10 99 S4 DS ye 97 Bs

General government consumption 9.6 12.3 11.3 11.0 -GDI t GDPImports of goods and services 7.4 9.3 14.5 14.0

1978-88 1988-98 1997 1998 Growth of exports and imports (%l(average annual growth)Agriculture 2.8 3.1 -1.9 7.2 40

Industry 5.9 6.4 '5.9 3.9 30Manufacturing 6.1 6.9 4.0 3.6 20

Services 6.2 7.3 9.0 8.3 210

Private consumption 5.1 5.6 1.6 10.3General government consumption 7.7 4.6 10.6 6.5Gross domestic investment 4.8 5.6 13.1 -0.1 93 94 95 99 97 98

Imports of goods and services 7.3 9.9 11.7 10.9 CEports ImponsGross national product 4.9 5.6 4.7 6.3

Note: 1998 data are preliminary estimates.

The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond willbe incomplete.

-49 -

India

PRICES and GOVERNMENT FINANCE1978 1988 1997 1998 Inflation (%)

Domestic prices 15(% change)Consumer prices .. 9.3 7.0 7.077oImplicit GOP deflator 2.5 8.1 6.4 9.4

Government finance(% of GDP, includes current grants) o

Current revenue .. 23.6 22.7 22.1 93 94 95 95 97 98

Current budget balance 1.0 -0.2 0.0 - GDP deflator CPI

Overall surplus/deficit .. -10.0 -8.0 -9.3 -

TRADE

(US$ mnillions) 1978 1988 1997 1998 Export and import levels (USS mill.)

Total exports (fob) .. 13,970 35,013 34,298 50.0o0Tea .. 421 505 482 .000

Iron .. 465 476 35 4C000

Manufactures .. 10,727 27,348 27,530 30,000

Total imports (cif) .. 19,497 41,484 47,544 20.00D

Food 1,203 1,845 2,647Fuel and energy 3,009 83217 6,435Capital goods .. 4,803 9,796 9,497 0

Export price index (1995=100) .. 111 100 96Import price index (1995=100) .. 88 94 9O 0 Eep.orts *lmportsTerms of trade (1995=100) .. 125 106 106

BALANCE of PAYMENTS1978 1988 1997 1998 Current account balance to GDP I%)

(US$ mililons)Exports of goods and services 8,380 18,213 45,109 47,484 0Imports of goods and services 9,900 26,843 59,297 58,565Resource balance -1,520 -8,630 -14,188 -11,081

Net income 223 -1,056 -3,166 -3,544 , lNet current transfers 1,150 2,654 11,830 10,280 1

Current account balance -147 -7,032 -5,524 -4,345

Financing items (net) 147 5,600 9,120 8,721Changes in net reserves 0 1,432 -3,596 -4,376 -2

Memo:Reserves including gold (USS millions) 7,299 5,467 30,314 33,206Conversion rate (DEC, locallUS$) 8.2 14.5 37.2 42.0

EXTERNAL DEBT and RESOURCE FLOWS1978 1988 1997 1998

(USS millions) Composition of 1998 debt (USS mill.)Total debt outstanding and disbursed 16,466 60,477 94,404 98,232

IBRD 646 5,590 8,138 7,993 G: 4,329 A: 7,993IDA 3,972 12,019 17,912 18,562

Total debt service 1,309 5,945 10,832 10,001IBRD 126 777 1,411 1,627 a. ls1ss 2IDA 38 179 381 1,372 /

Composition of net resource flows F: 39.448 C: 288Official grants 449 406 379 307Official creditors 603 2,645 -312 1,727 D:3,965Private creditors -10 5.741 2,840 -1,433Foreign direct investment 0 287 3,557 2,462Portfolio equity 0 0 1,828 -61 E: 23,647

World Bank programCommitments 1,829 2,645 1,755 2,055 A- IBRD E - Bilateral

Disbursements 507 2,472 1,372 1,421 a - IDA G- Other mult8ateral F - PrivatePrincipal repayments 84 383 1,071 2,193 C-IMF G-Short-termNet flows 423 2,088 302 -772Interest payments 80 572 721 806Nettransfers 342 1,516 -420 -1,578

Development Economics 3/28/00

- 50 -

AdditionalAnnex No.: 11

ENVIRONMENTAL ASSESSMENT AND MANAGEMENT PLAN

1. Project Description

National Highway II is one of the most important high-density corridors in the country connecting thecapital city of Delhi with Calcutta, a metropolitan city. It is a 1400 km long highway located in theUpper Gangetic Plain in northern India. On an average, it carries about 12,000 to 20,000 passenger carunits (PCUs) daily and a substantial part is goods traffic. The traffic volume is expected to increase toabout 40,000 PCUs between 2005 and 2010, and in some sections as high as 88,000 PCUs by 2028.To cater to such high volumes, four laning of the highway connecting the two cities is urgentlyrequired. While four-laning of the Delhi-Agra section and the Dhanbad-Calcutta section has alreadybeen done, the section between Agra and Dhanbad (about 1000 kin) is still a two-lane carriageway,with paved / unpaved shoulders. The proposed Third National Highway Project aims at strengtheningand four-laning of selected contract packages (total of 477.35 kIn) of this Agra-Dhanbad stretch, whichpasses through the two states of Uttar Pradesh and Bihar.

2. EA Background

Detailed Environmental Impact Assessments (EIAs) for five packages (Packages 1-V) along the IndianNational Highway II between Agra and Dhanbad were carried out. The break-up of the five packagesis given in the Table 2.1. The detailed Environmental Management Plans (EMPs) for all these fivepackages were also prepared. From Packages II, III, IV and V, eight contract packages were selected toform the proposed Third National Highway project. A consolidation of the EIAs for these eightcontract packages was undertaken and separate EMP for each contract package was prepared. Thedevelopment of the five detailed ElAs and EMPs were done by separate consultants on behalf of theNational Highway Authority of India (NHAI).

The EA work in each of the five packages employed a reiterative approach in which environmentalissues have been identified in successive levels of detail and specificity at each step in the process. Thecoverage of the EA included scoping, environmental legislation requirements, reconnaissance surveys,data compilation and analysis, environmental screening, baseline studies, assessment of potentialimpacts, integration of environmental considerations in the design, assessment of altematives, identifiedmitigation & environmental enhancement measures, community consultations, and preparation ofEMPs.

Table 2.1

No. Package Number / Contract Packages LengthDescription (km)

I Package I: Agra-Bhognipur IA Agra-Shikohabad 65.34IB Shikohabad-Sarai Ikdil 65.00IC Sarai lkdil-Bhognipur / Sikandra 63.00

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II Package II: Bhognipur - *L4 Sikandra(393 km) -Bhaunti 61.60Khaga (470 km)

IIB Bhaunti-Fatepur Border 51.33IIC Fatepur Border (38 km) -Khaga 77.00(115 km)

III Package III: Khaga - IIL4 Khaga (115 km) - Kokhraj (158 43.00Varanasi km)

IIIB Kokhraj-Paharpur Village 87.00IIICPaharpur Village (245 km) - 72.00Raja Talab (317km)

IV Package IV: Varanasi - IVA Varnasi Bypass - Mohania 78.00Aurangabad IVB Mohania (65 km) - Sasram 45.00

Bypass (110 km)IVC Sasram Bypass - Sone River 30.00IVD Sone River (140 km) -Aurangabad (180 km) 40.00

V Package V: Aurangabad - VA Aurangabad (180 km) -Raniganj 60.00Barwa Adda (240 km)

VB Raniganj-Barakatha 80.00VC Barakatha (320 km) - Dhanbad 78.75(398.75 km)

Note: Chosen Contract Packages are italicized and in bold;

The consolidation of the ElAs and the preparation of the eight separate EMPs for the selected contractpackages were undertaken by a different consultant on behalf of NHAI. The Bank reviewed andprovided detailed comments to the draft versions of all the documents. The final version of all thedocuments were submitted to the Bank in February / March 2000 and were found to be satisfactory.

3. Environmental and Forestry Clearances

For this project, Environmental and Forestry Clearances are required both from the State and CentralGovernnents. At the State Government level, NOCs from the State Pollution Control Boards and nodalForestry Officers have been obtained. The Forestry Clearances from the Conservators of Forests inBihar and UP and the final clearances from the Ministry of Environment & Forests (MoEF) have alsobeen obtained.

During the construction phase, the contractors are required to obtain clearances from the StatePollution Control Boards and other regulatory authorities as per the conditions stipulated in theGovernment Clearance documents. These clearances are in view of the contractors establishingpollution-generating operations such as the hot mix plants and batching plants, or the use of forestlandfor temporary construction camps. The establishment of new quarries would require clearance from theState Department of Mining, while the establishment of tube wells / bore-holes require the clearancefrom the State Ground Water Boards. NHAI and its Supervising Consultants will ensure that thecontractors obtain the relevant clearances prior to the commencement of their activities.

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4. Environmental Scenario: Existing situation, Impact Assessment and Mitigation

Climate: The road project is located in a sub-tropical region with marked monsoon effects, especiallythe South West Monsoon that prevails for four months in a year. The temperature ranges between 30 to47 degrees centigrade during the summer months and between 10 to 26 degrees during the wintermonths. Due to large variations in temperature and rainfall, the climate has a characteristic seasonality.There is no change in the macro-climatic setting (precipitation, temperature and wind) that is envisageddue to the proposed project. In terms of microclimate, there may be a slight increase in daytimetemperatures due to the loss of the shade provided by the trees. An extensive tree-plantation program isbeing implemented as part of the mitigation measures.

Physiography: The road project passes through a flat terrain and a seismic zone of very low intensity.There is little acquisition of new land in this project and hence the impact on topography is minimal.

Drainage: This is a very old highway and passes through the ridgeline along most of its alignment.Therefore, drainage problems do not exist in terms of waterway requirements. In addition, the alluvial,sandy loam soil has good drainage properties. Alternation of surface drainage due to the project is notenvisaged and the existing cross-drainage structures of the 2-lane carriageway will be extended.Wherever flow is obstructed in the existing road, additional cross-drainage structures are beingprovided. Raising the road level has been proposed to avoid future inundation in the road stretchessubject to ponding. Services lanes and roadside drains on either side of the project highway have beenproposed. With these provisions, the drainage problem would be minimal.

Soil Erosion: The soil is alluvial, sandy loam. As a major portion of the corridor passes through theIndo-Gangetic plains with practically no gradient, soil erosion at a large scale is not envisaged. Someerosion potential exists at the high embankment areas, especially at bridge approaches near majorwater crossings. To check soil erosion at the road embankment slopes, turfmg with shrubs and grassesis planned.

Land Acquisition: The minor bypasses (two in Package II and two in Package V) will require someland acquisition. The Bilinda and Thariyon bypasses (Package II) require some agricultural land anduncultivable wasteland. The other two bypasses (Package V) require land that is predominantlynon-agricultural. Some land acquisition will also be required for widening (primarily Package III - 3ha). In all, the land acquisition is minimal (128 ha in total).

Topsoil loss: As limited land acquisition is proposed and the acquisition of fertile land is even morelimited, the significance of this impact is expected to be low. Wherever the use of agricultural land isunavoidable, the topsoil will be stripped to specified depth and stored in stockpiles. During restoration,the stored topsoil will then be spread back to maintain the physico-chemical and biological activity ofthe soil. The productivity of crops and the local economy will not to be affected.

Land contamination: At the various construction sites, there is likelihood of oil / diesel spillageespecially from vehicles and fuel / oil storage units. This contaminates the land and hence goodworking practices are proposed in the construction camps to ensure no spillage / leakage. Improperdisposal of construction spoils also contaminates the land and a practice for dumping such wastes inselected pits developed on infertile land has been proposed. Non-bituminous waste that does notcontaminate the soil will be disposed in the borrow areas and covered with topsoil.

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Quarries: All aggregates will be obtained solely from licensed quarries, which have been identified asthe recommended list. Quality of material, proximity, requisite environmental clearances and theadoption of better environmental management practices will be used as the criteria for selecting thequarry. It is recognized that in some road stretches in the State of Uttar Pradesh materials will have tobe brought from quarries located at long distances (200 km and above). However, all the quarries havepermanent approach roads and hence the dust pollution due to transportation will be minimized throughthe adoption of proper practices.

Borrow areas: As the road passes through fertile land, care has been taken to identify wastelands /barren lands near the ROW. Specific borrow areas have been identified by contract packages for theentire road project. Where agricultural land has been used to obtain borrow materials, this has been atthe explicit requests of the landowners who may wish to lower the level of land to facilitate irrigation orto develop fish ponds. The remaining borrow materials has been selected from mounds, heaps,uncultivable barren land, low-lying submersible land unfit for cultivation or disused wasteland.Precautionary measures such as the covering of vehicles will be taken to avoid spillage duringtransportation. No adverse impact due to borrowing is envisaged. On the contrary, a beneficial impactdue to the redevelopment is envisaged due to the creation of fish ponds and enabling irrigation to theraised cultivable land areas.

River water resources: The road project traverses across the major river basins of three perennialrivers - Ganga, Yamuna and the Sone. The project intersects 5 major rivers (Phalgu, Mohane, Barakar,Damodar and Lilajan) and smaller rivers (such as Sengur, the Rind and Punpun) and a few irrigationcanals. In total, the project passes over 40 rivers / streams, including a canal and a drain in its vicinity.Most of the physico-chemical characteristics of river and canal water were found to be within theacceptable range limits of the Central Pollution Control Board. Some rivers showed higher BOD andtotal coliform count. There would be no adverse impact on the river water resources and there may besome improvement due to the reduced rate of siltation. Precautionary measures will be taken to ensurethat construction wastes and oil from construction sites do not find their way into the rivers, especiallyduring the monsoon period. All necessary precautions will be taken to construct temporary orpermanent facilities to prevent water pollution due to increased siltation.

Water bodies: Altogether there are 56 water tanks / ponds along the road project. Through designmodifications, direct impacts on as many as 36 ponds have been avoided. And 13 ponds are beingexplicitly protected from the possible impacts during the construction and operational phase of theproject. There are 7 other ponds that will be partly filled or fully filled. Many of these ponds arenon-perennial and hence of limited value. Of these, the Shivsagar pond (Package IV, 106 km) has areligious value but has to be partially filled in order to save the temple on the other side of the roadproject. The Shivsagar pond's water quality is likely to be directly impacted during the constructionperiod. However, there will be no adverse impact during the operational phase of the project.Site-specific designs have been contemplated for ponds that offer scope for the enhancement.

Water supply sources: Hand pumps, wells, tube wells, and overhead tanks exists within the corridorof impact of the proposed project. Of these, 374 hand pumps will be directly impacted by the roadproject and these will be relocated. Direct impacts on many water supply sources have been avoidthrough a lateral shifting of the alignment and other suitable treatment of the pavement / embankments.Wherever water supply sources have to be relocated, it will be done in consultation with the localresidents.

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Water availability: Water for construction purposes will come from two sources: surface water andground water. Since the surface water is perennial, no adverse impact is anticipated on this source. Theground water levels are at low depths of 4-8 m in general. However, in two particular sections(Contract Package HIA and VC), water depths vary from 20-26m and 15-20m respectively. As thegroundwater table is relatively high in most parts, there is no major impact anticipated on this source aswell. Water for drinking purposes is expected from municipal water supply and its use for constructionpurpose will be forbidden.

Air quality: The ambient air quality concentrations at various land use locations (residential,commercial, agricultural and industrial) along the road project exceeds the national standards onsuspended particulate matter, respirable particulate matter and carbon monoxide. The pollutantconcentrations were found to be high along congested areas, settlements, markets and intersections. Forthe SPM / RPM, the presence of earthen shoulder is one of the reasons and the proposed project willhave a beneficial impact. But the CO concentration in the ambient air is likely to increase critically atChandauli, Mohania, Raniganj (all in Package IV) and Rajganj (Package V).

Compared to the no-project scenario, the proposed project will lead to an improvement in air quality.The four-laning of the road and the service roads will result in less of congestion, which will contributeto the reduction of the vehicular air pollution. However, the quantum of air pollutants will increase dueto the increase in the number of vehicles using the road. Pollution absorbing tree-species are beingproposed along the highway in order to screen-off the pollutants. In addition, there will be an increasein dust levels during construction, which is likely to affect people in the vicinity of the roads.Precautions such as dust extraction units in hot mix plants, proper equipment maintenance, covering oftransport vehicles and appropriate downwind locations are planned to reduce the level of dust emissionsfrom construction-related activity. As the project involves only a lirited amount of bituminousconstruction, this impact will also be lower. The monitoring of air quality forms an important part ofthe EMP.

Noise: The impact of road-related noise is maximum when the road passes through densely populatedareas, townships and markets, and where there are traffic bottlenecks. Mitigation measures include theprovision of no-horn signs, noise absorbing tree plantations, noise barrier walls at sensitive locations(schools and hospitals) and siting of construction sites to minimize noise impacts on inhabited areas.During the construction phase, there will noise impacts due to the running equipment. Mitigationmeasures such as proper maintenance, the use of silencers, and regulating the construction activityduring daytime has been planned. The monitoring of noise levels also forms an important part of theEMP.

Roadside plantations: Within the ROW, there are altogether 181,851 trees. Of these, 66,558 (36%)trees will be felled. Some of the trees to be felled (Bargad, Neem, Peepal, Imli, Shisham and Arjun) areold and share a historic relationship with the road. None of the trees to be felled is rare or endangered.This loss is widespread and not in specific concentrations. Marginal impacts in the micro-climate, airquality and noise level may arise due to this felling. Design modifications resulted in reducing thisfelling to a minimum. Originally the percentage of trees to be cut ranged from 46 to 61% in differentcontract packages. Compensatory afforestation at a minimum the rate of 2 trees for every tree felledhas been incorporated in the project. The tree plantation program and the ensuring survival of theseplantations will be a focus area in the EMP implementation. Removal of grasses and other groundcovers will also be an impact, although temporary. It will also be ensured that only the earmarked treeswill be felled and no additional tree clearing will be carried out.

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Other Flora: Due to intense agricultural activities in the region, there are no natural forests withineither side of the ROW except in some parts of Bihar. There are three protected forests at Kahudag(Package VA), Barwadih on North and Kirtodih on South (both Package VC) along a total 7km stretchof the road project. These forests have already been degraded and have no trees in several areas. Theconstruction work will be carried out well within the ROW in such stretches and hence it will have noimpact on the forests. There is also a wildlife sanctuary about 2 km east of the road project (PackageVA). This sanctuary is also highly degraded in its present form and will not be impacted by this roadproject. Plantation of shrubs and under trees in the median will be carried out to enhance the flora.And, as construction equipment cause compaction of the vegetation, these will be moved periodically tominimize the negative impact on the flora.

Fauna: There are no endangered or rare or wild species in the entire stretch of the road project,including the forest and sanctuary areas (Package VA and VC). Even aquatic birds are relatively lessin the area. The major proportion of faunal density in the area surrounding the project highway aredomesticated animals. Since there are many rivers and streams, there would be some impact on theaquatic ecosystem due to downstream siltation. As this will be reduced under the road project, therewill be a beneficial impact on the aquatic ecosystem.

Cultural Properties: The only important archaeological property in the immediate vicinity of the roadproject is the Shukla Talab (Package IIA), which is more than 100m away from the road project and isnot being affected by it. Another tomb of Sher Shah Suri is about 1 km away from the road projeet atSasaram. No impact is anticipated. Altogether, there are about 175 cultural properties - temples,mosques, shrines and other religious structures - in the influence area of the road project Of these,about 65 are impacted but none of these are significant from a cultural, architectural or religious pointof view. Nevertheless, commrunities have been consulted and further discussions with the communityare planned before relocating or shifting of these cultural properties.

Human Health: Roads are generally transmitters of diseases and the four-laning may result in a slightincrease in the spread of diseases. A survey of human health was done as a part of the detailedEnvironmental Impact Assessment and the monitoring of human health forms a part of the EMP.Provision will be made to ensure good and sufficient water supply to the workers in the constructionsites so as to avoid water-related diseases. Adequate drainage, sanitation and waste disposal will alsobe provided at the workplaces.

Road Safety: In terms of safety, studies revealed that the accident-prone areas were generaly nearintersections. It is the combination of road users - pedestrians, cyclists, animals, herdsmen, bullockcarts, vehicles carrying hazardous goods, heavy vehicles and other motorized vehicles - that createhazardous conditions. During the construction stage, the various activities - tree-cutting, materialhaulage, dismantling of structures, lubricant / oil spillage - may increase the road accidents.

Overall, relative to the "no-project" scenario, the four-laning will bring about a smoother flow oftraffic, which results in less congestion and therefore less of accidents. The project will also providemedians, improved road geometry, facilities for pedestrian / non-motorized traffic and road signs in linewith the Indian Road Congress guidelines. All of these will result in improving the overall safety levels.Monitoring of road safety during the construction and operational phases is an important part of theEMP.

Social impacts / resettlement and rehabilitation: A social impact assessment focussing was carried

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out. The total number of properties affected by this project is 4225 (990 residential and 3235commercial) and the total number of PAPs will be about 27028. This subject has been extensivelyaddressed in the Resettlement Action Plan that has been prepared.

5. Analysis of Alternatives

Analysis of alternatives included the no-action alternative, engineering alternatives, alignmentalternatives, corridor alternatives, cross-section alternatives and bypass alternatives. This analysis wascarried out as was considered relevant to the different packages. The criteria for analysis of alternativesincluded minimization of tree loss, minirnization of direct impact on adjoining settlements and culturalproperties, reduction of air pollution, reduction of noise pollution, protection of water bodies,avoidance of land / property acquisition, improvement of road safety and maintenance of design speedfor through-traffic. The proposed road project has incorporated the outputs of this analysis of variousalternatives.

6. Community consultation

Public participation and community consultation has been undertaken as an integral part of the EAprocess at various stages of project preparation including environmental screening, feasibility andenvironmental assessment. Altogether consultations were held at 46 locations, which includeddoor-to-door personal interviews, focus group discussions, stakeholder consultation and district-levelpublic hearings.

The major issues identified by the public were dust, air and noise pollution due to the bad condition ofthe road and the overloading of the trucks. Concern was also shown regarding the removal of roadsidetrees as well as traffic congestion. At most locations, people were ready to trade temporary loss of treesfor the widening of the road and providing relief from congestion. People were also concernedregarding the loss of water bodies and need for better roadside drainage along the project corridor.There were suggestions for the provision of roadside facilities, rest areas and truck stoppage lay-byes.Other concerns were on road safety for which suggestions were provided - safe passages, underpasseswhere required and service lanes to separate local from through traffic. Local communities wereanxious about the impact on their religious structures and suggested their protection, relocation andenhancement.

The public feedback obtained was used as inputs in the design process and subsequently formed thebasis for design of mitigation measures for specific locations. To redress the environmental issueslikely to surface during construction and operational phases, regular public consultations is planned tobe undertaken in order to continually address public suggestions I complaints.

7. Environmental Enhancements

The various enhancement measures proposed for the different contract packages include theenhancement of roadside facilities (bus bays, bus stops and lay-byes with ornamental / shade trees,wayside amenities), improvement of aesthetic qualities of the road corridors (soft landscaping of thesurrounding area and landscaping of the traffic island), improvement of public access to naturalresources (stepped access to the edge of water bodies, flat boulders for washing, stone pitching,washing ghats, and sitting space on water body periphery) and enhancement of cultural properties(improving access, defining property boundaries, parking provision, seating / resting space and treeplanting).

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8. Capacity-building & implementation arrangements

Implementation arrangements: NHAI is establishing a corporate office position of EnvironmentalManager (HQ), who will be coordinating all matters regarding the EMP implementation with the allPIUs. Each PIU will have Project Director and other Technical managers, who will be responsible forthe implementation of the EMP on a day-to-day basis and work in close coordination with theEnvironmental Manager (HQ). Construction Supervision Consultants would have EnvironmentalOfficers who will directly supervise the works. The contractors for this project will have substantialenvironmental capacity with respect to the process, equipment, methods and quality of construction.While the PIUs are already functional and one Technical Manager has already been involved in thepreparation of the EMP, the Environmental Manager (HQ) will be selected and appointed throughintemal transfer in the near future.

Training: The Environmental Manager (HQ), the Managers (Technical) at the PLUs, the personnel ofthe Construction Supervision Consultant and the Contractor will be trained on environmental issues ofthe road development project. The proposed training plan incorporates the project needs as well as theintermediate termn capacity building needs of the NHAI and covers the following topics: environmentaloverview, environmental regulations and acts, pollution, environmental impact assessment,environmental management plan in general and in the project, highway projects and environmentalissues, environmentally sound construction management and planning for environmentally sustainableoperation of highways. The training is proposed to be implemented by a combination of training /academic institutions and individual experts. A training schedule and the various target groups for thetraining have also been identified. A budget of Rs. 1.875 million has been allocated for this purpose.

9. Environmental Management Plan

Detailed EMPs for the eight contract packages have been separately developed and NHAI will beresponsible for their implementation. These consists primarily of the mitigation / management /avoidance of the negative impacts, the enhancement of various environmental components along theproject and the monitoring program during the design, construction and operation stages of the project.An environmental budget has been included in each contract package. While the individual budgetsvary based on the nature of the remedial measures that are to be adopted, the total budget for the EMPswill be Rs. 155 million.

Of the three facets of the EMP, mitigation and enhancement measures have already been addressed inthe earlier sections and monitoring is addressed here. The objective of monitoring is to evaluate theperfornance of EMP mitigation / enhancement measures, to evaluate the adequacy of the EIA, tosatisfy legal and commnunity obligations, and to suggest improvements in the management plan. In themonitoring plan, performance indicators have been identified. Thus monitoring of air quality, waterquality, noise levels around sensitive locations, re-plantation success / survival, health and accidentstatistics, is included in the project.

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AdditionalAnnex No.: 12

INSTITUTIONAL STRENGTHENING AND CORRIDOR MANAGEMENT ACTION PLANMATRIX

Institutional Key Outputs Action(s) Required Time Frame& Corridor for

Management ImplementatiComponent on (Project

months)

1. NHAI NHAI with separated and Decision / Agreement by GOI, MOST and 0-6Functions clearly defined functions for NHAI.

selected corridors of NationalHighways, authority on fullinvestment decisions

2. NHAI Improved Operation and a) Decision / Agreement by GOI, MOST and 6-24Organization maintenance of NH system. NHAI

Enhanced organizational b) Make necessary modifications incapability to handle Organization structuremaintenance contracts, toll c) Strengthen field unitsissues, corridor managementand develop standards ondesign and contractdocuments

3. Social impact Develop expertise in Social a) Form R & R Cell and Environmental 3-12concerns in development, R & R and management Unit by appointment of Socialprojects environmental aspects Scientist / Environmental Manager /

outsourcing.c) Enhanced interactions with primarystakeholders and NGOs in the project influencearea

4. Delegation of a) An Improved works code in a) Develop works code / responsibility matrix 3-12power and place; higher accountability to shift focus of responsibility to operations andresponsibility and speedy decision making maintenance in addition to construction

b) Make PlUs self sufficient b) Delegate appropriate power to fieldfunctionaries

5. Project a) Strengthen project a) Engage services of Project Finance and 1-24Accounting accounting Management ConsultantSystem b) Meet reporting b) Develop and Implement Project Financial

requirements of International Management systemfunding agencies c) Train staff in improved financial

management system

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6. Management a) Better control on project a) Identification of data and system 6-18Information administration and asset requirementSystem management b) Procure / develop and Implement

b) Enhanced Capability of Management Information SystemNHAI on performnance c) Engage MIS implementation consultant andmeasurement train staff in MIS.c) Enhanced capability ofcollecting and analyzingtraffic, road and bridge datad) Revised systems andprocedures

7. a) National Highway Act a) Decision / Agreement by GOI 3-18Encroachment properly implemented and b) Draft Supplementary LegislationControl and supplemented c) Develop and Implement improved proceduresland b) Improved land acquisition for ROW Land Acquisition and ControlAcquisition and ROW Control process in

place.

8. Procurement a) Strengthened Domestic a) Formn a steering committee underof Construction Contracting Industry chairmanship of Secretary MOST, involving 6-18Services b) Improved system for NHAI chairman, state representatives,

Contractor Prequalification in representatives from foreign and domesticplace contractors and act as a facilitator forc) Improved Tender institutional strengthening of contractorsDocumentation and b) Review Contractor tendering andprocedures in place prequalification process

c) Develop improved standard prequalificationand tender documentd) Encourage Construction equipmentPooling/leasinge) Stronger interaction with contracting industry

9. Procurement Enhanced consulting a) Meet consulting firms on regular basis and 6-18of Consultancy capability act as facilitator to strengthen consultingservices Better Quality on project capacity

preparation, supervision and b) Review terms of reference for consultants andoverall administration selection process / criteria

c) Attempt on experimental basis whether largepool of state PWD expertise can be utilized inconsulting services

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10. Corridor a) Better regulation of a) Engage legal consultancy services for 3-24Management highway corridors reviewing present legislations andand Road b) Better traffic management, recommendation on improvementMaintenance reduced accidents, higher b) Institutional strengthening of police forces

traffic speed, reduced vehicle responsible for highway patrolling andoperating costs managementc) Better road user amenities, c) Collect data on traffic volume and roughnesshigher level of user on entire NH corridorsatisfaction d) Collect speed parameters and accident datad) Enhanced stakeholder on selected corridorsparticipation e) Engage Consultants on prioritisation ofe) Improved Road corridor selection for minor improvementMaintenance f) Access Minor improvements fund set up

under TNHP for corridor improvement on pilotbasis.g) Strengthen Maintenance Management databaseh) Develop and implement a MaintenanceManagement Systemi) Set up at least two maintenance managementunits on a pilot basisj) Procure consultancy services to assist MMUsto prioritize stretches, design, prepare biddocuments, supervise and monitor the corridormanagement / maintenance works

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-62 -

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