The World Bank New Delhi Office Phone +911141479301/+911149247601!NTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 70 Lodi Estate Mailing Address: P.O. Box 416INTERNATIONAL DEVELOPMENT ASSOCIATION New Delhi - 110 003

OFFOAL . ?DOCUMENTS February 27, 2015

Mr. Tarun BajajJoint Secretary (MI)

Department of Economic AffairsMinistry of Finance, Government of IndiaRoom No 40-B, North BlockNew Delhi - I 10001

Dear Mr. Bajaj:

INDIA: Andhra Pradesh and Telangana Road Sector Project - Loan No.7792-IN 0'(formerly known as Andhra Pradesh Road Sector Project)

Amendment to Loan Agreement and Supplemental Letter (Indicators)

We refer to: (i) the loan agreement between the International Bank for Reconstruction andDevelopment (the Bank) and India (the Borrower) dated January 22, 2010 (the Loan Agreement);(ii) the supplemental letter of the same date regarding performance monitoring indicators agreed further tothe Loan Agreement; and (iii) the Project agreement of the same date between the Bank and the State ofAndhra Pradesh (Andhra Pradesh) (the AP-Project Agreement).

The Recipient has advised the Bank of the enactment of the Andhra Pradesh Reorganization Act,2014 (6 of 2014), published in the Gazette of India dated March 1, 2014, creating the new TelanganaState (Telangana), formerly part of Andhra Pradesh.

We also refer to the Borrower's letter dated December 16, 2014 and to the discussions among theBorrower, Andhra Pradesh, Telangana and the Bank, relating to amendments to take into account thecreation of Telangana, and to reflect Telangana's endorsement and commitment to carry out certain partsof the Project and as reflected in the aide-memoire transmitted to the Borrower, Andhra Pradesh andTelangana through the Bank's letter dated September 1, 2014.

We are pleased to inform you that the Bank concurs with the request, and proposes to enter into aProject agreement with Telangana for this Project (T-Project Agreement). The Loan Agreement isamended as set forth below subsequent to the request and the above-mentioned discussions:

I. The name of the Project "Andhra Pradesh Road Sector Project", wherever used is replaced by"Andhra Pradesh and Telangana Road Sector Project".

2. All references to "RBD" and "RDC" in the Loan Agreement shall hereinafter been deemedreferences to the "AP-RBD" and the "AP-RDC" as defined in the Attachment I hereto.

2. Section 3.01 of Article Ill is amended to read as follows (emphasis added):

"3.01. The Borrower declares its commitment to the objectives of the Project. To this end, theBorrower shall cause the Project to be carried out by: (i) the State of Andhra Pradesh, throughits AP-RBD and AP-RDC; and (ii) the Telangana, through its T-RBD and PIU, all in

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Mr. Tarun Bajaj -2- February 27, 2015

accordance with the provisions of Article V of the General Conditions and the Respective ProjectAgreements."

3. Component I (Road Improvement) of Schedule I is amended to read as follows (emphasisadded):

"Upgrading and maintenance of roads in the Core Road Networks of the State of Andhra Pradeshand Telangana, through: (a) upgrading about 427 km of priority state highways (302 km in theState of Andhra Pradesh and 125 km in Telangana); and (b) maintenance of about 6,018 kmof roads in the Core Road Network (4,301 km in the State of Andhra Pradesh and about 1,717km in Telangana) under long-term performance-based maintenance contracts; includingimplementation of ancillary social, resettlement and environmental measures."

4. Component 2 (PPP Facilitation Support) of Schedule I is amended to read as follows (emphasisadded):

"Technical assistance to strengthen the capacity of the Project Implementing Entities to attract,on Public Private Partnership (PPP) basis, private sector participation in financing, development,and management of selected high traffic density corridors."

5. Component 3 (Institutional Strengthening) of Schedule I is amended to read as follows (emphasisadded):

"Technical assistance and support to the Project Implementing Entities to:(a) facilitate the full operationalization of the AP-RDC and strengthening of T-RBD, withrequisite capacity for its responsibilities in managing the Core Road Network; and (b) assist in theimplementation, coordination and monitoring of the Project, including the asset managementprogram, GAAP, and ISAP."

6. Component 4 (Road Safety) of Schedule I is amended to read as follows (emphasis added):

"Development of safer road corridors and reduction of road accidents by:(a) development of pilot demonstration projects on selected Core Road Network corridors; (b)development and implementation of institutional and policy action plans for improving theProject Implementing Entities' road safety responsibility framework and capacities; and (c)carrying out black-spot improvement program in the Core Road Network."

7. Section 1.1 of Schedule 2 is amended to read as follows (emphasis added):

"1. To facilitate the carrying out of the Project, the Borrower shall make the proceeds of theLoan available to the Project Implementing Entities in accordance with Borrower's standardarrangements for developmental assistance to the States of India."

8. Section 1.2 of Schedule 2 is amended to read as follows (emphasis added):

"2. The Borrower shall cause the Project Implementing Entities to take all necessary steps toensure that all Project activities are implemented in accordance with the Schedule to theirRespective Project Agreements."

Mr. Tarun Bajaj -3- February 27, 2015

9. Section II.A of Schedule 2 is amended to read as follows (emphasis added):

"The Borrower, through the Project Implementing Entities, shall monitor and evaluate theprogress of the Project and cause the Project Reports to be prepared in accordance with theprovisions of Section 5.08 of the General Conditions and on the basis of indicators agreed withthe Bank. Each Project Report shall cover the period of one (1) Financial Year quarter, and shallbe furnished to the Bank not later than forty-five (45) days after the end of the period covered bysuch report."

10. Section II.B.3 of Schedule 2 is amended to read as follows (emphasis added):

"3. Without limitation on the provisions of Part A of this Section, the Borrower shall causethe Project Implementing Entities to prepare and furnish to the Bank not later than forty-five (45)days after the end of each Financial Year quarter, interim unaudited financial reports for theProject, covering the quarter, in form and substance satisfactory to the Bank."

I1. The table in Section IV.A.2 of Schedule 2 is amended to read as follows:

Percentage ofAmount of the Loan Expenditures to

Allocated be financedCategory (expressed in USD) (inclusive of

Taxes)

(1) Works and R&R Assistance:

(a) for Components 1(a), 4(a), and 60,255,000 80%4(c) of the Project

(b) for Component 1(b) of the Project 35,812,500 20%

(2) Goods, Consultants' Services, 8,378,000 80%Training and Incremental OperatingCosts

(3) Front-end Fee 800,000 Amount payablepursuant to Section2.03 of thisAgreement inaccordance withSection 2.07(b) ofthe GeneralConditions

(4) Premia for Interest Rate Cap or -0- Amount payableInterest Rate Collar pursuant to Section

2.07(c) of this

Agreement inaccordance with

Mr. Tarun Bajaj -4- February 27, 2015

Section 4.05(c) ofthe GeneralConditions

(5) Works and R&R Assistance:

(a) for Components 1(a), 4(a), and 97,139,190 80%4(c) of the Project for the Stateof Andhra Pradesh

20%(b) for Component 1(b) of the 11,178,000

Project for the State of AndhraPradesh

(6) Goods, Consultants' Services, 12,044,000 80%Training and IncrementalOperating Costs under the Projectfor the State of Andhra Pradesh

(7) Works and R&R Assistance:

(a) for Components 1(a), 4(a), and 27,608,310 80%4(c) of the Project for Telangana

(b) for Component 1(b) of the 4,757,000 20%Project for Telangana

(8) Goods, Consultants' Services, 6,028,000 80%Training and IncrementalOperating Costs under the Projectfor Telangana

Cancelled as of February 19, 2014 56,000,000

TOTAL AMOUNT 320,000,000

12. Section IV.B.2 of Schedule 2 is amended to read as follows:

"2. The Closing Date is May 31, 2017."

13. Section I (Definitions) of the Appendix is amended to read as set forth in Attachment I hereto.

The attachment to the supplemental letter regarding performance monitoring indicators agreedfurther to Section II.A of Schedule 2 is amended to read as set forth in Attachment 2 hereto.

All other provisions of the Loan Agreement, except as amended herein, remain unchanged.

Mr. Tarun Bajaj -5- February 27, 2015

Please confirm your agreement to the foregoing by signing the form of confirmation set forthbelow, and returning one fully executed original of this amendment letter to us and retaining one originalfor your records.

This amendment letter shall become effective upon receipt by the Bank of: (a) duly countersignedoriginals of this amendment letter, the amendment letter to the AP-Project Agreement, and the T-ProjectAgreement, prepared further to the above-mentioned requests and discussions; and (b) a legal opinion,satisfactory to the Bank, prepared by counsel to Telangana, or a competent official of Telanganaacceptable to the Bank, pursuant to Article III of the T-Project Agreement and Section 9.02 of the GeneralConditions.

Sincerely yours,

Onno Ru hCountry Director, India

South Asia Region

AGREEDINDIA

By:__

Name: . n

(TARU-N 8AJ_^,Y1,Tile AMMjM,%u i of Fi anco

,p,es qff ftqrm/Deptua$ efco. AtOUT

Date: !__ Milao_O_

Mr. Tarun Bajaj February 27,2015

cc:

Mr. Subhash Chandra Garg, Executive Director (India), World Bank

Mr. L.K. Atheeq, Senior Advisor the Executive Director, World BankMr. Bhaskar Dasgupta, Deputy Secretary, Department of Economic Affairs, Ministry of Finance,Mr. S.G. Dastidar, Controller of Aid Accounts and Audit, Department of Economic Affairs,Ministry of Finance, Government of India

Mr. S.M. Das, Additional Director General, Ministry of Road Transport & Highways,Government of India

Government of Andhra PradeshMr. I.Y.R. Krishna Rao, Chief Secretary, Government of Andhra PradeshDr. P. V. Ramesh, Principal Secretary, Finance Department (R&E)Mr. L. Premachandra Reddy, Secretary, Finance DepartmentMr. B. Sam Bob, Principal Secretary, Department of Roads and BuildingsMr. G. JagannadhaRao Managing Director (RDC) and Chief Engineer & CRN (RBD)

Government of TelanganaDr. Rajiv Sharma, Chief Secretary, Government of TelenganaMr. K. Rama Krishna Rao, Special Secretary, Finance (IF) DepartmentMr. Ajay Misra, Principal Secretary, Department of Transport, Roads & BuildingsMr. P. Ravinder Rao, E-in-C (R&B), State Roads, CRN & Jt. MD, RDC

ATTACHMENT 1

Section I. Definitions

I. "Andhra Pradesh" means the Borrower's Andhra Pradesh State that existed prior toJune 2, 2014, and which has since been bifurcated into the States of Andhra Pradesh andTelangana as of June 2, 2014, pursuant to the Andhra Pradesh Reorganization Act, 2014 (6of 2014).

2. "Anti-Corruption Guidelines" means the "Guidelines on Preventing and Combating Fraud andCorruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15,2006.

3. "AP-Project Agreement" means the Project agreement dated January 22, 2010, entered intobetween the Bank and the Andhra Pradesh, as succeeded by the State of Andhra Pradesh,relating to the implementation of the State of Andhra Pradesh' respective parts of theProject, as such agreement may be amended from time to time. The term includes theGeneral Conditions and all appendices, schedules and agreements supplemental to the AP-Project Agreement

4. "AP-RBD" means, the Roads and Building wing of the Department of Transport, Roads, andBuildings of State of Andhra Pradesh, or any successor or successors thereto.

5. "AP-RDC" means the Andhra Pradesh Roads Development Corporation, a statutory corporationestablished through Act I of 1998, enacted by the Andhra Pradesh Legislative Assembly, andwhich came into effect on January 2, 1998, or any successor or successors thereto.

6. "Category" means a category set forth in the table in Section IV of Schedule 2 to this Agreement.

7. "Consultant Guidelines" means the "Guidelines: Selection and Employment of Consultants byWorld Bank Borrowers" published by the Bank in May 2004 and revised in October 2006.

8. "Core Road Network" means state highways and major district roads in the State of AndhraPradesh and Telangana that have been designated as being a part of the core road network bythe Government of Andhra Pradesh notification, dated March 21, 2007, as the same may beamended from time to time.

9. "EMPs" means the Project Implementing Entities' corridor specific environmental managementplans prepared, and/or to be prepared, in a manner and substance satisfactory to the Bankfor the activities contemplated under Component 1, and Sub-Components 4(a) and 4(c) ofthe Project, adopted, and/or to be adopted, by the Project Implementing Entities for theimplementation of their activities under such Component/Sub-Components of the Project;all such documents describing the environmental management, mitigation, monitoring, reportingand institutional measures that shall be undertaken by the Project Implementing Entities in thecarrying out of such Parts of the Project, as such plans may be revised from time to time withthe prior concurrence of the Bank.

10. "ESMF" means the Project Implementing Entities' environmental and social managementframework dated February 5, 2009satisfactory to the Bank, describing the environmental andsocial safeguards, policies, procedures and institutional framework applicable to Component 1(b)

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and to be adopted, as applicable, for Components 4(a) and 4(c) of the Project, includingidentification, assessment and mitigation of potential environmental and social impacts arisingfrom the Project, measures to protect cultural property, carrying out consultations, processing andredressing grievances, monitoring related impacts, and, where applicable, resettlement andrehabilitation actions plans, tribal development plans, and other development plans andentitlement frameworks for people adversely affected as a result of Project implementation, assuch framework may be revised from time to time with the prior concurrence of the Bank.

11. "Financial Year" means the Borrower's and Project Implementing Entities' financial yearbeginning April 1 and ending March 31 of the following year.

12. "*GAAP" means the Project Implementing Entities' governance and accountability action planadopted on April 1, 2009, which sets out the key actions to be undertaken by the ProjectImplementing Entities to strengthen governance, transparency, and accountability under theProject, as such plan may be amended from time to time with the prior concurrence of the Bank.

13. "General Conditions" means the "International Bank for Reconstruction and DevelopmentGeneral Conditions for Loans", dated July 1, 2005 (as amended through February 12, 2008), withthe modifications set forth in Section II of this Appendix.

14. "HIV/Aids Action Plan" means the Project Implementing Entities' HIV/aids action plan adoptedon March 24, 2009, satisfactory to the Bank, as such plans may be revised from time to time withthe prior concurrence of the Bank.

15. "Incremental Operating Costs" means incremental operating costs incurred by the ProjectImplementing Entities on account of Project implementation, management and monitoring,including salaries of non-civil service positions (but excluding salaries for civil service positions),consultancy costs, dissemination of Project related information, office and equipment purchase,maintenance and repair, vehicle maintenance and repair, travel, including travel to Project sites,security, communication, bank charges, and other costs directly associated with and necessaryunder the Project.

16. "ISAP" means the Project Implementing Entities' institutional strengthening action plan adoptedon April 1, 2009, satisfactory to the Bank, describing the key road sector policy, organizational,and legislative undertakings required to modernize the AP-RDC and strengthen T-RBD and toimprove the planning and financing framework for the road sector, as such plan may be revisedfrom time to time with the prior concurrence of the Bank.

17. "Phase I Roads" and "Phase 11 Roads" mean the roads referred to as such under Component I ofSchedule I to this Agreement.

18. "PIU" means Telangana's Project Implementation Unit, established within T-RBD forpurposes of assisting T-RBD with the carrying out of the Project pursuant to Section L.Aand 1.1B of the Schedule to the T-Project Agreement.

19. "Procurement Guidelines" means the "Guidelines: Procurement under IBRD Loans and IDACredits" published by the Bank in May 2004 and revised in October 2006.

20. "Procurement Plan" means the procurement plan for the Project, dated September 4, 2009, andreferred to in paragraph 1.16 of the Procurement Guidelines and paragraph 1.24 of the Consultant

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Guidelines, as the same shall be updated from time to time in accordance with the provisions ofsaid paragraphs.

21. "Project Implementing Entities" means, collectively the State of Andhra Pradesh andTelangana; and "Project Implementing Entity" means either of them individuallyconsidered, as the context may determine.

22. "R&R Assistance" means resettlement and rehabilitation assistance provided to eligible recipientsin accordance with the terms and conditions set forth in the R&R Policy Framework and theRAPs.

23. -R&R Policy Framework" means the Project Implementing Entities' resettlement andrehabilitation policy framework dated March 24, 2009setting forth the policies and proceduresaddressing adverse temporary or permanent social impacts resulting, or likely to result from, thecarrying out of the Project, as the same may be revised from time to time with the priorconcurrence of the Bank.

24. "RAPs" means the Project Implementing Entities' resettlement action plans prepared, and/or tobe prepared, in a manner and substance satisfactory to the Bank for the activitiescontemplated under Component 1, and Sub-Components 4(a) and 4(c) of the Project,adopted, and/or to be adopted, by the Project Implementing Entities for the implementationof their activities under such Component/Sub-Components of the Project, all in accordancewith the R&R Policy Framework, as such plans may be revised from time to time with the priorconcurrence of the Bank.

25. "Respective Project Agreements" means, collectively the AP-Project Agreement, and the T-Project Agreement, and the term "Project Agreement" means any of such agreements, asthe case may be, individually considered.

26. "State of Andhra Pradesh" means the Borrower's State of Andhra Pradesh as created onJune 2, 2014, pursuant to the Andhra Pradesh Reorganization Act, 2014 (6 of 2014), whichis one of the Project Implementing Entities for purposes of the General Conditions, or anysuccessor thereto.

27. "T-Project Agreement" means the Project agreement to be entered into between the Bankand Telangana relating to the implementation of Telangana's respective parts of theProject, as such agreement may be amended from time to time. The term includes theGeneral Conditions and all appendices, schedules and agreements supplemental to the T-Project Agreement.

28. T-RBD" means, the Roads and Building wing of the Department of Transport, Roads, andBuildings of State Telangana, or any successor or successors thereto

29. "TDP" means the tribal development plan related to Component 1(a) of the Project, adopted bythe Project Implementing Entities on March 27, 2009, satisfactory to the Bank, describing thestrategy and actions to ensure that tribal people participate in and benefit from the Projectactivities, as such plan may be revised from time to time with the prior concurrence of the Bank.

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30. "Telangana" means the Borrower's State of Telangana, as created on June 2, 2014,pursuant to the Andhra Pradesh Reorganization Act, 2014 (6 of 2014), which is one of theProject Implementing Entity for purposes of the General Conditions, or any successorthereto.

31. "Training" means reasonable and necessary costs of training related to Project implementation,including the fees of educational or other institutions that provide training, costs related toattendance or organization of conferences, seminars, workshops, and study tours, and thetrainees' cost of travel, boarding, lodging and per diem allowances.

ATTACHMENT 2

RESULTS INDICATORS

February 2015 Restructuring: Revised Results Framework for AP and Telangana Road Sector Project

Target Value (Actuals)

Indicators Baseline Thus Far End of Project

VRI-VR4 Andhra Pradesh Telangana

Outcome Indicators

Full operationalization of RDC still not fully Y I: Outstanding audits completed * GoAP provides RDC with If RDC is formed,

financial, administrative and * GoT provides RDC with financial,RDC with adequate operational: outstanding (Audit ofRDC accounts upto 2013-14 has operational powers; Rules and administrative and operational

procedures adopted powers: Rules and proceduresfinancial and human audits: Act to be reviewed; been completed) adopted

resources to manage the no independent financialRDC has own staffing and adequate

CRN & operational procedures: sources of revenue for CRN

many staff deputed from

RBD

Vehicle operating costs Cars: T5.41 per veh km 12% reduction with project, that is, 12% reduction with project, that is, I

decline relative to the T 4.76 per veh km 4.76 per veh km

without project scenario in Truck: 11.85 per veh km 8% reduction with project, that is, 8% reduction with project, that is,

upgradation roads f10.90 per veh km f l0.90 per veh km

Travel time for bus 10.6 hrs for travelling all 7.8 hrs (26% reduction) to travel in 7.8 hrs (26% reduction) to travel in all

passengers declines 422 km of upgradation all 422 km of upgrading component 422 km of upgrading component

relative to without project roads

scenario in upgradation

roads

Number of road accident S131: 16 Renigunta-- . Less than 0.47 fatalities per km Less than 0.36 fatalities per km

fatalities per vehicle Rayalacheruvu Corridor,

kilometers declines on (Andhra Pradesh

Road Demo Corridors 0.47 fatalities per km

S14: 16 Hyderabad -

Bijapur Corridor,

Telangana

0.36 fatalities per km

Share of CRN in good 40% Y3:60% 80% 75%

condition increased Y4: 71 % (indicative estimate based on

quantum of work undertaken and current (size of classified network: 6,800 (size of classified network: 4,020 km)

CRN length (6,800 km) km)

Results Indicators for

each Component

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Component 1: Road

Corridor Improvement

427 km upgraded 0 Y3:180 km 302 km upgraded 125 km upgraded

efficiently and Y4: 79 km of road length has been surfaced

environmental and socially with Bituminous layer

sustainable way

6,018 km of roads under 0 Y3: 1378 km 4,301 km maintained through Long 1717 km maintained through Long term

Long-term performance Y4: 6,018 km of CRN is under LTPBMC term performance-based performance-based maintenance

based maintenance maintenance contracts contracts

contract (LTPBMC)

Component 2: PPP

Facilitation

Three roads selected for 0 Y3: 2 2 Roads I Road

PPP transactions. Y4: 2 roads (HKR and NAM) have been

taken up under PPP

Component 3:

Institutional

Development

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Milestones in ISAP met Y3: ISAP studies completed: Training Needs

Assessment completed * IT-MIS. HR and Training plans * IT-MIS, HR and Training plans fullyfully operational operational

ISAP consultants delivered reports on * Complete Preparation of State * Complete Preparation of StateNetwork Master Plan Network Master Plan

Organization Structure of RDC, Scoping

study, Training Needs Assessment (March

2013) ; Study on Road Fund (Nov. 2013),;

and Road Network MasterPlan for combined

state.

The reports are to be revised to suit the

needs of Residual AP.

Y4: IT-MIS, HR plan Environment and

Social Management fully operational

IT-MIS procurement has been initiated. HR

plan, Environment and Social Management;

partly operational.

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Milestones in GAAP met YI: Disclosure & complaints handling Disclosure & complaints handling Disclosure & complaints handling

operational Disclosures completed mechanism operational mechanism operational

Complaint system established and

operational.

Y2: Third Party Monitoring: Procurement

monitoring

Third party monitoring consultant appointed

for OPRC packages; and auditing is being

taken up as per agreed plan.

Procurement committee was formed within

APRDC and committee is monitoring the

procurement process

Annual maintenance plans Procurement of RDBMS is completed. * RAMS operational and used forannual plan preparation

developed through the Procurement of agency for data collection,

RMS system other hardware and software is initiated

Component 4: Road

Safety

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Demonstration projects Y 1: Road Safety Lead Agency and Multi- Complete implementation Demo * Establish Road Safety lead Agencyand Multi-sector team for road safety

carried out in at least one sector coordination established Transport Corridor with multi-sector coordination (Dec 2015)

road corridor, Dept. has been established as the nodal/lead coordination and evaluate results* Complete implementation Demo

agency by the GoAPfor implementation of Corridor with multi-sectorcoordination and evaluate results

Road Safetv Action Plan (achieved in Y3).

Technical Working groups and Road Safety

Cell have also been constituted with the

different departments for multi sector

coordination (in Y4)

Comprehensive GoAP New Safety Policy approved: New Safety Policy approved;

road safety functions, institutional arrangement put in institutional arrangement put in place,

capacity and action plan(s) place, and Action Plan and Action Plan Implementation drawn

put in place Implementation drawn

Black Spot Improvement Y 1: Identification of Black Spots & Complete implementation of Complete implementation of

of CRN Collection of Baseline Data on accident improvement of 36 blackspots improvement of 10 blackspots

fatalities

36 black spots in five districts have been

identified. Procurement was completed

Works are in progress

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Land Acquisition Completed to-date: 305 Acres (62%) 100% to be completed 100% to be completed

AP: 235 Acres (6 1%)

Telangana: 70 Acres (65%) (Total: 383 Acres) (Total: 107 Acres)

Resettlement and Completed to-date: 1060 Nos. (34%) 100% to be completed 100% to be completed

Rehabilitation AP: 926 Nos. (33%)

Telangana: 134 Nos (43%) (Total: 2,733 Nos) (Total: 314 Nos)