The role of multilateral agencies such as the Asian Development Bank (ADB) complements the priority accorded to road development at the central as well as state levels. In light of the growing focus on road network augmentation at the state level, multilateral funding has assumed even greater importance. Moreover, ADB’s involvement as a lender to a project not only helps in providing technical and project-structuring support, but also reduces the risk perception on the part of foreign investors.
At present, ADB’s total commitment to the state road as well as rural road segments stands at about $6.07 billion spread across 23 projects/sub-projects/tranches. These are projects that have been funded by ADB during 2005-16 through the multi-tranche financing facility (MFF) or project loans. ADB largely finances state road projects through loans with a maturity of 20 years (excluding the grace period). In addition, ADB has extended technical assistance to several projects across states such as Bihar, Karnataka and Uttarakhand.
In terms of investment realisation, about 70 per cent of ADB’s total loan commitment is currently being mobilised for the execution of 16 active/approved projects. These projects entail the rehabilitation and upgradation of an aggregate road length of about 6,000 km in states such as Karnataka, Uttar Pradesh, Jharkhand, Madhya Pradesh, Bihar, Uttarakhand, and those in the Northeast.
In 2016, the bank approved loan commitments for three projects. The most recent is the Bihar New Ganga Bridge project involving a loan of $500 million. It entails the construction of a bridge across the Ganga river with the aim of improving transport connectivity between the northern and southern parts of the state. The main bridge structure of about 9.8 km is expected to become the longest river bridge in the country. It is likely to have a transformational impact by promoting the geographical integration of Bihar and help balance socioeconomic development. In the regional context, it is strategically located near Nepal and will improve the existing road corridors between the two countries. The other recently approved projects are the Madhya Pradesh District Connectivity Project involving the upgradation of about 1,500 km of district roads with a loan of $350 million and the Uttar Pradesh Major District Roads Improvement Project with a loan of $300 million and entailing the improvement of 430 km of major district roads (MDRs) in line with the Strategic Core Road Network Master Plan of the state. Notably, ADB has committed more than 50 per cent of the total project cost for all the three projects.
While most of ADB’s focus has been on funding state road and MDR projects, the bank has provided technical as well as financial assistance for augmenting road networks in the underserved northeastern region as well as for connecting India to its neighbours. In April 2014, ADB extended $500 million worth of financial assistance to improve roads and increase trade along the North Bengal-North-eastern region international trade corridor. The South Asian Subregional Economic Cooperation Road Connectivity Investment Program is building two national highways in West Bengal, as well as state roads in Manipur, extending to Myanmar. In total, the project is constructing about 500 km of roads in the area to help resolve the constraint of last-mile connections between the main in-country road network and neighbouring countries. These roads leading to the border areas will enable efficient and safe transport within the country and to neighbouring countries, providing key strategic links between South and Southeast Asia connecting Bangladesh, Bhutan, Myanmar and Nepal.
Meanwhile, there are three other projects which are proposed to be funded by ADB. These are the Second Rural Connectivity Investment Program, Karnataka State Highways Improvement Project (KHSIP) III and the Rajasthan State Highway Investment Program. KSHIP III is being designed to improve transport connectivity in the state by rehabilitating and upgrading state highways forming part of the core road network in the state. The project involves the rehabilitation and upgradation of about 500 km of state highways as well as road maintenance and asset management through the use of public-private partnerships.
Multilateral agencies act as a catalyst in attracting initial funding from the private sector into infrastructure. The transparency of their project evaluation procedures and their ability to benchmark an individual private sector project in a particular country against the international experience with similar projects could help avoid controversies that may otherwise arise in private sector projects. In the near term, funds to the tune of $1.35 billion are expected to be provided by ADB to augment road infrastructure. Going forward, it is essential to maintain policy stability across all infrastructure sectors to ensure the availability of low-cost, long-term debt from multilateral agencies. Regular project allotment, and timely funds and subsidy disbursement will enable lenders to commit to investing in the sector.