In recent years, the role of multilateral organisations in financing infrastructure projects in India has increased significantly and has assumed a position of great importance in assisting India’s growth. The Asian Development Bank (ADB) has been the most active agency funding state-level road projects in the country, within the ambit of its country partnership strategy (CPS) for India. The CPS’s objective has not only been limited to tangible investments, but has also leveraged knowledge, capacity development, and innovation and best practices. For future interventions, the agency’s recently established CPS (2018-22) for India rests upon three primary pillars – boosting India’s economic competitiveness to create more and better jobs; providing inclusive access to infrastructure networks and services; and addressing climate change and increasing climate resilience.
ADB commits maximum funds
In recent years, ADB has emerged as the most proactive multilateral agency in terms of funds committed specifically towards India’s road sector. Between 2012-13 and 2017-18 (till December 2017), a sum of nearly $4.2 billion was committed by the agency, accounting for the maximum share (44 per cent) in total funds committed, including those from the World Bank and the Japan International Cooperation Agency. The shares of these agencies stood at 18 per cent ($1.75 billion) and 38 per cent ($3.65 billion) respectively. Besides, in 2017-18, ADB’s allocations peaked to the highest ever level of $1.35 billion.
Key ADB-funded road projects
During the period 2012-13 to 2017-18 (till December 2017), some key ADB-funded projects (identified on the basis of highest fund allocation) were the Rajasthan State Highway Investment Programme that was approved a financial commitment of $500 million by the ADB board in May 2017. The loan agreement for the first tranche of $220 million was signed between the central government and ADB in July 2017. The programme primarily aims to upgrade around 2,000 km of state highways and major district roads (MDRs) to two-lane or intermediate-lane standards to meet road safety requirements and enhance the capacity of the Rajasthan Public Works Department’s public-private partnership (PPP) division and its project performance monitoring system. ADB will finance part of the construction costs for annuity-based PPP concessions and engineering, procurement and construction contracts. The first tranche of the loan will improve about 1,000 km of highways and MDRs . It will have a 25-year term, including a grace period of eight years. The loan will carry an annual interest rate determined in accordance with ADB’s Libor-based lending facility. The total cost of the project is $1.41 billion, of which the central government will contribute $465 million and $450 million will be contributed by the private sector.
Another multi-tranche financing facility worth $500 million was approved for the Second Rural Connectivity Investment Programme to improve rural roads in Assam, Chhattisgarh, Madhya Pradesh, Odisha and West Bengal. Under the project, ADB will undertake the construction and upgradation of 12,000 km of rural roads in these states. In January 2018, the central government and the agency signed a loan agreement for the first tranche of $250 million to
finance the construction of 6,254 km of all-weather rural roads. The second tranche of the same amount is expected to be granted by October 2019. Besides, a technical assistance (TA) grant worth $0.5 million was approved by ADB from its Technical Assistance Special Fund to strengthen the sustainability of rural road assets, enhance disaster resilience and increase innovation in rural road development. The TA is due for completion in December 2021, with the investment programme expected to be completed by the end of 2023.
ADB recently forayed into funding standalone projects in contrast to the regular practice of approving programme-level loans. In November 2016, ADB and the central government signed a $500 million loan agreement for the Bihar New Ganga Bridge Project aimed at building a 9.8 km road bridge across the Ganga river to improve transport connectivity between north and south Bihar and for better linkages between Patna and the surrounding areas. The bridge is likely to be the longest river bridge in the country and will be constructed using state-of-the-art engineering techniques. Besides, ADB will also provide $900,000 in TA to improve bridge operations and management works. The project is expected to be completed by the end of December 2020.
District roads have also attracted ADB’s attention. In March 2017, ADB and the central government signed a $350 million loan for improving about 1,500 km of MDRs under the Madhya Pradesh District Roads II Sector Project. The project involves upgrading roads with concrete pavements, strengthening culverts and bridges, and maintaining the improved road assets for a period of five years after construction, on a performance-based payment format. The project will also develop and introduce a cashless accident victim treatment facility in the state, and further improve the accident response system. This project is expected to be executed for nearly four years with its completion expected in March 2021.
Another project in Madhya Pradesh – the Madhya Pradesh District Connectivity Sector Project – also received approval for funding by ADB through a loan agreement for $350 million signed between the agency and the centre in February 2015. The project aims at improving around 1,600 km of MDRs in the state through lane widening, surface improvements, and the strengthening of culverts and bridges. It will also have innovative elements such as the creation of a state highways fund and border checkposts, to increase revenues and check overloading and damage to state roads.
Some of the key issues faced by ADB-funded projects in the past were those relating to their implementation. While counterpart funds, in most cases, were provided in a timely manner, implementation consultants in some instances failed to provide the agreed number of technical staff. Other issues were below-target achievements, slow progress of projects, contract issues, etc.
The way forward
Going forward, ADB is expected to continue offering assistance towards the country’s infrastructure development, with the road sector being one of its primary beneficiaries. The key projects currently in the proposal stage with ADB include the Bihar State Highways III Project and the Tamil Nadu Industrial Connectivity Project. While the former aims at rehabilitating around 300 km of state roads while also improving road transport connectivity in line with the state’s road development plan (2015-35), the latter aims at rehabilitating and upgrading around 640 km of state roads on the core road network in Tamil Nadu to improve road transport connectivity with economic and industrial centres in the state.