The World Bankdocuments.worldbank.org/curated/en/... · The World Bank Report No: ICR 2531 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA 3987 and IBRD 4753) ON A CREDIT 3987-IN

Document of The World Bank

Report No: ICR 2531

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA 3987 and IBRD 4753)

ON A

CREDIT 3987-IN IN THE AMOUNT OF SDR 206 MILLION

AND LOAN 4753-IN

IN THE AMOUNT OF US$99.5 MILLION

TO THE

GOVERNMENT OF INDIA

FOR THE

RURAL ROADS PROJECT

September 25, 2012

Sustainable Development Department India Country Management Unit South Asia Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective August 31, 2012)

Currency Unit = Indian Rupees

US$ 1.00 = Rs. 55.62 SDR 1= 1.52 US$ FISCAL YEAR

April 1- March 31

ABBREVIATIONS AND ACRONYMS CA Chartered Accountant

CAS Country Assistance StrategyDEA Department of Economic Affairs DLI Disbursement Linked Indicators

DPR Detailed Project Report ECoP Environmental Code of Practice

ESMF Environmental & Social Management Framework

FMS Financial Management System GOI Government of India

HP Himachal Pradesh HPSRRDA Himachal Pradesh State Rural Road

Development Agency ICRR Implementation Completion and Results Report

IPR Interim Performance Review IRI International Roughness Index

ISAP Institutional Strengthening and Action Plan ISR Implementation Status and Results

M&E Monitoring and Evaluation MMS Maintenance Management System

MORD Ministry of Rural Development MTR Midterm Review NCB National Competitive Bidding NGO Nongovernmental Organization NPV Net Present Value

NRRDA National Rural Roads Development Agency OMMAS On-line Monitoring Management and Accounting

System PAD Project Appraisal Document PDO Project Development Objective PIU Project Implementation Unit

PMGSY Pradhan Mantri Gram Sadak Yojana PRI Panchayati Raj Institution

PWD Public Works Department R&P Receipts and Payments R&R Resettlement and Rehabilitation

RMS Road Management System RP&F Resettlement Policy and Framework

RRP Rural Roads Project SMF Social Management Framework

TA Technical Assistance UP Uttar Pradesh VF Vulnerability Framework

VOC Vehicle Operating Costs

Vice President: Isabel M. Guerrero Country Director: Onno Ruhl Sector Manager: Karla Gonzalez Carvajal

Project Team Leader: Ashok Kumar ICR Team Leader: Atul Agarwal ICR Main Author: Atul Agarwal, Rashi Grover

REPUBLIC OF INDIA Rural Roads Project

Page

Contents A. Basic Information ............................................................................................................ i B. Key Dates ........................................................................................................................ i C. Ratings Summary ............................................................................................................ i D. Sector and Theme Codes................................................................................................ ii E. Bank Staff ....................................................................................................................... ii F. Results Framework Analysis .......................................................................................... ii G. Ratings of Project Performance in ISRs ....................................................................... vi H. Restructuring (if any) .................................................................................................... vi I. Disbursement Profile .................................................................................................... vii 1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 5 3. Assessment of Outcomes .......................................................................................... 16 4. Assessment of Risk to Development Outcome ......................................................... 21 5. Assessment of Bank and Borrower Performance ..................................................... 21 6. Lessons Learned ........................................................................................................ 25 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ........... 27 Annex 1. Project Costs and Financing .............................................................................. 28 Annex 2. Outputs by Component...................................................................................... 29 Annex 3. Economic and Financial Analysis ..................................................................... 31 Annex 4. Bank Lending and Implementation Support/Supervision Processes ................. 39 Annex 5. Beneficiary Survey Results ............................................................................... 41 Annex 6. Stakeholder Workshop Report and Results ....................................................... 42 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ......................... 46 Annex 8. List of Supporting Documents .......................................................................... 53

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DATA SHEET

A. Basic Information

Country: India Project Name: Rural Roads Project Project ID: P077977 L/C/TF Number(s): IBRD-4753-IN & IDA-3987-IN ICR Date: 09/19/2012 ICR Type: Core ICR Lending Instrument: SIL Borrower: Govt. of India

Original Total Commitment:

USD 412.7 million equivalent

Disbursed Amount: USD 408.6 million

Revised Amount: USD 412.7 million equivalent

Environmental Category: A-Full Assessment Implementing Agencies: Ministry of Rural Development, Government of Himachal Pradesh, Government of Rajasthan, Government of Jharkhand, Government of Uttar Pradesh Cofinanciers and Other External Partners: Not Applicable B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s) Concept Review: 10/21/2002 Effectiveness: 03/16/2005

Appraisal: 03/11/2004 Restructuring(s): 09/18/2009,

03/22/2010 & 02/10/2011

Approval: 09/23/2004 Mid-term Review: 03/9/2007 Closing: 03/31/2010 03/31/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Satisfactory

Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: Moderately Satisfactory

Overall Bank Performance: Moderately Satisfactory Overall Borrower

Performance:Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance Indicators QAG Assessments (if any) Rating Potential Problem Project at any time (Yes/No): No Quality at Entry (QEA): None Problem Project at any time (Yes/No): Yes Quality of Supervision (QSA): None DO rating before Closing/Inactive status: S

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D. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) Roads and highways 95% Sub-national government administration 5%

Theme Code (as % of total Bank financing) Rural services and infrastructure 100% E. Bank Staff

Positions At ICR At Approval Vice President: Isabel M. Guerrero Praful C. Pate1 Country Director: Onno Ruhl Michael F. Carter Sector Manager: Karla Gonzalez Carvajal Guang Zhe Chen Project Team Leader: Ashok Kumar Piers A. Vickers ICR Team Leader: Atul Agarwal ICR Primary Author: Atul Agarwal, Rashi Grover F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The PDO was to achieve broader and more sustainable access to markets and social services by the rural population in participating districts. Revised Project Development Objectives (as approved by original approving authority) There were no changes to the PDO. (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1: % of eligible habitations with all-weather access to social services and markets

Value quantitative or Qualitative)

Uttar Pradesh – 50%; Himachal Pradesh – 40%; Jharkhand – 35%; Rajasthan – 40%



Date achieved 08/01/2004 03/31/2010 03/31/2012

Comments (incl. % achievement)

The actual value achieved for this indicator at completion was higher than the target values for all participating states. Uttar Pradesh achieved a value that was 76% higher than its target value, while H.P. and Rajasthan over-achieved by about 30% and Jharkhand by about 15%. This is because these values are at state level and include domestic (PMGSY) funds. This is accordingly a program level indicator.

Indicator 2: % of through routes in the core rural road network in participating districts in fair or

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approval documents)


Values



better condition (PCI>2)





Date achieved 08/01/2004 03/31/2010 03/31/2012 Comments (incl. % achievement)

HP, Rajasthan and UP over-achieved this target. In Jharkhand, the target was just met. The percentage over-achievement was highest for UP (41%) followed by Rajasthan (18%) and HP (9%). This is again a program level indicator..

Indicator 3: Level of road user satisfaction with rural road network


Not available

Actual target value to be determined during base line study

Date achieved


The level of road user satisfaction with the project roads and poverty impacts of the PMGSY roads were assessed through a comprehensive national-wide study covering total 10 sample states including three participating states viz. Himachal Pradesh, Uttar Pradesh, and Rajasthan. The base line survey covered 11490 households within 750 habitations across 33 districts. The road user satisfaction was assessed on the basis of four major factors viz., reliability, transit time, connectivity, and user- friendliness and assessed on three levels viz. “low”, “medium” and “High”. Overall the satisfaction level was found high. The other findings of the survey include: increase in population by 3.46% in the income category of more than INR 10,000 per month, increase in child vaccination by 8%, increase in number of female patients to private doctors by 8%, reduction in travel time from 1.3 to 2 minute per km depending on the travel mode, and 12% increase in area cultivated.

(b) Intermediate Outcome Indicator(s)



approval documents)


Values



Indicator 1.1 : No. of kilometers of road upgraded/new construction (per year)

Value (quantitative or Qualitative)

NA

Uttar Pradesh – 1,100; Himachal Pradesh – 600; Jharkhand – 300; Rajasthan – 1,100

Date achieved 08/01/2004 03/31/2010 03/31/2012


Overall a total length of 9625 km has been constructed against a cumulative target of 9900 km, Another 325 km is in advance stage of completion and is expected to be completed by December 2012. The original state-wise targets are no longer valid as these were changes due to reallocation of funds between the states. While doing restructuring, the state wise targets should also have been modified accordingly which has not been done. At this stage the cumulative achievement against cumulative target is being compared. Finally, the state-wise achievement is UP 2228 km, HP 984 km,

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approval documents)


Values



Jharkhand 126 km and Rajasthan 6287 km against the state wise original total target of UP 3700 km, HP 1600 km, Jharkhand 1000 km and Rajasthan 3600 km. At macro level the achievement is 97% for the entire project duration.

Indicator 1.2: % of works out of compliance


NA




The value of this indicator changes as a road becomes in compliance as soon as the observations of the technical examiners are complied with. NRRDA has got a system of reimbursing the expenditure for the works only if found compliance finally.

Indicator 1.3 100% delivery of eligible benefits to project affected persons: Value (Qualitative) NA NA

Date achieved 08/01/2004 03/31/2010 03/31/2012


The implementation of ESMF has been rated satisfactory. The project involves only voluntary land donations. The agreed assistance through ongoing rural development schemes, community participation and PRI have been provided to the eligible categories. However, as such this indicator is not regularly monitored and recorded.

Indicator 2.1 % of core rural roads network subject to routine maintenance



Uttar Pradesh – 22.5%; Himachal Pradesh – 80%; Jharkhand – 60%; Rajasthan – 60%


Date achieved 08/01/2004 03/31/2010 03/31/2012


Jharkhand was the only state that under-achieved in terms of % of core road network subject to routine maintenance. UP again was the highest performer on this criterion, with the actual value achieved was more than three times the target value. This was partly because the initial target for UP was moderate compared to other states. HP and Rajasthan over-achieved on this indicator by 19% and 25% respectively. This component was with counterpart finance.

Indicator 2.2 No. of kilometers of rural roads subject to periodic renewals


Uttar Pradesh – 2,200; Himachal Pradesh – 300; Jharkhand – NA; Rajasthan – NA

Uttar Pradesh – 3,500; Himachal Pradesh – 900; Jharkhand – 1,200; Rajasthan – 1,000

Uttar Pradesh – 4,800; Himachal Pradesh – 1,400; Jharkhand – 1,500; Rajasthan – 2,702


All states over-achieved their targets w.r.t. this indicator. In this case, Rajasthan state had the highest achievement over target of 170%, followed by H.P. (56%), U.P. (37%) and Jharkhand (25%).

Indicator 3.1 % of actual vs. required maintenance funding (routine + periodic) for core rural road network

Value Uttar Pradesh – 25%; Uttar Pradesh – Uttar Pradesh – 85%;

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approval documents)


Values



(quantitative or Qualitative)

Himachal Pradesh – 50%; Jharkhand – 25%; Rajasthan – 25%

45%; Himachal Pradesh – 70%; Jharkhand – 50%; Rajasthan – 50%

Himachal Pradesh – 72%; Jharkhand – 40%; Rajasthan – 65%


Jharkhand was the only state which did not meet the target value for this indicator. UP was the highest over-achiever (by 89%) – perhaps because of a relatively lower initial target -followed by Rajasthan (30%), while HP over-achieved its target only by 3%.

Indicator 3.2 % of variance between budget and actual expenditure on maintenance of core rural road network


Uttar Pradesh –TBD; Himachal Pradesh – TBD; Jharkhand – TBD; Rajasthan – TBD


Uttar Pradesh – 0%; Himachal Pradesh – Jharkhand –; Rajasthan – 0%


While for Jharkhand and H.P. the end data is not available for this indicator, UP and Rajasthan were able to achieve 0% variance between budget and actual expenditure on maintenance, as opposed to a target value of 10%.

Indicator 3.3 % of periodic works on core rural road networks prioritized (within available budget), using maintenance management system.




Uttar Pradesh – MMS Database needs updating; Himachal Pradesh – 100%; Jharkhand – No MMS available; Rajasthan – MMS Database needs updating

Date achieved 08/01/2004 03/31/2010 03/31/2012


The achievement of this indicator could be established in only one state – HP where 100% of periodic works on core rural road network are being prioritized using MMS (as opposed to the target of 70%). For other states, either no MMS is available (Jharkhand) or the database for using MMS needs updating (UP, Rajasthan). There seems to be a discrepancy in base line value for UP and Rajasthan as for these states also, the base line value should be 0% since MMS did not existed.

Indicator 3.4 Publication of rural road performance and rural road expenditure information Value (quantitative or Qualitative)

NA NA


Information is available through OMMAS.

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G. Ratings of Project Performance in ISRs No.

Date ISR Archived

DO IP Actual Disbursements

(USD millions) 1 01/03/2005 Satisfactory Satisfactory 0.40 2 06/16/2005 Satisfactory Satisfactory 15.50 3 09/20/2005 Satisfactory Satisfactory 33.07 4 03/27/2006 Satisfactory Satisfactory 89.31 5 09/27/2006 Satisfactory Satisfactory 150.77 6 03/30/2007 Satisfactory Satisfactory 193.36 7 09/26/2007 Moderately satisfactory Moderately unsatisfactory 218.62 8 01/03/2008 Moderately satisfactory Moderately satisfactory 226.85 9 07/08/2008 Moderately satisfactory Moderately unsatisfactory 246.01 10 01/19/2009 Moderately satisfactory Moderately unsatisfactory 270.19 11 05/19/2009 Moderately satisfactory Satisfactory 291.59 12 11/23/2009 Moderately satisfactory Satisfactory 309.64 13 05/28/2010 Moderately satisfactory Satisfactory 367.67 14 12/11/2010 Satisfactory Satisfactory 386.87 15 05/31/2011 Satisfactory Satisfactory 396.75 16 01/01/2012 Satisfactory Satisfactory 404.19 17 04/14/2012 Satisfactory Satisfactory 404.19

H. Restructuring (if any)

Restructuring Date(s)

Board Approved PDO

Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made

DO IP

02/10/2011 No S S 390.62

MORD requested the Bank to reallocate funds under various categories of the Loan as currently all categories were allocated to civil works. The reallocation of funds to other categories was required to support consultancies, trainings and other activities under the institutional development component and helped facilitate a satisfactory conclusion to institutional development initiatives under the project. The reallocation was based on the proposal received from the Ministry of Rural Development (MORD) dated July 2, 2010 routed through DEA on September 28, 2010.

03/27/2010 No MS S 325.92 Extension of closing date by 24 months from March 31, 2010 to March 31, 2012

09/18/2009 No MS S 308.52

Reallocation of credit proceeds to provide more credit to Rajasthan and UP. This required changes in Schedule 1 of the Credit agreement.

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I. Disbursement Profile

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1. Project Context, Development Objectives and Design 1.1. Context at Appraisal 1.1.1. At the time of appraisal of the Rural Roads Project (RRP) in the year 2004, the

rural population in many states in India was suffering from poor physical access due to lack of all-weather roads. This was constraining economic activities in rural areas and preventing the rural population from being fully integrated into the economy and accessing essential services. At that time, an estimated 300,000 habitations (about 40% of the 825,000 habitations in India) were without all-weather road access. The low levels of access of habitations to all weather roads was partly a result of lack of adequate maintenance on the existing large rural road network of approximately 2.7 million km and partly a lack of capital investment.

1.1.2. Progress in decentralization of rural road management had also been slow. While

constitutionally, the management of rural roads had been entrusted to the Panchayati Raj Institutions (PRIs) 1 , almost all state governments retained ownership of the majority or all of the low volume roads in their states, leading to diffused accountability for the condition of the rural road network. Also, the rural road sector was suffering from relatively low levels of technical and planning capacity in many areas. This lack of technical and planning capacity was impacting the ability of road agencies to absorb new investment funds and was also affecting proper asset maintenance. In addition, multiple-ownership issues were also impacting road sector management.

1.1.3. In order to address the problem of poor rural accessibility and improve planning and management of rural roads, the Prime Minister’s Rural Road Program (Pradhan Mantri Gram Sadak Yojana, PMGSY) was announced in late 20002. This was a watershed program as it involved a recentralization of a fairly decentralized subject by taking up works through a mission mode steered by a national level Apex Body. At the time of project appraisal, the PMGSY had already made progress, having completed or close to completed works on 22,100 habitations with population 1,000 and above and financed works for connecting another 24,300 habitations with population of less than 1,000. This is against the PMGSY targets of providing new connectivity to about 178,000 habitations

1 The Panchayati Raj is a South Asian political system mainly in India, Pakistan, and Nepal. It is actually the oldest system of local government in the Indian subcontinent. The word "Panchayat" literally means "assembly" (ayat) of five (panch) wise and respected elders chosen and accepted by the local community. Gram Panchayats are local self-governments at the village or small town level in India. The Gram Panchayat is the foundation of the Panchayat System. Gram Sabha means a body consisting of persons whose names are for the time being entered as electors in the electoral roll for a Panchayat. 2 The program sought to achieve all weather access for every habitation with a population greater than 1,000 by the end of 2003, and for habitations greater than 500 people (250 people in hill states and desert areas) by the end of 2007.

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involving construction of about 375,000 km of roads apart from upgrading of 372,000 km of existing rural roads (in poor condition). Challenges being faced by the program at that stage included shortfall in the availability of funds, capacity constraints of road agencies and contractors and the issue of inadequate maintenance on rural roads.

1.1.4. Project rationale: The provision of connectivity to the rural population was the primary focus of the PMGSY program. Allocation of funds to different states under the program was mainly governed by the investment needs to achieve program targets with some linkages with performance indicators under the program. However, no mechanism of linking PMGSY funds with maintenance of the entire core network existed. RRP sought to introduce the notion of partly linking PMGSY grants to sound management on the entire core rural road network. Further, by demonstrating the value of sector planning and management reforms in pilot states or districts in partnership with the GOI, the likelihood that similar reforms would be implemented as a result of GOI’s own funding through PMGSY was greatly enhanced. GO1 had set itself very ambitious connectivity targets that required substantial additional resources if they were to be met on time, and the Bank, both through IDA and as needed through IBRD, had the financial capacity to contribute to the public investment in this huge public good.

1.1.5. This project was envisaged to provide funds, additional to existing Government of India transfers, to four of the most poorly connected states - Himachal Pradesh, Jharkhand, Rajasthan and Uttar Pradesh. The project aimed at accelerating rural growth. It sought to contribute to the Country Assistance Strategy (CAS) objective for poverty reduction in India through two channels: first, by enhancing mobility and thus providing more opportunities for employment, trade, and growth within the rural economy; and second, by providing better physical access to basic services thereby increasing the quality of life of the poor in the project influenced areas. This project was proposed as the first in a series of credits/loans to support the Government of India's program of total rural connectivity over the subsequent five to seven years. The second project in this series, “PMGSY Rural Roads Project”, has been already approved by the Bank in December 2010 and is under implementation.

1.2. Original Project Development Objective (PDO) and Key Indicators (as approved)

1.2.1. The project development objective was to achieve broader and more sustainable

access to markets and social services by the rural population in participating districts. This objective was to be measured through the following indicators: (i) percentage of eligible habitations in project areas with all-weather access to social services and markets; (ii) percentage of through routes in the core rural road network in participating districts in fair or better condition; and (iii) level of stakeholder satisfaction with rural road network in participating districts.

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1.3. Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification

1.3.1. The original PDO was not revised. Also, the indicators to measure performance

were not revised. 1.4. Main Beneficiaries 1.4.1. The main beneficiaries of the project included the people in the habitations which

were to be connected to all weather roads. Anticipated project benefits included all season access to economic opportunities and social services, employment generation for new construction and maintenance, and improved access to transport services. Participating states as a whole also benefited indirectly from improvements in the economy as a result of the project.

1.4.2. The staff of the implementing agencies in participating states and at NRRDA also benefited because of capacity development, which in turn, benefited the entire PMGSY program. Also, the contracting community benefited from the training and capacity building activities under the project.

1.5. Original Components (as approved) 1.5.1. A summary of the main components of the project, together with their costs, is

listed below:

a) New Connection and Upgrading of Core Rural Road Networks(USD 430.91 million): i. Civil Works (USD 422.66 million): This includes new construction and

upgrading of the core rural road network in four states to provide all-weather road access to habitations in identified project districts comprising up to 60% of all districts in the states, or 78 in all. The component is proposed to be implemented in four tranches over five years using NCB procedures generally in packages of Rs.1-5 Cr. in line with existing PMGSY practice. Tranche I will commence from effectiveness and subsequent tranches annually thereafter in line with current PMGSY practice. However, there may be some overlap in implementation of each tranche depending upon the capacity of the state agency and the local construction industry concerned.

ii. Technical Examination Services (USD 7.26 million): Consultants will be commissioned by each state to undertake independent technical examination of Bank funded works. The specific objectives of the services are - for Bank funded rural road sub projects in the State - to verify: (i) proper application of environmental, social and techno-economic screening procedures for the selection of rural road sub-projects; (ii) detailed design is in compliance with agreed technical standards as well as stipulated environmental and social

4

management measures; (iii) the quality of bidding documents is satisfactory and that procurement is undertaken in conformity with agreed procedures; (iv) compliance of actual works with contract conditions and quality assurance procedures as well as agreed environmental and social management measures; and (v) expenditures under the Credit/Loan have been made for the purpose intended (financial review). One firm will be hired to oversee the first two tranches of works in each state and then a separate firm for the remaining two tranches.

iii. Implementation of Compensatory Forestry and resettlement (USD 1.00

million): Wherever roads require compensatory afforestation to meet the provisions of any Forest Department clearance, State governments will deposit funds to undertake this afforestation prior to the clearance becoming effective. Under current PMGSY policy and practice, the state implementing agency concerned is to deposit funds for afforestation with the local forest offices. Assistance to eligible project affected persons will be made through ongoing state public programs or through community mobilization

b) Periodic and Routine Maintenance of Core Rural Road Network in Project

Areas(USD 235.00 million, financed by State Governments): This component is to be undertaken in every district where the Bank is providing additional investment concurrently with the four tranches of new construction works. The works (US$235.00 million, NBF) would be prepared and supervised by the same implementing agencies undertaking PMGSY works and will be implemented through a mixture of force account for routine works (in HP, Rajasthan and UP) and contract for periodic works. The size of the component was determined after discussion with Participating states and is roughly equivalent to a per km cost of Rs.20,000/year on average and works to be conducted on all the core rural road network of 100,000 km in all in these 78 districts. All districts that are seeking Bank funding in the first tranches have prepared and made public an annual maintenance plan.

c) Institutional Development (USD 13.56 million):

i. National Level (USD 0.96 million): There are two institutional development sub

components at the national level. First, a poverty impact and rural road user satisfaction monitoring system is to be put in place. This is to be achieved through hiring a single technical support agency to prepare the methodology and manage the system on behalf of the MORD (US$0.2 million). The actual data collection, to be undertaken three times during the project period, will be carried out by separate firms covering one or more states each (US$ 0.56 million). Second, technical assistance and training is to be made available to the MORD and the National Quality Monitors to build capacity in various areas (US$0.20 million).

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ii. State level (USD 12.60 million): There are three sub-components to the state level institutional development inputs. First, technical assistance consultants are to be commissioned by each state (US$4.24 million) with a view to: (i) develop and establish in use a simple Road Management System (RMS) in HQ and in district field offices; (ii) prepare annual maintenance programs and support the implementation by the road agency of these programs, including through the use of performance based contracting, on the core road network; (iii) recommend and help implement on a pilot basis a framework for transferring ownership of non core rural roads to PRIs; and (iv) transfer skills and procedures to an adequate number of staff in the road agency to sustain the use of the RMS and continuing implementation of maintenance. Second, various goods are to be procured by each State - material and quality control testing equipment, IT and associated office equipment - for use by the implementing agencies (US$4.72 million). Third, each state will undertake training needs analysis and implement training of their staff within the main rural road agency plus the local contracting industry (US$3.54 million).

1.6. Revised Components 1.6.1. There were no major revisions to the project components.

1.7. Other significant changes: Three times restructuring was done as detailed

below 1.7.1 Re-allocation of funds within categories: Undisbursed funds from the Works

category were re-allocated to other categories in February 2011. This reallocation was required to support consultancies, trainings and other activities under the institutional development component. The reallocation was based on the proposal received from the Ministry of Rural Development (MORD) dated July 2, 2010 routed through DEA on September 28, 2010.

1.7.2. Extension of closing date: The closing date of the project was extended in March 2010 by 24 months, i.e. from March 31, 2010 to March 31, 2012 in March 2010 to complete the remaining activities which include (i) consolidate the institutional development initiatives, (ii) complete the ongoing and additional rural roads works to be taken up from the recently reallocated funds to UP ($27) and Rajasthan ($9), and (iii) undertake further capacity building activities planned for rural roads agencies.

1.7.3. Allocation of additional funds to Rajasthan and UP: The Credit agreement schedule-1 was modified in September 2009 to provide additional funds to Rajasthan and UP from Jharkhand and other available savings.

2. Key Factors Affecting Implementation and Outcomes 2.1. Project Preparation, Design and Quality at Entry

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2.1.1. The project rationale of partly linking PMGSY grants to management of the entire core rural road network, demonstrating the value of sector reforms in pilot regions, as well as contributing financially to the public investment in this huge public good was sound and well detailed in the project appraisal document. The logical linkage between project issues of: (i) low levels of connectivity of the villages; (ii) poorly planned investments; (iii) inadequate maintenance and road asset management; and (iv) low capacity in many rural road agencies, and the project components was also strong. The focus on institutional development and capacity building of participating rural road agencies, local contractors as well as MORD was a desirable value-addition that this project envisaged and offered to the existing PMGSY program. The project design was based on the robust Comprehensive New-Connectivity Priority List (CNCPL) framework and also extensive public participation instruments. However, the M&E framework was not designed to effectively capture the outcomes of the institutional development component. Also, most of the indicators were designed for the outcome of the program in the participating states and did not necessarily capture the impact of the project.

2.1.2. Lessons learnt and reflected in the project design: Some of the lessons that were

recognized and substantially incorporated at the stage of design of the project were: (i) the requirement of state government commitment to adequately fund and undertake rural road maintenance; (ii) focused investments over a manageable area rather than thinly spread investments over a larger area; (iii) independent monitoring of quality of road designs and construction; (iv) a reliable and comprehensive database for investment decisions and promoting improved management of rural roads; and (v) capacity building and training of implementing agency staff in all aspects of rural road management. However, the scope for reducing construction costs through adopting optimal design standards and promoting the use of local materials especially for low trafficked rural roads was not fully captured as part of project design.

2.1.3. Risks and Mitigation measures: A largely comprehensive risk assessment was done and is available in the PAD. However, the extent of risk varied from state to state. In the case of two risks, namely: (i) rural road staff design road works poorly; and (ii) delayed or improper procurement by rural road agencies, the risks were seemingly underestimated. In the case of Jharkhand, the planned construction of roads was substantially reduced because of these delays. Another risk which was not identified during preparation was the reluctance of states to use Bank funds when funds could also be accessed through the normal PMGSY programme which had fewer requirements in terms of safeguard and fiduciary compliance. Several states were not able to meet the additional requirements of the project. Limited capacity of the implementing agency and NRRDA was also a risk that was not suitably identified and mitigated. However, the TA sub-project

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on Economic Reform 3 provided additional capacity building support which helped mitigate this risk to some extent. The risk of sustainability of the project was not directly identified.

2.1.4. Overall, the differences between the participating states in terms of: (a) infrastructure needs, and (b) capacity to implement such a project, was a major feature in the design of the project and its components and implementation was also a challenge due to this very factor.

2.1.5. Quality at Entry: No quality at entry assessment of the project was carried out. 2.2. Implementation

2.2.1. While the project got off to a smooth start in end-2004, issues relating to funding

of maintenance for the core network, limited concurrent institutional development and supply side constraints for new construction started emerging to different degrees in different states, and led to a downgrading of the PDO rating to “MS” and of the Implementation Progress rating to “MU” in mid-2007. At this time, some of the critical issues that the project faced included slow procurement in Jharkhand, lack of staff at headquarters as well as field levels in UP, delays in implementation of Tranche I works in HP, Jharkhand and UP, procurement delays and weak implementation of the Environment and Social Management Framework (ESMF) in the state of UP. Some of these issues (e.g. progress in Tranche I works, implementation of ESMF) were resolved fairly swiftly, while some others such as delays in the procurement process in UP and delays in preparation of annual maintenance plans were addressed through intensive monitoring and capacity building support (e.g. preparation of action plans to address issues, decision to prepare a simple annual maintenance plan followed by an excel based maintenance management system, and conducting workshops to sensitize the contracting community). The situation in Jharkhand however remained a concern which was mainly because of slow procurement and lack of staffing.

2.2.2. The mid-term review was done in March 2007. Though the disbursement at that time was better than the appraisal forecast (18.8% more than the forecast), there was imbalance in the performance of different states. The Jharkhand was lagging due to lack of ownership and lack of staff. Another area of concern was implementation of ESMF in UP. The need of relocating funds from Jharkhand to other states was already identified by then though it actually happened in September 2009.

2.2.3. Overall implementation progress came back to a satisfactory rating in 2009 while the PDO rating came back to satisfactory in end 2010 owing to proactive support

3 This was for a loan effective October 2010 for the amount USD 45 million

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and monitoring by the MORD and NRRDA. Some of the factors that gave rise to problems in the interim and how these were attempted to be overcome are briefly described below:

2.2.4. Different states had different levels of implementation challenges. There were some delays in preparation of the Detailed Project Reports (DPRs) and consequently in awarding of contracts in Jharkhand, HP and UP. Procurement in Jharkhand remained slow throughout the project. Inadequate staffing for the SRRDA and for safeguards in particular was a challenge. Sustained efforts by MORD and NRRDA for provision of training for the staff and interim missions by the Bank team, helped in resolving many of the implementation related issues. Training and sensitization workshops led to improvements in the participation of bidders in states such as UP and Rajasthan. However, the continued unsatisfactory progress in Jharkhand, especially resulting from slow progress of procurement, ultimately led to a substantial reduction of the Jharkhand component in the project, and funds that were originally allocated for use in Jharkhand were re-allocated to Uttar Pradesh and Rajasthan.

2.2.5. By the closure of the project, works for new construction had been mostly completed. Against the target of 9,900km of the new road construction, a total of 9625 km (97% of the target) had been completed. The core road network maintenance component was implemented with counterpart funds and the corresponding indicators have been mostly achieved. However, despite interventions supported by the Bank such as development of a pavement design manual, independent reviews of engineering designs through technical examiners, and preparation of a rural roads manual by MORD with separate technical specifications for rural roads, most of the implementation remained as per conventional designs in all the states, and the use of cost effective optimal designs using locally available material was inadequate. Similarly, adequate emphasis on optimization of geometric design and road alignment was not there.

2.2.6. There were initial delays in the institutional strengthening and maintenance components. Despite these initial delays, by project closing, all activities under this component were completed. The main areas of training (imparted in local as well as international institutions) included maintenance management, quality control, environment management and e-procurement. Indeed, the project’s training and capacity building activities have had a very significant impact and actually covered much beyond the project, spreading to the mainstream. Except for Jharkhand, all other states have also developed simple maintenance management systems (MMS) to prepare annual maintenance plans and HP has even started allocating maintenance funds based on the MMS. Utilization of the On-line Monitoring Management and Accounting Systems (OMMAS) was another major step forward, though OMMAS was not developed as part of this project. The participating states are now in the process of procuring consultancy services to further initiatives on asset management, maintenance contracts, quality assurance and other aspects. Some of the institutional development initiatives

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started under this project would continue through the Bank support available under the PMGSY Rural Roads Project.

2.2.7. Overall, despite the uneven implementation of the project because of the differing capacity and unwillingness of state governments to implement the agreed measures and wide variation in the implementation capacities, proactive engagement by MORD, NRRDA and the Bank helped resolve most of the issues. By the closure of the project, all the components were completed satisfactorily which is confirmed by the last seven ratings in the ISRs.

2.3. Monitoring and Evaluation, Design, Implementation and Utilization 2.3.1. Broadly, the project indicators captured the impact of the PMGSY program in the

project states and were not necessarily linked to the exclusive impact of the project as such. The targets set by the program have not only been achieved but exceeded in most cases, which broadly shows that the targets set for these indicators were moderate and that the PMGSY program has progressed well. Given that the PDO referred to the performance of selected districts, the performance indicators should ideally have been designed to measure performance in selected districts rather than the program as a whole in participating states. However since this project was envisaged to provide funds to 60% of the districts in participating states, the use of PMGSY indicators to measure progress should not be seen as too wide off the mark.

2.3.2. Another shortcoming of the M&E framework was that the indicators did not capture all the expected outcomes of the Institutional Development component, for which only one indicator i.e. percentage of rural road works prioritized using maintenance management system, was designed. The other anticipated outputs from this exercise, for instance initiatives on quality assurance and capacity building, transfer of ownership of noncore rural roads to PRIs on pilot basis were also not captured.

2.3.3. The maintenance management system in UP and Rajasthan is in need of updating the data, which raises questions about the extent to which the system is actually being used on a regular basis in these states, and about its sustainability beyond project closure. However, it is worth mentioning that the project promoted the use of the OMMAS, which NRRDA now recommends as mandatory for all progress reports and monitoring in order to access future PMGSY funds. Under the PMGSY Rural Roads Project, further refinements in OMMAS are being planned so as to use it as an effective management tool for PMGSY by producing customized management and performance reports at state and national levels.

2.4. Safeguard and Fiduciary Compliance

Fiduciary compliance is rated as Moderately Satisfactory

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2.4.1. Procurement. Procurement is rated as Moderately Satisfactory. Most of the procurement in this project consisted of procurement of works through NCB for new construction and upgrading of core rural road network in addition to the procurement of Technical Advisory Services and implementation of social and environmental measures. All goods, works and services were generally procured in accordance with the provisions contained in Bank Guidelines except some procedural errors noticed in procurement of works. The procurement capacity varied considerably between the states from satisfactory to unsatisfactory. While Rajasthan broadly demonstrated adequate procurement capacity, better ownership and strong monitoring, the other states were lagging on these aspects. This resulted in delays in award of contracts, frequent rebidding and procedural errors in finalizing the contracts. Delays in preparation and approvals of DPRs also contributed to delays in awarding of contracts in HP, Jharkhand and UP. Procurement remained slow in Jharkhand throughout the project and no procurement was done during the last two years of the project. The project faced a number of challenges including a rapidly increasing size of the program but a limited capacity of the construction industry in the states, outdated cost estimates which lacked flexibility to respond to fluctuating market rates, distortions to the bidding process caused by effective bid ceilings with respect to engineers’ estimates, high levels of rebidding and delays in award of contracts.

2.4.2. The factors responsible for inadequate competition in bidding were limited availability of qualified contractors, outdated cost estimates and reluctance of the states to award contracts above the estimated price even if the price obtained against the tender was competitive and reasonable compared to market rates. This was because the GOI funding was limited to the estimated price and the cost above the estimated cost was required to be funded by the states from their resources, for which the states were reluctant. Different qualification criteria and procurement procedures for this project compared to those used in the PMGSY program also created problems in states such as Jharkhand and UP where as a result, the level of competition was very low and many of the works had to be subjected to repeated re-invitation of bids.

2.4.3. An IPR carried out by the Bank suggested mitigation measures for weak contract management – namely, independent procurement, financial management, and contract management reviews; regular inspections by the senior officers of the road agency and SRRDAs; and improving the quality of engineering designs, field investigations, safeguard aspects to avoid subsequent delays during execution.

2.4.4. Overall, all goods, works and services were generally procured in accordance

with the provisions contained in Bank Guidelines. While the project did face some challenges and delays in implementation, the lessons learned from this project were effectively incorporated in the design of the PMGSY Rural Roads Project. Overall, procurement is rated as Moderately Satisfactory on this project.

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2.4.5. Financial Management. Financial management performance for the project is rated as Moderately Satisfactory. The PMGSY financial management systems were under development at the time the project was being prepared and this provided the Bank with the opportunity to contribute and provide inputs into the design of the systems. In its design, the system combines the features of traditional works department accounting practices with a double entry accounting system to prepare monthly and annual financial statements and has been considered as a best practice model for Central Plan Programs. The system is documented in three separate Accounts Manuals – Program Fund, Administrative Fund and Maintenance Fund. The customized financial management system as designed for PMGSY allows manual accounting as well as the web-based online computerized Receipts and Payments (R&P) module of the OMMAS. The public citizen interface facility of OMMAS4 allows access to updated compiled state wise financial reports.

2.4.6. The financial management arrangements for the project were fully embedded within PMGSY’s systems. For a variety of reasons, including the lack of reliable web connections in some districts and limited staff capacity, implementation of the computerized R&P module of the OMMAS was slower than the MORD had anticipated.

2.4.7. Disbursements which started with the SOE method were shifted to report based method as the timeliness and quality of the financial reports generated from the Receipts & Payments module of OMMAS improved. Weaknesses with respect to delays in bank reconciliations, inadequate controls over fund authorization, stale bank guarantees, non-settlement of advances etc. have been noted by successive Bank missions as well as internal and external audit reports. While the states continued to take several remedial measures to address the weaknesses, the results have been varying across the states. For the PMGSY Rural Roads Project, revised guidelines for selection of Chartered Accountant (CA) firms for external audit have been prepared; the selection of auditors will follow the quality and cost based method.

2.4.8. NRRDA has an important role in supervising the day-to-day operation of the PMGSY financial management system and for establishment of satisfactory financial management arrangements, providing timely financial reports to stakeholders including the World Bank and providing overall guidance in respect of the financial management issues for the project. The current staffing structure at NRRDA, however, only allows a fairly limited level of oversight and supervision. NRRDA’s oversight on the financial management arrangements at the state level is presently limited to review of the annual audit reports, troubleshooting on OMMAS and providing training on an “as required” basis.

4http://www.omms.nic.in/Aspnet/Citizens/STL/16RNP/StateAccountMonitoringLocalization.aspx?fund=P&value=70c5a0beac66a33163e0f9cdac540a2c

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2.4.9. On the overall, the project has had positive impact on financial management of PMGSY program, both in terms of the design of the systems as well as the quality of implementation. However the project did face some delays in implementation, and given the fairly limited oversight and supervision of financial management arrangements at state level currently, financial management is rated as Moderately Satisfactory on this project.

Environmental and Social Safeguard compliance overall is rated Satisfactory with environmental safeguards being Satisfactory and social safeguards being Satisfactory. 2.4.10. Social. Since the construction of rural roads was taken up on the existing revenue

tracks, the extent of land needed was minimal and there were no resettlement issues in terms of relocating families. The Borrower had carried out a social assessment in all the project states through an independent consulting agency and formulated an Environment and Social Management Framework - Resettlement Policy and Framework (ESMF-RP&F) to address social and resettlement issues in this project. The assessment brought out minimal land requirements for road widening and community willingness to volunteer for land donation. The ESMF-RP&F adopted the voluntary land donation approach with appropriate safeguards. The ESMF-RP&F/social safeguard objectives were: The alignment of the road is finalized in consultation with the community To ensure that land donation is not enforced upon the community The vulnerable community is assisted for income restoration

2.4.11. (i) Dissemination (ii) consultation (iii) collaboration and (iv) extension of choice

were the four major processing steps that the Framework prescribed for ensuring community participation, voluntary land donation and mitigation of adverse impacts on the vulnerable.

2.4.12. The project introduced some innovations in social aspects that led to the

implementation of the ESMF-RP&F, which included: Transect walk with the community for joint decision making, on site

inventory, identification of affected land and other immovable properties, land tenure and finalization of alignment. This technique was found to be useful in the finalization of the alignment through informed participation of the community and early identification of design requirements

Involvement of PRIs in the selection process of the core network, preparation of DPRs and implementation resulted in higher acceptance of the project among the community

Coordination with revenue officials on a day to day basis helped the implementing agencies in establishing land ownership

Consultations through the Gram Sabha were held in order to select the roads. After the consultations, a formal request was sent by the Gram Panchayat to the PWD for selection of the road. Consultation resulted in minimizing the resistance among the community members and maximizing

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community benefits. Involvement of the community also resulted in identification of several construction induced adverse impacts and its mitigation

Information dissemination to sensitize the community, disclosing the sub project level details and finalizing the schedule for consultation and transect walk through Information, Education and Communication (IEC) materials provided a foundation for collaboration between community and project authorities

Targeted support to vulnerable groups viz. (a) alternate land sites provided by the community or Gram Panchayat and (b) inclusion as beneficiaries in existing poverty alleviation/livelihood restoration program

2.4.13. Implementation: Social safeguard compliance is satisfactory for the following

reasons. The ESMF-RP&F, despite institutional constraints, has been implemented satisfactorily. The ESMF-RP&F essentially provided the platform for involvement of the local community in the selection and finalization of the alignment of the road and land to be made available to the executing agency.

2.4.14. The Bank closely monitored the various safeguards measures, and compliance

ratings were frequently adjusted (ranging from S to U and back again) in response to observed conditions, particularly for preparing social safeguard documentation in DPRs and land donations. Identified issues were normally resolved quickly, and the Bank’s persistent surveillance on these issues facilitated substantial improvements. Following the identification of serious deficiencies in safeguard preparation in project DPRs in Uttar Pradesh in year 2006, the Bank conducted complete audit of social safeguards preparation and implementation for all project roads and developed a time bound action plan for retrospective corrective measures5. Post MTR, these measures resulted in substantial improvement in safeguard compliance in UP. A series of training programmes were conducted at the Divisional level for field officers through Third Party consultants. The Government of UP also prepared a documentary video on social safeguards for wide dissemination and capacity building on social safeguards.

2.4.15. Rajasthan and Himachal Pradesh performed well on social safeguards

implementation. The Government of Rajasthan is bringing out a Good Practices Manual on ESMF-RP&F based on its implementation experience. In community interactions people expressed their satisfaction with road works and also stated that access to social and other physical infrastructure (schools, etc) had improved.

2.4.16. Overall, considering above facts, the social compliance is rated as Satisfactory.

5 This risk is mitigated in the PMGSY Rural Roads Project by strengthening capacity of state agencies to implement SMF/VF and ESMF/ECoPs provisions, verifying through supervision consultants/PIUs implementation of agreed SMF/VF and ESMF/ECoPs provisions before clearing Interim Payment Certificates (IPCs) and completion certificates, enhancing the use of the complaint handling module of OMMAS and developing a grievance redressal system to track monitoring of complaints

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2.4.17. Environment. The Borrower had carried out an environment assessment in the

four project states and formulated an Environment and Social Management Framework (ESMF) to address environmental issues in this project. The assessment identified issues such as impacts on topography, material sources, drainage, flora and fauna, community resources, waste disposal and soil conservation, which had to be addressed adequately during various stages of the project cycle to avoid, minimize and mitigate unwarranted impacts on natural and physical environment. Following this assessment, which included review of current practices through site visits and discussions with officials of the implementing agencies, a stand-alone document called Environmental Codes of Practice (ECoPs) was prepared. A total of 20 codes covering aspects such as sub-project selection and planning, construction camp management, borrow areas, top-soil conservation, debris management, public consultation, drainage and worker safety aspects, were prepared to assist implementing agencies in dealing with environmental issues likely to be encountered during project execution. This approach helped minimize the need for sub-project level EAs and Environmental Management Plans (EMPs) by mainstreaming environmental issues in the selection, planning, design and construction stages of the project.

2.4.18. Implementation: While, in the initial stages of project implementation, the awareness, understanding and capacity to deal with environmental issues in the context of the rural roads sector was fairly limited, the project with Bank’s support has been able to gradually sensitize and build the understanding of the key players in appreciating environmental issues, based on which project preparation improved and various measures were executed in the field to mitigate and better manage such concerns.

2.4.19. Since the construction of rural roads was largely taken-up on the existing revenue tracks, the extent of impact on environmental features such as fertile farmland, orchards, trees, sacred groves, water bodies and religious structures was minimal. Practices like transect walk and community consultation helped in addressing issues early on in the project cycle. The project also helped in introducing good practices for addressing two critical issues, namely slope protection and disposal of debris, which otherwise are responsible for creating a series of direct and indirect environmental and social impacts, particularly in hilly terrain. Notable efforts were made by HPSRRDA (Himachal Pradesh State Rural Road Development Agency) to prevent damage to properties and water sources through protection works, proper management of spoils/debris, and provision of adequate drainage works. Similarly, in Rajasthan, good practices, including those pertaining to road safety pre-cautions in settlement areas, community involvement and provision of measures in areas of wildlife presence (outside protected areas) have been introduced. A report covering good practices and lessons learnt during ESMF application and implementation in the said state has also been prepared.

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2.4.20. In almost all the participating states, some roads, especially in the initial phases, were delayed due to lack of forest clearances. In subsequent phases, with insistence of having a prior forestry clearance in hand before the bids are invited/awarded, such situations were almost completely avoided. In fact, this approach has helped in avoiding legal issues/court cases; reducing time and cost overruns in the sub-projects; and has helped states such as Himachal Pradesh in adopting the required forward planning and processing of regulatory requirements in a timely manner across both Bank and non-Bank funded projects. .

2.4.21. The Bank task team closely monitored the various environmental measures, and compliance ratings were frequently adjusted in response to observed conditions. Identified issues were usually resolved quickly, and the persistent implementation support from NRRDA and the Bank, including frequent interactions with communities and support to training programmes for SRRDA staff, PIUs and Contractors on identified issues facilitated in bring about the required improvements in project preparation and implementation. As brought out in para 2.4.15, following the identification of serious deficiencies in ESMF application in project DPRs in Uttar Pradesh in 2006, the Bank conducted intensive review/audit and developed a time bound action plan for retrospective corrective measures. A series of training programmes were conducted at the PIU level which helped in improving the quality of preparation of DPRs in the state.

2.4.22. On the whole, given the participating states’ efforts at applying and implementing the ESMF/ECoPs, environmental compliance is rated as Satisfactory on this project.

2.5. Post-completion Operation/Next Phase 2.5.1. As mentioned earlier, as a major step forward, MORD has made it mandatory for

the states to complete all data-entry in OMMAS and submit all progress reports through OMMAS in order to access future PMGSY funds. This has significantly improved the database of the OMMAS. Under the PMGSY Rural Roads Project, further refinements in OMMAS are being planned to use it as an effective management tool for PMGSY by producing customized management and performance reports at state and national levels.

2.5.2. All states that were part of this project are also participating in the recently started PMGSY Rural Roads Project. The systems already instituted as well as institutional development initiatives that commenced as part of the project are accordingly being carried forward by the PMGSY Rural Roads Project. This new project has a technical assistance component to help states undertake enhancements in PMGSY systems and address critical sector issues such as poor capacity, slow procurement, lack of design innovation, lack of road maintenance, and continued focus on capacity building of implementing agencies.

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2.5.3. Further, the state of Rajasthan has requested for Bank support for a rural roads project to provide road connectivity to smaller habitations not covered under PMGSY and also for road sector modernization, and this project is at the concept stage. For the PMGSY Rural Roads and Rajasthan Road Modernization Projects, it is recommended that all implementing agencies and also contractors be provided additional and regular training in aspects such as project preparation, road and bridge design, procurement, contract administration, quality control and safeguard management starting at an early stage.

3. Assessment of Outcomes 3.1. Relevance of Objective, Design and Implementation 3.1.1. The development priorities as reflected in the PDO, which was “to achieve

broader and more sustainable access to markets and social services by the rural population in participating districts” remained relevant throughout the life of the project and are as relevant now as they were at the time of project appraisal. The project was in line with the CAS for 2002-2005 and 2005-2008 as it aimed to strengthen the enabling environment for development and poverty reduction by accelerating rural growth. The project was also very much in line with the priorities of the GoI and supported the flagship PMGSY program. The importance and relevance of the objective is also reflected in the World Bank funded PMGSY Rural Roads project which aims to carry forward the achievements of the current project by further improving access to markets and social services for the unconnected habitations.

3.1.2. The project design comprising components for new construction and improvement of rural roads, maintenance of the core road network and institutional development rightly placed emphasis not only on the construction of new roads but also maintenance of existing roads as well as capacity development activities which would facilitate implementation of the larger PMGSY program, and was thus consistent with the overall project objectives of improving access to markets and social services for the rural population. The fact that construction of road component for one state (Jharkhand6) had to be reduced was not so much a result of a change in the relevance of the objectives and design of the project but rather a circumstance that showed that when a program runs in different states with differing implementation capacities, a degree of flexibility is required to tailor the technical assistance program to the specific needs of each state, which is in fact an important lesson learned from this project. Further there should also be flexibility in designing the overall project administration structure and implementation arrangements and safeguards compliance mechanisms without deviating from the basic framework. Though the project had an institutional development component, the PDO did not directly emphasize enabling

6 Jharkhand has the problem of Left Wing Extremism, in addition to other implementation issues such as slow procurement

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improvements in the PMGSY systems and institutional development. Also there were limited indicators for the institutional development component.

3.1.3. Considering that the project objectives and components remained relevant during the entire implementation period and are relevant even today, and also the fact that the PMGSY is considered a well performing program and the project objective and design helped in overall program implementation, the overall rating for relevance of objective, design and implementation is Satisfactory.

3.2. Achievement of Project Development Objectives: 3.2.1. Achievement of the PDO was measured through the key outcome indicators of the

project, which included: (i) percentage of eligible habitations with all-weather access to social services and markets; (ii) percentage of through routes in the core rural road network in participating districts in fair or better condition; and (iii) level of road user satisfaction with the rural road network in participating districts.

3.2.2. Overall about 83 percent of eligible habitations had been connected compared to a target of 60 percent. About 50 percent through routes were in good condition compared to a target of 43 percent. The level of road user satisfaction with PMGSY roads was found high in all the participating states as per the impact surveys undertaken in participating states at regular intervals. The PMGSY roads were found to be having a significant impact on agriculture, employment, land prices, girls’ education, and access to health facilities in medical emergencies. The participating states had also started to allocate maintenance funds for the PMGSY rural roads as per the instructions of the MORD in the later years of the project. This had made a significant impact on the level of road maintenance of the PMGSY roads which has also been noticed under the road user satisfaction surveys7.

3.2.3. As mentioned, there is a contradiction between the PDO and the actual value of the indicators, especially in terms of the area for which these indicators was to be measured. While the PDO talks about achievements over project districts, the indicators have been used for the entire state. In this way, the indicators have captured the impact of the entire PMGSY program in these states and not necessarily that of the project alone. However, the fact that the project covered 60% of the districts in participating states and the indicators have been mostly over-achieved, suggests a satisfactory level of achievement of PDO. Also, some of the indicators are not achieved. For example, Jharkhand could not achieve indicator 2.1, for indicator 3.2, end data is not available for two states, indicator 1.1 could be evaluated at macro level only as state wise detailed reallocation of

7 Aide Memoire March 29- June 29, 2012.

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roads to be constructed was not available after restructuring done in 2009 and indicator 3.3 is fully achieved by only one state. However, many other indicators are overachieved

3.2.4. On the basis of all the above, it may be concluded that the project’s achievement of its development objectives was Satisfactory at an overall level as there were minor shortcomings. This rating is also consistent with the rating in the last four ISRs

3.3. Efficiency 3.3.1. Efficiency in achieving the PDO in terms of EIRR is Moderately Satisfactory.

The economic analysis for the project roads indicates a relatively wide spread in the economic results among the states as shown in Table 1 below. The table also presents the results of economic analysis which were carried out at the time of appraisal, for comparison purposes. Table 1: Economic Analysis Results

State

Completed Road Length (Km)

Results from current analysis Results from PAD

EIRR (%)

Modified EIRR (%)*

Benefit/Cost Ratio

EIRR (%)

Modified EIRR (%)

Benefit/Cost Ratio

Himachal Pradesh 984.0 10% 11% 0.96 40% 21% 2.00

Jharkhand 126.0 23% 17% 1.89 28% 18% 1.93 Rajasthan 6,287.0 18% 15% 1.51 25% 17% 0.70 Uttar Pradesh 2,227.9 26% 18% 2.17 51% 25% 3.13 Total 9,624.9 19% 15% 1.56 33% 19% 1.53

* Modified EIRR assumes 12% cost of capital and reinvestment rate

3.3.2. The EIRR obtained ranges from 10% for Himachal Pradesh to 26% for Uttar Pradesh and the combined EIRR for all four states was 19% (Modified EIRR – 15%). Overall, the EIRRs are below the estimates at appraisal. This may be mainly because of increased construction cost and time over run. The economic analysis done at appraisal as well as at the time of ICR preparation does not include the counterpart financed road maintenance component where progress has been better than planned. Detailed economic analysis for all the states is presented in Annex 3.

3.3.3. Other indicators of efficiency: The project was extended by two years. Perhaps if more proactive and close monitoring by MORD and NRRDA of lagging states (such as Jharkhand) had taken place at an early stage and re-allocation of funds to Uttar Pradesh and Rajasthan had not been required, the same objectives would have been achieved sooner.

3.4. Justification of Overall Outcome Rating

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3.4.1. In summary, the project’s performance regarding PDOs and implementation of various sub-components has been satisfactory barring a minor shortcoming in achieving some of the indicators especially by one of the states ‘Jharkhand” and efficiency with which these accomplishments were achieved has on the other hand been Moderately Satisfactory mainly because of longer duration of implementation resulting in lesser EIRR than at the time of project appraisal, Keeping all these in view, on balance the overall outcome of the operation is rated as Satisfactory given the continued relevance of the objectives and design of the project and overall satisfactory achievement of the project objectives and benefits obtained from the project as well as the program in participating states.

3.5. Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 3.5.1. The project was part of a larger PMGSY program of GoI to provide connectivity

to rural population. It envisaged providing benefits such as all season access to economic opportunities and social services, employment generation for new construction and maintenance, and improved access to rural transport services to the target population of the project. The project also aimed at engaging local communities in planning and monitoring, and improving awareness and empowerment of the end beneficiaries. The level of road user satisfaction with PMGSY roads is rated high in all the participating states as per the impact surveys being undertaken in participating states at regular intervals. The PMGSY roads were found to be having a significant impact on agriculture, employment, land prices, girls’ education, and access to health facilities in medical emergencies in the participating regions. In community interactions people expressed their satisfaction with road works and also stated that access to social and other physical infrastructure (schools, etc.) has improved. The social impact of the project and of the PMGSY program in general, has been so strong that (as mentioned earlier) there is a second PMGSY Rural Road Project being financed by the World Bank, which will also try and develop these themes.

(b) Institutional Change/Strengthening 3.5.2. The project’s impact on institutional development has been mainly in the

following areas: Table 2: Impact on institutional development of the Rural Road Project

S. No.

Name of initiative Description

1. Training and Capacity Building Officers of MORD, NRRDA, and various implementing agencies have been trained in the areas of maintenance management, quality control, orientation for PMGSY, and e-procurement

The state of Uttar Pradesh in particular organized training courses for contractors to familiarize them with e-procurement

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S. No.

Name of initiative Description

Study tours were also organized to study good practice examples in countries such as South Africa and the UK

2. National level rural road user satisfaction surveys

A methodology for undertaking poverty impact and road user satisfaction surveys has been developed by MORD for PMGSY roads in various states in addition to the participating states. The Bank contributed to this methodology by participating in various meetings and providing comments

3. Road Maintenance Management Systems

Simple and effective maintenance management systems have been developed by Rajasthan, Himachal Pradesh, and Uttar Pradesh, and these would be used to prepare annual maintenance plans

Himachal Pradesh has also started to allocate maintenance funds according to the priorities established under the annual maintenance plans, which is perceived by PWD officials as a significant improvement over traditional practices. The challenge is to make these systems regular and sustainable

4. OMMAS As a major step forward, MORD has made it mandatory for states to complete all data-entry in the OMMAS (On-line Monitoring, Management and Accounting System) and submit all progress reports through OMMAS in order to access future PMGSY funds

3.5.3. It may be noted that these initiatives would be carried forward and further refined

as part of the PMGSY Rural Roads Project. For example, further refinements in OMMAS are being planned so to as to use it as an effective management tool for PMGSY by producing customized management and performance reports at state and national levels. Further, all participating states would be given support for collection of road inventory and condition data and in order to expand MMS to a state-wide Asset Management System (AMS). Training activities and the methodology for poverty impact and road user satisfaction surveys would also be carried forward/institutionalized under the new project(s).

(c) Other Unintended Outcomes and Impacts (positive or negative) 3.5.4. While the project does not seem to have any unintended negative outcomes, some

of the good practices that emerged from the project (e.g. strengthening of second tier quality control systems including loading of photographs on the PMGSY website for public viewing; improved formats for preparation of engineering designs; development of the local contractor industry; and efforts at mainstreaming of the ESMF into normal PMGSY works) have received attention as good practice examples worthy of being carried forward in subsequent programs.

3.6. Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

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3.6.1. The Bank participated in State level workshops organized by the PWDs/SRRDA of Rajasthan, Himachal Pradesh, Jharkhand and Uttar Pradesh where implementing agencies, contractors, and consultants who were involved in preparation and implementation of the project were invited. The common findings that emerged included: (i) need to improve the quality of DPR by ensuring proper reflection of the ground realities; (ii) continued training and capacity building efforts for the contractors and the staff; (iii) strategy for using locally available materials and design innovations; (iv) changes in bid documents such as inclusion of price adjustment to reflect market reality etc.; and (v) need for Government support in the provision of the latest survey instruments, office equipment and inspection vehicles for field officers.

3.6.2. Further details of the suggestions/comments raised at the stakeholder workshops are provided at Annex 6.

4. Assessment of Risk to Development Outcome 4.1.1. Several of the initiatives undertaken or commenced under this project are being

carried over by the PMGSY Rural Roads Project which proactively recognizes in its own design the main lessons that have been learned from this project (RRP), especially the need for flexibility in tailoring technical assistance programs to the needs of individual states as also for extra support/hand holding for states that may be lagging and are less pro-active. Specifically the agreed results in the new project have been formulated as a series of Disbursement Linked Indicators (DLI) which will be the basis for disbursement of funds during the project life, which also mitigates significant risks on sustainability and monitoring of a very large, spread out program.

4.1.2. However the complexity of the program and the likelihood of slippages in individual states in the event of a loosening of monitoring mechanisms remain a challenge. In addition, asset management is a risk that is still there but this risk is partly mitigated by the USD 4.2 billion approved under 13th Finance Commission, NRRDA’s decision to not sanction any new works unless 5 year maintenance funds are available and the activities of the new project to continue focus in this area. The increased awareness of these issues can in fact be attributed substantially to the activities of this project. Still, given the unmitigated risks that still remain, overall, the risk to development outcome of this operation is rated as Moderate.

5. Assessment of Bank and Borrower Performance 5.1. Bank Performance

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(a) Bank Performance in Ensuring Quality at Entry

5.1.1. The Bank performance at ensuring quality at entry is rated as Moderately

Satisfactory. The project design was built on a well-established program for larger rural connectivity – PMGSY - with high political commitment and focused on building the systems for the program further. Also, as observed from the continued relevance of the project development objective and the design of the project, due attention was paid at preparation and appraisal stage to ensure that the project was likely to achieve planned development outcomes. Having multiple states with varying implementation capacity as part of project design allowed the better states to have a “hand-holding” effect on the lagging states, thus not affecting overall progress much.

5.1.2. At the same time, while the PDO referred to “participating districts” for achieving broader and more sustainable access to markets and social services by the rural population, the indicators referred to the performance of the program as a whole in respective states rather than performance in project districts as such. However, though the indicators were for the program as a whole, the fact that the project covered 60% of the districts in participating states, and also that the target value of the indicators has been mostly exceeded, shows that the project as well as program have performed well.

5.1.3. The monitoring framework did not reflect outcomes relating to the institutional development components clearly. This was a shortcoming given that one of the major value additions that the project brought was in capacity building and institutional development. Also, one of the important lessons learned from past Bank projects, i.e. “considerable scope for reducing construction costs through adopting optimal design standards and promoting the use of local materials especially for low trafficked rural roads” was not adequately captured by the monitoring framework. As a result, this aspect remained somewhat lagging in terms of implementation.

5.1.4. Overall, the project was well prepared keeping in balance ring fencing by way of supporting a certain amount of new road construction and monitoring, ensuring that an otherwise much neglected area, i.e. maintenance of roads gets mainstreamed, and that the state government commits to financing this activity, at the same time influencing the overall program through capacity building.

5.1.5. Given some of the shortcomings especially in the monitoring framework, the overall Bank performance in ensuring Quality at Entry is rated as Moderately Satisfactory.

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(b) Quality of Supervision

5.1.6. The Bank performance at ensuring quality of supervision is rated as Moderately Satisfactory. The frequency of full supervision missions was twice a year and these were supplemented by interim missions. Bank supervision at the implementation stage of the project was forthright in rightly identifying and flagging problem issues which were likely to affect the progress towards achievement of the project development objective. It must be recognized that a project of this nature had to maintain a balance between delving into micro issues at the level of each state on the one hand and capturing an overall picture of where achievement with respect to the overall development objectives stood on the other. Further, given that the project covered four states which were geographically quite widely spread out and had been chosen on the basis of their low levels of connectivity, there was an inherent complexity in the implementation of the project, and the Bank’s level of supervision largely held up to that challenge. Bank mission documents were clear in admitting issues and problems early on, which helped some states to show substantial improvement with the help of closer monitoring and hand holding. Supervision of fiduciary and safeguard aspects was satisfactory. However, re-allocation of funds to UP and Rajasthan from Jharkhand could have been done early on which would have reduced the requirement for project closing date extension. Also, while reallocating the funds, corresponding targets were not revised, which made it difficult to monitor the performance of different states. In addition some of the indicators were not regularly monitored.

5.1.7. Considering that there was only moderate shortcoming in the proactive identification of opportunities and resolution of the threats, the Bank performance with respect to ensuring Quality of Supervision is rated Moderately Satisfactory.

(c) Justification of Rating for Overall Bank Performance 5.1.8. Given the Moderately Satisfactory rating for ensuring quality at entry and

Moderately Satisfactory for Quality of Supervision, the overall Bank performance is rated Moderately Satisfactory.

5.2. Borrower Performance (a) Government Performance

5.2.1. The Government performance on this project is rated as Satisfactory. The

Government (NRRDA and MORD) extended high levels of proactive support and close monitoring throughout the course of the project, to ensure that lagging states came up to a satisfactory level whenever slow decision-making threatened to hamper the progress of certain activities. For instance, the initial slow procurement in states such as UP and HP as well as Jharkhand, poor compliance with ESMF, and slow roll out of the computerized Financial Management System (FMS) were met with increased pressure and resources by NRRDA, which

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undertook state-by-state monitoring reviews, as well as efforts at further training, improved documentation and stricter enforcement. These efforts and constant monitoring and hand holding support contributed to a large extent in bringing the project back on track by early 2009. NRRDA and MORD had also been participating in some of the Bank supervision missions to help faster implementation.

5.2.2. Government performance during project preparation was satisfactory, with NRRDA’s efforts of holding regional workshops on rural road maintenance and of critically reviewing and revising existing PMGSY procedures in areas such as procurement and financial management contributing to project readiness. Given the strong Government commitment and ownership towards achieving the project development objectives, Government performance on this project is rated as Satisfactory.

(b) Implementing Agencies Performance 5.2.3. Implementing Agency performance on this project is rated as Moderately

Satisfactory. At the outset, it may be stated that the project design and initial preparation activity recognized that the implementing capacity of the four state agencies chosen would differ. Thus while it was expected that implementation would be uneven, the challenge was that each of the agencies should be able to meet or exceed their targets, so that, as a whole, the project would be able to achieve its development objective.

5.2.4. Of the four states chosen, Rajasthan and HP were clearly more pro-active and performed well with a reasonable degree of monitoring and supervision. UP faced initial issues with respect to frequent changes in senior management, inadequate staffing and weak coordination amongst their agencies, but managed to overcome these with the help of pro-active support and hand-holding and finally met or rather exceed the targets set by the project.

5.2.5. Implementing capacity in Jharkhand state was an issue right from the beginning and unfortunately this was the one state where despite constant efforts by the Bank and Borrower agencies, capacity and willingness to implement the program and resolve implementation issues in a timely manner remained a challenge. Compliance with fiduciary requirements and adequate ownership and staffing for the same remained an issue. Eventually, in September 2009, proceeds earmarked for Jharkhand were re-allocated to Rajasthan and UP.

5.2.6. By the end of the project, the implementing agencies had achieved the targets substantially. After reallocation of funds to other states, overall target of new construction and upgrading has been achieved by 97% (9625 km against total 9900 km). Another 325 km is in advance stage of completion and is expected to be completed by December 2012. However, given the delays and implementation issues faced in Jharkhand and the need to re-allocate funds from Jharkhand to

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other states, the overall implementing agency performance is rated as Moderately Satisfactory.

(c) Justification of Rating for Overall Borrower Performance: 5.2.7. Given that Government performance on the project is rated as Satisfactory and

Implementing Agency performance is rated as Moderately Satisfactory, overall Borrower performance on the project is rated at Moderately Satisfactory.

6. Lessons Learned

The important lessons learned from this project are outlined below. Some of these lessons have already been taken into account while preparing the design of the PMGSY Rural Roads Project. 6.1.1 In the case of large programs such as PMGSY, where the Bank’s contribution is

small relative to the overall size of the program, it is important to agree on harmonized standards for fiduciary and safeguard requirements across Program and Bank funds. This is essential to avoid the issues that arose with respect to, for instance, procurement on this project, where Bank guidelines were different from those under PMGSY. Based on the lessons learnt from this project, a number of issues have been addressed in the PMGSY Rural Road Project which include: Use of e-procurement system with two part bidding and adequate safeguards. Optimizing contract packaging based on updated cost estimates and

construction industry situation. Preparing cost estimates on the basis of updated realistic market prices. Refraining from rebidding of packages simply on the grounds that the price is

more than the estimated cost. In such cases, a proper analysis to be carried out to determine if the price obtained against the tender is reasonable or not as compared to the market value.

Enhancing competition through better information disclosure, contractor outreach programs and better phasing of procurement cycles.

Developing an effective complaint handling system for the benefit of contractors and other stakeholders.

Improving the system for maintenance and retrieval of records. NRRDA to play more effective role in procurement monitoring by increasing

their staff strength and also through Project Performance Audit Consultancy Contract

6.1.2. Similarly, in such cases, the possible value additions of the Bank engagement,

identified during project preparation should be built into the monitoring indicators so as to avoid these not getting implemented. For example, the possibility of design innovations and use of locally available materials could not be achieved as effectively as was envisaged.

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6.1.3. There was wide variation in the capacity of states to implement the program

effectively. The design for similar projects should build in some flexibility in the level of support required by different states in order to tailor the technical assistance program to the needs of each state. To support the development of capacity at state level, there is a need to institutionalize training activities within existing national and state institutions like state technical agencies and other academic institutions engaged in PMGSY.

6.1.4. Further, from the challenges that were faced in managing such large and diverse programs, the evolution of the Disbursement Linked Indicators (DLI) approach now being used for the PMGSY Rural Roads Project took place. This is a change in overall approach from a transaction based to a programmatic approach to support the implementation of the new project, wherein agreed results under the program have been formulated as a series of DLIs, which will be the basis for disbursement of funds during the project life. Performance against these indicators will determine the extent to which disbursements will be made at the end of each time period, i.e. the disbursements have been made performance linked.

6.1.5. Another important lesson relates to ensuring that maintenance of the road network is done in a regular and sustainable way, which in turn requires that reform in maintenance be carried out in an incremental and steady manner.

6.1.6. Some of the innovations introduced by the project that are now being mainstreamed for use in PMGSY works generally in project states include: the ESMF, use of the technical examiner system for ensuring quality of works, introduction of performance based maintenance management contracts and development of the maintenance management system which will be further evolved into an asset management system in these states. Based on the implementation experiences from the project and the preparatory work (particularly the diagnostic review) under the PMGSY Rural Roads Project, NRRDA revised its Standard Bidding Document to cover environment, health and safety issues as part of the normal PMGSY procedures even for the non-Bank funded works. The Operational Manual and IRC’s book of technical specifications for rural roads is also currently under revision through Bank’s support for PMGSY to include and better address environmental concerns – these initiatives will bring-in harmonization and improve environmental performance at the programme/sector level.

6.1.7. Need to introduce articulated social accountability systems during implementation. The project though well designed for community participation for the ‘project planning’ cycle through tools such as information dissemination; transect walk; collaboration for participatory mapping of the impacts; etc. had limited design for ‘community participation and supervision’ during the stage of construction. To achieve comprehensive community participation, social

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accountability systems through models such as Community Score Cards, Social Audit, etc. may be implemented.

6.1.8 Need to introduce innovative solutions for reducing environmental footprint. Now that the project has helped in raising awareness and understanding about environmental issues, there is a need to move towards innovative solutions for further reducing the environmental footprint of the program. Efforts in this direction could include: (i) addressing biodiversity related concerns in the selection, planning and design of rural roads (as some roads can induce development in heavily forested and biodiversity rich areas); and (ii) reduction in material requirements (such as cement and aggregates) by introducing improved materials (including reuse/recycling) and technology.

6.1.9 Extension of Rural Development program to the adversely affected. There are currently no provisions in other rural development programs for preferential treatment of people affected by PMGSY. It is therefore important to identify certain rural development income generation/beneficiary development schemes for the benefit of vulnerable PAPs affected by building rural roads under the PMGSY, and amend those identified schemes to build in the criteria and provisions for inclusion of adversely affected PAPs of PMGSY belonging to vulnerable sections.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 7.1. The Borrower’s version of the ICR was received and is appended in Annex 7

along with the Borrower’s comments on the ICR. While broadly agreeing with the assessment of the project reflected in the ICR, the Borrower has emphasized adoption of a more flexible approach, especially in procurement, tailored to the specific situation of a particular state or particular areas within a state so as to avoid repetitive bidding due to lack of response from contractors.

(b) Co-financiers 7.2. There were no co-financiers on this project. (c) Other partners and stakeholders 7.3. Not applicable.

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Annex 1. Project Costs and Financing (a) Project Cost by Category (in USD Million equivalent) for IDA Cr. No. 3987-IN

Category Appraisal Estimate

(USD millions)*

Actual/Latest Estimate (USD

millions)#

Percentage of Appraisal

Works 298.01 302.17 101.4 Goods 3.01 1.79 59.4 Consultants’ services other than services provided by tax-exempt providers.

8.59 7.37 85.8

Consultants’ services provided by tax-exempt provisions, and training

0.75 0.39 52.0

Total Financing Required 310.37 311.72 100.0

*Exchange Rate 1 XDR=1.52201000 USD as of August 31, 2012 (b) Project Cost by Category (in USD Million equivalent) for IBRD Ln. No. 4753-IN)

Category

Appraisal Estimate

(USD millions)*

Revised Estimate

(USD millions)*

Actual/Latest Estimate (USD

millions)#

Percentage of

Appraisal

Percentage of Revised Estimate

Works 99.00 96.34 97.60 98.6 101.3 Goods 0.00 0.90 0.01 NA 1.1 Consultants’ services other than services provided by tax-exempt providers.

0.00 1.40 1.14 NA 81.4

Consultants’ services provided by tax-exempt provisions, and training

0.00 0.36 0.25 NA 69.4

Front end fee 0.49 0.49 0.49 100 100 Total

Financing Required

99.50 99.50 99.49 100 100

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Annex 2. Outputs by Component The project had three components and the outputs of each are listed below:

Component Key Performance Indicators End of Project

Target Achievement/Remarks

Component One: New construction and upgrading of core rural road networks

Upgrading 9,900 km roads

Upgraded 9,625 km roads. This include 984km in HP, 126 km in Jharkhand, 6287 km in Rajasthan and 2228 km in UP. Another 325 km is in advance stage of completions and is expected to be completed by December 2012.

Technical examiner service

All states using Technical Examiner service.

Component Two: Periodic and routine maintenance of core rural road network

Periodic and Routine maintenance of Core Rural Road network in participating districts

This is an on-going activity. The corresponding indicators are largely achieved. INR 40,000 per km per year is being provided for routine maintenance of entire core rural road network and another average INR 100, 000 per km per year is being provided for periodic renewal for PMGSY roads as Central grant as recommended by 13th finance commission. In last Financial Year, total allocation for participating states for PMGSY roads alone was INR 125 million for Jharkhand, INR 54 million for HP, INR 838 million for Rajasthan and INR 1928 million for UP (Total for four states about US$58 million in one year). This allocation for current year is INR 167 million for Jharkhand, INR 59 million for HP, INR 1160 million for Rajasthan and INR 2080 million for UP8 (total for four states about US$69 million). The allocation is increasing over years as number of roads being built under PMGSY is increasing.

Component Three: Institutional development

Poverty impact and rural road user satisfaction monitoring system to be put in place

The level of road user satisfaction with the project roads and poverty impacts of the PMGSY roads were assessed through a comprehensive national-wide study covering total 10 sample states including three participating states viz. Himachal Pradesh, Uttar Pradesh, and Rajasthan. The base line survey covered 11490 households within 750 habitations across 33 districts. The road user satisfaction was assessed on the basis of four major factors viz., reliability, transit time, connectivity, and user- friendliness and assessed on three levels viz. “low”, “medium” and “High”. Overall the satisfaction level was found high. The

8 Source OMMAS

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other findings of the survey include: increase in population by 3.46% in the income category of more than INR 10,000 per month, increase in child vaccination by 8%, increase in number of female patients to private doctors by 8%, reduction in travel time from 1.3 to 2 minute per km depending on the travel mode, and 12% increase in area cultivated.

Develop simple road maintenance management system

Developed by Rajasthan, UP and HP. However, it is being effectively used by HP only.

Prepare the annual maintenance program and support the implementation by road agencies

Achieved in HP and partly achieved in UP and Rajasthan. HP is using the system for prioritizing the periodic works for core rural road network maintenance. UP and Rajasthan needs data updating to use the system.

Framework for transferring ownership of noncore rural roads to PRIs on pilot basis

Framework not prepared. However, PRI’s are actively involved in selection and monitoring of PMGSY roads. This involvement was further strengthened through a transect walk and process of community consultations under the ESMF.

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Annex 3. Economic and Financial Analysis The Impact of All Weather Road Access The economic and social benefit analysis was based on a cross section comparison of connected and unconnected habitations. During the economic analysis at loan processing stage, a detailed study was carried out to assess the impact of all-weather connected roads in 40 villages (both connected and unconnected of similar nature). The selection of a pair of connected and unconnected village was made in a manner to ensure that the paired villages have similar resource bases and a similar distance from the main road leading to a market. Detailed surveys were undertaken in each village to determine production, agricultural output and consumer commodity prices, social indicators and levels of traffic generated by the villages.

The provision of all-weather access can have very substantial impacts on the social and economic development prospects of rural areas. Access to markets is improved, competition among traders often increases, the prices of agricultural inputs and consumer goods fall, access to outside employment improves, and access to social facilities outside the village improves. Better access may facilitate the development of educational and medical services within the village and help to train personnel. Roads, particularly paved roads, encourage the establishment of regular public transport to the village. While all-weather access is not the panacea for rural development, it is generally a necessary condition for sustained economic and social development.

Initial Analysis On completion of RRP, revised economic analysis has been carried out for the project for the ICR. At the time of appraisal of the parent project, economic analysis was carried out for 914 rural roads with a total length of 3,668 km. The PMGSY program is not based on the prioritization of roads on economic criteria nor has it prescribed specific design standards based on estimated traffic levels. To indicate the potential economic and social benefits of the program, and thus this Credit/Loan, the Bank undertook a study to estimate the economic and social benefits of providing all weather access roads to different villages in the four selected States: Uttar Pradesh, Rajasthan, Himachal Pradesh, and Jharkhand. The study was also designed to determine the appropriate road design standards (investment) in relation to the potential traffic and acceptable economic returns. The approach used in the selection of roads and their design standard, to be funded through this Credit/Loan, is therefore cost effectiveness, based on economic analysis.

Under RRP, all the project roads were proposed for upgrade to single lane bitumen roads. These roads are either of new connectivity or the upgrading gravel roads. The economic viability of project sections due to RRP interventions was obtained due to increase in per-capita agricultural productivity, reduction in vehicle operation cost of and saving in travel time cost of passengers/goods with respect to without improved road sections. The overall economic feasibility results (EIRR) for RRP roads for four participating states arrived during the loan processing stage is summed up in Table A1.

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Table A1: Economic Analysis Results – RRP (2004)

State No. of Roads

Length (Km)

Average Road Length (Km)

ERR MERR NPV

Uttar Pradesh 204 514.1 2.52 51 25 3774 Jharkhand 35 199.6 5.70 28 18 868 Himachal Pradesh 93 672.5 7.23 40 21 1609 Rajasthan 582 2,282.1 3.92 25 17 2095 Total 914 3,668.2 4.01 32.9 19.4 8346

Source: Report No: 29742-IN, PAD, Rural Roads Project, August 2004

ICR Economic Analysis During the project completion stage in 2012, economic analysis is further updated for the ICR. The details of completed RRP Roads in four participating states are presented in Table A2. In total all RRP completed roads totaling 9625 km length, are considered for ICR analysis.

Table A2: Completed RRP Roads

State Completed Road Length (Km)

Total Completed Cost (Rs. Million)1

Completed Cost - NPV @6.5% at 2004-05 2

Completed Cost (Rs Million/Km)

Average Completion Period (Years) 3

Himachal Pradesh. 984.0 2,192.3 1,726.7 1.755 2.0

Jharkhand 126.0 308.5 255.8 2.030 1.5 Rajasthan 6,287.0 10,619.3 8,934.3 1.421 1.5 Uttar Pradesh. 2,227.9 6,874.3 5,467.5 2.454 1.5 Total 9,624.9 19,994.4 16,384.2 1.702 Note: 1. Completed Cost on yearly basis was collected from NRRDA, New Delhi 2. Discounted at 6.5%, the average annual growth of inflation was 6.5% during the period 2003-2012. 3. Based discussion with NRRDA Officials

Source: RRP Aid Memoire, Last Implementation Support Mission, March-June 2012

Approach to Economic Analysis The initial analysis carried out during the loan processing stage (as reported in PAD) needed to be updated to the present ICR analysis. For the ICR analysis, most of the parameters considered during the initial analysis are kept as same. However, the ICR analysis has considered certain parameters that had changed during the implementation period (up to the project closing year) and incorporated these, in order to assess how far the initial economic analysis results hold good after completion. Such major parameters that are captured from the actual implementation data include:

Revised project coverage Construction period

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Completed capital cost Phasing of capital cost

Economic Appraisal Methodology: Most of the candidate roads are designed to provide reliable all-weather motorized access to previously inaccessible habitations. Therefore, economic analysis based solely on measuring the reduction in vehicle operating costs (VOC) of existing vehicles is unlikely to measure fully the benefits of improving accessibility:

There may be very little vehicular traffic – people have to walk and carry goods to the nearest road

An all-weather road, with improved pavement conditions, often results in a substantial change in the composition of traffic – from tractors to buses and trucks

The intensity of agricultural production may increase in response to higher prices/lower input costs and a higher proportion of crops may be sold outside the village

The pattern of cropping may change to take advantage of cheaper and more reliable access to market

Substantial benefits may be generated by better access to social infrastructure and improved mobility through the establishment of regular public transport

The economic analysis of rural roads is much more complex than the analysis of upgrading existing all-weather roads, requiring a more multi-dimensional approach. However, the size of individual rural road projects is generally too small to justify the cost of detailed analysis and a more generic analysis need to be undertaken.

The appraisal methodology used for this project utilizes the parameters of difference between the connected and unconnected villages surveyed during the Initial Analysis.

The economic analysis assumes a project life of 15 years with no residual. The costs include the initial construction cost and subsequent maintenance costs, including the periodic resurfacing of the road. The benefits include the additional agricultural production expected, reduced VOC and the travel time savings of vehicle passengers. Major assumptions arrived out of detailed investigations and research during the Initial Analysis (2004) for calculating the benefits and life cycle cost flow were used for the present analysis with the appropriate changes that happened during the implementation.

Main Assumptions: (a) Benefits Agriculture produce surplus: The earlier surveys demonstrated that connected villages have significantly higher agricultural production values than unconnected villages. Changes in production and cropping patterns take time to develop, and other constraints may allow only partial adjustment by farmers in previously unconnected villages. A conservative approach is adopted: with a road connection the value/capita of agricultural

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production in the previously unconnected villages increases9 but only to 60 percent of the present production differential between connected and unconnected villages. The agricultural adjustment process is assumed to take 5 years. Subsequently, it is assumed that this benefit will grow at 1.6% annually during the remaining analysis period, after considering the average observed rural population growth rate of 1.68% (2001-2011).

Traffic and its growth: It was assumed that when villages are connected with an all-weather road, their vehicle generation pattern will change to approximately those found in the presently connected villages. Vehicle generation pattern used in the Initial Analysis as well as the present analysis is summed up in Table A3. The traffic was assumed to grow at 5 percent for the normal traffic. No attempt is made to differentiate between “normal” and “generated” traffic and to apply different values to the flows in general. In Himachal Pradesh, where considerably more traffic was observed for connected roads, it may be due to its longer length and more additional villages covered. So to be on the conservative side, the average of the other three states (Rajasthan, Uttar Pradesh & Jharkhand) was used for all the states in the present analysis for the calculation of traffic related benefits, as followed in the earlier analysis.

Table A3: Vehicular Trip Generation Pattern for Rural Roads

Vehicles/Day /1000 population M/C Car Tractor Bus Truck Uttar Pradesh Connected 16.3 3.9 3.1 2.0 3.1 Unconnected 23.5 4.7 16.9 Jharkhand Connected 18.8 2.2 0.9 1.1 2.4 Unconnected 15.8 4.4 2.1 Rajasthan Connected 10.3 8.7 2.8 3.5 0.7 Unconnected 13.0 12.6 10.8 Himachal Pradesh** Connected 15.13 4.93 2.27 2.20 2.07 Unconnected 17.43 7.23 9.93 0.00 0.00

* Non motorized transport: bicycles in Jharkhand, carts in Rajasthan ** Average value of other three states. Source: Report No: 29742-IN, PAD, Rural Roads Project, August 2004

Vehicle operating costs and Value of Time: The savings in the vehicle operating costs, VOC, for each vehicle type were estimated using the SP:30 of Indian Road Congress, Manual on Economic Analysis of Highway Projects for different type of roads. The model provides the VOC for both motorized and non-motorized vehicles. In order to estimate the benefits of savings in time for the users of village roads, the value of time for the passenger was assumed to be half of the unit value determined for the passengers

9 ‘The data illustrate the very wide diversity of conditions in the rural areas of India, but, taking all the villages together, the average per capita production in the connected villages is about Rs.2400 higher than in the unconnected villages’. – Annex 9, Economic and Financial Analysis of PAD

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using major roads. The unit values adopted from the Initial Analysis are summed up in Table A4.

Table A4: Unit Rates for Calculating VOC and Travel Time for Rural Roads (at 2004 Price) Vehicle Type

Value of Time: Rs/ vehicle/km Vehicle Operating Cost: Rs/ vehicle/km Earth Gravel Paved Earth Gravel Paved

M/C 1.3 0.9 0.5 2.64 1.71 0.96 Car 12.6 8.4 6.3 9.49 6.49 3.86 Tractor 16.4 12 8.7 12.44 10.08 8.64 Bus 32.5 27.1 16.3 12.82 10.34 8.47 Truck 17.4 12.8 9.3 13.13 10.18 8.64

(b) Costs Construction costs: The completed cost of construction for black-top for the four states of UP, Rajasthan, HP and Jharkhand was collected from NRRDA on annual basis and after discounting to 2004 level were used in the ICR analysis (Table A5). The financial costs were converted into economic costs by using a conversion factor (CF) of 0.9.

Table A5: Expenditure incurred by States under RRP Rs Million Year H.P. Jharkhand Rajasthan U.P. Exp. dg 2004-05 0.00 0.00 320.50 0.00 Exp. dg 2005-06 135.40 21.60 3160.20 816.20 Exp. dg 2006-07 468.80 119.80 2440.50 1320.50 Exp. dg 2007-08 417.40 45.20 759.20 608.50 Exp. dg 2008-09 289.60 80.20 1012.60 1468.10 Exp. dg 2009-10 442.10 36.30 1809.90 1963.10 Exp. dg 2010-11 248.30 3.60 949.00 239.40 Exp. dg 2011-12 190.70 1.80 167.40 458.50 Total Cost 1 2192.30 308.50 10619.30 6874.30 NPV @6.5% at 2004-05 4 1726.68 255.78 8934.25 5467.50 Completed Roads - 2012 (Km) 2 984 126 6287 2227.9 Completed Cost (Rs Million/Km) 1.7548 2.0300 1.4211 2.4541 Average Completion Period (Years) 3 2 1.5 1.5 1.5 Source: 1. NRRDA, New Delhi 2. Aid Memoire, Last Implementation Support Mission (March-June 2012) Report, World Bank 3. Based discussion with NRRDA Officials 4. Discounted at 6.5%, the average annual growth of inflation was 6.5% during the period 2003-2012.

On comparison of planned cost/construction period with the actual completion, Himachal Pradesh was found to have the maximum of both cost and time overruns followed by Uttar Pradesh. But Jharkhand and Rajasthan states were found to have reduced construction cost and increased construction period (Table A6). All these overruns will affect the economic return potential.

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Table A6: Details of Cost and Time over runs during Implementation

State Completed Road Length (Km)

Cost Over run Time Over run

Planned Cost (Rs Million/Km) - 2004

Completed Cost - NPV @6.5% at 2004 (Rs Million/Km) - 2004

Cost Escalation (%)

Average Construction Period - Planning Stage (Years)

Average Construction Period - Completion Stage (Years)

Time Overrun (%)

Himachal Pradesh. 984.0 1.305 1.755 34.5% 1.0 2.0 100.0%

Jharkhand 126.0 2.283 2.030 -11.1% 1.0 1.5 50.0% Rajasthan 6,287.0 1.488 1.421 -4.5% 1.0 1.5 50.0% Uttar Pradesh. 2,227.9 2.280 2.454 7.6% 1.0 1.5 50.0% Total 9,624.9 1.663 1.702 2.4% 1.0 1.6 62.5%

Maintenance costs: The maintenance costs for the different surfaces vary with the cost of materials and the damage resulting from both weather and traffic. For black-top roads, it is assumed that the road would require resurfacing every eighth year, at a cost of Rs. 200,000/km, and that annual maintenance during the intervening periods would average Rs.5,000/km. Again, the financial costs are converted into economic costs using a factor of 0.9. Results of Economic Analysis The economic model was applied to the project roads in the four States under RRP, covering over 2,474 roads representing a total of about 9,625 km. As the project size, its composition etc. of the ‘Initial Analysis’ and the present ‘ICR Analysis’ vary considerably along with large number of individual project roads, the present economic analysis was developed for an average road arrived from state aggregates. Data availability concerns for individual roads are also a reason for the average analysis approach. Both the economic rates of return and modified economic rates of return (assumes that the returns from the investment only yield the opportunity cost of capital, both at 12%) were calculated. The analysis indicated a relatively wide spread in the economic results among the states as shown in Table A7 below.

Table A7: Economic Analysis Results

State

Completed Road Length (Km)

Normal Scenario 20% Benefit Reduction Scenario

EIRR (%) Modified EIRR (%)

Benefit/Cost Ratio

EIRR (%)

Modified EIRR (%)

Benefit/ Cost Ratio

Himachal Pradesh 984.0 10.4% 11.2% 0.96 7.1% 9.4% 0.77 Jharkhand 126.0 22.9% 16.8% 1.89 18.4% 14.9% 1.51 Rajasthan 6,287.0 18.1% 14.8% 1.51 14.0% 12.9% 1.21 Uttar Pradesh 2,227.9 26.0% 18.0% 2.17 21.2% 16.1% 1.74 Total 9,624.9 18.8% 15.1% 1.56 14.7% 13.3% 1.25

Note: Modified EIRR assumes 12% cost of capital and reinvestment rate The EIRR obtained for the RRP roads is in the range of 10.4% for Himachal Pradesh to 26% for Uttar Pradesh (11.2% to 18% for modified EIRR) and the combined EIRR for all

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four states was 18.8% (Modified EIRR – 15.1%). The sensitivity analysis was conducted after assuming a 20% reduction of yearly benefits for the analysis period10 and EIRR/Modified EIRR obtained for road stretches is in the range of 7.1% to 21.2% for EIRR and 9.4% to 16.1% for Modified EIRR which are more than the 12%, except for Himachal Pradesh. In all states, except Himachal Pradesh, the NPV discounted at 12% is positive confirming the economic justification of the completed project even though the cost of civil works increased significantly. The EIRR for all the states except for Himachal Pradesh is more than 12%. The likely economic returns from connecting villages with all-weather paved roads vary considerably, depending on construction costs, the distance from the existing all-weather road, the size of the village and the production differential. Rates of return are high in Uttar Pradesh, despite the high construction costs, because of the large production differential, relatively short length of sample roads (2.6 km) and relatively high populations served. The returns on the roads in Himachal Pradesh are low, reflecting the high cost overruns (34%), relatively high average length of completed roads (6.4 km), high time overruns and the less average beneficiaries per village. Jharkhand and Rajasthan have performed in between these two extremes, with all impacts discussed above. However these two states have not been affected by cost overruns and the average completed cost was less than the planned cost.

Compared to the combined EIRR for all states of 33% during the planning stage, the combined post completion EIRR has come down considerably to 18.8% and this trend is observed in all states, but with difference in intensity. Major reasons that can be accounted for the reduction in EIRR include:

Project Coverage: Considerable negative change in project coverage in terms of reduced average road length and average project beneficiaries have together resulted in the estimated project benefits (Table A8).

Project Beneficiaries: All the states, except Rajasthan, have experienced reduction in the average project beneficiaries’ coverage. Maximum reduction of 59% in Himachal Pradesh followed by 40% in Jharkhand and 26% in Uttar Pradesh.

Cost Overruns: Cost escalation is very high in Himachal Pradesh (34.5%) followed by Uttar Pradesh (7.6%). However the other two states were found to have reduced completed cost as discussed above in Table A6.

Time Overruns: On an average, all the roads became operational later than expected at appraisal from six to twelve months and as a result the savings in the revised economic analysis are reduced.

10 As cost overruns and time overruns during the implementation period was already captured in the analysis, the only possible risk of benefit reduction during the operation period was considered for sensitivity analysis

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Table A8: Details of Changes in Project Coverage

State

Planning Stage Post Completion Stage

No. Of Roads

Length (Km)


Average Population Coverage / Road

No. Of Roads

Length (Km)


Average Population Coverage /Road

Uttar Pradesh 204 514.1 2.52 1891 863 2227.9 2.6 1402

Jharkhand 35 199.6 5.70 2707 29 126 4.3 1635

Himachal Pradesh 93 672.5 7.23 2823 154 984 6.4 1161

Rajasthan 582 2,282.1 3.92 1000 1427 6287 4.4 1012

Total 914 3,668.2 4.01 1450 2474 9624.9 3.9 1165

Distribution of Benefits The provision of all-weather road access has a pervasive impact, affecting not only production and facilities within the village but also improved access to economic and social opportunities outside the village. The entire village population should benefit from improved access to educational and health facilities and lower prices for basic consumer goods. The expected increase in the value of agricultural production will benefit farmers and may increase the demand for labor, thus improving wage rates for landless laborers. Overall, the project should reduce the levels of poverty and social deprivation in the previously unconnected villages. Conclusions The above results show the robustness of the economic feasibility indicators under normal and adverse sensitivity scenarios where the benefits are decreased significantly. The EIRR for all states except Himachal Pradesh is more than 12%. This justifies the project investment with more risk absorption capacity. However, this sensitivity is unlikely to happen as: (a) traffic is expected to grow to accompany the current economic growth, (b) there is little uncertainty on the cost of the works as all the contracts are completed, and (c) VOCs are unlikely to be reduced in view of the past trend for the prices of inputs such as fuel, lubricants, tires, and salaries.

The estimated economic feasibility results are much lower as qualitative project benefits such as tourism development, increased education and employment due to better accessibility, better road environment are not considered in this analysis.

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Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members

Names Title Unit Responsibility/

Specialty Lending Alok Nath Bansal Sr. Transport Planner SASEI Aniruddha Patil Project Analyst SASEI Ashok Kumar Sr. Rural Roads Specialist SASDT Binyam Reja Transport Economist TUDTR Gaurav Joshi Environment Specialist SASES Gladys Stevens Program Assistant SASEI Guang Zhe Chen Sector Manager SASEI Jayashree Shahria Program Assistant SASRD Kiran Ranjan Baral Sr. Procurement Officer SARPS

Manoj Jain Sr. Financial Management Specialist SARFM

Mohan Gopalakrishnan Financial Management Specialist SARFM Monica Femandes Program Assistant SASES Mridula Singh Social Development Specialist SASES N. S. Srinivas Senior Program Assistant SASDO Piers Vickers Task Leader SASEI Raj Soopramanien Sr. Counsel LEGMS Simon Thomas Sr. Transport Economist SASEI Sonia Chand Sandhu Sr. Environment Specialist SASES Tapas Paul Sr. Environment Specialist SASES Terje Wolden Sr. Environment Specialist SASEI Venkat Rao Bayana Consultant SASES Supervision/ICR Alok Nath Bansal Consultant SASDT Anupam Joshi Environmental Specialist SASDI Aniruddha Patil Transport Specialist SASDT Anand Kumar Srivastava Procurement Specialist SARPS Ashok Kumar Sr. Highway Engineer SASDT Atul Agarwal Sr. Transport Specialist SASDT Debabrata Chakraborti Sr. Procurement Specialist SARPS Dhirendra Kumar Consultant – Procurement SARPS Gaurav D. Joshi Environmental Specialist SASDI

Manoj Jain Lead Financial Management Specialist SARFM

Manvinder Mamak Sr. Financial Management Specialist SARFM

Mridula Singh E T Consultant SASDS

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Muthuthevar Boominathan Consultant SASDT N. S. Srinivas Sr. Program Assistant SASDO Neetu Sharda Program Assistant SASDO Neha Pravash Kumar Mishra Environmental Specialist SASDI

Parthapriya Ghosh Social Development Specialist SASDS Piers Vickers Task Leader SASEI Pyush Dogra Environment Specialist SASES Rajesh Rohatgi Sr. Transport Specialist SASDT Rashi Grover Consultant SASDT Ritu Sharma Program Assistant SASDO Sangeeta Kumari Social Development Specialist SASDS Shanker Lal Sr. Procurement Specialist SARPS Sonia Chand Sandhu Sr. Environmental Specialist SASDI

Sussane Holste Lead Social Development Specialist EASID

Tapas Paul Sr. Environmental Specialist SASDI Venkat Rao Bayana Consultant SASDS (b) Staff Time and Cost

Stage of Project Cycle

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending FY03 42.80 142,637.10 FY04 54.86 147,580.48 FY05 12.77 37,632.45 Total: 110.43 327,850.03 Supervision/ICR FY05 34.50 77,148.35 FY06 46.76 130,060.24 FY07 41.81 139,868.66 FY08 37.38 138,764.39 FY09 44.67 121,138.19 FY10 27.26 90,935.02 FY11 14.96 54,042.49 FY12 11.86 52,516.72 FY13 4.34 13,757.17 Total: 263.54 818,231.23

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Annex 5. Beneficiary Survey Results

Not applicable.

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Annex 6. Stakeholder Workshop Report and Results 1. The Bank participated in State level workshops organized by the PWDs/SRRDA of Rajasthan, Himachal Pradesh, Jharkhand and Uttar Pradesh inviting implementing agencies, contractors, consultants who were involved in preparation and implementation of the project. The objectives of these workshops were as under:

(i) The extent to which project development objectives were achieved; (ii) Feedback on factors and problems that affected project implementation; (iii) Lessons emerging for enhancing effectiveness of future Bank

engagements with the sector. 2. The discussions at the Workshops revolved around four important themes, viz.

Planning and Project Preparation including ESMF; Procurement and Project Implementation; Maintenance of Project Roads and Core Road Network; Concerns of Contractors.

3. In addition to participation at the workshops, the Bank had also brief discussions with the senior officers of the SRRDAs with a view to obtaining their views on lessons learning. 4. The summary of important findings and lessons learning during these Workshops are brought out in Table A9.

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Table A9: Summary of Discussions and Findings at the Workshops

Gist of Discussions Lessons Learning A. Planning and Project Preparation including ESMF (i) Selection of project roads was done

based on core road network, which was useful for identifying priority roads. The network data base was originally created on revenue village population and it needs updating as per latest census.

(ii) Time given for preparation of DPR varied from two weeks to four weeks, which was not sufficient. A period of three months is considered reasonable minimum for quality DPR.

(iii) Available resources like trained personnel, vehicles and modern survey equipment for project preparation are inadequate. Shortage of staff in PIUs was also a constraint.

(iv) The project contributed significantly towards improvement of design capability and project preparation.

(v) Use of new materials/processed materials was limited to pilot stretches in absence of specific provision in BOQ

(vi) Suggestions of STAs and Technical Examiners were valuable and incorporated in DPRs. However, sometimes they were guided by ceiling on costs per km where so specified.

(vii) ESMF has been helpful in addressing environmental and social concerns. Requirements like topsoil conversation, drainage, plantation, identification of borrow areas, and disposal sites are addressed. Sometimes lack of land availability and cooperation from public makes implementation difficult.

(viii) Need to encourage bio-engineering measures for erosion control and cold mix technology to avoid heating of bitumen in drums.

Reasonable time needs to be available to the PIUs for preparation of DPRs.

PIUs should be adequately equipped with modern survey and lab equipment as also vehicles to enhance efficiency in both DPR stage and monitoring implementation of works.

Preparation of a standard manual providing guidelines for preparation of DPR for roads and bridges under the PMGSY would help in laying down uniform practice.

Need to devise strategies for promoting the use of locally available and marginal materials to reduce both cost and carbon footprint.

Need for strengthening the system for monitoring of ESMF and ECOP guidelines.

Mainstreaming of bio-engineering measures for slope stability in hill areas and cold-mix technology in general.

B. Procurement and Project Implementation (i) Procurement of works got delayed in

Jharkhand as bids received were higher than sanctioned costs.

(ii) By and large works were executed satisfactorily. However, there were delays in some cases due to land, forest

The criteria for qualification of contractors for works in difficult areas need to be relaxed and steps taken to encourage sub-contractors without compromise on quality.

Need for continuing Bank engagement for strengthening and capacity building of road

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clearance, and law and order problems. Desired geometric improvements could not be undertaken where local people were not willing to donate land. The State of Himachal Pradesh faced difficulty in sourcing of aggregates.

(iii) Some roads, such as in mining areas, witnessed much higher axle loads than catered for in design.

(iv) Procedure for selection of contractors is satisfactory. However, sometimes they are not deploying the technical personnel of requisite qualification and experience. Delays have occurred where multiple contracts have been awarded to a contractor.

(v) Several PIUs in some states are handling all road works including PMGSY. They were not able to devote full time and exclusive attention to Project roads resulting in sub-optimal outcomes in some cases.

(vi) There has been considerable time gap in some areas between sanction of works and execution and even delays during execution. Since there is no price escalation in the contracts, contractors suffered financial losses and their quoted prices became unworkable.

(vii) Training of PIU staff in contract management, quality control, financial systems and ESMF guidelines contributed significantly in improving project implementing capacity of the States.

(viii) Disputes raised were few and these were largely for additional transportation of materials and natural calamities.

agencies and the contractors. This would also need strengthening of training infrastructure at State level.

Participation and support of PRIs and Forest Department would help in addressing social and environmental issues and locating waste material/debris disposal sites particularly in hill areas.

The States may consider creation of dedicated PIUs for rural road works including PMGSY.

Price adjustment for materials like bitumen where there is high volatility in prices need consideration

C. Maintenance of Project Roads and Core Road Network(i) Contractual obligations of 5-year routine

maintenance are not being met fully. The contractors find it difficult to maintain within the quoted rates. Packages being small, they find their establishment costs to be high during the maintenance period, resulting in lack of performance.

(ii) Annual maintenance programmes are prepared and implemented subject to overall fund allocation. Under the Bank project, Road Management System has been developed in Himachal Pradesh,

Maintenance of rural road assets being created under various schemes including PMGSY needs high priority attention of the State Governments.

In future Bank engagement, more strategic interventions for ensuring adequate maintenance on the ground need to be identified after due consultation with the PIUs and the contractors.

Need for conscious efforts for development of local small contractors in maintenance

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Rajasthan and Uttar Pradesh. However, for its sustained use the data collection system needs to be institutionalized. Outsourcing of data collection on regular basis would help.

(iii) There is a need to try out maintenance of rural roads under the PMGSY as a separate contract through local agencies.

works. This will require capacity building and support to contractors in ownership of simple mobile maintenance units.

D. Concerns of Contractors (i) Market prices of cement, bitumen and

steel are increasing rapidly justifying review of contract conditions to include price escalation.

(ii) Contractor is required to furnish details of make/brand, capacity of equipment at bid stage for which custom/excise duty exemption certificate is required. Subsequent changes become inevitable and then this creates problems. This stipulation needs review.

(iii) Sometimes there is delay in getting payments from the Employer affecting the cash flow and progress of work.

(iv) When there is delay by the Employer in handing over site to the Contractor due to forest clearance or otherwise, there should be provision for payment of damages to the Contractor.

(v) Clause for maintenance in the Contract should be reviewed and workable rates permitted to contractors.

(vi) The project has made significant impact in improving and enhancing capacity and skills of contractors. They have also acquired new machinery. Excise duty exemption under the project has also helped. However, facilities for training of contractors are still inadequate and government support is required for setting up State level training centres.

Need to revisit contract conditions to address genuine concerns of contractors.

Continued support for training facilities and opportunities for contractors.

Need for sensitizing PIUs in timely release of payment due to contractors.

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Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR 1. Introduction 1.1 Rural Roads have been seen as an entry point for poverty alleviation since the lack of access is accepted universally as a fundamental factor in continuation of poverty. There is a growing body of a empirical evidence that links transport investment to the improved well-being of the poor. In India, the Rural Roads are constitutionally the responsibility of the States. The States made all efforts to provide connectivity to unconnected villages and in many cases, the priority was given to connectivity of villages with high population resulting in improvement of connectivity of such villages still overall connectivity levels remained low. Only about 60 percent habitations got all weather connectivity by the year 2000. There were several States where connectivity to even higher population habitations remained poor. In view of importance of Rural connectivity as an entry point for poverty alleviation, the Government of India launched a rural roads development programme known as Pradhan Mantri Gram Sadak Yojana (PMGSY) in December 2000. The PMGSY envisaged connectivity to all habitations with population of 500 and above. However, in case of hill areas, deserts and tribal areas, the population threshold is relaxed – being connectivity to all habitations with population above 250. Under this programme, construction of roads is 100 percent centrally funded and maintenance is the responsibility of the States. Routine maintenance for five years is to be done through the same contractor who constructs these roads. The major source of funding envisaged was out of diesel cess. Currently, a cess equal to Re.0.75 per litre of diesel is set apart for development of rural roads. 1.2 Based on experience of implementation of various Rural Road Development Programmes in the States in the past and with a view to achieve the objectives envisaged under PMGSY, Government of India adopted quality centered strategy for implementation of this ambitious programme. Detailed guidelines for Planning, Standard and Specifications, Preparation of DPRs, Works Procurement, Dedicated Institutional Arrangement, A Three Tier Quality Management Programme and well defined mechanism for ensuring maintenance of Rural Roads have been put in place. The Ministry of Rural Development administers the programme at the Centre and the National Rural Roads Development Agency was set up at the centre to provide managerial and technical support to the programme and works are executed on the ground by the engineering units of the States. A conscious decision was taken by the government that these roads should be well engineered and be of sound quality and receive regular maintenance after construction. In order to accelerate the progress under the programme and supplement the available financial resources, the Central Government also decided to approach the multilateral agencies like the World Bank and the Asian Development Bank for financial assistance. 1.3 It was a matter of encouragement that the World Bank evinced interest in the programme since its inception. Particular mention is needed here with respect to importance of maintenance and preservation of rural road assets to be created under the PMGSY and works procurement systems. The standard bidding document under the

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PMGSY was developed by Government of India on the basis of World Bank Bidding Document W-II. A policy paper for dialogue on the issue of maintenance was prepared with the assistance of the Bank and discussed among all stakeholders at three regional workshops organized by the MORD with the States in the year 2002, where the Bank and other experts also participated. Subsequently, the MORD approached the World Bank through the Department of Economic Affairs in the Ministry of Finance, for financial assistance for construction of rural roads under the PMGSY. 1.4 The World Bank considered the proposal of Government of India and given that the Bank’s Assistance Strategy itself was poverty reduction and socio-economic growth of the country, the programme of PMGSY fitted well into the portfolio of the World Bank. 2. Project Component and Cost 2.1 Through a series of quick dialogues, the contours of the World Bank assistance were finalized. The project comprised the following components:

Component 1: Construction and improvement of 9,900 km of rural roads in participating districts of the States of Himachal Pradesh, Jharkhand, Rajasthan and Uttar Pradesh. Component 2: Maintenance of core road network, about 100,000 km, in the participating districts. Component 3: Institutional Development covering technical assistance to:

(a) Rural road agencies to help them plan, procure and execute works including maintenance and social and environment management measures.

(b) Contractors for training in efficient and quality execution. (c) MORD and NRRDA to further enhance their capacity for technical and managerial support to the programme and the States.

2.2 It may be added that all the four States selected were low connectivity States at the time of approaching the Bank for financial assistance. 3. Project Revision 3.1 There were no major revisions to the project except that some works originally envisaged for Jharkhand were dispensed with and reallocation of funds was got approved to meet with the requirements of consultancies, human resource and institutional development.

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3.2 There were no other financing sources for the project except for counterpart funds by the States for maintenance of the core road network in participating districts. 4. Implementation 4.1 The implementing agencies for the project were MORD and NRRDA at the centre and the States of Himachal Pradesh, Jharkhand, Rajasthan and Uttar Pradesh. The project was approved by the Bank in September 2004 and the States were gearing up for procurement of works having a good shelf of approved works at their disposal at the time of entry of project. Some project works got delayed initially in the participating districts of Jharkhand, Himachal Pradesh and Uttar Pradesh due to some delays in preparation of DPRs and lack of availability of contractors to the qualifications and experience imposed by the World Bank. Notably, due to constant efforts of both the Bank and the NRRDA in institutional development activities of the PIUs of the States and training of contractors project managers and site engineers, situation was brought up to mark. Further, implementation did continue to suffer in Jharkhand despite best of efforts by the NRRDA. In hind sight, the qualification thresholds for the contractors in this State could have been relaxed to promote entry of local small contractors with additional monitoring and hand holding support by the staff of the Technical Examiners engaged on the Project. Even size of each individual package could be reduced in areas where response of contractors was poor. 4.2 The project had good financial management system because of the already functional OMMAS by the NRRDA and MORD. The NRRDA continued to supervise the operations by the States and provide regular accounts to the Bank. The support of the Bank during their supervision missions to strengthen the reporting of financial picture also helped. 4.3 The social and environmental assessment and plan to mitigate the adverse effect, where so found was carried out as part of both DPR preparation and implementation stage. In this context, a number of training courses organized for the staff of the PIUs and consultants proved useful in enhancing capacity of the States’ implementing units. By the end of the project, dedicated cells for ESMF are becoming functional in the States. ESMF cells are also mainstreaming now in across the country. Under the PMGSY, land for rural roads is being largely received through voluntary donations. Under the project, communities were duly involved in joint decision making to finalise the alignment through transect walk and thereafter seeking the assistance of revenue officials in verifying ownership records and required mutation. It must be mentioned to the credit of the Bank environment team, that their regular interaction during the project duration also helped considerably in better implementation of ESMF safeguards. The NRRDA encouraged the States to prepare booklets highlighting good social and environment practices in respect of rural roads for mainstreaming them in other rural road works as well. The process of transact walk and active involvement of community in alignment fixation has become the part of PMGSY guidelines and is being implemented throughout the programme.

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4.4 In respect of maintenance of the core road network in the participating districts of the States concerned, the implementation experience has been mixed. Only after the MORD stipulated to the States that the construction funds would be released only if the States would specifically earmark funds for maintenance, did the situation start improving. Initially, maintenance of core road network was neglected and it received attention mainly towards the last two years of the project. The MORD is seriously concerned with the maintenance issue of rural roads and is reviewing its current policy in the light of decade’s experience of running the programme both, with or without the assistance of the multilateral agencies. While there is need for expanding the network to provide connectivity to hitherto unconnected habitations in remote areas, it is equally imperative to ensure regular maintenance of rural roads that already exist or being constructed under the PMGSY so that benefits of access continue to be available to rural people on a sustained basis. One of the biggest achievements of the project was to bring maintenance on the fore-front of PMGSY and developing appropriate process for maintenance. Now the attention to maintenance is pre- requisite for continuation of the programmes in the States in general. 4.5 Both the NRRDA and the States benefited immensely from the Technical Assistance component of the project in enhancing the capacity for efficient delivery of the projects and programmes under the PMGSY. Several officers of the SRRDAs of the States were exposed to training in different areas of project planning, project estimate, procurement, quality control, project management, dispute resolution, ESMF, financial management. However, the needs are huge and this has to be a regular and continuous exercise. The NRRDA has been requesting the States to formulate their training calendar so that it provides the much needed financial and other assistance in this regard. The contractors also require continuous dosage of skill development efforts for their workers and equipment operators. As a result of the other on-going projects by the Bank, the NRRDA would pursue further on this aspect. 5. Brief Assessment of the Project by the Borrower 5.1 World Bank Project RRP-I has very effectively supplemented the achievements of connectivity through good all weather roads as envisaged under PMGSY. The major objectives of the RRP-I project were well achieved and even targets of providing connectivity to eligible habitations finally got exceeded in the project. Generally, there has been positive impact on access to social infrastructure such as schools and health centres. 5.2 The basic contribution of the RRP-I has been with respect to overall institutional development and development of management process under PMGSY. The TA component provided various opportunities in development of institutional setup. Overall, the project received good appreciation from various stakeholders including the communities served by the roads covered under the programme. This was due to regular pursuit by the NRRDA, review meetings by MORD and active support of the State Governments and PIUs at field levels. The Bank supervision missions were a constant source of both monitoring and support in addressing the issues that cropped up in specific

50

packages for execution. Their minute detailing helped in successful completion of the project. However, the Bank could have shown more flexibility towards procurement guidelines in respect of weak states like Jharkhand where challenge was definitely unique compared to other States of the project. Holding on to the conditions stricter than the normal PMGSY guidelines, the Bank’s insistence compelled significant reduction of works in the State of Jharkhand and to that extent the cause of the State got suffered. This will need to be made up now on a fast track basis. 5.3 The experience of engaging Technical Examiners on the project was fruitful. Their staff provided useful support to the PIUs in quality execution of works by the contractors. In some cases, their contribution in review of DPRs was also commendable. 6. Lessons learnt

(i) The adoption of Decentralized planning through preparation of District Rural Roads Plan and Development of Core-Network has been extremely useful not only from the point of view of taking up new connectivity but also from the perspective of upgradation and maintenance of overall Rural Roads Network not only limited to PMGSY.

(ii) Capacity building of staff of SRRDAs (HQs and PIUs) needs to be a

continuing activity. The field staff along with the staff of NRRDA and MORD also need to be exposed to good national/international practices in project planning, design and execution.

(iii) The Bidding Document under PMGSY was developed using World Bank

Bidding Document W-II after due consultations with the States, however, the World Bank insisted upon using the document of NCB in its original form. The capacity of the local contractors was limited at the time of inception of the programme and it was difficult to award the work on the basis of World Bank NCB on time. Some delays in tendering and award resulted because of some stringent processes and qualifications. The procurement team of World Bank was projected certain alternatives which could not be accepted. However, for future the World Bank may find them useful for road and other projects.

(iv) ESMF codes of practices and mitigation measures should become an

integral part of DPRs and tender documents. (v) More stress needs to be laid on use of locally available and marginal

materials in construction to reduce burden on quarrying of aggregates. How to make this operational would require considerable support of academic and research institutions.

(vi) There is need for a more critical analysis of the strengths and weaknesses

of each individual SRRDA so that the institutional strengthening and hand holding support is geared upto their specific needs.

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(vii) There is need to review the current policy of 5-year maintenance from the

same contractor, in consultation with the States and the contractors associations to find a healthy solution.

(viii) Measures required to strengthen the monitoring and supervision

arrangements by the PIUs over the works executed by the Contractors.

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COMMENT OF BORROWER ON IMPLEMENTATION COMPLETION AND RESULTS REPORT

1 The Borrower broadly agrees with the assessment of the project reflected in the Bank draft ICR. It would be the Borrower’s effort to continue and strengthen institutional and capacity building under the on-going PMGSY RRPII as a follow up to the completed RRPI project. 2 The Bank will do well to also learn from the project to adopt a more flexible approach tailored to the specific situation of a particular State or particular areas within a State so as to avoid the repetitive bidding where there is lack of response from the contractors. A Procurement Manual has been finalized recently as part of the on-going PMGSY project. This is currently under use. Experience gained out of implementation of the Manual in the next one year or so should be utilized for a revisit and refinement where necessary in consultation with the stakeholders, viz. SRRDAs and contractors, etc.

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Annex 8. List of Supporting Documents Project Mission Aide Memoire

1. First Preparation Mission – December 8 – 20, 2002 2. Second Preparation Mission – April 1-24, 2003 3. Third Preparation Mission – September 3-30, 2003 4. Implementation Support Mission – December 1-17, 2004 5. Implementation Support Mission – July 25 – August 5, 2005 6. Implementation Support Mission – January 9 - March 13, 2006 7. Mid-Term Review Mission – February 22 – March 9, 2007 8. Implementation Support Mission – August 6 – September 7, 2007 9. Implementation Support Mission – April 1-18 and June 2-13, 2008 10. Implementation Support Mission – October – December 2008 11. Implementation Support Mission – June 22 – July 17, 2009 12. Implementation Support Mission – April 26 – July 23, 2010

Project Status Reports / Implementation Status & Results Reports

1. PSR dated January 3, 2005 2. ISR dated June 16, 2005 3. ISR dated September 20, 2005 4. ISR dated March 27, 2006 5. ISR dated September 27, 2006 6. ISR dated March 30,2007 7. ISR dated September 26, 2007 8. ISR dated January 3, 2008 9. ISR dated July 8, 2008 10. ISR dated January 19, 2009 11. ISR dated May 19, 2009 12. ISR dated November 23, 2009 13. ISR dated May 28, 2010 14. ISR dated November 26, 2010 15. ISR dated May 18, 2011 16. ISR dated December 20, 2011 17. ISR dated March 30, 2012