Report and Recommendation of the President to the Board of Directors

Project Number: 51180-001 October 2018

Proposed Loan India: Bihar State Highways III Project Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS (as of 12 October 2018)

Currency unit – Indian rupee/s (₹)

₹1.00 = $0.0135401363 $1.00 ₹73.854500

ABBREVIATIONS

ADB – Asian Development Bank BRRI – Bihar Road Research Institute BSRDCL – Bihar State Road Development Corporation Limited CSC – construction supervision consultant EIRR – economic internal rate of return GAP – gender action plan ha – hectare IEE – initial environmental examination km – kilometer km2 – square kilometer PAM – project administration manual PIU – project implementation unit PPP – public–private partnership RCD – Road Construction Department

NOTES

(i) The fiscal year (FY) of the Government of India and its agencies ends on 31 March.

“FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2018 ends on 31 March 2018.

(ii) In this report, "$" refers to United States dollars.

Vice-President Wencai Zhang, Operations 1 Director General Hun Kim, South Asia Department (SARD) Director Ravi Peri, Transport and Communications Division, SARD

Team leader Kai Wei Yeo, Transport Specialist, SARD Team members Marie Kristine Estrella, Project Analyst, SARD

Andrew Gutierrez, Senior Project Officer, SARD Laureen Laurito, Senior Social Development Officer (Safeguards), SARD Yang Lu, Transport Specialist, SARD Anil Motwani, Senior Project Officer (Transport), India Resident Mission, SARD

Joanne Pabis, Senior Operations Assistant, SARD Vankina Sri Rekha, Principal Counsel, Office of the General Counsel

Karma Yangzom, Senior Environment Specialist, SARD Peer reviewer Zheng Wu, Unit Head, Project Administration, Central and West Asia

Department (Transport Sector Group) In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page PROJECT AT A GLANCE MAP

I. THE PROPOSAL 1

II. THE PROJECT 1

A. Rationale 1

B. Impact and Outcome 3

C. Outputs 3

D. Summary Cost Estimates and Financing Plan 4

E. Implementation Arrangements 5

III. DUE DILIGENCE 6

A. Technical 6

B. Economic and Financial 6

C. Governance 6

D. Poverty, Social, and Gender 7

E. Safeguards 8

F. Summary of Risk Assessment and Risk Management Plan 10

IV. ASSURANCES 10

V. RECOMMENDATION 10

APPENDIXES 1. Design and Monitoring Framework 11 2. List of Linked Documents 13

Project Classification Information Status: Complete

PROJECT AT A GLANCE

Source: Asian Development BankThis document must only be generated in eOps. 19062018153725962397 Generated Date: 20-Jun-2018 15:45:19 PM

1. Basic Data Project Number: 51180-001Project Name Bihar State Highways III Project Department

/DivisionSARD/SATC

Country India Executing Agency Bihar State Road Development Corporation Ltd.Borrower Government of India

2. Sector Subsector(s) ADB Financing ($ million)Transport Road transport (non-urban) 190.00

Transport policies and institutional development 10.00

Total 200.00

3. Strategic Agenda Subcomponents Climate Change Information Inclusive economic growth (IEG)

Pillar 2: Access to economic opportunities, including jobs, made more inclusive

Environmentally sustainable growth (ESG)

Global and regional transboundary environmental concerns

Climate Change impact on the Project

Medium

ADB Financing

Adaptation ($ million) 15.35

4. Drivers of Change Components Gender Equity and MainstreamingGovernance and capacity development (GCD)

Institutional development

Private sector development (PSD)

Public sector goods and services essential for private sector development

Effective gender mainstreaming (EGM)

5. Poverty and SDG Targeting Location ImpactGeographic TargetingHousehold TargetingSDG Targeting

NoNoYes

Rural High

SDG Goals SDG9, SDG13

6. Risk Categorization: Complex.

7. Safeguard Categorization Environment: B Involuntary Resettlement: A Indigenous Peoples: C.

8. Financing

Modality and Sources Amount ($ million)

ADB 200.00

Sovereign Project (Regular Loan): Ordinary capital resources 200.00

Cofinancing 0.00

None 0.00

Counterpart 104.00

Government 104.00

Total 304.00

I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on a proposed loan to India for the Bihar State Highways III Project. 2. The project will rehabilitate and upgrade about 230 kilometers (km) of state highways in Bihar state and improve road transport connectivity in line with the state’s road development plan for 2015–2035.1 It will involve (i) upgrading state highways to standard two-lane width with paved shoulders; and (ii) reconstructing, widening, and strengthening culverts and bridges. The project will include building institutional capacity of the state for road design and maintenance and incorporating appropriate new technologies in the state’s road subsector.

II. THE PROJECT A. Rationale 3. State context. Bihar is the 12th largest state in India by area, covering about 99,000 square kilometers (km2); the third most populous, with about 104 million inhabitants; and the sixth most densely populated. It is in the eastern region of the country, bordering Uttar Pradesh in the west, West Bengal in the east, and Jharkhand in the south. The Ganga River flows through the middle of the Bihar plain from west to east, physically dividing the state into northern and southern regions. The northern region is bordered by Nepal. In the past, Bihar has lagged behind other states in terms of social and economic development. Based on 2011–2012 data, the Government of India estimates that 34% of Bihar’s population lives below the poverty line, compared with 22% nationally.2 The annual per capita income in Bihar (₹29,178 at constant 2011 prices) was about 35% of the national average in 2016–2017, compared with about 28% in 2006. With increased investment in social infrastructure and improved governance, the state aspires to grow at a faster rate than the country average. In 2016–2017, the medium-term growth rate for gross state domestic product in Bihar was 10.3%, compared with 7.0% for the national economy.3 4. Road network. The road network of the state comprises 226,350 km as of 2017 (Table 1). All higher-class roads—national highways, state highways, and major district roads—are paved, but most rural roads are unpaved. During 2015–2016, in terms of road length per 100 km2, Bihar overtook the national average—219 km against 139 km. However, at 4.7 km per 100 km2,

the road density of state highways in Bihar is lower than the national average of 5.1 km per 100 km2 and is much lower than in other developed states in India.4

Table 1: Road Network in Bihar

No. Class of Road Length

(kilometer) 1 National highway 4,917 2 State highway 4,006 3 Major district road 11,146 4 Rural road 206,281

Total 226,350 Source: Bihar State Road Development Corporation Limited.

1 Government of Bihar, RCD. 2015. Road Master Plan for Bihar’s State Highway Development (2015–2035). Patna. 2 Government of India, Reserve Bank. 2018. Handbook of Statistics on Indian States, 2017–2018. New Delhi. 3 Government of Bihar, Finance Department. 2018. Economic Survey, 2017–2018. Patna. 4 Footnote 3, p. 133.

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5. Vehicles. The number of motorized vehicles registered in the state has increased from 1.96 million in 2009 to 5.48 million in 2016, an average annual increase of 20%. Of these, over 74% were two-wheelers, about 7% were cars and jeeps, and the balance were other categories, including trucks and buses. The average annual vehicle growth observed during 2009–2016 was over 17% for two-wheelers and 14% for cars.5 Vehicular densities and current road conditions require road capacity improvement and upgrading, which this project primarily seeks to address. 6. Road safety. The road accident fatality rate in Bihar is much higher than the national average. In 2016, 54% of road accidents in Bihar resulted in death against the national average of 27%. The absolute number of fatalities is likely to increase as traffic grows, having increased from 4,390 in 2009 to 4,901 in 2016. To counter the rapid rise in road accident fatalities, the project will put stronger emphasis on road safety measures and will improve awareness through road safety campaigns conducted for the affected villages. 7. Vision for road development. Bihar’s vision as stated in the road master plan (2015–2035) is “(t)here shall be good transport accessibility for all populations in the State of Bihar, with a high-quality, high-mobility road network available for the transport of people and goods.”6 The Government of Bihar has stepped up investments in the development of transport infrastructure and has been improving the state highways and major district roads through a combination of budgetary support, financial assistance from the Asian Development Bank (ADB) and the Japan International Cooperation Agency, and public–private partnerships (PPPs). The State Highways Development Program aims to widen all state highways to two lanes, and to improve bridges and district and rural roads. To achieve this, the road master plan estimates a large capital expenditure requirement of $15.8 billion for road improvements until 2035. At present, approximately $8 billion has been allocated for the same period. The road development master plan considers PPPs and some form of cess on fuel will contribute about $4 billion. These measures are aspirational, and it appears likely that the master plan investments can only be partially met. The government relies heavily on increased budget allocations and multilateral and bilateral agency borrowing. 8. Road institutions. The Road Construction Department (RCD) is the nodal department for the road subsector. Institutional capacity in the road subsector has been gradually built in Bihar, with support from ADB in prior loans. The Bihar State Road Development Corporation Limited (BSRDCL) functions as a special-purpose company under the RCD, with delegated powers and responsibilities. The BSRDCL has contributed significantly to the state’s ability in using multilateral and bilateral finance, and in developing projects under PPP.

9. Road maintenance. In Bihar, the RCD manages the national highways (except roads under the National Highway Authority of India), state highways, and major district roads on behalf of the Government of Bihar. The RCD is organized into four wings—north Bihar, south Bihar, national highway, and special project—which are responsible for construction and maintenance of roads. The RCD receives fiscal allocations from the Government of Bihar. In fiscal year (FY) 2017, the total allocation was ₹67.6 billion, which was about three times more than that in FY2007 and with an average annual increase rate of 12.1% since FY2007. Meanwhile, the funds available for road maintenance have also increased at a similar pace. Under the Bihar Road Assets Maintenance Policy 2013, 7,760 km of state highways and major district roads are currently maintained by 72 output- and performance-based road asset maintenance contracts.

5 Government of India, Ministry of Road Transport and Highways. 2018. Road Transport Yearbook, 2015–2016. New

Delhi. 6 Footnote 1, p. 3.

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10. Previous ADB loans to the Government of Bihar. Since 2008, ADB has provided four loans, amounting to $1.43 billion, to upgrade about 1,453 km of state highways and to construct a new bridge over the Ganga River near Patna.7 During the implementation of previous loans, the BSRDCL has gradually built institutional capacity, which is now reasonably robust. Previous loans have performed well, except for time overruns related to land acquisition and termination of large contracts. In the present proposal, these risks are mitigated since land acquisition is not significant and the size of contracts will be limited to an estimated $40 million. Advance contracting actions are under way for both works and supervision consultant contracts. With these measures, it is anticipated that the works can proceed without substantive delays. 11. Project objectives. While the government has been progressively improving carriageway widths of state highways using budgetary and multilateral financing, about 35% of these roads are yet to meet the minimum two-lane standard.8 The present proposal seeks to advance this government program to upgrade all state highways to at least standard two-lane widths and improve road safety. The roads selected in this project are from the overall master plan, based on (i) development priorities of the government, (ii) key infrastructure roads for agriculture- and industry-based activities, and (iii) the readiness to implement. The project roads selected are spread across Bihar’s rural areas that lack reliable road connectivity, resulting in limited access to health and educational institutions, commercial facilities, and government development agencies. The project will also establish a state institution, proposed by the RCD, to improve institutional capacity at a technical level and in a sustained manner. B. Impact and Outcome 12. The project is aligned with the following impact: road transport accessibility in the state of Bihar improved (footnote 1). The project will have the following outcome: transport efficiency and safety on selected state highways in Bihar improved.9 C. Outputs 13. Output 1: State highways widened and upgraded. About 230 km of state highways will be widened and upgraded to all-weather standards with road safety features. 14. Output 2: Bihar Road Research Institute established. The Bihar Road Research Institute (BRRI) in Patna will be established to institutionalize and sustain technical and management capacity of road agency staff. The BRRI will be operated and staffed by the RCD. 15. Value added by ADB assistance. The project seeks to continue ADB engagement with the road subsector in the state. The project is consistent with the strategic objective set out in the country partnership strategy for India, 2018–2022 on the development of the state core network of lagging states, and with the transport sector objective of increased, more efficient, and 7 ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Loan to India for the

Bihar State Highways Project. Manila; ADB. 2010. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant to India for the Bihar State Highways II Project. Manila; ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan for Additional Financing and Technical Assistance Grant to India for the Bihar State Highways II Project. Manila; and ADB. 2016. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant to India for the Bihar New Ganga Bridge Project. Manila. The status of these projects is covered in the Sector Assessment (accessible from the list of linked documents in Appendix 2).

8 Footnote 3, p. 136. 9 The design and monitoring framework is in Appendix 1.

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sustainable movement of people and goods.10 Notable value additions of previous ADB loans to the state include establishing the BSRDCL and building its management and implementation capacity, creating the road master plan (footnote 1), and assisting in the construction of the Bihar New Ganga Bridge. For this project, the establishment of a state institution, the BRRI, is proposed to institutionalize and sustain technical and management capacity over time. The BRRI would focus on areas such as industrial waste utilization in road construction, ground improvements, environmental pollution, road traffic safety, and road assets performance monitoring. The project will include assistance in constructing facilities to house the BRRI, establishing its operations by building capacity in areas mentioned above, and providing institutional support by preparing the operational plan. The RCD will fund the staffing and operations of the BRRI. Key staff of the BRRI will consist of a chief engineer, two superintending engineers, three executive engineers, and four assistant engineers. The RCD will also provide administrative and support staff. D. Summary Cost Estimates and Financing Plan 16. The project is estimated to cost $304 million (Table 2). 17. ADB will finance from its ordinary capital resources a part of the project costs for consulting services and goods, service and civil works contracts, as well as recurrent costs and taxes, as relevant. The project will be implemented over a 4-year period, commencing in November 2018. Detailed cost estimates by expenditure category and by financier are included in the project administration manual (PAM).11

Table 2: Summary Cost Estimates ($ million)

Item Amounta A. Base Costb 1. State highways widened and upgraded 220.0 2. Bihar Road Research Institute established 10.0 3. Land acquisition, resettlement, and rehabilitation 23.0 4. Consulting services 10.5 5. Project management 5.5 Subtotal (A) 269.0 B. Contingenciesc 21.0 C. Financial Charges During Implementationd 14.0 Total (A+B+C) 304.0

a Includes taxes and duties of $25.08 million to be financed from government resources by cash contribution and the Asian Development Bank (ADB). Such amount does not represent an excessive share of the project cost. The amount of taxes and duties to be financed by ADB (i) are within the reasonable threshold identified during the country partnership strategy preparation process, (ii) represent only 8% of the investment plan, and (iii) apply only to ADB-financed expenditures. The financing of taxes and duties is considered material and relevant to the success of the project.

b In mid-2018 prices as of 25 May 2018. c Physical contingencies computed at 5% for civil works. Price contingencies computed at an average of 1.5% on

foreign exchange costs and 5.0% on local currency costs; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate.

d Includes interest and commitment charges. Interest during construction for the ordinary capital resources loan has been computed at the 5-year forward London interbank offered rate (LIBOR) plus an effective contractual spread of 0.5% and maturity premium of 0.1%. Commitment charges for the ordinary capital resources loan are 0.15% per year to be charged on the undisbursed loan amount.

Source: Asian Development Bank estimates.

10 ADB. 2017. Country Partnership Strategy: India, 2018–2022—Accelerating Inclusive Economic Transformation.

Manila. 11 Project Administration Manual (accessible from the list of linked documents in Appendix 2).

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18. The government has requested a regular loan of $200 million from ADB’s ordinary capital resources to help finance the project. The loan will have a 25-year term, including a grace period of 5 years; an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility; a commitment charge of 0.15% per year; and such other terms and conditions set forth in the draft loan and project agreements. The government has requested the straight-line repayment option. Based on the straight-line method, the average maturity is 15.25 years, and the maturity premium payable to ADB is 0.1% per year. 19. The summary financing plan is in Table 3.

Table 3: Summary Financing Plan Source

Amount ($ million)

Share of Total (%)

Asian Development Bank Ordinary capital resources (regular loan)

200.0

66.0

Government 104.0 34.0

Total 304.0 100.0 Source: Asian Development Bank.

20. Climate adaptation is estimated to cost $20.42 million. ADB will finance 75.2% of adaptation costs. Details are in the PAM and in the climate change assessment.12 E. Implementation Arrangements 21. The executing agency for the project will be the Government of Bihar, acting through the BSRDCL. The BSRDCL will engage construction supervision consultants (CSC) as the engineers for the works contracts. Procurement (including consulting services) to be financed by ADB will follow the ADB Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers (2017, as amended from time to time). 22. The implementation arrangements are summarized in Table 4 and detailed in the PAM.

Table 4: Implementation Arrangements Aspects Arrangements Implementation period November 2018–December 2022 Estimated completion date 31 December 2022 Estimated loan closing date 30 June 2023 Management

(i) Executing agency Government of Bihar, acting through BSRDCL (ii) Implementation units Four implementation units under BSRDCL with 17 staff

Procurement OCB with national advertisement

10 contracts $230.0 million

Consulting services Construction supervision consultants (international, FTP, QCBS 80:20)

62 p-m of international services and 2,722 p-m of national services (2 contracts)

$10.0 million

Institution capacity consultants (international, BTP, QCBS 80:20)

15 p-m of international services and 9 p-m of national services

$0.5 million

12 Climate Change Assessment (accessible from the list of linked documents in Appendix 2).

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Aspects Arrangements Retroactive financing and/or advance contracting

BSRDCL will use retroactive financing and advance contracting for civil works and consulting services. ADB will provide retroactive financing to finance expenditures incurred prior to loan effectiveness but not earlier than 12 months from the date of the legal agreements.

Disbursement The loan proceeds will be disbursed following ADB’s Loan Disbursement Handbook (2017, as amended from time to time) and detailed arrangements agreed between the government and ADB.

ADB = Asian Development Bank, BSRDCL = Bihar State Road Development Corporation Limited, BTP = biodata technical proposal, FTP = full technical proposal, OCB = open competitive bidding, p-m = person-months, QCBS = quality- and cost-based selection. Source: Asian Development Bank.

III. DUE DILIGENCE

A. Technical 23. The BSRDCL’s consultants prepared detailed design documents for the proposed roads for ADB financing, incorporating ADB requirements of economic, social, and environmental studies into the consultants’ terms of reference. The economic assessment and due diligence on environmental and social safeguards were conducted to ensure that the design complies with ADB requirements. The engineering designs were prepared to avoid land acquisition, minimize social and environmental impacts, incorporate road safety, and mitigate identified climate change risks, particularly extreme flooding. To mitigate climate change risks, adaptation will include raising embankment heights, increasing vent of culverts, improving drains, and increasing the height of bridges. In addition, advance actions were taken to ensure that construction can start early. These measures to improve project readiness will facilitate faster project implementation. B. Economic and Financial 24. The economic assessment for the five project roads was carried out in accordance with ADB’s Guidelines for the Economic Analysis of Projects (2017).13 The major benefits are savings in vehicle operating costs and passenger travel time. The estimated economic internal rates of return (EIRR) range from 11.3% to 20.4% and are averaged at 16.4%. The sensitivity analysis indicates that the project has an EIRR above 9.0%. If a 20.0% cost increase was combined with a 20.0% benefit reduction, the EIRR would still be 10.8% for the whole project. Thus, the proposed improvements are economically viable. The sensitivity analysis also showed that the EIRR was more sensitive to changes in economic benefits. For this reason, the state government needs to pay attention to socioeconomic development of the project area, fostering local transport services, and increasing incomes for rural road users. In terms of financial sustainability, the government will not adopt toll collection during operation. The annual average incremental recurrent costs associated with the project are estimated to be about 1.0% of the maintenance budget of the RCD, and it is thus reasonable to expect that the budget allocated will be sufficient to meet the maintenance costs. C. Governance 25. Policy, legal, and institutional capacity. The BSRDCL was incorporated on 20 April 2009 under the Companies Act of 1956 and is a wholly owned company of the Government of Bihar, established to develop, execute, manage, and maintain all types of roads, highways, and

13 ADB. 2017. Guidelines for the Economic Analysis of Projects. Manila.

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bridges. The BSRDCL has an 11-member board of directors and is headed by a managing director, with about 114 staff members. The corporate structure was developed along good-practice principles, and the organization is developing a good understanding of business practices and commercial ability and aims to provide good standards with regard to safety, performance, and user satisfaction and to operate under sound ethical standards. 26. Financial management. The financial management assessment was conducted in May 2018 in accordance with ADB’s Guidelines for the Financial Management and Analysis of Projects and the Financial Due Diligence: A Methodology Note.14 The financial management assessment considered the capacity of the BSRDCL, including funds flow arrangements, staffing, accounting and financial reporting systems, financial information systems, and internal and external auditing arrangements. The BSRDCL is experienced and familiar with managing ADB-financed projects. The overall financial management arrangements are considered satisfactory, and the overall risk is moderate, mainly because the position of the chief account officer is still vacant. The BSRDCL will fill this position before January 2019. 27. Procurement. The project procurement risk is rated low. BSRDCL has substantive prior experience with ADB procurement, including large contracts using international advertisement, such as the New Ganga Bridge. For this project, the civil works packages will be via national advertisement due to the smaller contract value. BSRDCL has also procured concessionaires under PPP contracts, including operate-maintain-and-transfer type contracts, so its procurement experience is extensive. Contracts under the project will use ADB standard bidding documents.

28. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the Government of India, the Government of Bihar, and the BSRDCL. The specific policy requirements and supplementary measures are described in the PAM. D. Poverty, Social, and Gender 29. Poverty reduction and social impact. Households along project roads were surveyed and indicated that poor road conditions were preventing safe and reliable travel, especially at night and during bad weather. Communities indicated that positive benefits of the project roads will include (i) improved access to health and education facilities, (ii) faster access to market places, (iii) increased job opportunities, and (iv) better public and private transport options. An efficient road network linking villages, towns, and cities will provide stronger links between rural communities and urban hubs. Road development encourages other development initiatives, which together considerably stimulate economic growth. The improvements will significantly improve the socioeconomic situation and enhance poverty reduction in the beneficiary districts and the state. Project roads will directly pass through 197 villages located in six districts. 30. Gender and development. The project is categorized effective gender mainstreaming. A gender action plan (GAP) has been prepared. Inequalities between men and women in Bihar are most obvious in (i) health and education, (ii) economic development, (iii) violence against women, (iv) participation in public life and policy making, and (v) social attitudes and gender stereotyping. Gender differentials adversely affect women more than men. Most women in the project area are homemakers, as rural women rarely work outside the home unless they are very poor. During gender assessment of the five roads—when 300 women were interviewed and 30 women-specific focus group discussions were conducted—women indicated that improved road conditions would

14 ADB. 2015. Financial Management and Analysis of Projects. Manila; and ADB. 2009. Financial Due Diligence: A

Methodology Note. Manila.

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provide better access to health care services, higher levels of education, economic opportunities, and social interaction. Shorter travel times will allow more time for productive activities, health care, and self-development. However, road construction and improvements may also lead to potential negative impacts such as the spread of sexually transmitted infections, human trafficking, and road safety issues. 31. Based on findings from consultations with the local community, including women and the executing agency, practical and implementable gender mainstreaming activities have been incorporated into the project. Some key activities include (i) raising awareness among community members and contractors’ personnel on sexually transmitted infections, including HIV/AIDS, health and hygiene, and human trafficking; (ii) incorporating specific needs of vulnerable users, e.g., the elderly, women, children, and disabled people, in the design and modification of roads; (iii) community participation in road safety awareness campaigns; and (iv) livelihood skills training for affected communities, including women, to receive micro enterprise development support. 32. In output 2, which covers the establishment of the BRRI, the GAP envisages (i) 20% of staff assigned to the BRRI are to be women; and (ii) impact assessment of skills training and income-generation activities, and various awareness campaigns to be completed. In addition, the BSRDCL staff will be oriented to improve gender-sensitive designs, measures, and implementation consistent with ADB’s Policy on Gender and Development.15 33. The project also provides for a robust mechanism and adequate arrangements to ensure regular implementation, monitoring, and reporting of gender mainstreaming activities based on sex-disaggregated data collection. A gender specialist consultant will be engaged to implement the GAP, supported by a nongovernment organization. A gender focal officer in the BSRDCL is assigned to ensure GAP implementation and provide overall supervision and coordination with other government departments, as needed. Budgetary provision to implement the GAP has been kept as component A of the project cost, which covers land acquisition, resettlement, and rehabilitation. 34. Labor. Provisions in the bidding documents for the civil works contractors, among others, are to (i) ensure that all applicable labor laws are complied with, including the prohibition against employing children in construction; (ii) encourage the employment of the poor, particularly women; and (iii) ensure that wages for men and women are equal for work of equal value.

E. Safeguards 35. In compliance with ADB’s Safeguard Policy Statement (2009), the project’s safeguard categories are as follows.16 36. Environment (category B). The project involves improvement of five existing state highways totaling about 230 km from single or intermediate lanes to two lanes with paved shoulders. No significant, irreversible environmental impacts are anticipated and none of the roads are located inside or near protected or environmentally sensitive areas. An initial environmental examination (IEE) has been prepared and was disclosed on the ADB website. Anticipated environmental impacts from the project entail typical issues related to road construction, such as removal of trees, generation of dust, noise, exhaust, waste from construction and worker camps, water contamination, occupational health and safety, slope failures, erosion, and siltation. Mitigation measures to address all of these have been included in

15 ADB. 2003. Policy on Gender and Development. Manila. 16 ADB. Safeguard Categories. https://www.adb.org/site/safeguards/safeguard-categories.

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the environmental management plan, which is part of the bid documents, and will be required to be implemented by the contractor. Meaningful consultations have been held with affected persons and other key stakeholders, such as forestry officials, while preparing the IEE. Concerns of affected people and stakeholders will continue to be addressed during project implementation through the grievance redress mechanism proposed in the IEE. 37. The general manager of the BSRDCL will be responsible for the overall implementation of safeguards under the project. At the project implementation unit (PIU) level, the deputy general manager of each of the four PIUs will serve as the focal person for environment and social safeguards supported by two CSC firms which will have environment specialists in their team. The civil works contractors will implement the environmental management plan and will include environment, health, and safety officers in their teams. Supervision and monitoring of the contractor will be conducted by the CSC. An initial coordination-cum-training workshop will be organized by the BSRDCL to clarify the roles and responsibilities of each party for complying with environment safeguard requirements. 38. Involuntary resettlement (category A). The project was developed with a commitment to minimize land acquisition through appropriate technical design. While road widening from single lane to two lanes will occur within existing rights-of-way, some land acquisition cannot be avoided where alignments will be improved for safety reasons. A 100% census of affected households was conducted based on the detailed design. Five resettlement plans and a due diligence report were prepared in accordance with ADB’s Safeguard Policy Statement and the policies and regulations of the governments of India and Bihar. 39. The project will require 10.74 hectares (ha) of land consisting of 8.23 ha of private land and 2.51 ha of government land (including 2.00 ha of vacant land owned by the BSRDCL to be used for the BRRI building). The total number of affected households are 4,021 (26,538 people), of which 439 are titled households and 3,582 are nontitled households (including sharecroppers, tenants, and employees). A total of 4,818 private and community structures will be affected by land acquisition and clearing of informal settler structures from the government-owned right-of-way. Some 1,650 households will be physically displaced and 2,371 will be economically displaced. About 3,618 households will lose more than 50% of their structure and may need to relocate. The entitlement matrix provides for specific compensation and resettlement assistance for the types of losses caused by the project. Compensation for lost assets will be paid based on replacement cost. Resettlement assistance for lost income and livelihoods will be provided to titleholders and nontitleholders alike, with special measures available to vulnerable households. Resettlement plans have been disclosed on the ADB and BSRDCL websites, and to affected communities through local government offices. The existing Environment, Social Development, and Resettlement Cell of the BSRDCL will implement this project. The BSRDCL will engage an external expert to advise on involuntary resettlement safeguard compliance. The total cost of resettlement is estimated at $23 million. 40. Indigenous peoples (category C). During project preparation, social assessment noted that the scheduled tribes live in the project area as individual households and not as indigenous peoples communities with distinct practices and collective attachment to land. The assessment indicates that scheduled tribe households are well integrated in the general population and will not require indigenous peoples safeguards under the project. One scheduled tribe household will be affected by land acquisition along State Highway 58. The resettlement plan provides that the household will receive additional compensation as a vulnerable affected household, in addition to compensation at replacement cost, transition allowances, and income restoration.

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F. Summary of Risk Assessment and Risk Management Plan 41. Significant risks and mitigating measures are summarized in Table 5 and described in detail in the risk assessment and risk management plan.17

Table 5: Summary of Risks and Mitigating Measures Risks Mitigation Measures Poor management of subcontractors may lead to contract termination and implementation delays

For larger contracts, contractors will subcontract substantial portions of work. Poor management of subcontractors and poor performance of subcontractors would lead to terminated subcontracts and possibly the main contract itself, leading to time overruns. Size of contracts for this project will be limited to $40 million or less, which will minimize the number of subcontractors. There are good quality and financially capable contractors in India that can do the work.

Extreme weather events that are beyond projections may cause significant damages to the project roads

Negative impacts of extreme weather on potential countermeasures have been identified in the initial environmental examination. More detailed site-specific risks and countermeasures will be duly considered in the environmental management plan.

ADB = Asian Development Bank, BSRDCL = Bihar State Road Development Corporation Limited. Source: Asian Development Bank.

IV. ASSURANCES

42. The Government of India, the Government of Bihar, and the BSRDCL have assured ADB that implementation of the project shall conform to all applicable ADB policies, including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, and disbursement as described in detail in the PAM and loan documents. 43. The Government of India, the Government of Bihar, and the BSRDCL have agreed with ADB on certain covenants for the project, which are set forth in the draft loan agreement and project agreement.

V. RECOMMENDATION

44. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve the loan of $200,000,000 to India for the Bihar State Highways III Project, from ADB’s ordinary capital resources, in regular terms, with interest to be determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility; for a term of 25 years, including a grace period of 5 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan and project agreements presented to the Board.

Takehiko Nakao President

23 October 2018

17 Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).

Appendix 1 11

DESIGN AND MONITORING FRAMEWORK Impact the Project is Aligned with Road transport accessibility in the state of Bihar improved (Road Master Plan for Bihar’s State Highway Development [2015–2035])a

Results Chain Performance Indicators with

Targets and Baselines

Data Sources and Reporting

Mechanisms Risks Outcome By 2023: Transport efficiency and safety on selected state highways in Bihar improved

a. Annual average daily traffic on project roads increased to 1,136,545 vehicle-km (2017 baseline: 762,795 vehicle-km) b. Average travel time on the project roads reduced by 20% (2017 baseline: 2.4 minutes per km) c. Reported serious and fatal accidents on the project roads reduced by 20% (2017 baseline: 60 per year)

a.–c. Post-implementation measurement endorsed by RCD c. Data from nearest police stations

Extreme weather events that are beyond projections may cause significant damages to the project roads

Outputs 1. State highways widened and upgraded

By 2022: 1a. At least 230 km of state highways widened and upgraded to all-weather standards with road safety featuresb (2017 baseline: 0) 1b. EWCD-friendly features installed in at least 100 locationsc (2017 baseline: 0) 1c. Ten trees planted for every tree removed during construction (2017 baseline: Not applicable) 1d. At least 20% of skilled and unskilled labor employed by civil works contractors are women (2017 baseline: Not applicable) 1e. At least 50 community members, linked with at least 2 poverty alleviation programs, of which at least 15 are women, from the project influence areas reported increased knowledge in livelihood skillsd

(2017 baseline: 0) 1f. At least 3,000 community members, of which at least 30% are women, reported increased awareness of road safety, sexually transmitted infections, health and hygiene, and trafficking (2017 baseline: 0)

1a.–f. Post-implementation progress report endorsed by RCD 1e. Post-training survey of training participants

Increased domestic demand for skilled staff leads to high turnover in key BSRDCL staff during implementation

12 Appendix 1

Results Chain Performance Indicators with

Targets and Baselines

Data Sources and Reporting

Mechanisms Risks 2. Bihar Road Research Institute established

By 2022: 2a. Facility constructed for the Bihar Road Research Institute in Patna (2017 baseline: Not applicable) 2b. At least 20 staff assigned to the Bihar Road Research Institute, of which 20% are women (2017 baseline: 0) 2c. Operational plan prepared for Bihar Road Research Institute (2017 baseline: Not applicable)

2a.–c. Post-implementation progress report endorsed by RCD

Key Activities with Milestones 1. State highways widened and upgraded 1.1 Award and mobilize construction supervision consultants by Q4 2018. 1.2 Award contracts for widening and upgrading about 230 km of state highways starting from Q4 2018,

and complete construction by Q3 2022. 1.3 Conduct orientation programs for contractors’ personnel to assess specific needs of vulnerable users,

i.e., EWCD to be taken into consideration, by Q4 2020. 1.4 Conduct post-implementation measurement of indicators by BSRDCL by Q4 2022. 2. Bihar Road Research Institute established 2.1 Identify site for the institute in Patna, Bihar by Q2 2018. 2.2 Award and mobilize consultants for preliminary design of institute by Q1 2019. 2.3 Start construction works by Q1 2020. 2.4 Include breastfeeding room in institute by Q4 2020. 2.5 Inaugurate functioning institute by Q3 2022. Project Management Activities Establish PIUs by Q2 2018. Complete resettlement plan activities by Q4 2018. Ensure adequate mechanism for oversight of GAP implementation is in place at BSRDCL and PIUs. Submit monitoring reports on GAP every quarter. Train 100% of project staff (PIUs and PMU) on GAP provisions and ADB’s requirement on GAP implementation, monitoring, and reporting by Q4 2020. Inputs ADB: $200 million (loan) Government: $104 million Assumptions for Partner Financing Not applicable

ADB = Asian Development Bank, BSRDCL = Bihar State Road Development Corporation Limited, EWCD = elderly, women, children, disabled, GAP = gender action plan, km = kilometer, PIU = project implementation unit, PMU = project management unit, Q = quarter, RCD = Road Construction Department.

a Government of Bihar, Road Construction Department. 2015. Road Master Plan for Bihar’s State Highway Development (2015–2035). Patna.

b Road safety features include geometric improvement, introduction of safety and crash barriers, improved drainage, rigid pavement in urban areas (reduces likelihood of potholes), and proper pavement markings.

c EWCD-friendly features include well-marked crossings, safety signage, and pedestrian walkways. d Initial survey will identify potential livelihood skills for training of affected communities, including women. Source: Asian Development Bank.

Appendix 2 13

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=51180-001-3

1. Loan Agreement 2. Project Agreement 3. Sector Assessment (Summary): Transport (Road Transport [Nonurban]) 4. Project Administration Manual 5. Contribution to the ADB Results Framework 6. Development Coordination 7. Economic and Financial Analysis 8. Country Economic Indicators 9. Summary Poverty Reduction and Social Strategy 10. Risk Assessment and Risk Management Plan

11. Climate Change Assessment 12. Gender Action Plan

13. Initial Environmental Examination 14. Resettlement Plan: Ghogha–Panjwara 15. Resettlement Plan: Akbarnagar–Amarpur

16. Resettlement Plan: Bihiya–Jagdishpur–PiroBihta 17. Resettlement Plan: Udakishanganj–Bhatgawa 18. Resettlement Plan: Kadirganj–Khaira 19. Social Safeguards Due Diligence Report