Lessons

India: Rural Roads Sector II Investment Program (Tranche 5 and Multitranche Financing Facility)

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Lessons

Careful scheduling, better contract management, and on-site monitoring can help minimize implementation delays.

This investment program experienced implementation delays, which reduced efficiency and postponed the project’s anticipated socioeconomic benefits. The government should analyze the reasons for these delays and develop practical measures to prevent their recurrence, including careful scheduling of project implementation, better contract management such as ensuring timely claims and payments, and on-site monitoring of contractor performance. Subprojects with land acquisition issues might require a longer time to resolve; this should be identified during subproject selection and addressed in subsequent tranches.

Project Cycle Stage: 
Preparation
Implementation

Promoting the local contractor industry requires better understanding and continued support from government.

All civil works contractors for this investment program were local, and some were small companies with limited access to equipment, financial resources, and skilled and qualified staff. Because of the increasing length of the roads being constructed under the Prime Minister’s Rural Roads Program (PMGSY), the industry was overstretched in the program areas.  Implementation delays have occurred more frequently and became an outstanding issue in the country. By providing more capacity building programs and necessary technical and financial support, the government can foster the development of the local contractor industry.  This would also give government a better understanding of local contractors’ existing capacity, which it can use to enhance future contract packaging and procurement.

Project Cycle Stage: 
Implementation

Price escalation can be an issue for short-duration civil works contracts.

The allocations for some materials, especially cement, steel, and asphalt, were substantially adjusted during implementation to meet large-scale price escalations that caused the contractors to work at a slow pace. The adjustment was made despite the18-month minimum contract duration required by the Asian Development Bank (ADB) procurement guidelines for price adjustment to be included in civil works contracts which, for this project, had to follow the standard 12-month contract period for PMGSY works.  If this is the case in future projects, price escalation can be an issue. Measures to address this potential issue should be put in place during project preparation.

Project Cycle Stage: 
Preparation
Implementation

Bigger-sized contracts can help mitigate the risk of unwarranted multiple contract awards.

The civil works packages in this program were tendered using national competitive bidding (NCB) procedures.  Some civil works packages received no response, even after many calls. Rebidding the packages slowed down the procurement process. Meanwhile, the ADB procurement review revealed that some contractors had been awarded more than one contract and that most of them had submitted bids for multiple contracts within a district. The experience suggests that the $1 million threshold for NCB contracts did not work to attract as many local contractors as possible; or that there was an oversupply of contracts than qualified contractors.  Under the scenario, the size of the packages should have been reviewed by ADB in close consultation with the executing and implementing agencies.  Bigger-sized contracts should have been considered to attract bigger contractors and mitigate the risk of unwarranted multiple contracts that can lead to the recruitment of unqualified subcontractors.

Project Cycle Stage: 
Implementation

Monitoring of gender-disaggregated key indicators can enhance the gender performance of infrastructure investments.

For investments in physical infrastructure to be effective and sustainable, programs needs to focus more on sex-disaggregated data analysis. This will help bring forward ADB’s gender equality agenda in the road subsector where infrastructure improvements have a high potential of improving women’s access to reproductive health, education, movable assets, employment, and nutrition. Monitoring of sex-disaggregated key indicators should be incorporated in ongoing and future road investment programs.

Project Cycle Stage: 
Preparation
Implementation

Well-prepared program performance reports are crucial.

Where issues and actions to be taken are documented to ensure that lessons identified in earlier tranches under an MFF are captured in the design of succeeding tranches.

Project Cycle Stage: 
Completion and Evaluation

A thorough sector-level demand analysis is crucial to identify targets and plans.

The provision for price escalation should be included in the contracts to avoid implementation delays.

Also, the size of contract packages should be adjusted to attract bigger contractors to speed up the procurement process.

Project Cycle Stage: 
Preparation

Revisions in targets of MFFs should be clearly reported in periodic financing request of succeeding tranches.

Sex-disaggregated key indicators should be incorporated in ongoing and future investment programs. Also, to better monitor the achievements under an MFF, any revisions in the targets of the MFF entail a revised DMF and should be clearly reported in the PFRs of succeeding tranches. In assessing the economic benefits, this validation notes that in cases where road projects promote substantial economic development such as rural roads, the level of generated traffic needs to be explicitly considered, estimated, and valued accordingly in terms of consumers’ surplus. It is incorrect to value generated traffic in terms of vehicle operating cost savings.

Project Cycle Stage: 
Preparation
Project Identification/ Preparation
Due Diligence
Background

Inadequate road connectivity has been an obstacle to economic growth in rural India. To address the issue, the government launched the Prime Minister’s Rural Roads Program (PMGSY) in 2000.  PMGSY is expected to upgrade about 738,000 kilometers (km) of rural roads to an all-weather standard at a total estimated cost of about $30 billion.  Its budget requirement for 2006−2010 was estimated at $11 billion, 40% of which would be met by the government, and 7% by development partners including the Asian Development Bank (ADB). After one loan, the government requested for further ADB assistance under a new lending instrument—the multitranche financing facility (MFF).  ADB approved its first MFF in December 2005, with an allocation of up to $750 million, to support India’s Rural Roads Sector II Investment Program.

This report covers the entire investment program, implemented in the states of Assam, Chhattisgarh, Madhya Pradesh, Orissa, and West Bengal, and tranche 5, the last loan under the MFF.  Tranche 5 was approved for $222.20 million in March 2010. As with the investment program and projects 1−4, it aimed to help reduce poverty and deprivation and support the economic growth of communities connected by the project roads. Its intended outcome was improved connectivity of rural communities to district headquarters, markets, and other centers of economic activity.  It had two planned outputs (i) construction and upgrading of rural roads to an all-weather standard, and (ii) improved community participation.

Against a target of 4,709.5 kilometers (km), tranche 5 project constructed or upgraded 4,476.7 km of rural roads, considerably improving connectivity in the project areas and yielding significant socioeconomic impacts that directly benefited about 1.098 million people. It brought to 13,100 km the rural roads built or enhanced by the investment program, and the total number of beneficiaries to about 5.4 million people. Community participation was improved by consulting with all affected communities. Information and aspirations captured informed the design of subprojects.

Despite a substantial reduction in the program target from about 30,000 km during appraisal to 13,891 km during the preparation of the five projects and an overall implementation period that almost doubled, the scope of the investment program generally aligned with the original design and the respective project objectives identified during preparation were substantially achieved. Government decision to finance a portion of the program’s original scope prompted the reduction in target.  Aside from natural and social reasons, weak capacity of local contractors was a major obstacle to the timely completion of projects 1−5.

Substantial delivery of the planned outputs has improved rural communities’ connectivity and access to markets, government services, and health and education facilities.  As of project completion review, average travel time to workplaces had decreased by 0.75 hour.  Daily public transport services remarkably increased for all vehicle types. Frequency of clinic or hospital visits rose by 5% for those visiting at least once a month.  Along with other rural development schemes, the improved roads had and will continue to significantly benefit the residents of the program areas, especially the poor.

The executing agencies for the investment program and all its tranches were the Ministry of Rural Development at the central level and the state governments at the state level. 

Project Information
Project Name: 
Rural Roads Sector II Investment Program (Tranche 5 and Multitranche Financing Facility)
Report Date: 
July, 2018
Main Sector: 
Transport
Country: 
India
Project Number: 
37066-013
Report Type: 
PCR
Project/Modality: 
MFF
Themes: 
Inclusive Economic Growth
Governance and Capacity Development
Gender Equity and Mainstreaming
SDG: 
Goal 8: Decent Work and Economic Growth
Goal 1: No Poverty
Goal 3: Good Health and Well-Being
Sub Sector: 
Road transport (non-urban)
Loan Number: 
2651
Source of Funding: 
OCR
Date Approved: 
20 December 2005
Report Rating: 
Successful

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