Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00004808 IMPLEMENTATION COMPLETION AND RESULTS REPORT ON A LOAN IN THE AMOUNT OF US$350 MILLION TO THE REPUBLIC OF INDIA FOR THE SECOND KARNATAKA STATE HIGHWAY IMPROVEMENT PROJECT October 23, 2019 Transport Global Practice South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective July 11, 2019) Currency Unit = Indian Rupees (INR) INR 68.36= US$1 FISCAL YEAR April1 - March 30 ABBREVIATIONS AND ACRONYMS AADT Annual Average Daily Traffic ADB Asian Development Bank BOT Build, Operate, Transfer CPS Country Partnership Strategy CRN Core Road Network DBFOMT Design, Build, Finance, Operate, Maintain, and Transfer EIRR Economic Internal Rate of Return E-LMS E-Learning Management System ENPV Economic Net Present Value EPC Engineering, Procurement, and Construction GAAP Governance and Accountability Action Plan GoK Government of Karnataka HDM Highway Development and Management Model ICR Implementation Completion and Results Report ICT Information and Communication Technology IDSAP Institutional Development and Strengthening Action Plan IEG Independent Evaluation IRI International Roughness Index ISO International Organization for Standardization ISR Implementation Status and Results Report IT Information Technology IUFR Unaudited Internal Financial Report KPWD Karnataka Public Works, Ports, and Inland Water Transport Department KRAMS Karnataka Road Asset Management System KRDCL Karnataka Road Development Corporation Limited KSHIP Karnataka State Highway Improvement Project MDR Major District Road MIS Management Information System MPI Multidimensional Poverty Index NGO Nongovernmental Organization NPV Net Present Value PAP Project-Affected People PDO Project Development Objective PIU Project Implementing Unit PMGSY Pradhan Mantri Gram Sadak Yojana PPIAF-SNTA Public Private Infrastructure Advisory Facility-Sub-National Technical Assistance PPP Public-Private Partnership PRAMC Planning and Road Asset Management Centre RAP Resettlement Action Plans RPF Resettlement Policy Framework TRSC Traffic and Road Safety Cell VfM Value for Money VOC Vehicle Operating Cost Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Senior Global Practice Director: Guangzhe Chen Practice Manager: Shomik Raj Mehndiratta Task Team Leader(s): Ashok Kumar, Pratap Tvgssshrk ICR Main Contributor: Reenu Aneja TABLE OF CONTENTS DATA SHEET .....................................................................................................................1 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES...................................................... 5 A. CONTEXT AT APPRAISAL ................................................................................................... 5 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) ................................. 7 II. OUTCOME .................................................................................................................... 8 A. RELEVANCE OF PDOs ........................................................................................................ 8 B. ACHIEVEMENT OF PDOs (EFFICACY) .................................................................................. 9 C. EFFICIENCY ..................................................................................................................... 13 D. JUSTIFICATION OF OVERALL OUTCOME RATING .............................................................. 13 E. OTHER OUTCOMES AND IMPACTS (IF ANY)...................................................................... 13 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ............................. 15 A. KEY FACTORS DURING PREPARATION ............................................................................. 15 B. KEY FACTORS DURING IMPLEMENTATION ....................................................................... 16 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME 18 A. QUALITY OF MONITORING AND EVALUATION (M&E) ...................................................... 18 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ............................................... 19 C. BANK PERFORMANCE ..................................................................................................... 21 D. RISK TO DEVELOPMENT OUTCOME ................................................................................. 22 V. LESSONS AND RECOMMENDATIONS ........................................................................... 23 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ...................................................... 25 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION .................... 41 ANNEX 3. PROJECT COST BY COMPONENT ...................................................................... 44 ANNEX 4. EFFICIENCY ANALYSIS ...................................................................................... 45 ANNEX 6. BORROWER COMMENTS ................................................................................. 62 ANNEX 7. SUPPORTING DOCUMENTS ............................................................................. 63 ANNEX 8. COMPARATIVE ASSESSMENT OF STATE INITIATIVES ........................................ 64 The World Bank Second Karnataka State Highway Improvement (P107649) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P107649 Second Karnataka State Highway Improvement Country Financing Instrument India Investment Project Financing Original EA Category Revised EA Category Full Assessment (A) Full Assessment (A) Organizations Borrower Implementing Agency Karnataka Public Works Department and Karnataka Road Republic of India Development Corporation Limited Project Development Objective (PDO) Original PDO To accelerate the development of the Core Road Network through leveraging public sector outlays with private sector financing and improving the institutional effectiveness of the road sector agencies to deliver effective and safe roads to users. Page 1 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 440,000 182,630 182,630 TF-92428 350,000,000 295,213,354 295,213,354 IBRD-80220 Total 350,440,000 295,395,984 295,395,984 Non-World Bank Financing 0 0 0 Borrower/Recipient 155,000,000 246,786,646 231,126,646 Foreign Private Commercial 500,000,000 400,000,000 416,000,000 Sources (unidentified) Total 655,000,000 646,786,646 647,126,646 Total Project Cost 1,005,440,000 942,182,630 942,522,630 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 24-Mar-2011 17-Jul-2008 04-Dec-2013 31-Dec-2016 28-Dec-2018 RESTRUCTURING AND/OR ADDITIONAL FINANCING Amount Disbursed Date(s) Key Revisions (US$M) 23-May-2016 125.22 Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Reallocation between Disbursement Categories Change in Legal Covenants Change in Implementation Schedule KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Satisfactory Substantial Page 2 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 31-Aug-2011 Satisfactory Satisfactory 10.18 02 28-Mar-2012 Satisfactory Satisfactory 15.82 03 06-Oct-2012 Satisfactory Moderately Satisfactory 21.81 04 15-May-2013 Moderately Satisfactory Moderately Satisfactory 32.98 05 09-Jun-2013 Moderately Satisfactory Moderately Unsatisfactory 37.52 Moderately 06 23-Oct-2013 Unsatisfactory 40.82 Unsatisfactory 07 20-Jan-2014 Unsatisfactory Unsatisfactory 44.23 Moderately 08 02-Aug-2014 Moderately Unsatisfactory 57.14 Unsatisfactory Moderately 09 09-Feb-2015 Moderately Unsatisfactory 62.68 Unsatisfactory Moderately 10 31-Jul-2015 Moderately Satisfactory 81.22 Unsatisfactory Moderately 11 26-Feb-2016 Moderately Satisfactory 97.40 Unsatisfactory 12 03-Jun-2016 Moderately Satisfactory Moderately Satisfactory 125.22 13 13-Oct-2016 Moderately Satisfactory Moderately Satisfactory 136.91 14 20-Mar-2017 Satisfactory Moderately Satisfactory 156.94 15 14-Sep-2017 Satisfactory Moderately Satisfactory 193.28 16 04-Jun-2018 Satisfactory Moderately Satisfactory 259.49 17 07-Feb-2019 Satisfactory Moderately Satisfactory 286.46 SECTORS AND THEMES Sectors Major Sector/Sector (%) Transportation 100 Rural and Inter-Urban Roads 100 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Page 3 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Private Sector Development 32 Jobs 22 Job Creation 22 Public Private Partnerships 10 Public Sector Management 33 Public Administration 33 Transparency, Accountability and Good 33 Governance Urban and Rural Development 44 Urban Development 22 Urban Infrastructure and Service Delivery 22 Rural Development 22 Rural Infrastructure and service delivery 22 ADM STAFF Role At Approval At ICR Regional Vice President: Isabel M. Guerrero Hartwig Schafer Country Director: N. Roberto Zagha Junaid Kamal Ahmad Director: John Henry Stein Guanzhe Chen Practice Manager: Michel Audige Shomik Raj Mehndiratta Task Team Leader(s): Binyam Reja Ashok Kumar, Pratap Tvgssshrk ICR Contributing Author: Reenu Aneja Page 4 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context 1. At the time of appraisal in 2010, the state of Karnataka which is located in the southwest of India, had a total classified road network of about 2,08,262 km comprising 3,958 km of national highways (2 percent), 22,078 km of state highways (10 percent), 50,037 km of major district roads (MDRs) (22 percent), and 147,212 km of rural roads (66 percent). Road development in Karnataka was lagging behind the growth in vehicle registration. About 70 percent of the national highway network, 35 percent of state highway and 25 percent of MDRs in the state was in good condition (International Roughness Index [IRI] less than 4 m per km). As per Karnataka Public Works, Ports, and Inland Water Transport Department (KPWD) data, about 79 percent of the state highways and the MDRs were single-lane standard and 13 percent intermediate, and only 8 percent had two-lane or higher standards. As part of the overall road sector reform, the government of Karnataka (GoK) established the Karnataka Road Development Corporation Limited (KRDCL) in 1999 to develop state highways under public-private partnership (PPP) arrangement and adopted the necessary policy framework to enable private sector participation. 2. On the financing front, traditionally, the road network improvement and maintenance are funded through pay-as-you-go expenditure program financed from the state government budget (taxes, duties, and Central Government transfers). Only 53 percent of the road user charge collections were returned for development and maintenance of the road sector and the remaining cross- subsidized other sectors. The GoK prioritized the state highways and major district network by identifying about 25,000 km of the core road network (CRN) into double-lane standards at an estimated cost of US$10 billion. To accelerate CRN development, it shifted the financing framework for long-term road development through PPP and borrowing from financial institutions. It also passed a tolling policy to allow the KRDCL and private concessionaires to toll state highways and MDRs. 3. On the institutional side, building on the success of the World Bank supported Karnataka State Highway Improvement Project (KSHIP) 1, which laid the foundation for strategic plan for investments and institutional reforms, GoK finalized an Institutional Development and Strengthening Action Plan (IDSAP) and a Governance and Accountability Action Plan (GAAP) to improve the policy, institutional, and governance framework in the sector and to modernize the KPWD and KRDCL. 4. On the road safety front, Karnataka accounted for 7 percent of road fatalities in the country. 60-70 percent of these fatalities comprised pedestrians, non-motorized and slow-moving vehicles due to the lack of effective road safety management and enforcement; growing motorization and mixed traffic of the state; and the inadequate provision for road safety measures in engineering designs due to the lack of funds. 5. Rationale for Bank Assistance. The project was designed to support the state highway development program of the GoK, diversify financing strategy for road development and maintenance beyond government budget; and improve road safety management to reduce road accident fatalities and major injuries. These issues were critical priorities for GOK and consistent with the World Bank’s Country Strategy for India (FY2009-12), which supported infrastructure development, providing cutting-edge knowledge and lending solutions that match the needs of a middle-income country/state 1 Implemented from 2001-2007 Page 5 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) and supported strategic action on road safety. With the support of PPIAF-SNTA 2 and the Global Road Safety Facility trust fund, the project supported the GoK in the design and implementation of innovative highway financing and road safety interventions by carrying out road safety management capacity review. As the follow up to KSHIP1, the project objectives were considered an essential contribution to the State Highway Development Program of the Government. The approach of leveraging private sector financing was also consistent with the Government of India’s approach during the Eleventh Five Year Plan (2007-12) of encouraging private sector participation for infrastructure development. Theory of Change (Results Chain) 6. The project aimed at addressing issues of accelerating CRN improvement, providing sustainable financing for the road sector, improving road safety management in the state, and enhancing the institutional and governance capacity of the KPWD and KRDCL. The figure below indicates the theory of change for the Project. Figure 1. Theory of Change Note: LT = Long-term. Project Development Objectives (PDOs) 7. To accelerate the development of the Core Road Network through leveraging public sector outlays with private sector financing and improving the institutional effectiveness of the road sector agencies to deliver effective and safe roads to users. 2 Public Private Infrastructure Advisory Facility-Sub-National Technical Assistance of the World Bank. Page 6 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Key Expected Outcomes and Outcome Indicators 8. The PDO is a composite statement consisting of two main expected outcomes and the indicators for assessing the achievement of these are shown in the table below: Table 1. Indicators for Assessing Achievement of Outcomes Expected Outcomes Outcome Indicators • Accelerated development of core • Share of Core Road Network in good condition (IRI < 4) increases road network by leveraging public from 50 percent to 65 percent by EOP. sector outlay with private sector • Achievement by GoK in generating at least US$500 million in new financing private sector capital for CRN improvement and management by • Increased institutional end-of-project (EOP). effectiveness by providing • 15 percent reduction in Vehicle Operating Costs and 25 percent effective and safe network to road reduction in Travel Time Cost on project corridors by EOP. users • 30 percent reduction in road-accident related fatalities on safe corridor pilots by EOP. Components 9. The project consisted of four main components, as summarized in the following paragraphs: • Component 1: Road Improvement Works. This component supported capital improvement and maintenance works of the selected priority CRN through a combination of traditional contracts and PPP-Design, Built, Finance, Operate, Maintain and Transfer (DBFOMT - annuity) concessions. • Component 2: Highway Financing Modernization. This component assisted KRDCL in implementing the concept of co-financing with private financial institutions through technical assistance and pilot transactions to develop selected priority highways from the CRN. • Component 3: Road Safety Improvement. This component assisted GoK to respond to the growing road safety problems in Karnataka through comprehensive strategic and institutional measures. • Component 4: Road Sector Policy and Institutional Development. This component supported implementation of a new medium-term IDSAP for the period 2010–16 which was a continuation of institutional and capacity improvements achieved during the first KSHIP covering both the KPWD and the KRDCL. B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Revised PDOs and Outcome Targets 10. There was no revision to the PDO and however, the outcome target of leveraging private financing of US$500 million was reduced to US$400 million, as explained below. Revised PDO Indicators 11. There were no revisions to the PDO indicators. Page 7 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Revised Components 12. The project was restructured on May 23, 2016 to (a) Extend the loan closing date by 24 months to December 28, 2018; (b) Include changes in the scope of sub-activities under the Road Improvement and Highway Financing Modernization components and the costs of all four components due to: the shifting of two roads from DBFOMT concessions to item-rate contracts since the tendering process did not result in yielding value for money (VfM) for the state government through this model and reduction in the total length of roads financed under the Highway Financing Modernization Component (363 km against the original 400 km) after techno-economic feasibility studies; (c) Reallocate the loan proceeds across various categories to reflect the change in mode of contracting for the upgradation of about 260 km, from two DBFOMT Annuity concessions (under the Road Improvement Component A2, with World Bank loan support to the extent of 50 percent of the estimated project cost) to three item rate contracts (under the Road Improvement Component A1, with World Bank loan support to the extent of 80 percent of the contract price); (d) Extend the due dates for two legal covenants, namely, development of consolidated investment and borrowing plan for the CRN, by three years to December 31, 2017, and operationalization of the Road Asset Management System, by 17 months to April 30, 2017 due to delay in procurement and implementation; (e) Recalibrate the Results Framework including the reduction of the outcome target of generating private sector capital to US$400 million instead of US$500 million due reasons explained in (b) and (c) above; and (f) Make adjustment in the implementation and disbursement schedule. Other Changes 13. In addition to the above, from the appraisal time to the time of restructuring, the changes in the total project cost (due to the above changes) were offset on account of depreciation of the Indian Rupee against the U.S. dollar since the time of appraisal. Rationale for Changes and Their Implication on the Original Theory of Change 14. The rationale for these changes is summarized above. These changes did not affect the scope or PDO of the project; neither did they trigger any new safeguard policy nor affect the original theory of change. The overall implementation risk after these changes in funding arrangements was rated as Moderate at that time. II. OUTCOME A. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating Rating: High Page 8 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) 15. The PDO to “accelerate the development of the Core Road Network through leveraging public sector outlays with private sector financing and improving the institutional effectiveness of the road sector agencies to deliver effective and safe roads to users” remained highly relevant throughout the duration of the project and continues to be relevant to the state’s development priorities of improving the transport infrastructure to ensure competitiveness and economic growth. The PDO of development of the state highway network through private participation and improving institutional effectiveness of road agencies are essential to achieving the GoK’s Vision 2020 of making Karnataka a globally competitive destination and a leader among Indian states by developing infrastructure to boost the state’s productive potential and also institutionalizing good governance across the state through enhanced transparency, accountability, and participation. 16. The project aimed at achieving a more diversified sector financing for increased road infrastructure development and improving road safety management to reduce fatalities and injuries which aligned throughout the project duration with the World Bank Group’s (WBG’s) India Country Partnership Strategy (CPS). This objective remains highly relevant to the current WBG’s CPS (FY18– 22) 3, notably the second focus area on enhancing competitiveness and enabling job creation through improved connectivity and logistics by applying the maximizing finance for development approach to prioritize leveraging of private sector finance through innovative PPP structures, risk mitigation, and credit enhancement instruments. The second objective of improving institutional effectiveness contributes directly to the third engagement pillar of the current CPS of strengthening public sector institutions through enhanced capabilities. B. ACHIEVEMENT OF PDOs (EFFICACY) 17. The achievement of the PDO has been evaluated based on the accomplishment of the two PDO elements: • Objective 1: Accelerating the development of the Core Road Network through leveraging public sector outlay with private sector financing • Objective 2: Improving the institutional effectiveness of the road sector agencies to deliver effective and safe roads to users. Assessment of Achievement of Each Objective/Outcome Objective 1: Accelerating the development of the Core Road Network through leveraging public sector outlay with private sector financing 18. Component 1 (Road Improvement Works) and Component 2 (Highway Financing Modernization) contributed to the achievement of this objective. 19. Road Improvement Works. The project supported the development of the selected priority CRN by financing the capital improvement (upgrading and widening) and maintenance works on 831 km through a combination of traditional item-rate contracts (266 km + 264 km) and PPP-DBFOMT (Annuity - 301 km) concessions with environmental protection and conservation measures and social safeguard management. These roads have been constructed with enhanced road safety measures beyond adequate signage and markings such as dedicated slow traffic lanes delineated by raised pavement markers, grade separated pedestrian crossings, footpaths and junction designs, paved shoulder, and other safety devices according to safety standards prescribed by the Indian Road 3 Report No. 126667-IN dated July 25, 2018. Page 9 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Congress. The defect liability period for these roads is over, and the roads have been handed over to the KPWD for regular maintenance. The DBFOMT model was tested first time in the project in which the concessionaire was paid approximately 50 percent of the estimated construction cost in five installments as a lump-sum up-front payment during construction stage and the balance funds were paid to the concessionaire as biannual annuity payments (quoted by the bidder) during the operation and maintenance period. The private concessionaires have contributed US$101.94 million in the ratio of 70:30 debt and equity. The concession period of these contracts is 10 years and they are currently under the operation and maintenance phase of eight years. All works under the three contracts have been substantially completed, notwithstanding land issues in small and isolated stretches having a total length of about 13 km in new item-rate contracts and 260 m in one of the annuity packages though the traffic flow is not affected, and the roads are operational. 20. The new bidding document for this type of DBFOMT model was developed for the first time under the project and is now being replicated by the government for expressways, corridor development, and highways at the national as well as subnational levels. Based on the success and learning of the hybrid annuity model in highways, it has been customized to suit the requirements of the water and energy sector. The procurement method was chosen based on the globally accepted framework of VfM Analysis for which a customized tool was developed. 21. Highway Financing Modernization. The project provided advisory services to KRDCL in modernizing highway financing by leveraging funding from financial institutions, as well supported pilot transactions. a. Technical assistance and advisory services. The project supported financial planning and transaction advisory services, enabled KPWD to identify and prepare a plan (including a financing plan) to mobilize private financing for improving 24,800 km of core road network. The project contributed to the preparation of the financing strategy including mobilizing private financing and co-financing from domestic financial institutions and an innovative structure for term loan repayment by securitizing revenue from toll proceeds. The future projects are being designed based on the CRN and this financing strategy using toll revenues. A white paper on the KRDCL financial policy, corporate governance, and KRDCL reorganization was also prepared. b. Co-financing pilot transactions. The project has contributed to substantial improvement of 344 km of CRN (against the planned target of 363 km) to two-lane carriageway (7.0 m wide) with 1.5 m paved shoulder and 1.0 m earthen shoulder through the completion of the six DBFOMT concessions with environmental, social safeguard management and enhanced road safety measures. KRDCL has been able to mobilize US$97 million from the private sector, about 60 percent of the total construction cost of these packages. The balance 40 percent of the construction cost was paid up-front by the KRDCL from equal contribution from the World Bank loan and co-financing from a commercial bank—M/s Vijaya Bank. This approach of co-financing was successful in raising commercial financing by ringfencing toll revenue at a reduced cost of capital 4 resulting in reducing the financial burden of the state government. These roads are currently under the operation and maintenance phase of eight years and toll proceeds are being utilized to meet its payment obligations to the concessionaire. The work on the balance length of 19 km consisting of two bypasses and other isolated locations is delayed due to land acquisition and utility shifting (13 km) and ongoing works (6 km). 4Through this co-financing model, KRDCL was able to mobilize term loan at MCLR, which is the lowest term loan rate achievable and achieved by PSUs so far. Page 10 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) 22. Environmental management. The project also supported the introduction of good practices for environmental enhancement in all packages e.g. rehabilitation of pond sites to convert them into wayside recreational facilities for the road users, rehabilitation of burrow areas, groundwater recharging through water harvesting structures along project roads and specialized actions for wildlife protection in Bidar Chincholi stretch. Rating: Substantial Objective 2: Improving the institutional effectiveness of the road sector agencies to deliver effective and safe road to users 23. Component 3 (Road Safety Improvement) and Component 4 (Road Sector Policy and Institutional Development) contributed to the achievement of this objective. 24. Road safety improvement. The project contributed to road safety improvement in Karnataka through capacity building, institutional and policy development, and the implementation of a safe corridor demonstration project. a. Institutional and policy development. GoK has adopted a Karnataka Road Safety Policy to reduce road accidents and fatalities by 25 percent and 30 percent, respectively which is being implemented by the Traffic and Road Safety Cell (TRSC). GoK has also established a Karnataka State Road Safety Authority to oversee implementation of the Road Safety Program. KPWD adopted Standard Operating Procedures and protocols for identification and rectification of blackspots; a yearly rectification program has been prepared and about 143 blackspots were treated in FY18–19. Gok has also established a separate budget ahead for the road safety program in FY17–18. b. Safe corridor demonstration approach. The project has successfully implemented a road safety demonstration corridor on a stretch of 62 km (SH20 from Belgaum to Yaragatti) comprising engineering measures (40 major and minor junctions, traffic signs, cycle tracks, footpaths, three truck laybys, metal crash barriers, speed calming measures, bus shelters, thermoplastic bar marking, solar traffic signals, and raised pavement markers); enforcement measures including equipment for the police (such as breathalyzers, laser speed guns, defibrillators, digital cameras, delineators, interceptor vehicles, cones, and jackets/first-aid boxes); speed limit restrictions; post- crash traffic management, recovery of accident victim, and investigation of accidents; educational measures (community awareness and outreach through media brochures and short films and presence of traffic wardens outside schools, traffic parks, and training institute for drivers); and health care measures (framework for strengthening post-crash management). These measures have resulted in road accidents being reduced by 66 percent and fatalities by 41 percent against the original target of 30 percent. There is an enhanced level of enforcement by the police and post-crash emergency care has also improved significantly. A large communication campaign was organized to spread awareness among the road users through videos, posters, pamphlets, and workshops. GoK is planning to replicate and scale up this approach to the entire state road network. However, the second corridor was dropped, as it was categorized as national highway. 25. Road sector policy and institutional development. The project contributed to the improvement of institutional effectiveness through implementation of structured institutional strengthening and development action plan (IDSAP) based on four key areas and the project has contributed to the following key elements: Page 11 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) a. Business process effectiveness: ISO certification for Quality management, environmental management, Revised Departmental code, Online Project Management System, IT-ICT-MIS Strategy. b. Asset sustainability: Fully-functional Planning and Road Asset Management Centre (PRAMC), state -of-the-art Karnataka Road Asset Management System (KRAMS), annual work plans, and budget allocations based on KRAMS data (including HDM-4), sound road inventory and condition database of State road network using advanced equipments c. Performance and accountability: Advanced level equipment for quality assurance and quality control, online grievance redressal system, 24*7 public resource center, two rounds of Road User Satisfaction Surveys. d. Human resources: KPWD-wise training needs assessment, three-year High-Impact Training Plan and cloud-based E-Learning Management System with KPWD-specific content and resources. 26. All the identified activities together aimed at enhancing the effectiveness and capacity of the KPWD through various consulting services have been completed successfully and have led to establishing a sound approach to plan, fund, and deliver strategic state highway corridors using modern business and engineering practices in the functioning of the KPWD. The KPWD has started to scale up this approach to about 20,000 km of CRN. Annex-4 shows the summary of the outputs and outcomes of these activities. A comparison between the achievements of the Project and other recently closed Bank financed road sector projects in India is provided at Annex-9. Rating: High Justification of Overall Efficacy Rating 27. Overall, except for minor shortfall in meeting the physical targets under the road improvement component (which does not impact the Outcome), the project has successfully met the target of all key outcome indicators: • About 70 percent of the road network is assessed in good or better condition and 65 percent of the road network has an IRI < 4 (against baseline of 50 percent); Target exceeded • Generated US$416.56 million (against the revised target of US$400 million) from the private sector outlay for CRN improvement and management by EOP; Target exceeded • Travel time on project roads decreased by 30–40 percent against a target of 25 percent and savings of 19 percent on vehicle operating cost (VOC) against a target of 15 percent; Target exceeded • 60 percent reduction in road accident and 41 percent reduction in fatalities on safe corridor pilots by EOP; Target exceeded • IDSAP was implemented largely along the lines envisaged at the time of appraisal, with varying degree of delays in completing some elements; Target achieved 28. In view of the above, the efficacy of the Project is rated as “Substantial”. Page 12 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) C. EFFICIENCY Assessment of Efficiency and Rating 29. Economic analysis. Economic analysis was carried out at completion, using the same methodology as at appraisal. Table 2 summarizes the results of the economic analysis. The combined EIRR at completion (32 percent) is marginally higher than at appraisal, which was 30 percent. The difference in the EIRR between appraisal and at completion can be explained by higher traffic growth on the project roads. The detailed description including methodology, assumptions, and results are in Annex-5. Table 2. Results of the Economic Analysis Length Appraisal Normal Scenario (Improvement Alternative) With 20% Reduction in Benefits Km EIRR (%) EIRR (%) NPV (INR, millions) EIRR (%) NPV (INR, millions) 833.5 30 32.0 24,400 27.2 17,164 30. Other indicators of efficiency. In terms of time efficiency, the project took two more years than the original schedule of five years (reasons explained in Section III B). The time overruns in civil works were about 13 months on an average, however, adoption of these innovative contracting approaches have resulted in significant reduction in time overruns only to the extent to 7 percent against the traditional item-rate contracts in which the maximum time overrun observed was 183 percent. Due to the in-built incentive mechanism, the performance of these projects under innovative DBFOMT contracts has substantially improved which were implemented according to the planned schedules and in some cases ahead of the schedule resulting in enhanced efficiency. The operation and maintenance phase of these projects has already started. The subsequent adoption of these models across India in other sectors shows the high impact of these models on project efficiency. In terms of cost variations, these packages had cost overruns of about 14 percent against the estimated cost. These variations were mostly on account of design revisions and steep rise in input prices and not necessarily due to inefficiency in implementation. All the activities related to institutional development and road safety were completed during the revised project period. 31. Taking into account the economic efficiency and other indicators of efficiency and considering the achievement of the PDO and completion and implementation of all works and institutional development, the efficiency of the project is rated as Substantial. Rating: Substantial D. JUSTIFICATION OF OVERALL OUTCOME RATING 32. Based on the ratings of relevance (High), efficacy (Substantial) and efficiency (Substantial), the overall outcome of the project is rated as Satisfactory. E. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender 33. Though the project did not conduct specific gender analysis to identify gender gaps related to project activities and no specific indicator was included in the Results Framework to measure gender relevant progress, project beneficiaries included both men and women and the project captured the disaggregated impact on women, men, and their families as a result of land acquisition and resettlement through surveys including road user satisfaction surveys. Page 13 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) 34. About 20 percent of the land owners affected by the project were women and a similar proportion of women-headed households received resettlement assistance. A large majority of women (75 percent of sample survey respondents of the impact evaluation study, refer Annex-6) reported that they were consulted during the planning stage of the project. Those living in resettlement sites felt that security of title had been the biggest gain from the resettlement process since earlier they were under constant threat of eviction. Women indicated that they were comfortable in the resettlement sites in terms of physical safety and security and that their living standards had improved considerably with the availability of separate kitchens, cooking gas, and increase in household assets. They also felt the need for more attention to drinking water, livelihood support, child-care facilities and functional toilets, and indicated that special support could be extended to women headed households to consolidate documentation requirements for land acquisition and receipt of compensation. Institutional Strengthening 35. The project made a substantial effort to improve the institutional effectiveness of the road agencies i.e. KSHIP and KRDCL. These are discussed in the Efficacy section, especially under Objective 2: Improving the Institutional Effectiveness of the Road Sector Agencies to Deliver effective and Safe Roads to Users and Annex-4. Mobilizing Private Sector Financing 36. The project has successfully achieved its intended outcome of leveraging public sector outlays with private sector financing. The two DBFOMT concessions and six co-financing packages supported in mobilization of US$347 million of debt and equity from the private sector and US$27 million from scheduled commercial banks. This approach is now being used at the national as well as the state levels by other road agencies and water & energy utilities in the country for encouraging private sector participation in infrastructure development. Poverty Reduction and Shared Prosperity 37. The road users and roadside communities have benefited from the reduction in transport cost, improved riding quality, reduction in travel time, and safer roads. The improvement in institutional capacity has contributed to better governance of the state highway sector with improved financing, adoption of life cycle approach to asset management, enhanced planning and implementation capacities, along with environmental protection and enhancement measures, financial management, and institutional sustainability. These improvements have and are expected to continue to have a positive impact on business investment and commerce, increased social and economic development benefits, and increased tax revenues from additional economic activities, and will thereby, contribute to poverty reduction. 38. The project made a concerted effort to restore the income of project-affected people (PAP) to their pre-displacement status. The poverty status of the displaced families in the resettlement colonies was studied by resettlement impact evaluation consultants (summary at Annex-6), which measured multidimensional poverty Index (MPI) in terms of education, health, and living conditions. The overall MPI of people residing in the resettlement sites has declined from 0.14 to 0.06, and the number of multidimensionally poor declined from 39 percent to 11 percent. Page 14 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Other Unintended Outcomes and Impacts 39. Local construction industry. The project has been successful in enhancing the capacity and performance of the local construction industry in implementing PPP-DBFOMT and co-financing as well as new item-rate contracts. There is increased awareness and sensitivity towards environmental management not only among the KPWD staff but also among local firms, contractors, and consultants. 40. Employment opportunities. The project provided opportunities for engaging local unskilled labor in road works. About 0.834 million person-days of unskilled employment opportunities were created by the project contractors, and of these, 69 percent were local workers. The proportion of women employed was approximately 17 percent. 41. Social development outcomes. The key social development outcome of the project is the facilitation of the inclusion of more than 2,000 untitled holders for resettlement assistance in the process of helping them reestablish their livelihoods and housing. In addition, about 140 informal households were also provided (or are in the process being provided) security of tenure. The project also provided additional cash support to 106 vulnerable houses in reestablishing their livelihoods. Vulnerable people who received support include widows, elderly, and disabled. In addition, about 50 landowners who became landless or marginal landowners (less than 1 ha of unirrigated land) were provided additional compensation, and a further 155 landowners whose lands were severed were paid additional 25 percent compensation. 42. HIV/AIDS prevention program. The State AIDS Prevention Society assisted the project in implementing a HIV/AIDS prevention program in the contractor’s camps and road habitations through IEC materials, folk shows, wall paintings, interactive and sensitization sessions and distribution of free condom boxes at the contractor work sites. About 55,000 local villagers and about 6,000 construction workers were reached through the campaign and posters were provided in about 75 locations. III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 43. The project took nearly three and a half years to prepare, but the loan was declared effective within four months of Board approval in July 2011. The key factors during project preparation were: (a) Project design. This project incorporated the lessons learned from the predecessor Karnataka State Highway Project to consolidate the efforts made to improve the state’s road network and improve institutional capacity of the KPWD & KRDCL. The scope of the project and phasing was finalized based on discussions between the state and central governments and the Bank and took into account the state’s fiscal situation and the capacity of the local construction industry. Detailed discussions and studies were undertaken to optimize resources and explore possible ways to leverage private sector financing through build, operate, transfer (BOT) toll; annuity concessions; domestic borrowings; and so on. Additional resources were mobilized from a PPIAF-SNTA Grant and a Global Road Safety Partnership Grant to support these efforts. Thorough stakeholder consultations were undertaken before finalization of the financing strategy, engineering designs, tender documents, contract features, maintenance contracts, multisectoral road safety interventions, policy and regulatory aspects, and governance and institutional strengthening plans. These factors contributed to the extended project preparation since these new and innovative concepts took additional time, efforts, and resources for finalization and adoption by the state government through a consultative process. Page 15 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) (b) Harmonized institutional strengthening and road safety efforts. A conscious efforts was made to harmonize and integrate the technical assistance support from the Asian Development Bank and other development partners to optimize results and improve outcome for institutional strengthening and road sector governance in the state. Concerted efforts were also made for developing capacity and improving horizontal and vertical coordination among road safety stakeholder institutions (including State Road Safety Council) to achieve an effective decision- making hierarchy and partnership for achieving road safety results. The Bank also supported in improving coordination among other government initiatives and programs being undertaken by other departments particularly the Health Department. (c) Risk identification and mitigation measures. The overall risk rating at project preparation was categorized as ‘Low Impact High Likelihood’, and at project implementation as ‘High Impact Low Likelihood’. The implementation agency risk was rated as High due to its lack of familiarity with PPP contracts and the risk of fraud and corruption due to lack of transparency. Technical assistance was provided for PPP transactions and a complaint handling mechanism was established to manage these risks. Other risks identified, and the corresponding risk management measures included: market response for PPP transactions; road financing reform implementation; social and environment risks including timely completion of land acquisition, resettlement, and rehabilitation; environmental regulatory clearances; and implementation of the multisectoral road safety agenda. Some of these risks materialized during implementation: delays in finalizing and scrutiny of bidding documents for DBFOMT contracts and co-financing arrangements, delay in award of DBFOMT contracts; finalizing the methodology for VfM analysis, obtaining regulatory clearances by contractors, and resettlement and rehabilitation, including payment of compensation to the PAP. Risk of staffing and staff turnover and contract management issues from the adoption of innovative contracts were underestimated and affected the project implementation. (d) Implementation readiness. Based on the GoI’s criterion for implementation readiness, the implementation agency completed most of the preparation activities, including: feasibility studies; initiation of bidding for item-rate projects; completion of environmental and social impact assessments; and putting in place implementation arrangements. GoK initiated significant steps during project preparation to improve highway financing by endorsing a new road sector policy and amended the Highway Act to allow tolling on state highways and increase PPP transactions in the road sector. However, the structuring of the DBFOMT transactions, bidding documents for annuity contracts, co-financing arrangements, hiring of financial planning and transaction advisory for highway financing modernization, and establishment of the TRSC and its staffing took much longer than anticipated and resulted in significant implementation delays. B. KEY FACTORS DURING IMPLEMENTATION 44. The loan was extended for two years from its original closing date to allow sufficient time for the completion of key activities, including the DBFOMT and co-financing civil works contracts, the road safety demonstration corridor, and institutional strengthening activities. Despite the good initial momentum, progress was downgraded to Unsatisfactory after two years of implementation, with only 40 percent of the loan committed. The project disbursed only US$58 million (16 percent of the loan) after nearly three of years of implementation but picked up momentum after implementation of the midterm review action plan. At closing, the loan disbursed US$295.21 million, i.e., 84.34 percent of the original loan amount. The main factors that affected the project implementation were: (a) Land acquisition and utility shifting. Land acquisition and resettlement was a major problem throughout the project implementation due to frequent transfers of key staff involved with land acquisition, lack of coordination between engineering and land acquisition/resettlement staff, Page 16 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) increased workload, inordinate delays in land acquisition process, and delays in compensation payments and transition due to India’s new land acquisition act. (b) Procurement. There were significant delays in the procurement of DBFOMT contracts due to the delay in the preparation and finalization of the bidding and contract documents, as there were no readily available documents for this type of contract, as well as the delay in finalization of the VfM methodology since this model was being piloted for the first time in the country. The lowest bidder of one of the packages withdrew the bid because of delays in the contract award. Two of the initially envisaged four DBFOMT contracts were subsequently converted into three item-rate contracts, leading to a gap of two years between project conceptualization and commencement of work. Given the significance of these contracts in the context of the financial reforms in the road sector in Karnataka, advice from the Bank to finalize the methodology based on global practices was timely. (c) Procurement of co-financing DBFOMT contracts. The several rounds of consultation with commercial banks for co-financing these subprojects took a long time and effort to build confidence to not only invest but also access financing at economical rates. The Bank’s advice and role in achieving co-financing, as well as role of the FPTA consultant were crucial in creating an innovative structure for term loan repayments and providing comfort to the lenders. This resulted in an encouraging response from commercial banks and non-banking financial institutions, who participated in the process and offered reasonable interest rates, even though the national PPP market in the highway sector was sluggish. (d) Contract management. As DBFOMT and co-financing were being implemented for the first time, these concessions faced contract management issues and agreements had to be revised based on the ongoing implementation challenges related to: the provisions of applicable permits; clarity on definitions on completion of different stages of work; appointed date; redefinition of milestones; and completion certificate. In some cases, supplementary agreements were also issued and signed. Contractual remedies, such as levying of liquidated damages, were also applied to deal with the slow progress and poor performance of the contractors for all works contracts. Key aspects of the contract management (such as processing of variations in item rate contracts, extension of completion period in the cases of consultancy services) were given inadequate attention and took a long time to finalize. (e) Implementation arrangements, staffing, and turnovers. The implementation arrangements were well structured with clearly defined roles and responsibility for KSHIP PIU and KRDCL, supported by project management consultants, design consultants, NGOs, media and communication consultants. The project also benefited from continuity of the PIU staff of first project KSHIP I. However, implementation progress suffered due to the frequent turnover of PIU staff and shortage of key staff across all key disciplines (engineering, land acquisition and road safety). Inordinate delays were encountered in the creation of the Traffic and Road Safety Cell, and the subsequent staffing of this Cell from the respective stakeholder departments (police, health, transport) which impacted the progress of road safety activities. (f) Contractors performance. The progress in the item-rate contracts was slow initially and affected due to delays in obtaining licenses for quarrying and crushing of aggregates, poor sequencing and planning of works, cash flows, lack of coordination among joint venture partners, and inadequate resource deployment by the contractors. This led to termination of one of the contracts which was re-tendered by splitting into two packages resulting in increasing the project cost and supervision charges including the loss of intended benefits to the road user on time. The contractors under the DBFOMT contracts did meet their contractual obligations to obtain debt and Page 17 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) equity for meeting their respective part of the capex making a big stride in contributing to the PDO of leveraging private sector financing. These contractors have performed reasonably well and put in extra efforts to complete the construction phase on time on the available right of way. (g) Midterm review. The mid-term review in December 2013 the confirmed relevance of the PDO but noted the inordinate delay in the procurement of DBFOMT contracts and other civil works contracts which accounted for 60 percent of the loan. The detailed mid-term review report highlighted the implementation challenges and factors attributing to delays. An action plan was agreed at the end of the MTR, with agreed timelines for critical actions. Project implementation picked up in the subsequent period. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 45. The project adopted a structured result framework, with component activities designed to contribute to the achievement of the PDO. Four PDO indicators were specified to assess achievement of the PDO: an indicator to assess private sector contribution (debt and equity); an indicator to measure improvement in the quality of the road network and expansion of the CRN; an indicator to evaluate the contribution of civil works to the improved efficiency and effectiveness (i.e., reduction in vehicle operating cost and travel time cost on project corridors); and an indicator to measure improvements in road safety. The Results Framework included eight intermediate indicators, which measured project outputs as well as land acquisition/ resettlement implementation and environmental management. However, there was only a single indicator to assess progress of the institutional development component; additional indicators could have been included to monitor the progress/achievement of reforms in business processes, human resources, asset sustainability and performance, and accountability. 46. The M&E design included monthly and quarterly reports and mid-term review report, as well surveys on land acquisition/resettlement impacts, and road user satisfaction. Most of the baseline data for monitoring was collected by the time of Board approval of the project, and arrangements were put in place for remaining data collection during implementation. Overall, the design of the monitoring and evaluation system of the project was comprehensive, and appropriate. M&E Implementation 47. The monitoring and evaluation were generally implemented as designed. Adjustments were made to the Results Framework in response to changes in the project (e.g. changes to the length of the state highways to be improved through item-rate contracts and the DBFOMT and under co- financing) and to fine-tune them for better reporting. There were data collection issues initially during project implementation, however, progress on PDO and most key intermediate indicators was tracked as part of regular implementation supervision missions and reported in Aide Memoires and Implementation Status and Results Reports (ISRs). 48. The quarterly progress reports (including the mid-term review report) were shared with the Bank regularly in an acceptable form, and the quality of the reports improved based on feedback from the Bank. The mid-term review report was prepared in 2014 to facilitate a joint assessment of the status of project implementation, identify critical issues requiring attention, and agree on an action plan for complete the project. A project management system was developed and operated under the Page 18 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Project to monitor the physical and financial progress of all components. An impact evaluation study was conducted after the close of the project to comprehensively assess the impact and outcome of land acquisition. However, against the originally planned three road user satisfaction surveys, the project undertook these surveys only at the start and mid-term of the project; the final round on completion of the project was not carried out. There were also some shortcomings in terms of detailed reporting, as well as delays in submitting QPRs (especially towards the end of the project) and in updating project progress review on the public website. M&E Utilization 49. On balance, utilization of the M&E system during project implementation was above average. The introduction of the online project management system, supplemented by the implementation and operationalization of the Karnataka Road Asset Management System, the capacity to systematically collecting information for M&E of the service level of the CRN and the management of the road assets has now increased substantially. The systems are now mainstreamed and are being used for regular monitoring of all KPWD works. The information is also available in the public domain through the websites of KPWD-KSHIP and KRDCL. Justification of Overall Rating of Quality of M&E 50. Considering the above rating, the overall rating of quality of M&E is rated ‘Substantial’. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environmental Safeguards: 51. At the time of appraisal, OP/BP 4.01 (Environmental Assessment) and OP/BP 4.36 (Forests) were triggered. The project was assigned environment category ‘A’ because of the possible significant impacts from upgrading and rehabilitating 1100 kms of roads, including the acquisition of short patches of forest land, removal of roadside trees, potential for localized changes to natural drainage system close to the road, and increased level of noise and air pollution near schools and hospitals. The environmental assessment was carried out in parallel with the preparation of engineering designs for all project roads. Corridor-specific Environmental Management Plans were prepared, including enhancement measures proposed and integrated with the engineering designs for each of the project roads. 52. Environmental clearances for the EPC and Annuity road packages were obtained from the Ministry of Environment and Forest and the Karnataka State Pollution Control Board. Contractors established quarries and crusher plants after obtaining the necessary permits from the statutory authorities. Noise barriers were constructed along project roads in sensitive locations, such as schools, colleges, hospitals and offices. About 10.57 hectares of forest land was taken over after obtaining statutory clearances from the authorities and handed over to the respective contractors for construction. The project monitored the ambient air quality, water quality, noise quality, and soil quality during construction and adequate preventive and remedial measures were taken. Compensatory tree plantation along the project corridors was carried out based on a well-conceived plan; however, implementation was affected by insufficient availability of saplings, rainy season, poor rains, and delays in availability of completed stretches. In all over 153,000 saplings were planted against a plan of over 223,000; the remaining 73,500 is scheduled to be completed by December 2019. 53. Several environmental enhancement measures were undertaken, including: the rehabilitation of pond sites to convert them into wayside recreational facilities for the road users; rehabilitation of Page 19 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) borrow areas (converted into cultivable land parcels and/or irrigation/farm ponds); and ground water recharge through water harvesting structures along project roads. The pond and basin areas enhancement measures undertaken in these packages included desilting of pond basin, bund improvement, inlet and outlet improvement, slope protection, island development, parking areas, tree plantation, fencing at water front, recreational park, paved footpath, grass turfing, drinking water and toilet facility, solar lighting, and tree plantation along pond basin. All these measures enhanced benefits from the project, especially close to the adversely affected people. The disposal of waste material from road construction such as dismantled bituminous and concrete waste was reused to develop haul roads and village and temple roads with the consent of local bodies. Overall, the project closed with a Satisfactory rating on environmental safeguard management. Social Safeguards 54. The project triggered OP 4.12: Involuntary Resettlement. Land acquisition related impacts included 602 acres of private land affecting about 6,800 landowners. In addition, about 2,200 informal settlers were also affected; this included physical displacement of about 200 households, of whom about 140 were informal settlers. 55. A Resettlement Policy Framework (RPF) and Resettlement Action Plans (RAPs) were prepared. The land acquisition and resettlement policy adopted for the project were modified in 2014 in the context of India’s new land legislation. A separate Land acquisition and resettlement unit was established headed by Special District Commissioner and three Assistant commissioners, one Resettlement Officers with additional support staff. The implementing agency engaged local NGOs to provide land acquisition and resettlement support and to coordinate implementation with local units. Concurrent monitoring consultants were also appointed to report on implementation progress and suggest mid-stream alterations where required. 56. Implementation of land acquisition and resettlement faced several challenges, including inordinate delays in land acquisition due to frequent staff turnover, increased workload, and transition to the provisions of the new land legislation. The project also faced encountered serious problem in dealing with NGOs and consultant services due to delayed payments and failed to put in place a functional database. Timely implementation of land acquisition and resettlement was an issue for most of project implementation and the safeguards management for OP 4.12 remained Unsatisfactory or Moderately Unsatisfactory for over three years. The Bank worked with the implementing agency in putting together remedial plans to bring the project into compliance with safeguard policies. However, as of June 2019, there are few outstanding land acquisition and resettlement actions remain to be implemented and the Bank will follow-up with implementing agencies until these actions are implemented. The details of outstanding actions are described in Annex-6. 57. Some of the good practices in the project include: (i) establishment of dedicated land acquisition units within PIU and KRDCL for faster land acquisition; (ii) development of resettlement sites wherever possible to resettle vulnerable displaced families; (iii) quickly aligning with India’s new land legislation provisions immediately after it came into effect in 2014; (iv) provision of an additional 25% compensation as an incentive for consenting with compensation rates; (v) use of NGOs to support project affected people and use of independent consultants for concurrent monitoring of land acquisition and resettlement implementation; (vi) regular annual updating of resettlement unit costs for inflation adjustment; and (vii) social inclusion of the large number of informal settlers for resettlement assistance. Some issues were: depositing over 40% of the compensation amounts with the courts; frequent turnover of land acquisition and resettlement staff, with the average time for key staff being less than 9 months; non-functional grievance committees; and non-functional data base for tracking land acquisition and resettlement implementation. Page 20 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Financial Management 58. The project’s financial management performance was satisfactory throughout the project and there were no significant issues. Overall, the project was timely in submission of quarterly IUFRs, disbursement claims, submission of Internal and external audit reports to the Bank. This was mainly on account of: (i) simplified financial management arrangements; (ii) use of government treasury systems; (iii) sustained availability of experienced and qualified accounting staff in the PMU; and (iv) effective oversight and control by the PIU through internal audit reports. Procurement 59. Procurement management performance was satisfactory for most of the project, taking into consideration the new contracting mechanism developed and the types of complex procurement undertaken, which led to delays against the procurement timelines. There were no significant procurement issues encountered during project implementation, except for: delays in preparation of procurement documentation; development of the VfM model and its application during evaluation; and awards under the innovative DBFOMT contracting model. One of the key reasons was the continuity of the senior staff in the PIU and KRDCL responsible for procurement, as well as close coordination and knowledge sharing between them. However, procurement documentation submitted (especially with respect to selection of consultancy services) was sometimes not of satisfactory quality due to inadequate experience in the procurement of consultancy services and changes in staff. There were slippages in procurement time lines, especially for consultancy services and goods. 60. Contract Management. There were initial hiccups in DBFOMT contracts, as these were new contracting structures and provisions were being implemented for the first time by the implementing agencies, as well as contractors and consultants. Key aspects of contract management and amendments (such as processing of variations in item rate contracts, extension of completion period in cases of works and consultancy services) were not given adequate attention and took a long time to finalize. In the case of ICB procurement of laboratory equipment, there was a long delay in the opening of the letter of credit which led to delays and non-supply of equipment until project closing. Liquidated damages were applied to deal with the slow progress of civil works contractors. C. BANK PERFORMANCE Quality at Entry 61. The task team worked closely with GoK to maximize resources for core road network management by leveraging private sector finances and improve road safety management through a multi-sectoral approach. It assisted the government in the structuring of the co-financing framework and the DBFOMT model. It engaged in a dialogue with GoK on highway financing reform, introduction of the user-pay principle, options for leveraging road fund revenue, financing strategy for the state road network (including stakeholder consultations with the commercial banks, financial institutions and the construction industry to convince and build consensus on the proposed framework) and bidding documents since this was being piloted for the first time. The team reviewed the technical, financial, economic, and safeguards aspects of the project, including detailed project reports, cost estimates, resettlement policy framework and environmental management plans with enhancement measures. The team assisted KPWD in obtaining a PPIAF grant to prepare a comprehensive financing strategy for the road sector and leverage private sector financing through PPP and domestic borrowings. The team also carried out a road safety management capacity review through funds from the Global Road Safety Facility. Page 21 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) 62. On balance, while the project had several innovative features, as discussed in Section III A, some of the risks relating to their implementation were underestimated which affected the Project performance in the initial three years. Quality of Supervision 63. The Bank conducted 14 implementation support missions at an average of two missions per year, supplemented by interim missions and technical visits. The task team provided handholding support to both KSHIP PIU and KRDCL in identifying problems that hindered project implementation (as mentioned in Section III.B) and in recommending solutions to improve project performance (such as finalization of the VfM methodology on sound principles, finalizing procurement, termination, retendering and repackaging of contracts, improving contractor’s performance, and highlighting deficiencies in design and quality of construction including road safety demonstration corridor) which resulted in the completion of almost all project activities albeit, with some delays. 64. Multi-disciplinary Bank teams and just-in-time technical expertise participated in the missions and reviewed all relevant documents, before, during and after supervision missions. The continuation of team members involved since KSHIP played a crucial role, since they were aware of the project history and the capacity of the implementing agency. As pointed out in Section IIIB, there were notable delays in providing no-objections to procurements documents, in part because no standard bidding documents were available with the Bank for the innovative DBFOMT model and the co-financing framework. 65. Comprehensive Aide Memoires were prepared and issued to the client after each mission, highlighting progress and critical issues, along with detailed timelines for agreed actions. The mid- term review in 2014 was followed up by a restructuring in mid-2015, which identified the adjustments needed for the project to achieve its outcomes. Action plans were prepared to speed up implementation and improve project performance, including compliance with the project resettlement policy framework. The key issues during implementation were regularly brought to the attention of the government and country management through management letters and Implementation Status and Results Reports (ISRs). The ISR ratings assigned to the quality of implementation provide an accurate reflection of project performance. The team will continue to monitor the completion of the remaining activities (refer Section III B), especially those related to land acquisition, and related rehabilitation and resettlement. Justification of Overall Rating of Bank Performance 66. Based on the quality of performance at entry and supervision, the overall rating of the performance is ‘Satisfactory’. D. RISK TO DEVELOPMENT OUTCOME 67. Roads improved through rehabilitation and upgradation contracts under the project are likely to be sustained for their designed surface life because of the good quality of works, built-in long-term maintenance provisions in the DBFOMT annuity contracts, and the commitment of the government to maintain these roads by making adequate budgetary allocations. Positive changes have been noticed in the functioning of the KPWD and KRDCL, such as: scientific approach to planning, funding, and delivering road network through annual work plans prepared using KRAMS; declaring PRAMC as the sector apex body for policy development, planning and programming of road assets; certification process of ISO14001-2015 and ISO9001-2015 for expansion to cover entire KPWD; public resource center; and adoption of the e-learning system. The project management systems and tools developed Page 22 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) under the project are considered sustainable, since they are being mainstreamed and customized to provide effective planning, implementation and monitoring of state funded works of KPWD. The long- term challenge would be to keep the systems relevant through continuous updating of the input information, which requires adequate staff capacity. The use of modern contract methodologies is expected to be sustainable and is being continued in the new project KSHIP-IV, which is being prepared with the support of ADB. However, KPWD needs to take the initiative in furthering the institutional development agenda for appropriate adoption/scale up of IT/ICT Strategy, quality-control interventions, and learning management system. V. LESSONS AND RECOMMENDATIONS 68. Robust planning and project preparedness. Projects should give enough lead time and resources for innovative and complex initiatives on civil works and institutional strengthening. However, project design appears to systematically underestimate the time and resources needed for the preparation of the bid documents and terms of references by institutions that are unfamiliar with these approaches such as there were no standard or model bidding documents were available for the DBFOMT or co-financing projects, and the consultations took a lot of time and effort during implementation. 69. Asset management and utility shifting. Road agencies with robust asset management systems having road inventory and condition database such as in this case should start recording and updating information and as built drawings from the contractors on utility shifting in this database which will reduce transactions cost and time during future upgradation of assets. 70. Procurement. A substantial portion of the delays under this project are attributable to the lack of documents for the modified-annuity contracts, as it was a new concept in the Bank projects. It required considerable time and effort including stakeholder consultations, to come to an agreement on the new document. When such innovations are planned, the Bank should be able to bring expertise on board as early as possible. Completion of the procurement process within a stipulated timeframe (including timely award decisions) will result in reducing time and cost overruns, as well as risks during the operation and maintenance phase. 71. Benefits for the modified-annuity and co-financing projects. The new contracting structure and the incentive system underpinning the same have resulted in several benefits. The new approach has resulted in a substantial reduction and/or elimination of time and cost overruns, which have been the scourge of the then prevailing predominant contracting mode, that is, item-rate contracts. The long-term concessions have secured good operation and maintenance of the assets during the post- construction period, thereby, breaking the erstwhile vicious ‘build-neglect-rebuild’ cycle in the sector. With a very strong alignment of incentives, there has been very sharp focus on completing the capital works on or ahead of time and toward that end, concessionaires worked in tandem with the implementation agency in addressing the environmental and social issues. Project contracts have also not had any serious disputes requiring arbitration. The future projects should consider preferably adopting these contracting structures over traditional item-rate contracts and also inculcate the culture of ‘contract and risk management’ rather than just ‘contract administration’ as adopted under this project. 72. Road safety beyond engineering design. The project approach of road safety demonstration corridor successfully validates that physical/engineering improvements are not enough to bring about a reduction in road fatalities in the face of rising traffic volume. The engineering measures must necessarily need to be accompanied by robust programs for enforcement, education, and awareness and post-crash management. Though difficult to implement due to the coordination required among Page 23 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) stakeholders, this approach has now been successfully tested even in other World Bank-funded state highway projects in India. The approach requires scaling up at the network level with coordinated efforts from all stakeholder departments to reduce road accidents. Synergies can be achieved in terms of cost if the activities are designed and integrated well with other programs being implemented by the respective departments. 73. Environmental management. The implementation of environmental measures during the construction is likely to be more effective if integrated as part of the construction contracts, with provisions for related bill of quantities and incidental items and penalties to address noncompliance. Conscious effort to achieve ISO certification for streamlined environmental management allowed systematic consideration, and advocacy and principles have been incorporated into the Departmental Codes reflects the maturity of the institution towards sustainable development. These have been taken forward by the KPWD in subsequent projects with international funding where ISO 14001 certification of successful bidders has been incentivized. 74. Social safeguard management. Timely land handover is critical in annuity contracts, because there are no provisions for time extensions. In the case of two annuity contacts in KSHIP and six annuity contracts in KRDCL (co-financing contracts), the land hand over as on due date for 100% land handover as per contract provisions varied between 82% to 95%. In none of the contracts 100% land was handed over within the concession period, resulting in non-completion of certain stretches by the end of concession period. This suggests that there should be a robust readiness criterion for land hand over to avoid time and cost overruns and those provisions should be strictly enforced. This suggests that there should be a robust readiness criterion and provisions for land hand over to avoid time and cost overruns should be strictly enforced. The future project should consider the provision for annual adjustment of resettlement payments, successfully implemented in this project to ensure fair compensations for loss of assets and interim support to the PAP. The resettlement impact evaluation confirmed that inclusion of informal settlers for resettlement support will contribute positively to poverty reduction among the vulnerable sections of the society. 75. Longer Term Engagement is Key to Significant Reforms. Long-term, programmatic approach is key to introduce innovative approaches and achieve transformative results. The project built on the success of KSHIP, which set out to test the response to innovative approaches and laid the foundation for road sector modernization in Karnataka. Implementation of reforms requires political consensus, client ownership and change in mindset at the bureautic as well executive levels. A flexible, learning and continuous improvement approach was adopted under the project, which was reflected in the successful implementation of new innovative contracting arrangements – DBFOMT and co-financing - without major implementation issues or arbitration. One of the notable achievements of the project was building consensus and political will for the introduction of the user pay principle in the state through a tolling policy and securing revenue for sector financing which will ensure long term financial sustainability. . Page 24 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: PDO level Results Indicators Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Achievement by GoK in Amount(USD) 200.00 500.00 400.00 416.56 generating at least US$400 million in new private sector 24-Mar-2011 30-Dec-2016 28-Dec-2018 28-Dec-2018 capital for CRN improvement and management by end-of- project (EOP). Comments (achievements against targets): Target Achieved Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 15% reduction in Vehicle Text VOC:$0.26 TT:$0.074 VOC:$0.20 TT:$0.06 No change Yet, travel on Operating Costs and 25 completed sections Page 25 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) percent reduction in Travel resulted in about 30 to Time Cost on project 40% reductions in corridors by EOP travel time. 24-Mar-2011 30-Dec-2016 28-Dec-2018 28-Dec-2018 Comments (achievements against targets): Status: Target Achieved Comment: The data shared during the ICR Mission reported a 50 percent reduction in travel time on completed sections. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 30% reduction in road- Percentage 31.00 21.00 21.00 41.00 accident related fatalities on safe corridor pilots by EOP 15-Feb-2011 30-Dec-2016 28-Dec-2018 28-Dec-2018 Comments (achievements against targets): Status: Target Achieved Page 26 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Comment: The data shared during the ICR Mission reported a reduction of road accidents by 66% & fatalities by 41%. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads in good and fair Percentage 50.00 50.00 50.00 70.00 condition as a share of total classified roads 24-Mar-2011 30-Dec-2016 28-Dec-2018 28-Dec-2018 Comments (achievements against targets): Status: Target Achieved Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Size of the total classified Kilometers 19735.00 19735.00 19735.00 24266.00 networks 24-Mar-2011 30-Dec-2016 28-Dec-2018 28-Dec-2018 Comments (achievements against targets): Status: Target Achieved Page 27 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Comment: 24,266 km is total length of Core Road Network including National Highways in the state of Karnataka A.2 Intermediate Results Indicators Component: Component 1: Road Improvement Works (IBRD: US$294 million, GOK: US$106 million, Developer: US$239 million) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Completion of upgrading and Kilometers 0.00 269.00 534.00 503.00 widening of about 534 km. through item–rate contracts 24-Mar-2011 30-Dec-2016 28-Dec-2018 28-Dec-2018 Comments (achievements against targets): Status: Target not achieved Comment: During the ICR period and the latest data shared, 523 km brought up to bituminous layers (267 km in item rate and 256 km in new item rate). Page 28 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Completion of upgrading, Kilometers 0.00 562.00 301.00 300.00 widening of about 301 km. through DBFOMT (Annuity) 24-Mar-2011 30-Dec-2016 28-Dec-2018 28-Dec-2018 Concessions Comments (achievements against targets): Status: Target Achieved Comment: As reported, 300 km were brought up to bituminous layer and opened to traffic. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads constructed, non-rural Kilometers 0.00 1078.00 1078.00 31-Mar-2011 28-Dec-2018 28-Dec-2018 Comments (achievements against targets): Status: Target Achieved. Page 29 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Comment: As reported, in all, 1165 km have been brought up to bituminous layers. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Land acquisition and Percentage 0.00 100.00 100.00 93.00 resettlement implementation (a) land 24-Feb-2011 28-Dec-2016 28-Dec-2018 28-Dec-2018 acquisition completed Comments (achievements against targets): Status: Target almost achieved Comment: As per the latest reported data, Land Acquisition of KSHIP: 438.24 acres (99%) out of 441.08 acres and KRDCL: 153.26 acres (100%) out of 153.26 acres have been completed. Payment of land acquisition compensation: KSHIP: 4493 (99%) of 4516 Sy.Nos and KRDCL: 2317 (98%) out of 2354 land owners.The balance of 37 cases have been submitted to the government for denotification. Page 30 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion LA and Resettlement Percentage 0.00 100.00 100.00 58.00 Implementation- (b) Key R&R assistance provided 24-Feb-2011 28-Dec-2016 28-Dec-2018 28-Dec-2018 (alternative housing and livelihood support) Comments (achievements against targets): Status: Target almost achieved Comment: As per the latest data reported, Resettlement (Providing alternative housing) KSHIP: 145 families out of 145 (100%); KRDCL: 24 out 55 families (44%) Page 31 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Livelihood support: KSHIP: 1125 out of 1128 (99.7%) • KRDCL: 663 out of 694 (95.53%) (Remaining 31 families are yet to be settle due to tangadagi RC centre.) a) As against 102 families 47 families in this Hamsabhavi village has been descoped as alternative R&R site could not be found. b) 24 families have been paid site cost of Rs.1.50 lakhs and Rs. 2 .00 lakhs of construction cost apiece. c) The RC centre at Tangadagi village (WCP-7) is proposed to be developed through the concessionaire Page 32 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion LA and Resettlement Percentage 0.00 100.00 100.00 92.00 Implementation (c) Improve the living standards 24-Feb-2011 28-Dec-2016 28-Dec-2018 31-Jul-2017 (measured % PAFs with increase/restored income in real terms) Comments (achievements against targets): Status: Target Almost Achieved Comment: As per the latest data reported, living standards of KSHIP- 99% and KRDCL-98.42% PAPs were improved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Environmental Management Text 0 EMP implemented EMP Implemented & Implementation of - (a) implementation of EMP ISO certification EMP is being carried as agreed (b) ISO 14001 obtained out certification obtained for operational units ISO certification completed in all Page 33 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) targeted offices in Aug 2015. 24-Mar-2011 28-Dec-2016 28-Dec-2018 28-Dec-2018 Comments (achievements against targets): Status: Target Achieved Comment: As per the latest reported data, EMP implemenation in the WEP and WAP contract packages is completed and nearing completion in WAEP contract packages. ISO certification completed in all targeted offices in Aug 2015.Revised ISO certification for all 14 KPWD offices is completed in April 2019 Component: Component 2: Highway Financing Modernization: (IBRD:US$38 million; GOK: US$42 million; Developers/Financial Institutions: US$200 mil lion) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion KRDCL generates additional Text Passing of Toll Policy Developed PPP Developed PPP Toll Policy has been road user revenues and transactions backed transactions backed Page 34 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) commits them for mobilizing by toll revenues by toll revenues adopted by GoK. debt financing (via GoK permitted tolling securitization) and/or making of 19 roads (1530 km) payments for PPP vide dt March 31, transactions 2017. Issuance of debt and developing toll sanctions backed by toll revenues: Co- financing projects piloted on the model and loan secured from Vijaya Bank. 24-Mar-2011 30-Dec-2016 28-Dec-2018 28-Dec-2018 Comments (achievements against targets): Status: Targets achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Completion of upgrading Text Screening commenced 400 363 The works are in widening and O&M of 363 progress in all the six Page 35 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) km through co-financing contracts. arrangement As on July 2018, DBM is completed in 290 km stretch and BC is completed in 275 km stretch 24-Mar-2011 30-Dec-2016 28-Dec-2018 28-Dec-2018 Comments (achievements against targets): Status: Target not achieved Comment: As per the latest reported data, the works are in progress in all the six contracts. As on July 2019, 341 km stretch is completed upto BC level and opened to traffic. Balance stretches include 2 bypasses of 6 km length, 9 km in Bidar Chincholi road and miscellaneous small sections affected due to land issues. The overall work is expected to be completed by Dec 2019. Component: Component 3: Road Safety Improvement (IBRD: US$7.3 million; GOK: US$1.9 million) Page 36 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Effective implementation of Text Lead Agency SCDP implemented SCDP Implemented Safe Corridor Established: pilot SCDP has been corridor identified successfully completed. 24-Mar-2011 30-Dec-2016 28-Dec-2018 28-Dec-2018 Comments (achievements against targets): Status: Target Achieved Component: Component 4: Road Sector Policy and Institutional Development. (IBRD: US$6.5 million; GOK: US$1.7 million). Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Satisfactory implementation Text IDSAP and GAAP Implementation of Implementation of Y1 Target of IDSAP of agreed action plan for Endorsed IDSAP IDSAP and GAAP endorsed: institutional development completed and governance improvement Y4 Target of Key consultant services Page 37 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) procured: only QA/QC equipment procurement is pending All the studies have been completed. 24-Mar-2011 28-Dec-2018 28-Dec-2018 28-Dec-2018 Comments (achievements against targets): Status: Target Achieved Comment: As per the latest reported data, Y1 Target of IDSAP and GAAP endorsed: completed Y4 Target of Key consultant services procured: QA/QC equipment procured (except for 2 Equipment in Lot 2. Expected to be completed by 31st Oct 2019). All the studies have been completed. Page 38 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) B. KEY OUTPUTS BY COMPONENT Objective/Outcome 1: Accelerating the development of the Core Road Network through leveraging public sector outlay with private sector financing 1. Achievement by GoK in generating at least US$400 million in new private sector capital (debt and equity) for CRN improvement and management by end-of-project (EOP) 2. Roads in good and fair condition as a share of total classified roads (IRI<4) increases from 50% Outcome Indicators to 65% by EoP 3. 15 percent reduction in Vehicle Operating Costs and 25 percent reduction in Travel Time Cost on project corridors by EOP. 1. Completion of upgrading and widening of about 534 km through item–rate contracts 2. Completion of upgrading, widening of about 301 km through DBFOMT (Annuity) Concessions 3. Land acquisition and resettlement implementation (a) land acquisition completed (b) R&R assistance provided (c) improving living standard Intermediate Results Indicators 4. Environmental Management - (a) implementation of EMP as agreed (b) ISO 14001 certification obtained for operational units 5. KRDCL generates additional road user revenues and commits them for mobilizing debt financing (via securitization) and/or making payments for PPP transactions 6. Completion of upgrading widening and O&M of 363 km through co-financing arrangement Component 1: 1. 831 km of capital improvement works undertaken 2. US$279.35 million private sector investment generated Key Outputs by Component 3. Environmental enhancement measures undertaken (linked to the achievement of the 4. Road safety measures undertaken on all corridors Objective/Outcome 1) Component 2: 1. 344 km of CRN upgraded under cofinancing pilot transactions 2. US$136.34 million private sector investment mobilized 3. Financing strategy developed for CRN including financing plan to mobilize private financing Page 39 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) 4. White paper on KRDCL financial policy, corporate governance, and KRDCL reorganization structuring 5. Environmental enhancement measures undertaken 6. Road safety measures undertaken on all corridors • All together a total of 600 acres of private land acquired for upgradation works under Components 1 and 2 including road safety corridor • About 70 percent of the road network is assessed to be in good or better condition and 65 percent of road network has an IRI < 4 • Travel time on project roads has decreased by 30–40 percent against a target of 25 percent and savings of 19 percent on VOC against a target of 15 percent Objective/Outcome 2: Improving the institutional effectiveness of the road sector agencies to deliver effective and safe road to users Outcome Indicators 1. 30 percent reduction in road-accident related fatalities on safe corridor pilots by EOP 1. Effective Implementation of Safe Corridor Intermediate Results Indicators 2. Satisfactory implementation of agreed action plan for institutional development and governance improvement Component 3: 1. Successfully implemented road safety demonstration corridor – SH20 from Belgaum to Key Outputs by Component Yaragatti on a stretch of 62 km (linked to the achievement of the 2. 60 percent reduction in road accident and 41 percent reduction in fatalities on safe corridor Objective/Outcome 2) pilots by EOP Component 4: 1. IDSAP was implemented with all key activities completed Page 40 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A.TASK TEAM MEMBERS Name Role Preparation Binyam Reja Sr. Transport Economist/TTL Arnab Bandyopadhyay Senior Transport Engineer/Co-TTL Mei Wang Senior Counsel LEGES Sri Kumar Tadimalla Senior Public Private Partnerships Specialist Junxue Chu Senior Finance Officer Said Dahdah Road safety Specialist Juan Carlos Alvarez Senior Counsel Yash Gupta Procurement Specialist Duthaluri Nagaraju Senior Procurement Specialist S. Krishnamurthy Financial Management Specialist I. U. B. Reddy Senior Social Development Specialist Gaurav D. Joshi Environmental Specialist Rodrigo Archondo-Callao Senior Highway Engineer Radia Benamghar Operation Analyst S Gizella Diaz Program Assistant (Washington) N.S. Srinivas Program Assistant (Delhi) Fredrick Kranz Consultant (Procurement/PPP Transactions) A.K. Swaminathan Consultant (Engineering) Krishnan Srinivasan Consultant (Governance) Ernst Huning Institutional Development (consultant) Benjamin Darche Consultant (PPP/Financing Specialist) Supervision/ICR Ashok Kumar, Pratap Tvgssshrk Task Team Leader(s) Sri Kumar Tadimalla Senior Public Private Partnerships Specialist Arnab Bandyopadhyay Senior Transport Specialist Binyam Reja Practice Manager Page 41 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Arun Kumar Kolsur Procurement Specialist(s) Anantha Krishna Karur Financial Management Specialist S. Krishnamurthy Financial Management Specialist I. U. B. Reddy Social Specialist Gaurav D. Joshi Environmental Specialist Nitika Surie Team Member Sri Kumar Tadimalla Team Member Reenu Aneja ICR Author Muthuthevar Boominathan Consultant (Economist) Arpita Roy Consultant Krishnan Srinivasan Consultant (Governance) G. Srihari Social Development Specialist Ernst Huning Institutional Development (consultant) Said Dahdah Transport Specialist Monica Sawyer Operations Officer Khabilongtshup Khumujam Consultant (Environment) S. Venkatesan Consultant Gaurav Relhan Consultant (IT-ICT) A. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY08 30.125 123,835.06 FY09 35.153 171,476.72 FY10 20.571 77,569.10 FY11 64.564 409,827.86 FY12 0 6,220.65 FY13 0 0.00 Total 150.41 788,929.39 Page 42 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Supervision/ICR FY08 0 0.00 FY11 14.130 66,386.57 FY12 73.602 365,244.62 FY13 57.733 285,426.53 FY14 47.298 202,798.69 FY15 38.550 120,640.76 FY16 43.174 142,742.52 FY17 27.664 122,580.79 FY18 29.219 140,964.88 FY19 28.392 143,231.89 FY20 9.602 27,969.33 Total 369.36 1,617,986.58 Page 43 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) ANNEX 3. PROJECT COST BY COMPONENT Amount at Actual at Project Percentage of Approval Component Approval (US$, Closing (US$, (%) millions) millions) Component 1: Road 603.00 638.82 106 Improvement Works Component 2: Highway 373.7 280.03 75 Financing Modernization Component 3: Road Safety 13.6 9.21 68 Improvement Component 4: Road Sector 11.8 8.17 69 Policy and Institutional Development Project Management 2.0 6.11 306 Total 1,004.1 942.34 94 Page 44 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) ANNEX 4. SUMMARY OF OUTPUTS AND RESULTS UNDER INSTITUTIONAL DEVELOPMENT 1. A summary of key activities, outputs and results of the IDSAP are provided in the table below. Activities Outputs Results Business process • The KSHIP and the KRDCL Project Implementing Unit (PIU) • Strengthen the business effectiveness and field offices secured ISO 14001 certification for and engineering streamlined environmental management, which is being procedures and advanced mainstreamed to secure certification for all KPWD field sector governance. offices. • Secured ISO 9001 certification for streamlined and structured quality management across all 60 KPWD units. • Updated the Departmental Code by incorporating aspects of PPP, environmental management, electronic payment to contractors, e-procurement, provisions of KTPP Act and rules, and other pertinent areas. • Online Project Management System to monitor physical and financial progress of works facility for managing Request for Inspection and Inspection Payment Certificate, which is being customized for scaling up for adoption for entire the KPWD works. • An IT-information and communication technology (ICT)- management information system (MIS) Strategy to modernize the KPWD on IT-related investments, integration, operations management, and security was also prepared. Performance • The KPWD and the KRDCL procured conventional as well as • Enhanced accountability and advanced-level equipment for quality assurance and quality and transparency. accountability control for all works contracts in all the KPWD field labs. • Since three years of • Online system for grievance redressal with dedicated 24-7 inception, a total of 2,112 public resource center having unified phone number. complaints have been • Prepared a Draft Development Strategy Report for outlining received, of which 96 the quality management and quality control capacity at the percent have been institutional level considering existing processes, systems, resolved and balance and staff endowments, under the consideration of the complaints are being government for adoption. reviewed and addressed. • Two rounds of road user satisfaction surveys undertaken for seeking feedback and satisfaction level of the road user, though dissemination of the result at the highest level in the government has been substantially delayed and the government has not awarded work for the third and final round of the survey. Asset • A PRAMC is now fully functional introducing modern asset • The state government has sustainability management practices in the state. made PRAMC as a ‘Sector • Adopted advanced KRAMS 5; all capital works of the KPWD Apex Body’ for road for the next five years are to be taken up according to the sector policy, planning, 5KRAMS is a comprehensive and integrated system for effective management of road assets under the jurisdiction of the KPWD for the state road network (CRN and non-CRN) having nine modules—Pavement Management, Bridge Management, Traffic Page 45 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Activities Outputs Results priorities established under the Annual Works Plans asset management prepared using KRAMS. 6 matters, IT support, and • Annual works program is prepared based on the output road safety engineering. from Highway Development and Management Model • Sound road inventory and (HDM)-4 software supported under the project. condition database for • Supported the data collection for non-CRN roads. the entire state road network (about 75,000 km) using modern state- of-the-art equipment such as Road Condition Data Collection Vehicle, Falling Weight Deflectometer, Ground Penetration Radar, and Bridge Inspection Vehicle. Human • Contributed to development of a cloud-based E-Learning • System established for Resources Management System for the KPWD staff (3,000 users) for continuous capacity delivering staff training and capacity building. building of staff. • Going beyond the original scope of the project, it has • Three high impact contributed to the development of new KPWD-specific training already delivered content and resources alongside ICT-enabled access to and remaining ongoing. international road engineering and management standards and best practices. • Conducted comprehensive, KPWD-wise training needs assessment and improvement undertaken for staff performance assessment methods/processes. • Prepared and rolled out three-year High-Impact Training Plan. Data Management, Transport Modelling Tool, Traffic Incident Management, Monitoring and Evaluation, Environment and Social Information System, and Cross Asset Prioritization System. 6 According to the Government Order dated December 18, 2017. Page 46 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) ANNEX 5. EFFICIENCY ANALYSIS 1. Summary of Previous Rounds of Economic Analysis 1. At the time of appraisal of the project, economic analysis was carried out for 833 km of nine road packages of upgrading roads. The existing carriageway configuration of all packages was generally single lane to intermediate lane. Very few sections had narrow two lanes. Under KSHIP II, all the upgradation project roads were proposed for upgrade to two-lane configurations with paved shoulders. The economic viability of project sections due to upgradation was obtained considering reduction in VOC and saving in travel time cost of passengers with respect to without improved project sections. The overall EIRR for the upgrade road was 30 percent with an NPV, discounted at 12 percent, of US$835.2 million. Table 4.1 Results of the Revised Economic Feasibility (2010) for KSHIP II Cost (US$, millions) 480.8 NPV of net benefits (US$, millions) 835.2 EIRR (%) 30.0 2. Approach and Methodology for the Economic Analysis for Implementation Completion and Results Report (ICR) 2. The economic analysis carried out in 2010, at the project appraisal stage, was revised and updated for the ICR with actual data as on completion of works. For this, completed KSHIP II upgrade roads totalling 833 km road length are considered and analyzed using HDM 4. 3. The details of homogeneous sections of KSHIP II roads and their improvement proposals are presented in table 4.2. In total, all KSHIP II roads totalling 833 km length are considered for ICR analysis. Table 4.2. Details of Upgrade Road Sections for ICR Analysis Before Completion After Completion Package Length (km) Average CW Width (m) Lane Configuration Lane Configuration WEP-1 52.40 4.5 SL to IL 2L with paved shoulder WEP-2 75.26 4.5 SL to IL 2L with paved shoulder (WEP-2A +WEP 2B) WEP-3 38.50 4.3 SL to IL 2L with paved shoulder WEP-4 73.76 3.8 SL 2L with paved shoulder WEP-5 28.63 6.2 IL to 2L 2L with paved shoulder WAP-1 193.34 6.0 2L 2L with paved shoulder WAP-2 107.94 7.0 2L 2L with paved shoulder WAP-3 153.67 3.8 SL 2L with paved shoulder (WAEP3A +WAEP3B) WAP-4 109.95 5.5 IL 2L with paved shoulder (WAEP-4) Total 834 Note: CW = Carriageway; SL = Single lane; IL = Intermediate lane; 2L = Two lane. Page 47 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) 4. Revised economic analysis was carried out for the upgrade roads because there were cost changes in these works. The following tables 4.3 to 4.5 present the variation in costs in the upgrading contracts from processing (2010) to project completion (2018). Table 4.3. Comparison of Initial Cost (2010) and Completed Cost (2018) Package Upgradation Package Length Processing Stage Total Completed Cost Cost No. Name (km) Value (INR, millions) (INR, millions) Change (%) WEP-1 Hoskote to 52.44 1,237.5 1,208.0 −2.4 Chintamani Bypass WEP-2A Haveri to Hangal 31.78 832.5 987.3 18.6 WEP-2B Hangal to Tadasa 43.46 967.5 887.7 −8.3 WEP-3 Dharwad to Saundatti 38.50 909.0 979.6 7.8 WEP-4 Tinthini to Kalmala 73.76 1,926.0 1,972.4 2.4 WEP-5 Chowdapur to 28.63 720.0 657.5 −8.7 Gulbarga WAP-1 Malavalli to Pavagada 193.34 5,427.0 5,815.7 7.2 WAP-2 Mudhol to Nippani 107.94 3,114.0 3,248.5 4.3 WAEP-3A Shimoga-Shikaripura- 82.04 2,187.0 2,988.9 36.7 Anandapura WAEP-3B Shikaripura to Hangal 71.63 1,755.0 2,614.7 49.0 WAEP-4 Managuli to 109.95 2,569.5 3,335.9 29.8 Devapura Total 834 21,645.0 24,696.4 14.1 Source: Data collected from the KSHIP. Note: For annuity packages (WAP1 and WAP2), the discounted values of initial and annuity payments are considered. Table 4.4. Phasing of Project Completion Cost at 2010 Prices (INR, millions) WEP1 WEP2 WEP3 WEP4 WEP5 WAP1 WAP2 WAP3 WAP4 Financial Economi Financial Economi Financial Economi Financial Economi Financial Economi Financial Economi Financial Economi Financial Economi Financial Economi Year Cost c Cost Cost c Cost Cost c Cost Cost c Cost Cost c Cost Cost c Cost Cost c Cost Cost c Cost Cost c Cost 2011 32.9 29.6 22.5 20.2 11.1 10.0 55.6 50.0 108.6 97.7 35.4 31.9 23.0 20.7 46.8 42.1 28.9 26.0 2012 393.0 353.7 29.8 26.8 223.0 200.7 526.3 473.7 350.0 315.0 24.1 21.7 24.2 21.8 24.0 21.6 31.1 27.9 2013 294.1 264.7 217.5 195.8 241.1 217.0 786.4 707.7 96.7 87.0 22.9 20.6 42.3 38.1 13.3 12.0 21.7 19.5 2014 346.2 311.6 631.9 568.7 248.2 223.3 484.7 436.3 59.4 53.4 127.0 114.3 70.9 63.8 27.5 24.8 6.3 5.7 2015 139.1 125.2 822.9 740.6 165.3 148.8 103.0 92.7 42.9 38.6 1087.7 978.9 740.5 666.5 211.7 190.5 163.7 147.3 2016 2.6 2.3 127.0 114.3 27.0 24.3 16.4 14.8 0.0 0.0 559.6 503.7 364.3 327.9 1495.8 1346.2 1242.2 1118.0 2017 0.0 0.0 21.5 19.4 0.4 0.4 0.0 0.0 0.0 0.0 2030.3 1827.3 1143.3 1029.0 2149.8 1934.8 1323.7 1191.3 2018 0.0 0.0 2.0 1.8 63.6 57.2 0.0 0.0 0.0 0.0 1926.1 1733.5 818.7 736.8 1519.3 1367.4 518.3 466.4 2019 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.1 4.6 0.0 0.0 115.5 104.0 0.2 0.2 Total Proje 1,208.0 1,087.2 1,875.0 1,687.5 979.6 881.6 1,972.4 1,775.2 657.5 591.8 5,818.2 5,236.4 3,227.2 2,904.5 5,603.7 5,043.3 3,335.9 3,002.3 Source: Data collected from the KSHIP. 5. Approach. The economic evaluation is carried out within the broad framework of social cost- benefit analysis assuming the analysis period of 20 years including the achieved construction period. There will be reduction in road user costs of motorized traffic and non-motorized traffic upon the improvement of the existing road. The economic savings at significant levels in the following areas are expected to occur due to improvement of the existing roads: Page 48 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) • Savings in VOCs • Savings in journey time of passengers and goods 6. The economic analysis is based on comparison of costs and benefits under two scenarios: ‘without the upgradation project’ and ‘with the upgradation project’. All costs and benefits are valued in monetary terms and expressed in economic prices to obtain the analysis on resource-based framework. The analysis is made package-wise and the results are expressed in terms of EIRR and ENPV. 7. Construction program. The analysis period of the project has been taken as 20 years including construction time. The completed construction program for KSHIP II upgrade road network is summarized in table 4.5, in which the actual construction period is only considered in the analysis by leaving the spillover works in the beginning and end. For the analysis, it is assumed that traffic is opened on completion of all construction activities. Table 4.5. Construction Program (Project Phasing on Completion) Construction Phasing (%) Length Package No. Upgradation Package Name (kms) 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 Total WEP-1 Hoskote to Chintamani Bypass 52.44 2.7% 32.5% 24.3% 28.7% 11.5% 0.2% 0.0% 0.0% 0.0% 100.0% WEP-2A Haveri to Hangal 31.78 2.3% 3.0% 18.2% 31.1% 40.8% 4.6% 0.0% 0.0% 0.0% 100.0% WEP-2B Hangal to Tadasa 43.46 0.0% 0.0% 4.3% 36.6% 47.3% 9.2% 2.4% 0.2% 0.0% 100.0% WEP-3 Dharwad to Saundatti 36.00 1.2% 24.3% 26.3% 27.1% 18.1% 3.0% 0.0% 0.0% 0.0% 100.0% WEP-3A Dharwad to Saundatti in Dharwad 2.5 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.6% 99.4% 0.0% 100.0% WEP-4 Tinthini to Kalmala 73.76 2.8% 26.7% 39.9% 24.6% 5.2% 0.8% 0.0% 0.0% 0.0% 100.0% WEP-5 Chowdapur to Gulbarga 28.63 16.5% 53.2% 14.7% 9.0% 6.5% 0.0% 0.0% 0.0% 0.0% 100.0% WAP-1 Malavalli to Pavagada 193.34 0.6% 0.4% 0.4% 2.2% 18.7% 9.6% 34.9% 33.1% 0.1% 100.0% WAP-2 Mudhol to Nippani 107.94 0.7% 0.7% 1.3% 2.2% 22.9% 11.3% 35.4% 25.4% 0.0% 100.0% WAEP-3A Shimoga- Shikaripura-Anandapura 82.04 1.6% 0.8% 0.4% 0.7% 3.4% 28.7% 38.1% 23.8% 2.5% 100.0% WAEP-3B Shikaripura to Hangal 71.63 0.0% 0.0% 0.0% 0.2% 4.3% 24.4% 38.7% 30.9% 1.6% 100.0% WAEP-4 Managuli to Devapura 109.95 0.9% 0.9% 0.7% 0.2% 4.9% 37.2% 39.7% 15.5% 0.0% 100.0% Total 833.47 1.5% 6.6% 7.0% 8.1% 14.1% 15.5% 27.0% 19.6% 0.5% 100.0% 8. Procedure for estimation of benefits. The following procedure has been employed to estimate the aforesaid benefits: • Estimation of processing-stage traffic volume on the completed road sections/packages from field surveys was used. • Estimation of traffic growth rate—adopted from the ‘initial base analysis of 2010’ was used. • Considering the completion stage, traffic data collected through surveys in 2019 were compared with the processing-stage (2010) traffic data to arrive at the actual traffic growth for the period (2010–2019) and the same was used. • The time values and other HDM 4 model unit data used in the VOC/time value estimation at processing stage are retained. • Usual maintenance provisions and costs in ‘with’ and ‘without’ conditions considered in the processing-stage analysis at 2010 prices are retained for the present ICR. • Except the changed variables during implementation (construction cost, construction phasing, and traffic growth rate achieved during implementation period of 2010–2018), all other variables used during the processing stage were retained. • Base year used in processing stage analysis (2010) is retained for the present ICR analysis and all completed costs were converted to the base year (2010). Page 49 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) • The model used for analysis is HDM 4. • EIRR and NPV estimation was used with the sum of benefits from o VOC savings and o Time savings. 9. Components of cost. From the financial costs of completed packages of KSHIP II, the economic cost has been worked out by multiplying the financial cost by a factor of 0.9 and is presented in table 4.6. Table 4.6. Financial Costs for Proposed Upgradation of Different Packages Processing- Completed Cost Total stage (INR, millions/km) Package Upgradation Package Length Completed Value No. Name (km) Cost (INR, Financial Economic (INR, millions) Cost Cost millions) WEP-1 Hoskote to Chintamani 52.44 1,237.5 1,208.0 23.04 20.73 Bypass WEP-2A Haveri to Hangal 31.78 832.5 987.3 31.07 27.96 WEP-2B Hangal to Tadasa 43.46 967.5 887.7 20.42 18.38 WEP-3 Dharwad to Saundatti 38.50 909.0 979.6 25.44 22.90 WEP-4 Tinthini to Kalmala 73.76 1,926.0 1,972.4 26.74 24.07 WEP-5 Chowdapur to Gulbarga 28.63 720.0 657.5 22.97 20.67 WAP-1 Malavalli to Pavagada 193.34 5,427.0 5,815.7 30.08 27.07 WAP-2 Mudhol to Nippani 107.94 3,114.0 3,248.5 30.10 27.09 WAEP-3A Shimoga-Shikaripura- 82.04 2,187.0 2,988.9 36.43 32.79 Anandapura WAEP-3B Shikaripura to Hangal 71.63 1,755.0 2,614.7 36.50 32.85 WAEP-4 Managuli to Devapura 109.95 2,569.5 3,335.9 30.34 27.31 Total 834 21,645.00 24,696.37 29.63 26.67 Note: For annuity packages (WAP1 and WAP2), the discounted values of initial and annuity payments are considered. 10. Maintenance cost. The maintenance works considered in the analysis include the following: • Annual routine maintenance • Periodic maintenance 11. The financial costs pertaining to maintenance operations have been converted into economic costs by applying the conversion factor of 0.90. The details of the maintenance program have been adopted from base analysis (2010) and presented below and are retained for the present ICR. (a) Without project alternative • Routine maintenance • Periodic maintenance o 20 mm premix carpet every four years o 25 mm SDBM whenever the roughness reaches IRI of 8 (b) With project alternative Page 50 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) • Routine maintenance • Periodic maintenance o 20 mm premix carpet every five years o 25 mm SDBM whenever the roughness reaches IRI of 4.5 12. Traffic-specific parametric values. The economic unit costs (2010) parametric values for motorized and non-motorized vehicles have been taken from the base analysis (2010) during the processing stage and are used in HDM model inputs. 13. Residual value. Considering the remaining life of the construction items, the residual value (salvage value) has been assessed at the end of the analysis period. For structures, the life is assumed to be 50 years. Values of the selected construction items such as land acquisition, structures, sub-base, and social displacement cost are included in the economic analysis as residual values at the end of the analysis period. These residual values are considered as benefits to the project in the analysis. The value has been taken as 10 percent for the present analysis. 14. Volume of traffic and growth rates. The annual average daily traffic (AADT) on different road sections during 2010 to 2018 is given in table 4.7. For analysis, the AADT adopted during the initial analysis (2010) is used. However, based on the AADT from the post-completion surveys (2019), the actual growth rate achieved during the implementation period (2010–2018) for different vehicle categories has been adopted for the present analysis. Accordingly, the AADT and the periodical growth rates adopted for the analysis are presented in tables 4.7 and 4.8. Page 51 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Table 4.7. AADT Traffic on Different Road Packages Adopted for Analysis (2010) Packa Link Loca Leng Motorised Vehicles Non-Motorised ge No. tion th Km Bus Minibu Multi 3-Axle 2-Axle LCV & Two Car/Je Auto Total Animal Cycle Cycle Total s Axle Rigid Rigid Tractor Wheele ep/ Ricksh Drawn Ricksh s r Taxi aw aw 67A 67-1 23.5 356 122 27 353 589 473 2390 1173 413 5896 12 328 3 343 67B 67-2 29 256 88 20 255 424 340 1721 845 298 4247 11 163 2 176 WEP 1 Weighted Ave. 301 103 23 299 498 400 2021 992 349 4985 11 237 2 251 % Composition 6.0% 2.1% 0.5% 6.0% 10.0% 8.0% 40.5% 19.9% 7.0% 100.0% 4.6% 94.5% 1.0% 100.0% T8 31.8 143 42 8 16 150 492 1230 505 349 2936 63 391 9 463 M1D 43.5 104 31 6 12 109 358 894 367 254 2134 0 49 1 50 WEP 2 Weighted Ave. 120 36 7 14 126 415 1036 425 294 2473 27 193 4 224 % Composition 4.9% 1.4% 0.3% 0.5% 5.1% 16.8% 41.9% 17.2% 11.9% 100.0% 11.9% 86.2% 2.0% 100.0% 21B 21-2 38.5 536 54 1 106 631 236 699 696 96 3056 14 467 0 481 WEP 3 Weighted Ave. 536 54 1 106 631 236 699 696 96 3056 14 467 0 481 % Composition 17.5% 1.8% 0.0% 3.5% 20.7% 7.7% 22.9% 22.8% 3.1% 100.0% 2.9% 97.1% 0.0% 100.0% 13A 13-1 32.5 395 20 0 112 317 420 2017 974 275 4530 45 412 6 463 13B 13-2 41.4 204 10 0 58 164 217 1041 503 142 2338 2 18 0 20 WEP 4 Weighted Ave. 288 15 0 82 231 306 1470 710 200 3302 21 191 3 215 % Composition 8.7% 0.4% 0.0% 2.5% 7.0% 9.3% 44.5% 21.5% 6.1% 100.0% 9.7% 89.0% 1.2% 100.0% 6C 6-3 28.7 480 62 7 43 422 240 1429 728 474 3885 29 208 2 239 WEP 5 Weighted Ave. 480 62 7 43 422 240 1429 728 474 3885 29 208 2 239 % Composition 12.4% 1.6% 0.2% 1.1% 10.9% 6.2% 36.8% 18.7% 12.2% 100.0% 12.1% 87.0% 0.8% 100.0% 63A 63-1 22.8 634 51 5 309 1103 605 3016 919 396 7039 441 2144 8 2593 63B 63-2 27.5 274 22 2 133 477 262 1304 397 171 3043 45 688 1 734 63C 63-3 21.1 282 23 2 137 490 269 1340 408 176 3127 6 230 0 236 63D 63-4 35.2 543 44 5 265 945 518 2584 788 339 6030 8 1287 7 1302 WAP1 63E 63-5 27.9 541 44 4 264 942 517 2575 785 338 6010 1 135 6 142 64F 64-6 20 409 33 3 199 712 390 1945 593 255 4540 9 261 0 270 64G 64-7 35.8 230 19 2 112 400 219 1093 333 144 2552 14 818 7 839 Weighted Ave. 413 33 3 201 718 394 1964 599 258 4584 65 821 5 891 % Composition 9.0% 0.7% 0.1% 4.4% 15.7% 8.6% 42.8% 13.1% 5.6% 100.0% 7.3% 92.2% 0.5% 100.0% 19A 19-1 19.2 141 63 8 56 359 560 1353 442 49 3030 20 340 0 360 19B 19-2 42.4 222 99 12 88 566 883 2134 697 78 4780 35 484 1 520 19C 19-3 18.4 180 80 10 71 457 714 1725 564 63 3864 51 846 2 899 WAP 2 19D 19-4 28.1 157 70 9 62 398 622 1503 491 55 3367 38 200 0 238 Weighted Ave. 183 82 10 73 467 729 1762 576 64 3946 36 446 1 483 % Composition 4.6% 2.1% 0.3% 1.8% 11.8% 18.5% 44.6% 14.6% 1.6% 100.0% 7.4% 92.4% 0.1% 100.0% M7A 49.8 163 73 9 65 415 648 1565 511 57 3505 10 149 1 160 M7B 45.4 199 89 11 79 506 790 1909 624 69 4276 6 87 1 94 M7C 26.2 26 12 1 10 66 103 248 81 9 555 1 91 2 94 WAP 3 T21 32.2 161 72 9 64 409 639 1543 504 56 3457 25 1480 4 1509 Weighted Ave. 150 67 8 60 381 595 1437 470 52 3220 10 400 2 412 % Composition 9.6% 1.0% 0.0% 2.2% 7.4% 8.7% 46.3% 16.4% 8.4% 100.0% 2.5% 97.0% 0.4% 100.0% 10A 10-1 61.3 74 3 0 63 178 337 301 331 167 1453 30 84 6 120 10B 10-2 48.7 106 4 1 90 255 484 432 476 240 2088 166 277 1 444 WAP 4 Weighted Ave. 88 3 0 75 212 402 359 395 199 1734 90 169 4 263 % Composition 5.1% 0.2% 0.0% 4.3% 12.2% 23.2% 20.7% 22.8% 11.5% 100.0% 34.2% 64.3% 1.4% 100.0% Source: (a) PAD of KSHIP II, 2011. 'Annex 9: Economic and Financial Analysis'; (b) KSHIP II. Page 52 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Table 4.8. Growth Pattern of Vehicular Traffic on KSHIP II Project Roads (2010–2019) Length Km Bus Mini Bus Multi 3 Axle 2Axle LCV Two Car,Jee Autoric Total Animal Cycles Cycle Total Package Year Axle Trucks Trucks & Wheeler p, Van kshaw Motoriz Drawn Ricksha Non- Truck Tracto s ed w Motoriz 2010 384 132 29 381 634 509 2575 1264 445 6353 11 237 2 251 WEP-1 52.5 2019 747 64 295 400 150 1506 7302 7018 461 17943 0 16 1 17 ACGR% 7.7% -7.7% 29.3% 0.6% -14.8% 12.8% 12.3% 21.0% 0.4% 12.2% -100.0% -25.9% -9.5% -25.8% 2010 142 42 8 16 149 489 1223 502 347 2919 27 193 4 224 WEP-2 75.3 2019 239 172 40 32 75 557 2956 860 208 5139 7 18 2 27 ACGR% 6.0% 17.0% 19.0% 8.1% -7.4% 1.4% 10.3% 6.2% -5.5% 6.5% -14.2% -23.0% -8.3% -21.0% 2010 513 52 1 101 604 226 669 666 92 2924 14 467 0 481 WEP-3 38.5 2019 376 64 92 100 200 1033 1940 1401 91 5297 3 21 0 24 ACGR% -3.4% 2.3% 63.3% -0.1% -11.6% 18.4% 12.6% 8.6% -0.1% 6.8% -15.7% -29.2% 0.0% -28.3% 2010 121 5 1 103 292 554 494 545 275 2390 90 169 4 263 WEP-4 73.9 2019 123 8 73 100 200 687 2408 566 129 4292 6 37 1 44 ACGR% 0.2% 5.5% 70.2% -0.3% -4.1% 2.4% 19.2% 0.4% -8.1% 6.7% -25.8% -15.5% -19.2% -18.1% 2010 264 34 4 24 232 132 786 400 261 2137 29 208 2 239 WEP-5 28.7 2019 500 118 735 25 714 1515 802 797 250 5456 32 267 1 300 ACGR% 7.4% 14.8% 79.4% 0.5% 13.3% 31.2% 0.2% 8.0% -0.5% 11.0% 1.1% 2.8% -7.4% 2.6% 2010 284 23 2 138 495 271 1352 412 178 3156 65 821 5 891 WAP-1 190.3 2019 402 105 349 320 487 775 5,069 2,262 521 10290 0 54 4 58 ACGR% 3.9% 18.4% 74.2% 9.7% -0.2% 12.4% 15.8% 20.8% 12.7% 14.0% -100.0% -26.1% -1.5% -26.2% 2010 125 56 7 50 319 498 1202 393 44 2693 36 446 1 483 WAP-2 108.1 2019 179 18 51 85 228 215 250 1137 336 2499 0 21 0 21 ACGR% 4.1% -11.8% 24.7% 6.1% -3.7% -8.9% -16.0% 12.5% 25.4% -0.8% -100.0% -28.8% -100.0% -29.4% 2010 1833 343 53 813 2725 2679 8302 4182 1641 22572 272 2542 18 2832 Combined 567.3 2019 2566 548 1635 1062 2053 6287 20726 14041 1996 50916 48 434 9 491 ACGR% 3.8% 5.3% 46.5% 3.0% -3.1% 9.9% 10.7% 14.4% 2.2% 9.5% -17.6% -17.8% -7.9% -17.7% Table 4.9. Annual Vehicular Traffic Growth Rates (%) 2010–2018 Vehicle Type 2018–2021 After 2021 Processing Stage Completion Stagea Car 11.3 14.4 11.7 12.0 Two wheelers 8.4 10.7 8.1 7.4 Three wheelers 7.0 2.2 4.3 3.6 Bus 8.2 3.8 8.2 7.2 Minibus 8.2 5.3 6.5 6.3 Tractor 7.5 9.9 7.2 6.7 Two-axle truck 5.2 −3.1 4.9 4.4 Multi-axle truck 7.8 46.5 8.3 8.6 Light commercial vehicle 7.5 9.9 7.2 6.7 Note: a.Traffic growth rate during 2010–2018 is based on the traffic data collected in 2019. 15. Model inputs. Post-completion review has shown considerable improvement in road surface for KSHIP II road packages, as shown in table 4.10. Table 4.10. Comparison of Road Roughness Average Roughness Length (IRI) Package Package Name (km) 2010a 2019b WEP1 Hoskote to Chintamani Bypass 52.44 4.0 2.4 WEP2 (2A+2B) Haveri to Tadasa 75.24 6.9 1.8 WEP3 Dharwad to Saundatti 38.50 5.9 2.5 WEP4 Tinthini to Kalmala 73.76 5.5 2.2 WEP5 Chowdapur to Gulbarga 28.63 7.2 2.3 WAP1 Malavalli-Pavagada 193.34 4.0 2.6 WAP2 Mudhol-Nippani 107.94 6.6 2.1 Page 53 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Average Roughness Length (IRI) Package Package Name (km) 2010a 2019b WAP3 (WAEP -3A+3B) Anandhapura-Shikaripura 153.67 7.2 2.3 WAP4 (WAEP-4) Managili-Devapura 109.95 7.4 2.3 Total 834 6.0 2.3 Note: a. Roughness during loan processing stage (2010); b. Post-completion data collection (2019). 3. Project Benefits 16. VOC savings. HDM 4 has been used to estimate the VOC for traffic in each vehicle category on each selected road with and without improvement. The model estimates VOC in both the with- and without-project situations considering the speed and travel time including surface quality and road congestion. The model comprehensively predicts the performance and operating costs of motorized vehicles in the selected fleet. Motorized vehicle performance predictions include speeds (free flow and congested conditions) and consumptions. Predictions for VOCs include fuel, oil, tire and parts costs, crew and maintenance labor costs, capital depreciation, borrowing costs, and overhead costs. 17. Travel time saving. The model estimates the value of travel time for passengers and goods in transit in both the with- and without-project scenarios considering speed and travel time including surface quality, road congestion, and so on. 4. Economic Viability 18. The EIRR is calculated by the model applying a project discount rate of 12 percent to the annual undiscounted net differences of the economic elements considered in the analysis. The sum of these discounted values gives the ENPV of the project which is generated and presented, together with the associated EIRR from HDM output. Major inputs used for HDM 4 pertaining to the road conditions before and after improvements are presented in tables 4.13 to 4.15. 19. Economic evaluations were carried out for packages and for the scenarios in table 4.11. In the analysis, the ‘with project’ improvement alternative was compared with the base option of ‘without project’ alternative of maintaining the existing road and minimum maintenance ‘do minimum’, that is, (a) Base case. Without improvements and with annual ‘do minimum’ maintenance with (b) Improvement alternative. With improvement/rehabilitation and annual ‘routine maintenance’ supplemented by a structural overlay at IRI of 4.5. 20. The results of section-wise economic analysis conducted considering modified cost of project packages and their sensitivity analysis after 20 percent reduction in benefits are summarized in table 4.11. Table 4.11. Results of the Economic Analysis Normal Scenario (Improvement Scenario with 20% Reduction in Length Alternative) Benefits Package (km) EIRR (%) NPV (INR, millions) EIRR (%) NPV (INR, millions) WEP-1 52.4 56.4 7,045.0 42.9 5,141.3 Page 54 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Normal Scenario (Improvement Scenario with 20% Reduction in Length Alternative) Benefits Package (km) EIRR (%) NPV (INR, millions) EIRR (%) NPV (INR, millions) WEP-2 75.2 45.6 5,087.9 38.3 3,787.6 (WEP-2A +WEP 2B) WEP-3 38.5 14.8 356.1 10.5 −183.1 WEP-4 73.8 34.6 3,066.2 28.7 2,163.8 WEP-5 28.6 42.7 4,696.4 38.0 3,603.6 WAP-1 193.34 22.2 1,198.3 18.9 752.5 WAP-2 107.9 35.3 1,912.7 30.8 1,413.1 WAP-3 153.7 15.3 429.3 12.8 90.3 (WAEP3A +WAEP3B) WAP-4 110.0 21.7 608.5 18.9 395.4 (WAEP-4) Total 834 32.0 24,400.4 27.2 17,164.6 21. EIRRs obtained for road packages of KSHIP II are in the range of 15 percent to 56 percent with an overall EIRR of 32 percent. EIRRs for all packages were found with more than the minimum required 12 percent. Hence, it can be concluded that the project is found economically viable after absorbing the changes that happened during the implementation such as (a) increase in the traffic growth, (b) increased construction cost, and (c) experienced time delays. These results show some changes with respect to the earlier study due to the following: • EIRR is higher as the effects of benefits obtained due to VOC and travel time cost saving during the analysis period are more after considering the increased traffic growth during 2010–2018, modified construction cost, and implementation period, as shown in table 4.12. Table 4.12. Results of Time Overrun and Cost Overrun Analysis Package Upgradation Package Name Length (kms) Time Overrun Cost Overrun No. Contract Target Actual Time Processing Contract Disburshed LA, R&R Total Cost Cost award date completion date completion overrun stage Value Rs.in and utility completed overrun overrun % date (Months) value Rs Million Contractors shifting cost Rs Rs.in Million Value Rs.in Million Million Rs.in Million WEP-1 Hoskote to Chintamani Bypass 52.44 12-04-2011 12-02-2014 30-05-2015 16.0 1,237.5 982.2 1166.63 41.36 1207.99 -29.51 -2.4% WEP-2A Haveri to Hangal 31.78 22-02-2013 01-12-2014 27-06-2016 19.0 832.5 925.3 897.21 90.14 987.3 154.8 18.6% WEP-2B Hangal to Tadasa 43.46 06-07-2013 19-04-2015 31-01-2017 21.0 967.5 978.7 867.36 20.30 887.7 -79.8 -8.3% WEP-3 Dharwad to Saundatti 36.00 07-04-2011 27-06-2013 31-01-2016 19.0 909.0 844 867.92 47.78 915.7 6.7 0.7% Dharwad to Saundatti in Dharwad WEP-3A 2.5 25-10-2017 28-02-2019 11/10/20191 7.0 184 62.60 1.28 63.9 63.9 town limits (2 5km) WEP-4 Tinthini to Kalmala 73.76 31-03-2011 12-08-2014 24-06-2015 11.0 1,926.0 1606.9 1916.40 56.00 1972.4 46.4 2.4% WEP-5 Chowdapur to Gulbarga 28.63 31-03-2011 18-01-2013 25-04-2014 15.0 720.0 615.5 631.43 26.10 657.5 -62.5 -8.7% WAP-1 Malavalli to Pavagada 193.34 24-03-2014 09-06-2017 20-09-2018 16.0 5,427.00 4889.02 929.20 5818.2 391.2 7.2% WAP-2 Mudhol to Nippani 107.94 14-03-2014 12-12-2016 10/12/2017 12.0 3,114.00 2939.20 288.00 3227.2 113.2 3.6% WAEP-3A Shimoga- Shikaripura-Anandapura 82.04 28-04-2015 11-04-2018 30-11-2018 8.0 2,187.0 2647.3 2676.39 312.56 2988.9 801.9 36.7% 2 WAEP-3B Shikaripura to Hangal 71.63 06-07-2015 28-02-2018 12/05/2019 14.0 1,755.0 2247 2487.13 127.60 2614.7 859.7 49.0% WAEP-4 Managuli to Devapura 109.95 30-04-2015 26-04-2018 08-11-2018 6.0 2,569.5 3170.5 3137.03 198.91 3335.9 766.4 29.8% Total 833.47 13.7 21,645.00 14,201.40 22538.3 2139.2 24677.5 3032.5 14.0% Note: 1. EoT is approved upto 11/10/2019 2. In the 90th PSC ,it is proposed to contractually close the project on 12/05/2019,proceedings is awaited. 3. For Annuity roads, cost overrun analysis did not carried out. Page 55 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) 22. The sensitivity analysis is conducted after 20 percent reduction of yearly benefits for the analysis period and EIRRs obtained for road stretches are in the range of 10.5 percent to 42.9 percent, which are more than the required 12 percent. This decrease in benefit sensitivity is unlikely to happen due to the following: • Traffic is expected to grow to accompany the current economic growth. • There is little uncertainty on the cost of the works as all the contracts are nearing completion and the costs have been updated to consider the price escalation as well as variations. • VOCs are unlikely to be reduced in view of the past trend for the price of inputs such as fuel, lubricants, tires, and salaries. Table 4.13. Existing Characteristics of Upgradation Roads - KSHIP II Motorized Cost Link Length Width Average Cost (INR, Package Link Name Traffic (US$, No. (km) (m) Roughness millions) (AADT) millions) 67A Hoskote-H Cross 23.5 7.0 5,896 3.9 11.9 535.5 H Cross-Chintamani WEP1 67B 29.0 5.5 4,247 4.0 15.6 702.0 Byepass Average 52.5 6.2 4,985 4.0 27.5 1,237.5 T8 Haveri-(NH4)-Hangal 31.8 5.5 2,936 6.3 18.5 832.5 WEP2 M7D Hangal-Tadasa 43.5 3.8 2,134 7.4 21.5 967.5 Average 75.3 4.5 2,473 6.9 40.0 1,800.0 21B Dharwad-Soundatti 38.5 7.0 3,056 5.9 20.2 909.0 WEP3 Average 38.5 7.0 3,056 5.9 20.2 909.0 13A Tinthini-Devadurga 32.5 3.8 4,530 5.7 19.9 895.5 WEP4 13B Devadurga-Kalmala 41.4 3.8 2,338 5.4 22.9 1,030.5 Average 73.9 3.8 3,302 5.5 42.8 1,926.0 6C Chowdapur-Gulburga 28.7 5.5 3,885 7.2 16.0 720.0 WEP5 Average 28.7 5.5 3,885 7.2 16.0 720.0 63A Malavalli-Maddur 22.8 7.0 7,039 3.9 21.1 949.5 63B Maddur-Huliyur durga 27.5 5.5 3,043 4.0 16.0 720.0 63C Huliyur durga-Kunigal 21.1 5.5 3,127 3.0 10.9 490.5 63D Kunigal-Tumkur 35.2 7.0 6,030 4.2 21.0 945.0 WAP1 63E Tumkur-Kortagere 27.9 5.5 6,010 4.1 18.4 828.0 64F Kortegere-Madugiri 20.0 5.5 4,540 4.9 12.1 544.5 64G Madugiri-Pavagada 35.8 5.5 2,552 4.1 21.1 949.5 Average 193.34 6.0 4,584 4.0 120.6 5,427.0 19A Mudhol-Mahalingapura 19.2 5.5 3,030 5.4 13.7 616.5 19B Mahalingapura-Kabbur 42.4 3.8 4,780 7.9 24.9 1,120.5 WAP2 19C Kabbur-Chikodi 18.4 3.8 3,864 6.0 11.2 504.0 Chikodi-(NH4 Cross) 19D 28.1 5.5 3,367 5.9 19.4 873.0 Nippani Page 56 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Motorized Cost Link Length Width Average Cost (INR, Package Link Name Traffic (US$, No. (km) (m) Roughness millions) (AADT) millions) Average 108.1 4.5 3,946 6.6 69.2 3,114.0 T21 Anandapura-Shikaripura 32.2 3.8 3,505 5.5 21.1 949.5 M7B Shikaripura-Anavatti 45.4 3.8 4,276 8.1 27.5 1,237.5 WAP3 M7C Anavatti-Hangal 26.2 3.8 555 8.1 24.7 1,111.5 M7A Shimoga-Shikaripura 49.8 5.5 3,457 7.1 14.3 643.5 Average 153.6 4.3 3,214 7.2 87.6 3,942.0 10A Managili-Talikota 61.3 3.8 1,453 6.8 30.1 1,354.5 WAP4 10B Talikota-Devapura 48.7 3.8 2,088 8.1 27.0 1,215.0 Average 110.0 3.8 1,734 7.4 57.1 2,569.5 Total 834 481.0 21,645.0 Table 4.14. Characteristics of Upgradation Roads on Completion (2018) Completed Improvements (2018) Length Average Package Road Shoulder Completed Cost Completed Cost (km) Roughness Work Type (US$, millions) (US$ per km) (IRI) WEP1 52.44 2 Lane Paved 26.84 0.51 2.4 WEP2 75.24 2 Lane Paved 41.67 0.55 1.8 (WEP-2A+2B) WEP3 38.50 2 Lane Paved 21.77 0.57 2.5 WEP4 73.76 2 Lane Paved 43.83 0.59 2.2 WEP5 28.63 2 Lane Paved 14.61 0.51 2.3 WAP1 193.34 2 Lane Paved 129.24 0.67 2.6 WAP2 107.94 2 Lane Paved 72.19 0.67 2.1 WAP3 153.67 2 Lane Paved 124.53 0.81 2.3 (WAEP-3A+3B) WAP4 109.95 2 Lane Paved 74.13 0.67 2.3 (WAEP-4) Total 834 548.81 0.66 2.3 Note: US$1 = INR 45. Table 4.15. Details of Average Speed on Project Road Sections Length Travel Speed (km/h) Package Package Name (km) Before Project (2010) On Completion (2019) WEP1 Hoskote to Chintamani Bypass 52.5 23 57 WEP2 Haveri to Tadasa 75.3 21 67 (WEP-2A+2B) WEP3 Dharwad to Saundatti 38.5 36 68 WEP4 Tinthini to Kalmala 73.7 30 57 WEP5 Chowdapur to Gulbarga 28.6 31 64 WAP1 Malavalli-Pavagada 193.34 37 58 WAP2 Mudhol-Nippani 107.9 27 50 Page 57 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Length Travel Speed (km/h) Package Package Name (km) Before Project (2010) On Completion (2019) WAP3 Anandhapura-Shikaripura 153.7 20 55 (WAEP-3A+3B) WAP4 Managili-Devapura 110.0 36 68 (WAEP-4) Total length/average speed 834 29 59 Table 4.16. Achievement against Target of Results Framework for VOC and Travel Time Achieved at Completion Target for Completion Baseline at Processing Stage (2019) Stage (2019) Stage (2011) Vehicle Category VOC/Vehicle TT/Vehicle km VOC/Vehicle TT/Vehicle VOC/Vehicle TT/Vehicle km (US$) (US$) km (US$) km (US$) km (US$) km (US$) Car 0.09 0.16 Two-axle truck 0.32 0.01 Average for all vehicles 0.211 0.063 0.2 0.06 0.26 0.074 Reduction at completion (2019) 19% 15% against baseline (2011) % Note: TT = Travel time. 23. A comparison of major parameters including results for KSHIP II during the processing stage and completion stage in table 4.17 justifies the ICR analysis of economic feasibility results. Table 4.17. Comparison of Economic Analysis Results KSHIP II Sl. No. Details Appraisal Completion 1 Number of upgrade packages 9 9 2 Total length (km) 830.8 834 3 Traffic (i) combined AADT (number of motorized vehicles) 2010 22,572 22,572 2019 46,698 50,916 (ii) Annual average growth rate (%) 8.40 9.5 4 Road roughness (IRI/km) 6 2.3 5 Travel speed Average travel speed (km/h) 29 59 6 Cost Project cost (INR, millions) 21,645.00 24,696.37 Cost overrun (%) — 14.10 7 Time overrun Average/package (months) 0 13.7 8 EIRR Combined EIRR (%) 30 32.0 Page 58 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) ANNEX 6. IMPACT EVALUATION OF LAND ACQUISITION AND RESETTLEMENT IMPLEMENTATION 1. Two impact evaluations on land acquisition and resettlement implementation were carried out at midterm in 2014 and end term in 2019 through independent consultants. The key findings are summarized in the following paragraphs. 2. Midterm impact evaluation. The key findings of midterm evaluation carried out in 2014 include that overall improvement in living standards was observed with respect to average incomes; average size of the new houses and basic facilities in the houses; and improved ownership in assets such as television, cooking gas, vehicles, and agricultural implements. However, a large number of PAP (more than 90 percent) are not satisfied with the compensation amounts, and about 20 percent have approached the courts for enhancement of compensation amounts and PAP have difficulties in presenting a large number of supporting documents of ownership of affected assets. The study also noted that the compensation amounts are primarily used for purchase of agricultural implements, repayment of debts, and children’s education. The study also observed that the rehabilitation and resettlement assistance has helped most of the affected informal settlers to improve their affected business and reported consequent improvements in their living standards; some of them also acknowledged the help of NGOs in realizing certain entitlements. 3. The end-term study was carried out in 2019 with an objective of assessing the outcomes of compensation and resettlement support received by the affected people. The study was carried out through a sample household survey among 700 families supplemented by focus group consultations, interviews, and secondary data. A survey for a small sample of 110 households from controlled population was also carried out to compare the current living standards of PAP with a population with similar socioeconomic background in the project area. The key findings and study outcomes are summarized in the following paragraphs. 4. Overall living conditions. The study showed a significant improvement in the overall living conditions of the resettled households under the KSHIP component. The proportion of pucca houses increased from 25 percent to 75 percent, houses with separate kitchen from 70 percent to 98 percent, and separate bath from 70 percent to 76 percent. Poverty assessment of the displaced families in the resettlement colonies showed marked reduction in poverty. The MPI measured in terms of education, health, and living conditions has seen a vast improvement with the baseline and control population. The overall MPI for all people residing in the resettlement sites has declined from 0.14 to 0.06 and the number of multidimensionally poor declined from 39 percent to 11 percent. The significant reduction in the MPI is owing to an improvement in the living standards related to access to electricity, sanitation, house floor, cooking fuel, and assets ownership. The education and health indicators largely remain the same. 5. The proportion of all categories of affected people possessing television increased from 39 percent to 88 percent, fridge from 2 percent to 12 percent, telephone from 11 percent to 97 percent, two -wheeler from 32 percent to 45 percent, and four-wheeler from 3 percent to 17 percent. The proportion of pucca and semi-pucca houses increased from 38 percent to 59 percent and 15 percent to 33 percent, respectively. About 41 percent of commercial resettlement sites in the KRDCL are employing people in their business, from just 12 percent in the baseline. The monthly turnover of the affected households has increased, in the range of 4 percent to 88 percent in different road projects. The size of commercial structure increased from 8 m2 in the baseline to 31 m2 among the people affected by the KRDCL. The study Page 59 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) also observed that the proportion of those with debt has increased considerably from baseline and this may be because loans from banks are now easily available. The residents in the resettlement sites showed a high level of satisfaction with the location of the site, drainage, street lights, and social/community life. The study found that more than three-fourths of the relocated people resettled within 2 km of their original habitation. The study revealed effective functioning of more than 80 percent of sample community assets reconstructed under the project. The groundwater reservoir system built by the KSHIP in Pavagada, WAP I package is a good practice in holistically addressing a local issue relating to water. The study observed that compensation amounts are largely used for productive purposes. The study observed that about 80 percent used compensation amounts for business purposes, while 5 percent used for house construction, 3 percent for clearing debts, and 2 percent made bank deposits. Only less than 1 percent used them for purchasing alternative agricultural lands, and the rest used them for routine expenditures and social functions. The study observed that timely resettlement supported those who lost their shops/businesses and enabled them to establish their business or purchase assets resulting in improvements in their overall living standards. The current living standards of PAP are favorable when compared with controlled population in terms of housing conditions and ownership of assets. 6. With regard to overall resettlement implementation, 69 percent in the KSHIP and 80 percent in the KRDCL rated it satisfactory, while more than two-thirds in the KRDCL and about 60 percent in the KSHIP are satisfied with the compensation rates for land acquisition. With regard to changes in income among PAP affected by the KSHIP, about one-third rated that their incomes improved in the post- resettlement period, another 52 percent rated that their incomes are same compared to baseline, while about 15 percent feel that their incomes are lower in the resettlement period. In contrast, more than 50 percent in the KRDCL rated that incomes are improved in the post-resettlement period. 7. Land acquisition process. The private land acquired for the project is more than 90 percent of the total land requirement of 660 acres for the project and the rest is public land. The overall private land acquisition impacts are minimal as less than 1 percent affected landowners have lost more than 1 acre of land and wet lands acquisition is only 12 percent. The average land lost is only about 360 m2. The average time taken for land acquisition is about two years; while 22 percent of awards took more than three years, about 40 percent awards took less than one year to complete the land acquisition process from first notification to award. The minimum time taken for land acquisition is about 6 months and maximum time taken is 5 years 11 months. The study noted that a large proportion of compensation amounts, especially by the KSHIP, has been deposited in the courts for want of ownership documents and these people faced several hardships in realizing the compensation amounts from the courts with high legal fees, long delays, multiple court hearings, and so on. The study also noted that income tax was deducted from compensation amounts from those losing houses and structures in habitational areas, which is against the provisions of resettlement policy provisions adopted for the project and recommends that those amounts need to be reimbursed to comply with the policy provisions. 8. Grievance redress mechanism. Though the project established district-level grievance committees, the people preferred to approach the implementing agencies to resolve their grievances. In all, the KSHIP received 1,235 complaints and the KRDCL received 543 complaints related to land acquisition and resettlement during the project implementation. The complaints mostly related to compensation payments, nonreceipt of notice, discrepancies in the measurement of impacts area, nonpayment of difference in compensation due to revisions, and related complaints. The study noted that about 70 percent expressed satisfaction with the outcome of grievance redress process, but some pointed out that they were not aware of the process for redressing the grievances. The study also pointed out that Page 60 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) the aggrieved PAP could also register their complaints through multiple channels: online, phone/SMS, and social media (WhatsApp/Facebook). The complainant receives a unique complaint number and an acknowledgement, and on his/her acceptance of the resolution of grievances, the resolution is closed. 9. Outstanding land acquisition and resettlement activities. As of June, 2019, there are few land acquisition and resettlement actions and those include: (i) On KSHIP side, the remaining actions include: (i) additional land acquisition of 6.23 acres in 15 villages identified recently for drain improvements, (ii) outstanding compensation payments to 21 land owners whose compensation awards are expected to be announced shortly; (iii) resettlement assistance payments to 6 families; and, (iv) issue of ownership titles to 27 families in one of the resettlement site at Hungsagi Village in Yadgiri district; On KRDCL side, the outstanding actions include: (i) outstanding land possession of 24 acres due to resistance from land owners until the compensation is released from the courts; (ii) resettlement of 31 displaced Thangadagi village in Bijapur district; and, (iii) de-notification of 4.10 acre of land which is no longer required by the project. In addition, the impact evaluation study found that income tax amounts were deducted from the compensation amounts from 7 land owners by KSHIP unit and 67 land owners by KRDCL, which will be required to be reimbursed as per the policy provisions applied for the project. The Bank will continue to follow up with KSHIP unit and KRDCL until these actions are completed. Page 61 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) ANNEX 7. BORROWER COMMENTS Thank you for sharing the draft. We have gone through the same. Please find attached our comments below. We are certainly hopeful that there will be possible up-gradation of the rating from your end. Please do let us know, should you have any comments. Comments from PIU, KSHIP:  Para 17 (Page 9 of 87) - It is true that one stretch had to be dropped. But the Safe Corridor Demonstration project was conducted on the stretch between Belgaum to Yaragatti. This was one of the first successful Safe Corridor Demonstration Project conducted in India  Para 26 (Page 11 of 87) - All the Projects boast of on-time delivery and have been completed on time. This may be kindly added as well.  Para 29 (Page 12 of 87)- The CRN analysis and MTFP also fed into selection of roads from ADB 2nd Tranche HAM contracts. Further, based on the same, KRDCL has mobilized toll contractors to generate toll revenue.  Para 30 (Page 12 of 87)- It is to be noted that under the pilot model itself, KRDCL was able to mobilize term loan at MCLR, which is the lowest term loan rate achievable and achieved by PSUs so far. This may please be taken note of.  Para 30 (Page 12 of 87)- The project was completed on/before time, setting an execution record.  Para 31 (Page 12 of 87)- This is one of the first projects in the country in which specialized actions were taken to enable safeguards (e.g animal underpasses, etc) for wildlife protection in Bidar Chincholi stretch  Para 32 (Page 13 of 87)- We would request the rating to be improved as the project demonstrated many first of its kind in India:  HAM and Co-financing projects successfully executed on or before time, which were replicated in NHAI and other State Governments as well  Innovative term loan borrowing backed by developed revenue streams at cheapest rate available in market  PRAMC established and operational  Intensive wild-life interventions  Successful SCDP outcome  Para 44 (Page 16 of 87)- We would request that the rating should be made higher given that the projects were delivered with successful outcomes and delivered innovations which has been taken note of across the country. These projects have been replicated across NHAI and other States across India.  Para 94 (Page 33 of 87)- In WAP 1 of KSHIP DBFOMT projects, substantial claims have been raised recently which may get into disputes. A key learning so far is to inculcate the culture of ‘contract and risk management’ to prevent it, rather than just ‘contract administration’ to report it. In KRDCL, such ‘preventive’ philosophy has resulted in zero disputes. Often technical consultants lack this skillset and may be focused upon in future. Page 62 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) ANNEX 8. SUPPORTING DOCUMENTS • Loan Agreement, Second Karnataka State Highway Improvement Project, Loan No. 8022-IN, between India and International Bank for Reconstruction and Development, May 30, 2011, including Amendments • Project Agreement, Second Karnataka State Highway Improvement Project, Loan No. 8022-IN, between International Bank for Reconstruction and Development and State of Karnataka, May 30, 2011, including Amendments • Project Appraisal Document, Second Karnataka State Highway Improvement Project, Report No. 59089-IN, February 24, 2011 • Aide Memoires and Management Letters of the Preparation and Implementation Supervision Missions from 2008 to 2019, The World Bank • Implementation Status and Results Reports, Second Karnataka State Highway Improvement Project, Sequence Nos. 1–17, 2011–19 • Country Strategy for India for the Period 2009–12, World Bank, Report No. 46509-IN, November 14, 2008 • Country Partnership Framework for India for the Period 2018–22, World Bank, Report No. 126667- IN, July 25, 2018 • Economic Survey of Karnataka, 2017–18, Government of Karnataka, Department of Planning, Programme Monitoring & Statistics • Karnataka Road Sector Policy, 2009, Karnataka State Highway Improvement Project, Karnataka Public Works Department • Final Report on Road Fund Policy and Legislation and Credit Assessment Strategy, PricewaterhouseCoopers, April 2010 • Report on PPP and Financing Options - Analysis and Recommendations, PricewaterhouseCoopers • Safety Management in SCDP Corridor and in the State of Karnataka, Final Report, April 2018 • A Report on the Mass Media Campaign, Karnataka State Highway Improvement Project, EKA People Solutions Pvt. Ltd. • Localized Awareness Programme (LAP) for Safe Corridor Demonstration Programme (SCDP), Shrestha Communications • Road User Satisfaction Survey-I under KSHIP II, March 2014, and Road User Satisfaction Survey-II under KSHIP II, March 2016 • End-term Evaluation of LARR Implementation in KSHIP II Project, Center for Excellence in Management of Land Acquisition, Resettlement and Rehabilitation (CMLARR), Administrative Staff College of India (ASCI), Hyderabad • Karnataka Public Works Departmental Code, 2014. Page 63 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) ANNEX 9. COMPARATIVE ASSESSMENT OF STATE INITIATIVES: CASE OF KARNATAKA, ANDHRA PRADESH & TELANGANA AND RAJASTHAN Background and Objective: 1. The World Bank (“the Bank”) has been extensively involved in the Indian transport sector over the past 70 years. By the end of 2018, it had closed 62 projects (loans and credits) totalling $11.1 billion to the sector, or about 15 percent of the Bank portfolios of loans and credits closed this far in the country. Roads and highways accounted for 63% (active and closed projects combined) of the total investments in the transport sector. The Bank has successfully implemented and closed 29 road projects including National Highways, State Highways and rural roads in India worth US$ 8.77 billion and has an active portfolio of 11 projects (one NH, 7 SHs and 3 rural roads) worth US$3.2 billion across nine states of India including two centrally funded projects of national highways and rural roads where civil works are also being implemented in additional nine states. In addition, four projects worth US$989 million in the state of Meghalaya, Himachal Pradesh, Tamil Nadu and including one National Highways project are under preparation and scheduled to be delivered in the current fiscal year i.e. FY20. 2. In view of the above, it is worthwhile to take stock of the performance of the portfolio and assess the impact of Bank support in the sector. As part of that effort this note presents a comparative review of three state roads projects that have closed at about the same time: Second Karnataka State Highway Improvement Project (KSHIP II), Andhra Pradesh & Telangana Road Sector Project (APTRSP) and Rajasthan Road Sector Modernization (RRSMP). This note focuses particularly on elements of project design and impact related to institutional development in the three projects. Strategic Framework: 3. Project Designs consistent with the Strategic Framework. Three key reports frame the Bank’s intervention in the state roads sector in India. The 1995 India: Transport Sector- Long Term Issues 7 report examined the ways to respond to the national economic reforms initiatives and proposed policy and institutional reforms to improve regulation of private transport operations, as well as the provision and maintenance of physical infrastructure. This was updated in year 2001-02 8 with the objective to provide policy dialogue between the Bank and the Government of India and laid the Bank’s sector assistance strategy for Transport. This was followed by a review 9 of highway agencies in the South Asia Region to help governments and policy makers identify reforms required to modernize and strengthen the capacity and performance of their road agencies to deliver large investment programs through performance monitoring as a tool. These studies have laid the foundation for the sector assistance strategy for road sector modernisation and highlighted the essential elements of the strategic framework which are shown in the figure 1 below with the objective to transform road agencies from the role of “provider” to “manager” of road infrastructure. The project designs of the three projects was consistent with this approach and strategic framework. 7 India: Transport Sector – Long Term Issues, The World Bank Group 8 India: Transport Sector – The Challenges Ahead, 2002, Report No. 24457, The World Bank Group 9 A Review of the Highway Agencies in South Asia Region, 2002, Transport Research Support, DFID and the World Bank Page 64 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) 4. This framework is broadly consistent with the engagement framework recommended by the IEG Report on “A Decade of Action in Transport” 10 of supporting private sector development and improving governance and institutional capacity. Though the approach of improving institutional capacity in procurement, financial management and asset management etc. are all in line with that strategy, there is one key difference – in terms of the focus on corporatisation and creating bankable institutions. Although Bank support has seen some success in encouraging the establishment of commercially run road agencies and the creation of road funds to bring greater stability into financing recurrent road expenditures, especially in Africa. The judgment was that in Indian states, an initial focus on strengthening existing institutions was more politically feasible with only incremental steps towards corporatisation and bankable institutions till date. The private sector development in the South Asia region has been encouraged mainly through road construction and maintenance management. Figure 1: Strategic Framework Project Design: 5. All three projects were designed as investment project finance (IPF) operations with institutional strengthening components complementing primarily infrastructure projects. The civil works focused on the investment and maintenance requirements of the state’s core road network. The investment support 10Independent Evaluation Group: A Decade of Action in Transport - An Evaluation of World Bank Assistance to the Transport Sector: 1995-2005, IEG (2007), The World Bank. Page 65 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) was combined with strengthening institutional capacity of the road departments at the state level through introduction of sound strategic and regulatory framework, organisational reforms, modernisation of business and engineering practices and human resource development through training of staff, contractors and consultants. The engagement also provided support to reduce maintenance backlog by funding periodic maintenance in the state of Andhra Pradesh and Karnataka with introduction of modern maintenance equipments replacing manual operations and piloting alternative contracting methods based on performance. Further, the investment components were also designed to aid institutional strengthening: the Karnataka and Andhra Pradesh projects included important pilots/demonstrations for private sector participation for infrastructure development and innovations in contractual arrangements to increase operational efficiency and the implementation capacity of state institutions. 6. Focusing on Institutional Strengthening through Road Sector Modernisation. In case of Rajasthan, though the civil works were mainly on rural roads, however, the road sector modernisation agenda including road safety was designed to focus on transformation of the entire Public Works Department into a modern road agency by adopting best practices and strengthen institutional effectiveness. The key elements of this road sector modernization approach were like the Institutional Development Action Plan prepared in KSHIP II and APTRSP. Project Interventions: 7. The civil works in all three projects focused on improving the quality of core road network through upgradation, widening and maintenance of priority roads in Andhra Pradesh, Telangana as well as in Karnataka whereas in Rajasthan, the works were focusing on providing all-weather road connectivity to the rural population of the state. In Andhra Pradesh & Telangana, the focus was to improve riding quality and capacity of the network by reducing the maintenance backlog through adoption of long-term output and performance based maintenance contracts on a significant part of the core road network and pilot transactions to increase states capacity to engage private sector to finance, develop and manage two road concessions on public-private partnership (PPP) basis. In Karnataka, project activities mainly focused towards highway financing modernization and strengthen the capacity of the government to attract private sector financing through adoption of PPP– Design, Build, Finance, Operate, Maintain and Transfer (DBFOMT) contracts and commercial financing through domestic financial institutions. In addition, the project interventions were focusing on enhancing the institutional effectiveness in all states through structured institutional strengthening and development action plans in Andhra Pradesh, Telangana and Karnataka and road sector modernisation plan in Rajasthan. The road safety demonstration corridor approach was adopted in all four states. A snapshot of project interventions in provided in the table one below and a detailed comparison of the design and interventions is at Appendix-1. Table 1: Summary of Project Interventions AP Telangana Karnataka Rajasthan Civil Works – Upgradation/ Widening/ Maintenance/ connectivity     Highway Financing Modernisation     Institutional Strengthening & Road Sector Modernization     Road Safety Management – Demo Corridor     Road Safety Management – Policy & Institutional Actions     Note:  - substantially done;  - partly done;  - yet to be done Page 66 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Results Achieved: 8. Element 1. Policy & Planning. Defined policy & planning framework for effective road sector management: The first key element of the sector modernization agenda is for the road agencies to clearly define a road sector policy with the comprehensive vision/mission statement, backed by a legal and regulatory framework, covering development, asset management and safety. The international experience suggests that creating a policy framework ensures adequate flow of resources to the sector. Additionally, in order to effectively prioritize expenditures (both capital and maintenance) and channel them for most impact – it is important for road agencies to put in place a masterplan/core road network. A systematic effort was made in Karnataka, Andhra Pradesh and Telangana with reasonable success to adopt a road sector policy framework; develop network level master plans and finalize a core road network to replace the ad hoc systems of planning, budgeting and investment. However, in Rajasthan, the experience was less successful. While a comprehensive road sector policy was developed it has not been formally adopted by state government. Though the state government has identified the core road network and finalise the strategic road network which led to development of State Highway Development Program, currently being supported by the Bank through ongoing engagement. Table 2: Policy & Planning Framework AP Telangana Karnataka Rajasthan Road Sector Policy     Network Level Master Plans & Finalised Core Road Network     Note:  - substantially done;  - partly done;  - yet to be done 9. Element 2. Adequacy of Funds. Framework to ensure adequacy of funds and stabilise road financing: The second key element of sector modernization is to ensure an adequate and stable financing base for managing the asset base and finance new expansion. Adoption of a comprehensive and structured framework would ensure adequacy of funds for cost-effective, efficient and sustainable asset management including capital works as well as maintenance. The fundamental need here is to identify an adequate funding base via a combination of road user charges and stable transfers from the general revenue base. A sound funding base facilitates the development of a range of financing options including: private financing for projects, domestic borrowing and multilateral financing, ring-fencing and securitization of revenue proceeds. The state of Karnataka has shown high level of ownership in successfully implementing reforms to improve highway financing by endorsing a new road sector policy with appropriate financing strategy 11. The state of Andhra Pradesh and Karnataka have strengthened the budgetary discipline through multi-year planning based on asset management data, however, the current financial system and governing mechanism does not allow for multi-year budgeting. The draft road fund bills in Andhra Pradesh and Telangana and road sector policy including the financing plan in Rajasthan are still under the consideration of the Government. However, the fundamental issues such as prioritizing maintenance over capital works, appropriate balance between capital and recurrent expenditure; 11Financing Strategy included adoption of user-pay principle approach, amending Highway Act to allow tolling on state highway, increasing PPP transactions in the road sector, ring-fencing and securitization of toll proceeds for annuity payments and framework for domestic borrowings. Page 67 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) adequate and appropriate cost sharing between central and state governments; and multi-year budgeting remain unaddressed due to political economy and constraints of existing systems. Table 3: Financing Framework AP Telangana Karnataka Rajasthan Financing Strategy     Road Fund     Multi-Year Budget Planning     Note:  - substantially done;  - partly done;  - yet to be done 10. Element 3. Efficiency of expenditures: Strengthening network management approaches. A comprehensive and integrated road asset management system (RAMS) 12 ensures systematic management of the network in a sustainable and cost-effective way using scientific life-cycle based approach. This approach affects the full range of activities including planning, engineering, finance, programming, and actual works. It supports preparation of both annual and multi-year investment plans for maintaining the road network considering the condition, function, available funding, resources and prioritization. The state of Andhra Pradesh and Karnataka have achieved considerable success in institutionalising this system and are currently using Multi-year rolling plans including annual investment and maintenance plans prepared through the RAMS. The use of RAMS has increased credibility of budget requests from the PWD and resulted in significantly higher outlays for maintenance. The budget planning & allocation decisions are based on the outputs of the RAMS replacing the old ad hoc systems. Many other states have also attempted for similar network level system for asset management such as Tamil Nadu, Assam, Orissa, however, the key achievement in Andhra Pradesh and Karnataka that they have adopted a strategic and holistic approach through the backward and forward integration of the system for planning, investment, maintenance, financial allocation and monitoring and supervision. These states have established Asset Management cell with dedicated staff for operations and close monitoring of these systems. The state of Andhra Pradesh has also pioneered in developing an IT-Command and Control Centre which is a comprehensive console (web and GIS map platform) utilising RAMS and MIS for decision support. On the other hand, Rajasthan has not been able to complete the development of the system and it is still at the nascent stage due to lack of support and ownership of the relevant stakeholder department including the finance department. Though after bifurcation, it has been non-starter in case of state of Telangana also. Table 4: Asset Management System AP Telangana Karnataka Rajasthan Road Asset Management System     Note:  - substantially done;  - partly done;  - yet to be done 12 A comprehensive and integrated road assets management system includes – Pavement Management, Bridge Management, Traffic Data Management, Transport Modelling Tool, Traffic Incident Management, Monitoring & Evaluation, Environment and Social Information System, Road Safety Management, Cross Asset Prioritization System. Page 68 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) 11. Element 4. Implementation Capacity. Enhancing the implementation Capacity through innovative contracting approaches, use of digital tools for program management and institutional strengthening: a. Adoption of innovative contracting approaches: The implementation of innovative contracting models to boost private sector investment in construction and maintenance of road assets resulted in improving efficiency, economies of scale and implementation capacity by shifting focus from traditional input and process-based to output and performance-based approach. It involved adoption of toll based Public private partnership contracts, long-term performance-based maintenance (LTPBM) contracts in Andhra Pradesh and Telangana; and annuity-based Design, built, finance, operate and Transfer (DBFOMT) model and co-financing framework from domestic financial institutions in Karnataka. This approach of long-term concessions resulted in substantial reduction and/or elimination of time and cost over runs due to inbuilt incentive mechanism of concession stake in capital expenditure. 13 This output and performance-based approach resulted in securing good operation and maintenance of assets financially and legally and payment is linked to service standards. The framework is now being replicated by the government for infrastructure development including expressways, corridor development, highways, water supply and renewable energy at national as well as sub-national level. Table 5: Implementation Capacity AP Telangana Karnataka Rajasthan PPP-Toll Based BOT/ DBFOMT     Long Term Output & Performance Based     Maintenance Contracts Note:  - substantially done;  - partly done;  - yet to be done b. Enhanced implementation Capacity through use of digital tools for program management: These projects have been successful in adopting digital project management systems which are currently being mainstreamed for monitoring and supervision of all construction and maintenance works based on work life cycle approach (irrespective of funding sources) at the Department level. These systems have been further integrated with the GIS based IT command and control centre in the state of Andhra Pradesh. One of the notable initiatives undertaken in Rajasthan was the adoption of innovative Performance Assessment Tool (PAT) with relevant training for staff was beneficial in getting management’s attention towards better quality of works and creating performance competition among divisions and PIUs. The PAT also helped in ensuring better management of environmental and social safeguards, and health and safety of workers on site. c. Improved sector governance through institutional strengthening: A strategic and holistic approach of institutional strengthening was adopted under these projects based on five broad common themes: Strategic & Regulatory Framework; Organisational Reforms, Business & Management Processes; Asset Sustainability; Performance & Accountability; and Human Resource Development. Structured and streamlined institutional development and strengthening Action 13See https://blogs.worldbank.org/transport/our-infrastructure-projects-can-help-build-many-things-including-stronger- institutions Page 69 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Plans (IDSAP) based on institutional development assessments and strategies were drawn in the state of Karnataka and Andhra Pradesh. These actions plans for institutional strengthening focused on organisational functional realignments from a provider to manager role; restructuring of field offices; support for operationalisation of Road Development Corporations, core business process including planning, programming works, effective procurement and contract management, strengthening program monitoring through online project management systems, revision of department codes and systemize quality control; financial mechanism by modernising planning and budgeting function through use of financial management systems; establishing road information systems and strengthening of state’s environment and social management capabilities. The state of Andhra Pradesh and Karnataka have shown a high level of ownership in implementation of these actions plans and the dedicated staff have champions to lead the initiatives towards successful implementation and mainstreaming such as ISO certifications for quality management and environmental management, E-learning management system and project management system are being scaled up at the departmental level. However, the institutional mechanism of the road sector modernisation working group has been unsuccessful in delivering the reform agenda in case of Rajasthan. A comparison of the detailed outputs achieved under these action plans in the three projects is at Appendix-2. Table 6: Institutional Strengthening AP Telangana Karnataka Rajasthan Strategic & Regulatory Framework     Business Process Reengineering     Asset Sustainability     Performance & Accountability     Human Resource Development     Note:  - substantially done;  - partly done;  - yet to be done 12. Element 5. Safety: Result focused approach to road safety management. An incremental approach to road safety management was adopted in all the three projects to reduce the road accidents and fatalities in a sustainable manner through policy and institutional reforms and multi-sectoral demonstration corridor pilots. The interventions were centred around developing the policy framework, road safety strategy and actions plans, incorporation of road safety engineering measures in design, construction and maintenance of investment programs, and pilot safety demonstration corridors with multi-stakeholder interventions based on globally accepted safe system approach. This comprehensive and holistic approach of road safety demonstration corridors was highly successful in the state of Karnataka which validates that physical/ engineering improvements are not enough to bring reduction in road fatalities in the face of rising traffic volume, however, engineering measures necessarily be accompanied by robust programs for enforcement, education and awareness and post-crash management. It requires coordinated effort from different stakeholder departments with proper institutional structure and synergies can be achieved if designed and integrated well with other programs being implemented by the respective departments. 14 This approach resulted in reasonable success in in Andhra Pradesh 15 and Telangana where creation of the road safety cell within the Transport Department 14 See https://blogs.worldbank.org/transport/human-lives-need-not-be-lost-road-crashes-much-less-current-levels-0 15 See https://blogs.worldbank.org/transport/road-safety-action-pays-and-demonstration-corridors-are-here-prove-it Page 70 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) in Andhra Pradesh has proven effective for planning and tracking impacts of road safety initiatives and managing data for road safety indicators. On the other hand, it was unsuccessful in the state of Rajasthan where the road safety interventions on the selected corridor could not be undertaken during the project period due to lack of ownership and proper institutional arrangement for implementation. Table 7 summarises the project interventions in the Bank funded road projects. Table 7: Road Safety Interventions Themes Andhra Telangana Karnataka Rajasthan Pradesh Safe Corridor Demonstration Program - Multi-sectoral     interventions based on iRAP surveys Institutional Structure     Policy & Strategy     Capacity Building     Black Spot improvement program     Note:  - substantially done;  - partly done;  - yet to be done 13. Success Factors: The analysis of the three ICRs suggest the four key factors contributed to the achievement/ success in these states including: Ownership, Strategic & Holistic Approach and Constant learning and Innovation approach. The state government of Karnataka and Andhra Pradesh have shown greater level of ownership leading to successful implementation of the reform agenda in both states. The projects have used a strategic and comprehensive approach to road sector management which is also consistent with the strategic framework in these states including planning, financing, efficiency, implementation capacity and safety. The assessment also showed that the support to system planning, institutional strengthening, private sector participation and road safety was highly successful in Karnataka and achieved reasonable success in case of Andhra Pradesh with constant learning and innovative approach adopted in these states. The performance was average in case of Telangana and Rajasthan where road sector modernisation could not be achieved as planned and designed reflecting lower level of ownership. Table 8: Analysis of Key Success Factors Andhra Pradesh Telangana Karnataka Rajasthan Ownership Strategic Constant Ownership Strategic Constant Ownership Strategic Constant Ownership Strategic Constant & Holistic Learning & & Holistic Learning & & Holistic Learning & & Holistic Learning & Approach Innovation Approach Innovation Approach Innovation Approach Innovation Policy & Planning Framework             Financing Framework             Asset Management             Institutional Capacity             Road Safety Management             Note:  - substantially done;  - partly done;  - yet to be done Page 71 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Key Takeaways and Recommendations: 14. State Highway engagement remain relevant today: The state highways and major district roads (MDRs) constitute the secondary system of road transportation in the country carrying about 40 percent of the total road traffic. Neglect of this strategic secondary network, serving as the bridge between the National Highways and rural roads, could result in the ‘missing middle’ in the increasingly integrated overall road network and could seriously impact the overall road transport cost and logistic efficiency of the country. Traditionally, the development of national highways and rural road network has been boosted by centrally sponsored schemes like National Highway Development Program (now rebranded as Bharatmala) and Pradhan Mantri Gram Sadak Yojana. The vital feeder/ collector network of state highways and MDRs, however, have been neglected due to chronic underfunding, in absence of any comprehensive National program and/or individual state-run programs. The inadequate and unstable funding has also made systematic planning and improvement of the state highways difficult in most of the states, resulting in deteriorating condition and lower level of services, even compared to rural roads at times. Except financing from MDBs such as World Bank and ADBs, the states have not been able to attract or mobilize enough private/ commercial financing for state highways and MDRs in comparison to national highways or even rural roads. Therefore, as recommended by the Working Group of Twelfth Five Year Plan of the Planning Commission, resource mobilization for the sector needs to be enhanced, adequately supplemented with adequate external financing sources from MDBs and suitably leveraged with private sector financing. 15. State Highway Sector Agenda is evolving. Keeping in line with the evolving agenda in highway sector in India encompassing improved transport and logistic efficiency, safety and services, as enshrined in the flagship Bharatmala program, the state highway agenda need to also evolve towards improved logistic efficiency, safety and services, resource efficiency and climate resilience. The state highway institutions also need to consolidate the gains from reform initiatives undertaken during the last decade to emerge as independent, bankable institutions running on commercial principles to attract private sector financing and manage assets and services more efficiently. 16. The Bank’s contribution to this institutional and sector evolution has been significant and effective – though not universally successful. IEG’s seminal report for the transport sector, ‘A Decade of Action in Transport’ 2007, highlights the importance of creating public sector capacity for attracting private sector financing. The report has also highlighted in several emerging middle income countries how the Bank has played a significant role in strengthening the institutional capacity of the public sector in procurement, financial management, asset management and project management as well as improving the investment climate which has played a critical role in attracting private investments and bringing private sector efficiency in asset management and services. India has not been an exception. The aforementioned analysis clearly indicates that Bank engagement has resulted in significant success in Karnataka and Andhra Pradesh and has contributed to encouraging private sector development in financing, construction and maintenance, sustainable management of the sector through adoption of network level master plans, core road network and asset management system, scientific planning, financing framework, innovative contracting approaches, improving institutional strengthening and providing safer network. Relatively modest success was seen in Rajasthan and Telangana though, Page 72 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) reflecting low level of ownership and willingness to change. The Bank experience in the sector suggest that pace of institutional reform has been incremental and slow with significant variance across states based on their capacity, public sector governance structure and reform commitment. Notwithstanding significant sector reform in quite a few states, major institutional reform and transition of the public sector road agencies towards commercial autonomous roads authorities remains a work in progress and yet to commence in some states. 17. The Bank’s engagement strategy in the state road sector is evolving: To support the much needed transformation in the state highway agenda, Bank’s approach towards engaging with the state road sector is also rapidly evolving with the ongoing new generation of state road projects such as Rajasthan State Highway projects targeting towards operationalising a corporatized autonomous highway authority with a mandate to mobilize commercial financing by leveraging public resources at its disposal. In the current pipeline projects, the direction now is moving towards stronger focus, though in an incremental manner, on corporatized institutions, logistics and transport services, and developing an integrated multimodal transport framework. A more cohesive and results-focused road safety management approach has been adopted in Uttar Pradesh State Road Project. 18. Delivery instruments are also evolving: From conventional investment project financing (IPF), most projects are increasingly adopting result-based financing approach through Disbursement linked Indicators with IPF such as Rajasthan State Highways Project. Some pipeline projects are also exploring the possibility of Development Policy loan combined with IPF to support reform on logistics, transports services and corporatized institutions. 19. Time to redefine engagement strategy through national platforms: Moving forward, to respond to the menacing impacts of transport expansion, the strategic approach towards engaging in the state highway sector needs to be redefined by considering this evaluation and the ongoing assessment of the Bank’s contribution to this sector in India. The focus of the Bank’s transport operations needs to move beyond intercity highways and give more attention to issues of growing urgency including congestion, logistics efficiency, bankable institutions, transport services, safety, affordability and sustainability. The future strategy also needs to explore possibilities of developing National Platform for creating benchmarking among states for strategic investment and distinguished support for advanced states versus lagging states. A Road Transport Community of Practise need to be developed under the lighthouse India approach for enhancing knowledge and experience sharing among states with stronger role of institutions such as NITI Aayog, Indian Roads Congress and Central Road Research Institute. Page 73 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Appendix-1 Key Interventions under the Projects Core Areas APTRSP KSHIP II RRSMP Civil Works upgrade and maintain the Improvement & Increasing share of rural Core Road Network (CRN): maintenance works of population with access to an • 429 km upgraded selected priority core road all-season road efficiently in an network • Construction of 2500 km environmental and socially • 269 km upgraded of rural roads sustainable way. through traditional item- • 6,241 km of roads rate contracts under Long-term • 562 km to be upgraded performance-based & O&M through PPP- maintenance contract DBFOMT concession Highway Technical assistance to • KRDCL to generate --- Financing strengthen the capacity of additional road user Modernisation/ the GOAP to attract revenue and commit them PPP facilitation private sector for mobilising debt participation: financing and/or making • RDC manages payments for PPP concession of three roads transactions of those selected for PPP • Upgrading and O&M of transactions 400 km through co- financing arrangements Road Safety • Multi-sectoral • Multi-sectoral • Multi-sectoral Demonstration projects Demonstration projects on Demonstration projects on carried out in at least two two road corridors two road corridors road corridors • Lead Agency • Star rating for Model • Comprehensive GOAP established Corridor road safety functions, • Policy and Institutional • Road Safety Policy and capacity and action plan(s) Actions Action Plan put in place • Road Safety Awareness • Black-spot Campaign improvements initiated Institutional Institutional Institutional Development Implementation of a Road Development Strengthening Action and Strengthening Action Sector Modernisation Plan: and Road Plan: Plan: • Sector Policy & financing Sector • Strategic & • Business Process framework Modernisation Regulatory Framework Effectiveness • Engineering practices • Organisation, • Performance and and key procedures Management & Systems Accountability modernized • Human Resources • Asset Sustainability • Road Asset Management Development • Human Resources System & innovative forms of contracting • Training Plan and HR policy & Procedures developed Page 74 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Appendix-2 Comparison of Institutional Development/Strengthening/ Road Sector Modernization Plan Themes APTRSP KSHIP II RRSMP Strategic & Regulatory • AP Road Act • Road Sector Policy • Road Sector Policy Framework (Policy & • State Level Road • Karnataka State • Financing financing) Network Master Plan Highway Act -tolling Framework for the • Core Road Network powers for both public Network – • Road Fund and PPP roads construction and • Encouraging PPP & • New Road Asset maintenance performance-based Maintenance Policy • Encouraging private CRN maintenance • Establishing Core Road participation contracts Network • Road Safety Action • Financing Strategy & Program Institutional Measures • Black spot for CRN rectification program • Road Fund • Increase private sector participation • Finalise and roll out of State Level Road Master Plan Modernisation of Key • Revised • Revised Departmental • Modern Project Organisation, Business Departmental Code Code & its cyclical Preparation and Process Effectiveness • IT-ICT-MIS Strategy review and updating management (Business and • Financial Powers & including E&SM, Safety practices Engineering Practices, FM tools • IT-ICT-MIS Strategy • Design & Processes) • MIS • Financial Management construction • Staffing powers & Information System standards defined • ISO Certification for • Cost-effective new • Dedicated HRM & Environmental technologies for HRD functions & Management road construction capacity • IT Based Project • PWD-wide • PPP roles & capacity Management System procurement and contract management manual • Computerisation of PWD offices Performance and • GAAP • GAAP • E-procurement Accountability • Road User • Road User Satisfaction • Improved public (including Satisfaction Surveys Surveys disclosure & Governance) • ISO Certification • Quality Management information sharing Quality Management System -ISO Certification Page 75 of 76 The World Bank Second Karnataka State Highway Improvement (P107649) Themes APTRSP KSHIP II RRSMP • Quality control- Laboratory/Equipments • E-procurement • E-billing &E-contract management Asset Sustainability • Planning & • Road Asset • Asset Management (Road Asset Budgeting based on Maintenance and System Management) Road Asset Management System • Prioritised Annual Management System integrated with RIS & Plans for GIS construction & • Planning & Road Asset maintenance based Management Centre on RAMS • Asset Maintenance • Area-wide Plan maintenance contract system Human Resources • Training Needs • Training Needs • Training & Capacity Development Assessment Assessment Building (Training & Capacity • Multi-Year Staff • Multi-Year Staff Building) Training Program Training Program • New Staff Appraisal • New Staff Appraisal Policy & Process Policy & Process Implementation Implementation • Specific PPP Training • Separate Budget Head Program for Staff Training • High Impact Training Plan Page 76 of 76