The World Bank National Highways Interconnectivity Improvement Project (P121185) REPORT NO.: RES42084 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF NATIONAL HIGHWAYS INTERCONNECTIVITY IMPROVEMENT PROJECT APPROVED ON OCTOBER 29, 2013 TO THE REPUBLIC OF INDIA TRANSPORT SOUTH ASIA Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Regional Director: Guangzhe Chen Practice Manager/Manager: Shomik Raj Mehndiratta Task Team Leader(s): James Markland The World Bank National Highways Interconnectivity Improvement Project (P121185) ABBREVIATIONS AND ACRONYMS COVID-19 Novel Coronavirus DEA Department of Economic Affairs, Ministry of Finance EPC Engineering, Procurement, Construction ERP Enterprise Resource Planning FY Fiscal Year GNHCP Green National Highways Corridor Project GoI Government of India ICR Implementation Completion and Results Report INR Indian Rupee IP Implementation Progress IPF Investment Project Financing MoRTH Ministry of Road Transport and Highways NH National Highway NHAI National Highways Authority of India NHIDCL National Highways & Infrastructure Development Corporation Ltd. NHIIP National Highways Interconnectivity Improvement Project PD Project Director US$ United States Dollar The World Bank National Highways Interconnectivity Improvement Project (P121185) BASIC DATA Product Information Project ID Financing Instrument P121185 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 29-Oct-2013 30-Jun-2020 Organizations Borrower Responsible Agency Department of Economic Affairs, Ministry of Finance Ministry of Road Transport and Highways Project Development Objective (PDO) Original PDO The development objective of the project is to improve the National Highway network connectivity to less-developed areas and low-income states and enhance the institutional capacity of MoRTH to better manage the highway network under the purview of the Ministry. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-83010 29-Oct-2013 01-Jul-2014 05-Aug-2014 30-Jun-2020 450.01 279.02 170.99 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING The World Bank National Highways Interconnectivity Improvement Project (P121185) A. Project Implementation 1. The National Highways Interconnectivity Improvement Project (NHIIP) finances the upgrading of 1,089 km of National Highways (NH), institutional capacity enhancement activities for the Ministry of Road Transport and Highways (MoRTH) and measures to improve road safety. Overall disbursement as on June 19, 2020 is US$279.02 million, 62.0% of the loan value of US$450.01 million. Progress on implementation of the Project components is summarized below. 2. Component A: Road Improvement & Maintenance Component supports the upgrading of about 1,089 km of road comprising the upgrading and maintenance of 403 km using item-rate contracts in 5 contract packages, and the upgrading and maintenance of 686 km using innovative EPC contracts in 10 contract packages. The road improvements are located in the states of Bihar, Odisha, Rajasthan, Karnataka and West Bengal. Of these 15 civil works contracts, eight contracts covering 621 km of road have been completed, and a further four are over 60 percent completed. Three contracts in Bihar for a total of 212 km of road are delayed with progress at between 28 and 32 percent. This slow progress has been caused by liquidity problems faced by some contractors due to the limited availability of financing from national banks, extensive flooding in Bihar during the heavier than normal 2019 monsoon season, and the impact of the COVID-19 restrictions on working methods on the sites. Measures taken by MoRTH to manage and accelerate progress include the introduction of a daily site reporting mechanism, the facilitation of payment processes for contractors to improve their cashflow, and the use of contractual provisions on sub-contracting to increase implementation capacity. 3. Component B: Institutional Development Component: This component seeks to enhance the institutional capacity of MoRTH to better manage the part of the NH network that is not covered under the National Highway Development Plan through support in five areas: (i) process improvements; (ii) network monitoring and management; (iii) financing; (iv) governance and accountability; and (v) training. The development and implementation of an Enterprise Resource Planning (ERP) system, a key part of this component, is now well advanced. The ERP system is in use on a trial basis and has played a key role in ensuring business continuity for the National Highways and Infrastructure Development Corporation Ltd. (NHIDCL) during the COVID-19 lockdown. The System will eventually benefit the National Highways Authority of India (NHAI) in addition to MoRTH and NHIDCL. 4. MoRTH worked with NHAI under the World Bank funded NHAI-TA project to implement a study on “Organization and Process Transformation in MoRTH and its implementing agencies” that reviews the framework for the-delegation of works- execution and drafts a project preparation and implementation manual. Also under the NHAI-TA, an Asset Management System has been developed. Completed actions in support of governance and accountability include: (i) the use of electronic procurement for Project works; (ii) effective monitoring of procurement plans; (iii) use of third-party audits for Project works; (iv) disclosure of Project related information and documents; and (v) review of the Project by the Project Steering Committee. 5. Component C: Road Safety Component: The objective of this component is to improve road safety through: (i) updating Indian standards and regulations related to road safety; (ii) improving road accident data collection and analysis at central and state levels through implementation of the Integrated Road Accident Database (IRAD) in project states; (iii) strengthening road safety capacity at the central level; and (iv) training. 6. The Indian Roads Congress manual on road safety auditing has been updated and is now being introduced to identify and address safety hazards on existing and planned roads. Plans to train engineers in the use of the manual have been interrupted by the COVID-19 situation. The development of software for the IRAD system, based on a successful system that is in use in Tamil Nadu, is now underway and will be piloted and rolled out nationally as the COVID-19 situation eases. Bids The World Bank National Highways Interconnectivity Improvement Project (P121185) have been received for the establishment of pilot road safety patrol and enforcement systems on about 1,200 km of National Highways. B. Rationale for Restructuring 7. The Project is on course to achieve the PDO, but because of the delays in implementation described above, the PDO will be only partially achieved by the current Loan Closing date. The completion of civil works contracts has been delayed for reasons largely outside the control of MoRTH. The continuing financial difficulties faced by contractors, heavy flooding in the 2019 monsoon season, and more recently the lockdowns and operating restrictions resulting from COVID-19 during the main operating period have meant that it was not possible to take full advantage of the previous extension of the Loan Closing date. 8. The disbursement rate for the Project has been substantially lower than planned during the past year due to the slow rate of civil works implementation, resulting in an undisbursed balance of US$171 million. This comprises undisbursed contract commitments, exchange rate savings because of the depreciation of the Indian Rupee against the US dollar and lower than estimated price escalation during implementation. 9. The ongoing Project activities remain priorities for MoRTH and the World Bank. The Department of Economic Affairs (DEA) of the Ministry of Finance has written to the World Bank requesting to cancel the remaining balance of the NHIIP Loan, extend NHIIP for three-month, and to transfer the ongoing NHIIP Project activities to Green National Highways Corridor Project (GNHCP). II. DESCRIPTION OF PROPOSED CHANGES 10. The following changes are proposed to the Project: (a) Cancellation of US$113.741 million from the loan; (b) Extension of the Loan Closing Date from June 30, 2020 to September 30, 2020; (c) Reallocation of loan proceeds between Disbursement Categories 1 and 2 to meet the Borrower’s estimated expenditure until the Loan Closing Date; and (d) Adjustments to the Results Framework. 11. These changes will be the first phase in the implementation of the solution identified above. 12. Those NHIIP activities that have not been completed by the revised Loan Closing Date will be transferred to the Green National Highways Corridor Project (GNHCP), which will be restructured accordingly. 13. The preparation of the Implementation Completion and Results Report (ICR) for the NHIIP will be postponed until completion of the remaining activities to allow their contribution to the achievement of the PDO to be assessed. The Results Framework has been amended to reflect this situation. The World Bank National Highways Interconnectivity Improvement Project (P121185) III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Components and Cost ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE The World Bank National Highways Interconnectivity Improvement Project (P121185) LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-83010 Effective 30-Jun-2019 30-Jun-2020 30-Sep-2020 30-Jan-2021 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation LOAN Disburs IBRD- 450,010,000.0 113,741,000.0 336,269,000.0 RESTRUCTUR ing&Re USD 19-Jun-2020 83010-001 0 0 0 ING, COST paying SAVINGS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IBRD-83010-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: Wrks under Sub comp A.1 A.2 of Proj 348,350,000.00 253,237,339.18 300,019,000.00 50.00 50.00 iLap Category Sequence No: 2 Current Expenditure Category: Gds,NCS,CS,Trng under A.4 B C of pr 100,410,000.00 24,533,736.48 35,000,000.00 80.00 80.00 Total 448,760,000.00 277,771,075.66 335,019,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed The World Bank National Highways Interconnectivity Improvement Project (P121185) 2014 0.00 0.00 2015 21,090,453.37 21,090,453.37 2016 59,159,513.58 59,159,513.58 2017 78,994,961.23 78,994,961.23 2018 44,871,118.27 44,871,118.27 2019 58,643,953.60 52,873,614.70 2020 186,000,000.00 20,781,414.51 2021 0.00 57,247,924.34 2022 0.00 0.00 . The World Bank National Highways Interconnectivity Improvement Project (P121185) . Results framework COUNTRY: India National Highways Interconnectivity Improvement Project Project Development Objectives(s) The development objective of the project is to improve the National Highway network connectivity to less-developed areas and low-income states and enhance the institutional capacity of MoRTH to better manage the highway network under the purview of the Ministry. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target Improve the National Highway network connectivity (Action: This Objective has been Revised) Roads in good and fair condition as a share of total classified 65.00 68.25 roads (Percentage) Rationale: Action: This indicator has been Revised Updated to reflect expected attainment date Size of the total classified network (Kilometers) 37,501.00 37,501.00 Reduced average Vehicle Operating Cost (VOC) per kilometer on Cars: Rs 8 Cars: Rs 7.2 project roads (Text) Trucks: Rs 14 Trucks: Rs 12.6 Rationale: Action: This indicator has been Revised Updated to reflect expected attainment date Reduced average travel time per kilometer on project roads Cars: 2 min Cars: 1.5 min (Text) Trucks: 3 min Trucks: 2.4 min The World Bank National Highways Interconnectivity Improvement Project (P121185) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target Rationale: Action: This indicator has been Revised Updated to reflect expected attainment date No increase in fatalities on project roads (Text) 163 fatalities in 2009 no increase Rationale: Action: This indicator has been Revised Updated to reflect expected attainment date PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Road Improvement and Maintenance Component Roads constructed, non- 0.00 1,000.00 1,089.00 rural (Kilometers) Action: This indicator has been Revised Audits done regularly Third Party Audit (technical, Auditors not yet Audit is conducted 2 for all work contracts social and environment) procured times a year and its findings acted (Text) upon Action: This indicator has been Revised Institutional Development Component The World Bank National Highways Interconnectivity Improvement Project (P121185) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Increase in Road User Increase in road user Satisfaction [on a scale of 0 2.50 Baseline survey done satisfaction to 5 on project roads] (Text) Action: This indicator has been Revised Asset Management System developed and AMS implemented in 3 implemented for the non- No AMS states. NHDP network in the states. (Text) Action: This indicator has been Revised Works Execution- Delegation Framework Framework Framework No framework developed and developed implemented implemented (Text) Action: This indicator has been Revised Road Safety Component Improved design standards 0.00 2.00 3.00 /IRC codes (Number) Action: This indicator has been Revised Improved accident data management system in 0.00 2.00 6.00 selected states. (Number) The World Bank National Highways Interconnectivity Improvement Project (P121185) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Action: This indicator has been Revised Project roads subject to Road Safety Audits. 0.00 50.00 100.00 100.00 (Percentage) Action: This indicator has been Revised IO Table SPACE . The World Bank National Highways Interconnectivity Improvement Project (P121185)