Document of The World Bank Report No: ICR2505 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-4706-IN and IBRD-7865) ON A LOAN AND ADDITIONAL FINANCING IN THE AMOUNT OF USD MILLION (USD 398.7 MILLION EQUIVALENT) TO INDIA FOR THE TAMIL NADU ROAD SECTOR PROJECT September 25, 2012 Sustainable Development Department India Country Management Unit South Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective March 2012) Currency Unit = Indian Rupees US$0.02 = Rs. 1.00 US$ 1.00 = Rs. 50.90 FISCAL YEAR April 1- March 31 ABBREVIATIONS AND ACRONYMS CA Chartered Accountant CAS Country Strategy EOP End-of-Project EMP Environmental Management Plan ESMP Environmental & Social Management Plan FMS Financial Management System GOI Government of India GoTN Government of Tamil Nadu HD Highways Department ICRR Implementation Completion and Results Report IRI International Roughness Index ISAP Institutional Action Plan ISG Institutional Strengthening Group ISR Implementation Status and Results M&E Monitoring and Evaluation MTR Midterm Review NGO Nongovernmental Organization PAD Project Appraisal Document PDO Project Development Objective PFMS Project Financial and Management System PMU Project Management Unit PPP Public Private Partnership RADMS Road Accident Database Management System RAP Resettlement Action Plan R&IPDP Resettlement& Indigenous Peoples’ Development Plan R&R Resettlement and Rehabilitation RMS Road Management System TA Technical Assistance VOC Vehicle Operating Costs Vice President: Isabel M. Guerrero Country Director: Onno Ruhl Sector Manager: Karla Gonzalez Carvazal Project Team Leader: Pratap Tvgssshrk ICR Team Leader: Sri Kumar Tadimalla ICR Main Author: Sri Kumar Tadimalla REPUBLIC OF INDIA Tamil Nadu Road Sector Project CONTENTS Page   A. Basic Information ............................................................................................................ i  B. Key Dates ........................................................................................................................ i  C. Ratings Summary ............................................................................................................ i  D. Sector and Theme Codes................................................................................................ ii  E. Bank Staff ....................................................................................................................... ii  F. Results Framework Analysis .......................................................................................... ii  G. Ratings of Project Performance in ISRs ..................................................................... viii  H. Restructuring (if any) .................................................................................................. viii  I. Disbursement Profile ..................................................................................................... ix  1. Project Context, Development Objectives and Design ................................................... 1  2.   Key Factors Affecting Implementation and Outcomes .............................................. 5  3.   Assessment of Outcomes .......................................................................................... 13  4.   Assessment of Risk to Development Outcome ......................................................... 21  5.   Assessment of Bank and Borrower Performance ..................................................... 21  6.   Lessons Learned........................................................................................................ 24  Annex 1. Project Costs and Financing .............................................................................. 28  Annex 2. Outputs by Component...................................................................................... 29  Annex 3. Economic and Financial Analysis ..................................................................... 32  Annex 4. Bank Lending and Implementation Support/Supervision Processes................. 42  Annex 5. Beneficiary Survey Results ............................................................................... 44  Annex 6. Findings from Road User Satisfaction Survey .................................................. 46  Annex 6A. Questionnaire-based Dip-stick Survey of Government Stakeholders ............ 48  Annex 7. Summary of Borrower's ICR and Comments on Draft ICRR ........................... 61    DATA SHEET A. Basic Information Country: India Project Name: Tamil Nadu Road Sector Project Project ID: P050649 L/C/TF Number(s): IBRD-4706-IN & IBRD-7865-IN ICR Date: 09/30/2012 ICR Type: Core ICR Lending Instrument: SIL Borrower: GOVERNMENT OF INDIA (GOI) Original Total USD 348.00 Disbursed Amount: USD 384.26 million Commitment: million USD 398.75 Revised Amount: Cancelled Amount: USD 11.65 million million Environmental Category: A-Full Assessment Implementing Agencies: Highways Department, Government of Tamil Nadu, India Co-financiers and Other External Partners: Not Applicable B. Key Dates Revised / Actual Process Date Process Original Date Date(s) 10/31/2003 10/31/2003 Concept Review: 03/27/1999 Effectiveness: 09/30/2010 and 09/30/2010 and Appraisal: 02/10/2003 Restructuring(s): 03/02/2012 03/02/2012 06/17/2003 and Approval: Mid-term Review: 12/15/2005 08/25/2006 03/30/20101 Closing: 03/31/2009 03/31/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation Performance Indicators QAG Assessments (if any) Rating Potential Problem Project at any time (Yes/No): Yes Quality at Entry (QEA): None Problem Project at any time (Yes/No): Yes Quality of Supervision (QSA): None DO rating before Closing/Inactive status: Satisfactory 1 For the additional financing loan. i D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Sub-national government administration 10 10 Roads and highways 90 90 Theme Code (as % of total Bank financing) Infrastructure services for private sector development 40 40 Trade facilitation and market access 40 40 Other public sector governance 20 20 E. Bank Staff Positions At ICR At Approval Vice President: Isabel M. Guerrero Mieko Nishimizu Country Director: Onno Ruhl Michael Carter Sector Manager: Karla Gonzalez Carvazal Guang Zhe Chen Project Team Leader: Pratap Tvgssshrk A.K. Swaminathan ICR Team Leader: Sri Kumar Tadimalla ICR Primary Author: Sri Kumar Tadimalla F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) To improve the quality and sustainability of the state’s core road network. The core road network refers to the state highways and major district roads being managed by the Highways Department (HD) of Tamil Nadu. Revised Project Development Objectives (as approved by original approving authority) There were no changes to the PDO. (a) PDO Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years Percentage of core road network in poor condition reduced from about 35% at Indicator 1: appraisal to not more than 10% at the end of the project Value quantitative or 35% 10% 8% Qualitative) Date achieved 03/31/2003 03/31/2009 Year 2012 Exceeded targets. The achievements are based on data collected for the Road Asset Comments Management System (RMS) from 2006 to 2009 on 13,891 km of SHs and MDRs by (incl. % the RMS consultants, and data collected by the Highways Department on some of the achievement) stretches. Travel time reduced by on average 20% on two selected project corridors by EOP Indicator 2: (Nagapattinam to Tuticorin and Arcot to Nagapattinam) Value Corridor 1 - Bus - 14 hrs; 20% 40% quantitative or Cars - 11 hrs; Truck - 15 ii Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years Qualitative) hrs. Corridor 2 - Bus - 10 hrs; Cars - 8 hrs; Truck - 10 hrs Date achieved 03/31/2003 03/31/2009 03/31/2012 Exceeded targets. Travel time from Nagapattinam to Tuticorin by car has been reduced Comments from 11 Hours 30 minutes to 5 Hours 47 minutes (50 %) Travel time from Arcot to (incl. % Nagapattinam has been reduced from 8 Hours 15 minutes to 5 Hours 25 minutes achievement) (34 %). Average reduction in travel time for both the corridors is about 40%. No. of fatalities from road accidents per 10,000 registered vehicles reduced from 19 to Indicator 3: 14 by EOP Value quantitative or 19 14 10.27 Qualitative) Date achieved 03/31/2003 03/31/2009 2011 Comments Exceeded targets. Number of fatalities from road accidents per 10,000 registered (incl. % vehicles reduced from 19 at the time appraisal to 10.27 by 2011 (as against the target achievement) of 14 by 2009). In year 2011: No of Fatalities: 14,032, No of vehicles: 13,660,717. Actual expenditure for maintenance of total road network to be increased annually Indicator 4: from 63% (FY2001/02) to at least 80% of 11th Finance Commission norms by FY 2004/05 Value quantitative or 63% (2001-02) 80% 109.7% Qualitative) Date achieved 03/31/2003 03/31/2009 03/31/2012 Comments The target of 80% was achieved by Mid-Term Review and the performance further (incl. % increased (to 109.7%) by the End-of-Project. achievement) Indicator 5: Implementation of institutional development action plan in HD to schedule Value Implementation as quantitative or N.A. Satisfactory scheduled Qualitative) Date achieved 03/31/2003 03/31/2009 03/31/2012 Comments Met the targets. Implementation as scheduled by the time of Mid-Term-Review and the (incl. % End-of-Project. achievement) Indicator 6: Ex post ERRs as per appraisal estimates at EOP Value IRR: Upgrading – 30%; Equal to or better Nearly equal or better quantitative or Maintenance – 43.5%; than appraisal than the appraisal Qualitative) Total > 30% estimates estimates Date achieved 03/31/2003 03/31/2009 June 2012 Nearly equal to or better than the targets. The EIRR obtained for road stretches of Comments TNRSP are in range of 30% to 56% which are same or much higher EIRR than at (incl. % appraisal, which was 30.2%. Even in the sensitivity analysis, considering 20% achievement) reduction of yearly benefits for analysis period, the EIRR obtained for road stretches are in range of 27% to 51%. iii (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years Cost effective capacity and quality enhancement of about 750 km of state highways Indicator 1 : with proper management of social and environmental impacts No. of km upgradation delivered to time, budget, safety and quality constraints – MTR Indictor 1.1 – 300 km and by EOP – 750 km 724 km completed. The remaining 4 km Value MTR-300km bypass and a bridge (quantitative 0 km Not Applicable EOP-750km likely to be or Qualitative) completed by September 2012 Date achieved 10/31/2003 03/31/2009 03/31/2012 The project achieved 97% of the targeted upgradation of 750 km roads by the revised Comments end date of the project, with some time and budget overruns but in satisfactory (incl. % adherence to safety and quality standards. Here, it is noteworthy that the substantive achievement) portion (about 97%) of the expenditure towards the four major civil works contracts was completed by March 2010. Indicator 1.2 : Delivery of compensation and entitlements to PAPs to schedule Value 14,976 14,757 (quantitative Not Applicable 100% (PAD) (100%) or Qualitative) Date achieved 07/31/2003 03/31/2009 03/31/2012 All PAPs received compensation and R&R assistance, except some residual benefits to few PAPs. The end term impact evaluation conducted in March, 2012 confirmed that Comments 90 percent of PAPs who were provided alternative houses have expressed satisfaction (incl. % with the new houses which have facilities such as electricity connection, drinking achievement) water facilities and individual toilets. The proposition of families living below the poverty line has reduced from 34 to 24% and the average income increased by 29% from Rs. 4,424 in 2002 to Rs. 5,717 in 2012. Indicator 1.3 : Survival rate of afforested trees at EOP is above 70% Value 70% by End of (quantitative 0 Not Applicable 87% Project or Qualitative) Date achieved 10/31/2003 03/31/2009 03/31/2012 Comments While there were poor survival rates initially (as low as 37%), the PMU has taken (incl. % special initiatives to improve the survival rate to 87% by the end of the project achievement) implementation with 90,000 trees ranging from 2 to 3 years age. Indicator 1.4 : Environmental mitigation measures carried out according to contract clauses Value (quantitative Not Applicable Fully Complied Not Applicable Fully Complied or Qualitative) Date achieved 10/31/2003 03/31/2009 03/31/2012 Comments (incl. % Yes. The project closed with a satisfactory rating on environmental safeguards. achievement) Cost effective periodic/routine maintenance and black-spot improvements on about Indicator 2 : 2,000 km of the core network iv Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years No. of km of periodic maintenance works delivered to time, budget, safety and quality Indicator 2.1 constraints – by MTR – 750 km and by EOP – 1,500 km Value (quantitative 0 km 1,500 km Not Applicable 1,030 km or Qualitative) Date achieved 10/31/2003 03/31/2009 03/31/2012 In terms of the physical targets, the project’s achievement of maintenance of 1,030 km through traditional annual contracts implies a short fall of about 31% compared to Comments target. The shortfall is mainly due to inadequacy of funds as the actual costs were (incl. % higher than the budgeted levels. However, with the general increase in the outlay for achievement) maintenance, many of the targeted roads were reportedly covered through maintenance contracts with the government’s own funds. Indicator 2.2 Environmental mitigation measures carried out according to contract clauses Value (quantitative Not Applicable Fully Complied Not Applicable Fully Complied or Qualitative) Date achieved 10/31/2003 03/31/2009 03/31/2012 Comments (incl. % Yes. The project closed with a satisfactory rating on environmental safeguards. achievement) No. of km subject to performance based routine maintenance by contract – 100 km by Indicator 2.3 MTR and 500 km by EOP Value (quantitative 0 km 500km Not Applicable 300 km or Qualitative) Date achieved 10/31/2003 03/31/2009 03/31/2012 In terms of the physical targets, the project’s achievement of maintenance of 300 km Comments through performance-based contracts implies a short fall of 40%. It is, however, (incl. % noteworthy that the government is planning to gradually increase the use of achievement) performance-based contracts in the works to be financed by their own funds. Indicator 2.4 No. of black-spots improved – 30 by MTR and 75 by EOP Value (quantitative 0 75 Not Applicable 75 or Qualitative) Date achieved 10/31/2003 03/31/2009 03/31/2012 After improving the 75 black-spots initially targeted, the Highways Department had Comments (incl. % taken up 307 black-spots with their own funds and of these, 282 are already improved achievement) and the work on the remaining is in progress. Indicator 3 Improvements to the management of the state road network Indicator 3.1 : Publication of medium term and annual business plans and reports Value Publication of medium-term and (quantitative -- Complied annual plans and reports or Qualitative) Date achieved 10/31/2003 03/31/2009 03/31/2012 Comments The Highways Department has been publishing the medium term and annual business v Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years (incl. % plans and reports as envisaged. achievement) Indicator 3.2 Functional reorganization of HD as spelt out in ISAP by end 2005 HD restructured Functional Value along functional reorganization of (quantitative -- lines and a post of HD as spelt out in or Qualitative) DG (Roads) has ISAP been created Date achieved 10/31/2003 End 2005 03/31/2012 Following the functional reorganization, the Highway Department now has new Comments divisions/departments focusing on critical areas such Planning, Quality Assurance and (incl. % IT. Also, the staffing norms across work units have been rationalized and standardized achievement) in line with the functions/workload. Key HD divisions achieve internationally recognized quality and environmental Indicator 3.3 : management system certification by EOP ISO Certification ISO Certification for Value obtained for selected selected Circles and (quantitative -- offices, that is, 2 Divisions of the or Qualitative) Circles and 3 Department Divisions. Date achieved 10/31/2003 03/31/2009 03/31/2012 Comments Fully achieved. As envisaged, ISO 9001-2008 Certification obtained for selected (incl. % offices, that is, 2 Circles and 3 Divisions by the End of Project. achievement) Indicator 3.4 : Enhancements to procurement and contract management procedures Enhancements to Procurement and Value procurement and contract management (quantitative -- contract procedures have been or Qualitative) management enhanced in a manner procedures detailed below Date achieved 10/31/2003 03/31/2009 03/31/2012 Some of the notable changes induced by TNRSP in the procurement and contract management practices of the HD are: (i) in case of upgradation and widening, progressively moving away from small, 10-20 km/year interventions to larger-size contracts and corridor-based approach; (ii) prioritization of works within the network Comments based mostly on the conditions of the roads; (iii) intent to increase the use of multi-year (incl. % performance based contracts for maintenance; (iv) exposure to use of FIDIC-based achievement) contract documents; (v) inclusion of escalation clauses in contracts; and (vi) increased use of external experts to bridge the skill/resource gaps within the HD, especially in the areas of engineering design, traffic studies, and preparation of detailed technical and/or feasibility reports. Road safety policy and action plan approved and implemented by MTR and EOP Indicator 3.5 : respectively Road Safety Policy was approved and Value Policy and Plan disseminated. The (quantitative -- approved and implementation is in or Qualitative) disseminated progress with some notable initial achievements vi Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years Date achieved 10/31/2003 03/31/2009 03/31/2012 Road Safety Policy was approved and disseminated. The implementation is in progress Comments with some notable initial achievements such as, for example, Road Safety Audit & (incl. % Assessment training, road safety awareness programs for users and school children and achievement) successful operationalization of the Road Accident Database Management System. Cost of HD establishment as a share of total HD expenditure reduced from 9% (2001) Indicator 3.5 : to 5% by EOP Value 5% 5.01% (quantitative 9% (EOP) (4.6% in 2009-10) or Qualitative) Date achieved 2001 03/31/2009 2011-12 As against the originally envisaged target of reducing the cost of HD establishment as a Comments share of total HD expenditure to 5% by the EoP (that is, March 2009), the project (incl. % achieved to bring down this share to 4.6% in 2009-10 and by the revised end date of achievement) the project, that is in 2011-12, the share remained at around 5%. Indicator 4 Enhanced funding and improved allocation procedures for the road sector Road Maintenance Fund administered by a Road Board to be created by March 31, Indicator 4.1 : 2004 and working effectively Value GO/Supporting (quantitative -- regulations. Board Waived Not Applicable or Qualitative) Meeting Minutes Date achieved 10/31/2003 03/31/2004 2009 03/31/2012 The requirement of creation of Road Maintenance Fund to be administered by a Road Comments Board was waived during the course of implementation, that is, in 2009, based on the (incl. % government’s plea that they have been consistently providing sufficient quantum of achievement) funds for maintenance. HD senior management using outputs from computerized financial management Indicator 4.2 : system to plan works on Core Road Network by MTR Value (quantitative -- Outputs from FMS Not achieved. or Qualitative) Date achieved 10/31/2003 03/31/2009 03/31/2012 Comments By the end of the project, the computerized project and financial management was (incl. % developed and undergoing tests for user acceptance. achievement) RMMS installed and is used by Senior Management to plan works on Core Road Indicator 4.3 : Network by MTR Not achieved by Value Outputs from MTR as envisaged (quantitative -- RMMS but partially achieved or Qualitative) by EOP Date achieved 10/31/2003 August 2006 03/31/2012 Comments Partially achieved. Road Asset Management System is fully functional and the output (incl. % from the system is one of the key inputs for the preparation of budget for plan and non- achievement) plan works. Indicator 4.4 : Lane km of highways partly or wholly financed by the private sector Value Aided by the No specific target (quantitative 300 lane-km technical assistance indicated or Qualitative) provided under the vii Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years project, 30 km Ring Road with an estimated cost of Rs. 8.6 billion awarded as PPP and is being implemented Date achieved 10/31/2003 03/31/2009 03/31/2012 In addition to the 30km Chennai Outer Ring Road, as of now, there are two other roads Comments with a total length of about 133 km, which are under operation through private (incl. % participation; five other projects are under consideration for possible development on a achievement) PPP format. G. Ratings of Project Performance in ISRs Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 08/07/2003 Satisfactory Satisfactory 0.00 2 02/23/2004 Satisfactory Satisfactory 0.00 3 08/18/2004 Satisfactory Satisfactory 0.00 4 03/28/2005 Satisfactory Satisfactory 30.53 5 05/17/2005 Satisfactory Moderately Satisfactory 30.53 6 11/03/2005 Satisfactory Moderately Unsatisfactory 47.26 7 05/09/2006 Moderately Satisfactory Moderately Unsatisfactory 69.28 8 09/19/2006 Moderately Satisfactory Moderately Satisfactory 81.25 9 03/22/2007 Moderately Satisfactory Moderately Satisfactory 103.42 10 09/25/2007 Satisfactory Satisfactory 132.72 11 04/17/2008 Satisfactory Satisfactory 188.48 12 09/21/2008 Satisfactory Satisfactory 215.16 13 05/04/2009 Satisfactory Satisfactory 267.86 14 07/20/2009 Satisfactory Satisfactory 286.03 15 11/30/2009 Satisfactory Satisfactory 314.73 16 05/28/2010 Satisfactory Satisfactory 327.7 17 12/11/2010 Satisfactory Satisfactory 355.78 18 05/27/2011 Satisfactory Satisfactory 367.03 19 10/09/2011 Satisfactory Satisfactory 376.31 20 04/13/2012 Satisfactory Satisfactory 383.71 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Restructuring Disbursed at Reason for Restructuring & Key Approved PDO Date(s) Restructuring in Changes Made Change DO IP USD millions Additional financing of the amount of USD 50.7 million was provided 03/30/2010 No S S 314.73 in order to meet cost overruns which were out of the control of the Government of Tamil Nadu. 03/02/2012 No S S 383.71 Since there were savings of about viii USD10 million in the loan, a partial cancellation of loan proceeds with category re-allocation was done. I. Disbursement Profile Source: Operations Portal, World Bank2 2 Source:http://projportal.worldbank.org/servlet/secmain?PSPID=P050649&theSitePK=213348&piPK=603 43&Tab=Disbursement&pagePK=60235&menuPK=60328 ix   1. Project Context, Development Objectives and Design 1.1. Context at Appraisal 1. At the time of appraisal, road transport accounted for about 80% of both freight and passenger trips in the state of Tamil Nadu, facilitating trade as well as generating substantial employment in its own right. The demand for road transport was increasing exponentially with a phenomenal annual growth (of 14%) in the vehicle registration during the 1990s. The supply of road infrastructure was severely lagging and, even among the State Highways and Major District Roads, more than 50% (about 8,700 km) of the roads were of less than two lane width (7.0m carriageway); the remainder of the state road network comprising Other District Roads (ODRs) and village and urban roads, too, were generally single lane (3.5m carriageway). 2. On the financing front, during the Ninth Plan Period (1997-2001), the road sector expenditure constituted about 3% to 4% of total expenditure of the Government of Tamil Nadu (GoTN). However, following a several fiscal crisis in 2001-02, the share of road sector expenditure decreased to 2% of the total expenditure. Funding for road maintenance used to be less than 65% of the estimated requirements. Moreover, a substantial portion of this allocation used to be consumed for establishment expenditure, reaching a high of 68% in 2001-02. As a result, the network was fraught with a substantial backlog of capital expenditure and deferred maintenance and marked deterioration of the structural condition and riding quality. 3. On the institutional front, an independent review of the state’s Highways Department (HD) – the main agency responsible for the development and maintenance of state road network – identified the following major weaknesses: (i) mixed function characteristics of the HD making it less amenable for applying clear lines of responsibility for service delivery; (ii) ineffective funding mechanisms leading to an inadequate, bureaucratically cumbersome and unstable resource-flow for asset management; (iii) ineffective systems for collecting and analyzing the information required for managerial decision making with regard to strategic, program and works planning; (iv) obsolete processes for management of several core functional areas such as, for example, information, environmental and social safeguards, financial management, design, quality assurance and procurement; and (v) sub-optimal regulatory environment due to out of date legislation and supporting regulations. As is the case elsewhere in India, road safety was a major concern. Rapid motorization combined with inadequate enforcement of driving and vehicle road worthiness regulations as well as inadequate infrastructure led to a rapid rise in the number of deaths and injuries from road accidents. 4. In summary, at the time of appraisal, the challenges being faced by the highway sector in Tamil Nadu can be grouped under the following four broad categories: (a) capacity expansion severely lagging behind demand; (b) inadequate allocation of funds in general and to maintenance in particular; (c) organizational capacity of HD constrained by a combination of ineffective/obsolete structures, systems and processes; and (d) lack of a coherent strategy to address road safety issues. 1 5. Government’s strategy: To address the myriad problems outlined above, the GoTN sought to undertake several initiatives including: (a) implementing reforms in the HD in the areas of organizational structure, procurement, financial and information management; (b) establishing a Road Fund including preparation of a Road Fund Bill; (c) giving fillip to road safety enhancements through establishment of a Road Safety Fund and creation of a unique position of Special Commissioner for Transport and Road Safety as the nodal officer to implement the road safety action plan; and (d) improving regulatory environment to facilitate greater private sector involvement. In addition, the Highways Act enacted in September 2002 considerably strengthened the HD’s ability to enforce its right of way; prevent ribbon development; utilize simplified land acquisition procedures; and to enter into agreements with private companies to undertake road maintenance and development. Also, the government increased the target for road sector expenditure during the Tenth Plan period (2002-07) to an average of USD 291 million annually, i.e., 115% more than the expenditure during the previous five years. During the same period, the share of establishment expenses in the total sector expenditure was sought to be decreased from 17% to 5%, thereby creating room for more maintenance and investment expenditures on the state road network. 6. Project Rationale: The project was designed to assist the GoTN in addressing the aforementioned challenges in the state road sector, through a combination of road upgrading and maintenance & safety components that respectively focused on alleviating capacity constraints and maintenance backlog on selected routes, and an institutional strengthening and policy development component closely aligned with the government’s reform priorities. Furthermore, the project was envisaged to bring to bear the Bank’s experience from similar projects in other states in the country, especially with regard to: (a) accelerating the institutional and policy reform process; (b) ensuring that community participation, social development and environmental concerns are fully reflected in project design; and (c) achieving enhanced transparency, adoption of streamlined procedures, pragmatic and timely implementation and dissemination of ‘best practices’ in road construction and management. 1.2. Original Project Development Objective (PDO) and Key Indicators (as approved) 7. The project development objective was to improve the quality and sustainability of the state's core road network, that is, the state highways and the major district roads being managed by the Highways Department of Tamil Nadu. This objective was to be achieved through the following four outputs: (i) capacity and quality enhancement of about 750 km of state roads in the core network with proper management of environment and social impacts; (ii) major maintenance of about 2,000 km and accident black-spot improvements at a number of critical locations; (iii) improvements to the management of the state road network through institutional strengthening and Public-Private Partnerships (PPP); and (iv) enhanced funding and improved allocation procedures for the road sector. 2 1.3. Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 8. The PDO was not revised. 1.4. Main Beneficiaries 9. The target population of the project included road users, agricultural producers, urban consumers, roadside communities, transport operators and tourists. These were expected to benefit from: (a) better connectivity leading to higher levels of economic activity and tourism and hence greater employment opportunities; (b) lower freight and passenger transport costs enhancing the competitiveness of tradable sectors of the economy, providing economic and social benefits to the communities; (c) improved access to urban industrial consumption centers enhancing agricultural sector productivity and incomes; and (d) better maintained and managed roads leading to lower life cycle costs and more effective use of limited public funds for the road sector. In addition, people living adjacent to project roads were expected to be direct net beneficiaries as a result of their improved access to services, markets and information. 1.5. Original Components (as approved) 10. A summary of the main components of the project, together with their costs as estimated at the time of appraisal, is as follows:  Road Upgrading Component (about 750 km) (USD 320.97 million): This component primarily aimed at improving the capacity of the state road network through widening and strengthening of about 750 km of existing state highways (including 14 bypasses - some of which are new) to two-lane roads. It was expected to bring in medium to large sized contractors through international competitive bidding procedures for the execution of these works. The designs were proposed to be done by international consultants and works were also proposed to be supervised by consultants procured through international competition. This component also aimed at supporting upgrading and/or construction of state roads and bridges through sub- projects to be taken up through PPP by the GoTN. Appropriate environmental mitigation and resettlement action plans developed for these works were also proposed to be implemented to take care of the possible impacts.  Road Maintenance and Safety Works Component (USD 110.72 million): Under this component the project aimed at addressing the periodic maintenance and safety related minor works needed to maintain a smooth, safe and comfortable flow of traffic on the core road network of the state. Maintenance of about 2,000 km of state roads was to be taken up over a four year period with the Bank's funding decreasing over the years. The work was to be implemented through a mix of conventional maintenance contracts and performance-based maintenance contracts, targeted to involve small to medium sized national contractors to help strengthen their capabilities. These were to be supervised by HD officers with a periodic technical review being undertaken by an independent consultant engineer. Similarly, accident 3 black-spots identified under the project were proposed to be analyzed and followed up with design and execution of suitable minor remedial interventions at up to 100 locations.  Institutional Strengthening and Policy Development Component (USD 14.83 million): Under this component of the project the state government proposed to utilize the services of experts and consultant firms to help in the implementation of an Institutional Strengthening Action Plan (ISAP). The component also aimed at strengthening the road maintenance planning and implementation within HD through supporting the development and use of a maintenance management system and improving the capacity of agencies concerned with road safety in the state through technical assistance services and training. This component also aimed at helping the state in looking at PPP for road transport infrastructure development through appropriate technical assistance. 1.6. Revised Components 11. There were no major revisions to the project components. 1.7. Other significant changes 12. In May 2005, the Loan Agreement was amended to support the reconstruction and rehabilitation of a few roads and structures damaged by the Tsunami that struck the coast of Tamil Nadu on December 26, 2004. These changes constituted a relatively smaller portion of the overall loan and there were no changes in the overall PDOs and the performance indicators. In 2009, the project closing date was extended by one year, to March 31, 2010, and the GoTN’s request for waiver of the covenant pertaining to creation of Road Fund was accepted based on the plea that sufficient funds for maintenance are being allocated through the budget. 13. Additional financing (loan) of USD 50.7 million: In March 2010, an additional loan amount of USD 50.7 million was provided to help finance the costs associated with cost overruns in the project which were primarily due to: (i) increased costs of the upgrading works due to delays and the consequent increase in the prices of key construction materials; (ii) appreciation of Indian Rupee vis-à-vis the US Dollar; and (iii) addition of a Tsunami affected bridge for which amendment to the Loan Agreement was carried out. The additional loan approval also included extension of loan closing date to March 31, 20123. 14. Partial cancellation of loan proceeds: In 2012, since there were savings in the loan, USD 11.65 million was cancelled. Thus the total amount of loan reduced from USD 3 The additional financing loan was consistent with the November 2008 CAS (for the period FY 2009 – 2012) which was organized around the pillars of: rapid and inclusive growth, sustainable development, and service delivery, with a cross-cutting focus on improving the effectiveness of public spending and achieving results. 4 398.7 million (USD 348 million + USD 50.7 million) to USD 387.05 million (USD 346.2 million + USD 40.85 million). 2. Key Factors Affecting Implementation and Outcomes 2.1. Project Preparation, Design and Quality at Entry 15. At the outset, it is important to note that the preparation for this project started almost 15 years ago, in 1997, and its concept was reviewed in March 1999 but the appraisal was completed nearly four years later, in February 2003. This significant time lapse between the concept review and appraisal was reportedly due to serious differences between the project coordination consultants and the implementing agency and lack of effective leadership at the Project Management Unit (PMU). The Bank took a conscious decision to “pause� the project preparation until both these issues were resolved. Following the resolution of these issues, from 2002 onwards, the project preparation regained traction and its development objectives and design acquired final shape mainly during the couple of years immediately preceding the appraisal. Some of the factors that had notable impact during this phase are detailed below. 16. A simple, evidence-based and realistic approach to project preparation and design: The team’s approach to project preparation and design was simple and fairly methodical. First, a set of core sector issues/challenges were identified based on a robust state-specific analysis that relied on existing data (reflecting the declining availability of funds for the sector and neglect of maintenance), independent studies (highlighting the limitations of the Highways Department and the priorities/expectations of the road users) and the client government’s priorities (as ascertained through discussions as well as review of various policies and other reform initiatives). Then, each of the identified core challenges was sought to be addressed through a designated project component. In specific terms, the project was geared towards addressing three specific challenges, namely, inadequate capacity and quality of the core road network, maintenance backlog and lack of attention to safety and weak institutional capacity of HD, respectively through three components, viz., Road Upgrading, Road Maintenance & Safety works, and Institutional Strengthening & Policy Development. 17. The design of each of the project components, too, was closely aligned with the findings of a strategic options study (in case of civil works) or the government’s willingness and commitment (in case of institutional and policy development). Furthermore, the scope and size of the components indicate a good appreciation of what is realistically doable within the limits of the project budget and timeframe. This logical approach seems to have paid off in terms of a project that is simple in design – with each component/task addressing a fairly well-defined challenge/output and, in turn, linked to a set of relevant outcome indicators – and, therefore, more amenable to effective implementation and monitoring. 18. Assimilation of experience and lessons from other projects: Some of the notable lessons from other projects that were brought to bear on the design of the project – and proven to be critical during the course of implementation – are as follows: 5  Implementation readiness: (i) By the time of project approval, all the upgradation projects, accounting for about 70% of the project cost, were nearly ready for invitation of bids; (ii) prequalification for four large civil works packages (totaling about USD 270 million) and selection of the supervision consultants was done before the loan negotiations, leading to issuance of contracts for four large civil works before end-2005; (iii) up-front preparation of the Resettlement Action Plan (RAP) and advanced initiation of land acquisition; and (iv) provisions for ensuring the payment of compensation and resettlement assistance to project-affected persons (PAPs) prior to handing over of respective road stretches to the contractors.  Client ownership for implementing institutional development measures as reflected, for example, in the enactment of the TN Highways Act in 2000 (to empower HD) and the state government’s endorsement of the principles and concepts underpinning the framework for institutional development (in August 2001).  Familiarizing the client with the Bank’s procurement procedures: During the project preparation, a number of seminars were organized to help the state road agencies familiarize themselves with the Bank procurement and disbursement arrangements. 19. Identification and Mitigation of Risks: At the time of appraisal, the project was assigned a rating of “Modest Risk� based on identification and analysis of a total of 18 risks with potential impact on the project’s financial, physical or institutional sustainability. Of these, four risks were rated as “Substantial Risks�, viz., absence of sustained commitment (of government) to sector reform; slow flow of funds from GoTN to HD and delays in submission of audit reports; resistance of HD staff to change and organizational restructuring; and delays in land acquisition and resettlement. In reality, the “modest� risks of lack of effective senior management leadership, inadequate performance of HD and delayed procurement turned out to be “substantial� at least for some time during preparation and implementation. 20. Major risks overlooked: Given the large upgradation works, delays on account of utility shifting could have been recognized as a “substantial risk� and appropriately mitigated. Yet, another major risk was the government’s willingness and commitment to adopt the changes/recommendations emanating from the Institutional Strengthening component. Interestingly, the importance of such commitment was reflected in a couple of output indicators (nos. 4.2 and 4.3) but even there, the means chosen to assess them – that is, outputs from the respective IT systems – were not sufficient indicators of the intended results. Finally, the fact that the project required additional financing indicates that price escalation and exchange rate could have been recognized as the potential risks. 21. Ex-ante Agreement on Key Actions: At the time of appraisal/negotiations, a clear and explicit agreement was reached with GoTN on a wide array of actions that were identified as critical for effective implementation. These were related to: (i) project management, coordination and oversight at various administrative levels (e.g. constitution of Empowered Committee, Steering Committee, and Evaluation Committee, maintenance and adequate staffing of PMU, etc.); (ii) data collection, management and reporting; (iii) maintenance management; and (iv) environmental and social safeguard 6 management. Many of these actions such as, for example, establishment of a dedicated PMU (also referred to as Tamil Nadu Road Sector Project (TNRSP)), have indeed proven to be critical in implementation phase. 2.2. Implementation 22. The project implementation started on a slow track and slipped into the “Moderately Unsatisfactory� territory for about one year around 2006, but picked up pace soon after due to concerted efforts from both the client and the Bank. Some of the factors that had notable impact on implementation are as follows. 23. Implementing Agency Leadership and Staffing: Although the government had established and staffed PMU by the time of loan effectiveness, the implementation was adversely affected for one to two years because of inadequate leadership. This led to delays on several key fronts such as, for example, land acquisition and utility shifting. As the government rectified this sometime around 2006 and thereafter ensured capable leadership until the end, the implementation rating quickly moved up to “Moderately Satisfactory� in 2006 itself and then to “Satisfactory� from 2007 onwards till the closing date. Interviews with implementation partners such as contractors and independent consultant engineers (supervision consultants) have underscored the critical role played by the project leadership in: (a) keeping the communication channels open and creating an environment of mutual trust, wherein the problems at the ground level as well as suggestions for addressing them could be easily shared; and (b) resolving “knotty� problems in a proactive and flexible manner. The project also continuously enjoyed the benefit of adequate staffing with requisite skills in the areas of procurement, project monitoring and management of financial, environmental and social safeguards. 24. Ripple Effect of Initial Delays: In case of the four high-value contracts pertaining to upgradation works, the significant time lapse between the design stage to beginning of construction had a ripple effect, beginning with a substantive deterioration of structural condition of the roads (accentuated by little or no maintenance of these stretches by the HD and also the heavy monsoons and Tsunami in the interregnum). The deterioration, in turn, necessitated sizeable design changes and the time taken in according approvals to the design changes contributed to further delays and consequent cost over runs as the prices of key BoQ items such as bitumen and steel had substantially increased during the extended construction periods. 25. Procurement and Contract Management: Barring the 12-16 month time taken between the bid opening and contract signing in case of the three large upgradation contracts, the project performed fairly well in terms of proactively managing the contracts as reflected in relatively low levels of cumulative value of variations/claims4. Also, contract conditions such as liquidated damages have been judiciously applied to 4 The delays in these upgradation packages were mainly attributable to re-bidding (in case of one package where the bids received were much higher than the estimated amount) and longer time taken for Bank’s clearance for award (in case of another package, wherein the “winning bidder� was under an INT investigation in some other project). 7 expedite compliance; most of them were upheld during the subsequent judicial process. On the issue of compliance with agreed procurement procedures also, this was a relatively better example, since not many deviations were noted during the post reviews. The project was able to ensure that the staff assigned to procurement functions were both adequate and suitably trained, which helped ensure better procurement and contract management. Close supervision of procurement by senior officials (e.g. Project Director) also helped in ironing out problems. 26. Effective and Innovative Approaches to Land Acquisition and R&R: As in the case of many other aspects of the project, the implementation of land acquisition and RAP, too, was delayed during 2005-06 and the social safeguards implementation was rated as moderately satisfactory and then moderately unsatisfactory due to non- compliance with the safeguard policy provisions related to payment of compensation and alternative resettlement prior to displacement.5 These problems, however, were resolved soon after and, on the whole, the project made good progress on land acquisition and R&R mainly on the strengths of: (a) sustained consultations with the affected communities, with facilitation by NGOs and concurrent monitoring consultants, throughout the planning, preparation, design and implementation phases; and (b) the innovative approach of private negotiations (based on guideline values ranging between 159-209% depending on the severity of impacts). Another important feature of the resettlement implementation was the additional assistance to severely affected people through land purchase grants, house building allowances and severance allowance6. 27. Appropriate Sizing and Phasing of Activities: Within the institutional/policy actions, instead of attempting some “big bang� reforms, the teams focused on clearly defined activities with potential to address some tangible, proximate challenges being faced by the targeted users in their duties, e.g., road accident database management system for recording and analysis of information related to accidents (to help police and other departments to better manage various post-event and preventive aspects of accidents), project financial and management system to track physical and financial progress of projects (to help HD in better management of contracts) and road asset management system for mechanized collection of structural data to determine road condition (to help HD in better planning and budgeting). Also, during the preparation and initial phases of implementation of the project, relatively stronger emphasis on expediting large civil works contracts seems to have generated goodwill for the project and paved the way for smoother implementation of the institutional/policy actions that needed interventions beyond the realm of the PMU. 28. Implementation partners, especially in large Civil Works: Once the project implementing agency started proactively addressing major issues like land acquisition and utility shifting, the contractors and independent consultant engineers (supervision consultants) responded positively by mobilizing adequate resources for expediting 5 ISRs dated 03/28/2005 and 11/03/2005. 6 Success through Innovation and Negotiations: Land Acquisition in India, SASDS Dissemination Note, January, 2012. 8 progress. While there were a few niggling instances such as delays in finalization of structural designs, the PMU, contractors and supervision consultants have mostly worked in unison to overcome the challenges through flexibility (as in paying some additional compensation to expedite “last mile� land acquisition) and ingenuity (as in use of pre-cast boxes to overcome the delay in shifting water supply lines). 29. Coordination with other government agencies: A review of the delays in civil works highlights the importance of effective coordination with other government agencies such as, for example, the revenue department (for expediting land acquisition and R&R activities) and Railways (for timely completion of Road-Over-Bridges).7 The Road Accident Database Management System, on the other hand, provides a good example of how the user (department) buy-in was achieved through securing the commitment from the highest level (Secretary, Home Department) followed by intensive discussions with the potential users to draw the system specifications during the preparation of the Request for Proposal (RfP). 30. The Mid-Term Review (August 2006) examined the project objectives, implementation structure, project finances, and implementation of civil works and institutional strengthening components and the action plans for resettlement and environmental management. During the MTR, the status of implementation progress was upgraded from “Moderately Unsatisfactory� to “Moderately Satisfactory.� The relevant observations and findings from the mid-term review were used to build upon or corroborate the ICR team's observations and analysis with respect to implementation challenges and progress. 2.3. Monitoring and Evaluation: Design, Implementation and Utilization 31. M&E Design: The outcome/output indicators listed at the time of appraisal were fairly comprehensive and relevant for monitoring and evaluating the overall project development objective and outputs/outcomes related to civil works components, that is, Road Upgrading and Maintenance & Road Safety. The indicators for some of the activities under the institutional and policy development component, however, could have been more precise. For example, some of the indicators referred to either the occurrence of events (as, for example, scheduled implementation of institutional development action plan or functional reorganization of HD) or outputs from systems such as the Project Financial and Management System (PFMS) and Road Asset Management System. Mere occurrence/production of such events/outputs may not be a sufficient evidence of tangible improvement in the functioning of the Highways Department. A more effective approach could have been to measure how the Highways Department’s functioning had improved in terms of say, time taken in preparing, awarding and implementing projects or the efficiencies gained in capital and maintenance expenditure. 7 For instance, during the course of implementation, Indian Railways objected to third-party construction of all the Road-Over-Bridges (RoBs) and insisted that the same be constructed through the agencies designated by them. 9 32. M&E Implementation and Utilization: The project monitored various output and outcome indicators through a judicious combination of: (a) regular sources such as the annual reports of HD, Quarterly Progress Reports, and government’s plan and policy documents; and (b) specially commissioned studies and surveys (for evaluating resettlement impacts and road user satisfaction). Also, the project-supported IT-systems have significantly added to the Highways Department’s ability to regularly monitor and evaluate data on many critical parameters, viz., project & financial management, road accidents, traffic and road conditions. 2.4. Safeguard Compliance (Satisfactory) 33. Social Safeguards. At the time of appraisal in 2003, the magnitude of land acquisition and displacement triggered by this project – 572 hectares of land and impact on about 15,000 households – was the largest among this type of state highway projects financed by the World Bank in India. GoTN adopted a project specific Resettlement and Rehabilitation (R&R) policy and also prepared a project Resettlement Action Plan summarizing the magnitude of impacts, results of baseline surveys and institutional responsibility/capacity. The land area finally acquired for this project was 645 hectares including 432 hectares of private land, 13% more than what was anticipated at the time of appraisal. The number of affected people remained more or less the same at 14,757 including 3,646 non-title holders (25%) as projected at the time of project appraisal indicating that the resettlement impacts were identified accurately at the outset. By the project closing date, resettlement implementation was fully completed as all affected families received their compensation and main entitlements, except some residual benefits such as title to alternative houses in case of 52 families and electricity connection to 53 families and extending additional benefits such a house building and land purchase grants to those who had received compensation under the TN Highways Act. In all, more than 90% of 11,121 land owners came forward to the private negotiations and as many as 62 small resettlement sites were developed to resettle 543 families including 40 shops. One of the highlights of resettlement implementation is social inclusion. As many as 3,646 families, i.e. about one-fourth of affected families such as squatters and encroachers were given assistance and support in the form of ex-gratia amounts for lost assets, subsistence/shifting allowances and alternative houses/shop and support for income generation activities. As regards community properties, 1,679 assets such as school buildings, small temples, hand pumps, Panchayat offices, etc. were reconstructed. In some cases the local villagers also came forward to contribute the money for reconstruction of some of the affected communities such as worship places8. 34. The land acquisition and resettlement implementation was largely successful and the project closed with a satisfactory rating on social safeguards. Also, based on the experience of this project and key provisions from the National R&R Policy, “Land Acquisition and Resettlement Guidelines� were developed and are awaiting adoption. 8 The total land acquisition and resettlement costs were 3.8% of the project cost (Rs. 733 million, against the project cost of Rs. 22,350 million). 10 35. Environmental Aspects: The overall Environmental Safeguards Management for the project was complex and challenging due to a wide range of issues, with some of the key issues being: (i) impacts on different environmental settings including highly sensitive coastal areas and forested areas; (ii) road corridors passing through rich cultural heritage areas (temples, shrines, mosques, tombs and churches), including temples like Gangaikondacholapuram temple, a UNESCO World heritage site built during 1012-44; (iii) project corridors passing adjacent to many community surface water collection ponds9, and affecting some of them due to project interventions; and (iv) cutting of large number of road side trees for road widening. 36. During the preparation, the environmental issues were comprehensively addressed through: (a) delineating various measures as well as institutional arrangements for implementation of Environmental Management Plan (EMP); (b) extensive public consultations; and (c) design and integration of environmental enhancement measures into precise BOQs. Also, the project preparation included comprehensive tree plantation measures with well-defined arrangements for implementation. In addition, the project implementation plans included preparation of Environmental Management Policy under the institutional development component. 37. During implementation, although there were some initial slippages, over time, TNRSP has taken relevant actions including enforcement of penal provisions under the contract to ensure that the overall implementation of environmental measures was satisfactory. In order to ensure environmental issues were effectively addressed during the construction phase, appropriate provisions including costing for implementation of EMP measures were incorporated in the construction contracts. The enhancement measures included integration of cultural property enhancement measures; specific actions to reduce impact of construction in the proximity of cultural properties; protection and desilting/deepening of community ponds along the project corridors; landscaping and enhancement of incidental spaces (“oxbow� areas) created due to geometric corrections; and construction of roadside water recharge pits in dry and water scarce areas. Integration of environment into contracts has helped in enhancement of community assets at one third to one fifth of actual cost of implementation under “no project� scenario (see Table 1 below). Interestingly, for enhancement of ponds and cultural properties, the communities have contributed, on an average, 3% and 8% of the project costs, respectively; in some cases, the contribution percentage was as high as 15%. Table 1: Community Benefits through Enhancement Measures S. Enhancement Total quantity Cost Actual Cost Savings No. Category Estimate (US$ 000s) (%) (No Project Scenario) (US$ 000s) 1 Pond Enhancement 140 (Avg. Water 418 279 33 9 Tamil Nadu age old practice of surface water harvesting through series of ponds with improved catchment areas, traditionally known as ooranies. 11 S. Enhancement Total quantity Cost Actual Cost Savings No. Category Estimate (US$ 000s) (%) (No Project Scenario) (US$ 000s) (including protection, capacity ~ desilting/deepening 1500cum. to with average water hold 2 Cultural Properties 181 650 325 50 (temples, churches, and mosques) 3 Landscaping Incidental 120 (~6 hectares) 340 235 31 Spaces 4 Recharge pits 52 99 62 37 38. Tree Plantation: The compensatory tree plantation along the project corridors has been carried out through a well-conceived plan, supported by growing nurseries early in the project implementation. While there were poor survival rates initially (as low as 37%), TNRSP took special initiatives to improve the survival rate to 87% by the end of the project implementation with 90,000 trees ranging from 2 to 3 years age. As per the provisions in the MoU with the Forest Department, the maintenance of these trees will be carried out till March 2013 which includes replacement of casualties. The project closed with a satisfactory rating on environmental safeguards. 2.5. Fiduciary Compliance (Satisfactory) 39. Procurement. The project had four large civil works packages (for upgradation of roads) procured through ICB and some relatively smaller works packages (mostly for maintenance of roads) procured through NCB. In addition, there were several packages of consultancies, some related to civil works (such as supervision) and the balance under the institutional strengthening component. Some goods were also procured under the institutional strengthening component. As already detailed in the earlier sections, despite some delays, the procurement aspects, in general, were effectively managed and made significant positive contribution to the preparation (e.g., pre-qualification for four large contracts) and implementation (e.g., proactive contract management including expeditious imposition of liquidated damages where appropriate) of the project. On the whole, the procurement of works, goods, and services was carried out in accordance with Bank guidelines and the procurement plan was updated each year and also as and when necessary. 40. Financial Management: The financial management performance of this project has been satisfactory and there were no significant issues encountered during the project implementation. This was mainly on account of: (i) simplified financial management arrangements; (ii) use of government’s mainstream treasury systems; (iii) sustained availability of experienced and qualified accounting staff in the PMU and field divisions; and (iv) effective oversight and control by the PMU through institutionalization of the internal audit wing for the road upgradation component. While the field divisions maintained adequate expenditure records, the PMU was regular in the submission of 12 monthly accounts to the Accountant General (Accounts & Entitlements) and expenditure claims and audit reports to the Bank.10 These aspects resulted in submission of external audit reports to the Bank, albeit with some delays. The PMU played an instrumental role in guiding and following-up with the respective field divisions in resolving the issues related to financial management, disbursement and internal and external audit. The one area that needed better coordination between the finance and technical units in the PMU was contract management, especially relating to contract variations. In addition the decision by the Bank’s controller’s department to discontinue, mid way during project implementation, the monitoring of disbursements against prior review contracts, combined with project disbursements based on Statement of Expenditures (SoE), put increased pressure on the team to monitor that variations beyond 15% have been approved by the Bank at the time of reimbursement of claims. The implementation of a standard IT based accounting system under the bank’s Loan Accounting Change Initiative (LACI) which was mandatory for all bank projects prepared around 2003 was unsuccessful since it remained a system parallel to the mainstream government accounting system; however the project was largely timely in submission of quarterly FMRs, based on a system developed in excel with aggregate expenditures reconciled to the reports from the mainstream accounting system. 2.6. Post-completion Operation/Next Phase 41. TNRSP is currently focusing its efforts on completion of the residual civil works such as two bypasses and one bridge and also on mainstreaming various IT-based systems developed under the aegis of the project to improve the operational efficiency of the Highways Department. Spurred by the successful implementation of the project, the state government is now working on preparation of a larger project and intends to propose it for funding from multilateral institutions. Going forward, HD could focus on enterprise-wide mainstreaming of the following achievements under the project, viz., (a) capacity acquired to better manage capex and maintenance projects (through mainstreaming and up-scaling); (b) successful practices/approaches for better management of social and environmental aspects; (c) road safety and enhanced use of IT to improve operational efficiency with regard to planning, road asset management and project financial & management; and (d) adoption of innovative contracts such as long- term performance-based maintenance contracts and PPPs. 3. Assessment of Outcomes 3.1. Relevance of Objective, Design and Implementation (Rated: High) 42. Relevance of Objectives: The project development objective of improving the quality and sustainability of the state’s core road network continues to be relevant as this network forms the crucial intermediate link bridging the primary network of national 10 The audit report and the project financial statements for the expenditures incurred by the project under the Original Loan and Additional Financing for the extended period of 16 months i.e. for the financial year 2011-12 including the grace period of 4 months have to be submitted to the Bank by January 31, 2013. 13 highways and the tertiary network of rural roads in the state. The challenges negotiated with regard to civil works – that is, capacity expansion, maintenance and black-spot improvement – continue to plague the rest of the state highway network. In a similar vein, the institutional strengthening components aimed at improving operational efficiencies of HD (through various IT-based interventions), road safety and increasing the role of private participation have the potential to substantially improve the road services in the state. 43. The project was structured in line with one of the key objectives of the Country Strategy at the time of approval, i.e., providing high quality infrastructure to promote private sector led growth, which, in turn, was justified on the grounds that adequate infrastructure and more effective governance could strengthen the enabling environment for investment and sustainable growth, and thereby contribute to poverty reduction in the state. From the sector’s perspective, the focus on improving the physical condition and capacity of the state highway network through improving the effectiveness of the public sector road agency is particularly relevant as it holds the potential for replication in many other states facing similar problems. 44. Relevance of Design: The project design had a balanced mix of civil works and institutional strengthening components, which were closely aligned respectively with the strategic options study and the government’s reform priorities. The project was structured around three components targeting four fairly well-defined sub-objectives, which together seem to have the sufficient weight/potential to achieve the overall PDO. The project’s results framework is found to be logically consistent as the selected set of sector-level indicators provided a fair metric for measuring the achievement of the overall PDO. To measure each of these sub-objectives, too, the framework included appropriate output indicators, except in case of some of the activities aimed at institutional change. 3.2. Achievement of Project Development Objectives (Rating: Satisfactory) 3.2.1 Overall Outcomes (Satisfactory) 45. The project achieved its objective of improving the quality and sustainability of the state’s core road network, through improving the quality of riding as well as travel time over nearly 2,200 km, which accounted for 21% of the state highways (and about one-tenth of the network comprising state highways and major district roads). Through a combination of upgradation, maintenance and/or black-spot improvement works over these roads the project delivered better connectivity and improved access to targeted beneficiaries. The project also laid a good foundation for sustaining these outcomes through: (a) encouraging the government to increase the allocations for the road sector, especially for maintenance; and (b) seeding organizational changes and information systems for improving the functioning of the Highways Department. The project has achieved – and in most cases, exceeded – the targets with regard to all the six sector/project-level outcome/impact indicators as detailed below.  In terms of overall user satisfaction at the End of Project, the TNRSP roads were rated at 4 (on a 5-point scale) whereas the National Highways and State Highways 14 were rated, respectively, at 4.1 and 3.8. These ratings indicate a significant improvement from the baseline surveys where the user satisfaction with both State Highways and National Highways was rated at 3 (on a 5-point scale);  The percentage of core road network in poor condition reduced from about 35% at appraisal to 8% (as against the target of 10%) at the end of the project;  The travel time on two selected corridors, namely, Nagapattinam-Tuticorin and Arcot-Nagapattinam, reduced, on an average, by about 40% (as against the target of 20%);  Number of fatalities from road accidents per 10,000 registered vehicles reduced from 19 to 10.27 (as against the target of 14%);  Actual expenditure for maintenance of total road network, as a percentage of 11th Finance Commission norms, increased from 63% in FY 2001-02 to 100% (as against the target of 80%) in FY 2004-05. From 2006-07, the government expenditure on maintenance from its own funds has been consistently above the normative levels (i.e. 100% or more); and, in years where it received grant-in-aid from the central government, the expenditure was about 50-70% above the norms;  Institutional Development Action Plan was implemented largely along the lines envisaged at the time of appraisal, albeit with varying degrees of delays in completing some elements such as, for example, the PFMS; 46. Ex-post EIRRs for the four major upgradation packages were found to be in the range of 32-58%, vis-à-vis the estimates at the time of appraisal (EIRR for Upgrading – 30%; Maintenance – 43.5%; Total > 30%). Sub-Objective/Output 1: Capacity and quality enhancement of about 750 km of state roads in the core network with proper management of environment and social impacts (Satisfactory) 47. As part of the Road Upgrading component, 724 km of roads (including 14 bypasses) were widened and strengthened to specified standards, with due attention to environment and social impacts. In addition to reduction of travel time, all the upgraded roads were also assessed for road safety and HD is planning to undertake remedial measures suggested by the consultant. The quality of the project roads was substantially superior to the non-TNRSP roads of similar vintage in the project vicinity; the International Roughness Index (IRI) was 2.88 as compared to 5.28 on a selected sample of 240 km of non-TNRSP roads. Keeping in view the quality of outputs with respect to adherence to technical, environmental and social standards/guidelines during construction, riding comfort, safety interventions, and reduction in travel time, the achievement with respect to this component is rated as “satisfactory�. Sub-objective 2: Major maintenance of about 2,000 km and accident black-spot improvements at a number of critical locations (Moderately Satisfactory) 48. Of the two activities under this component, road maintenance fell short of target but black-spot improvement far exceeded the target levels. In case of black-spots, as against the target of improving 75 black-spots, the Highways Department improved 282 black-spots and the work on improving 25 more black-spots is in progress. As regards 15 maintenance, 1,030 km were covered under traditional, annual maintenance contracts and an additional 300 km were under multi-year performance based contracts, and all of them were in conformity with the prescribed quality and environmental standards. In terms of seeding innovative approaches, although the project supported only one multi-year performance-based contract, the government has been convinced of the merits of this approach and is planning to expand it throughout the state; even the maintenance of the 724 km of upgraded roads developed under the project is slated to be done through two performance-based maintenance contracts. 49. In physical terms, the project’s achievement of maintenance of 1,330 km implied a shortfall of 33% (as against the target of 2,000 km). This shortfall is mainly due to increase in the actual costs of O&M vis-à-vis the estimate. Also, with the general increase in the outlay for maintenance, many of the targeted roads were reportedly covered through contracts with the government’s own funds. Accordingly, the physical shortfall is considered as a moderate shortcoming and performance for this component has been rated as Moderately Satisfactory. Sub-objective 3: Improvements to the management of the state road network through institutional strengthening and Public-Private Partnerships (PPP) (Satisfactory) 50. This component comprised several sub-activities ranging from restructuring and enhanced use of Information and Communication Technologies (ICT) aimed at improving the functioning of the Highways Department to interventions related to road safety and increasing the role of private participation. All the sub-activities, except the PFMS, have been completed well and within the project timeframe. 51. As part of restructuring, a post of Director General was created to achieve better coordination among different functions and new divisions/departments were established to enhance focus on critical areas such Planning, Quality Assurance and IT. The staffing norms across work units were rationalized in line with the functions/workload. In addition, various systems and procedures were streamlined and ISO Certification was done for five selected offices, that is, 2 Circles and 3 Divisions. The government is proceeding with the process of achieving similar certification for the remaining Circles and Division with their own funds and the same is expected to be achieved in the next two years. As part of staffing rationalization, over an eight-year period, the staff strength was reduced from 7,884 to 6,935. The establishment costs as a percentage of total expenditure have been reduced from 9% in 2001 to 5% in 2011-12 (as against the target of 5%). 52. The project goal of enhancing the use of ICT, too, was accomplished through: (a) strengthening the IT infrastructure11; (b)imparting of basic IT training to staff at different levels; and (c) introducing specialized software/systems for: (i) Road Accident Database 11 This was done through installation of software and hardware (1,717 desktops, 10 servers, 9 laptops, 620 printers, 30 scanners and 450 webcams) across various offices and levels of HD. 16 Management (RADMS); (ii) Road Asset Management System (RMS)12; and (iii) Project Financial and Management System (PFMS). The specialized software is being further integrated through a Geographical Information System (GIS). 53. Road Safety. Over the project period, there has been a notable reduction in the overall number of fatalities in road accidents as a percentage of number of registered vehicles in the state. The key interventions supported by the project to improve road safety included: (a) approval and dissemination of the Road Safety Policy; (b) Road Safety Audit & Assessment Training to HQ and field based staff of HD and also police officers; (c) road safety awareness programs for about 1,200 three and four-wheeler drivers in ten districts and also for about 400 school children; and (d) development and operationalization of the RADMS. RADMS is currently being used by the Police, Traffic and Highways Departments and is also widely recognized by several state and central road agencies and external experts, as a best practice example that is worthy of emulation. 54. PPP Facilitation. As part of an attempt to encourage GoTN to harness the PPP approach for delivering improved services to road users, the project supported assessment of nine roads for their amenability to development as PPP projects and, thereafter, preparation of techno-economic feasibility reports for roads that were found to be amenable. A notable achievement of this technical assistance was the award of the Phase I of the Chennai Outer Ring Road Project on a PPP basis, with an innovative structuring wherein the traditional annuity-model was modified with about 35% of the project cost payable by the government during the construction phase, thereby making the project more attractive for the potential private players. It is also noteworthy that this was a fairly large project with an estimated cost of about Rs. 8.6 billion (USD 170 million) and was awarded during a period when the project finance market was going through a great deal of uncertainty in the aftermath of the global financial crisis. 55. Ideally, the ICR team would have preferred to complement the aforementioned analysis of outputs of the institutional and policy development component with an assessment of their impact in terms of quantitative improvements in operational efficiency of the HD. In the absence of such measures in the monitoring framework and also because most of the activities were completed in the later stages of project implementation, a qualitative assessment was attempted through the questionnaire survey and interactions with the officers of the Highways Department. The survey and interactions have pointed out to quite a few positive changes in the functioning of the Highways Department, which are summarized in Section 3.3.2 on Institutional Strengthening/Change. Keeping in view the quality of outputs under various activities aimed at institutional strengthening as well as the positive directional changes in the functioning of the HD, the performance under this objective is rated as “Satisfactory.� 12 With the fully functional road asset management including adequate equipment for data collection, the Department now has enough capacity to collect and update road condition data for the entire road network (including Other District Roads) in the state, every year. 17 Sub-objective 4: Enhanced funding and improved allocation procedures for the road sector (Satisfactory) 56. The overall outlay and expenditures for the state road sector have significantly increased over the years. During the Ninth Plan Period (1997-98 to 2001-02), the government on an average spent Rs. 6.5 billion (USD 135 million) per annum on the sector13. As against this, in the year 2011-12, the government spent nearly Rs. 39 billion (USD 780 million) 14 . Within this overall increase, maintenance has been receiving allocations that have progressively moved up to match 100% or more of the normative levels. With the adoption of IT-based Road Asset Management system developed under the project, the allocation of these expenditures is expected to be made on a more rational and consistent basis taking into account the road conditions. 57. In summary, barring a shortfall in meeting the physical targets under the maintenance component, the project has successfully delivered on all activities under various sub-components/objectives and met targets on all key outcome indicators. Accordingly, the project has been rated “Satisfactory� with regard to achievement of overall outcomes and major outputs. 3.2.2 Efficiency 58. Economic Analysis: The end-of-project EIRRs of the four discrete sections of major upgradation roads under TNRSP (with a total length of 712 km) are in the range of 32% to 58%, which indicates that the project is economically viable even with increased construction cost. In all the road stretches, the NPV discounted at 12% is positive confirming the economic justification of the project. All the road stretches have almost same or much higher EIRRs than at appraisal, which was 30.2%. Even in the sensitivity analysis, considering a 20% reduction of yearly benefits for the analysis period, the EIRRs obtained for road stretches are in the range of 29% to 53%. For a more detailed description of the Economic Analysis, including the methodology, assumptions and results, please refer to Annex 3. 59. Other Indicators of Efficiency: In terms of calendar years, the project took three more years than the original schedule of six years. The time overruns in major civil works (that is, road upgradation contracts), too, seem quite large ranging from one to three years. Interestingly, these overruns do not necessarily imply inefficient implementation because a substantive portion of disbursements had been made (with corresponding physical progress in civil works) by Q4 of year 201015. For example, the financial progress data on the four major upgradation projects – which constitute a bulk of the total project cost – indicates that these projects together achieved a progress of 92% and 98%, respectively 13 Tamil Nadu Road Sector Project Appraisal Document, May 2003. 14 Performance Budget 2011-12 (Demand No.21), Highways and Minor Ports Department, Government of Tamil Nadu, 2012. 15 Here, it is noteworthy that the calendar dates indicated for completion of works are linked to issuance of “taking over� certificates, which are usually prone to administrative delays and hence, to that extent, the reported time overruns may be prone to overstatement. 18 by the end of March 2010 and March 2011 (based on Table A3-7 in Annex 3 on Project Economic and Financial Analysis). In terms of construction phasing too, by the end of March 2011, work on all the project packages was nearly complete (based on Table A3-9 in Annex 3 on Project Economic and Financial Analysis)16. 60. In terms of cost variations, three upgradation packages had cost overruns of 40%, 51% and 77% respectively. However, it is noteworthy that these packages together covering about 330 km constitute less than half of the major upgradation component. Also, all these variations were not necessarily on account of inefficiency in implementation; they were partly attributable to design revisions necessitated on account of substantial deterioration in road conditions (due to prolonged time lapse from design preparation and also partly on account of the Tsunami in December 2004) and the subsequent steep escalation in prices of high value items such as bitumen and steel. 61. In view of the above, the project’s efficacy in achieving the PDOs and in implementing the works and institutional development and policy components is rated as “Satisfactory�. 3.2.3 Justification of Overall Outcome Rating 62. In summary, the project has been rated “high� with regard to its relevance, design and implementation. The project’s performance regarding PDOs and implementation of various sub-components has been satisfactory barring a minor shortcoming (shortfall) in achieving physical targets for maintenance. The efficacy with which these accomplishments were achieved has also been “Satisfactory�. Keeping all these in view, on balance, the overall outcome of the project is rated as “Satisfactory.� 3.3. Overarching Themes, Other Outcomes and Impacts 3.3.1 Poverty Impacts, Gender Aspects, and Social Development 63. As envisaged, the project delivered on the promises of better connectivity and improved access to main beneficiaries, by significantly improving the quality of riding surface as well as reducing travel time over nearly 2,200 km of the state’s core road network. In particular, the nearly 700 km long corridor developed through the upgradation component, running mostly parallel to the east coast and connecting several places of cultural and religious importance, is expected to give significant boost to tourism, which was identified as one of the four potential areas to make Tamil Nadu a “leading state�17. The improved infrastructure created through the project thus is expected 16 Construction of TNRSP packages 03 and 04 was 100% complete by March 2011 and that for packages 01 and 02 was 97% complete. 17 In 2002, a study conducted by the Centre for International Development of the Harvard University’s Kennedy School of Government, for the Government of Tamil Nadu, identified health, education, tourism and biotechnology as four critical areas of importance to make it a “leading state�. 19 to have a positive impact on poverty alleviation through the value chain of higher and more efficient economic activity including in tourism and the consequent increase in livelihoods and employment opportunities. 64. Social Development: As indicated earlier, despite the large magnitude of land acquisition and displacement, the project closed with a satisfactory rating on social safeguards. Nearly 94% of the 623 titleholder displaced families had chosen self- relocation with the support of house building grants. In addition, 133 families were assisted in re-establishing their livelihoods through purchase of income generation assets. Two resettlement impact evaluation studies conducted by the Highways Department, in consultation with the Bank, confirmed that the project had not caused any significant adverse impacts on the livelihoods, and the PAPs had improved their living standards. 65. The environmental measures benefited the communities. TNRSP documented the achievements in the form of systematic case studies and photo documentation as well as compiling villagers’ perception of benefits to the communities. This documentation, along with the integrated perspective with which the project sought to address environmental management, is an interesting value-add that could be put to good use while designing similar road projects in future, by GoTN as well as the Bank. 3.3.2 Institutional Change/Strengthening 66. The project has completed all the planned activities aimed at improving the functioning and operational efficiency of the Highways Department. Of these, road safety audit and assessment and the RADMS have already been mainstreamed. The quantitative impact of the remaining activities, however, could not be ascertained in the absence of a baseline and a comprehensive assessment of the Department’s functioning and efficiency across various levels. However, a qualitative assessment based on a questionnaire survey and interactions with various officers of the Highways Department indicated several notable positive directional changes especially in the areas of procurement and contract management, viz., (i) the department’s upgradation and widening projects are progressively moving away from small, 10-20 km/year interventions to larger-size contracts and corridor-based approach; (ii) planning of works within the network are being prioritized based mostly on conditions of the roads; (iii) strong intent to increase the use of multi-year performance based contracts for maintenance; (iv) inclusion of escalation clauses in contracts; (v) increased use of external experts to bridge the skill/resource gaps within the HD, especially in the areas of engineering design, traffic studies, and preparation of detailed technical and/or feasibility reports; and (vi) widespread use of computers/IT systems in day-to-day working (Refer Annex 5 on Beneficiary Survey Results). 67. The project also made good progress in implementation of the Governance and Accountability Action Plan (GAAP), which was introduced only at the time of additional financing, especially with regard to: (a) dissemination of project related information including contract awards, status reports, expected dates of completion and complaint handling systems, through its website in both English and Tamil (local language); (b) appointment of officers to monitor compliance with social and environmental safeguards; 20 and (c) developing database to ascertain/track contractor capacity/performance during the procurement and implementation phases. 3.3.3 Other Unintended Outcomes and Impacts (positive or negative) 68. There were no noticeable negative impacts and on the positive side, at least three practices from the project – namely, private negotiations for land acquisition, road accident database management system, road safety audit & black-spot improvements – have received wide recognition as good practice examples worthy of emulation by other road development agencies. 3.4 Summary of Findings of Beneficiary Surveys 69. Key findings of the Road User Satisfaction Survey and a questionnaire-based dip- stick survey among various officers of the GoTN, HD and TNRSP, both carried out at the end of project, are placed in Annex 6 and Annex 6(a), respectively. 4. Assessment of Risk to Development Outcome 70. Roads improved through upgradation and maintenance contracts under the project are likely to be sustained in the immediate future as the government has been making adequate allocations for maintenance of the entire road network. In case of institutional strengthening activities, too, some positive directional changes in the functioning of HD especially in the areas of procurement and contract management (detailed above) suggest that the project’s outputs and achievements will be progressively mainstreamed. For instance, the department is currently focusing its efforts on mainstreaming the GIS and PFMS into its working and the GoTN is attaching high priority to such integration. The recent launch of all these systems by the Hon’ble Chief Minister – under an umbrella program, entitled e-Pathai (Electronic Project, Administration, Traffic, Highway Assets and Information Management System) – indicates that the government fully appreciates the need – and is committed – to implement these systems in an integrated fashion. 71. To sum up, the early indications are that the government is keen to take advantage of and build on the aforementioned positive developments/outputs from the project. Realizing this intent, however, requires a substantive change in mindset and functioning across several layers of HD and the government. Also, the government should pay particular attention to preserving the capacities acquired by the PMU for preparing and implementing large and complex construction and maintenance projects and harnessing them to achieve similar efficiencies in spending the rapidly increasing allocations to the road sector. Keeping the aforementioned indications and uncertainties in view, the risk to development outcome has been rated as “Moderate.� 5. Assessment of Bank and Borrower Performance 5.1. Bank Performance: Satisfactory 21 (a) Bank Performance in Ensuring Quality at Entry. Moderately Satisfactory 72. The Bank’s performance during the preparatory period was satisfactory with regard to strategic relevance and approach, technical, financial and economic analysis, and paying adequate attention to fiduciary and safeguards and monitoring & evaluation arrangements. The team’s interaction and inputs at this phase have played a significant role in arriving at a project design that was focused on key challenges at that time and choice of components/actions that directly addressed these challenges within the project’s budget and time limitations. During this phase, the Bank’s decision to “pause� preparation had resulted in a nearly 2-year delay but it seems to have finally worked in favour of the project as it led to not only infusion of effective leadership at entry but also the Highways Department stepping up its involvement and thereby building up competencies in project preparation. 73. On the other hand, as the preparation resumed after a two-year gap and withdrawal of the project preparation consultants, in some of the upgradation contracts, the road and sub-soil conditions at the time of implementation were such that the designs had to be modified from mere strengthening to reconstruction. Since this is the first project of this size and complexity with multilateral partnership for the client government, as a more ‘knowledgeable’ partner in development, the Bank could have alerted the government to this shortfall and encouraged them to review and update the designs. The absence of such review had resulted in subsequent time and cost overruns in – and to that extent had exerted downward pressure on achievement of the outcome of – a major project component, namely, road upgradation. Considering this as moderate shortcoming, the Bank’s performance in ensuring quality at entry is rated as “Moderately Satisfactory�. (b) Quality of Supervision. Satisfactory 74. The Bank had been fully engaged with the client during the implementation of all planned activities, paying due attention to the client’s priorities and preferences as well as the Bank’s fiduciary and safeguards requirements. Adequate numbers of staff with requisite skills and expertise in technical and safeguards’ functions were engaged in supporting implementation including through missions at regular intervals. The mission management letters and aide-memoires suggest comprehensive attention to all major components, duly highlighting the achievements as well as areas of concern, along with suggestions for addressing the proximate challenges. It is particularly noteworthy that the supervision has been fairly alert and responsive to unforeseen developments such as the need for addressing road sections damaged on account of Tsunami in December 2004, and also to relatively more common “housekeeping� needs such as extending the closing date and additional financing. Major problem areas such as, for example, delays in land acquisition and in according approvals to design changes were identified early on and persistently followed up through to their satisfactory resolution. The key issues in implementation were also regularly brought to the attention of the sector and country management through the Implementation Status Reports (ISRs) and the guidance received was promptly acted upon. The ISR ratings assigned to the quality of implementation provide a fairly accurate reflection of the project’s performance in the 22 corresponding periods, e.g., rating downgrades in 2005 and 2006. Finally, the level and quality of the Bank team’s support during the implementation was uniformly appreciated by the PMU, contractors and consultants. In view of this, the Bank’s performance during the implementation was rated as “Satisfactory.� (c) Justification of Rating for Overall Bank Performance. 75. Normally, a combination of “Moderately Satisfactory� and “Satisfactory� rating of performances, respectively, in ensuring quality at entry and during implementation, would have lent itself to an overall performance rating of “Moderately Satisfactory�. Yet, here it is important to recognize that, despite the moderate shortcoming of delays during the entry period, the project has finally achieved an overall “Satisfactory� outcome. Keeping in view this final positive outcome and the Bank’s notable contributions during the implementation in achieving the same, the Bank’s overall performance has been rated as “Satisfactory�. 5.2. Borrower Performance: Satisfactory (a) Government Performance. Satisfactory 76. Through the project preparation and implementation, the project received requisite level of support from the Government of India (GoI). GoTN, too, extended full support to the project through most of the preparation and implementation phases, especially in lining up reasonable level of skilled resources and fully endorsing the broader institutional and policy agenda including bracing itself up to tough challenges such as, for example, rationalization of manpower, devolution of more powers and autonomy to the Highways Department and increasing budgetary allocations to the sector. A notable exception is the lack of effective leadership at the PMU during two periods of two-years each, respectively during the middle-phase of preparation and around two years into implementation. The government eventually addressed the above limitations by assigning the implementation leadership to senior civil servants from the Indian Administrative Service, thereby adding a greater degree of autonomy and empowerment to TNRSP; these senior civil servants were able to muster better cooperation/compliance from other government agencies involved in key functions such as land acquisition, R&R and utility shifting. Also, as the Government has highlighted in their comments on ICRR, this was the first externally aided project in the road sector in the state, with a relatively huge outlay, larger size of contracts and new procedures, all of which have contributed to a rather steep learning curve in the preparation and initial phases of implementation. Keeping this in view, the periods with paucity of effective leadership are considered as a minor shortcoming and, accordingly, the Government’s performance is rated as “Satisfactory.� (b) Implementing Agencies Performance. Satisfactory 77. The project was implemented by a dedicated PMU (also referred to as TNRSP) under the aegis of the Highways Department. The waxing and waning of the project progress in tandem with the presence of effective leadership at the helm suggests that the 23 next level leadership at the PMU is inadequately empowered. Also, anecdotal accounts suggested that the Highways Department’s involvement in the project has been rather tepid especially during the preparation and early stages of implementation. Despite these limitations, the PMU, on the whole, had been fairly effective in expediting preparation and implementation of all activities. 78. Here, it is important to note that this is a first World Bank supported road sector project in the state and it comprised relatively large-size civil works with “new� norms/processes for managing social and environmental aspects, new IT-based systems and novel contracting approaches such as use of supervision consultants, performance- based maintenance contracts and PPPs. Consequently, the PMU staff responsible for these activities often had to go through a rather steep learning curve and, to their credit, they mostly rose to the occasion and enthusiastically built up their capacities and acquired new skills. Interestingly, some of the PMU officers equipped with this experience were subsequently hand-picked to undertake similar tasks with equal or more complexity in the Chennai Metro Rail project and have performed well there as well. 79. Most importantly, the implementing agency fully bounced back from earlier setbacks and completed the major civil works components substantially in time and also delivered on the maintenance, safety and institutional development and policy components, with a reasonable degree of efficiency. Keeping these achievements in view, the implementing agency’s performance is rated as “Satisfactory.� (c) Justification of Rating for Overall Borrower Performance. 80. Considering that the performance of both the Government (of Tamil Nadu) and the implementing agency has been “Satisfactory�, overall performance of the borrower has been rated as “Satisfactory.� 6. Lessons Learned 81. Some of the notable lessons from the project are summarized below. 82. Staffing and Leadership: A dedicated project unit with an empowered leadership supported by an appropriate skill mix can be very useful in managing large projects spread over several years and seeking to introduce new approaches on multiple fronts. Yet, it is important to recognize that the units that are put together just for the sake of the project tend to lack full empowerment and leadership from within and often rely on the strength of individuals assigned to lead them. Hence, the Government, implementing agency and the Bank should pay more attention to enhancing the leadership and empowerment of dedicated units at multiple levels. 83. Replication of Best Practices and Preservation of Capacities: A salient aspect of the TNRSP is that it has clearly demonstrated that the GoTN and Highway Department have the inherent potential to successfully prepare and implement large-scale civil works that deliver roads with better riding quality and reduced travel time. It is important to recognize that this was made possible mainly through adoption of various best practices (such as, for example, channeling funds to large-sized projects based on their economic 24 potential and adopting more efficient contracting approaches like performance-based maintenance and PPP contracts) and gradual enhancement of the skill sets of their own staff. Accordingly, going forward, the government could consider progressively shifting its own allocations to the road sector – which are substantive and increasing – in a manner that replicates these best practices and harnesses the skills built up within their cadres. 84. Management of Interdependencies: Large “linear� construction works such as upgradation of roads require cooperation of several stakeholders for expediting critical activities such as, for example, statutory clearances, land acquisition (project affected persons and revenue department), utility shifting (agencies responsible for electricity, telecom and/or water networks), construction (contractors) and supervision (independent consulting engineers). The experience from the most effective periods of progress in TNRSP underscores that cooperation from these stakeholders is likely to be most effective when they are engaged: (a) as early as possible in the activities in which they have an important stake and better knowledge & control; and (b) in a manner that encourages frank exchange of perspectives and is equitable in sharing risks, responsibilities. In case of utility shifting, the government could consider according an ex-ante, omnibus approval for the authority to take a lead role as it seemed to have done – with successful results – in case of Chennai Metro. 85. Robust planning and preparation: The organizational structure and culture of most of the works departments seem to willy-nilly attach relatively less priority to planning and preparation activities such as design, including land acquisition, R&R and utility shifting. Inadequate attention to these activities, as highlighted in TNRSP, is likely to have negative ripple effects. Hence, utmost priority should be given to complete planning and preparatory activities within a reasonably tight schedule. Also, if there is a significant time lapse from preparation to implementation, care should be taken to suitably update the designs and to ensure reasonable level of maintenance in the interim to avoid acute deterioration of road structure. 86. Contract Management – Civil Works: Well-written contracts are a necessary but not sufficient condition for achieving good results. In order to deliver the intended outputs, contracts need to be effectively administered by the implementing agency. Specifically, the agency should be prompt in responding to developments such as design changes (by taking decisions and according approvals without undue delay) and lax performance by contractors (by promptly enforcing various remedial provisions available in contracts including liquidated damages where necessary). 87. Consultants – Civil Works: The responses from the TNRSP and HD officers during the dip-stick surveys and from some of the contractors during one-to-one interviews suggest an apparently widespread feeling that the consultants associated with civil works components – for DPR preparation and for supervision – should be made more accountable for their outputs, say, through imposition of rather strict penalties/damages in case of lack of progress. While it may not be fair to make the consultants liable for items such as lack of progress and faulty construction, which are 25 beyond their control, it may be useful to require them to provide “enforceable� guarantees for diligent and timely performance of their duties. 88. Re-thinking indicators relating to achievement of institutional development: In a project with a strong institutional development agenda, the teams may consider choosing more granular targets/indicators to measure achievements and impacts. Such targets, ideally, should relate not only to mere completion of all sub- activities/components but also to the actual improvements achieved in project implementation and other operational efficiencies (e.g., reduction in time and cost overruns; reduction in per km costs of construction and maintenance, etc.). 89. Land acquisition through private negotiations, coupled with innovative approaches to valuation, appears to offer significant promise to expedite land acquisition in a timely and amicable manner18. This lesson was already highlighted in a World Bank dissemination note19 building upon the experience from four State Highway projects (in the states of Tamil Nadu, Punjab, Uttar Pradesh, and Gujarat) and a hydroelectric power project (Himachal Pradesh). 90. Environmental Safeguards – Early Planning, Integrating with Contracts, Right Sequencing and Inclusive Approach: The implementation of environmental measures during the construction stage is likely to be more effective if they are identified early on and integrated as part of the construction contracts, with provisions for related BoQ and incidental items and penalties to address non-compliance. Similarly, early initiation of landscaping and tree plantation activities (starting with raising nurseries) as part of project implementation could lead to good results, instead of differing the implementation of plantation. Also, an inclusive approach in consultation with local communities could help harness opportunities to create valuable community assets and also generate positive response and good will, which could be leveraged for important aspects such as traffic management and road safety awareness where citizens can play a very important role. A key learning through the TNRSP project has been to make communities and road users part of the road landscape through cultural integration which adds the sustainability dimension to the overall project development objectives. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 91. A summary of the Borrower’s own ICR, along with their comments on the Bank’s draft ICRR, is enclosed in Annex 7. While accepting the analysis and findings of the Bank’s draft ICRR, the Implementing Agency requested reconsideration of the 18 By adopting private negotiations, 53% of land acquisition cases under the private negotiations method were completed in less than 2 years, whereas land acquisition took more than 2 years in case of 85% of land acquisition cases under TN Highways Act. 19 “Success through Innovation and Negotiation: Land Acquisition in India�, South Asia Social Dissemination Unit, Dissemination Note No. 2, January 2012. 26 “moderately satisfactory� ratings for a sub-objective (major maintenance component) and for the “government’s role�. Acknowledging some of the arguments of the agency, the rating for the “government’s role� has been moderated to “Satisfactory� category. (b) Other partners and stakeholders 92. Not applicable. 27 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD million equivalent) Revised Actual/Lat Percentage Appraisal Estimate est Percentage of Revised Estimate Components (USD Estimate of Estimate (USD millions)# (USD Appraisal millions)* millions)** Road Upgrading Component 320.97 379.33 385.83 120.2% 101.7% Road Maintenance and Safety 110.72 105.28 106.18 95.9% 100.9% Works Components Institutional and Policy 14.83 18.88 9.41 63.5% 49.8% Strengthening Component Total Baseline Cost 446.52 503.49 501.42 112.3% 99.6% Total Project Costs 446.52 503.49 501.42 112.3% 99.6% Front end fee 3.48 3.61 3.61 103.7% 100.0% Total Financing Required 450.00 507.10 505.03 112.2% 99.6% * Exchange Rate 1USD = 48.00 Indian Rupees at the time of appraisal # At the time of Additional Financing, March 2010 **On the basis of actual disbursement data for Bank portion and exchange rate of 1 USD = 45 Indian Rupees for Government portion (b) Financing Appraisal Actual/Latest Percentage Type of Co- Estimate Estimate Source of Funds of financing (USD (USD Appraisal millions) millions) Borrower 102.00 108.40 106.27 IBRD 348.00 387.05 111.74 Source: Tamil Nadu Road Sector Project 28 Annex 2. Outputs by Component The project had three components and the outputs of each are listed below: Component Key Performance Indicators End of Project Achievement/Remarks Target 1.1.Upgradation 1) 750 km upgradation 724km upgraded. Work on a bridge and a 4 delivered on time, km bypass is in progress and expected to be Cost effective budget, safety and completed by September 2012. The project capacity and quality quality constraints achieved 97% of the targeted upgradation of enhancement of 750km roads by the revised end date of the about 750km of state project, with some time and budget overruns highways with but in satisfactory adherence to safety and proper management quality standards. of social and 2) Delivery of All PAPs received compensation and R&R environmental compensation and assistance, except some residual benefits to safeguards entitlements to schedule few PAPs. 3) Survival rate of While there was poor survival rates initially afforested trees at EoP is (as low as 37%), the PMU took special above 70% initiatives to improve the survival rate to 87% by the end of the project implementation with 90,000 trees ranging from 2 to 3 years age. Also, TNRSP entered into an MoU with the Forest Department, which provides for the maintenance of these trees and replacement of casualties, if any, until March 2013. 1.4 Environmental Yes. The project closed with a satisfactory mitigation measures rating on environmental safeguards. carried out according to contract clauses 1.2.Maintenance & 1) 1,500 km periodic 1,030 km covered for periodic maintenance Safety Works maintenance works under traditional contracts. delivered to time, Cost effective budget, safety and periodic/routine quality constraints maintenance and 2) Environmental Yes. The project closed with a satisfactory black-spot mitigation measures rating on environmental safeguards. improvements on carried out according to about 2,000 km of contract clauses the core road 3) 500km subject to 300 km awarded under a performance-based network performance based maintenance contract. routine maintenance contracts 4) 75 black-spots After improving the 75 block-spots initially improved targeted, the Highways Department took up 307 black-spots with their own funds and of 29 Component Key Performance Indicators End of Project Achievement/Remarks Target these, 282 are already improved and the work on the remaining is in progress. 1.3.Institutional 1) Publication of Yes. Strengthening medium term and annual and Policy business plans and Development reports 2) Functional HD reorganized along functional lines. A post Improvements to the reorganization of HD as of DG (Roads) was created. Staff strength management of the spelt out in ISAP by end reduced from 7,884 to 6,935. Following the state road network 2005 functional reorganization, the Highway Department now has new Enhanced funding divisions/departments focusing on critical and improved areas such Planning, Quality Assurance and allocation IT. Also, the staffing norms across work units procedures for the have been rationalized and standardized in road sector line with the functions/workload. 3) Key HD divisions ISO certification completed in selected achieve internationally offices, that is, 2 Divisions and 3 Circles. recognized quality and environmental management system certification 4) Enhancements to Some of the notable changes induced by procurement and TNRSP in the procurement and contract contract management management practices of the HD are: (i) in procedures case of upgradation and widening, progressively moving away from small, 10-20 km/year interventions to larger-size contracts and corridor-based approach; (ii) prioritization of works within the network based mostly on the structural conditions of the roads; (iii) increasing use of multi-year performance based contracts for maintenance; and (iv) inclusion of escalation clauses in contracts. Also, the Project Financial and Management System has been developed and is undergoing user acceptance testing. 5) Road safety policy Road Safety Policy was approved and and action plan disseminated. The implementation is in approved and progress with some notable initial implemented achievements such as, for example, Road Safety Audit & Assessment training, road safety awareness programs for users and 30 Component Key Performance Indicators End of Project Achievement/Remarks Target school children and successful operationalization of the Road Accident Database Management System. 6) Cost of HD As against the originally envisaged target of establishment as a share reducing the cost of HD establishment as a of total HD expenditure share of total HD expenditure to 5% by the reduced from 9% (2001) original closing date of project (that is, March to 5% 2009), the project achieved to bring down this share to 4.6% in 2009-10 and by the revised end date of the project, that is in 2011-12, the share remained at around 5%. 7) Road Maintenance Not Applicable. The requirement of creation Fund administered by a of Road Maintenance Fund to be administered Road Board to be by a Road Board was waived during the created by March 31, course of implementation, that is, in 2009, 2004, and working based on the government’s plea that they have efficiently been consistently providing sufficient quantum of funds for maintenance. 8) HD senior Not achieved. By the end of project, Project management using Financial and Management System had been outputs from developed and is undergoing user acceptance computerized financial testing. management to take decisions 9) RMSS installed and Not achieved by MTR as envisaged but is used by Senior partially achieved by EOP. As of now, Road Management to plan Asset Management System is fully functional works on Core Road and is expected to be progressively Network mainstreamed for decision-making. 10) Lane Km of Aided by the technical assistance provided highways partly or under the project, Chennai Outer Ring Road wholly financed by the (about 30km) awarded and under private sector (no target) implementation as PPP. Also, as of now, there are two other roads with a total length of about 133km, which are under operation through private participation; five more projects are under consideration. 31 Annex 3. Economic and Financial Analysis 1.0 Summary of Results and Conclusions from the Economic Analysis at the End of Project 1. Economic evaluation was carried out for all the TNRSP upgraded roads totalling 712 km length, excluding two bypasses. In the analysis, the �with project� improvement alternative was compared with the �without project� alternative of minimum maintenance of the existing road: “Do Minimum� i.e., (a) Base case (without improvements and with annual “Do Minimum� maintenance), and (b) Improvement Alternative (with improvement/rehabilitation and annual “Routine Maintenance� supplemented by a Periodical Maintenance at five year intervals). The results of the economic analysis conducted considering: (i) final completion costs, (ii) implementation period and (iii) achieved traffic on upgraded roads and sensitivity analysis considering 20% reduction in benefits are summarized in the following table: Table A3-1: Results of the Economic Analysis Normal Scenario Scenario with 20% Contract/ Length [Improvement reduction in Benefits Road Name (km) Alternative] Stretch EIRR NPV (Rs. EIRR NPV (Rs. (%) million) (%) million) TNRSP 01 Arcot- Nagapattinam 378.6 32.8% 15,707.69 29.9% 12,022.20 Nagapattinam - 14,178.24 TNRSP 02 118.6 58.8% 18,023.61 53.7% Kattumavadi Kattumavadi - 6,386.88 TNRSP 03 100 35.2% 8,227.68 32.4% Ramanathapuram Ramanathapuram - 9,079.32 TNRSP 04 114.6 47.7% 11,518.65 44.2% Tuticorin Combined Arcot- Tuticorin 711.8 41.9% 53,477.62 38.3% 41,666.64 2. The end-of-project Economic Internal Rates of Return (EIRRs) of the above road stretches of TNRSP are in the range of 32% to 58% which indicates that the project is economically viable. In all the road stretches, the Economic Net Present Value (ENPV) discounted at 12% is positive confirming the economic justification of the project. All the road stretches have almost same or much higher EIRR than at appraisal, which was 30.2%. Even in the sensitivity analysis, considering 20% reduction of yearly benefits for the analysis period, the EIRRs obtained for road stretches are in range of 29% to 53%. 3. The sections in TNRSP 02 have higher EIRRs than all other stretches due to comparatively higher traffic volumes supported with higher traffic growth rates achieved during the implementation period (2003-2012) and comparatively less increase in the project cost. 4. The first reason which explains the differences in the EIRR is the relative increase in construction costs compared to the higher increase in VOCs and savings. The second reason is that the roads deteriorated between the time the initial economic analysis was carried out (2003) and the time the works were completed and roads were improved 32 (2012). The third reason is the higher traffic growth pattern the project road sections achieved during the project implementation period (2003-2012). This resulted in higher savings on VOCs than estimated at appraisal, further confirming that the upgrading/improvement of the roads was justified. 5. Conclusions: The above results show the robustness of the economic feasibility indicators under normal and adverse sensitivity scenarios including significant decrease in benefits, significant increase in costs or the worst scenario of both occurring simultaneously. The end-of-project EIRR for all the above packages justifies the project investment with more risk absorption capacity. However, this sensitivity is unlikely to happen as: (a) traffic is expected to grow to accompany the current economic growth, (b) there is no uncertainty on the cost of the works as all the contracts are completed, and (c) VOCs are unlikely to be reduced in view of the past trend for the price of inputs such as fuel, lubricants, tires, and salaries. Also, the estimated economic feasibility results are on the conservative side as the qualitative project benefits like tourism development, increased road safety, better highway environment are not considered in this analysis. 2.0 Summary of Previous Rounds of Economic Analysis 6. At the time of appraisal of the project, economic analysis was carried out for 743 km of upgrading roads. The existing carriageway configuration of all roads was single- lane/intermediate-lane. Very few sections had two-lane configuration. Under TNRSP, all these project roads were proposed for upgrade to two-lane configurations. The economic viability of project road sections due to upgradation was obtained considering reduction in vehicle operation cost and saving in travel time cost of passengers with respect to “Do Minimum� project road sections. The overall EIRR for these roads was 30.2% with an NPV, discounted at 12%, of Rs. 26,233 million. 7. Subsequently during the additional financing process in 2009-10, the economic analysis was again carried out in which four homogenous/typical stretches in TNRSP 01 and two stretches each in all the other roads have been considered. Ten sections totalling 279 km of the completed upgradation works, which works out to 40% coverage, were considered for economic analysis. The EIRR for all the sections was more than 12%. Some of the sections had higher EIRR than at appraisal. Table A3-2 presents the results of the sensitivity analysis. The sensitivity analysis considers a 20 percent decrease in benefits. Table A3-2: Results of the Economic Analysis (2009-10) for Selected Completed Sections of TNRSP Results of economic analysis with 20% reduction in benefits Contract / Road Homogenous / (carried out at the time of Length (Km) stretch typical section additional financing) EIRR (%) NPV (Rs million) 1 24.7 24 254 TNRSP 01 2 27.8 40 963 3 28.6 37 494 33 Results of economic analysis with 20% reduction in benefits Contract / Road Homogenous / (carried out at the time of Length (Km) stretch typical section additional financing) EIRR (%) NPV (Rs million) 4 27 28 398 1 17.6 44 2493 TNRSP 02 2 30.3 42 4251 1 31.5 18 523 TNRSP 03 2 23.5 17 301 1 29.2 13 29 TNRSP 04 2 38.5 16 90  Source: Project Paper on a Proposed Additional Financing (Loan) in the amount of  US$50.7 million to the Republic of India for the Tamil Nadu Road Sector Project, March  4, 2010, The World Bank    3.0 Approach and Methodology for the Economic Analysis for ICRR 8. The economic analysis carried out in 2003, at the project appraisal stage is updated for the Implementation Completion and Results Report (ICRR) with actual data as on completion of works. For this, complete TNRSP project roads totalling 712 km road length, are considered, and analysed using the Highway Development and Management Model (HDM-4). 9. The details of TNRSP Roads and their improvement proposals are presented in Table A3-3. In total, all TNRSP roads totalling 712 km length, excluding two bypasses, have been considered for analysis. Table A3-3: Details of Roads for Analysis Road Contract/ Length Initial Road configuration Road Name (km) Configuration after Stretch upgrading TNRSP01 Arcot- Nagapattinam 378.6 Single to Two Lane Two Lane TNRSP02 Nagapattinam - Kattumavadi 118.6 Single to Two Lane Two Lane TNRSP03 Kattumavadi - Ramanathapuram 100.0 Single to Intermediate Two Lane TNRSP04 Ramanathapuram - Tuticorin 114.6 Single to Two Lane Two Lane 10. Economic analysis is carried out for the upgrade roads because there were cost overruns in these works. The following Tables A3-4 to A3-8 present the variation in costs in the contracts for upgrading roads at different stages from processing (2003) to additional finance (2009-10) and further to project completion (2012). Table A3-4: Comparison of Initial Cost (2003) and Revised Cost (2009-10) Provision in the Project Revised cost (Rs. % Upgrading Component Cost (Rs. million) 1 million) 2 Difference 2003 2009-10 TNRSP 01 7685 6612 -14% 34 Provision in the Project Revised cost (Rs. % Upgrading Component Cost (Rs. million) 1 million) 2 Difference 2003 2009-10 TNRSP 02 2369 3305 40% TNRSP 03 1433 2533 77% TNRSP 04 1329 2029 53% Notes: (1) Costs used in PAD, 2003; and (2) .Revised Cost during Supplementary Finance Analysis, 2009-10 Source: TNRSP Table A3-5: Comparison of Revised Cost (2009-10) and Completion Cost (2012) Revised cost Actual cost Upgrading Component (Rs. million) 1 (Rs. million)2 % Difference 2009-10 2012 TNRSP 01 6612.0 6,795.6 2.8% TNRSP 02 3305.0 3,307.9 0.1% TNRSP 03 2533.0 2,548.7 0.5% TNRSP 04 2029.0 2,028.8 0.0% Notes/Source: 1. Revised Economic analysis for Additional Financing, 2010 2. Completion cost as on 31 March 2012 (Compiled from the data collected from TNRSP) 3. For Comparison purpose, only civil costs were considered both during 2009-10 and 2012. Table A3-6: Cost Escalation (2003-2012) Initial Cost Completed Cost Contract/Road Stretch % Increase (Rs. million) (Rs. million) 1 TNRSP 01 7,685 6,796 -11.57% TNRSP 02 2,369 3,308 39.63% TNRSP 03 1,433 2,549 77.85% TNRSP 04 1,329 2,029 52.65% 1. 2012 Cost discounted at 6.5%, the average annual growth of inflation was 6.5% during the period 2003-2012, to the Base Year 2003. 2. Only civil costs are considered in both costs for comparison purpose. Table A3-7: Composition of Completion Cost (2012) TNRSP 01 TNRSP 02 TNRSP 03 TNRSP 04 Year 3 Rs. mn % Rs. mn % Rs. mn % Rs. mn % March 2003 54.12 0.7% 16.84 0.5% 14.33 0.5% 16.45 0.8% March 2004 17.77 0.2% 1.26 0.0% 0.22 0.0% 0.46 0.0% March 2005 689.99 8.9% 132.04 3.8% 148.74 5.6% 10.23 0.5% March 2006 583.25 7.5% 386.67 11.1% 151.96 5.8% 142.14 6.6% March 2007 1,068.61 13.8% 484.15 13.9% 498.68 18.9% 145.15 6.7% March 2008 1,379.84 17.8% 781.19 22.4% 788.17 29.8% 333.92 15.4% March 2009 1,797.87 23.2% 679.22 19.4% 851.37 32.2% 821.08 38.0% March 2010 1,518.96 19.6% 567.41 16.2% 172.15 6.5% 568.43 26.3% March 2011 403.73 5.2% 339.15 9.7% 9.36 0.4% 114.25 5.3% March 2012 241.35 3.1% 106.84 3.1% 7.18 0.3% 10.48 0.5% Total Cost 7,755.48 100% 3,494.76 100% 2,642.16 100% 2,162.59 100% NPV-2003 1 5,590.23 2,497.22 1,938.36 1,503.60 35 Source: Compiled from the data provided by TNRSP Note: 1. Discounted at 6.5%, the average annual growth of inflation was 6.5% during the period 2003-2012. Table A3-8: Comparison of Completion Cost (2012) Actual Cost Base Cost of 2002 - 03 Revised Cost 2010 Actual Cost - 2012 discounted at 2003 Price Project Length (Rs. Mn./Km) (Rs. Mn./Km) (Rs. Mn./Km) (Rs. Mn./Km) Road (Km) (Rs. Mn.) (Rs. Mn.) (Rs. Mn.) (Rs. Mn.) TNRSP 01 378.6 7685 20.3 6612 17.4 6796 17.9 5590.2 14.8 TNRSP 02 118.6 2369 20.0 3305 27.9 3494.8 29.5 2497.2 21.1 TNRSP 03 100.0 1433 14.3 2533 25.3 2642.2 26.4 1938.4 19.4 TNRSP 04 114.6 1329 11.6 2013 17.6 2162.6 18.9 1503.6 13.1 11. Approach: The economic evaluation has been carried out within the broad framework of social cost-benefit analysis assuming the analysis period of 25 years including the achieved construction period. There will be reduction in road user costs of motorized traffic (MT) upon the improvement of the existing road. The economic savings at significant levels in Vehicle Operating Costs (VOCs) and in journey time of passengers and goods are expected to occur due to improvement of the existing roads. 12. The economic analysis has been based on comparison of costs and benefits under two scenarios: �without the upgradation project� and �with upgradation road 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. 13. Construction Program: The analysis period of the project has been taken as 25 years including construction time. The completed construction program for TNRSP road network is Table A3-9, in which the actual construction period is only considered by leaving the spill over works in the beginning and end. For the purpose of analysis, it is assumed that traffic is opened in 2012 on completion of all construction activities for TNRSP 01 and TNRSP 02; 2010 for TNRSP 03 and 2011 for TNRSP 04. 36 Table A3-9: Construction Program Project Phasing Period TNRSP 01 TNRSP 02 TNRSP 03 TNRSP 04 2003 2004 2005 9.8% 4.3% 6.2% 2006 7.5% 11.1% 5.8% 7.8% 2007 13.8% 13.9% 18.9% 6.7% 2008 17.8% 22.4% 29.8% 15.4% 2009 23.2% 19.4% 32.2% 38.0% 2010 19.6% 16.2% 7.1% 26.3% 2011 5.2% 9.7% 5.8% 2012 3.1% 3.1% Total 100.0% 100.0% 100.0% 100.0% Source: TNRSP 14. Procedure for Estimation of Benefits: The following procedure has been employed to estimate the aforesaid benefits:  Estimation of present traffic volume on the completed road sections/packages from field surveys  Estimation of traffic growth rate – adopted from the ‘initial base analysis of 2003’  The time values are used in the VOC estimation  Usual maintenance provisions and costs in ‘with’ and ‘without’ conditions have been considered  The model used for analysis is HDM-4  EIRRs of the sections have been estimated with HDM but the EIRR of the packages and subsequently for the entire project has been obtained also taking together all the sections  EIRR and NPV Estimation with the sum of benefits from (i) VOC savings; and (ii) Time savings 15. Components of Cost: From the financial costs of completed packages of TNRSP, the economic cost has been worked out by multiplying the financial cost by a factor of 0.9, and is presented in Table A3-10. 37 Table A3-10: Financial for proposed up-gradation of different packages Financial/Economic Cost - 2012 Actual Discounted to 2003 (Rs. million) Contract/ Length Financial Name Cost/km Road Stretch (km) Cost – 2012 Total (Rs. million) Financia Financial Economic l Cost2 TNRSP 01 Arcot- Nagapattinam 378.6 7,755.5 5,590.2 14.77 13.29 Nagapattinam – TNRSP 02 Kattumavadi 118.6 3,494.8 2,497.2 21.06 18.95 Kattumavadi - TNRSP 03 Ramanathapuram 99.95 2,642.2 1,938.4 19.39 17.45 Ramanathapuram – TNRSP 04 Tuticorin 114.6 2,162.6 1,503.6 13.12 11.81 Note: 1. Project cost includes civil works, supervision cost, LA, R&R, utility relocation, EMP and PCC support. 2. Discounted the cost flow during the period 2003-2008 at 6.04% and beyond that (2008-2012) at 7.09%, the average annual rate of inflation during these periods were 6.04% and 7.09 respectively.   16. Maintenance Cost: The maintenance works considered in the analysis include (i) Annual Routine maintenance; and (ii) Periodic maintenance. 17. 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 (2003) and Revised Analysis (2009-10) and presented below. 18. Maintenance (annual and periodic) costs for the base-case and for the upgrading project alternatives are given in the following tables respectively. The periodic maintenance cost for base-case as well as for the upgrading project alternatives would be applicable after a 5 year interval. Table A3-11: Maintenance Cost Adopted Project Terrain Maintenance Cost Maintenance Type Alternative Type (per km) in Rs. Periodic 0.65 million Base-Case Plain Scenario Routine 0.04 million Periodic 1.30 million With Upgradation Plain to Two Lane Routine 0.08 million Scenario 19. Traffic Specific parametric values: The economic unit costs (Year 2003) parametric values for motorized vehicles have been taken from the Base Analysis (2003) during the processing stage, are used in HDM Model inputs, as shown in Table A3-12. In 38 order to make meaningful comparison with the Base Analysis (2003) and Revised Analysis (2009-10), non-motorised vehicles are not considered for the present analysis. Table A3-12: Vehicle Economics at Economic Prices Multi Two Three 2-Axle Item Car Bus Axle LCV Tractor Wheel Wheel Truck Truck Vehicle Price 197,989 21,913 132,483 1,400,000 1,220,000 1,825,000 393,067 353,127 (Rs.) No. of Wheels 4 2 3 6 6 10 4 7 No. of Axles 2 2 2 2 2 3 2 3 Passengers 4 1 3 25 Tyre (Rs.) 1,500 730 763 6,317 6,317 7,716 6,317 2,027 Fuel Per/Lt. 18 18 18 18 18 18 18 18 (Rs.) Lubricating 120 120 120 120 120 120 120 120 Oil (Rs) Maint. Labor 40 25 25 40 40 30 30 50 (per hr.) (Rs.) Crew Wages 40 20 80 150 80 40 15 (per hr) (Rs.) Annual Overhead 16,571 500 1,841 112,347 112,347 135,000 107,084 107,084 (RS) Interest Rate 12 8 8 12 12 12 12 12 (%) Passenger Work Time 58 34 35 40 3 - Value (per/hr.) (Rs.) Non work Time Value 14 7 8 6 (per hr) (Rs.) Cargo Time Value - - - - 7 17 3 - (per/hr.) (Rs.) PCSE 1 1 1 2 2 2 2 Working 1,950 1,300 3,600 2,200 2,100 2,100 1,500 350 Hours Annual km 32,000 16,000 21,900 100,000 75,000 75,000 60,000 4,000 Avg. life 10 10 8 8 8 8 8 10 20. The 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 LA, structures, sub-base, social displacement cost etc. are included in the economic analysis as residual values at the end of the analysis periods. These residual values are considered as benefits to the project in the analysis. The value has been taken as 10% for the present analysis. 39 21. Volume of Traffic and Growth Rates: The AADT traffic on different road sections during the period 2003 to 2012 is given below. For analysis, the AADT adopted during the initial analysis (2003) is adopted. However, based on the AADT arrived from the post completion surveys (2012), the actual growth rate achieved during the implementation period (2003-2012) 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 A3-13 and A3-14. Table A3-13: AADT traffic on different road section adopted for analysis Traffic volume in PCUs in the year Contract / Road Annual Growth Stretch 2003 1 2009-10 2 2012 3 (%) - (2003- 2012) TNRSP 01 3450 6104 8678 10.8% TNRSP 02 6148 11586 12836 8.5% TNRSP 03 2414 4486 3815 5.2% TNRSP 04 1087 2221 5132 18.8% Table A3-14: Traffic Growth Rates Traffic growth rates (% per year) Vehicle TNRSP01 TNSRP02 TNSRP03 TNSRP04 type 2003- 2013- After 2003- 2013- After 2003- 2013- After 2003- 2013- After 12 17 2017 12 17 2017 12 17 2017 12 17 2017 Bus 11.5%  8.2%  5.0% 1.4%  3.2%  5.0% 5.2%  5.3%  5.5% 11.9%  8.4%  5.0% Multi Axle 11.9%  9.2%  6.5% 2.6%  4.5%  6.5% 14.2%  11.1%  8.0% 21.3%  14.1%  7.0% Vehicle Tractor 22.5%  13.8%  5.0% 7.9%  6.4%  5.0% 14.7%  7.8%  1.0% 33.0%  19.0%  5.0% Heavy Commerci 5.5%  5.2%  5.0% 0.7%  2.6%  4.5% 10.5%  8.2%  6.0% 14.1%  9.6%  5.0% al Vehicle Light Commerci 10.4%  8.2%  6.0% 1.2%  3.3%  5.5% 13.8%  10.2%  6.5% 19.6%  12.6%  5.5% al Vehicle Two 19.1%  14.1%  9.0% 17.8%  13.4%  9.0% 6.6%  7.3%  8.0% 17.1%  13.1%  9.0% Wheeler 10.0 Car 20.8%  14.6%  8.5% 10.0%  9.3%  8.5% 10.4%  10.2%  31.2%  20.1%  9.0% % Auto 11.3%  9.4%  7.5% 8.1%  7.8%  7.5% 5.5%  6.5%  7.5% 13.9%  11.2%  8.5% Note: 1. Traffic Growth Rate during 2003-2012 is based on the traffic data collected in 2012.  2. Traffic Growth Rate after 2017 is adopted from the Revised Economic Analysis (2009-10).   40 Traffic growth rates (% per year) Vehicle TNRSP01 TNSRP02 TNSRP03 TNSRP04 type 2003- 2013- After 2003- 2013- After 2003- 2013- After 2003- 2013- After 12 17 2017 12 17 2017 12 17 2017 12 17 2017 3. Traffic growth rate during 2013-17 is the average of above two periods. 22. Model Inputs: Post completion review has shown considerable improvement in road surface for TNRSP road sections, as shown below. Table A3-15: Comparison of Road Roughness Contract/ Roughness Roughness Road Section Name Length (Km) (IRI) - IRI (2012)2 Stretch 20021 TNRSP 01 Arcot- Nagapattinam 378.6 6.48 3.18 TNRSP 02 Nagapattinam - Kattumavadi 118.6 5.72 2.55 TNRSP 03 Kattumavadi - Ramanathapuram 100 7.06 2.38 TNRSP 04 Ramanathapuram - Tuticorin 114.6 7.41 2.67 Note: 1. Roughness during Loan Processing Stage (2002) 2. Post completion data collection (2012). Source: TNRSP 23. Project Benefits 24. VOCs 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 taking into account 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 vehicle operating costs include fuel, oil, tire and parts costs, crew and maintenance labour costs, capital depreciation, borrowing costs, and overhead costs. 25. Travel Time Saving: The model estimates the Value of Travel Time (VOTT) for passengers and goods in transit in both the with- and without-project scenarios taking into account speed and travel time including surface quality, road congestion etc. 26. Accident Cost Savings: There can be some anticipated reduction of accidents due to improved signing and engineering intervention; however, the benefits deriving from this rehabilitation project are deemed to be moderate and consequently the accident- related benefits have not been discounted in the analysis. As a result the actual economic return in respect of increased Road Safety would be expected to be nominally higher than the rates of return presented in this report. 41 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Team Leader & A. K. Swaminathan Transport Specialist SASDT Highway Engineer Piers Vickers Transport Specialist SASDT Co-Team Leader R&R & Social I. U. B. Reddy Social Development Specialist SASDS Development Specialist Highway Arnab Bandyopadhyay Highway Engineer SASDT Engineer Procurement Natarajan Raman Sr. Procurement Specialist SARPS Specialist Financial Rajat Narula Financial Management Specialist SARFM Management Specialist Financial Priya Goel Financial Management Specialist SARFM Management Specialist Mohan Nagarajan Economist SASPR Economist Alok Nath Bansal Transport Planner SASDT Transport Planner Environment Sonia Chand Sandhu Environment Specialist SASDI Specialist V. J. Ravishanker Economist SASPR Economist Raj Soopramanien Counsel LEGES Legal Counsel N. S. Srinivas Team Assistant SASDO ACS Rajesh B. S. Dongol Program Assistant SASDO ACS Hyacinth Brown Finance Officer CTRLA Finance Specialist Environment S. Vaideeswaran Consultant SASDI Specialist Supervision/ICR A. K. Swaminathan Sr. Transport Specialist SASDT Team Leader Jean-Noel Guillossou Program Manager AFTTR Team Leader Pratap Tvgsssshrk Sr. Transport Specialist SASDT Team Leader Social Sr. Social Development I. U. B. Reddy SASDS Development Specialist Specialist Environmental A. S. Ramakrishna Environmental Specialist SASDI Specialist 42 Procurement Shanker Lal Procurement Specialist SARPS Specialist Financial Mohan Gopalakrishnan Sr. Finance Management Spl. SARFM Management Specialist Arvind Prasad Mantha Financial Management Analyst SARFM FM Analyst PPP Specialist & Sri Kumar Tadimalla Sr. PPP Specialist SASDT Team Leader (ICR) Muthuthevar Boominathan Consultant SASDT Economist Rashi Grover Kashyap Consultant SASDT Analyst Krishnan Srinivasan Consultant SASDT Governance Engineer & S. Venkatesan Consultant SASDT Design Specialist Highway V. Murahari Reddy Consultant SASDT Engineer Rajesh B. S. Dongol Program Assistant SASDO ACS N. S. Srinivas Sr. Program Assistant SASDO ACS Payal Malik Madan Program Assistant SARPS ACS (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) USD Thousands Stage of Project Cycle No. of staff weeks (including travel and consultant costs) Lending FY00 FY01 8.60 19,168.47 FY02 12.04 25,190.07 FY03 42.06 109,329.91 Total: 62.70 153,688.45 Supervision/ICR FY03 0.00 0.00 FY04 21.21 40,769.77 FY05 27.61 67,575.56 FY06 30.08 84,124.35 FY07 25.13 101,194.38 FY08 33.67 151,340.87 FY09 32.65 158362.32 FY10 17.75 73,051.02 FY11 14.09 47,081.99 FY12 20.27 73,785.68 Total: 222.46 797,285.94 43 Annex 5. Beneficiary Survey Results 1. Resettlement Impact Evaluation Surveys. Two impact evaluation studies were carried out during the project implementation to assess the impact of R&R implementation and make mid-stream alterations through remedial measures as appropriate. The first one was carried out in 2009-10 and study findings indicated that the proportion of families living below the poverty line has decreased by 10%, and that about 70% of the PAPs reported that they have more incomes now compared to the previous situation. Most of the people who have received alternative houses have expressed their happiness since these houses have facilities such as electricity connection, separate kitchen and bathroom which were not available in their previous houses. However, they also reported leakages in their houses, absence of adequate arrangements for timely repair of hand pumps and non-availability of individual electricity connections in some of the sites. The study also reported that the people have improved their asset ownership such as possessing a refrigerator, two wheeler, phone connection and cooking gas. The study also reported increase in savings but also that in indebtedness. The report also identified some remedial measures such as assistance for getting electricity connection though Government schemes, motivation of people for use of toilets provided to them, construction of boundary walls, improvement of drainage provisions and issue of land title in three sites, and these additional measures were largely implemented. 2. The end term impact evaluation conducted in March, 2012 confirmed that 90 percent of PAPs who were provided alternative houses have expressed satisfaction with the new houses which have facilities such as electricity connection, drinking water facilities and individual toilets. The proportion of families living below the poverty line has reduced from 28 to 24% and the average income increased by 29% from Rs. 4,424 in 2002 to Rs. 5,717 in 2012; as many as 87 reported that their incomes have increased during the post impact period due to increases in wages in the project areas, availability of jobs under National Rural Guarantee program, more business opportunities and improvement in the local economy. However, two-thirds of the land owners have expressed their dissatisfaction with the compensation paid to their land and other assets. The study also indicated that the unskilled employment opportunities under the contractors have benefited the local people. 68% of the unskilled man days generated by all contracts (1.52 million man days) went to the local people. The study also confirmed that the household asset ownership has improved, with 88% people owning phone/mobile now compared to 18% at the pre-project level. The proportion of those using refrigerator went up to 28% from 10% and those who use cooking gas increased to 63% from 24% earlier. The grievance redress mechanism has helped people to address their grievances. In all, 184 formal grievances were fielded and out of these 108 received favorable decisions (59%). The grievances mostly relate to compensation, provision of alternative sites, change in alignments, etc. Some of the successful outcomes of the grievance redress mechanism include enhanced compensation for affected fish pond (revised almost twice) and additional compensation in some cases for unmeasured structures in the original survey. The issue of land title is another important outcome. In all about 450 non-title holders received house titles to their allotted houses which had a significant empowering 44 effect on the resettled PAPs and their ability to access the formal sector. These titles were given in the joint name of wife and husband. 3. Some of the feedback from the local people and PAPs is summarized below:  Value of land has increased, travel time reduced and agriculture products were transported quickly to the markets and access to schools improved due to good quality of projects roads;  Due to increased land prices along the project. some of the farmers could sell part of their land and repay their debts;  As a result of good roads, children went to better schools to nearby towns/cities and thus the standard of education has gone up in the areas around the project roads.  The non-title holders expressed that the biggest benefit that they received from the project is the title to their houses and improved basic amenities; and  Compensation amount received is generally low and the alternative shops allotted to the affected shop owners were far away from the villages and were not considered suitable to run businesses successfully. 45 Annex 6. Findings from Road User Satisfaction Survey 1. At the End of Project (EOP), TNRSP engaged National Institute of Technical Teachers’ Training & Research, Chennai, to conduct the third Road User Satisfaction Survey (RUSS, 2012). The specific objectives of this round of RUSS were as follows: (i) to elicit views on public perceptions of current sector outcomes, HD’s performance and Government’s policies related to the road sector; (ii) to document the views in a comprehensible format suitable for comparison over time; (iii) to compare findings of the survey with RUSS 1 and RUSS 2; and (iv) to present the findings of the survey to the senior decision makers in GoTN, stakeholders and the general public. The study comprised both quantitative (structured interview) and qualitative (in-depth interview) methods and was carried out during the months of June and July 201220. 2. The key findings of the survey – drawn from the draft report of the consultants – with respect to user satisfaction with roads included:  Awareness and use of different types of roads: The awareness of most types of roads (NHs, SHs, MDRs and ODRs) remained the same in the second and third rounds of RUSS; however, the awareness of VRs declined steadily (from 98% to 96% to 94%) over the three rounds. Usage of different roads remained largely same in rounds 2 and 3 except for a marginal decline in usage of VRs from round 2 to 3;  Overall satisfaction levels with TNRSP roads: On a 5-point scale (with “5� being “very satisfied� and “1� being “not at all satisfied�), the overall level of satisfaction of users was found to be “4� on TNRSP roads compared to “3.8� for SHs and “4.1� for NHs. Overall, 37% of users were satisfied with TNRSP roads and 27% were very satisfied;  Reduction in travel time on TNRSP roads: 30% of users were very satisfied while 38% were satisfied with reduction in travel time on TNRSP roads – thus 68% of road users were at least satisfied with the reduction in travel time on TNRSP roads. Only 4% of users were not at all satisfied;  Safety aspects on TNRSP roads: About 20% and 30% of road users (i.e. about half) surveyed were very satisfied and satisfied respectively with safety aspects on TNRSP roads. 28% of users were only somewhat satisfied while 14% were not satisfied and 8% not at all satisfied. Safety aspects seem to be an issue on TNRSP roads given the likelihood of over speeding due to smooth roads;  Road signs: 18% of users were very satisfied and 40% satisfied with the quality of road signage on TNRSP roads. About 18% of users were not satisfied and 6% not at all satisfied;  Enabling lower congestion: As many as 36% of users were very satisfied with the impact of TNRSP roads on reducing the level of congestion on roads; another 20 The quantitative method consisted of a large scale survey among the general population (sample=7,650) and the qualitative method comprised in-depth interviews with road user and stakeholder groups to elicit views and opinions on specific concerns related to road safety and policies (sample=350). The quantitative survey covered the target groups – main users, vulnerable users and school students. 46 30% were satisfied with this result – which meant that 66% of users were at least satisfied with the project roads’ impact on reducing congestion. About 10% and 4% of users respectively were not satisfied with reduction in congestion levels;  Riding quality: 32% of users were satisfied with the improvement in riding quality on TNRSP roads while as many as 44% were satisfied – totaling to as many as 76% of users who were at least satisfied with improvement in riding quality on TNRSP roads. Only a small proportion (6% of users) was either not satisfied or not at all satisfied with improvement in riding quality but this appears to be a minority. 3. The key findings of the survey with respect to the functioning of the Highways Department included:  On a 5-point scale (with “5� being “very good� and “1� being “very bad�), nearly one-third of road users rated the performance of the HD21 as “good�;  The overall performance of the Department has improved over the three rounds of the RUSS and fell between “satisfactory� and “good� in all three rounds;  The mean score for environmental management increased compared to that for emergency management over round 2, which may be due to the impact of TNRSP roads which have been upgraded with due consideration to the environment also;  The main priorities for the Department as rated by users included “remove encroachments� and “enforce road rules� perhaps indicating that these aspects should also be taken care of in other road projects of the department apart from TNRSP. 4. Some of the general suggestions for road improvement from all three surveys included the need for widening of roads, better road geometrics, improving the quality of construction and maintenance, providing signs and markings, providing good drainage, filling up potholes, and finally facilitating private participation in the road improvement programs. 21 Users were asked to rate the performance of the HD in terms of: (i) adding new capacities through road widening and bypasses, (ii) maintenance of roads/bridges, (iii) dealing with public, (iv) removing encroachments, (v) disaster/emergency management and (vi) environmental management. 47 Annex 6A. Questionnaire-based Dip-stick Survey of Government Stakeholders 1.0 Introduction 1. A questionnaire-based dip-stick survey to obtain feedback of officers across various levels of GoTN, HD and TNRSP, on various components and sub-activities of the project. Specifically, the feedback was sought on the performance of different types of civil works contracts and all major institutional & policy development initiatives. Components, and on the project’s overall design and implementation and lessons and suggestions for the future. In all, 32 officers from the administration and engineering functions responded to this questionnaire. (A copy of the questionnaire is appended at the end of this Annex, as Attachment 1). The number of respondents constitutes just about of 2% of the total staff in HD and the sampling was not structured. Accordingly, it would be appropriate not to attach too much of “statistical� significance to the survey. However, the survey did provide a fairly good indication of the trends/perceptions, especially in the areas where many of the respondents providing similar ratings. Also, the open-ended questions have elicited a large number of suggestions which merit consideration. Accordingly, the key findings and suggestions were incorporated as appropriate in the main text, and this annex has been included to document the results/feedback for future reference. 2.0 Performance of Civil Works Contracts 2. The overall performance of civil works components has been rated �Satisfactory� or �Moderately Satisfactory� by: (i) 100% of respondents for Upgrading Contracts; (ii) 88% of respondents for Routine Maintenance Contracts and Black-spot improvements; and (iii) 69% of respondents for Performance-based Maintenance Contracts. The fact that all aspects of civil works have scored Assessment of the overall performance of civil works components  fairly high positive ratings indicates the under the TNRSP 59% satisfactory execution and completion 60% 56% 50% of most civil works though with 50% 47% 41% 41% varying extents of delays. The pilot 40% 38% PBMCs are under execution and likely 30% to be completed soon. The relatively 20% 13% 13% 16% 6% 6% 6% 6% lower figure in the case of 10% 0% 0% 0% 0% 0% 3% Performance-based Maintenance 0% Satisfactory Moderately Moderately Unsatisfactory Don't  Know Contracts may be attributed to the fact Satisfactory Unsatisfactory that this was a lone contract and still Upgrading Contracts Routine Maintenance  Contracts under implementation. Black�spot Improvement Performance�based Maintenance 3. The critical success factors indicated for implementation of upgrading contracts (table A6A-1) included –(i) creation of dedicated unit at HQ and field divisions for Project Management; (ii) quality of preparatory activities, viz., land acquisition, R&R, utility shifting; and (iii) selection of contractors. Some of the other factors listed by respondents include e.g. quick dispute resolution; quality of technical staff of contractors; quality of staff as well as Head of the Project Management Unit (PMU); continuous and focused training of PMU staff; integrated continuous documentation of lessons learned 48 from the project; and special attention to address R&R with emphasis on the loss of livelihood. Table A6A-1 Critical Success Factors (in the order of their importance) Score Creation of a dedicated unit at HQ and field divisions for Project Management 1.5 Quality of preparatory activities, viz., Land Acquisition, R&R, Utility shifting 2 Selection of contractors 3 Expeditious use of contractual remedies to ensure contractors’ performance 5 Independent Engineer to oversee contract implementation/progress 5 Timely payments and provisions for cost escalation 5 World Bank reviews and implementation support 5 4. Further about 78% of respondents indicated that they would be able to replicate the top 3/4 critical factors in their regular capital/upgrading contracts. The reasons why (the remainder 22% of the) respondents said that replication is not possible include:  Other departments mostly non responsive in case of LA and utility shifting  Difficulty in maintaining a dedicated team due to the policy of transferring staff frequently /superannuation  In many cases, payments not made in time for want of approval from competent authorities  Introducing independent engineers affects the performance, experience, and dedication of departmental engineers  Non availability of Project Coordination Consultant (PCC) during implementation 5. For implementation of Regular Maintenance Contracts under TNRSP, the critical factors indicated included: (i) creation of a dedicated unit at HQ and field divisions for Project Management; (ii) packaging of contracts with reasonable size and quality; and (iii) selection of contractors. Some other factors mentioned included e.g. provision for cost escalation of works; excise duty exemption; active participation of departmental field staff; reduction in time taken from DPR preparation to award of contract; and focused training provided to staff. About 93% of respondents felt that the top factors indicated could be replicated in their regular maintenance contracts. According to the remaining respondents, replication may not be easy because of the difficulties associated with (i) employing an independent technical review consultant to audit and support the HD in implementation; (ii) changing the mind-set of the department not geared towards scientific implementation and project/contract management; and (iii) maintaining this level of fund allocation for maintenance of road to such higher specifications as in TNRSP. 3.0 Institutional strengthening component 6. Awareness: While all respondents are fully aware of the IT-related interventions and restructuring of HD, some of them are not familiar with the ISO certification (16%) 49 and staffing rationalisation (23%), indicating a need for more communication with regard to these sub-activities. 7. On the restructuring of the HD, while 66% of respondents felt that such restructuring is appropriate/desirable, about 22% felt otherwise on the following grounds, viz., (i) implementation of the IS plan not executed to the full extent as envisaged; (ii) absence of specialized divisions for Planning, ICT and Training functions; and (iii) no perceptible initiatives to reduce the work load. 8. On the extent of training/exposure visits, 62% of the respondents felt that the level of training/exposure visits was “not sufficient� or “highly insufficient�, which corroborates with the extent of unutilized training budget. 9. As regards the hardware for IT, all the respondents are aware of this activity and majority (84%) of them also felt that the quantum of hardware provided was sufficient. However, only three-fourths of the respondents felt that the divisional and circle officer regularly use the hardware/software, indicating the need for further propagation of IT usage in these offices. A sizeable number of respondents felt that the level and number of staff covered under IT training is insufficient. 10. On the RMS, awareness is 100% and the perception of comprehensiveness and user-friendliness of the system, too, is high at 87%; As regards the use of RMS outputs for decision making, although only 23% of respondents felt that the system is currently being used, a broader cross section (69%) of respondents felt that in the system would be used more regularly in future. 11. Awareness of the Road Accident Database Management System is also 100% and the system is rated as comprehensive and user-friendly by as many as 97% of the respondents. Further, survey findings indicate that the system is being regularly used by the Traffic Police and Highways Department (as stated by 59% and 66% of respondents respectively). Awareness about the Project and Financial Management system is also 100% and the system was rated as comprehensive and user-friendly by 81% of respondents. The same percentage felt that the system will improve HD efficiency. On whether the staff will use it, only 44% felt that they would do so “regularly�, with 38% stating that they may use it “sometimes�. This perhaps indicates scope for some improvement in encouraging usage of the software. 12. On road safety activities, awareness of both road safety policy and road safety awareness campaigns is 100% while 81% felt that the policy is comprehensive and effective and 88% stated that awareness campaigns have been comprehensive and effective. The most critical factors highlight by the respondents for sustaining the road safety awareness activity included: (i) creation of a dedicated Unit for Road Safety, followed by – (ii) adequate allocation of resources and inter-departmental co-ordination. Suggestions for improvement included: (i) conducting aggressive regular campaigns; (ii) imposing fines and penalties for violation of traffic rules; and simply – (iii) “it has to be continued�. 50 13. On PPP facilitation, awareness of the PPP transaction advisory support provided in TNRSP is 100%; however only 38% of respondents felt that the support is comprehensive and effective, with an even larger proportion (44%) stating their opinion as “Don’t Know�. On whether PPP capacity built during the project would dwindle or be used by the department to do more PPPs again most responses were ambivalent. This is perhaps understandable because the government’s broader intent and policy push towards increasing the use of PPP is yet to gain momentum. 4.0 Overall Project Design, Implementation, Utility & Sustainability 14. On overall Project Design, Implementation, Utility & Sustainability, an equal number of respondents (50% each) rated the overall objectives and design of the TNRSP project as �Satisfactory� and �Moderately satisfactory�. In terms of implementation, the level of satisfaction has been highest with respect to the upgrading component, followed by the maintenance and institutional development & policy components. According to the respondents, the project has been successful in bringing notable innovations and/or improvements in the following processes/functions:  Creation of a dedicated unit from the beginning to the end with independence to the PMU for taking decisions  Optimal utilization of manpower and expertise by selecting 10-15 dedicated staff from different wings and preparing them to take the lead in project activities  Quality & specifications, IT implementation, planning and budgeting tools  Road safety  Contract management and exposure to international contracts  Ensuring timely payments  Road investment prioritization  Development of RMS, RADMS, GIS, and P&FMS  Improved quality of roads with environment and social management in line with the standards for such projects  Deployment of Contract Management Advisor. This role should be enlarged to include development of an effective implementation plan. 15. Also, a majority of the respondents felt that most of the above lessons are likely to be internalized by the department, subject to adequate deployment of staff at various levels and sustained emphasis of the senior management to continue the change management agenda, say, through creating a dedicated team of 15-20 officers who could act as catalysts for change. 16. Some specific comments/suggestions on how the project objectives/design aspects could have been improved include:  Regular interaction between contractor, consultant, Independent Engineer and departmental engineers with open minded, problem oriented discussion 51  Thorough document vetting and checking of the design at the DPR stage to avoid needless arbitration later and holding the DPR consultant responsible for structural design and recommendations made by him till the work is completed  Imposing penalties on the Independent Engineer for deficiency of service and holding him responsible for the quality and quantity of work; avoiding random checking for quality control  Appointment of consultants before signing works contract and introducing clauses in consultancy services contracts to impose penal charges in contract conditions if consultants do not perform services as per the contract  Standardized documents for the project and guidelines to be followed need to be prepared at the initial stage and updated to achieve the objectives efficiently  Expeditious land acquisition - should be completed before avoiding the contract. Timely decisions on contracted issues  Exposure to international produces and practices especially in the procurement of highly technical goods which requires specialized staff with related technical backgrounds  Improved co-ordination and interfacing with various stakeholders to facilitate participation and use of expertise 17. Some of the notable suggestions on how the Bank could have made a more effective contribution included:  Further reduce the time taken for issuing NOCs and resolving issues;  Ensuring compulsory training in use of procurement procedures to all engineers;  Providing model TORs for various services;  Moderation in respect of R&R/Social/Environment covenants to suit Indian conditions;  In consultant selection guidelines/contracts, include stronger deterrents for deficient service delivery, say, through penalty clauses. 52 Attachment 1: Questionnaire used for Dip-stick Survey Brief Description of Major Components of the Project and Key Performance Indicators A) Civil Works Component: This component consisted of (a) capital expenditure contracts (widening and strengthening of 724km of roads, including 14 bypasses, through 7 contract packages); (b) traditional maintenance contracts (covering 1030 km of roads); (c) improvement of 50 black-spots and road safety audit and assessment of 750 km of roads; and (d) performance based maintenance contract (covering 300 km). As on date, all the capital expenditure contracts, except a bridge and two bypasses, and all the traditional maintenance contracts are completed. After improving the 50 block-spots initially targeted, the Highways Department had taken up 307 black-spots; of these, 282 are already improved and the work on the remaining is in progress. Works for improvement of about 300 km of roads on performance-based maintenance contract are currently in progress. Key Performance Indicators (a) Capital Expenditure (Seven Upgrading Contracts)  Average size of the project 177 Km22  Wt. Ave. Final cost of packages per km Rs. 1.84 Crore per Km23  Wt. Ave. Time for completing project with app. size of 100km 38 Months24 (b) Average Estimated Cost of Traditional Maintenance Contracts: 0.41 Crore per Km per yr25 (c) Travel time reduction on two selected corridors From To  on Corridor 1 (Nagapattinam – Tuticorin) 11 Hrs 30 5 Hrs 47 Min Min  on Corridor 2 (Arcot – Nagapattinam) 8 Hrs 15 5 Hrs 25 Min Min B) Institutional Strengthening and Policy Development Activities  Organizational Restructuring: The Highway Department has been restructured along the functional areas of focus (e.g., creation of positions of Chief Engineers for “Construction and Maintenance� and “Quality Assurance and Research� in place of two other CE positions) and a post of the Director General was created to achieve better coordination among different functions. In addition, steps were taken to streamline/standardize the systems and procedures; towards this end, ISO Certification was done for 2 Circles and 3 Divisions and the remaining Circles and Division are expected to achieve ISO Certification in the next two years. Concomitantly, staffing has been rationalized and redundancies were brought down; over an eight-year period, the overall staff strength of the Department has been reduced from 7884 to 6935.  Enhancing use of ICT: The project supported purchase and installation of various software and hardware (1717 desktops, 10 servers, 9 laptops, 620 printers, 30 22 Length of roads in km taken up for packages TNRSP 1-4 since these are the major road upgrading works 23 Final costs (including variation) for contract packages TNRSP 1-6 24 Weighted average time for completion of packages TNRSP 1-6 25 Weighted average cost of 1st, 2nd, 3rd and 4th year maintenance works 53 scanners and 450 webcams) and provision of basic IT training to staff at various levels of HD. Using the “IT-platform� thus created, the project has been inducting other specialized software/systems as detailed below.  Road Accident Database Management System has been developed and operationalized and is currently being used extensively by the Police, Transport and Highways Departments. Government of Tamil Nadu is now taking steps to further improve this system through procurement of handheld devices and ensuring uninterrupted internet connectivity.  Road-Asset Management System (RMS) has been strengthened through purchase of four sets of data collection equipment. With these, the Department now has enough capacity to collect and update road condition data for the entire road network (including ODRs) in RMS every year.  Geographical Information System and Project & Financial Management Systems have been developed and are being tested for user acceptance.  Road Safety. Road Safety Policy was approved and disseminated. Road Safety Audit & Assessment Training was imparted to HQ and field based staff of HD and also police officers. Road Safety Awareness campaigns were conducted for 1200 three and four-wheeler drivers in 10 districts and 400 students through educational institutions.  PPP Facilitation. The project supported engagement of transaction advisory services to examine nine roads for their amenability for development as PPP sub- projects and, thereafter, in preparing techno-economic feasibility reports for selected roads and in successful bidding and awarding of one road (Chennai Outer Ring Road Project) on PPP basis. 54 Questionnaire Estimated Time for Completion: 15-20 Mins PART I: Participant Information Designation: ____________________________ Department/Organization: ______________________________________________________ Note: In this survey analysis/reporting, we intend use your designation/dept./organizational affiliation only for purpose of classifying responses from/under various categories. Can we contact you for further information/clarification? Yes  No  PART II: Civil Works Component Q1: What is your assessment of the overall performance of the following civil works components under the TNRSP? S=Satisfactory; MS=Moderately Satisfactory; MU=Moderately Unsatisfactory; U=Unsatisfactory; X=Don’t Know (a) Upgrading Contracts S MS MU U X (b) Routine Maintenance Contracts S MS MU U X (c) Black-spot Improvement S MS MU U X (d) Performance-based Maintenance S MS MU U X Q2: In the implementation of Upgrading Contracts under TNRSP, please rank the following factors in the order of their importance Critical Factors Rank Quality of preparatory activities, viz., Land Acquisition, R&R, Utility shifting Creation of a dedicated unit at HQ and field divisions for Project Management Expeditious use of contractual remedies to ensure contractors’ performance Independent Engineer to oversee contract implementation/progress Timely payments and provisions for cost escalation Selection of contractors World Bank reviews and implementation support Others (pl specify)_________________________ Others (pl specify)_________________________ Others (pl specify)_________________________ Can the Highway Department replicate the top 3-4 factors you have indicated above in their regular capital expenditure/upgrading contracts? Yes  No  If your answer is “NO�, may we request you to indicate why such replication is not feasible: ________________________________________________________________________ ________________________________________________________________________ 55 Q3: In the implementation of Regular Maintenance Contracts under TNRSP, please rank the following factors in the order of their importance Critical Factors Rank Packaging of contracts with reasonable size and quality Creation of a dedicated unit at HQ and field divisions for Project Management Regular Monitoring of Contractors’ performance by the regular field divisions Independent Technical Review Consultant to audit and support the HD through suggestions and advice on contract implementation/progress Increasing scope/level of maintenance with corresponding allocations Timely release of payments to contractors Selection of contractors Others (pl specify)_________________________ Others (pl specify)_________________________ Others (pl specify)_________________________ Can the Highway Department replicate the top 3-4 factors you have indicated above in their regular maintenance contracts? Yes  No  If your answer is “NO�, may we request you to indicate why such replication is not feasible: ________________________________________________________________________ ________________________________________________________________________ _______________________________________________________________ PART III: Institutional Strengthening Component Q4: Organizational Restructuring Activities Restructuring of Highways Department along functional areas of focus Are you familiar with this restructuring activity? Yes  No  If Yes, do you think such restructuring is appropriate/desirable? Yes  No  Don’t Know  If No, why? Or, how it could have been done better___________________________________________________________________ ____________________________________________________________ ISO Certification of Circles and Divisions Are you familiar with this restructuring activity? Yes  No  If Yes, do you think such certification is a useful exercise? Yes  No  Don’t Know  If No, why?___________________________________________________________________ __________________________________________________________________ Rationalization of Staffing Are you aware of this staffing rationalization activity Yes  No  If Yes, what do you think of - The “extent� of rationalization Not enough  Adequate  Very High  The “pace� of rationalization Very Slow  Optimal  Very Fast  56 Q5: Use of Information and Communication Technologies (ICT) Provision of hardware Are you aware of this activity? Yes  No  If Yes, whether the quantum of hardware provided is Sufficient  Not Sufficient  Highly Insufficient  Don’t Know  Use of hardware/software by the staff of Highways Department At the Head Quarters Regularly  Sometimes  Rarely  At the Divisional Offices Regularly  Sometimes  Rarely  At the Circle Offices Regularly  Sometimes  Rarely  IT Training provided to staff Are you aware of this training activity? Yes  No  If Yes, whether the level of training provided is Sufficient  Not Sufficient  Highly Insufficient  Don’t Know  If Yes, whether the number of staff covered under training is Sufficient  Not Sufficient  Highly Insufficient  Don’t Know  Training & International Exposure Visits financed through Bank projects/part of consultant studies Are you aware of this training & exposure visits activity? Yes  No  If Yes, whether the level of training/exposure visits provided is Sufficient  Not Sufficient  Highly Insufficient  Don’t Know  If Yes, whether the number of staff covered under training/exposure visits is Sufficient  Not Sufficient  Highly Insufficient  Don’t Know  Use of Manuals and Guidelines developed Manuals/Guidelines Are you aware of If, yes, which of the manuals and guidelines this? do you think are most useful (rank the ones below) i. Highways Bulletin Yes  No  ii. Corporate Plan Yes  No  iii. Performance Budget Yes  No  Framework iv. Employee Handbook Yes  No  v. Quality Management Yes  No  Policy Note vi. Quality Management Yes  No  of Construction and Supervision of Roads and Bridges vii. Environment Policy Yes  No  Statement viii. Guidelines on Yes  No  Environmental Issues ix. Guidelines on Social Yes  No  Management 57 Road Asset Management System (RMS) Are you aware of this system? Yes  No  If Yes, do you think the RMS is comprehensive & user-friendly Yes  No  Whether RMS is currently used for making expenditure decisions? Never  Sometimes  Regularly  Don’t Know  Whether the four sets of equipment provided for collecting road condition data are Sufficient  Not Sufficient  Highly Insufficient  Don’t Know  In future, do you think the Highway Department will use RMS for decision-making? Never  Sometimes  Regularly  Don’t Know  If your answer is “Never� or “Sometimes�, please explain why____________________________________________________________________ ________________________________________________________________ Road Accident Database Management System Are you aware of this system? Yes  No  If Yes, do you think this system is comprehensive & user-friendly Yes  No  Level of use of this system by the following departments Traffic Police Never  Sometimes  Regularly  Don’t Know  Highways Dept Never  Sometimes  Regularly  Don’t Know  Project & Financial Management System Are you aware of this system? Yes  No  If Yes, do you think this system is comprehensive & user-friendly Yes  No  In your assessment, Whether it will improve Highway Dept efficiency? Yes  No  Don’t Know  Whether staff will use it: Never  Sometimes  Regularly  Don’t Know  Q6: Road Safety Activities Road Safety Policy Are you aware of this policy? Yes  No  If Yes, is this policy comprehensive and effective Yes  No  Don’t Know  If No, how the policy can be improved/made more effective?________________________________________________________________ ________________________________________________________________ Road Safety Awareness Campaigns Are you aware of these campaigns? Yes  No  If Yes, are these comprehensive and effective Yes  No  Don’t Know  If No, how they can be improved/made more effective?________________________________________________________________ ____________________________________________________________ In your assessment, what are the critical factors for sustaining the road safety awareness activity? 58 Critical Factors Rank Adequate allocation of resources Creation of a dedicated Unit for Road Safety Making road safety audit mandatory for approving expenditure plans Including road safety in school/college curriculum Making attendance in road safety campaigns compulsory for drivers (like, for example periodic pollution check for vehicles) Inter-departmental co-ordination Others (pl specify)_________________________ Others (pl specify)_________________________ Others (pl specify)_________________________ Q7: PPP Facilitation Are you aware of the PPP transaction advisory support provided in TNRSP? Yes  No  If Yes, is this support comprehensive and effective Yes  No  Don’t Know  If No, how this support can be improved/made more effective?________________________________________________________________ __________________________________________________________________ Do you think the PPP capacity built during the project will: Eventually dwindle/taper off Yes  No  Don’t Know  Be preserved/used by the Dept to do more PPPs Yes  No  Don’t Know  PART IV: Overall Project Design, Implementation, Utility & Sustainability S=Satisfactory; MS=Moderately Satisfactory; MU=Moderately Unsatisfactory; U=Unsatisfactory; X=Don’t Know What is your assessment of the overall objectives and design of the TNRSP project? S MS MU U Don’t Know Any specific comments/suggestions on how the project objectives/design aspects could have been improved? ________________________________________________________________________ __________________________________________________________________ What in your opinion were the key lessons learned from this project? ________________________________________________________________________ ________________________________________________________________________ _______________________________________________________________ Please indicate the major functions/processes wherein the project has been successful in bringing in notable improvements and innovations (E.g., contract management, quality and specifications, environment and social management, road investment prioritisation, planning and budgeting tools, road safety, etc.) ________________________________________________________________________ ________________________________________________________________________ _______________________________________________________________ 59 Which of the above lessons, improvements, best practices, etc., are most likely to be internalized and sustained by the Highway Department? What steps can be taken to ensure such internalization/sustainability of these lessons and practices? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ How would you rate the overall quality of the Bank’s contribution, from identification to supervision, to the TNRSP project? S MS MU U Don’t Know Any comments/suggestions on how the Bank could have made better contribution? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ Any suggestions for the Bank for improving the design and implementation of similar projects in the future? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ THANK YOU 60 Annex 7. Summary of Borrower's ICR and Comments on Draft ICRR 1. The Borrower prepared their own version of the Implementation Completion Report (ICR) running into about 40 pages. A summary of the same, prepared by the Bank’s task team following the structure indicated in the ICRR guidelines, is provided below, along with the Borrower’s comments on the Bank’s draft ICRR. 1. Summary of Borrower’s ICR 1.1 Objective, Design, Implementation and Operational Experience 2. The Tamil Nadu Road Sector Project (TNRSP) has been implemented with World Bank assistance of $398 million (original loan of $348 million and additional financing of $50 million); the overall project cost initially estimated at $450 million, has been subsequently revised to $510 million. The project comprised three components, viz., Road Upgrading, Road Maintenance & Safety Works and Institutional & Policy Strengthening. A total of 101 contracts (goods, works and services) were taken up under these components. The achievements of the project in terms of outputs with respect to each of these main components are summarized in Table A7-1 below. Table A7-1: Component-wise Achievement of Outputs (as of March 31, 2012) Component Output Description Achievement Up-gradation 7 contracts, with a total length of 724 99.86% Completed including 13 Km (including 16 major bridges, 67 Bypasses minor bridges and 1600 culverts), at a total cost of Rs.1,540 Crore Enhanced Periodic 39 contracts, with a total length of 100% Completed Maintenance 1,033 Km, at a total cost of Rs.425 Crore Institutional RMS, RADMS, GIS, P&FMS, Road Safety activities completed. Strengthening 3. Enhanced Periodical Maintenance (EPM) works were taken up in a phased manner over four years. They were taken up for a total length of 1,033 km of roads and completed as per the following program: (i) 597 km taken up and completed under the first year program; (ii) 252 km taken up and completed under the second year program; (iii) 184 km up and completed under the third and fourth year program. Independent technical review services for EPM works were carried out utilizing the services of the consultants. 4. The Environmental Guidelines and R&R work prepared during the DPR stage have been implemented successfully in separate wings in the TNRSP PMU. A tree planting strategy was worked out under the control of a separate unit under the leadership of the Assistant Conservator of Forest, and trees were planted on all project roads. 61 5. The PMU followed the procurement guidelines of the World Bank, which helped achieve competitive rates and significant savings. The TNRSP Engineers got trained in World Bank procurement guidelines with the help of ASCI, Hyderabad. 6. Frequent staff change among the consultants was an issue which constantly arose during the project duration. Replacements of the same caliber were not found from the original staff and on many occasions, it was observed that the personnel employed by the consultant were project specific and not belonging to the regular establishment of the consultant. Such project specific personnel lacked allegiance towards work, therefore the quality of work suffered. Certain activities handed over to NGOs which were not functioning properly lead to some penal activities against the NGOs who were not performing their duties as per the contract. 7. Some of the other challenges faced in implementation and the way they were handled are highlighted below:  Audit objections were raised on many issues by the Auditor General Office. Many of the objections were raised due to non-awareness of FIDIC conditions in the TNRSP contracts. These audit objections were cleared with the help of a separate unit under the control of the Financial Advisor and Chief Accounts Officer (Audit Department). The audit certificates up to 31.03.2011 have been received. After the completion of all the contracts, the TNRSP is facing about 40 arbitration cases across the five packages.  TNRSP 04 encountered difficulties initially in mobilization of laborers, machineries and mixing plant, and was almost on the verge of termination. After the World Bank Implementation Support Mission and discussion during September 2007, the contractor gave certain assurances and made a remarkable turnaround in the execution of the works. TNRSP and the Team Leader of the SC on their part quantified every item of pending work and monitored it very closely on a day-to-day basis which had a very salutary effect on the progress. The way in which the contractor rose to the occasion and completed the work in an exemplary manner was commendable.  TNRSP 06: The project was not progressing well in the initial phases mainly due to lack of competency of the then Supervision Consultant (SC-04) and, accordingly their services were terminated in July 2011. But for this timely termination, the reconstruction of the Tsunami Affected Bridge connecting Keelamanakudi and Melamanakudi villages and work on Kumbakonam bypass extension would have suffered further in terms of delays and technical quality. The order of termination was upheld by the Madras High Court thanks to the meticulous documentation after review at every stage by TNRSP and strict adherence to laid down procedure. 1.2 Assessment of Outcome 8. The internal rating of the TNRSP project compared with the other projects taken up by Government of Tamil Nadu is more than satisfactory, and this is overall a successful project. The project has been completed and received good appreciation in all 62 the activities performed under the loan component with able assistance from the World Bank and contributions from Highway Department Engineers, Land Acquisition Wing, Finance Wing, Audit Wing and Forest Wing. This TNRSP project is now the role model project for other road infrastructure projects. The achievements of the project in terms of outcomes are summarized in Table A7-2. Table A7-2: Outcomes and Outputs Achieved (as of March 31, 2012) Outcome Indicator Baseline Progress to End-of-project date target Percentage of core road 35% 8% 10% network in poor condition Travel time reduced on two Travel time by car 40% 20% selected project corridors Corridor I – (Nagapattinam to Tuticorin Nagapattinam to and Arcot to Nagapattinam ) Tuticorin 11 Hours 30 Minutes Corridor II- Arcot to Nagapattinam 8 Hours 15 minutes No. of fatalities from road 19 10.27 14 accidents per 10,000 registered vehicles Actual expenditure for 63% 100.6% 80% maintenance of total road network compared to 11th Finance Commission norms Implementation of NA Progress is Implementation institutional development rated as scheduled action plan in HD satisfactory Ex-post ERR IRR: Upgrading: 30% Will be Maintenance: 43.5% measured As per Total:30% after appraisal completion estimates of the works 1.2.1 Next Steps 9. A description of proposed arrangements for future operations of the project for TNRSP – II is summarized below:  A Techno Economic Feasibility Study has been carried out by IITM, Chennai for 2,477 km length roads from the core road network of the state, chosen and prioritized based on the traffic and road condition data from RMS. 63  As per the study, a project for Rs. 1500 crore is viable under Public Private Partnership (PPP) mode and a project for Rs. 6500 crore is feasible under EPC with a good Economic Internal Rate of Return (EIRR).  GoTN initiated a proposal to take up the Rs.1500 crore of viable roads under PPP. In respect of roads which have good EIRR, the project will be posed for funding to external funding agencies through the DEA (GoI) for Rs. 6500 crore, of which 20% will be borne by the Government. For posing the project to the external funding lending agency, GoI has been addressed to indicate the appropriate agency. 1.3 Evaluation of Borrower’s Own Performance 10. The TNRSP PMU unit has grown and gained confidence and enhanced its skills for executing Externally Aided projects. The PMU unit officers were actively involved (some directly and some indirectly) during project execution in Land Acquisition and R&R activities, monitoring of works, Environmental, Social issues in order to take up the project effectively. This helped the project earn a good rating among the other road infrastructure projects executed by GoTN. 1.3.1 Suggestions for Borrower’s Effectiveness 11. The structure for the implementation unit, along with delineation of roles and responsibilities of the line departments of GoTN at different stages, should be finalized at the time of negotiations with the Bank. 12. Active involvement of Highways Department (HD) engineers during construction supervision: During the construction phase, the Construction Supervision consultant is designated as “Engineer�, and he and his team are actively involved in works execution. During this period, the HD engineers have no active role to play. In order to transfer technology it is suggested that the HD engineers should also be actively involved during construction supervision of work along with CSC. The Bank should evolve a system whereby the HD engineers are actively involved in construction supervision. This should be agreed on during the loan negotiation. 13. It would help in future works contracts to specify the role of the Divisional offices and the limits of authority as delegated by the Chief Engineer. In other words the Employers’ representatives and their respective authority should be clearly defined. 14. The Engineer’s power stated in the contract document should prevail over the delegated powers. 15. Government Auditors are not exposed to FIDIC contract conditions. To address this limitation, training should be imparted to groups of Auditors before the start of project implementation. 64 1.4 Evaluation of Performance of the Bank 16. The World Bank support missions were of a generally high standard and beneficial to the project. The Bank Implementation Support Missions inspected the site every six months and issued detailed guidelines about the progress and quality of works. The missions never failed to point out defects and the slow progress of works. 17. During the Implementation Support Mission wrap up meetings, the Bank used to suggest some immediate remedies to rectify the defects if any and give suggestions to speed up the work. The comments and suggestions in the Aide Memoires helped in solving problems that arose. For future projects, the Bank may consider the Annuity based mode of implementation besides the normal EPC contract. 1.5 Overall Lessons and Suggestions 18. Some of the notable lessons from the project and suggestions for the future, organized in line with various phases of the project life cycle are listed below: 1.5.1 Project Preparation 19. Suggestions for Design and DPR stage: (i) Traffic diversions wherever required during execution of work should be reviewed practically with respect to the particular site conditions and should be determined at the design stage itself; (ii) The ToR for the project design should allow for detailed inspection rather than visual inspection only of the existing structures. This should include non-destructive testing, taking of core samples, proper bearing inspection etc., so that the full scope of work required can be detailed and properly priced by the bidders; (iii) Stronger pavement in designs is required for corridors carrying high or even moderate volumes of industrial traffic; (iv) Introduction of formal safety audits at the design stage is commensurate with international practice for subsequent projects; (v) While preparing the longitudinal profile plan, adequate care should be taken to avoid environmental impacts due to cutting and filling. (vi) Joint verification with revenue personnel should be carried out prior to finalization of LA plans; and (vii) Marking of RoW. 20. Land Acquisition, Fixing of RoW and Shifting of Utilities: (i) Effective and vigorous public consultation regarding realignment and bypasses should be conducted on proposals to incorporate stakeholder views and local requirements; (ii) The proposal for shifting of utilities coming in the right of way should be made based on proper surveys and consultation with concerned departments and be made part of the contract; and (iv) The work of land acquisition and shifting of utilities should be well planned and coordinated. All preconstruction activity should be completed before award of work. 21. Engaging NGOs for Social Safeguards: Involvement of NGOs and Sociologist in the Project Management Team at the field level is a prerequisite for bridging the communication gap between the PAPs and the project for effective management for R&R and other social issues. The deployment of NGOs in the field level is a very sensitive 65 matter and the decision on deployment should be taken based on broad enquires about the performance of the NGOs in similar projects. 22. The time gap between project preparation and implementation affects the Resettlement Action Plan and quantities in the BOQ items such as Earth works, GSB, etc., and, hence, should be minimized as much as possible, say, to one year. 23. Suggestions for improving Project Coordinating Consultant’s Services:  Performance of the design consultant/PCC should be monitored. The ToR/Agreement should incorporate suitable clauses for: (i) Quality assurance on detailed engineering designs included in DPR; (ii) Quality audit and safety audit on detailed engineering designs carried out by the design consultant; (iii) Responsibility for accuracy of design with economy/aesthetics; (iv) Disincentives and deterrent action for deficiency in designs and consultancy services; and (v) Performance appraisal report  In civil works contracts and consultancy supervision contracts the role and mandate of the project coordinating consultant needs to be defined clearly.  It may be desirable that the PCC is retained as the Supervision Consultant also. This will enable quick decisions, early processing of design changes and ensure reduction in variations.  More than one design consultant should be engaged for preparation of feasibility report and detailed engineering designs including DPR. 1.5.2 Contract Documents and Procurement 24. Some of the suggestions with respect to various types of bidding and some parts of the contracting documents are listed below26. Table A7-3: Suggestions with respect to contract documents and procurement International Competitive Bidding National Competitive Bidding  Under FIDIC conditions of contract  A condition should be included in GCC and COPA, time limits are not (NCB) which should mean as under: prescribed for rectification of defects the contractor will deploy at site only noted or identified during the defect those key personnel who are approved liability period. According to Clause by the "Engineer". Non deployment of 49.4, in case of default on the part of key personnel at the work site would the contractor in carrying out such attract penalty as stated in the contract instructions within a reasonable time, data. the employer will rectify the defect at  The employer should be empowered to the risk and cost of the contractor. recover of a specified amount per 26 ICR Team’s note: Some of these suggestions are already appear to be present/covered in the extant bid documents. Yet, given that the Borrower chose to include them in their report, the same are included in this summary. 66  “Reasonable time� is a very vague person per month if the approved key term. Because of this ambiguity in the personnel remain absent from the contract conditions, contractors often works site without valid reasons avoid timely rectification of defects, exceeding a period of 7 days in a causing inconvenience to the public. month. To avert such a situation, it is  According to Clause 38, the Engineer suggested to include the following will adjust the rate of an item if its final provisions in COPA: “every time quantity differs from the quantity notice of defects is given, the stated in the BOQ by more than 25% contractor shall correct the notified provided the change exceeds 1% of the defect within the length of time initial contract price. In order to adjust specified by the Engineer’s notice�. the rate, the Engineer may ask the contractor for a detailed cost break down of any item in the BOQ. A clear cut mechanism for adjusting the rate should be incorporated in the contract. Moreover, the limit of the change exceeding 1% is on the lower end especially for road maintenance contacts, for which it should be 10%.  If the contractor's quotation for the variation item is unreasonable, the Engineer will make his own forecast of the effects of the variation on contractors' cost. The mechanism to forecast the effects of contractors' cost should be included in the contract.  According to Clause 47, Price Adjustment in 18 months' contract time escalation is not allowed. Escalation should be applicable for government controlled items even for small contracts.  According to the Retention Clause (Clause 48), during the defect liability period, only 50% of the retention money in the form of bank guarantees remains with the employer. Since the amount retained with the employer is not substantial, the contractor avoids timely corrections of defects. The total amount of retention money (5% of the actual cost of the project) should be retained with the employer during the defect liability period. The refund should be made in a phased manner 67 according to the performance of the contractor and response time taken by him in correcting the defects during the defect liability period. Instructions to Bidders  A condition may be incorporated in the prequalification documents and the ITB stating that unofficial sub-contracting of work either in part or whole is prohibited. Further, a condition to this effect should also be included in COPA or GCC whereby if during execution it is discovered that a contractor has indulged in the practice of unofficial sub-contracting, he would be summarily disqualified for future tendering in the World Bank financed projects. Maximum limit for subcontracting a work stated in the contract conditions, instructions to be done.  In order to encourage joint ventures of local firms with foreign firms, the price preference for domestic bidders should not be included in the ITB Clause.  Joint Venture partners who abscond from their responsibilities should be subject to punitive action. A condition in ITB and COPA/GCC should be incorporated stating that the JV partners would be considered as one entity and should respond to the needs of the contract as and when required. Responsibilities of JV partners should be clearly defined.  The contractual power for checking and verification of Financial Statements of Joint Ventures should be given to the employer, even when the contract is in force.  A specific limit for the clarification process should be incorporated in the ITB within which if a bidder fails to provide the required information, his bid should be considered non-responsive.  A position of planning and Chief Quantity surveyor should be included in the list of contractors' key personnel. All key personnel should be employees of the main contractor. Conditions of Contract  The basic requirement to satisfy “substantial completion� should be defined in the documents.  It is suggested that instead of full release of BG it is extended for an agreed “full completion� period for a reduced amount to cover the value of outstanding works.  The submission of as-built drawings (COPA Clause 6.6) should not be linked to the issue of taking over certificate. It would be better to revise the wordings of this clause to give a specific time limit (e.g.: 14 days after issue of the TOC) and specify remedies available to the employer in case of non-compliance.  It is suggested that the performance BG should be released on submission of approval of “as-built drawing�.  “As built drawings� should be submitted in the format/template as standardized by the employer. The standard format/template should be uniformly applicable for the entire project duration. Such a template/format should be part of the bidding document.  New and improved codes and specifications developed in the Indian construction industry from time to time should reflect and incorporate best practices. However if need be, the use of foreign codes should be permitted as a source of guidance in 68 cases where Indian codes or specifications are found inadequate.  The power of attorney clause should be deleted from the GCC.  The contractor should provide insurance agencies well-defined costing of works to be insured, especially for temporary works. Such mandatory provisions shall be effected through COPA so that the contractor avoids any ambiguity with respect to temporary work damage valuation etc. 25. During the evaluation of the bid documents, the verification of contractors’ pre- qualification statement is a must. It is often found that the information submitted by the prospective bidder for prequalification on “paper� bears little resemblance to his actual capabilities. The evaluation of the bid documents and verification of contractors’ pre- qualification statement should be confirmed with the agencies, submitted by the prospective bidder for prequalification on “paper�. The bidders should be blacklisted if found wrong. 26. Role of Project Coordinating Consultant: The contract conditions should be amended in the civil contract, CSC contract, and PCC contract to fix the responsibilities of the project coordinating consultant and the timelines for requirement of PCC contract. 1.5.3 Civil Works Implementation/Contract Management 27. The major problem during execution of works is traffic, and the diversion of the traffic is essential to complete the work with good quality in a fixed time. This requires a pre-planned land acquisition beyond the RoW, for a temporary period. 28. Environment Management is an aspect of the contract which is very difficult to control with widespread abuses by the contractor, who is ruled simply by cost vs. profit. Most of the bidders will not make sufficient allowance in their price and do their best to avoid or minimize the expenditure on EMP compliance after contract award. 29. Most of the contractors have not deployed the key personnel mentioned in the bid documents at the work site. Sometimes, the contractors’ foreman or junior technical personnel was found to be managing the day to day construction activity at the site. This has an adverse impact on the quality of works. Contract conditions should be amended to penalize the contractor for not engaging the already identified key staff in the bid document. 30. In the civil works bid documents and in construction supervisory contracts, the role of the project coordinating consultant has to be clearly defined. 31. Suggestions for improving Supervision Consultant’s services  The mix of staff with strong international experience and local staff should be more balanced if international consultants are to be employed; otherwise the benefit of employing an international consultant is diminished.  Replacement staff must be equal in caliber to the outgoing incumbent and should be in place in a timely fashion. Such replaced person(s) should be inducted only 69 after approval by the client. The remuneration should be reduced to 90% for such replacement each time.  The procedure for monitoring the performance of CSC should be evolved and incorporated in the ToR of CSC.  It is suggested that consultants’ personnel posted onsite supervision works should belong to the regular establishment of the consulting firm.  Accountability and liabilities of CSC and PCC have not been clearly laid out in the ToR of Services. The ToR should include this aspect also.  In the event of emergencies such as floods, earthquakes etc. the CSC should play an active role in getting the project cleared and making the corridor traffic worthy through the contractor. Such conditions should be incorporated in the ToR of CSC. 1.5.4 Contract Completion/handover phase 32. Safety Audits were felt inadequate at the completion stage. 33. The basic requirements to satisfy substantial completion are not clearly defined in the bid document. This “substantial completion� is necessary at the time of completion of the project to avoid time and cost overruns. “Substantial Completion� of the project should be defined clearly in the bid document and should be part of the contract 34. The value of EMP compliance with respect to the BOQ items in the bid documents should be carried out before completion of work. 35. Tenure of the Project Coordinating Consultant: Disputes regarding excess payment for the works executed are notified by the contractor only after the completion of the work. At the time of arbitration, after completion of the work, the CSC has already demobilized the contractor’s establishment from the project. The decisions taken during execution with respect to contract conditions are taken independently by the CSC. The employer is ignorant about this matter and is required to defend the same before the arbitrator. Therefore, the timelines for the PCC should be fixed till the end of the legal processes, such as in the case of arbitration in the High Court. 2. Comments of Borrower on ICR Report 36. Borrower’s comments on the Bank’s draft ICRR, received vide their letter no.536/2012/TNRSP dated 27.08.2012, are listed below: 37. The draft ICR for the TNRSP prepared by the World Bank has been reviewed and found to be acceptable on almost all topics. While appreciating the efforts taken by the ICR task team in bringing out the various status of the project right from its formulation, implementation, lessons learnt, it is submitted that our views on the ratings on enhanced periodical maintenance and Government’s role may be considered. 38. Comment on the analysis and “Moderately Satisfactory� rating for Sub- objective 2, that is, enhanced periodical maintenance: Unlike the upgradation works, 70 which had been tendered at the inception stage of the project itself, the maintenance works were programmed to be taken up in a phased manner for four years. Hence, the planned physical target could not be achieved because of the hike in the bitumen price during the project execution, which pushed up the cost of the maintenance works. This resulted in reduction of length from the originally planned physical target. However, the allotted financial target under this component was achieved. Further, about 350 km length of roads was proposed for execution during the fourth phase to comply with the physical target under this component, utilizing the savings amount in the project cost. Since the World Bank did not agree during the discussions, the same was dropped. Hence, considering the above points, taking the physical target alone into consideration for rating this component would not be prudent as this component objectives have been fully complied with, including all aspects like good procurement processes, well administrated contracts, capacity enhancement of the HD in technical review of works independently by HRS and PMU of the third and fourth year maintenance works. Hence it is requested that this may be rated as “SATISFACTORY�. 39. Comment on the “Moderately Satisfactory� rating for the Government’s Role: It is prudent to note that TNRSP was the first Externally Aided Project (EAP) in Road Sector in the state. Such a new system of external funding with a huge outlay, new international procedures in formulation of the project and follow up, the preparation of massive DPRs utilizing the HDM and related international standards and procuring international consultants for project preparation were all new introductions to the sector. All these led to the initial delay, which in any sector is inevitable. Although initial delay as mentioned was there, the government took the necessary steps to make the changes required for course correction in the department and succeeded, which is exemplified by the fact that the project was a major success, considering its complex nature and sustainability issues of the interventions in the institutional development. Taking into account the Government’s commitment and success in achieving the physical & financial goals as well as institutional development, it is requested that this may be changed to “SATISFACTORY�. 71 Annex 8. List of Supporting Documents A. Bank Staff Assessments/Supervision 1. Implementation Status Results Report: Sequence 20, 2011 2. Implementation Status Results Report: Sequence 19, 2011 3. Implementation Status Results Report: Sequence 18, 2011 4. Implementation Status Results Report: Sequence 17, 2010 5. Implementation Status Results Report: Sequence 16, 2010 6. Implementation Status Results Report: Sequence 15, 2009 7. Implementation Status Results Report: Sequence 14, 2009 8. Implementation Status Results Report: Sequence 13, 2009 9. Implementation Status Results Report: Sequence 12, 2008 10. Implementation Status Results Report: Sequence 11, 2008 11. Implementation Status Results Report: Sequence 10, 2007 12. Implementation Status Results Report: Sequence 9, 2007 13. Implementation Status Results Report: Sequence 8, 2006 14. Implementation Status Results Report: Sequence 7, 2006 15. Implementation Status Results Report: Sequence 6, 2006 16. Implementation Status Results Report: Sequence 5, 2005 17. Implementation Status Results Report: Sequence 4, 2005 18. Implementation Status Results Report: Sequence 3, 2004 19. Implementation Status Results Report: Sequence 2, 2004 20. Implementation Status Results Report: Sequence 1, 2003 21. Project Paper on Additional Financing for the Tamil Nadu Road Sector Project, March 2010 22. Status Report for Mid-Term Review, Highways Department, Government of Tamil Nadu, August 2006 23. Project Appraisal Document for Tamil Nadu Road Sector Project, May 2003 24. Aide Memoires and Management Letters, Various Preparation, Appraisal, Implementation Support and Supervision Missions, 2000 to 2012 B. Other 1. “Success through Innovation and Negotiation: Land Acquisition in India�, South Asia Social Dissemination Unit, Dissemination Note No. 2, 2012 2. Performance Budget 2011-12 (Demand No.21), Highways and Minor Ports Department, Government of Tamil Nadu, 2012 3. “Road Ministry Banks on Software to Check Accidents�, Moushumi Das Gupta, Hindustan Times, 2012 4. Policy Note 2011-12, Roads, Bridges, Minor Ports and Shipping; Highways and Minor Ports Department, Government of Tamil Nadu, 2011 5. “Firmly on the Road to Safety: In a country with one of the world’s highest road accident rates, the Tamil Nadu Road Safety Programme shows the way…� by Isher Judge Ahluwalia, The Indian Express, October 2011 6. Implementation Unit, Tamil Nadu Road Sector Project, Status Report for Mid- Term Review, Highways Department, Government of Tamil Nadu, 2006 7. TNS Mode, TNRSP Road User Satisfaction Survey Main Report, 2004 72 8. Ehouman L, et al, Tamil Nadu: The Path to Becoming India’s Leading State: A Strategic Analysis of Health, Education, Biotechnology and Tourism, Centre for International Development, Kennedy School of Government, Harvard University, May 2002 73 74