Document of The World Bank Report No: 75291-LK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SL- ROAD SECTOR ASSISTANCE PROJECT CREDIT TO THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA April 8, 2013 ABBREVIATIONS AND ACRONYMS CKE Colombo Katunayake Expressway DLP Defects Liability Period EA Environmental Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan ESMF Environmental and Social Management Framework GOSL Government of Sri Lanka MOPH Ministry of Ports and Highways RAP Resettlement Action Plan RDA Road Development Authority RMTF Road Maintenance Trust Fund SIA Social Impact Assessment UDA Urban Development Authority VOC Vehicle Operating Cost Regional Vice President: Isabel M. Guerrero, SARVP Country Director: Diariétou Gaye, SACSL Sector Manager / Director: Karla Gonzalez Carvajal, SASDT/John H. Stein, SASSD Task Team Leader: Amali Rajapaksa, SASDT 2 SRI LANKA SL- ROAD SECTOR ASSISTANCE PROJECT P086411 CONTENTS Page A. SUMMARY ........................................................................................................................... 4 B. PROJECT STATUS ............................................................................................................. 5 C. PROPOSED CHANGES ...................................................................................................... 6 D. APPRAISAL SUMMARY ................................................................................................... 9 ANNEX 1: RESULTS FRAMEWORK AND MONITORING............................................... 15 ANNEX 2: REALLOCATION OF PROCEEDS ...................................................................... 18 3 SRI LANKA - ROAD SECTOR ASSISTANCE PROJECT RESTRUCTURING PAPER A. SUMMARY The Road Sector Assistance Project (CR 4138-CE) was approved by the Bank in December 2005 for the rehabilitation and upgrading of prioritized national roads of 620 km that required immediate attention due to a backlog of maintenance over several years. The project also supported the institutionalization of a sustainable maintenance arrangement for national road network. It also included a pilot for the rehabilitation and upgrading of rural roads, based on a rural road strategy supported through the project. The project closing date was September 30, 2011. The project during implementation faced severe cost escalations due to the unprecedented rise in world fuel prices in 2007/08. The First Additional Finance (CR 4429-CE) was approved on September 16, 2008 to support the cost escalations without an extension of the project closing date. The rehabilitation of both national and rural roads financed by these two credits was completed well ahead of the project closing date. The rehabilitation of rural roads under the pilot project has also now been completed. The subsequent request from the Road Development Authority (RDA) under the Ministry of Ports and Highways (MOPH) for the rehabilitation of additional road sections in the national road network was processed as the Second Additional Finance credit (CR 4906-CE) which was approved by the Bank in April 29, 2011 as a scale up of the project by extending the Project closing date by 3 years to September 30, 2014. This included the rehabilitation of the following new road sections in two phases together with financing of periodic maintenance and piloting of a road safety corridor. The road sections were as follows: Phase 1 Kantale to Trinco section of the A6 {45.4 km - 157 km to 199+300 km (42.3km) and Kantale to Peratuweli section of the B196 (3.1km)} Phase 2 Ambepussa to Dambulla section of the A6 (91 km - 0 km to 90+900 km) These two road sections are located on the main artery connecting the Western Province to the Eastern and Northern Provinces. Subsequently, the Government of Sri Lanka (GOSL) by letter dated March 6, 2012 has informed the Bank of its intention to widen the road section in phase 2 (Ambepussa to Dambulla) from two lanes to four lanes due to the increase in the level of traffic and future plans with respect to the development of the Northern Province. The timeline for the proposed widening would not fall within the timeline envisaged under this project due to the time required for land acquisition. The GOSL has therefore requested the replacement of the road sections for rehabilitation included under phase 2 as follows: 4 Phase 2 – The rehabilitation and upgrading of: (i) A2 (Colombo-Galle-Hambantota-Wellawaya Road) 13+275 km to 18+480 and 25+240 to 30+300 km (total of 10.26 km) and AB011 (6.78km) which was constructed as a bypass but currently acts as the continuation of the A2 and are collectively called A2 (17.0km). (ii) A3 (Peliyagoda-Puttalama Road) 0+600 km to 18+300 km (17.7 km). Both of these road sections are in Western Province and are urban sections serving high levels of population. In addition, the road section (chainage 13+275 km to 40+000 km) on the A002 has been identified as the demonstration safety corridor of the project. The project development objective and the environmental category (Category “B�) remain unchanged. No changes are proposed to the implementation, financial management, disbursement and procurement arrangements. The proposed restructuring relates to: (i) The change in road sections financed under CR 4906-CE; (ii) The category re-allocation of the original credit (CR 4138-CE) to better reflect changed circumstances as it continues to support the current operations. B. PROJECT STATUS The Civil Works financed by CR 4906-CE under phase 1 (Kanthale – Trinco) that provides connectivity to the Eastern Province has been substantially completed where the physical and financial progress of 99% and 82% have been reached. All of the contracts have been handed back to the Road Development Authority (RDA) and will have a defects liability period of one year. The preparatory work on the new road sections have commenced immediately upon identifying prioritized road sections where the RDA itself has completed the feasibility study and engineering designs. The Design review and supervision consultant has been appointed and the designs have been reviewed. The environmental and social assessments, resettlement and action plans, drainage plans, road safety audit, collection of baseline data etc., have already been completed. The RDA on January 10, 2013 has advertised for the procurement of civil works for the rehabilitation and upgrading of the new road sections. The contracts are expected to be awarded by May 2013 and have a construction period and a defects liability period of one year each. The Board of Trustees of the Road Maintenance Trust Fund (RMTF) which was fully functional from 2012 has approved the periodic maintenance programs for the RDA for 2012 based on which the procurement of the first few civil contracts under IDA and GOSL joint financing have been advertised. . The preparation of these contracts has been delayed due to capacity limitations in identification and procurement of maintenance contracts where the capacity is currently being enhanced. The monitoring of maintenance contracts financed by the GOSL is currently being carried out by the RMTF that is expected to produce an Annual Report for the year 2012. 5 Subsequent to change of road sections, 27 km of the A002 was selected as the road safety demonstration corridor due to its high level of road accidents. . The UN document on ‘Decade of action for road safety 2011 to 2020’, the ‘World report on road traffic injury prevention’ and the Road Safety Action Plan for Sri Lanka provide guidance on planning for and implementing road safety through a five-pronged approach of (i) strengthening road safety management; (ii) improving infrastructure; (iii) use of safe vehicles; (iv) improving road user behavior; and (v) provision of post-crash care services. Based on these recommendations, a committee consisting of members from the MOPH, RDA, the Traffic Police, Ministry of Health, the four local authorities on the corridor (Dehiwala/MountLavinia, Moratuwa, Panadura and Kaluthara), University of Moratuwa, Ministry of Transport and National Council for Road Safety (NCRS) was appointed to scope and implement the demonstration corridor. Considerable amount of time and effort has been utilized to mobilize and bring this committee together on a multitude of issues focusing on the successful implementation of the demonstration corridor. The committee has provided inputs to the changes required in the road infrastructure and the civil works in these road sections are being procured based on designs incorporating these changes which have also been supported by a road safety audit. The committee is in the process of finalizing actions to be carried out by each organization in the demonstration corridor as well as an investment plan to support these activities. The road traffic fatalities and grievous injuries will be monitored following the completion of the demonstration corridor. The Project Development Objective continues to be relevant and the project indicators are being achieved. The Results Framework included in annex 1 indicates the revised base line values for intermediate indicators as a result of the replacement of road sections. C. PROPOSED CHANGES  Road Sections: The phase 2 currently consists of the rehabilitation and upgrading of Ambepussa to Dambulla road section on the A6 on the East-West corridor providing connectivity to the Eastern and Northern Provinces. The phase 2 will now be replaced by priority urban sections in the Western Province. It will include rehabilitation and upgrading of approximately 34.7 km of “A� class urban roads. It will also include design review and supervision of these sections. The road sections under phase 2 will therefore be changed as follows: i. Previously approved section on phase 2: Ambepussa-Dambulla section (91km) of the A6. ii. New sections to be approved on phase 2: (i) 17 km of the Colombo-Galle-Hambantota- Wellawaya Road (A002); and (ii) 17.7 km of the Peliyagoda-Puttalam Road (A003). The phase 1 has been completed and remains unchanged. The scope of work on phase 2 remains largely unchanged.  Results/indicators The Project Development Objective remains unchanged and the outcome indicators described in the project paper for the Second Additional Finance will be monitored and remains unchanged. The PDO level results indicators used in the original project and the second additional finance consist of Vehicle Operating Cost, International Roughness Index, Average Road Condition and 6 Annual Road Maintenance expenditure. The target values revised for these indicators in the project paper for second additional finance remains applicable. These indicators will be shared with IDA through the road condition and traffic survey reports produced annually by the RDA. Rural Roads pilot – (component 2 under the original project) - At the inception of the project it was envisaged that the spot improvements and patching would be sufficient and improvement of 635km was envisaged. However based on the rural roads strategy study prepared through the project and extensive stakeholder consultations done during the implementation of the project, an improvement to 157 km has been achieved and the revised estimate recorded during the Mid Term Evaluation of the project. Hence, the intermediate results indicator for component two in the original project applicable to rural roads “about 635 km of rural roads improved� has been revised to “no of km improved through rehabilitation of rural roads� to 157 km. This has no impact on any other indicator. Due to the change in road sections in phase 2, the Intermediate Results indicators for Result 1 will be revised from “Rehabilitation of 134 km of priority National Roads Class “A� Implemented� to: “Rehabilitation of Priority National Roads Class “A� is implemented.� This includes phase 1 and 2. (includes 45.3 km for K-T section, 17 km of A002 and 17.7 km of A003). The baseline data for number of km, IRI and travel time have been revised. Please see details in Annex I (Results Framework and Monitoring) Financing o Project Costs: Relates to project costs financed through CR 4906-CE. Project Costs1 (US$m) Components/Activities Current Proposed Civil Works - Phase 1 0 0 - Phase 2 83 81 - Periodic maintenance 10 10 Consultancies 4.5 5 Goods 2 Incremental Operating Cost 2.5 2 Total 100 100 o Financing Plan – There is no change in the financing plan. The funds under the original credit (CR 4138-CE) will continue to be used to support the project activities and strengthening of the RDA. However, based on changes in circumstances, the re-allocation of CR 4138-CE envisages at the time of processing CR 4906-CE is not required. The following re-allocation is therefore proposed (for CR 4138-CE only): 1 An exchange rate of US$ = LKR 125 has been used in all calculations. 7 Category The current Amount to be re- Allocation allocated in SDR (Expressed in SDR Equivalent) Equivalent) 1(A) Works 49,200,000 49,264,094 1( B) Goods 592,100 970,000 1© Consultant Services & Training 8,114,266 7,672,271 1(D) Incremental Operation Costs 1,317,414 1,317,414 2.(A) Goods, works, consultant’s services, training, 3,107,893 2,951,893 and incremental operating costs for North-Central Province under Part B of the Parent Project 2(B) Goods, works, consultants’ services, training, 3,107,893 3,348,893 and incremental operating costs for Southern Province under Part B of the Parent Project 2 © Goods, works, consultants’ services, training, 3,107,893 3.022,893 and incremental operating costs for Uva Province under Part B of the Parent Project Refunding of Project Preparation Advances 552,542 552,542 TOTAL 69,100,000 69,100,000 o The re-allocation indicated above is proposed by increasing the allocation under the “Goods� category by SDR 377,900 and decreasing same under the “Consultants services and training� category to support the purchase of a Milling Machine for the RDA and replacement of water pipes for the changed sections. o The other re-allocations have been carried out to clear any minor over drawals under “works� category and “Goods, works, consultant’s services, training and incremental operating cost under Part B� of the project. o CR 4429-CE will continue to finance the civil works of phase 1 and CR 4906-CE will finance phase 2 civil works and other associated costs as indicated in project cost table above. Disbursement arrangements: No change in the disbursement arrangements. The overall disbursement of the project is US$207 million out of a total current value of the credit of US$295 million with an undisbursed balance of US$88 million. o The estimated disbursements are as follows: Credits Available Balance FY 13 FY 14 FY 15 (Client Connection) (US$ m) (US$ m) (US$ m) (US$ m) CR 4138-CE 3 0.5 1.5 1 CR 4429-CE 1 1 - - CR 4906-CE 84 17 30 37 Total Disbursement 882 18.5 31.5 38 2 Available balance as at January 28, 2013 8  Implementation schedule Due to the change in road sections to be rehabilitated under phase 2 of the second additional finance, corresponding changes were required for the collection of baseline data, several assessments, engineering designs and selection of design review and supervision consultants which have contributed to a delay of approximately one year. The revised implementation schedule for phase 2 civil works is as follows: Activity Timeline Invitation for Bids issued January 10, 2013 Receipt of Bids February 21, 2013 Award of contracts May 2013 Completion of rehabilitation May 2014 Completion of DLP May 2015 D. APPRAISAL SUMMARY  Technical (i) Maliban Junction to Nalluruwa Section (A002) (a) Section 1 – Maliban Junction to Cross Junction (5.205 Km of A002) and Cross Junction to 80 m on AB011 This section is a six lane divided carriageway and consists of seven main Junctions. The carriageway width varies from 8.7m - 9.5m. The median width varies from 3.1m - 3.9m while the foot path width varies from 1.7m - 3.8 m. The existing pavement is in poor condition and edge breaking and surface distress and cracks are substantially visible. The proposed work includes - improvements in horizontal alignment and vertical profile; milling; pavement rehabilitation; restoration of footpaths to provide consistency to the Colombo City section of A002; cleaning of road side storm drainage system including reconstruction of some culverts; laying of water distributions pipelines under the footpath and; improving road safety. Water distribution lines will be laid on both sides of the road. All works are proposed to be done within the Right of Way (ROW) of RDA, not requiring any land acquisition. Once completed, this section would have a uniform divided carriageway width of 9.35 m (3 x 3.0 m lanes), Center median of 3.2m, raised foot path of minimum 2.0m and parking lanes of 3m, wherever existing). (b) Section 2 – Cross Junction to Walana Junction (6.70 Km of AB011) + Walana Junction to Nalluruwa (5.06 Km of A002) This section is a four lane divided carriageway and consists of two main Junctions. The carriageway is about 7.5m. The median width varies from 1m – 1.2m while the foot path width varies from 1m – 2.5m. The existing pavement is in poor condition and edge breaking and 9 surface distress and cracks can are substantially visible. A by-pass to the A002 road at the Cross Junction built some years back is the AB011 road which now serves as the continuation of the A002 section connecting Cross Junction to Walana Junction. This AB011 section also has severe road side drainage issues. The proposed work include - improvements in horizontal alignment and vertical profile; pavement rehabilitation; restoration of footpaths to provide consistency to the Colombo City section of A002; cleaning of road side storm drainage system including reconstruction of some culverts; Escalator for pedestrian traffic at private bus stand at Panadura, and; improving road safety. There is also provision of laying of water distributions pipelines under the footpath in Cross Junction to Walana Junction section. Once completed, this section would have a uniform divided carriageway width of 7.4m (2 x 3.5m lanes), Center median of 1.2 m and raised foot path of minimum 2.0m. Designs of A002: Geometric designs have been carried out according to the “Geometric Design Standards of Roads� issued by Road Development Authority in 1998 for a Design Speed of 60 km/hr and Operating Speed of 50 km/hr. The pavement design include providing 40mm wearing course, 60mm binder course, profile corrective course as required and dense graded aggregate base course of 360 -460mm. Section 1 of the carriageway in this section would require milling. (ii) Nawaloka Junction to Seeduwa (A003) This section is a four lane divided carriageway having a width about 7.5m. The median width varies from 1m – 1.2 m while the foot path width varies from 1.5m - 2.5m. The existing pavement is in poor condition and edge breaking and surface distress and cracks are substantially visible. The proposed work include - improvements in horizontal alignment and vertical profile; pavement rehabilitation; restoration of footpaths; cleaning of road side storm drainage system including reconstruction of some culverts, laying of water distributions pipelines under the footpath and improving road safety. There are two junctions with access to the Colombo Katunayake Expressway (CKE), which will be improved under CKE project. Once completed, this section would have a uniform divided carriageway width of 6.8m (2 x 3.1m lanes), Center median of 1.2m, Raised foot path of minimum 1.5m and parking lanes of 2.5m wherever existing. Designs of A003: Geometric designs have been carried out according to the “Geometric Design Standards of Roads� issued by Road Development Authority in 1998 for a Design Speed of 60 km/hr and Operating Speed of 50 km/hr. The pavement design include providing 50mm wearing course, 60mm binder course and profile corrective course as required. Review of Designs: The review of designs have been completed by Messers. Roughton and their comments together with the suggestions from the Moratuwa University on the road safety audit have been incorporated in to the tender designs. 10  Road Safety Accident data analysis by Professor Amal Kumarage indicates that 60% of road accidents in Sri Lanka occur in the first 40 km of the A001, A002, A003 and the A004. The data depicted below for this section of the A002 corridor indicate that during the period from 2008 to 2011 the total numbers of accidents have increased by 11% and the percentage of fatalities have increased by 54% with a substantial increase in grievous accidents. Fatal Road (Person Non Damage Grand Section Year Dead) Grievous Grievous only Total Accidents 2008 17 during 2008-2011 9 occurred 52 125 203 Maliban Jn 2009 6 27 34 115 182 to Cross Jn 2010 12 25 50 125 212 2011 21 40 33 99 193 2008 8 16 22 30 76 2009 10 11 51 24 96 AB011 2010 11 23 28 36 98 2011 9 22 31 30 92 2008 5 7 66 72 150 Walana Jn to 2009 6 16 63 56 141 Nalluruwa Jn 2010 14 16 85 71 186 2011 4 36 57 96 193 2008 22 40 140 227 429 2009 22 54 148 195 419 Summary 2010 37 64 163 232 496 2011 34 98 121 225 478 Source: Road Development Authority Summary of Traffic Accidents between Maliban Junction and Nalluruwa Junction of A002 road 1000 Fatal (Person Dead) Grieveous 500 Non Grieveous 0 2008 2008 2009 2009 2010 2010 2011 2011 2012 Source: Road Development Authority Summary of Traffic Accidents by location from Maliban Junction Ratmalana No. of Accidents to Nalluruwa Junction Panadura during the Year 2011 15 10 5 0 25 13 14 15 16 17 18 0.5 2.5 3.5 4.5 6.5 26 27 28 29 30 2 1 3 4 5 6 13.5 15.5 16.5 17.5 18.5 25.5 26.5 27.5 28.5 29.5 Fatal Grieveous Non Grieveous Chainage Source: Road Development Authority 11 A detailed analysis of accidents has been carried out by the University of Moratuwa that identifies the causes of accidents specific to each section. Overall,64% of the fatal accidents have involved pedestrians and cyclists. The major physical interventions that require attention are: (i) improved geometry of roads; (ii) pedestrian facilities; (iii) improved lighting; and (iv)Location of the bus stops and pedestrian crossings. The committee for the implementation of the demonstration corridor are focusing specifically on issues identified within this corridor and reviewing interventions such as placing of pedestrian crossings especially in view of schools and bus stands, street lighting, provision of safety barriers, raised foot walks, availability of ambulance and fire facilities and training of staff for emergency care, provision of an emergency number to access these facilities, safety awareness for schools, three wheelers and private buses, enforcement of speeds, etc. Further to the above, the committee is also reviewing the improvement in the collection and recording of accident data.  Social The experiences of original project and first phase suggest that there will be no significant adverse social impacts by the proposed interventions. According to the experiences of parent project and consequent phase 1 shows that safeguard polices (OP/BP 4.10 Indigenous Peoples and OP/BP 4.11 Cultural Properties) will not be triggered in the proposed road improvement activities. All works are proposed to be done are within the Right of Way (ROW) of RDA and does not require any land acquisition where the impacts are expected to be negligible as the proposed improvement works are limited within the Right of Way that is RDA land. In cases where the current road width needs to be widened within the RDA land, the corridor of improvements works under the project shall be executed from boundary wall to boundary wall. Only in case of junctions and drains there is possibility of works outside the RDA land but within the exiting available space to match with the other roads and drains joining the project road without causing any impacts on properties. Thus, as per the Environmental and Social Management Framework (ESMF) the social safeguard policy that has been already triggered (OP/BP 4.12 - Involuntary Resettlement) remained to be valid. Social Impact Assessments (SIA) have been conducted for A002 and A003 road sections and site specific draft Resettlement Actions Plans (RAP) have been prepared. The RAP provides for limited adverse social impacts expected under the project along with mitigations measures, institutional, monitoring arrangements and a budget to address them. The social safeguard monitoring and compliance process as in earlier road sections will be continued. The project staff of RDA as well as contractor’s staff engaging in social safeguard monitoring and implementation will be provided with appropriate training and guidance to implement the necessary safeguard compliance procedures stipulated in the ESMF. The Urban Development Authority (UDA) plans to develop three locations on the sea side in the section AB011 of the A002 corridor in order to create recreational facilities for the public. The UDA has identified the three locations based on them being free of any encumbrances for the development to be financed by a private bank under their Corporate Social Responsibility activities which may possibly be carried out in parallel to the activities under this project. It has been agreed that the work to be carried out by the RDA and to be financed under the IDA credit will only be to the edge of the foot walk. Work beyond the foot walk towards the beach will be 12 outside of this project and not the responsibility of the RDA and will not be financed by IDA. It was agreed with the RDA that consultation will be carried out with the roadside community to explain the scope of final design and clarify the corridor of impact on the ground. Furthermore, RDA was advised to request UDA to carry out a social impact assessment for the corridor that the UDA would be carrying out works to identify the risks, mitigation methodology and time lines and share with the Bank for information. It has been further agreed between the RDA and the UDA that the drainage designs carried out for the section on AB011 by the RDA will be shared with the UDA in order for them to address within the activities to be carried out by the UDA.  Environment Considering the scope of the project, which is limited to rehabilitation of national roads, with drainage improvements where needed, there will be no significant and/or irreversible adverse environmental impacts. Any potential adverse environmental impacts triggered under this project will be seen off-site where road construction material would be sourced and disposal of material removed and waste generated from the existing roads. Project is therefore continued to be categorized as Category B and the two environmental safeguards policies that have been already triggered, i.e. OP/BP 4.01 – Environmental Assessment and OP/BP 4.04 – Natural Habitats will continue to be valid. Based on the Environmental and Social Management Framework of the parent project and experiences of the phase 1 of the project, road specific Environmental Assessments (EAs) have been undertaken for A002, AB011 and A003 road sections, resulting in individual Environmental Management Plans (EMPs). The EAs and EMPs have been disclosed in country to the public on December 5, 2012. As part of improvements to the processes, a more guided Environmental Methods Statements are expected to be developed by the contractors and non- compliance penalty clauses in contractual documents have been further improved for the restructured phase. The project will continue to provide training for appropriate RDA staff, particularly focused on field staff and contractors.  Economic and Financial The Economic Analysis was carried out for both sections using HDM-4 software and fleet and traffic forecast data collected by RDA. Results of the cost-benefit analysis of the civil work for re-surfacing and improvement of approximately 17 km of A002 road (with an economic cost of US$39.3 million3) indicates that the Economic Internal Rate of Return (EIRR) is 29% with an NPV of US$101.2 Million (Rs. 12,652 million). For the A003 road sections (with an economic cost of US$24.6 million); the EIRR is 46.7% and the NPV is US$132.1 million (Rs.16,512 million). Sensitivity analyses were carried out for both sections with capital and maintenance cost increases by 10% and 20% and ADT forecast and traffic growth rate decreases by 10% and 20% and found that results yet remained robust. The table below summarizes the main results comparing EIRR before and after restructuring of the project. While EIRR for the project has been reduced from 51% to 28.4%, it still remains significantly above the 12% threshold. 3 Using an exchange rate of 125 13 Table 1: Summary of Economic Analysis Internal Rate of Km NPV (US$ Million) Return (%) (*) K-T Section 42.81 23.62 21.0% A-D Section 90.89 498 65.1% Before Restructuring (A-D and K-T sections) 133.7 521.51 51.0% K-T Section 42.81 23.62 21.0% A002 Section 17 101.20 29.0% A003 Section 16.9 132.10 46.7% After Restructuring (K-T section; A002; and A003) 76.71 256.92 28.4% (*) EIRR it is a averaged weighted by number of km The economic evaluation was subjected to a sensitivity analysis carried out by increasing capital or maintenance costs by 10% and 20%, decreasing benefits (traffic and traffic growth rate) by 10% and 20% and the whole scenario together. Main results are described in the table below. Table: Main results from Sensitivity Analysis Table: Results on Economic and Sensitivity Analysis A002 A003 Average Scenario Sensitivity Parameter IRR (%) NPV (Rps. Mn) NPV (US$ Mn)* IRR (%) NPV (Rps. Mn) NPV (US$ Mn)* IRR (%) Basic Scenario Baseline Parameters 29 12,652.00 101.22 46.7 16,512.60 132.10 37.85 ADT decrease 10% 27.4 11,019.44 88.16 39.8 12,701.60 101.61 33.60 Scenario 1 ADT decrease 20% 25.3 9,145.26 73.16 34.4 9,606.20 76.85 29.85 Growth Rate decrese 10% 28.8 12,474.10 99.79 46.4 16,205.50 129.64 37.60 Scenario 2 Growth Rate decrese 20% 28.7 12,280.70 98.25 46 15,905.50 127.24 37.35 Increase in capital cost 10% 27.5 12,220.57 97.76 44.9 16,363.90 130.91 36.20 Scenario 3 Increase in capital cost 20% 26.3 11,789.24 94.31 43.3 16,215.30 129.72 34.80 Increase in Maintenance cost 10% 28.9 12,615.45 100.92 46.7 16,480.20 131.84 37.80 Scenario 4 Increase in Miantenance cost 20% 28.9 12,578.90 100.63 46.6 16,447.73 131.58 37.75 All 10% Scenarios Together 25.8 10,374.30 82.99 37.8 12,240.30 97.92 31.80 Scenario 5 All 20% scenarios together 22.5 7,850.14 62.80 31.3 8,841.90 70.74 26.90 Note: (*) Exchange rate 125'  Risk (i) Given the internal discussions within the GOSL for the change of road sections and the time taken to reach a decision, the risk of revoking this decision was likely. The team had therefore agreed with the GOSL that the restructuring of the project to accommodate the replacement of road sections will be carried out upon the GOSL advertising for the civil works on the new road sections and are therefore confident that this risk has been mitigated. (ii) Due to the change in the road sections, the preparatory work needed to be repeated for the new road sections which have contributed to a delay in implementation. However, based on the present time line, the contracts are expected to be completed by May 2014. It is envisaged that this time line can be met unless there are adverse weather conditions or unforeseen events. . 14 ANNEX 1: Results Framework and Monitoring SRI LANKA: SL- ROAD SECTOR ASSISTANCE PROJECT Project Development Objective (PDO): To lower transportation costs through sustainable delivery of an efficient national road system. Revised Project Development Objective: No change D=Dropped Cumulative Target Values** C=Continue Responsibility Core PDO Level Results N= New Unit of Data Source/ Baseline Frequency for Data Indicators* R=Revised Measure 2011 2012 2013 2014 Methodology Collection Reduction in average Continue RDA’s road network Vehicle Operating LKR/km 14.6 13.6 12.5 11.5 10.5 Once per year condition RDA Costs (VOC) for average report vehicle Reduction in Average Continue RDA’s road Network Roughness (IRI); IRI 6.2 6.1 6.1 6.0 5.9 Once per year condition RDA report Reduction in percentage of Continue RDA’s road the Network in poor and bad % 38 37 36 36 35 Once per year condition RDA condition; report Routine and Periodic Continue RDA’s road 44 Maintenance Funding for LKR bn 5.0 5.5 6.0 6.6 Once per year condition RDA (US$ mn) National Roads Increased report Intermediate Result (Component One): Rehabilitation of 134 km of Priority National Roads Class “A� is implemented.(Original) Revised Intermediate Result (Component One): Rehabilitation of 80 km of Priority National Roads Class “A� is implemented.(Revised) D=Dropped Cumulative Target Values** Frequency Responsibility Core PDO Level Results C=Continue Unit of Data Source/ N= New Baseline for Data Indicators* Measure 2011 2012 2013 2014 2015 Methodology R=Revised Collection Revised Progress Km of roads rehabilitated km 0 0 41 80 Once per year Report RDA Reduction in Phase 1 Revised 6.0 - 2.8 network IRI for A2 Beginning and Progress IRI 4.3 - - - 2.4- RDA end of project Reports A3 3.1 - - - 2.4- Reduced Travel Phase 1 Revised 66 42 Beginning and Progress time on A2 Minutes 13.8 - 12.5- RDA end of project Reports A3 26.5 - 23.9- Improved level Continue Before the of satisfaction of project starts Road User No- road-users % collected and after the Satisfaction RDA project is Survey completed Intermediate Result (Component Two): Road Maintenance Trust fund in operation and Road Maintenance 3-year program implemented Revised Intermediate Result (Component Two): No Change Km of national roads on Continue Progress which periodic km 0 0 20 45 60 Once per year Report from RDA maintenance has been RMTF carried out Annual Road Maintenance Continue program is approved by Approved Approved Approved Once per year RMTF RMTF RMTF Baseline YR1 YR2 YR3 YR4 YR5 Frequency & Reports Data Collection Responsibility for Data Parent Project Component 2 Instruments Collection No. of km. Rural Roads At completion of - - - - - 157 contracts. Technical Audit Reports MLGPC improved 16 MAP OF SRI LANKA – A002 & A003 ROADS ANNEX 2: Reallocation of Proceeds _____________________________________________________________________ SRI LANKA — SL- ROAD SECTOR ASSISTANCE PROJECT P086411 {CR 4138 CE} Restructuring Paper 1. Proceeds for Sri Lanka, SL- Road SECTOR ASSISTANCE PROJECT, [CR 4138 CE], P086411 will be reallocated as follows: Category of Expenditure Allocation (Expressed in % of Expenditure to be SDR Equivalent) Financed Current Revised Current Revised Current Revised Works 80% up to June 30, 2006, 70% up to 49,200,000 49,264,094 June 30, 2007, and No 65% thereafter No change Goods change 592,100 970,000 100% Consultant Services & 8,114,266 7,672,271 100% Training Incremental Operation Costs 1,317,414 1,317,414 100% Goods, works, consultant’s services, training, and incremental operating costs 3,107,893 2,951,893 100% for North-Central Province under Part B of the Parent Project Goods, works, consultants’ No services, training, and change No change incremental operating costs 3,107,893 3,348,893 100% for Southern Province under Part B of the Parent Project Goods, works, consultants’ services, training, and incremental operating costs 3,107,893 3.022,893 100% for Uva Province under Part B of the Parent Project Refunding of Project No 552,542 552,542 100% No change Preparation Advances change TOTAL 69,100,000 69,100,000 2. The civil works financed under CR 4138 CE for national and rural roads have been completed. This credit continues to support the training, consultancies and incremental operating costs under the project. 3. The proposed reallocation is necessary to support the purchase of goods and equipment arising as a result of the change in road sections as well as to clear minor over drawals under certain categories. ( see section C for further details). 18