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  • ADB’s 490 million dollars loan to upgrade Indian state’s roads

    Published on December 20, 2019

    Asian Development Bank, ADB and Government of India today signed a 490 million dollars loan for public-private partnership, PPP project to upgrade about one thousand six hundred kilometres of state highways and major district roads from single-lane to two-lane widths in Madhya Pradesh.

    An additional 286 million dollars investment will be mobilised through private sector participation under the PPP modality.

    Additional Secretary (Fund Bank and ADB) in Department of Economic Affairs in Finance Ministry Sameer Kumar Khare and Country Director of ADB’s India Resident Mission Kenichi Yokoyama signed the loan agreement.

    Mr Khare said, state highways and major district roads provide a crucial link between rural roads and national highways and up-gradation of these roads under the project will improve rural and peri-urban connectivity in the state and improve access to markets and better services.

    Mr Yokoyama said that the project continues ADB’s engagement with the state’s road sector since 2002 and it will open a new partnership by introducing PPP through the hybrid-annuity model, thereby leveraging government financing and improving the sustainability of capital investments.

    The Hybrid-Annuity Model is a mix of engineering, procurement, construction, and build-operate-transfer. This passes the responsibility of design, implementation, and operation and maintenance obligations to the private sector while attracting some private sector financing.

    Under this model, the government will release 60 per cent of the total project cost during construction, to be paid to the concessionaire in tranches linked to completion milestones. The remaining 40 per cent is arranged by the concessionaire in the form of equity and commercial debt.

    Once the project is completed, the government will repay the concessionaire’s financial investment over 10 years.

    The project will upgrade 750 kilometres of state highways and 850 kilometres of major district roads to two-lane and all-weather standards with road safety features.

    It will also develop an e-maintenance system, which can record defects or required maintenance, along with a training program to develop capacity on contract implementation and project finance in the Madhya Pradesh Road Development Corporation.

    Since 2002, ADB has provided the state government with five loans to develop its road network, improving about seven thousand three hundred kilometres of roads or about 11 per cent of the total network.