World Bank Provides US$1.5 Billion to Expand Support for India's Rural Roads Program

December 20, 2010

WASHINGTON, December 20, 2010: The World Bank today approved a $1.5 billion Credit and Loan for the Prime Minister’s Rural Roads Program, or the Pradhan Mantri Gram Sadak Yojana (PMGSY) to continue improving rural accessibility of roads for hundreds of millions of residents especially in lagging regions.

The program was established in 2000 to address the challenge of poor rural accessibility at a time when almost 40 percent, or 300 million people in the country lacked access to all weather roads and a large part of the existing 2.7 million km of the rural road network were in poor condition, impeding access to markets and increasing transportation costs. While the PMGSY has since added 274,000km of new roads, vast parts of the country, especially in economically weaker and hilly areas, continue to remain inaccessible.

“A good road network can generate many commercial and social benefits for rural economies through increasing access to goods as well as services such as health and education,” said the World Bank’s Country Director for India, Roberto Zagha. “Therefore, improving the access and quality of rural roads is critical to increasing growth and promoting development in lagging regions.”

 The new project will concentrate on the states of Himachal Pradesh, Jharkhand, Meghalaya, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh. Over the next five years, the project will aim to provide these states with an average connectivity of around 91 percent by constructing 24,200 km of all-weather roads to benefit an estimated 6.1 million people. The project will also develop a system for maintaining these roads in good condition over the long term.

 The new project will build on the experiences gained through earlier World Bank funded rural roads projects and aims to enhance the PMGSY’s effectiveness by improving the program’s overall policy framework and systems with a greater focus on achieving results. The project also includes $60 million in technical assistance to build the capacity of the rural roads agencies, especially in the ongoing management of assets and the sustainable maintenance of roads. 

Greater emphasis will be placed on developing the capacity of road agencies to carry out the program effectively, and adhere to technical design standards, especially in the smaller and more remote habitations. 

The bulk the of credit and loan is from the International Development Association (IDA) – the World Bank’s concessionary lending arm, which provides interest-free loans with 35 years to maturity and a 10-year grace period, and from the International Bank for Reconstruction and Development (IBRD) which has a 5-year grace period, and a maturity of 18 years. A portion of the IDA funding comes from its low-interest window.

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