Government of India and World Bank Sign $175 Million Agreement to Accelerate State Highway Development in India and Improve about 625 km of the Core State Road Network

February 13, 2014

NEW DELHI, February 12, 2014 - The Government of India and the World Bank today signed a $175 million loan agreement for the Second Gujarat State Highway Project to support the Government of Gujarat improve the quality of the state’s core road network, enhance road safety and strengthen the road sector management capacity of the state.

The loan agreement for the Second Gujarat State Highway Project was signed by Nilaya Mitash, joint secretary, department of economic affairs, ministry of finance, on behalf of the government of India; Paresh Vakharia, chief engineer, roads & buildings department, government of gujarat and Onno Ruhl, World Bank country director, India on behalf of World Bank.

“This project will support the Government of Gujarat to develop and implement a long term road sector financing strategy for enhanced investment in the road sector. It will also focus on enhancing road safety,” said Nilaya Mitash, Joint Secretary, Department of Economic Affairs, Ministry of Finance.

Over the last 15 years, Gujarat has made considerable progress in developing and expanding its road network. During this period its share of paved roads increased from about 66% to 92%, which is significantly higher than the national average of 58%. The First Gujarat State Highway Project, supported by the World Bank, helped the state build an improved network, reduce the maintenance backlog and develop a robust IT based asset management system for the core road network in the state.

However, despite these positive developments, the road sector in Gujarat continues to face challenges related to its transport carrying capacity, access to finance and serious safety concerns. According to a report, over 7,500 people were reported to have died in road crashes in 2010 and many more were seriously injured; this represents an increase of more than 60% between 2000 and 2010.

The Second Gujarat State Highway Project, passing through 16 districts of Gujarat with a population of 38 million people, will improve about 625 km of the core state road network. The key components of the project include improving connectivity to the underdeveloped eastern tribal region of the state through construction of roads; modernizing highway financing; helping the government in creating a conducive investment climate for raising market resources; and strengthening road safety management systems.

“This project will build on our long engagement in the road sector in India by connecting small and remote habitations in the lagging tribal regions of east Gujarat to the mainstream. Keeping in mind the state’s development agenda, developing a long-term financing strategy for the road sector in Gujarat will also be a priority for the project,” said Onno Ruhl, World Bank Country Director for India. “Rapid growth in the state has led to substantial increase in vehicle ownership, taking the state’s motor vehicle density to about 44% above the national average. An important aspect of the project will be to strengthen road safety in order to bring down the number of fatalities and serious injuries from traffic accidents in the state,”  Ruhl added.

The project will also set up a 30 km safe corridor which will demonstrate measures to improve the safety of pedestrians, bicyclists, drivers, passengers and motorized two-wheelers. The safe corridor will promote energy efficient construction techniques, use of renewable energy for street and junction lighting and benefit from a multi-sectoral approach with better engineering, enforcement, health care and community awareness.

“Financing of civil works is a relatively small component of this project. The project will focus on developing new contracting approaches aimed at improving investment and operational efficiencies; pilot transactions which will leverage innovative private sector investments; and also help increase the road sector’s institutional and financial capacity to fulfill the needs of the road users for better and safer roads”, said Arnab Bandyopadhyay, senior transport engineer and the project’s task team leader.

The project will also build in a 3-year maintenance liability period into all its civil works contracts. “This will help ensure that maintenance is an integral part of the contractor’s responsibilities under the awarded contract,”  Bandyopadhyay added.

The loan, from the International Bank for Reconstruction and Development (IBRD), has a 5-year grace period, and a maturity of 18 years.

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