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Implementation Completion Report (ICR) Review - Tamil Nadu Road Sector Project

1. Project Data:   
ICR Review Date Posted:
Project Name:
Tamil Nadu Road Sector Project
Project Costs(US $M)
 450.00  501.12
L/C Number:
Loan/Credit (US $M)
 348.00  387.05
Sector Board:
Cofinancing (US $M)
Board Approval Date
Closing Date
03/31/2009 03/31/2012
Roads and highways (90%), Sub-national government administration (10%)
Trade facilitation and market access (40% - P) Infrastructure services for private sector development (40% - P) Other public sector governance (20% - S)
Prepared by: Reviewed by: ICR Review Coordinator: Group:
Victoria Alexeeva
Robert Mark Lacey Soniya Carvalho IEGPS1

2. Project Objectives and Components:

a. Objectives:
The statement of objectives in the Project Appraisal Document (PAD) and the legal documents is identical: "to improve the quality and sustainability of the state's core road network".

In March 2010, Additional Financing in the amount of US$50.7 million was approved to help finance cost overruns, 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 the Indian Rupee against the US Dollar; and (iii) addition of a Tsunami affected bridge for which an amendment to the Loan Agreement was carried out. The development objectives did not change.

b. Were the project objectives/key associated outcome targets revised during implementation?

c. Components:
Component 1: Road Upgrading (about 750 km): (appraisal cost US$320.97million; actual cost US$385.83million). 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 also aimed at supporting upgrading and/or construction of state roads and bridges through subprojects to be taken up through public-private partnership by the Government of Tamil Nadu.

Component 2: Road Maintenance and Safety Works Component (appraisal cost US$110.72million; actual cost US$106.18million). 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. Accident 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.

Component 3: Institutional Strengthening and Policy Development Component (appraisal cost US$14.83million; actual cost US$9.41million). Under this component, the state government proposed to utilize the services of experts and consultant firms to help in the implementation of an Institutional Strengthening Action Plan. The component also aimed at strengthening the road maintenance planning and implementation within the Highways Department 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 public-private partnership for road transport infrastructure development through appropriate technical assistance.

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 small portion of the loan and there were no changes in the development objectives or the performance indicators.

In 2009, the Government of Tamil Nadu requested a waiver of a covenant pertaining to the creation of a road fund on the grounds that maintenance was sufficiently funded through the budget process. This was accepted by the Bank.

d. Comments on Project Cost, Financing, Borrower Contribution, and Dates
Project cost: Total project cost was US$501.42 million at closure, 11.5% higher than the appraisal estimate of US$450 million as a result of the factors mentioned in Section 2a above.

Financing: The World Bank Group contribution consisted of a loan in the amount of US$348million and Additional Financing of US$50.7 million, totaling US$398.7. At closure, the total amount of the loan was reduced to US$387.05 million due to savings in loan-supported expenditures.US$11.65 million was cancelled. There was no other external partner financing.

Borrower contribution: The Borrower contribution of US$102.00million at appraisal increased to US$108.40 by project closure as a result of cost overruns due to implementation delays and appreciation of the Indian Rupee against the US Dollar.

Dates: The project was extended twice by a total of three years from the original closing date of March 31, 2009 to March 31, 2012. The first extension, in 2009, was for one year, to March 31, 2010, as a result of implementation delays. At the time of the Additional Financing in March 2010, the closing date was extended by further two years to March 31, 2012.

3. Relevance of Objectives & Design:

a. Relevance of Objectives:
At the time of appraisal, the supply of road infrastructure in relation to the demand was severely lagging in the state of Tamil Nadu: more than 50% (about 8,700 km) of the state highways and major district roads were of less than two lane width. Funding for road maintenance was less than 65% of the estimated requirements. As a result, the network had a substantial backlog of capital expenditure, deferred maintenance, and marked deterioration of the structural condition and quality. The project development objectives were consistent with the focus on infrastructure enhancement in the Government of India's 10th and 11th Five Year Plans (2002-2012). The objectives are also relevant to the World Bank Group's FY09-12 Country Strategy for India, the key goals of which include inclusive growth, ensuring sustainable development, and removing structural constraints to growth through expanding and improving the quality of infrastructure service delivery. The objectives are also in line with the main priorities of the Country Strategies at appraisal and during implementation which aimed at improving the infrastructure bottlenecks to help sustain rapid economic growth and poverty reduction.

b. Relevance of Design:
The statement of development objectives was clear. The project results framework indicated a clear causal chain between the activities financed by the project and the outputs and outcomes related to the attainment of the development objectives. For example, with regard to physical investments in road upgrade, maintenance, and safety works (Component 1 and 2), the activities were expected to reduce the percentage of the core road network in poor condition, reduce travel time and the number of fatalities from road accidents on the project corridors. These, reinforced by strengthened institutional effectiveness of the public sector road agency and an increased role for private sector participation, were intended to lead to improved quality and sustainability of the state's core road network.

4. Achievement of Objectives (Efficacy) :

A. Improved quality of the state's core road network: Substantial.
  • 724 km of roads (including 14 bypasses) were widened and strengthened to the specified standards, with what the ICR reports as due attention to environment and social impacts. The project achieved completion of 97% of the target.
  • 1,030 km were covered under traditional annual maintenance contracts in conformity with the prescribed quality and environmental standards. The project completed 70% of the targeted 1,500km of roads. With the general increase in the outlay for maintenance, many of the targeted roads were reportedly covered through contracts financed with the government’s own funds.
  • 300 km were covered under multi-year performance- based contracts in conformity with the prescribed quality and environmental standards. The project completed 60% of the targeted 500km of roads.
  • 75 black spots were improved in accordance with the target. In addition, the Highways Department has taken up 307 black spots with their own funds, of which 282 black spots were improved by the project completion date.

  • The percentage of core road network in poor condition had been reduced from about 35% at appraisal to 8% (against the target of 10%) by the end of the project.
  • The travel time on the two selected corridors, namely Nagapattinam-Tuticorin and Arcot-Nagapattinam, was reduced by about 40% on average, exceeding the target of 20%. Travel time from Nagapattinam to Tuticorin by car has been reduced from 11 Hours 30 minutes to 5 Hours 47 minutes (50 %). Travel time from Arcot to Nagapattinam has been reduced from 8 Hours 15 minutes to 5 Hours 25 minutes (34 %).
  • The number of fatalities from road accidents per 10,000 registered vehicles fell from 19 at the time of appraisal to 10.27 by 2011 exceeding the target of 14.
  • The quality of the project roads was substantially superior to the non-project 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-project roads.
  • In terms of overall user satisfaction at the end of the project, the project roads were rated at 4 (on a 5-point scale) whereas the National Highways and State Highways were rated at 4.1 and 3.8 respectively. 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).

B. Improved sustainability of the state's core road network: Substantial.
  • The covenant by which the Government of Tamil Nadu undertook to establish a Road Maintenance Fund to be administered by a Road Board was waived during the course of implementation in 2009, based on the government’s argument that they had been consistently providing sufficient funds for maintenance. The allocations for maintenance matched and exceeded 100 percent of the target set under the Government’s road sector expenditure plan (ICR, page 18).
  • A Road Safety Policy was approved and disseminated. Road safety audits and a Road Accident Database Management (RADMS) system have been mainstreamed into the work of the Police, Traffic, and Highways Departments. These systems have received wide recognition as good practice examples worthy of emulation by other road development agencies.
  • Road Safety Audit & Assessment Training was provided to HQ and field based staff of Highways Department and also police officers; road safety awareness programs were delivered for about 1,200 three and four-wheeler drivers in ten districts and also for about 400 school children.
  • By the end of the project, the computerized project and financial management systems to plan works on the core road network were developed and undergoing tests for user acceptance.
  • The Road Asset Management System for mechanized collection of structural data to determine road condition is fully functional; the system is a key input for preparation of the budget for road works.
  • Aided by the technical assistance provided under the project, 30 km of the Chennai Outer Ring Road with an estimated cost of Rs. 8.6 billion (US$170million) were awarded as a public- private partnership (PPP) and are being implemented. The technical assistance supported the Government of Tamil Nadu to harness the PPP approach for delivering improved services to road users. About 35 percent of the project cost was paid by the government during the construction phase, thus making the project more attractive for the private players.
  • In addition, two other roads with a total length of about 133 km are under operation as public-private partnerships; and five other projects are under consideration for possible development with private participation. The project demonstrated that the Government of Tamil Nadu and the Highway Department could prepare and implement large-scale civil works, in particular through adoption of more efficient contracting approaches like PPP contracts.
  • To enhance transparency and accountability, the project introduced the Governance and Accountability Action Plan 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; (b) appointment of officers to monitor compliance with social and environmental safeguards; and (c) developing a database to ascertain/track contractor capacity/performance during the procurement and implementation phases.
  • As part of restructuring of the Highways Department, 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 as Planning, Quality Assurance and IT. The staffing norms across work units were rationalized in line with the functions/workload. As part of staffing rationalization, over an eight-year period, the staff strength was reduced from 7,884 to 6,935. The administrative costs as a percentage of total expenditure have been reduced from 9% in 2001 to 5% in 2011-12 in line with the target.

  • Annual expenditure for maintenance of the total road network, as a percentage of the Finance Commission norms, has increased from 63% (FY2001/02) to100% (FY2004/05) exceeding the target of 80%. From 2006-07, the government expenditure on maintenance from its own funds has been consistently above these norms; and, in years where it received grant-in-aid from the central government, the expenditure was about 50-70% above the norms. With the adoption of a computerized 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.
  • According to a questionnaire survey and project team interactions with Tamil Nadu Highways Department staff, the enhancement of procurement and contract management practices under the project led the Highways Department to: (i) progressively move away from small, 10-20 km/year interventions to larger-size contracts and a corridor-based approach in carrying out road works; (ii) prioritize works within the network based mostly on the conditions of the roads; (iii) plan to increase the use of multi-year performance based contracts for maintenance; (iv) include escalation clauses in contracts; and (v) increase the use of external experts to bridge the skill/resource gaps within the Highways Department, especially in the areas of engineering design, traffic studies, and preparation of detailed technical and feasibility reports.

5. Efficiency:

The economic internal rate of return (EIRR) for the four major upgrade works packages at closure (which constituted 76% of final project cost) is estimated to be in the range of 32% and 58% as compared with 30.2%at appraisal. The analysis was carried out for all the project upgraded roads totaling 712 km in length, excluding two bypasses, considering: (i) final completion costs, (ii) implementation period, and (iii) achieved traffic on upgraded roads and sensitivity analysis taking into account 20% reduction in benefits The economic analysis has been based on comparison of costs and benefits under “with project’ and ‘without project” scenarios.. The model used for the analysis is the Highway Development and Management Model (HDM-4). The main benefits were (i) vehicle operation costs (VOC) savings, and (ii) travel time savings.

The project had a one year delay in implementation and a further two -year extension for the Additional Financing to help finance cost overruns, 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 the Indian Rupee against the US Dollar; and (iii) addition of a Tsunami affected bridge for which an amendment to the Loan Agreement was carried out.

In case of the upgrade works contracts, delays ranged from one to three years. The reported time overruns were claimed to have been overstated as they were linked to the issuance of ‘taking over’ certificates, which were usually prone to administrative delays. The physical works were nearly complete by March 2011. The cost overruns in the three out of four upgrade works packages represented 40, 51, and 77 percent of contract values. These three packages covered about 330 km constituting less than a half of the major upgrade works component. These cost overruns were also the result of the design revisions necessitated by a substantial deterioration in road conditions due to a prolonged time lapse between the design preparation and contracts award that resulted from the Bank’s decision to ‘pause’ a project for two years (see Section 8a below).

Efficiency is assessed as substantial.

a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:

Rate Available?
Point Value
ICR estimate:

* Refers to percent of total project cost for which ERR/FRR was calculated

6. Outcome:

The project’s development objective was highly relevant to the challenges faced by the highway sector in the state of Tamil Nadu. The project substantially contributed to better quality and sustainability of the state's core road network improving road conditions on 21% of the state's highways (2,200km). Along with the reductions in travel times and number of fatalities achieved under the project, the Government increased its allocations for the road sector, in particular for maintenance. Efficiency and relevance of design are rated substantial. Outcome is assessed as satisfactory.

a. Outcome Rating: Satisfactory

7. Rationale for Risk to Development Outcome Rating:

The roads improved through upgrade works 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. Regarding the institutional strengthening activities, some positive directional changes in the functioning of the Highways Department, in particular in the areas of procurement and contract management, suggest that the project’s outputs and achievements will be progressively mainstreamed. For instance, the Department is currently focusing its efforts on mainstreaming the Geographical Information System and Project Financial and Management System into its operations and the Government of Tamil Nadu is attaching a high priority to such integration. The recent launch of all these systems by the 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.

a. Risk to Development Outcome Rating: Moderate

8. Assessment of Bank Performance:

a. Quality at entry:
The project design appropriately targeted the key challenges faced by the highway sector in Tamil Nadu, i.e., (a) capacity expansion severely lagging behind demand; (b) inadequate allocation of funds in general and to maintenance in particular; (c) organizational capacity of the Highways Department constrained by a combination of ineffective/obsolete structures, systems and processes; and (d) lack of a coherent strategy to address road safety issues. The choice of components directly addressed these challenges within the project’s budget and time limitations.

During the preparatory period, the Bank’s decision to “pause” preparation," due to serious differences between the project coordination consultants and the implementing agency and lack of effective leadership at the Project Management Unit" (ICR, page 5) had resulted in a nearly 2-year delay. This had the positive result of infusing effective leadership at entry and building up competencies in project preparation of the Highways Department (see Section 9 below). Nevertheless, this two-year gap and withdrawal of the project preparation consultants in some of the upgrade works contracts resulted in obsolete designs that had to be modified. The Bank could have alerted the Government to this issue and encouraged them to review and update the designs. The absence of such a review resulted in subsequent time and cost overruns in a major project component of road upgrade works.

At the time of appraisal, the project team identified a total of 18 risks with potential impact on the project’s financial, physical or institutional sustainability. Of these, four risks were rated 'substantial', i.e., absence of sustained commitment of government to sector reform; slow flow of funds from Government of Tamil Nadu to the Highways Department (HD), and delays in submission of audit reports; resistance of Highways Department 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 the Highways Department, and delayed procurement turned out to be 'substantial' at least for some time during preparation and implementation.

Also, given the large upgrade works, delays on account of utility shifting could have been recognized as a substantial risk and appropriately mitigated. Another major risk was the government’s willingness and commitment to adopt the recommendations emanating from the Institutional Strengthening component. Finally, the fact that the project required additional financing indicates that price escalation and exchange rate could have been recognized as potential risks.

Quality-at-Entry Rating: Moderately Satisfactory

b. Quality of supervision:
According to the ICR, supervision was carried out at regular intervals. Adequate numbers of staff with requisite skills and expertise in technical and safeguards functions were engaged in supporting the implementation (ICR, page 22).

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 arising challenges. For example, the task team was alert and responsive to unforeseen developments such as the need for addressing road sections damaged on account of the Tsunami in December 2004, and also to needs such as extending the closing date and additional financing. Major problem areas such as delays in land acquisition and approvals to design changes were identified early on and persistently followed through to their satisfactory resolution.

According to the ICR, the Mid-Term Review (August 2006) was thorough. The key issues in implementation were brought to the attention of the sector and country management and the guidance received was promptly acted upon.

Quality of Supervision Rating: Satisfactory

Overall Bank Performance Rating: Moderately Satisfactory

9. Assessment of Borrower Performance:

a. Government Performance:
Throughout the preparation and implementation stages, the project received a requisite level of support from the Government of India. The Government of Tamil Nadu extended full support to the project through most of the preparation and implementation phases, especially in putting in place a reasonable level of skilled personnel and fully endorsing a broader institutional and policy agenda. It responded well to such challenges as the rationalization of manpower, devolution of more powers and autonomy to the Highways Department, and increasing budgetary allocations to the sector.

The Government of Tamil Nadu responded to a lack of effective leadership in the project management unit during two years of the middle phase of preparation and around two years into implementation by assigning the implementation leadership to senior civil servants from the Indian Administrative Service. This added a greater degree of autonomy and empowerment to the project. Officers from this service usually function as the Heads of District Administration overseeing the revenue (land) and other public services in their respective districts, before moving on to take higher level positions in the government administration. This puts them in an advantageous position not only in terms of understanding the intricacies involved in key preparatory activities such as land acquisition, resettlement, and utility shifting --- all of which require the cooperation of the local administration/departments at the District/field level --- but also expedite action, if necessary, through quickly interacting with the relevant officers in their cadre-networks. These senior civil servants were able to secure better cooperation and compliance from other government agencies involved in key functions such as land acquisition, resettlement and rehabilitation, and utility shifting.

Government Performance Rating: Satisfactory

b. Implementing Agency Performance:
The project was implemented by a dedicated Project Management Unit under the aegis of the Highways Department. The Unit was fairly effective in expediting preparation and implementation of all the activities despite such initial limitations as a lack of the effective leadership and what the ICR describes (page 24) as a "rather tepid" involvement of the Highways Department in the project during the preparation and early stages of implementation.

The Unit staff had to go through a steep learning curve, as this was the first World Bank-supported road sector project in the state; it comprised relatively large-size civil works with “new” norms and processes for managing social and environmental aspects, new Information Technology-based systems and novel contracting approaches such as the use of supervision consultants, performance- based maintenance contracts, and private sector participation. In the process, the staff responsible for these activities built up their capacity and acquired new skills. Some of the 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 reportedly performed well there. The implementing agency recovered from earlier setbacks and completed the major civil works components on the maintenance, safety, institutional development and policy components with what the ICR describes as a reasonable degree of efficiency.

Implementing Agency Performance Rating: Satisfactory

Overall Borrower Performance Rating: Satisfactory

10. M&E Design, Implementation, & Utilization:

a. M&E Design:
The project's indicators were appropriately linked with the intermediate objectives. The key indicators included baseline data and measurable targets set at appraisal (PAD Annex 1; ICR-Annex 2 and Section F of the Datasheet). The key performance indicators for the project development objective included: (i) percentage of core road network in poor condition; (ii) travel time reductions on two selected project corridors; (iii) number of fatalities from road accidents per 10,000 registered vehicles; and (iv) actual expenditure for maintenance of total road network as a percentage of Finance Commission norms.

The indicators for some of the activities under the institutional and policy development component were less precise. For example, some of the indicators referred to either the occurrence of events (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 be insufficient evidence of tangible improvement in the functioning of the Highways Department. A more effective approach would have been to measure how the Highways Department’s functioning had improved in terms of time taken in preparing, awarding, and implementing projects or the efficiencies gained in capital and maintenance expenditure.

The Highways Department was responsible for managing and operating the M&E system.

b. M&E Implementation:
The project monitored various output and outcome indicators through the annual reports of the Highways Department, quarterly progress reports, and Government’s plans and policy documents as well as specially commissioned studies and surveys (for evaluating resettlement impacts and road user satisfaction). Also, the project- supported Information Technology- systems have significantly added to the Highways Department’s ability to regularly monitor and evaluate data on many critical parameters for example, project & financial management, road accidents, traffic and road conditions.

a. M&E Utilization:
The M&E system was used to support recommendations or inform management decisions during the course of implementation.

M&E Quality Rating: Substantial

11. Other Issues:

a. Safeguards:
This was a Category “A” project that triggered four safeguards policies – OP4.01 Environmental Assessment, OP 4.12 Involuntary Resettlement, OP4.04 Natural Habitats, and OP4.11 Cultural Resources.

Environmental Assessment and Management: The ICR reports that "the project closed with a satisfactory rating on environmental safeguards" (page 12). The key areas of concern were (i) the project's impact 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 the eleventh century; (iii) project corridors passing adjacent to many community surface water collection ponds, and affecting some of them due to project interventions; and (iv) cutting of large number of road side trees for road widening.

The ICR reports that, during preparation, the environmental issues were comprehensively addressed through: (a) delineating various measures as well as institutional arrangements for implementation of the Environmental Management Plan (EMP); (b) extensive public consultations; and (c) design and integration of environmental enhancement measures into precise bills of quantities (ICR, page 11). 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 or deepening of community ponds along the project corridors; landscaping and enhancement of incidental spaces created due to geometric corrections; and construction of roadside water recharge pits in dry and water scarce areas. For enhancement of ponds and cultural properties, the communities have contributed, on average, 3% and 8% of the project costs; in some cases, the contribution percentage was as high as 15%.

According to the ICR, 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%), the project management unit 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 of age. The maintenance of these trees, including replacement of those damaged, will be carried out until March 2013.

Involuntary Resettlement: The ICR reports that "the land acquisition and resettlement implementation was largely successful and the project closed with a satisfactory rating on social safeguards" (page 10). At the time of appraisal in 2003, the magnitude of land acquisition and displacement triggered by this project – 572 hectares of land and about 15,000 households – was the largest among this type of state highway projects financed by the World Bank in India. The Government of Tamil Nadu adopted a project specific Resettlement and Rehabilitation 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 was 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.

The implementation of the Land Acquisition and Resettlement Action Plan was delayed during 2005-06; however, the ICR reports that the problems, which were related to payment of compensation and alternative resettlement prior to displacement, were resolved soon after. According to the ICR, the project made good progress on land acquisition and resettlement 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. Another important feature of the resettlement implementation was the additional assistance to severely affected people through land purchase grants, house building allowances and severance allowance.

The ICR reports that, by the project closing date, resettlement implementation was fully completed as all affected families had received their compensation and main entitlements, except some residual benefits such as title to alternative houses in the case of 52 families, 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 Tamil Nadu 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. 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 or shops and support for income generation activities. 1,679 community property assets such as school buildings, small temples, hand pumps, and Panchayat offices, were reconstructed. Two resettlement impact evaluation studies conducted by the Highways Department, in consultation with the Bank, indicated that the project had not caused any significant adverse impacts on livelihoods, and the project- affected people had improved their living standards.

b. Fiduciary Compliance:
Procurement: The ICR reports that the procurement of works, goods, and services was carried out in accordance with Bank guidelines and the procurement plan was updated each year and when necessary. The project had four large civil works packages for upgrade works procured through International Competitive Bidding and some relatively smaller works packages (mostly for maintenance of roads) procured through National Competitive Bidding. 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. Despite some delays, the procurement aspects were, according to the ICR, 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. The delays were caused by re-bidding in one of the upgrade works packages (the bids received were much higher than the estimated amount) and a longer time taken for Bank clearance for award of another package (the “winning bidder” was under an INT investigation in another project). It took between 12 and16 months to sign the contracts from the bid opening date. No cases of misprocurement were reported.

Financial management. The financial management performance of this project was rated satisfactory in the supervision reports, and the ICR reports that there were no significant issues encountered during the project implementation. This was mainly due to: (i) simplified financial management arrangements; (ii) use of government’s mainstream treasury systems; (iii) sustained availability of experienced and qualified accounting staff in the Project Management Unit and field divisions; and (iv) effective oversight and control by the Unit through institutionalization of the internal audit wing for the road upgrade works component. The field divisions maintained adequate expenditure records and, the Unit was regular in the submission of monthly accounts to the Accountant General (Accounts & Entitlements) and expenditure claims and audit reports to the Bank. The one area that needed better coordination between the finance and technical units in the Unit was contract management, especially relating to contract variations. The implementation of a standard Information Technology-based accounting system under the bank’s Loan Accounting Change Initiative, 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.

The Borrower's ICR (ICR, page 62) states that "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." The ICR states that the audit report and the project financial statements for the financial year 2011-12 were to be submitted to the Bank by January 31, 2013 (after the ICR completion date). According to information provided subsequently by the project team, the audit report and the project financial statements were received on December 19, 2012. There was one audit qualification, which was addressed by the project and was subsequently dropped.

c. Unintended Impacts (positive or negative):
None reported.

d. Other:

12. Ratings:

IEG Review
Reason for Disagreement/Comments
Risk to Development Outcome:
Bank Performance:
Moderately Satisfactory
Due to the fact the Quality at Entry rating is moderately satisfactory. The Bank could have alerted the Government to the need of updating the road upgrade works designs. The obsolete designs that had not been modified during a two-year 'pause' in preparation resulted in subsequent time and cost overruns in the major project component. 
Borrower Performance:
Quality of ICR:
- When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
- The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate.

13. Lessons:
The ICR has identified a number of lessons, of which the most important are listed below with some adaptation:

Adequate attention needs to be paid to enhancing the leadership and empowerment of dedicated implementation units at multiple levels. The units that are put together just for the sake of a project tend to lack full empowerment and leadership from within and often rely on the strength of individuals assigned to lead them.

In a project with a strong institutional development agenda, the teams may consider more outcome-based targets and indicators to measure achievements and impacts. Such targets, ideally, should relate not only to mere completion of all sub-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).

Land acquisition through private negotiations, coupled with innovative approaches to valuation, offers significant promise to expedite land acquisition in a timely and amicable manner. The benefits of private negotiations that factored in current realities with regard to the land value include a higher compensation to the landowners, a simplified and faster payment of compensation for the land acquired, elimination of court reference cases thus avoiding litigations and additional costs to the government, and saving considerable time through reduction in land acquisition process.

Early planning, integrating with contracts, right sequencing, and inclusive approach are essential for addressing environmental and social safeguards in a proper and satisfactory way. The implementation of environmental measures during the construction stage is more effective if they are integrated as part of the construction contracts, with provisions for related bills of quantities and incidental items as well as penalties to address non- compliance. Also, an inclusive approach in consultation with local communities could help harness opportunities to create valuable community assets and generate positive response and good will.

14. Assessment Recommended?


15. Comments on Quality of ICR:

The ICR is concise and outcome-oriented. The quality of evidence is adequate. The ICR offers a good analysis of the project activities. The lessons are evidence-based. The ICR did not explicitly stated the compliance with the OP4.04 Natural Habitats and OP4.11 Cultural Resources safeguard policies triggered by the project, while just covering a few aspects related to these safeguards under environmental assessment.

a. Quality of ICR Rating: Satisfactory

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