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Regions and Countries Country Partnership Strategy Document
Country Strategy and Program Update 2005-2007: India
III. Portfolio Management IssuesA. Portfolio Performance23. As of 31 December 2003, ADB’s India portfolio included 27 ongoing loans for $5.2 billion with $2.4 billion (47%) in the transport sector, $1.1 billion in urban infrastructure, $1 billion in the energy sector, and $0.7 billion in multisector loans. The undisbursed balance was $4.3 billion, of which only $1 billion was accounted for by loans that had been effective for more than 2 years. Loans worth $1.6 billion are yet to be made effective. The portfolio is, therefore, relatively young. Portfolio performance during 2003 was generally good. The proportion of projects “at risk” dropped significantly, from 27.6% on 31 December 2002 to 14.8% on 31 December 2003, well on track for the CSP target of reducing the proportion of “at risk” projects to 10% by 2006. The disbursement ratio improved from 17.9% in 2002 to 20% in 2003, because of a record disbursement level of $658 million. Contract awards were $758 million, yielding a contract award ratio of 18.5% in 2003, which is lower than the ratio of 22.4% in 2002. The disbursement and contract award ratios for the India portfolio are close to the ADB-wide averages of 21.75% and 17.31%, respectively. The turnover of imprest accounts has improved from 0.6 in 2002 to 1.5 in 2003, though it remains below the desirable level of at least 2.13 Based on the projected lending pipeline for 2005–2007, and the age structure of the portfolio, disbursements should reach $850 million by 2005, and exceed $1 billion from 2006 onward. B. Performance Monitoring and Evaluation24. The India Resident Mission (INRM) is responsible for overall portfolio management and also administering 14 loans. INRM conducted three tripartite portfolio reviews through 2003 and 2004, in addition to the Country Portfolio Review Mission for 2003. One key lesson from this review process is the urgent need for better preparedness of projects at entry to avoid delays in loan signing.14 The Government and ADB have agreed that establishment of a PMU, with adequate advance training of PMU staff, shall be completed before loan negotiations. This will also help reduce the time lag between loan signing and subsequent disbursement. An innovative approach has been introduced in the urban sector to considerably shorten the implementation period (discussed in Chapter II, above). This can serve as a model for other sectors. INRM, supported by the Project Coordination and Procurement Division has significantly increased training programs to familiarize executing agencies with ADB’s policies and procedures, with nine seminars conducted at the federal and state levels in 2003–2004. INRM has also taken vigorous action to ensure timely submission of audited accounts, a persistent concern in India. This includes formal advice on consequences of non-compliance up to possible loan suspension. 25. Of the 10 loans from 1996 to 2003 that the Operations Evaluation Department (OED) evaluated, one was rated highly successful, six were rated successful, one, partly successful, and two, as unsuccessful (Appendix 1, Table A1.8). During the year OED completed a detailed performance audit report for Loan 1285-IND Gas Rehabilitation and Expansion Project in February 2004. The loan was rated, overall, as successful, but OED has noted that financial costs and technical risks should be better assessed to avoid burdening executing agencies with excessive commitment charges and other unwarranted costs, and that loan covenants should be based on a realistic assessment of feasible policy and sector reforms. __________________________
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