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Reforming the Road Sector in Madhya Pradesh, India

MANILA, PHILIPPINES (5 December 2002) - The Asian Development Bank (ADB) has approved a US$30 million program loan and a US$150 million project loan to support road sector reform and rehabilitate the road network in India's Madhya Pradesh state.

Inadequate institutional and technical capability have limited the capacity of Madhya Pradesh's public works department to manage the road sector.

This has resulted in rapid deterioration of the road network, increased road transport capacity bottlenecks and unreliable road transport services.

These problems, combined with inefficient use of scarce financial resources for road maintenance, have become major constraints to the state's social and economic development. Madhya Pradesh is one of three focal states for ADB operations in India.

The main objective of the Madhya Pradesh State Roads Sector Development Program (SDP) is to establish more effective and efficient management of state roads and ensure more reliable road transport services to support the state's social and economic development, and thus reduce poverty.

The program loan addresses policy and institutional frameworks in the state's public works department through implementing the reform measures and providing necessary institutional capacity building.

This will be achieved through:

• Instituting measures for good governance in management of the sector
• Improving road asset management
• Boosting institutional effectiveness and efficiency
• Identifying pilot cases for outsourcing and better private sector participation

The project loan is designed to rehabilitate about 1,750 kilometers of state highways and rural connector roads. It will also provide investments to rehabilitate and improve physical transport connections to most of the state's important socio economic centers.

Benefits include improved mobility and political and economic empowerment of the poor by giving better access to the mainstream economy, business opportunities and social services.

The program loan, from ADB's ordinary capital resources, is to be released in two tranches of US$12 million and US$18 million, respectively. It has a term of 15 years, including a grace period of three years.

The project loan is also drawn from ADB's ordinary capital resources, and has a term of 20 years with a grace period of five years.

Interest on both loans will be determined in accordance with ADB's LIBOR-based lending facility.

In addition, ADB will administer a complementary US$1.5 million technical assistance (TA) grant, funded by the UK, to assist the state government in implementing the institutional reform and provide institutional strengthening and capacity building of the state road sector.

Designed to assist the state government to implement institutional reform, the TA will:

• Help build institutional capacity to support the road network
• Strengthen transport planning, project financing, investment management and environmental management
• Disseminate recommendations through training programs
• Assist in labor rationalization and social safety net programs

More at adb.org/media

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