ADB Extends $315 Million for Highway Overhaul in India's Karnataka State

MANILA, PHILIPPINES - The Asian Development Bank (ADB) will extend $315 million to the government of Karnataka state in India for a major overhaul of the overburdened state highway system, which will help spur new economic growth and livelihood opportunities.

ADB's Board of Directors today approved a loan for the Karnataka State Highway Improvement Project. It will upgrade over 600 kilometers of state highways and support improved road planning, programming, operation, maintenance, and safety.

"The long-term impact of this initiative will be accelerated economic growth in Karnataka, with road upgrades improving access to essential services while providing employment opportunities for the rural poor," said Oleg Tonkonojenkov, Senior Transport Specialist in ADB's South Asia Department.

India's booming economy has led to a sharp rise in passenger and freight travel on its roads. State highways - which are secondary routes linking to national roads and carry about 40% of all traffic - are especially overburdened with increasing congestion, deteriorating surfaces, and growing safety issues.

The physical work will include expanding current roads into two lanes, constructing bypasses, strengthening existing culverts and bridges, and building new road bridges, rail overbridges and cross-drainage structures. The project puts a strong focus on beefing up the capacity of the state's Public Works Department to plan, develop, operate and maintain the road network effectively, and includes support for the establishment of a Planning and Road Asset Management Center.

"The project will help the department put in place objective, data-driven planning and programming for network development and maintenance, as well as ensuring safety measures and environmental and social safeguards are incorporated into the project cycle," said Mr. Tonkonojenkov.

ADB's loan from its ordinary capital resources makes up over 68% of the total project cost of nearly $463 million. The loan has a 25-year term with a grace period of 5-years and an annual interest rate determined in accordance with ADB's LIBOR-based lending facility. An additional technical assistance grant of $1.5 million from ADB's concessional Technical Assistance Special Fund will be used to help the Public Works Department build capacities for strengthening its road asset and safety management capabilities. The technical assistance will also help the government of Karnataka build capacities for carrying out projects with private sector participation.

The government of Karnataka's Public Works Department is the executing agency for the project, which is due for completion by December 2014.