ADB Provides $300 Million to India's Bihar State to Improve Roads, Boost Growth

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending $300 million to Bihar, one of India’s poorest states, for road improvements that will help spur new livelihood opportunities and boost sustainable growth.

ADB’s Board of Directors today approved the loan for the Bihar State Highways II Project, which will build or upgrade about 356 kilometers of state highways. It is the second ADB project in support of Bihar’s State Highway Development Program that is targeting improvements to over 2,800 kilometers of state highways between 2007 and 2012.

Bihar is India’s third most populous state but nearly 43% of the population lives below the official poverty line - the highest proportion of any region in the country. The existing road network is poor with half of all villages lacking all-weather connections, and a lack of funds for road works in the past causing road sections to deteriorate beyond maintainable condition. Rehabilitating state highways, which will provide basic rural connectivity, is a key step in opening up new economic opportunities for subsistence farming families, and other rural poor, as well as providing indirect benefits from improved access to health, education and other social services.

The project will upgrade targeted highways into two-lane roads, build new drainage and bridges, and strengthen culverts and existing bridges. ADB will also extend technical assistance of $1 million to help build up the capacity of the recently established Bihar State Road Development Corporation to operate and maintain the improved roads, and to design future road projects.

“By helping reduce travel times, improving road safety, and supporting the state government’s capacity for road asset management and maintenance, the project will create a more efficient highway system, which in turn will help support sustainable economic growth,” said Markus Roesner, Transport Specialist in ADB’s South Asia Department.

The loan, from ADB’s ordinary capital resources, makes up around 71% of the total project cost of $424 million, and has a 25-year term with a 5-year grace period and an annual interest rate determined in accordance with ADB’s LIBOR based-lending facility. The government of Bihar is providing counterpart funds of $124 million. ADB’s technical support is from its Technical Assistance Special Fund.

The Bihar State Road Development Corporation is the executing agency for the project, which is expected to be completed by December 2014.