OFFOAL.? DOCUMENTS. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized The World Bank New Delhi Office Phone / !NTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 70 Lodi Estate Mailing Address: P.O. Box 416 INTERNATIONAL DEVELOPMENT ASSOCIATION New Delhi OFFOAL.? DOCUMENTS February 27, 2015 Mr. Tarun Bajaj Joint Secretary (MI) Department of Economic Affairs Ministry of Finance, Government of India Room No 40-B, North Block New Delhi - I Dear Mr. Bajaj: INDIA: Andhra Pradesh and Telangana Road Sector Project - Loan No.7792-IN 0' (formerly known as Andhra Pradesh Road Sector Project) Amendment to Loan Agreement and Supplemental Letter (Indicators) We refer to: (i) the loan agreement between the International Bank for Reconstruction and Development (the Bank) and India (the Borrower) dated January 22, 2010 (the Loan Agreement); (ii) the supplemental letter of the same date regarding performance monitoring indicators agreed further to the Loan Agreement; and (iii) the Project agreement of the same date between the Bank and the State of Andhra Pradesh (Andhra Pradesh) (the AP-Project Agreement). The Recipient has advised the Bank of the enactment of the Andhra Pradesh Reorganization Act, 2014 (6 of 2014), published in the Gazette of India dated March 1, 2014, creating the new Telangana State (Telangana), formerly part of Andhra Pradesh. We also refer to the Borrower's letter dated December 16, 2014 and to the discussions among the Borrower, Andhra Pradesh, Telangana and the Bank, relating to amendments to take into account the creation of Telangana, and to reflect Telangana's endorsement and commitment to carry out certain parts of the Project and as reflected in the aide-memoire transmitted to the Borrower, Andhra Pradesh and Telangana through the Bank's letter dated September 1, We are pleased to inform you that the Bank concurs with the request, and proposes to enter into a Project agreement with Telangana for this Project (T-Project Agreement). The Loan Agreement is amended as set forth below subsequent to the request and the above-mentioned discussions: I. The name of the Project "Andhra Pradesh Road Sector Project", wherever used is replaced by "Andhra Pradesh and Telangana Road Sector Project". 2. All references to "RBD" and "RDC" in the Loan Agreement shall hereinafter been deemed references to the "AP-RBD" and the "AP-RDC" as defined in the Attachment I hereto. 2. Section 3.01 of Article Ill is amended to read as follows (emphasis added): "3.01. The Borrower declares its commitment to the objectives of the Project. To this end, the Borrower shall cause the Project to be carried out by: (i) the State of Andhra Pradesh, through its AP-RBD and AP-RDC; and (ii) the Telangana, through its T-RBD and PIU, all in Headquarter(J Washington DC L) USA

2 Mr. Tarun Bajaj -2- February 27, 2015 accordance with the provisions of Article V of the General Conditions and the Respective Project Agreements." 3. Component I (Road Improvement) of Schedule I is amended to read as follows (emphasis added): "Upgrading and maintenance of roads in the Core Road Networks of the State of Andhra Pradesh and Telangana, through: (a) upgrading about 427 km of priority state highways (302 km in the State of Andhra Pradesh and 125 km in Telangana); and (b) maintenance of about 6,018 km of roads in the Core Road Network (4,301 km in the State of Andhra Pradesh and about 1,717 km in Telangana) under long-term performance-based maintenance contracts; including implementation of ancillary social, resettlement and environmental measures." 4. Component 2 (PPP Facilitation Support) of Schedule I is amended to read as follows (emphasis added): "Technical assistance to strengthen the capacity of the Project Implementing Entities to attract, on Public Private Partnership (PPP) basis, private sector participation in financing, development, and management of selected high traffic density corridors." 5. Component 3 (Institutional Strengthening) of Schedule I is amended to read as follows (emphasis added): "Technical assistance and support to the Project Implementing Entities to: (a) facilitate the full operationalization of the AP-RDC and strengthening of T-RBD, with requisite capacity for its responsibilities in managing the Core Road Network; and (b) assist in the implementation, coordination and monitoring of the Project, including the asset management program, GAAP, and ISAP." 6. Component 4 (Road Safety) of Schedule I is amended to read as follows (emphasis added): "Development of safer road corridors and reduction of road accidents by: (a) development of pilot demonstration projects on selected Core Road Network corridors; (b) development and implementation of institutional and policy action plans for improving the Project Implementing Entities' road safety responsibility framework and capacities; and (c) carrying out black-spot improvement program in the Core Road Network." 7. Section 1.1 of Schedule 2 is amended to read as follows (emphasis added): "1. To facilitate the carrying out of the Project, the Borrower shall make the proceeds of the Loan available to the Project Implementing Entities in accordance with Borrower's standard arrangements for developmental assistance to the States of India." 8. Section 1.2 of Schedule 2 is amended to read as follows (emphasis added): "2. The Borrower shall cause the Project Implementing Entities to take all necessary steps to ensure that all Project activities are implemented in accordance with the Schedule to their Respective Project Agreements."

3 Mr. Tarun Bajaj -3- February 27, Section II.A of Schedule 2 is amended to read as follows (emphasis added): "The Borrower, through the Project Implementing Entities, shall monitor and evaluate the progress of the Project and cause the Project Reports to be prepared in accordance with the provisions of Section 5.08 of the General Conditions and on the basis of indicators agreed with the Bank. Each Project Report shall cover the period of one (1) Financial Year quarter, and shall be furnished to the Bank not later than forty-five (45) days after the end of the period covered by such report." 10. Section II.B.3 of Schedule 2 is amended to read as follows (emphasis added): "3. Without limitation on the provisions of Part A of this Section, the Borrower shall cause the Project Implementing Entities to prepare and furnish to the Bank not later than forty-five (45) days after the end of each Financial Year quarter, interim unaudited financial reports for the Project, covering the quarter, in form and substance satisfactory to the Bank." I1. The table in Section IV.A.2 of Schedule 2 is amended to read as follows: (1) Works and R&R Assistance: Percentage of Amount of the Loan Expenditures to Allocated be financed Category (expressed in USD) (inclusive of Taxes) (a) for Components 1(a), 4(a), and 60,255,000 80% 4(c) of the Project (b) for Component 1(b) of the Project 35,812,500 20% (2) Goods, Consultants' Services, 8,378,000 80% Training and Incremental Operating Costs (3) Front-end Fee 800,000 Amount payable pursuant to Section 2.03 of this Agreement in accordance with Section 2.07(b) of the General Conditions (4) Premia for Interest Rate Cap or -0- Amount payable Interest Rate Collar pursuant to Section 2.07(c) of this Agreement in accordance with

4 Mr. Tarun Bajaj -4- February 27, 2015 (5) Works and R&R Assistance: Section 4.05(c) of the General Conditions (a) for Components 1(a), 4(a), and 97,139,190 80% 4(c) of the Project for the State of Andhra Pradesh 20% (b) for Component 1(b) of the 11,178,000 Project for the State of Andhra Pradesh (6) Goods, Consultants' Services, 12,044,000 80% Training and Incremental Operating Costs under the Project for the State of Andhra Pradesh (7) Works and R&R Assistance: (a) for Components 1(a), 4(a), and 27,608,310 80% 4(c) of the Project for Telangana (b) for Component 1(b) of the 4,757,000 20% Project for Telangana (8) Goods, Consultants' Services, 6,028,000 80% Training and Incremental Operating Costs under the Project for Telangana Cancelled as of February 19, ,000,000 TOTAL AMOUNT 320,000, Section IV.B.2 of Schedule 2 is amended to read as follows: "2. The Closing Date is May 31, 2017." 13. Section I (Definitions) of the Appendix is amended to read as set forth in Attachment I hereto. The attachment to the supplemental letter regarding performance monitoring indicators agreed further to Section II.A of Schedule 2 is amended to read as set forth in Attachment 2 hereto. All other provisions of the Loan Agreement, except as amended herein, remain unchanged.

5 Mr. Tarun Bajaj -5- February 27, 2015 Please confirm your agreement to the foregoing by signing the form of confirmation set forth below, and returning one fully executed original of this amendment letter to us and retaining one original for your records. This amendment letter shall become effective upon receipt by the Bank of: (a) duly countersigned originals of this amendment letter, the amendment letter to the AP-Project Agreement, and the T-Project Agreement, prepared further to the above-mentioned requests and discussions; and (b) a legal opinion, satisfactory to the Bank, prepared by counsel to Telangana, or a competent official of Telangana acceptable to the Bank, pursuant to Article III of the T-Project Agreement and Section 9.02 of the General Conditions. Sincerely yours, Onno Ru h Country Director, India South Asia Region AGREED INDIA By: Name:. n (TARU-N 8AJ_^,Y1, Tile AMMjM,%u i of Fi anco,p,es qff ftqrm/deptua$ efco. AtOUT Date:! Milao_O_

6 Mr. Tarun Bajaj February 27, 2015 cc: Mr. Subhash Chandra Garg, Executive Director (India), World Bank Mr. L.K. Atheeq, Senior Advisor the Executive Director, World Bank Mr. Bhaskar Dasgupta, Deputy Secretary, Department of Economic Affairs, Ministry of Finance, Mr. S.G. Dastidar, Controller of Aid Accounts and Audit, Department of Economic Affairs, Ministry of Finance, Government of India Mr. S.M. Das, Additional Director General, Ministry of Road Transport & Highways, Government of India Government of Andhra Pradesh Mr. I.Y.R. Krishna Rao, Chief Secretary, Government of Andhra Pradesh Dr. P. V. Ramesh, Principal Secretary, Finance Department (R&E) Mr. L. Premachandra Reddy, Secretary, Finance Department Mr. B. Sam Bob, Principal Secretary, Department of Roads and Buildings Mr. G. JagannadhaRao Managing Director (RDC) and Chief Engineer & CRN (RBD) Government of Telangana Dr. Rajiv Sharma, Chief Secretary, Government of Telengana Mr. K. Rama Krishna Rao, Special Secretary, Finance (IF) Department Mr. Ajay Misra, Principal Secretary, Department of Transport, Roads & Buildings Mr. P. Ravinder Rao, E-in-C (R&B), State Roads, CRN & Jt. MD, RDC

7 ATTACHMENT 1 Section I. Definitions I. "Andhra Pradesh" means the Borrower's Andhra Pradesh State that existed prior to June 2, 2014, and which has since been bifurcated into the States of Andhra Pradesh and Telangana as of June 2, 2014, pursuant to the Andhra Pradesh Reorganization Act, 2014 (6 of 2014). 2. "Anti-Corruption Guidelines" means the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, "AP-Project Agreement" means the Project agreement dated January 22, 2010, entered into between the Bank and the Andhra Pradesh, as succeeded by the State of Andhra Pradesh, relating to the implementation of the State of Andhra Pradesh' respective parts of the Project, as such agreement may be amended from time to time. The term includes the General Conditions and all appendices, schedules and agreements supplemental to the AP- Project Agreement 4. "AP-RBD" means, the Roads and Building wing of the Department of Transport, Roads, and Buildings of State of Andhra Pradesh, or any successor or successors thereto. 5. "AP-RDC" means the Andhra Pradesh Roads Development Corporation, a statutory corporation established through Act I of 1998, enacted by the Andhra Pradesh Legislative Assembly, and which came into effect on January 2, 1998, or any successor or successors thereto. 6. "Category" means a category set forth in the table in Section IV of Schedule 2 to this Agreement. 7. "Consultant Guidelines" means the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" published by the Bank in May 2004 and revised in October "Core Road Network" means state highways and major district roads in the State of Andhra Pradesh and Telangana that have been designated as being a part of the core road network by the Government of Andhra Pradesh notification, dated March 21, 2007, as the same may be amended from time to time. 9. "EMPs" means the Project Implementing Entities' corridor specific environmental management plans prepared, and/or to be prepared, in a manner and substance satisfactory to the Bank for the activities contemplated under Component 1, and Sub-Components 4(a) and 4(c) of the Project, adopted, and/or to be adopted, by the Project Implementing Entities for the implementation of their activities under such Component/Sub-Components of the Project; all such documents describing the environmental management, mitigation, monitoring, reporting and institutional measures that shall be undertaken by the Project Implementing Entities in the carrying out of such Parts of the Project, as such plans may be revised from time to time with the prior concurrence of the Bank. 10. "ESMF" means the Project Implementing Entities' environmental and social management framework dated February 5, 2009satisfactory to the Bank, describing the environmental and social safeguards, policies, procedures and institutional framework applicable to Component 1(b)

8 -2- and to be adopted, as applicable, for Components 4(a) and 4(c) of the Project, including identification, assessment and mitigation of potential environmental and social impacts arising from the Project, measures to protect cultural property, carrying out consultations, processing and redressing grievances, monitoring related impacts, and, where applicable, resettlement and rehabilitation actions plans, tribal development plans, and other development plans and entitlement frameworks for people adversely affected as a result of Project implementation, as such framework may be revised from time to time with the prior concurrence of the Bank. 11. "Financial Year" means the Borrower's and Project Implementing Entities' financial year beginning April 1 and ending March 31 of the following year. 12. "*GAAP" means the Project Implementing Entities' governance and accountability action plan adopted on April 1, 2009, which sets out the key actions to be undertaken by the Project Implementing Entities to strengthen governance, transparency, and accountability under the Project, as such plan may be amended from time to time with the prior concurrence of the Bank. 13. "General Conditions" means the "International Bank for Reconstruction and Development General Conditions for Loans", dated July 1, 2005 (as amended through February 12, 2008), with the modifications set forth in Section II of this Appendix. 14. "HIV/Aids Action Plan" means the Project Implementing Entities' HIV/aids action plan adopted on March 24, 2009, satisfactory to the Bank, as such plans may be revised from time to time with the prior concurrence of the Bank. 15. "Incremental Operating Costs" means incremental operating costs incurred by the Project Implementing Entities on account of Project implementation, management and monitoring, including salaries of non-civil service positions (but excluding salaries for civil service positions), consultancy costs, dissemination of Project related information, office and equipment purchase, maintenance and repair, vehicle maintenance and repair, travel, including travel to Project sites, security, communication, bank charges, and other costs directly associated with and necessary under the Project. 16. "ISAP" means the Project Implementing Entities' institutional strengthening action plan adopted on April 1, 2009, satisfactory to the Bank, describing the key road sector policy, organizational, and legislative undertakings required to modernize the AP-RDC and strengthen T-RBD and to improve the planning and financing framework for the road sector, as such plan may be revised from time to time with the prior concurrence of the Bank. 17. "Phase I Roads" and "Phase 11 Roads" mean the roads referred to as such under Component I of Schedule I to this Agreement. 18. "PIU" means Telangana's Project Implementation Unit, established within T-RBD for purposes of assisting T-RBD with the carrying out of the Project pursuant to Section L.A and 1.1B of the Schedule to the T-Project Agreement. 19. "Procurement Guidelines" means the "Guidelines: Procurement under IBRD Loans and IDA Credits" published by the Bank in May 2004 and revised in October "Procurement Plan" means the procurement plan for the Project, dated September 4, 2009, and referred to in paragraph 1.16 of the Procurement Guidelines and paragraph 1.24 of the Consultant

9 -3- Guidelines, as the same shall be updated from time to time in accordance with the provisions of said paragraphs. 21. "Project Implementing Entities" means, collectively the State of Andhra Pradesh and Telangana; and "Project Implementing Entity" means either of them individually considered, as the context may determine. 22. "R&R Assistance" means resettlement and rehabilitation assistance provided to eligible recipients in accordance with the terms and conditions set forth in the R&R Policy Framework and the RAPs R&R Policy Framework" means the Project Implementing Entities' resettlement and rehabilitation policy framework dated March 24, 2009setting forth the policies and procedures addressing adverse temporary or permanent social impacts resulting, or likely to result from, the carrying out of the Project, as the same may be revised from time to time with the prior concurrence of the Bank. 24. "RAPs" means the Project Implementing Entities' resettlement action plans prepared, and/or to be prepared, in a manner and substance satisfactory to the Bank for the activities contemplated under Component 1, and Sub-Components 4(a) and 4(c) of the Project, adopted, and/or to be adopted, by the Project Implementing Entities for the implementation of their activities under such Component/Sub-Components of the Project, all in accordance with the R&R Policy Framework, as such plans may be revised from time to time with the prior concurrence of the Bank. 25. "Respective Project Agreements" means, collectively the AP-Project Agreement, and the T- Project Agreement, and the term "Project Agreement" means any of such agreements, as the case may be, individually considered. 26. "State of Andhra Pradesh" means the Borrower's State of Andhra Pradesh as created on June 2, 2014, pursuant to the Andhra Pradesh Reorganization Act, 2014 (6 of 2014), which is one of the Project Implementing Entities for purposes of the General Conditions, or any successor thereto. 27. "T-Project Agreement" means the Project agreement to be entered into between the Bank and Telangana relating to the implementation of Telangana's respective parts of the Project, as such agreement may be amended from time to time. The term includes the General Conditions and all appendices, schedules and agreements supplemental to the T- Project Agreement. 28. T-RBD" means, the Roads and Building wing of the Department of Transport, Roads, and Buildings of State Telangana, or any successor or successors thereto 29. "TDP" means the tribal development plan related to Component 1(a) of the Project, adopted by the Project Implementing Entities on March 27, 2009, satisfactory to the Bank, describing the strategy and actions to ensure that tribal people participate in and benefit from the Project activities, as such plan may be revised from time to time with the prior concurrence of the Bank.

10 "Telangana" means the Borrower's State of Telangana, as created on June 2, 2014, pursuant to the Andhra Pradesh Reorganization Act, 2014 (6 of 2014), which is one of the Project Implementing Entity for purposes of the General Conditions, or any successor thereto. 31. "Training" means reasonable and necessary costs of training related to Project implementation, including the fees of educational or other institutions that provide training, costs related to attendance or organization of conferences, seminars, workshops, and study tours, and the trainees' cost of travel, boarding, lodging and per diem allowances.

11 ATTACHMENT 2 RESULTS INDICATORS February 2015 Restructuring: Revised Results Framework for AP and Telangana Road Sector Project Target Value (Actuals) Indicators Baseline Thus Far End of Project Outcome Indicators VRI-VR4 Andhra Pradesh Telangana Full operationalization of RDC still not fully Y I: Outstanding audits completed * GoAP provides RDC with If RDC is formed, financial, administrative and * GoT provides RDC with financial, RDC with adequate operational: outstanding (Audit ofrdc accounts upto has operational powers; Rules and administrative and operational procedures adopted powers: Rules and procedures financial and human audits: Act to be reviewed; been completed) adopted resources to manage the no independent financial RDC has own staffing and adequate CRN & operational procedures: sources of revenue for CRN many staff deputed from RBD Vehicle operating costs Cars: T5.41 per veh km 12% reduction with project, that is, 12% reduction with project, that is, I decline relative to the T 4.76 per veh km 4.76 per veh km without project scenario in Truck: per veh km 8% reduction with project, that is, 8% reduction with project, that is, upgradation roads f10.90 per veh km f l0.90 per veh km

12 Travel time for bus 10.6 hrs for travelling all 7.8 hrs (26% reduction) to travel in 7.8 hrs (26% reduction) to travel in all passengers declines 422 km of upgradation all 422 km of upgrading component 422 km of upgrading component relative to without project roads scenario in upgradation roads Number of road accident S131: 16 Renigunta--. Less than 0.47 fatalities per km Less than 0.36 fatalities per km fatalities per vehicle kilometers declines on Road Demo Corridors Rayalacheruvu Corridor, (Andhra Pradesh 0.47 fatalities per km S14: 16 Hyderabad - Bijapur Corridor, Telangana 0.36 fatalities per km Share of CRN in good 40% Y3:60% 80% 75% condition increased Y4: 71 % (indicative estimate based on quantum of work undertaken and current (size of classified network: 6,800 (size of classified network: 4,020 km) CRN length (6,800 km) km) Results Indicators for each Component

13 -3- Component 1: Road Corridor Improvement 427 km upgraded 0 Y3:180 km 302 km upgraded 125 km upgraded efficiently and environmental and socially Y4: 79 km of road length has been surfaced with Bituminous layer sustainable way 6,018 km of roads under 0 Y3: 1378 km 4,301 km maintained through Long 1717 km maintained through Long term Long-term performance Y4: 6,018 km of CRN is under LTPBMC term performance-based performance-based maintenance based maintenance maintenance contracts contracts contract (LTPBMC) Component 2: PPP Facilitation Three roads selected for 0 Y3: 2 2 Roads I Road PPP transactions. Y4: 2 roads (HKR and NAM) have been taken up under PPP Component 3: Institutional Development

14 -4- Milestones in ISAP met Y3: ISAP studies completed: Training Needs Assessment completed * IT-MIS. HR and Training plans * IT-MIS, HR and Training plans fully fully operational operational ISAP consultants delivered reports on * Complete Preparation of State * Complete Preparation of State Network Master Plan Network Master Plan Organization Structure of RDC, Scoping study, Training Needs Assessment (March 2013) ; Study on Road Fund (Nov. 2013),; and Road Network MasterPlan for combined state. The reports are to be revised to suit the needs of Residual AP. Y4: IT-MIS, HR plan Environment and Social Management fully operational IT-MIS procurement has been initiated. HR plan, Environment and Social Management; partly operational.

15 -5- Milestones in GAAP met YI: Disclosure & complaints handling Disclosure & complaints handling Disclosure & complaints handling operational Disclosures completed mechanism operational mechanism operational Complaint system established and operational. Y2: Third Party Monitoring: Procurement monitoring Third party monitoring consultant appointed for OPRC packages; and auditing is being taken up as per agreed plan. Procurement committee was formed within APRDC and committee is monitoring the procurement process Annual maintenance plans Procurement of RDBMS is completed. * RAMS operational and used for annual plan preparation developed through the Procurement of agency for data collection, RMS system other hardware and software is initiated Component 4: Road Safety

16 -6- Demonstration projects Y 1: Road Safety Lead Agency and Multi- Complete implementation Demo * Establish Road Safety lead Agency and Multi-sector team for road safety carried out in at least one sector coordination established Transport Corridor with multi-sector coordination (Dec 2015) road corridor, Dept. has been established as the nodal/lead coordination and evaluate results agency by the GoAPfor implementation of Road Safetv Action Plan (achieved in Y3). * Complete implementation Demo Corridor with multi-sector coordination and evaluate results Technical Working groups and Road Safety Cell have also been constituted with the different departments for multi sector coordination (in Y4) Comprehensive GoAP New Safety Policy approved: New Safety Policy approved; road safety functions, institutional arrangement put in institutional arrangement put in place, capacity and action plan(s) place, and Action Plan and Action Plan Implementation drawn put in place Implementation drawn Black Spot Improvement Y 1: Identification of Black Spots & Complete implementation of Complete implementation of of CRN Collection of Baseline Data on accident improvement of 36 blackspots improvement of 10 blackspots fatalities 36 black spots in five districts have been identified. Procurement was completed Works are in progress

17 -7- Land Acquisition Completed to-date: 305 Acres (62%) 100% to be completed 100% to be completed AP: 235 Acres (6 1%) Telangana: 70 Acres (65%) (Total: 383 Acres) (Total: 107 Acres) Resettlement and Completed to-date: 1060 Nos. (34%) 100% to be completed 100% to be completed Rehabilitation AP: 926 Nos. (33%) Telangana: 134 Nos (43%) (Total: 2,733 Nos) (Total: 314 Nos)