INDIA: Rajasthan State Highway Investment Program

Transcription

1 Rajasthan State Highway Investment Program (RRP IND 49228) Facility Administration Manual Project Number: Loan Number: XXXX April 2017 INDIA: Rajasthan State Highway Investment Program

2 ADB APFS DMF EA EMP EMOP FAM GOR IA KM PFR PMC PPP PWD SPS ABBREVIATIONS Asian Development Bank audited project financial statements design and monitoring framework executing agency environmental management plan environmental monitoring plan facility administration manual Government of Rajasthan Implementing agency kilometer periodic financing request project management consultant public-private partnership Public Works Department Safeguard Policy Statement

3 CONTENTS I. INVESTMENT PROGRAM DESCRIPTION 1 II. IMPLEMENTATION PLAN AND READINESS ACTIONS 2 III. PROJECT MANAGEMENT ARRANGEMENTS 3 A. Project Implementation Organizations Roles and Responsibilities 3 B. Key Persons Involved in Implementation 3 C. Project Organization Structure 4 IV. COSTS AND FINANCING 6 A. Cost Estimates Preparation and Revisions 6 B. Key Assumptions 6 C. Detailed Cost Estimates of Tranche 1 by Expenditure Category and by Year 7 D. Allocation and Withdrawal of Loan Proceeds in Tranche 1 9 E. Contract and Disbursement S-Curve 9 F. Fund Flow Diagram 10 V. FINANCIAL MANAGEMENT 12 A. Financial Management Assessment 12 B. Disbursement 15 C. Accounting 15 D. Auditing and Public Disclosure 15 VI. PROCUREMENT AND CONSULTING SERVICES 18 A. Advance Contracting and Retroactive Financing 18 B. Procurement of Goods, Works, and Consulting Services 18 C. Procurement Plan 18 D. Consultant's Terms of Reference 19 VII. SAFEGUARDS 20 A. Environmental Safeguards 20 B. Social Safeguards 24 C. Indigenous Peoples 27 D. Grievance Redress Mechanism 27 E. Capacity Development 28 F. Prohibited Investment Activities 28 VIII. GENDER AND SOCIAL DIMENSIONS 29 A. Gender 29 B. Health 29 C. Labor 30 IX. PERFORMANCE MONITORING, EVALUATION, REPORTING, AND COMMUNICATION 31 A. Project Design and Monitoring Framework 31 B. Monitoring 31 C. Evaluation 32 D. Reporting 32 E. Stakeholder Communication Strategy 33 X. ANTICORRUPTION POLICY 35

4 XI. ACCOUNTABILITY MECHANISM 36 XII. RECORD OF CHANGES TO THE PROJECT ADMINISTRATION MANUAL 37 ATTACHMENTS A. List of Project Roads under Tranche 1 B. Procurement Plan C. Terms of Reference for Project Management Consultant

5 Facility Administration Manual Purpose and Process The facility administration manual (FAM) describes the essential administrative and management requirements to implement the investment program on time, within budget, and in accordance with government and Asian Development Bank (ADB) policies and procedures. The FAM includes references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the FAM. The executing and implementing agencies are wholly responsible for the implementation of ADB-financed projects under the investment program, as agreed jointly between the borrower and ADB, and in accordance with the government and ADB s policies and procedures. ADB staff is responsible for supporting implementation including compliance by executing and implementing agencies of their obligations and responsibilities for project implementation in accordance with ADB s policies and procedures. At loan negotiations the borrower and ADB have agreed to the FAM and ensured consistency with the loan agreement. Such agreement is reflected in the minutes of the loan negotiations. In the event of any discrepancy or contradiction between the FAM and the loan agreement, the provisions of the loan agreement shall prevail. After ADB Board approval of the investment program's report and recommendations of the President (RRP), changes in implementation arrangements are subject to agreement and approval pursuant to relevant government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval, they will be subsequently incorporated in the FAM.

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7 I. INVESTMENT PROGRAM DESCRIPTION 1. Many of the state highways and major district roads in Rajasthan are in poor condition in terms of ride quality, geometry, pavement strength, drainage, and safety standards. The Rajasthan State Highway Investment Program (the investment program) will improve the efficiency and safety of transport on the state highways. The investment program will deliver two outputs: (i) improved state highways and major district roads, and (ii) enhanced capacity of Rajasthan Public Works Department (PWD). The two outputs will be delivered through two components of the investment program: (i) Road improvement component will design, improve, and maintain about 2,000 kilometer of state highways and major district roads to 2-lane or intermediatelane standard and meet the safety requirements. All improved roads will be included in the state highway network. (ii) Capacity development component will build the capacity of Rajasthan PWD, and focus on its Public-Private Partnership (PPP) Division. The scope of capacity development will cover road asset management, road safety, PPP, and project management under the PPP Division s business process. 2. Tranche 1. Tranche 1 is estimated to cost $655 million; and will require a loan of $220 million from ADB s ordinary capital resources. The first tranche will deliver two outputs: (i) about 1,000 km of improved state highways and major district roads, and (ii) enhanced capacity of Rajasthan PWD by developing the streamlined business process and a project performance monitoring system. 3. A list of project roads under Tranche 1 is in Attachment A. The civil works will involve two types of contract modalities: (i) (ii) Annuity-based PPP concessions. Under the concession agreements, 50% of the project capital cost is paid by the government from ADB loans to the concessionaire during the construction period. The remaining 50% of the project capital cost along with interest is disbursed as Annuity Payments in 20 biannual installments spread over a period of ten years commencing from the commercial operation date, along with the payments for operation and maintenance. Engineering, procurement, and construction (EPC) contracts. The EPC contracts are based on the model contracts developed by the Ministry of Road Transport and Highways, Government of India. The initial construction will be completed in the first 1-2 years, followed by a 5-year performance-based maintenance period.

8 2 II. IMPLEMENTATION PLAN AND READINESS ACTIONS A MFF Availability Period Activity Project Preparation 1 Preparation of Projects under Tranche 1 2 Preparation of Projects under Tranche Advance Actions 2017 Year Year Year Year Year 5 Year 6 Year 7 Year 8 B Project Management 1 Establishment of PIU 2 Selection of Consultants 3 Procurement of civil works under Tranche 1 4 Procurement of civil works under Tranche 2 5 Contract Administration C Civil Works 1 Implementation of civil works under Tranche 1 2 Implementation of civil works under Tranche 2 D Capacity Building 1 Capacity Building Program MFF = Multitranche Financing Facility, PIU = Project Implementation Unit Source:Government of Rajasthan

9 3 III. PROJECT MANAGEMENT ARRANGEMENTS A. Project Implementation Organizations Roles and Responsibilities Project Stakeholders Executing agency (EA) Asian Development Bank PWD = Public Works Department Source: Asian Development Bank. Management Roles and Responsibilities State Government of Rajasthan through the PWD overall coordination of project implementation interagency coordination day-to-day project management consultant recruitment and procurement of works withdrawal applications project progress reports maintaining project accounts and complete loan financial records Monitor and review overall implementation of the project in consultation with the EAs/IAs including: the project implementation schedule; actions required in terms of poverty reduction, environmental impacts, and resettlement plans (RPs) if applicable; timeliness of budgetary allocations and counterpart funding; project expenditures; progress with procurement and disbursement; statement of expenditure when applicable; compliance with particular loan covenants; and the likelihood of attaining the project s immediate development objectives. B. Key Persons Involved in Implementation Executing Agencies Mr. D.B. Gupta Additional Chief Secretary (Infra & PWD) GoR Government of Rajasthan (T): Mr. Shiv Lahari Sharma Chief Engineer and Additional Secretary Public Works Department Government of Rajasthan (T): Mr. Anoop Kulshreshtha Additional Chief Engineer (PPP) Public Works Department Government of Rajasthan (T): ADB Hiroaki Yamaguchi Director, SATC,

10 4 South Asia Regional Department (T): Chen Chen (Mission Leader) Senior Transport Specialist, SATC South Asia Regional Department (T): C. Project Organization Structure 4. The following flow chart and table show the reporting lines and essential internal structures of the project implementation units and their staffing assignments. Sr. No Position Name Existing 1 Additional Chief Engineer S.L. Fageria (OIC) appointed 2 [1] Superintendent Engineer (ADB Projects) Anoop Kulshreshtha appointed 3 [2A] Project Director 1 Smt. Sangeeta Sharma appointed 4 [2B] Project Director 2 Sh. Niranjan Choudhary appointed 5 [2C] Project Director 3 Sh.S.C. Agrawal appointed 6 [2D] Project Director 4 Sh.D.K.Gupta appointed 7 [2E] Project Director 5 Sh. R.K.Jain appointed 8 [2F] Project Director 6 Sh. S.M. Swami appointed 9 [3A] Assistant Engineer (Safeguard Focal) Sh. Hanuman Ratnu appointed 10 [3B] Assistant Engineer (Safeguard Focal) Sh. I.P. Choudhary appointed 11 [3C] Assistant Engineer (Safeguard Focal) Sh. Lokendra Singh appointed 12 [3D] Assistant Engineer (Safeguard Focal) Sh. P.P. Singh appointed 13 [3E] Assistant Engineer (Safeguard Focal) Sh. Surendra Kumar appointed 14 [3F] Assistant Engineer (Safeguard Focal) Sh. Krishan Saroagi appointed 15 [4A] Executive Engineer Shi. Somesh Rathi appointed 16 [4B] Executive Engineer Sh. Kaushlendra Bharadwaj appointed Appointment Timeframe

11 17 [4C] Executive Engineer Sh. V.K. Jain appointed 18 [4D] Executive Engineer Sh. Neeraj Jain appointed 19 [5A] Assistant Engineer Sh. Rakesh Sharma appointed 20 [5B] Assistant Engineer Sh. Fanish Kumar appointed 21 [5C] Assistant Engineer (Social Officer) Ms. Ritambhara Bohra appointed 22 [5D] Assistant Engineer (Environment Officer) Mrs. Shilpa Shrimal appointed 23 [6] Chief Accounting Officer Mr. Raju Sood appointed 24 [6A] Accounting Officer Sh. Umed Singh Godara appointed 25 [6B] Accountant appointed Feb [6C] Accountant appointed Jun [6D] Accountant appointed Dec [6E] Accountant appointed TBD 29 [7] Resettlement and Acquisition Supervisor appointed Jan [7A] Land Acquisition Officer I appointed Jan [7B] Land Acquisition Officer II appointed Jan [7C] Land Acquisition Officer III appointed TBD 33 [7D] Revenue Inspector appointed Jan [7E] Revenue Inspector appointed Jan [7F] Revenue Inspector appointed Apr [7G] Revenue Inspector appointed Apr [7H] Revenue Inspector appointed Sep [7I] Revenue Inspector appointed Sep [7J] Revenue Inspector appointed Dec [7K] Revenue Inspector appointed Dec [7L] Revenue Inspector appointed Dec-16 PPP= Public-Private Partnership, PWD= Public Works Department Source: Government of Rajasthan. 5

12 6 IV. COSTS AND FINANCING 5. The investment program is estimated to cost $1,415 million, including taxes and duties, physical and price contingencies, interest and other charges during implementation. A. Cost Estimates Preparation and Revisions 6. The cost estimates were prepared by ADB and Government of Rajasthan s Public Works Department with information for the investment costs extracted from the consultants detailed project report. The cost estimates were based on March 2016 prices. B. Key Assumptions 7. The following key assumptions underpin the cost estimates and financing plan: (i) Exchange rate: INR = $1.00 (as of 15 December 2016). (ii) Price contingencies based on expected cumulative inflation over the implementation period are as follows: Table 1: Escalation Rates for Price Contingency Calculations (%) Item Foreign rate of price inflation Domestic rate of price inflation Source: Asian Development Bank. Table 2: Investment Program ($ million) Item Amount a A. Base Cost b 1. Road improvement 1, Capacity development Subtotal (A) 1, B. Contingencies c C. Financing Charges During Implementation d Total (A+B+C) 1, a Includes taxes and duties of $25.29 million to be financed from ADB loan resources, and $46.37 from government resources by cash contribution. The amount of taxes and duties to be financed by ADB are (i) within the reasonable threshold identified during the CPS preparation process; (ii) represent only 1.8% of the investment plan; (iii) apply only to ADB-financed expenditures. The financing of taxes and duties is considered material and relevant to the success of the project. b In 2016 prices. c Physical contingencies computed at 2% for civil works. Price contingencies computed at about 1.5% on foreign exchange costs and 5 to 6% on local currency costs; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate. d Includes interest and commitment charges. Interest during construction for the ADB loan has been computed at the 5-year swap London interbank offered rate plus a spread of 0.5% for the ordinary capital resources loan. Commitment charges for an ADB loan are 0.15% per year to be charged on the undisbursed loan amount. Source: Asian Development Bank. 8. The government has requested an MFF in an amount up to $500 million from ADB s ordinary capital resources to help finance civil works and consulting service, including part of the taxes and duties to be financed under the investment program. Private sector investment of

13 7 about $450 million will be appropriately structured under the design-build-operate/maintenancetransfer model. Financing from the private sector will be predicated on future contractual payments from the state government, in the nature of annuity payments, and subject to meeting specified performance standards. 1 Such payments from the government are not unconditional, and will be assessed by the commercial finance market (debt and equity) based on performance capacities of the contractor in construction and maintenance, as well as credit-worthiness of the state government. This financing element is therefore considered as private sector investment. The Government of Rajasthan will provide counterpart financing of $465 million for land acquisition and resettlement, utility shifting, operation and maintenance costs under the concession or contract agreements, consulting services, taxes and duties, project management, and financing charges during implementation. The first tranche of the MFF is estimated to cost $655 million, with ADB financing of $220 million, it will have a 25-year term, including a grace period of 8 years, using the annuity-type repayment option based on 5% discount factor, an annual interest rate determined in accordance with ADB s London interbank offered rate (LIBOR)-based lending facility, a commitment charge of 0.15% per year, and such other terms and conditions set forth in the draft loan and project agreements. Based on this, the average loan maturity is years and the maturity premium payable to ADB is 0.20% per annum. 9. The financing plan and an indicative tranche schedule are in Table 3. Table 3: Investment Program Financing Plan Amount Share of Amount ($ million) Source ($ million) Total (%) Tranche 1 Tranche 2 Asian Development Bank Private Sector Government Total 1, Source: Asian Development Bank. C. Detailed Cost Estimates of Tranche 1 by Expenditure Category and by Year 10. The detailed cost estimates of Tranche 1 by expenditure category and detailed cost estimates by financier are presented below. The percentages showing in the table represent the financing contribution from each party as a portion of the total investment costs covering the construction period and the commercial operation period. The total investment costs include the project capital costs, the associated financial charges from ADB and the private sector, and the operation and maintenance costs. 1 Fifty percent of the project capital cost is paid by the government to the concessionaire during the construction period. The remaining 50% of the project capital cost along with interest is disbursed as annuity payments in 20 biannual instalments spread over a period of 10 years commencing from the commercial operation date.

14 8 Table 4: Detailed Cost Estimates of Tranche 1 ($ million) Total ADB GOR Private S. ADB GOR Private S. A. Investment Costs 1. Civil Works a. Annuity Packages % 27.0% 46.3% b. EPC Packages % 6.5% c. Land Acquisition and Resettlement % d. Utility Shifting % 2. Consultancy a. Project Management % b. Independent Engineer % 50.0% c. Road Safety % Subtotal (A) % 31.2% 36.3% B. Project Management 1. Project Implementation Unit % Subtotal (B) % C. Contingencies 1. Physical Contingency % 25.2% 2. Price Contingency % 24.8% Subtotal (C) % 24.9% D. Financing Charges During Implementation 1. Interest During Implementation % 2. Commitment Charges % Subtotal (D) % Total Project Cost (A+B+C+D) % 33.6% 32.8% Source: Asian Development Bank. Table 5: Detailed Financial Projection by Year (Tranche 1) ($ million) A. Investment Costs 1. Civil Works a. Annuity Packages b. EPC Packages c. Land Acquisition and Resettlement d. Utility Shifting Consultancy a. Project Management b. Independent Engineer c. Road Safety Subtotal (A) B. Project Management 1. Project Implementation Unit Subtotal (B)

15 9 C. Contingencies 1. Physical Contingency Price Contingency Subtotal (C) D. Financing Charges During Implementation 1. Interest During Implementation Commitment Charges Subtotal (D) Total Project Cost (A+B+C+D) Source: Asian Development Bank. D. Allocation and Withdrawal of Loan Proceeds in Tranche The following table should be read in conjunction with the narrative paragraphs contained in the loan agreements schedule entitled Allocation and Withdrawal of Loan Proceeds. Table 6: Allocation and Withdrawal of Loan Proceeds CATEGORY Number Category Amount Allocated ($ million) ADB FINANCING Percentage and Basis for Withdrawal From the Loan Account 1 Works percent of total expenditure* 2 Consulting Services percent of total expenditure 3 Unallocated Total * during the construction period. E. Contract and Disbursement S-Curve 12. The following graph shows quarterly contract awards and disbursement projections of ADB loan over the life of Tranche 1.

16 $ million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Contract Awards (Projection) Disbursement (Projection) F. Fund Flow Diagram 13. The following diagrams show how the funds will flow from ADB and the Borrower to implement project activities. The funds of the private sector as concessionaires will directly be utilized for construction, and therefore are not part of the fund flow process.

17 11 ADB Government of India Government of Rajasthan PWD PPP Division Payment Civil Works Contractors Treasury System/ Letter of Credit System IPC Billing Payment Vouchers Payment Vouchers Payment Certify Construction Supervision Consultant Equipment Suppliers Land Acquisition, R&R, Imprest to PIU and other noneligible cost items Withdrawal Application ADB India Resident Mission Withdrawal Application Ministry of Finance CAAA Replenishmen t (monthly)/ LC System Finance Department Request for Replenishment Controller GOI Bank Account Source: Government of Rajasthan

18 12 V. FINANCIAL MANAGEMENT A. Financial Management Assessment 14. The financial management assessment (FMA) was conducted from July 2015 to January 2016 in accordance with ADB s Guidelines for the Financial Management and Analysis of Projects and the Financial Due Diligence: A Methodology Note, and Technical Guidance Notes. 2 The FMA considered the capacity of the Rajasthan PWD including funds-flow arrangements, governance, staffing, budgeting, accounting and financial reporting systems, internal control procedures, financial information systems, and internal and external auditing arrangements. The fiduciary assessment of Rajasthan PWD, and in particular the PPP Division is carried out to determine the degree to which the financial management arrangements are adequate to manage fiduciary risks and provide reasonable assurance that ADB funds will be used for their intended purpose Disbursement and budgeting mechanisms are adequate. However, the overall financial management risk is rated as Moderate due to a lack of proper internal audit function, delays in completion of the external audit, and lack of experience in implementing ADB-funded projects by PWD PPP Division. The PWD staff who is handling the World Bank-funded project, will provide support to the proposed program on a need basis. In addition to this, key actions are given below, based on which the financial management arrangements are considered satisfactory. 16. The key risks and the financial management action plan is given in Table below: Table 6: Financial Management Action Plan Risk Mitigating Measure Timeline Responsibility 1 Weak internal audit function PWD 2 Lack of experience in ADB funded projects 3 Weak capacity of PWD staff Additional arrangements to be made for appropriate independent internal audit of the project activities, either by deploying separate staff or by outsourcing to a private external qualified auditor PWD staff who is handling the World Bank funded project, will provide support to the proposed program on a need basis. A dedicated and competent financial management specialist will be recruited Fill staff vacancies Training is required for the finance and accounts staff in ADB procurement and disbursement Ongoing until the project completion Ongoing Prior to loan effectiveness Prior to loan effectiveness Within 3 months after the PMC is PWD PWD PWD ADB 2 Available at: and Financial Management. See also Analysis of Projects Guidelines (2005): 3 Financial Management Assessment Report available upon request.

19 13 Risk Mitigating Measure Timeline Responsibility guidelines and financial reporting appointed. requirements 4 Enhance project reporting and monitoring (i) Detailed budget estimates and variance analysis are to be done with respect to financial and physical targets, at least on a quarterly basis, to have more control on the projects Ongoing PWD and activities(ii) incorporate requirement for recording expenditure by output and financing 5 Weak controls over fixed assets 6 Ensure availability of funds into the FMIS Computerized asset register and automatic updating may be considered with regular monitoring of the physical assets To incur expenditure there must be a budget allocation, Administrative Sanction and Technical Sanction. Ongoing Ongoing PWD State Finance Department ADB= Asian Development Bank, FMIS= financial management information system, PMC= project management consultant, PWD= Public Works Department. Source: Asian Development Bank 17. The Risk Assessment and Mitigation Measures are listed below: Risk Risk Risk-Mitigation Measures Assessment 1. Implementing entity M PWD PPP Division is a newly formed Division under PWD. Program managers will get support on a need basis from PWD staff who are already doing World Bank-funded EAP. A dedicated and competent financial management specialist will also be recruited. 2. Funds flow L GOR shall ensure the timely release of funds to PWD PPP Division including counterpart funds to the projects as per loan covenant. ADB disbursement will follow the reimbursement procedure. Timely availability of counterpart funds will be ensured by implementing the proposed funds flow arrangements. No systematic problems related to funds have been reported in the current projects handled by PWD. 3. Budgeting L Budgeting in PWD PPP Division for roads are based on the government system of budgeting. As per the allocation, projects are selected and funds are made available in the yearly state budget under a single line item. To incur expenditure there must be a budget allocation, administrative and technical sanctions.

20 14 Risk Risk Risk-Mitigation Measures Assessment 3. Staffing M PWD PPP Division now has sanctioned posts of Financial Advisor-1, Accounts Officer -2, Assistant Accounts Officer -2, and Accountants 6. Out of this, one accounts officer, one assistant accounts officer and 4 accountants are exclusively planned for ADB Projects. 4. Accounting policies and procedures L Government of Rajasthan s (GOR) PWF&AR are followed. Chart of accounts is adequate to capture financial information required to meet ADB reporting requirements. There is room for improvement to include component- and activitywise booking of expenditure. 5. Internal audit M Internal checking is done on a need basis by the departmental audit section in PWD in all offices under their control on need base. Additional arrangements will be made for appropriate independent internal audit of the project activities, either by deploying separate staff or by outsourcing to a private external qualified auditor. 6. External audit (statutory) M The Accountant General (Audit) of the Government of Rajasthan is mandated to carry out the statutory audit of PWD. The AG does the audit and prepares reports of each department separately, including multiple reports for PWD. PPP Division is not yet audited by AG. 7. External audit (project level) M The project will inform AG s office and include in their work plan, as state level audits for projects historically face delays. 8. Reporting and monitoring M PWD PPP Division reports to the Chief Engineer PWD. There are no reports other than the governmental reporting now in place in PWD PPP Division. It is recommended to have quarterly and annual progress reports for the proposed project. Standard templates for APFS shall else be provided to PWD. 9. Information systems M Optimal use of technology in the Finance and Accounts Wing for the preparation of accounts and reporting requirements will be explored. The present software Integrated Financial Management System Software may be fine-tuned to get maximum details required with the help of NIC. 10. Internal controls M Poor controls over fixed assets identified by the auditor. The fixed asset register to be automated and reconciled regularly. Overall Control Risk M H High, S- Substantial, M Moderate, L Low.

21 15 AFPS= audited project financial statements, AG= accountant general, AR= accounts rules, EAP= East Asia Pacific, NIC= National Informatics Centre, PPP= Public-Private Partnership, PWF= Public Works Financial, PWD= Public Works Department Source: Asian Development Bank. B. Disbursement 18. The loan proceeds will be disbursed in accordance with ADB s Loan Disbursement Handbook (2015, as amended from time to time), and detailed arrangements agreed upon between the government and ADB. 4 Online training for project staff on disbursement policies and procedures is available. 5 Project staff are encouraged to avail of this training to help ensure efficient disbursement and fiduciary control. 19. Reimbursement procedure will be used for civil works, consulting services, and equipment. The statement of expenditure procedure (SOE) will be used to reimburse eligible expenditure for payments less than $100,000. Supporting documents and records for the expenditures claimed under the SOE should be maintained and made readily available for review by ADB's disbursement and review missions, upon ADB's request for submission of supporting documents on a sampling basis, and for independent audit. Any individual payment to be reimbursed under the SOE procedure shall not exceed the equivalent of $100,000. Reimbursement of individual payments in excess of the SOE ceiling should be supported by full documentation when submitting the withdrawal application to ADB. 20. Rajasthan PWD will be responsible for (i) preparing disbursement projections, (ii) requesting budgetary allocations for counterpart funds, (iii) collecting supporting documents, and (iv) preparing and sending withdrawal applications to ADB. Before the submission of the first withdrawal application, the borrower should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the government, together with the authenticated specimen signatures of each authorized person. The minimum value per withdrawal application is set in accordance with the Loan Disbursement Handbook. Individual payments below the amount should be paid by the PWD and subsequently claimed to ADB through reimbursement, unless otherwise accepted by ADB. 21. All disbursements under government financing will be carried out in accordance with regulations of the Government of Rajasthan. C. Accounting 22. The Rajasthan PWD will maintain, or cause to be maintained, separate books and records by funding source for all expenditures incurred on the investment program and separately for each tranche. The Rajasthan PWD will prepare project financial statements in accordance with the government's accounting laws and regulations which are consistent with international accounting principles and practices. D. Auditing and Public Disclosure 23. The Rajasthan PWD will maintain, or cause to be maintained, separate books and records by funding source for all expenditures incurred on the investment program and separately for each tranche. Project financial statements will follow the government of India s 4 Available at: 5 Disbursement e-learning.

22 16 cash-based accounting laws and regulations which are consistent with international accounting principles and practices, template financial statements provided in the standardized terms of reference for audit of ADB-assisted projects, agreed with the Comptroller and Auditor General (CAG) of India, the DEA and ADB can be referred to as a guide for preparing financial statements. 24. The Rajasthan PWD will cause the detailed project financial statements to be audited in accordance with international standards on auditing, government's audit regulations, by the CAG, acceptable to ADB. The audited project financial statements together with the auditor s opinion will be presented in the English language to ADB within 6 months from the end of the fiscal year. 25. To ensure the timely submission of audited project financial statements, PWD shall formally request the C&AG to include audits of the project in their yearly work plan. Unaudited project financial statements should be submitted to C&AG for audit within 3 months of the end of the fiscal year. The Rajasthan PWD shall inform AG (Rajasthan) about the requirements The annual audit report for the project financial statements will include a management letter and auditor s opinions, which cover (i) whether the project financial statements present an accurate and fair view or are presented fairly, in all material respects, in accordance with the applicable financial reporting standards; and (ii) whether the proceeds of the loan were used only for the purpose(s) of the project. Internal audit continues to be undertaken by Rajasthan PWD and sample internal audits shall be conducted by Rajasthan PWD for at least 10% of the vouchers. 27. Compliance with financial reporting and auditing requirements will be monitored by review missions and during normal program supervision, and followed up regularly with all concerned, including the external auditor. 28. The government and Rajasthan PWD have been made aware of ADB s approach to delayed submission, and the requirements for satisfactory and acceptable quality of the audited project financial statements. 7 ADB reserves the right to require a change in the auditor (in a manner consistent with the constitution of the borrower), or for additional support to be provided to the auditor, if the audits required are not conducted in a manner satisfactory to ADB, or if the audits are substantially delayed. ADB reserves the right to verify the project's financial accounts to confirm that the share of ADB s financing is used in accordance with ADB s policies and procedures. 6 The audit of the ADB project account to be carried out by the Accountant General (Audit) Rajasthan as agreed with the ADB, DEA and CAG vide letter No. 5/2/2010-ADB-1 dated 2 nd September 2013 from the DEA, GOI. 7 ADB s approach and procedures regarding delayed submission of audited project financial statements: (i) When audited project financial statements are not received by the due date, ADB will write to the executing agency advising that (a) the audit documents are overdue; and (b) if they are not received within the next 6 months, requests for new contract awards and disbursement such as new replenishment of imprest accounts, processing of new reimbursement, and issuance of new commitment letters will not be processed. (ii) When audited project financial statements are not received within 6 months after the due date, ADB will withhold processing of requests for new contract awards and disbursement such as new replenishment of imprest accounts, processing of new reimbursement, and issuance of new commitment letters. ADB will (a) inform the executing agency of ADB s actions; and (b) advise that the loan may be suspended if the audit documents are not received within the next 6 months. (iii) When audited project financial statements are not received within 12 months after the due date, ADB may suspend the loan.

23 Public disclosure of the audited project financial statements, including the auditor s opinion on the project financial statements, will be guided by ADB s Public Communications Policy After the review, ADB will disclose the audited project financial statements and the opinion of the auditors on the project financial statements no later than 14 days of ADB s confirmation of their acceptability by posting them on ADB s website. 8 Public Communications Policy:

24 18 VI. PROCUREMENT AND CONSULTING SERVICES A. Advance Contracting and Retroactive Financing 30. All advance contracting and retroactive financing will be undertaken in conformity with ADB Procurement Guidelines (2015, as amended from time to time) and ADB s Guidelines on the Use of Consultants (2013, as amended from time to time). The issuance of invitations to bid under advance contracting and retroactive financing will be subject to ADB approval. The borrower, the GOR, and the Rajasthan PWD have been advised that approval of advance contracting and retroactive financing does not commit ADB to finance the project. 31. Advance contracting. Advance contracting includes prequalification of contractors, tendering, and bid evaluation for all civil works packages; and recruitment of consultants. 32. Retroactive financing. Withdrawals from the loan account may be made for financing of eligible expenditures incurred under the investment program before the effective date, but not earlier than 12 months before the date of signing of the loan agreement, in connection with works, consulting services, and equipment, subject to a maximum amount equivalent to 20% of the loan amount. B. Procurement of Goods, Works, and Consulting Services 33. All procurement of goods and works will be undertaken in accordance with ADB s Procurement Guidelines (2015, as amended from time to time). 34. International competitive bidding (ICB) procedures will be adopted for all contracts over $40 million for civil works and $0.5 million for goods. National competitive bidding may be used for contracts below these thresholds. Shopping can be used for goods with contract values lower than $100,000, as appropriate. As for the investment program, it is recommended that all civil works packages are procured under ICB procedures. This is for efficiency and simplification of procedures given that one package exceeds the threshold value of $ 40 million. 35. All consultants will be recruited according to ADB s Guidelines on the Use of Consultants (2013, as amended from time to time). 9 A project management consultant will be recruited to assist Rajasthan PWD in project implementation and capacity development. In addition, the Rajasthan PWD will recruit Independent Engineers and Road Safety Consultants for directly supervising all civil works under the terms of reference given in the concession agreement of annuity-based PPP projects or the EPC contracts. C. Procurement Plan 36. An 18-month procurement plan indicating threshold and review procedures, goods, works, and consulting service contract packages and national competitive bidding guidelines is in Attachment B. 37. The procurement plan describes the threshold and review procedures of all procurement of goods, works and consulting services to be undertaken for the Investment Program The procurement plan will be updated at least once every 18 months or whenever change in the 9 Checklists for actions required to contract consultants by method available in e-handbook on Project Implementation at:

25 19 procurement arrangements is required and agreed. D. Consultant's Terms of Reference 38. For the Project Management Consultant, an estimated 312 person-months (66 international, 246 national) of consulting services are required to (i) facilitate project management and implementation, and (ii) strengthen the institutional and operational capacity of the executing agency. Consulting firms will be engaged using the quality- and cost-based selection (QCBS) method with a standard quality cost ratio of 80:20. The EA may also engage individual consultants (independent engineers, road safety consultants, and safeguard advisors). Outline of the terms of reference of the PMC is in Attachment C.

26 20 VII. SAFEGUARDS 39. Safeguards categorization under Tranche 1 are described in the table below. Table 7: Safeguard categorization for Tranches Environment Involuntary Resettlement Indigenous Peoples Tranche 1 B A C A. Environmental Safeguards 40. The scope of works under Tranche 1 involves upgrading of existing and recently notified state highways through widening of existing roads into two lane or intermediate lane with shoulders. All 16 roads are outside any legally protected, eco-sensitive, or critical habitat areas. 10 Most of the adverse impacts are co-terminus with the construction stage, site-specific, limited within the right of way (ROW), and are mitigated through good engineering practice. Since the project roads are geographically dispersed, a state-level initial environmental examination (IEE) was drafted based on road-specific IEEs done during the feasibility study preparation and supplemented by external environmental expert site visits, consultations, and assessment. Each project road was subjected to environmental screening guided by the ADB s rapid environmental assessment checklist, environmental baseline compiled including stakeholder consultations, impacts assessed, and concomitant mitigation and monitoring plans prepared. The costs of mitigation and monitoring plans for the construction phase are integrated in the civil works cost estimates. 41. Implementation arrangements for environment safeguards. The responsibilities of various agencies and parties for implementing environment safeguards are provided below. (i) PPP Division of Rajasthan PWD will be the project management unit and responsible for the overall compliance ADB Safeguard Policy Statement 2009 and the applicable laws and rules under the Ministry of Environment, Forest and Climate Change. The PMU will have a safeguard officer-environment with a rank of executive engineer to coordinate with the project directors for PIUs to that ensure project implementation complies with the environmental assessment review framework and environmental management plan. The safeguard officer-environment is responsible for: Environmental screening and proposed categorization to reflect the significance of potential impacts or risks that a proposed road might present, and advise feasibility for inclusion and identify the needed level of assessment; Reviewing and approving all environment safeguards related documents such as IEE, monitoring reports, and due diligence prepared under the investment program with recommendations and clarifications from the PIUs and PMC where necessary; Timely endorsement and signing of key documents and forwarding to the respective agency required for processing of forestry clearance, tree cutting permit, permission for groundwater extraction, etc., and disclosure on ADB and PWD websites; 10 Critical habitat according to the SPS is an area with high biodiversity value, including habitat required for the survival of critically endangered or endangered species; areas having special significance for restricted range species; sites that are critical for the survival of migratory species; areas supporting globally significant concentrations or numbers individuals of congregatory species; areas with unique assemblages of species or that area associated with key evolutionary processes or provide ecosystem services; and areas having biodiversity of significant social, economic or cultural importance to local communities.

27 21 Ensure all contractors obtain permits, licenses, etc. for activities such as operation of asphalt plants, quarries, borrow areas, etc., before the implementation of the respective construction activity. Taking proactive and timely measures to address any environment safeguards related challenges at the national or state level such as delays in processing of clearances during pre-construction stage and significant grievances (during construction stage) (ii) Project implementation units (PIU). The project implementation unit through the PD will be responsible for supervising implementation of the environmental management plan (EMP) and environmental monitoring plan (EMOP) by the contractor through the following: Review all sub-plans identified in the EMP to be prepared by the Contactor to include camp layout, waste/debris management plan, borrow area management plan, traffic management plan with guidance from the PMC; Review monthly environmental monitoring reports prepared by the Contractor-EFC; Conduct monthly site and follow-up inspection to ensure the veracity of the submitted monitoring reports and enforce the EMP and EMOP; Conduct compliance conference with the Contractor to discuss non-compliance and agree on corrective measures with guidance from the PMC; and Recommend sanctions to the PMU-SOE in case of recalcitrant contractors. (iii) Project Management Consultant (PMC). The main objective of Project Management Consultant is to support the project management unit (PMU) implements the environmental requirements of the Project by providing assistance in the monitoring of the EMP implementation by: Conduct environmental site induction training to all contractors and PIUs to ensure understanding of the EMP and domestic environmental laws and regulations requirements particularly on the required clearances and permits, training on occupational and community health and safety, timely mobilization of the Contractor s EFC, and review of sub-plans required in the EMP and advise the PIU on adequacy; 11 Ensure contractors secure necessary permits and clearances; Prepare environmental due diligence reports on EMP implementation needed for the processing of subsequent tranches; Prepare an environmental monitoring report template for contractor s self-monitoring reports; Design quarterly and semi-annual compliance assessment checklist and report formats for PMU and ADB review; Prepare annual environmental monitoring reports required by the ADB for public disclosure; Preparing summary monthly, quarterly, and semi-annual monitoring reports from the monthly environmental self-monitoring reports prepared by the Contractor s EFC and reports for the review and guidance of the PMU and PIUs; 11 Site induction training includes but not limited to: i) discussion and review of EMP and EMoP detailing how specific environmental risks associated with their Scope of Work will be managed legal compliance, inspection and audits, and progress tracking and reporting; ii) environmental training and awareness needs shall be determined and documented via a training needs analysis prior to commencement; iii) Health and Safety Awareness Course, which details general environmental awareness and specific performance requirements expected on site; and iv) GRM.

28 22 Advice the Contractor through the PMU and PIUs on how to comply with requirements and address non-compliances; and Report apparent unanticipated impacts, recommend mitigation measures to be implemented by the PMU and update the IEE report. (iv) Contractor. The Contractor is the principal agent to implement the EMP and EMOP during the pre- and during construction stage. Specifically, the contractor will: Appoint the Contractor s environment focal person and attend the site induction workshop to be organized by the PMC; Obtain necessary environmental license(s), permits etc., from relevant agencies as specified by EARF (Table 3) for associated facilities for project road works, quarries, hot-mix plant etc. prior to commencement of civil works contracts; Implement all mitigation measures in the EMP and activities in the EMOP; Submit monthly, quarterly, and annual self-monitoring reports to the PIU and PMU with guidance from the PMC; Ensure that all workers, site agents, including site supervisors and management participate in training sessions delivered by PIU; Ensure compliance with environmental statutory requirements and contractual obligations; Collect the baseline data on environmental quality before the start of physical works and continue collection as given in the EMOP during construction and operation; Participate in resolving issues as a member of the GRC; Respond promptly to grievances raised by the local community or any stakeholder and implement environmental corrective actions or additional environmental mitigation measures as necessary; and Based on the results of EMP monitoring, cooperate with the PIU to implement environmental corrective actions and corrective action plans, as necessary. 42. Ensuring implementation of environmental standards. The PMU will ensure that all environment safeguard requirements under the investment program will be implemented as required by the EARF and state-level IEE. Rapid environment assessment checklists will be completed for each project road including bridges and based on these checklists recommend environmental categorization based on ADB SPS The state-level IEE report must clearly present information and issues that may be unique to a district or geographic area or project road and all sensitive issues identified in the environment checklist must be clearly documented. The EMP and EMOP will be comprehensive and cover all environmental issues that may be expected during road construction and maintenance. Necessary provisions for this will be included in the bidding documents and accordingly the contractor will be required to include all costs for implementing the contract package specific EMP and EMOP. 43. The EMP is a plan for mitigating all anticipated environment impacts during project construction and operation. Specific mitigation measures with details on location, time and responsible agency for implementation is given in the EMP. The EMOP is a plan for monitoring various environment quality parameters and checking the effectiveness of the EMP. It comprises activities on testing the quality of air, water, noise through laboratory tests and physical monitoring of problems of soil erosion, tree plantations and habitat enhancement activities carried out and occupational health and safety issues. Quality testing of air, water and noise will be outsourced by the contractor to recognized and approved laboratories.