ADB approves US$ 300 million loan to India for roads and growth

The Asian Development Bank (ADB) has approved a US$ 300 million loan to the Indian state of Bihar for road improvements designed to improve economic growth in one of India's poorest states.

The loan for the Bihar State Highways II Project, which will build or upgrade about 356 km of state highways, is the second ADB project in support of Bihar's State Highway Development Program, which is targeting improvements to over 2800 km of state highways between 2007 and 2012.

The project will upgrade targeted highways into two-lane roads, build new drainage and bridges, and strengthen culverts and existing bridges.

The ADB will also extend technical assistance of US$ 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.

Bihar is India's third most populous state, but nearly 43% of the population lives below the official poverty line, which 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.

Commenting on the new loan, Markus Roesner, transport specialist in ADB's South Asia Department, said, "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."

The loan, from ADB's ordinary capital resources, makes up around 71% of the total project cost of US$ 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 US$ 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.