India’s Bihar state gets US$ 420 million highway loan

By Steve Skinner19 September 2008

The Asian Development Bank (ADB) has given the Indian state of Bihar a US$ 420 million, 25-year loan to upgrade and expand the region’s highway network.

The loan, in conjunction with US$ 48 million of central government funding, will finance the improvement of some 820 km of roads under the state government’s highway development plan and support economic expansion and poverty alleviation in what is one of the poorest states in India.

Large areas of Bihar State were flooded on 18 August when the embankment of the Kosi River was breached, and some of the funding will go to reconstruction of two roads affected by the flooding once it has subsided.

The development of Bihar, India’s third most populous State, is key to the country’s goal of regionally balanced growth. Many roads have deteriorated badly in the past, yet demand for improved transport infrastructure has increased sharply in line with India’s strong economy.

“The project is a core investment of the state government to transform Bihar from being a state dependent on subsistence farming to being one that’s built on market-orientated agriculture and tourism,” said Hiroaki Yamaguchi, a senior transport specialist with ADB’s South Asia department.

“This project will improve access to socio-economic services, increase employment opportunities and improve transport services, all of which will reduce poverty in the region,” continued Mr Yamaguchi.

The investment project is the first in Bihar State to adopt international best practice for procurement and contract management. Under the project, contracts are to be packaged into larger sizes to attract major contractors, who will then sub-contract work back to smaller local firms while passing on their expertise.

It is envisaged that technical assistance will help reform the state’s road construction department, which previously suffered from time and cost overruns on projects.
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