Completion Report

Project Number: 37091-013 MFF Number: 0045 Loan Numbers: 2669 and 2837 September 2019

India: Agribusiness Infrastructure Development

Investment Program

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS Currency unit – Indian rupee (₹)

At Appraisal At Project Completion

9 August 2010 31 March 2016 ₹1.00 = $0.0217 $0.0151 $1.00 = ₹46.15 ₹66.20

ABBREVIATIONS

ADB – Asian Development Bank APFS – audited project financial statement DCMT – Department of Co-operation, Marketing and Textiles DOA – Department of Agriculture DPR – detailed project report FPC – farmer producer company IVC – integrated value chain JFPR − Japan Fund for Poverty Reduction

MFF – multitranche financing facility MSAMB – Maharashtra State Agricultural Marketing Board PFR – periodic financing request PMU – project management unit PPP – public–private partnership RFQ – request for qualification SGOB − State Government of Bihar

TA − technical assistance

TAG – transaction advisory group

NOTES

(i) The fiscal year (FY) of the government of and its agencies ends on 31 March. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2019 ends on 31 March 2019.

(ii) In this report, “$” refers to United States dollars.

Vice-President Shixin Chen, Operations 1 Director General Hun Kim, South Asia Department (SARD) Director Mio Oka, Environment, Natural Resources, and Agriculture Division,

SARD Team leader Sanath Ranawana, Principal Portfolio Management Specialist, SARD Team members Pamela Barrameda, Associate Operations Officer, SARD Cynthia Ceniza, Senior Operations Assistant, SARD

Dennis Lopez, Project Officer, SARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. DESIGN AND IMPLEMENTATION 2

A. Program Design and Formulation 2 B. Program Outputs 4 C. Program Costs and Financing 5 D. Disbursements 6 E. Program Schedule 6 F. Implementation Arrangements 7 G. Technical Assistance 7 H. Consultant Recruitment and Procurement 8 I. Safeguards 9 J. Monitoring and Reporting 9

III. EVALUATION OF PERFORMANCE 10

A. Relevance 10 B. Effectiveness 11 C. Efficiency 11 D. Sustainability 11 E. Development Impact 11 F. Performance of the Borrower and the Executing Agency 11 G. Performance of the Asian Development Bank 12 H. Overall Assessment 12

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 13

A. Issues and Lessons 13 B. Recommendations 14

APPENDIXES

1. Design and Monitoring Framework 16 2. Project Cost at Appraisal and Actual 22 3. Project Cost by Financier 23 4. Disbursement of ADB Loan and Grant Proceeds 25 5. Contract Awards of ADB Loan and Grant Proceeds 27 6. Status of Compliance with Loan Covenants 29

BASIC DATA

A. Loan Identification

1. Country India 2. MFF number and financing source 0045 / Ordinary Capital Resources 3. Project title Agribusiness Infrastructure Development

Investment Program 4. Borrower India 5. Executing agencies Bihar Department of Agriculture and

Maharashtra Department of Co-operation, Marketing and Textiles

6. Amount of loan $170,000,000 7. Financing modality Multitranche Financing Facility

B. Loan Data

1. Appraisal – Date started – Date completed

12 April 2010 23 April 2010

2. Loan negotiations Tranche 1

– Date started – Date completed

Tranche 2 – Date started

– Date completed

17 August 2010 18 August 2010 28 November 2011 28 November 2011

3. Date of Board approval Facility Tranche 1 Tranche 2

16 September 2010 24 September 2010 19 December 2011

4. Date of financing agreement Facility Tranche 1 Tranche 2

18 August 2010 9 July 2012 18 January 2012

5. Date of loan effectiveness Tranche 1

– In loan agreement – Actual – Number of extensions

Tranche 2 – In loan agreement – Actual – Number of extensions

7 October 2012 30 August 2012 None 17 April 2012 9 April 2012 None

6. Project completion date Tranche 1

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– Appraisal – Actual Tranche 2 – Appraisal – Actual

31 December 2017 12 August 2016 30 June 2015 30 June 2015

7. Loan closing date Tranche 1

– In loan agreement – Actual – Number of extensions Tranche 2

– In loan agreement – Actual – Number of extensions

30 June 2018 12 August 2016 None 31 December 2015 31 December 2015 None

8. Financial closing date Tranche 1

– Actual Tranche 2 – Actual

12 August 2016 31 March 2016

9. Terms of loan Tranche 1

– Interest rate – Maturity (number of years) – Grace period (number of years)

Tranche 2 – Interest rate – Maturity (number of years) – Grace period (number of years)

London interbank offered rate (LIBOR)-based Sum of LIBOR and 0.60% 25 5 Sum of LIBOR and 0.60% 25 5

10. Terms of relending (if any)

N/A

11. Disbursements1

a. Dates

Tranche 1

Effective Date

30 August 2012

Actual Closing Date

12 August 2016

Time Interval

48 months

1 Only Loan 2837-Tranche 2 had disbursements. Loan 2669-Tranche 1 was cancelled on 11 May 2017.

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Tranche 2

Initial Disbursement

17 September 2012

Final Disbursement

31 March 2016

Time Interval

42 months

Effective Date

9 April 2012

Actual Closing Date

31 December 2015

Time Interval

44 months

b. Amount ($ million)

Tranche 1

Category

Original Allocation

(1)

Increased during

Implementation (2)

Canceled during

Implementation (3)

Last Revised

Allocation (4=1+2–3)

Amount Disbursed

(5)

Undisbursed Balance (6 = 4–5)

Capital grant to concessionaire

50.0 0 50.0 0 0 0

Consulting services

2.8 0 2.8 0 0 0

Training 4.3 0 4.3 0 0 0 Works 5.4 0 5.4 0 0 0 Project management

0.4 0 0.4 0 0 0

Unallocated 4.7 0 4.7 0 0 0 Total 67.6 0 67.6 0 0 0

Tranche 2

Category

Original Allocation

(1)

Increased during

Implementation (2)

Canceled during

Implementation (3)

Last Revised

Allocation (4=1+2–3)

Amount Disbursed

(5)

Undisbursed Balance (6 = 4–5)

Capital grant to concessionaire

21.79 0.00 13.10 8.69 0.00 8.69

Equipment 0.44 0.00 0.00 0.44 0.16 0.28 Consulting services

0.80 0.00 0.00 0.80 0.17 0.63

Office and vehicle hire

0.28 0.00 0.00 0.28 0.13 0.15

Project management

0.24 0.00 0.00 0.24 0.06 0.18

Unallocated 0.75 0.00 0.00 0.75 0.00 0.75 Total 24.30 0.00 13.10 11.20 0.52 10.68

C. Project Data

1. Project cost ($ million)

Tranche 1 Cost Appraisal Estimate Actual

Foreign exchange cost 84.78 0.00 Local currency cost 0.00 0.00 Total 84.78 0.00

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Tranche 2 Cost Appraisal Estimate Actual

Foreign exchange cost 30.30 0.88 Local currency cost 0.00 0.00 Total 30.30 0.88

2. Financing plan ($ million)

Cost Appraisal Estimate Actual

Implementation cost Borrower financed 34.00 0.36 ADB financed 170.00 0.52 Total implementation cost 204.00 0.88

Interest during construction costs Borrower financed 8.20 0.00 ADB financed 0.00 0.00 Total interest during construction cost 8.20 0.00

3. Cost breakdown by project component ($ million)

Component Appraisal Estimate Actual

Component 1: Support for Integrated Value Chains 193.70 0.00 Component 2: Institutional Development and Project

Management 10.10 0.88

Commitment Charges 0.20 0.00 Finance Charges During Implementation 8.20 0.00 Total 212.20 0.88

4. Project schedule

Item Appraisal Estimate Actual

Establishment of PMU Q2 2010 Q2 2010 Date of contract with TAG 1 consultants Q2 2012 Q1 2012 Date of contract with TAG 2 (PMU PPP consultants) Q2 2012 Q3 2012 Concession agreement (Nashik) Q4 2012 Not Achieved Concession agreement (Aurangabad-Amravati) Q4 2012 Not Achieved Completion of engineering designs Q2 2013 Not Achieved Civil works for marketing infrastructure Q4 2012 Not Achieved

PMU = project management unit; PPP = public−private partnership; Q = quarter; TAG = transaction advisory group

5. Project performance report ratings

Tranche 1 Implementation Period

Ratings

Development Objectives

Implementation Progress

From 30 August 2012 to 31 December 2012 On track On track From 1 January 2013 to 31 December 2013 Potential problem Potential problem From 1 January 2014 to 31 December 2014 Actual Problem Actual Problem From 1 January 2015 to 31 December 2015 Actual Problem Actual Problem From 1 January 2016 to 12 August 2016 Actual Problem Actual Problem

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Tranche 2

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 9 April 2012 to 31 December 2012 On track On track From 1 January 2013 to 31 December 2013 On track On track From 1 January 2014 to 31 December 2014 On track On track From 1 January 2015 to 31 December 2015 Actual problem Actual problem From 1 January 2016 to 31 March 2016 Actual problem Actual problem

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Members

Loan inception 25 April–7 May 2012 2 12 p, n, f Review mission 1 25 November 2012 3 3 p, n, f Special loan administration 1 23–24 January 2013 1 2 p and n Special loan administration 2 17–21 March 2013 2 10 p, n Special loan administration 3 5–8 July 2013 2 6 p, n Review mission 2 15–25 October 2013 4 16 d, p, n, f Review mission 3 5–12 February 2014 1 7 n Special loan administration 4 6–13 October 2014 3 21 n, pp, f Review mission 4 27–28 August 2015 1 2 pp Review mission 5 4–10 December 2015 1 6 pp d = director, f = project analyst, n = natural resources and agriculture specialist, p = portfolio management, pp = public–private partnership specialist.

I. PROJECT DESCRIPTION

1. Agriculture is an important sector of the Indian economy, having contributed 16.0% of the national domestic product in 2009 and 17.5% in 2015. It is also an important sector for employment; in 2010, 53% of the workforce relied on agriculture for income and livelihood.1 India’s Eleventh Five-Year Plan, 2007–2012, which set a 4% annual sector growth rate target, recognized the relevance of the sector to promoting inclusive economic growth through higher farm incomes and increased employment opportunities (footnote 1). However, agriculture had failed to achieve the growth rates set in the Ninth and Tenth Five-Year plans, so the goals for reducing the rates of poverty in rural areas had not been achieved.

2. The Government of India (GoI) recognized that the lack of private sector investment was a contributing factor to the poor performance of the agriculture sector. The Eleventh Five-Year Plan targeted (i) a modern, efficient marketing structure; (ii) backward links between markets and production areas to give producers higher prices; and (iii) coordination along the value chains. GoI proposed the promotion of private sector investment through public–private partnerships (PPPs) and the provision of public sector capital grants to private sector investors wanting to establish agribusiness infrastructure.

3. The Asian Development Bank (ADB) approved the multitranche financing facility (MFF) for the Agribusiness Infrastructure Development Investment Program for $212.2 million in 2010. ADB envisaged the MFF to consist of at least four tranches, subject to the government's submission of related periodic financing requests (PFRs) and fulfillment of other terms and conditions.2 Tranche 1 for $67.6 million was to establish two integrated value chains (IVCs) in Bihar’s Muzaffarpur and Patna–Nalanda regions. It was originally planned to be completed on 30 June 2018 but was cancelled on 12 August 2016. On 19 December 2011, ADB approved tranche 2 in Maharashtra for $24.3 million, to expand agriculture value chains and integrate small-holder farmers into IVCs in the regions of Nashik and Aurangabad–Amravati. Tranche 2 became effective on 9 April 2012, was completed on 31 December 2015 and was closed on 31 March 2016.3

4. ADB designed the investment program using an IVC approach to invest in physical and institutional links along horticulture value chains by supporting (i) site development and agribusiness infrastructure; (ii) infrastructure links to ensure connectivity and basic services across value chains; (iii) backward links to the production areas through contract farming and farmer-operated producer companies; and (iv) capacity development to strengthen technical and managerial skills across value chains. The impact of the investment program was higher value of horticulture products captured by the stakeholders of the IVCs. The investment program was to be implemented in selected regions of Bihar and Maharashtra that had adopted different agri-marketing policies—Bihar promoting the provision of agri-marketing as a private-sector-led function, and Maharashtra enabling greater private sector participation but leaving the role of regulator and market manager with the public sector. The investment program outcome was to be delivered through eight or more PPP contracts to private sector concessionaires. The private sector concessionaires were expected to bring in world-class technology and modern

1 Government of India, Planning Commission. 2008. Eleventh Five-Year Plan, 2007–2012. New Delhi. 2 ADB. 2010. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche

Financing Facility to India for the Agribusiness Infrastructure Development Investment Program. Manila. 3 ADB. 2011. Periodic Financing Request: Proposed Tranche 2 of the Agribusiness Infrastructure Development

Investment Program. Manila.

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management. They were to design, build, finance, operate, and maintain the IVCs in selected regions of the two states.

II. DESIGN AND IMPLEMENTATION

A. Program Design and Formulation

5. The investment program was in line with the sector priorities of ADB and the government during appraisal, particularly for private sector development through PPPs. Support for private sector involvement in development through PPPs was both an ADB and government priority. Investment in the agriculture sector, specifically in agricultural value chains, was fully in line with the Government of India’s agricultural strategy as reflected in the Eleventh Five-Year Plan (footnote 1). The investment program was consistent with ADB’s country partnership strategy, 2009–2012 for India, which placed a high priority on agriculture and natural resources and emphasized private sector participation in infrastructure development, including through PPPs.4 ADB adopted a participatory approach in project formulation by conducting stakeholder consultations, workshops, field visits, and capacity-building activities. ADB provided a separate technical assistance (TA) to address institutional and capacity constraints in Maharashtra.5 The investment program remained relevant to the government’s agricultural strategy as reflected in the Twelfth Five-Year Plan, 2012–2017 during the project period.6 This latest plan recognized that faster growth of agriculture contributed to inclusive growth, and set a target of 4% agricultural growth to ensure inclusiveness through improving market linkages and encouraging private sector investment. The project complemented two other externally funded programs: the Convergence of Agricultural Interventions in Maharashtra’s Distressed Districts Program funded by the International Fund for Agriculture Development and the World Bank’s Maharashtra Agriculture Competitiveness Project.7 At completion, the investment program was well-aligned with ADB’s operational plan for agriculture and natural resources, particularly priority 2: improved market connectivity and value chain linkages.8 The project was aligned with the latest country partnership strategy under strategic pillar 2: inclusive provision of infrastructure networks and services.9 Using MFF was an appropriate modality to provide support to long-term sectoral investment programs such as the case for agribusiness investments in Bihar and Maharashtra states.

6. The investment program had a rigid design for establishing the PPP modality for IVCs in both states. Private concessionaires, selected on a competitive basis, were to design, build, finance, operate, and maintain two IVCs each—in Muzaffarpur and Patna–Nalanda regions in Bihar and in Nashik and Aurangabad–Amravati regions in Maharashtra—on predetermined government land sites. The concessionaires were to retain all revenues from the investment. The public sector was to provide land under a 20-year lease, with leasing costs based on the rent prescribed in accordance with prevailing state government rates. Lease rent was to be reviewed every 5 years, and the lease agreement was to be terminated or renewed at the end of 20 years,

4 ADB. 2009. Country Partnership Strategy: India, 2009–2012 – Abridged Version. Manila. 5 ADB. 2013. Advanced Project Preparedness for Poverty Reduction – Institutional Development for a Value Chain

Approach to Agribusiness in Bihar and Maharashtra (Subproject 12). Consultant’s Final Report. Manila (TA 7766-IND).

6 Government of India, Planning Commission. 2012. Twelfth Five-Year Plan (2012–2017): Faster, More Inclusive and Sustainable Growth. New Delhi. With the Planning Commission dissolved in 2014, the government did not launch any formal economic plans.

7 IFAD. 2015. Convergence of Agricultural Interventions in Maharashtra's Distressed Districts Programme: Supervision

Report. https://operations.ifad.org/documents/654016/de77e4af-bd57-406e-b80b-4462e717c03e 8 ADB. 2015. Operational Plan for Agriculture and Natural Resources: Promoting Sustainable Food Security in Asia

and the Pacific in 2015–2020. Manila. 9 ADB. 2013. Country Partnership Strategy: India, 2013–2017. Manila.

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subject to the agreement of all parties involved. The successful private sector investor was to provide capital for the construction of the infrastructure, provision of equipment, and the ongoing management and maintenance of the sites. To attract private sector investors, the state governments offered a capital grant of a maximum of 70% (Bihar) and 40% (Maharashtra) of the total investment cost to the successful bidder. In other words, the concession was to be awarded based on the lowest capital grant required, with a maximum grant of 70% or 40% being available. The successful concessionaires were to share 30% of gross revenue with the state government of Bihar after 3 years, while in Maharashtra, they were to retain all rights over the revenue generated by each IVC.

7. The investment program was unable to award PPP contracts and undertake activities as planned because of design and implementation problems. In Bihar, prior to the signing of tranche 1, the state government requested ADB to amend the PPP arrangements as follows: (i) reduce the maximum capital grant provided by the public sector to private sector concessionaires from 70% to 35% of the cost of the IVC infrastructure; 10 (ii) remove the requirement for the private sector concessionaire to share 30% of the IVC gross revenue with the state government; and (iii) shift the obligation for land provision from the public sector to the concessionaire. ADB approved these changes on 4 July 2012 and declared the loan effective on 30 August 2012. However, the private sector’s concerns for the high commercial risks of investment were not alleviated, and no concessionaire was identified. ADB cancelled the loan without disbursement on 12 August 2016.11

8. In Maharashtra, despite two rounds of bidding, there was little private sector interest, and no bid was responsive to the bidding documents. Problems with the project design were the following: (i) processors and other private investors were reluctant to invest in preselected IVCs on government-owned land with the likelihood of loss of business upon termination of the concession period; (ii) the land owned by the government and leased to private concessionaires was deemed a complex arrangement, and potential investors feared they would be subject to political interference; (iii) lease rentals for land offered by the government were too high, which negatively affected the financial feasibility for potential concessionaires; and (iv) many potential investors were reluctant to invest in the whole value chain and expressed a preference to focus on strengthening their existing businesses in specialized parts of their value chains.

9. The lack of response of the private sector, even following extensive rounds of consultations and clarifications (para. 34), and their stated concerns regarding the conditions of the contracts, indicate that the overall relevance of the project design and selection of the PPP modality did not match the demands of the market. In July 2017, the executing agency showed interest in proposing a tranche 3 for $85 million, with a change in focus from a PPP modality through competitive bidding to an investment promotion scheme that will focus on post-harvest infrastructure. However, given the limited remaining period in the investment program, the state government and ADB jointly agreed that no further tranche will be processed beyond tranche 2.

10. The project team did not prepare this facility completion report together with the tranche 2 project completion report because during the preparation of the tranche 2 project completion report, the possibility of processing a third tranche was still under discussion. As ADB cancelled

10 The decrease in maximum capital grant, from 70% to 35%, reduced the tranche amount to $35.1 million following

approval of the partial cancellation of $32.5 million on 2 May 2014. For details, ADB. 2010. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility to India for the Agribusiness Infrastructure Development Investment Program. Facility Administration Manual (accessible from the list of linked documents in Appendix 2). Manila.

11 ADB. 2017. Loan Cancellation: Agribusiness Infrastructure Development Investment Program – Tranche 1. Manila.

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tranche 1 without disbursement and tranche 3 did not materialize, this facility completion report is being prepared without an accompanying project completion report.

B. Program Outputs

11. The investment program outputs included the following: (i) IVC infrastructure are set-up and functional; (ii) IVC stakeholders effectively participating in and properly managing the IVCs; and (iii) state governments efficiently performing their regulatory and oversight functions over the IVCs and the PPP contracts. The investment program outputs were to be delivered through two components: (i) support for IVCs, and (ii) institutional development and investment program management.

1. Support for Integrated Value Chains

12. This component aimed to support the strengthening and establishment of infrastructure and institutional links among the value chain stakeholders for horticultural high-value crops, ensuring that IVCs are operational by financing basic and agribusiness infrastructure, linking infrastructure to ensure connectivity and basic utilities, strengthening and/or establishing backward links, and supporting technical and managerial skills development along the value chains. The output achievement was to be measured through diverse indicators, ranging from the number of IVC infrastructure to be established through the project (e.g., 50 market sites and IVC locations upgraded or developed; water supply within IVC facilities satisfies 95% of demand) to IVC performance (e.g., at least 10% increase in the quantity produced by IVC suppliers) and positive economic benefits achieved within the IVC. All indicators presumed that the IVCs would come into existence in some form with investment program support. However, because this did not materialize under the investment program in either Bihar or Maharashtra, none of the output indicators were achieved. The baseline survey was also expected to be carried out at the outset of the investment program implementation to set the baseline data for these indicators. In light of the absence of progress in the investment program implementation, no survey was conducted.12

2. Institutional Development and Program Management

13. To establish sound project and PPP contract management systems, project management units (PMUs) in each state were to provide implementation support, consisting of staff, office facilities and equipment, consulting services, and liaison and coordination with other line agencies. The PMUs were expected to establish and maintain a website with information on project activities, including procurement procedures and results. A transaction advisory group (TAG) with the requisite experience and skills were to be engaged by each PMU to ensure that the PPP transactions for the establishment of the IVC infrastructure are successfully completed and their implementation monitored. Indicators for this output included (i) timely and within-budget implementation of investment program tranches, and (ii) completion of at the minimum, eight PPP transactions per state. Although some key milestones were completed under the investment program, none of the output indicators was successfully met.13

12 The project team, through the associated grant funded by the Japan Fund for Poverty Reduction, conducted producer

baseline surveys in both Bihar and Maharashtra (para. 29), but the scope of the survey did not necessarily correspond to the program’s integrated value chain, since no integrated value chain had been established.

13 Completed activities include the estabishment of the PMUs in both states, and website creation in Maharashtra.

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C. Program Costs and Financing

1. Facility

14. The total cost of the investment program at approval was $212.2 million. Out of which, ADB was to finance the equivalent of $170.0 million. The MFF was to consist of at least four tranches, subject to the government’s submission of related PFRs. However, the government submitted and approved only two PFRs, amounting to $91.9 million ($67.6 million for tranche 1 and $24.3 million for tranche 2). ADB approved partial cancellations of $32.5 million (for tranche 1) and $13.1 million (for tranche 2) to adopt to actual project conditions. Details of the cancellations are discussed in the succeeding paragraphs.

2. Tranche 1

15. The total cost of tranche 1 at appraisal was estimated at $84.78 million, comprising an ADB loan of $67.60 million and government counterpart funds of $17.18 million. ADB approved a partial cancellation of $32.5 million, at the request of the government, on 2 May 2014 based on the recalculation of actual capital grant to concessionaires, which was initially estimated at $50 million. The government informed that the maximum capital grant, which is a bidding parameter, was reduced from 70% to 35% and thus it only required $17.5 million from ADB financing.

16. Overall progress remained slow given the rapid staff turnover within the Department of Agriculture. After several rounds of consultations and the fielding of seven review missions and four special loan administration missions to Bihar, the State Government of Bihar (SGOB), with guidance from ADB, decided to move towards loan closure. ADB discussed this option both with the SGOB and the Department of Economic Affairs, and, based on the advice of SGOB, the government requested to close the loan through its letter dated 4 August 2016. The tranche was subsequently closed on 12 August 2016 with zero disbursement.

17. SGOB signed one contract for technical advisory services on 5 February 2015. Following the loan cancellation, the executing agency rescinded the contract with the consultants in August 2016, with the assurance that it will meet the contract obligations through its own resources, and confirmed that no withdrawals were made under the loan.

3. Tranche 2

18. The total cost of the project at appraisal was estimated at $30.3 million, comprising an ADB loan of $24.3 million and government counterpart funds of $6.0 million. The actual project cost was $0.89 million (2.9% of estimates at appraisal). ADB financing amounted to $0.53 million (59.6% of actual project costs) and government financing was $0.36 million (40.4% of actual project costs) for the lone contract for the transaction advisory consultant.

19. The maximum capital grant to concessionaires, which is a bidding parameter, was limited to only 40% (or $8.7 million). However, the provision under the loan was for 100% (or $21.8 million). To rectify this, following discussions with ADB, the State Government of Maharashtra requested a partial cancellation of $13.1 million, approved on 16 January 2014, which reduced the total loan amount to $11.2 million. ADB cancelled a further $10.7 million at loan closure on 31 March 2016. No withdrawals were made for the concessionaire equity.

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D. Disbursements

20. Total disbursements under the facility were $0.53 million, or 0.25% of the original investment amount. Minimal disbursement was due to the lack of physical progress. There were no disbursements under tranche 1 (paras. 15 and 16). The loan proceeds under tranche 2 were disbursed using the reimbursement method (through statement of expenditures procedure), in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time).

E. Program Schedule

21. The investment program implementation period was until 30 June 2018, and the investment program period expired as scheduled due to the lack of physical progress in tranches 1 and 2. The fundamental design issues that affected program implementation are discussed in para. 43.

1. Tranche 1

22. The overall implementation period for the project at appraisal was 6 years from loan effectiveness, or from 30 August 2012 to 30 June 2018. The project was cancelled earlier, on 12 August 2016 due to lack of physical progress (footnote 11).

23. The project encountered delays from its outset. The Bihar state cabinet delayed the approval to sign tranche 1, triggering a 6-month extension in the MFF approval validity period from 15 September 2011 to 15 March 2012.14 ADB issued the approval for signing in April 2012, 19 months after the loan approval. The loan agreement was signed subsequently in July 2012 by ADB and DEA and declared effective in August 2012 after the state government’s request for amendments to the PPP model for the IVCs (para. 7). The implementation thereafter was slow, as manifest in the delayed signing of the contract for the transaction advisory services consultant by 2.5 years (paras. 31–32), and there was no progress in implementation until the cancellation in August 2016. The delay was partially attributed to the high staff turnover within the executing agency, coupled with the fundamental design issues.

2. Tranche 2

24. The overall implementation period for tranche 2 at appraisal was 4 years. PPP concessionaire contracts were to be implemented over 4 years, including a 3-year window for the establishment of PPP concessionaire contracts and the implementation of civil works contracts. The time required for completing the procurement process for the IVCs was substantially underestimated at appraisal, as ADB had no experience in standard bidding documents to facilitate such procurement. It took 17 months (35% of the implementation period) to prepare, amend, and finalize the request for qualifications (RFQs). Following the issuance of the RFQ, it took 15 months to issue the request for proposals to the short-listed firms, mainly because prospective investors sought clarifications, particularly on documentation and eligibility requirements. Maharashtra State Agricultural Marketing Board (MSAMB) issued 11 corrigenda, including five extensions of the deadline for submission of qualification requirements.

25. Prospective bidders did not respond in the first round of bidding despite efforts to attract private sector investors. MSAMB, with guidance from ADB, streamlined the procurement

14 The ADB President approved a major change in the implementation arrangements on 28 September 2011 to extend

the validity period of the MFF by 6 months (ADB. 2011. Major Change in Implementation Arrangements: Agribusiness Infrastructure Development Investment Program in India. Manila). ADB validated the MFF and made effective on 18 January 2012 with the signing of the legal agreement for tranche 2.

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documentation and combined the RFQ and request for proposals for the second round of bidding announced in October 2015, 42 months after loan effectiveness. However, MSAMB received only two proposals by 28 December 2015 and both were determined to be nonresponsive. In summary, except for the timely establishment of the PMU, the entire implementation period was consumed in the procurement process without completing the selection of the concessionaires for the IVCs.

F. Implementation Arrangements

26. Consistent with the facility administration manual, both states established PMUs as implementing agencies under the respective executing agencies. In Bihar, the Bihar Department of Agriculture (DOA) served as both the executing and implementing agency. In Maharashtra, the executing agency was Maharashtra Department of Co-operation, Marketing and Textiles (DCMT), and the implementing agency was MSAMB. The PMUs in both states, assisted by TAG consultants, were to select the concessionaires for the development of IVCs. In Maharashtra, the state level committee (Empowered Committee on Agricultural Marketing) was established on 3 December 2010 to oversee decisions on procurement activities that were initiated (i.e., review of bidding documents, changing the concession period from 20 to 25 years, project location, etc.). In Bihar, however, no state level committee was established.

27. At project approval, it was intended that the PMUs will focus more on facilitation rather than hands-on implementation. The design, construction, and operation of the IVCs was the responsibility of the private sector partners under the guidance and supervision of the PMUs. The implementation arrangements were appropriate for the investment program, and lack of

achievement of the outputs was a result of design weaknesses (paras. 6−9) rather than deficiencies in the implementation arrangements.

G. Technical Assistance

28. A transaction advisory consultant carried out the design work for the MFF through a project preparatory TA, which was implemented from 27 April 2009 to 31 October 2011 and disbursed a total amount of $0.92 million.15 The executing agencies for the project preparatory TA were the agriculture development agencies of Bihar (DOA) and Maharashtra (DCMT). The project preparatory TA identified gaps in the value chain, which formed the basis of the investment program design. The consultant used stakeholder consultations as the basis for preparing (i) the project components for the selected IVCs and (ii) the investments to be funded under the first and second tranches of the MFF. Given the identified problems associated with project design, the overall quality of the project preparatory TA is considered less than successful.

29. The investment program did not have an attached transaction TA to support investment program implementation, but the Japan Fund for Poverty Reduction (JFPR) provided an associated grant, Improving Small Farmers’ Access to Market in Bihar and Maharashtra, for $3 million.16 The grant complemented the investment program’s subcomponent of establishing IVC backward links to the production areas so that producers can participate in the IVC activities. The ADB Board of Directors approved the grant on 30 July 2010 and it became effective on 21 November 2011. Its original closing date was 30 June 2014 but was extended until 31 December 2018, when the grant was physically closed. The expected outcome was enhanced integration of fresh fruit and vegetable farmers into high-value horticulture value chains in the states of Bihar

15 ADB. 2008. Technical Assistance to India for Preparing the Agribusiness Infrastructure Development Investment

Program (Phase 2). Manila. 16 ADB. 2010. Japan Fund for Poverty Reduction Grant to India for Improving Small Farmers’ Access to Market in Bihar

and Maharashtra. Manila.

8

and Maharashtra. The key outputs included (i) enhanced ability of target farmers to provide consistent fresh fruit and vegetable supply that meets the requirement of modern markets, (ii) improved linkage between target farmers and the market, and (iii) an established project management system. Of the $3.0 million grant, ADB nominally allocated $1.5 million each to Bihar and Maharashtra at grant approval, but due to lack of implementation progress in Bihar and significant achievement made in Maharashtra, ADB, in consultation with the respective grant implementation units in Bihar and Maharashtra, revised the allocation to $2.4 million for Maharashtra and $0.6 million for Bihar. On 14 November 2018, ADB cancelled $0.6 million out of the total grant amount following discussions with both executing agencies that only $1.8 million will be utilized by Maharashtra and $0.6 million will be utilized by Bihar. Of the remaining $2.4 million, the total actual disbursement was $2.27 million. ADB cancelled the unutilized balance of $0.13 million at financial closing (30 April 2019).

30. Key achievements of the associated Japan Fund for Poverty Reduction grant. In Bihar, the key achievements were the following:(i) 27 farmer groups and two farmer producer companies (FPCs) were formed; and (ii) a potato grader and a honey primary processing unit were purchased for the FPCs. The key achievements in Maharashtra include the following: (i) founding of 18 FPCs, comprising 3,682 members from 1,404 farmer groups of 22,417 members; (ii) implementation of the revolving fund schemes by 15 of the FPCs; (iii) establishment of 13 FPCs’ direct market linkages with bulk buyers in distant markets; and (iv) launch of the FPC portal

to facilitate farmer−buyer direct linkages. The overall performance of the grant is expected to be less than satisfactory largely on account of Bihar’s nonperformance.17

H. Consultant Recruitment and Procurement

1. Tranche 1

31. DOA initiated the TAG recruitment in July 2013, including issuance of the request for proposals. The transaction advisory services consultant was selected through quality- and cost-based selection and signed on 5 February 2015. The consultant was to provide 117 person-months of inputs to support the executing agency, DOA, in structuring the bidding process to engage a private sector partner for investment in the two IVCs. The expected output was to develop an appropriate framework and design, as well as recommended changes to the proposed design in the detailed project reports of the IVCs, based on consultations with the private sector and potential investors to finalize the procurement strategy. The consultants helped prepare the detailed project reports as part of the PPP model.

32. Nonetheless, SGOB did not make a timely decision on the proposed PPP modality and associated documentation, in spite of its agreement with ADB to validate them and approve the documents for bidding by April 2016. The findings from the stakeholder consultations organized in 2015 showed that the high commercial risks to be absorbed by concessionaire was the main reason for the failed PPP model. By extension, the procurement process for the IVCs was unsuccessful, leading to tranche 1 closure on 12 August 2016 with no disbursement. DOA rescinded the contract with the consultants in August 2016.18

2. Tranche 2

33. Tranche 2 financed two consulting services packages: (i) TAG 1 for supporting the bidding process for IVCs in Nashik and Aurangabad–Amravati, and (ii) TAG 2 for the preparing the

17 The Implementation Completion Memorandum is under preparation. 18 The state government assured that it will meet the consultant contract obligations through its own resources.

9

detailed project reports for additional four IVCs envisaged under the project. The GIU, under the Directorate of Horticulture, engaged TAG 1 through the consultants’ qualifications selection method. TAG 1 was mobilized in February 2012, and provided 10.7 person-months of inputs. The GIU recruited TAG 2 through the quality- and cost-based selection method. TAG 2 was mobilized them in September 2012, and provided 30.5 person-months of inputs.

34. The procurement process for the two IVCs was not successful. In the first round of bidding, none of the short-listed firms submitted a proposal. MSAMB restructured the bid to (i) unbundle the package to allow concessionaires to bid for individual locations rather than the entire IVC in response to their preference to strengthen existing businesses in specialized parts of the value chain; and (ii) allow the use of private land for establishing the IVCs, given that leasing of public land was expensive and carried an unacceptable business risk for potential investors. MSAMB conducted road shows and stakeholder consultations to inform and generate interest from the private sector in establishing the IVCs. In the second round of bidding, the only two proposals submitted were determined not responsive to the bidding documents.

I. Safeguards

35. The investment program was categorized C for involuntary resettlement and indigenous peoples. ADB prepared a resettlement framework and an indigenous peoples’ planning framework for the investment program to guide concessionaires in planning PPPs, but the investment program did not progress to a point where PPP concessionaires were engaged. No involuntary resettlement or indigenous peoples’ plans were implemented, given there were no capital works, as required in the loan covenants (Appendix 5).

36. The investment program was categorized B for environment. ADB prepared an initial environmental examination and an environmental management plan for investments under tranche 1 in Bihar prior to the investment program approval and in accordance with ADB's Safeguard Policy Statement (2009). The environment assessment and review framework for Bihar proposed mitigation measures for potential environmental impact of the market infrastructure and other related infrastructure such as rural roads. Since no physical progress was made on the project implementation, no safeguard issue arose, and no monitoring was undertaken. For subsequent tranche(s), an environmental assessment was to be undertaken once the design and location details of the subcomponents to be implemented through PPP were made clear. This did not happen for tranche 2 due to the lack of physical progress in the implementation.

J. Monitoring and Reporting

37. The status of compliance with the loan covenants for both Bihar and Maharashtra is in Appendix 6. In Bihar, out of 31 covenants, 10 were complied with, referring mainly to the set-up of the PMU and ADB’s prior review of consultant recruitment and procurement documents. However, none of the concessionaire agreements was finalized and awarded. Thus, the remaining covenants related to project implementation and compliance to safeguards requirements during implementation were not relevant until the project made physical progress.

38. In Maharashtra (tranche 2), 26 out of 38 covenants were complied with in a timely manner. The remaining 10 covenants were not due until the PPP concessionaires and civil works commenced: (i) ensure that the preparation, design, construction, implementation, commissioning, and decommissioning of project facilities comply with environmental and safety requirements; (ii) ensure that land is available to the concessionaires for facilities to be constructed; (iii) safeguards monitoring and reporting; (iv) ensure that the works contracts comply

10

with applicable labor laws; and (v) ensure that the gender action plan is implemented and incorporated in key documents and activities. Not all covenants could be complied with because of lack of physical progress.

39. As for the financial management arrangements, the investment program provisioned for a finance and administration unit to be established in each of the state PMUs, comprising a professionally qualified project finance manager, assisted by qualified staff. This financial management structure was put in place in both states.

40. For tranche 1, ADB deferred the audited project financial statement (APFS) for fiscal year ending (FYE) 2014 and subsequently received only one APFS (FYE 2015). For tranche 2, APFS

from FYE 2014 to 2016 were submitted to and accepted by ADB. MSAMB submitted the first APFS late mainly due to PMU’s lack of familiarity on compliance with the financial covenants. MSAMB submitted the succeeding APFSs in a timely manner, reporting no significant audit findings.

III. EVALUATION OF PERFORMANCE

A. Relevance

41. The investment program is rated less than relevant. Investment in the agriculture sector was in line with the Government of India’s Eleventh Five-Year Plan and ADB’s country partnership strategy, 2009–2012 for India, and focused on stimulating investments in value chain infrastructure through PPPs. In the case of Maharashtra, the state was well-established as a private sector investment destination, and a 2006 legal reform allowed for direct marketing contracts between agribusinesses and farmers, as well as for individual businesses to establish new private market areas. The design recognized the constraints of poor coordination and low management capacity to deal with large numbers of individual multilocation producers and multilocation wholesale and retail. The MFF modality was appropriate for the proposed design of providing long-term support to two states.

42. However, the model was premature given the limited experience with adopting PPPs in both states. The design did not undertake any comprehensive assessment of potential private sector investors and their preference not to invest in supply chain operations and to be located near urban centers. The design also did not recognize the preference of private investors to establish IVCs on private rather than public land. The designers did not undertake sufficient market assessments to determine the parameters of the IVC bids. The details of the bid process had to be worked out during implementation, which was highly inefficient. As a result of the lack of relevant design, the project could not be implemented.

43. The ADB consultants conducted a strengths, weaknesses, opportunities, and threats analysis in November 2015 to compile the factors impacting the agricultural growth and assess the realistic conditions for development of the IVCs under the program. It identified that the program had a number of weaknesses: (i) limited support for the development of backward linkages with farmers and forward linkages with wholesalers and retailers to reduce the commercial risks related to the usage of the infrastructure to be created; (ii) absence of support during the first years of operation and maintenance of the facilities, until the IVC is fully sustainable; and (iii) limited support to vulnerable farmers to help them cope with production, financing, quality, and other challenges. MSAMB proposed to prepare a third tranche under the MFF to (i) allow sufficient time to complete the bidding process for the concessionaires; (ii) incorporate comments from the Government of Maharashtra on the draft strengths, weaknesses, opportunities, and

11

threats report; and (iii) hold a tripartite meeting on the approach for the way forward. However, these actions did not materialize, and the proposed tranche 3 was not processed.

B. Effectiveness

44. The investment program is rated ineffective as it did not achieve the output targets for the following: (i) IVCs infrastructure set up and functional; (ii) IVC stakeholders effectively participate in and properly manage the IVC; (iii) state governments perform efficiently their regulatory and oversight functions of the IVCs; and (iv) the PPP contracts provide the additional value added to the IVC. Since no IVC was established through the investment program due to fundamental design problems, none of its outcome targets were achieved (paras. 6–9).

C. Efficiency

45. The investment program is rated inefficient on the basis that (i) no economic benefits were generated as the outputs and outcome were not achieved, and (ii) process efficiency was poor given the disbursement of only 0.25% of funds. Tranche 1 experienced major delays from the loan signing until it was deemed to be of such magnitude that ADB and the borrower agreed to cancel the project, in consultation with the executing agency. The implementation period of tranche 2 was consumed in the procurement process (paras. 22–23), bar the timely establishment of the PMU, without completing the selection of the concessionaires for the IVCs.

D. Sustainability

46. The investment program is rated unlikely sustainable since there are no outputs and outcome to sustain. No PPP contract was awarded, because the investment program was not financially viable, and therefore also unlikely to have been sustainable. Similarly, no further assessment can be made on environmental and social sustainability considerations.

E. Development Impact

47. The investment program’s development impact is unsatisfactory as it did not result in any poverty or economic impacts or increased private sector investment options in agribusiness value chain attributable to the investment program, given the lack of achieved outputs or outcome. However, in Maharashtra, the state government’s capacity to understand agribusiness through PPP was enhanced. The knowledge imparted by tranche 2 through road shows and consultations also raised awareness in the private sector on the possible options available to invest in the value chains.

F. Performance of the Borrower and the Executing Agency

48. The borrower, the Department of Economic Affairs of the Government of India, played a central role in the design of the overall facility, particularly in recommending the PPP approach for agribusiness development, and followed up with the executing agencies in both Bihar and Maharashtra on several occasions to expedite the implementation progress. High staff turnover in Bihar’s DOA—mainly due to the absence of a dedicated PMU—showed low buy-in by the state and was a contributing factor to the slow implementation of tranche 1, which eventually led to loan cancellation. In contrast, DCMT and MSAMB demonstrated strong ownership and made a concerted effort to implement the project, despite difficulties in attracting private sector investments in the proposed IVCs. Following the closure of the loan, DCMT and MSAMB have continued to demonstrate an interest in participating in further agribusiness projects if a more viable model could be developed to attract investments in the value chains in Maharashtra under

12

the existing facility or through a new facility. Nonetheless, none of the agencies—including the Department of Economic Affairs, DOA, DCMT, and MSAMB—anticipated the complexity of the investment program and lacked information about the real preferences of the private sector with regards to investments in agribusiness during the project design stage. As a result, project implementation did not make progress.

49. The performance of the borrower is rated less than satisfactory; DOA in Bihar, unsatisfactory; and DCMT and MSAMB in Maharashtra, less than satisfactory.19

G. Performance of the Asian Development Bank

50. From the facility effectiveness to the closure of tranche 2, nine ADB officers were responsible for administering the investment program since its effectiveness in 2012, with some officers being in charge for no more than 3–6 months. ADB fielded 10 missions, entailing 85 field days, to support the investment program implementation in both Bihar and Maharashtra. From November 2014 to June 2015, ADB delegated the implementation of tranche 2 to the India Resident Mission to enhance support to DCMT and MSAMB.20 As evident in the high number of special loan administration missions fielded by ADB, ADB made efforts to provide the required project administration support and respond on matters that required facilitation, including selection of consultants, processing of withdrawal applications, and timely cancellation of loan proceeds. However, in view of the high turnover of project officers involved in the administration, timely responses and support to redesigning a poorly performing investment program, backed with insufficient knowledge on the project-specific context, were difficult to deliver to the government agencies consistently.

51. The investment program design did not properly recognize the challenges associated with implementing a pioneering PPP approach to agribusiness development. The choice of PPP modality was, in hindsight, inappropriate for the market and not sufficiently flexible to adapt during investment program implementation. The design was overly complex, and the PPP modality was not aligned to the emerging needs of private sector operators who preferred more flexible business models. As such, ADB was unable to advise DOA, DCMT, and MSAMB on appropriate bidding documents and processes to be used for selecting the concessionaire for the proposed IVCs. This contributed to extensive delays in both states. In Maharashtra, ADB provided a TA to assist MSAMB in streamlining the procurement process, but it was not sufficient to provide broader solutions to the investment program’s fundamental design issues.21 ADB’s performance is considered less than satisfactory given the identified deficiencies in design and contributions to implementation delays.

H. Overall Assessment

52. The investment program was unable to undertake the tasks to accomplish the outputs and outcome. Hence, it was not implemented as designed, contract awards and disbursements were

19 Although the project team rated the DCMT and MSAMB performance as satisfactory in the project completion report

for tranche 2, the Independent Evaluation Department contested this rating as indicated in the project validation report and downgraded the final rating to less than satisfactory, citing that the executing agency has a share of responsibility in not foreseeing the complexity of the investment program and the rigidity of the proposed PPP model. Same can be said of the borrower’s performance by the same token and is rated less than satisfactory. ADB. 2017. Completion Report: Agribusiness Infrastructure Development Investment Program (Tranche 2) in India. Manila; ADB. 2018. Validation Report: Agribusiness Infrastructure Development Investment Program (Tranche 2) in India. Manila.

20 Loan administration was transferred back to the South Asia Environment Natural Resources and Agriculture Division in July 2015 when the project officer was transferred from the resident mission to ADB headquarters.

21 ADB. 2010. Advanced Project Preparedness for Poverty Reduction – Institutional Development for a Value Chain Approach to Agribusiness in Bihar and Maharashtra (Subproject 12). Consultant’s report. Manila (TA 7195-IND).

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minimal, and none of the targets in the design and monitoring framework were met. In accordance with the project performance rating criteria, the overall rating of the project is unsuccessful given the ratings of less than relevant, ineffective, inefficient, and unlikely sustainable. The investment program was also unsatisfactory in achieving the development impact of capturing greater value of horticulture products by IVC stakeholders, since no IVC was developed. The performance ratings for the borrower and executing agencies are differentiated between the tranches, reflecting the level of efforts made by the respective executing agencies; compared to tranche 1, which was cancelled without disbursement, Maharashtra’s DCMT, supported by the borrower, made considerable efforts toward realizing the conclusion of PPP contracts.

Overall Ratings

Criteria

Rating

Tranche 1a Tranche 2b MFF

Relevance - Less than relevant Less than relevant Effectiveness - Ineffective Ineffective Efficiency - Inefficient Inefficient Sustainability - Unlikely sustainable Unlikely sustainable Overall Assessment - Unsuccessful Unsuccessful Development impact - - Unsatisfactory Borrower and executing agency - Satisfactory Less than satisfactory Performance of ADB - Less than satisfactory Less than satisfactory

- = not rated, ADB = Asian Development Bank, MFF = multitranche financing facility. a Due to the loan cancellation, no project completion report was required for the tranche; thus, no assessment on the

criteria was undertaken. b The project completion report did not provide rating for the development impact.

Source: Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS

A. Issues and Lessons

53. The investment program design was complex and implementation arrangements were not aligned to the emerging needs of the private sector. The following lessons may be derived from the experience with the investment program:

(i) The formulation of designs involving PPP-oriented procurement and private sector involvement in public sector projects requires time, experience, and specialized resources. In India, there is limited experience on procedures and mechanisms with respect to PPP arrangements in the agribusiness sector, particularly for large-scale projects. A significant amount of capacity for implementing agencies is required, especially in understanding and managing PPP contracts. Innovative activities should be pilot-tested before scaling them up and incorporating them in projects, with appropriate preparation and controls.

(ii) When designing IVCs and their infrastructure, it is important to understand the size and capacity of the established businesses, their infrastructure needs, and business models. The growth and sustainability of revenues for agribusiness investors also depends crucially on successfully integrating and coordinating many small farmers to provide a consistent supply that also meet the quality requirements of the food market.

(iii) It is also critical to ensure that stakeholders are involved in the process to prepare business models and to allow sufficient flexibility in the project design (such as location of businesses). A more flexible design that allowed private sector to identify their infrastructure needs and submit subproject proposals based on their

14

business interests may have been a more successful approach than the concessionaire model.

(iv) The preparation of detailed project reports (DPRs) by Maharashtra’s DCMT for the proposed value chains prior to contract award was unnecessary as DPRs prepared before bidding process did not involve the investor. In addition, due to the time it took to award the contract, the DPRs became obsolete and the selected investor needed to prepare a fresh DPR. Consequently, this requirement resulted in the duplication of work and delays.

(v) While capital grants or subsidies may be appropriate in some cases for establishing sustainable business operations, alternative options such as providing finance through an investment vehicle should also have been considered. The entire process needs to be carefully managed, as PPP-oriented procurements are generally more complex and require specialized resources and adequate attention to the needs of the prospective investors. For sustainable infrastructure investment, investors should have robust business plans with secured supply lines with processors and retailers who would source from them.

(vi) Investment proposals should be formulated from procedures and mechanisms that are proven to be workable, either through experience in the borrowing country, ADB’s experience in other countries, or that of other development partners. Untried innovative initiatives should be included in a project design on a pilot basis and if proven successful, can be scaled up in ensuing projects.

(vii) Agriculture value chains consist of several individual entities that act in a quasi-independent but mutually interactive manner. This allows adaptation to changes in supply, market conditions, new technologies, and transport conditions. To contract out the entire IVC under a government-managed arrangement may not be suitable for a dynamic business environment, as private entrepreneurs specialize in different segments of the value chain, which limits their capacity and interest to invest in infrastructure beyond their segment. They also require flexibility to source products and technologies in line with the emerging market demand. Restricting their investment to government land also discouraged interest and participation, given the perceived high political risks.

B. Recommendations

54. In view of the lack of physical implementation progress, few program-specific recommendations can be made on the investment program beyond immediate further action or follow-up (para. 52). The recommendations derived from the investment program have general applications to agriculture value chain development interventions. The most fundamental recommendation from the investment program implementation is that for future agriculture value chain development programs to succeed, the design should first construct demand-led business models with accurate projections of viable business growth before proposing substantial capital investment on infrastructure to ensure healthy utilization rate and economic returns on investment. The following points are derived from this fundamental recommendation:

(i) In view of the level of risk entailed, highly innovative and new activities in a project’s scope should be limited to a small component of a project where they can be tested and perfected. A stronger value chain linkage is essential, and the design should include capacity building among value chain stakeholders to improve their ability to analyze opportunities and to strengthen trust through transparent governance arrangements between entities.

15

(ii) To ensure synergy and complementarity, project preparatory TA and fact-finding should include a full assessment of the capacity and willingness of all stakeholders, as well as a full investigation of the ongoing initiatives in the sector.

(iii) Learnings from the implementation of the associated JFPR grant (para. 29), specifically the successful implementation of its Maharashtra component, have highlighted that the value chain approach should be end-to-end, starting with the integration of farmer producers through intensive capacity building and access to working capital financing.

(iv) Preparation of projects that entail an element of private sector involvement should include in-house coordination with ADB’s Private Sector Operations Department

and Office of Public−Private Partnership and an investigation into the willingness to participate (whether private sector entrepreneurs or individual farmers). In this project, the design assumed that there will be sufficient private sector investors willing to participate as concessionaires. The design should have allowed for more flexibility in the type of private sector investments than possible with the concessionaire approach.

55. With respect to implementation, a clear assessment of the business enabling environment and the private sector’s willingness to participate in the investment program should be identified early during the implementation period. In case the results indicate a lack of support from the state or the stakeholders, design adjustments should be immediately implemented and restructuring of the design should be considered.

56. To address the rigidity of the PPP models witnessed in this investment program, future PPP programs should adequately build in flexibility.

57. Further action or follow-up. In view of the experience and knowledge accumulated by Maharashtra’s DCMT and MSAMB in designing and implementing agribusiness development opportunities, ADB must continue engaging with the state government and other stakeholders on sector policy dialogues and future opportunities to support agribusiness-led sector development in general and value chain development in particular, ensuring that the lessons from the investment program are fully reflected. ADB’s support to the aggregation of Maharashtra’s smallholder producers through successful implementation of the associated JFPR grant could be built on to continue assessing the farmer producers’ needs and supporting them in their integration into value chains.

58. Timing of the project performance evaluation report. No project evaluation report is recommended.

Appendix 1 16

DESIGN AND MONITORING FRAMEWORK

1. The Facility

Design Summary Performance Indicators and Targets Project Achievements

Impact

Greater value of horticulture products captured by the stakeholders of the integrated value chain in selected regions of Bihar and Maharashtra

By 2020: Increased investments to diversify into HVC by 10% Increased value addition in horticultural HVC from 2% (2008) to 4% 40% of the IVC throughput is supplied by farmers through direct contracting with the IVC Increased per capita incomes for suppliers to the IVCs by at least 5%

Not achieved. There was no investment made on HVC and no IVC established. The baseline data for HVC was not collected, and therefore, the indicators were not measured.

Outcome Private and public sectors invest, and private sector manages at least 8 IVCs for horticultural HVC, which are inclusive of small-scale farmers.

By 2018: At least 25% of the additionally marketed HVCs go outside the traditional marketing system. 75% of producers' groups facilitated by the investment program have a supply contract with the IVCs Increased rural employment beyond the farm-gate by 0.7 million days per IVC.

Not achieved. There was no investment made on HVC and no IVC established.

Outputs A. IVCs infrastructure set up

and functional.

By 2017: 50 market sites and IVC locations upgraded or developed with modern IVC infrastructure 600,000 tons per year of horticulture crop throughput marketed through the IVC infrastructure Post-harvest losses reduced on average from 30% (2008) to 21% of product throughput Farm gate prices for IVC suppliers 20% higher than non-value chain producers An additional 20% of value added captured within the IVC Price premium increased by 6% for grains and 22% (2008) to 42% for perishable HVC

All suppliers to the IVCs have access to the IVC collection centers and reefer vehicles.

No output was achieved. There was no investment made on HVC and no IVC established. The baseline data for HVC was not collected, and therefore, the indicators were not measured.

No PPP transaction materialized.

Appendix 1 17

Design Summary Performance Indicators and Targets Project Achievements

B. IVC stakeholders effectively

participate in and properly manage the IVC

C. State governments perform

efficiently their regulatory and oversight functions of the IVCs and the PPP contracts

Power supply outage frequency and duration reduced by 50% compared to consumers supplied from local distribution line Water supply within IVC facilities satisfies 95% of demand at all times

At least 10% increase in the quantity produced by IVC suppliers At least 10% increase of the grade A HVC

90% of IVC farmers meet quality requirements of IVCs. At least 20% of the farmer groups enter into long-term agreements with the IVC. 50% of IVC stakeholders trained within the first year of IVC operations on VC technology and management systems At least 20% of the IVC farmer groups turn into producer companies by 2013.

MFF tranches implemented timely and within budget At least 8 PPP transactions per state completed successfully by 2015 and properly monitored Construction and equipment installation achieved at all spokes and hubs to specifications by 2016 All executing agencies officials in the PMU trained on the job for managing a transparent bidding process, awarding and implementing a PPP contract

HVC = high-value crops, IVC = integrated values chain, MFF = multitranche financing facility, PMU = project management unit, PPP = public–private partnership. Source: Asian Development Bank.

18 Appendix 1

2. Tranche 1

Design Summary Performance Targets and Indicators with Baselines

Project Achievements

Impact Greater value of horticulture products captured by the stakeholders of 2 the IVC in Muzaffarpur and Patna-Nalanda regions of Bihar

By 2020:

• Increased investments to diversify into HVC by 10%

• Increased value addition in horticultural HVC from 2% (2008) to 4%

• 40% of the IVC throughput is supplied by farmers through direct contracting with the IVC

• Increased per capita incomes for suppliers to the IVCs by at least 10% compared to non-value chain participants

No target was achieved. The investments did not materialize and therefore the project could not achieve its expected impact.

Outcome Private and public sectors invest and private sector manages 2 end-to-end IVCs for horticultural HVC, which are inclusive of small-scale farmers (through PPP contract)

By 2017:

• At least 25% of the additionally marketed HVCs go outside the traditional marketing system

• Increased rural employment beyond the farm-gate by 0.7 million days per IVC

Not achieved. There was no project activity completed and thus no IVC was established.

Outputs A. Infrastructure in

Muzzafarpur and Patna-Nalanda Set-up and Functional

By 2017:

• 11 market sites (with 2 hubs and 9 spokes) upgraded or developed with modern IVC infrastructure

• 450,000 tons of horticulture crop throughput marketed through the IVC infrastructure

• Post-harvest losses reduced on average from 30% (2008) to 21% of product throughput

• Farm gate prices for IVC suppliers 20% higher than non-value chain producers an additional 20% of value added captured within the IVC

• Price premium increased by 6% for grains and 22% (2008) to 42% for perishable HVC

• 80% suppliers to the IVCs have access to the IVC collection mechanism

• Power supply outage frequency and duration within the IVC facilities reduced by 50% compared to consumers supplied from local distribution line Water supply within the IVC facilities satisfies 95% of demand at all times

No target for this output was achieved. There was no project activity completed and thus no IVC infrastructure was set-up.

Appendix 1 19

Design Summary Performance Targets and Indicators with Baselines

Project Achievements

B. IVC stakeholders effectively participate in and properly manage the IVC

By 2017:

• At least 10% increase in the quantity produced by IVC suppliers

• At least 10% increase of the grade A HVC 90% of IVC farmers meet quality requirements of IVCs

• At least 20% of the farmer groups enter into long-term agreements with the IVC

• 50% of IVC stakeholders trained within the first year of IVC operations on VC technology and management systems

• At least 20% of the IVC farmer groups turn into producer companies by 2013.

No target for this output was achieved. No IVC infrastructure was set-up or established.

C. Governments perform efficiently their regulatory and oversight functions of the IVCs and the PPP contracts

• 2 PPP transactions completed successfully by 2012 and properly monitored

• Construction and equipment installation achieved at all spokes and hubs to specifications by 2014

• DOA officials in the PMU trained on the job for managing a transparent bidding process, awarding a PPP contract, and implementing of build, operate, and transfer model in agribusiness infrastructure.

No target for this output was achieved. IVCs were not established and PPP contracts were not awarded.

DOA = Department of Agriculture, HVC = high-value crops, IVC = integrated value chain, PMU = project management unit, PPP = public–private partnership.

20 Appendix 1

Tranche 2

Design Summary Performance Targets and Indicators with Baselines

Project Achievements

Impact Increased private sector investment in IVC infrastructure and producer returns in HVC in Maharashtra

By 2020: Share of private sector investment in infrastructure to diversify into HVC increases by at least 10%

Not achieved. There was not enough interest from the private sector and no IVC was established.

Farm gate prices for IVC suppliers 20% higher than non-value chain producers

Not achieved. No IVC was established.

Outcome Expanded agricultural value chains and better integration of small-scale farmers into IVCs in the Nashik and Aurangabad-Amravati regions

By 2015: Post-harvest losses reduced on average from 30% (2008) to 21% of product throughput

Not achieved. No IVC was established.

At least 30,000 producers supplying more than 250,000 metric tons of HVCs to modern value adding infrastructure

Not achieved. No IVC was established.

An additional 20% of value added captured within the IVC

Not achieved. No IVC was established.

At least 30% of the farmer groups enter into long-term agreements with the IVC

Not achieved. No IVC was established.

Outputs 1. IVC infrastructures in

Nashik and Aurangabad – Amravati regions set-up and functional

By 2015: 15 market sites (with 1 hub and 14 spokes) upgraded or developed with modern IVC infrastructure, site and linking infrastructure (e.g., roads)

Not achieved. No IVC infrastructure was built.

Power supply outage frequency and duration within the IVC facilities reduced by 50% compared to consumers supplied from local distribution line experiencing 8 hours power shortage daily

Water supply within the IVC facilities satisfies 95% of demand at all times

2. IVC stakeholders effectively participate in and manage IVCs

By 2015: 2 PPP contracts completed successfully by 2013 and properly monitored

Not achieved. PPP contracts did not materialize due to lack of interest from the private sector.

50% of IVC stakeholders trained on VC technology and management systems (Baseline = 0, 20% female)

Not achieved. No IVC was established

Appendix 1 21

Design Summary Performance Targets and Indicators with Baselines

Project Achievements

3. Project Management support strengthened

TAG for PMU formed within 6 months from project effectiveness

TAG consultant was engaged on 14 February 2012 as advanced action, 2 months before loan effectiveness.

PMU officials trained on the job in managing a transparent bidding process, awarding a PPP contract in agribusiness infrastructure by the end of 2012

Partially achieved. TAG consultant was engaged on 14 February 2012 and provided training and support during the bidding process. However, no PPP contract was awarded due to lack of interest from the private sector.

Concessionaire contract management and monitoring system institutionalized within the implementing agency by the end of 2013

Not achieved. There was no concessionaire contract awarded.

HVC = high-value crop, IVC = integrated value chain, PMU = project management unit, PPP = public–private partnership, TAG = technical advisory group, VC = value chain. Source: Asian Development Bank estimates.

22 Appendix 2

PROJECT COST AT APPRAISAL AND ACTUAL

($'000)

Appraisal Estimate Actual

Item Government

Asian Development

Bank Total Cost Government

Asian Development

Bank Total Cost

A. Component One: Institutional Development and Program Management

1. Institutional Development a. Formation and Operation of PMU 1.30 0.80 2.10 0.36 0.35 0.71 b. PMA Support 1.50 5.20 6.70 0.00 0.00 0.00

c. Consultants- safeguards – monitoring and design

0.20 1.00 1.20 0.00 0.00 0.00

Subtotal (A) 3.00 7.00 10.00 0.00 0.35 0.71 B. Component Two: Horticultural Integrated Value Chains

1. IVC Infrastructure a. Market yard infrastructure 25.40 141.90 167.30 0.00 0.00 0.00 b. Linking infrastructure 4.20 12.60 16.80 0.00 0.00 0.00 2. Producer Linkages 0.80 2.90 3.70 0.00 0.00 0.00 3. IVC Capacity Building 0.60 5.40 6.00 0.00 0.17 0.17 Subtotal (B) 31.00 162.70 193.70 0.00 0.17 0.17 TOTAL PROJECT COSTS 34.00 169.70 203.70 0.36 0.52 0.88 Interest during Implementation 8.20 0.00 8.20 0.00 0.00 0.00 Commitment Charges 0.00 0.00 0.00 0.00 0.00 0.00 Total Cost 42.20 170.00 212.20 0.36 0.52 0.88

IVC = integrated value chain, PMA = project management agency, PMU = project management unit. Source: Asian Development Bank estimates.

Appendix 3 23

PROJECT COST BY FINANCIER

Table A3.1: Project Cost at Appraisal by Financiera

Government

Asian Development

Bank

Total Cost

Amount % of Cost Category Amount

% of Cost Category Amount

Taxes and Duties

Item

A. Investment Costs

1. Civil works 26.48 20.6% 101.81 79.4% 128.29 11.70 2. Equipment, machinery 0 0.0% 30.25 100.0% 30.25 4.45 3. Vehicles 1.89 20.0% 7.56 80.0% 9.45 1.39

4. Miscellaneous Assets 1.21 15.0% 6.84 85.0% 8.05 0.91 5. Support Services 3.17 12.3% 22.60 87.7% 25.77 0.18

Subtotal (A) 32.75 16.2% 169.06 83.8% 201.81 18.63 B. Recurrent Costs

1 Staff Costs 1.09 66.1% 0.56 33.9% 1.65 - 2 Office Costs 0.19 55.2% 0.15 44.8% 0.34 0.01

Subtotal (B) 1.28 64.2% 0.71 35.8% 1.99 0.01 Total Base Cost (A+B) 34.03 16.7% 169.77 83.3% 203.81 18.64

C. Interest During Implementation 8.17 100.0% 0 0.00% 8.17 - D. Commitment Charges - - 0.23 100.0% 0.23 -

Total Project Cost (A+B+C+D) 42.2 20.0% 170.00 80.0% 212.21 18.64

a Values may not be exact due to rounding off. Source: Asian Development Bank estimates.

24 Appendix 3

Table A3.2: Project Cost at Completion by Financier Government

Asian

Development Bank

Total Cost

Amount % of Cost Category Amount

% of Cost Category Amount

Taxes and Duties

Item

A. Investment Costs

1. Civil works 0 0.0% 0 0 0 0 2. Equipment, machinery 0 0.0% 0.16 100.0% 0.16 0 3. Vehicles 0 0.0% 0 0.0% 0 0

4. Miscellaneous Assets 0 0.0% 0 0.0% 0 0 5. Support Services 0 0.0% 0.17 100.0% 0.52 0

Subtotal (A) 0 0.0% 0.33 100.1% 0.33 0 B. Recurrent Costs

1 Staff Costs 0.06 50.0% 0.06 50.0% 0.12 0 2 Office Costs 0.30 69.8% 0.13 30.2% 0.43 0

Subtotal (B) 0.36 65.5% 0.19 34.5% 0.55 0 Total Base Cost (A+B) 0.36 40.1% 0.52 59.9% 0.88 0

C. Interest During Implementation 0 0.0% 0 0.0% 0 0 D. Commitment Charges 0 0.0% 0 0.0% 0 0

Total Project Cost (A+B+C+D) 0.36 40.1% 0.52 59.9% 0.88 0

Sources: Audited Project Financial Statements and Asian Development Bank’s Loan Financial Information System.

Appendix 4 25

DISBURSEMENT OF ADB LOAN AND GRANT PROCEEDS

Table 4.1: Annual and Cumulative Disbursement of ADB Loan Proceeds ($ million)

Annual Disbursement Cumulative Disbursement

Year Amount

($ million) % of Total Amount

($ million) % of Total

2012 0.22 42.3% 0.22 42.3% 2013 0.08 15.4% 0.30 57.7% 2014 0.18 34.6% 0.48 92.3% 2015 0.00 0.0% 0.48 92.3% 2016 0.04 7.7% 0.52 100.0% Total 0.52 100.0%

ADB = Asian Development Bank. Source: Asian Development Bank estimates.

Figure 4.1: Projection and Cumulative Disbursement of ADB Loan Proceeds ($ million)

Tranche 1

Year At Effectiveness After Partial Cancellation

Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total

2012 Projected - - - - - - - - - - Actual - - - - - - - - - - 2013 Projected - - - - - - - - - - Actual - - - - - - - - - - 2014 Projected 54.90 0.30 0.50 0.30 56.00 - - - - - Actual - - - - - - - - - - 2015 Projected 0.50 0.50 0.80 1.50 3.30 - - - - - Actual - - - - - - - - - - 2016 Projected 1.40 1.40 1.00 1.00 4.80 - - - - - Actual - - - - - - - - - - 2017 Projected 2.50 1.00 - - 3.50 - - - - - Actual - - - - - - - - - - 2018 Projected - - - - - - - 30.40 4.70 35.10 Actual - - - - - - - - - -

Total Projected 67.60 Projected 35.10 Actual - Actual -

Q = quarter. Source: Asian Development Bank estimates.

26 Appendix 4

Tranche 2

Year At Effectiveness After Partial Cancellation

Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total

2012 Projected - - 0.11 0.11 0.22 - - 0.11 0.11 0.22 Actual - - - - - - - 0.11 0.11 0.22 2013 Projected - - - 0.08 0.08 - - - 0.08 0.08 Actual - - - - - - - - 0.08 0.08 2014 Projected 17.12 0.93 1.81 1.82 21.68 - - - - - Actual - - - - - 0.09 - - 0.09 0.18 2015 Projected 2.24 0.03 0.02 0.03 2.32 - - 0.50 10.40 10.90 Actual - - - - - - - - - - 2016 Projected - - - - - - - - - - Actual - - - - - 0.04 - - - 0.04

Total Projected 24.30 Total Projected 11.20 Actual - Actual 0.52

Q = quarter. Source: Asian Development Bank.

Appendix 5 27

CONTRACT AWARDS OF ADB LOAN AND GRANT PROCEEDS

Table 5.1: Annual and Cumulative Contract Awards of ADB Loan Proceeds ($ million)

Annual Contract Awards Cumulative Contract Awards

Year Amount

($ million) % of Total Amount

($ million) % of Total

2012 0.52 100% 0.52 100% 2013 - - 0.52 100% 2014 - - 0.52 100% 2015 - - 0.52 100% 2016 - - 0.52 100% Total 0.52 100.0%

ADB = Asian Development Bank. Source: Asian Development Bank estimates.

Figure 5.1: Projection and Actual Contract Awards of ADB Loan Proceeds ($ million)

Tranche 1

Year At Effectiveness After Partial Cancellation

Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total

2012 Projected - - - - - - - - - - Actual - - - - - - - - - - 2013 Projected - - - - - - - - - - Actual - - - - - - - - - - 2014 Projected 57.57 2.05 1.79 1.62 63.03 - - - - - Actual - - - - - - - - - - 2015 Projected 1.58 1.03 0.33 0.33 3.27 0.16 - - - 0.16 Actual - - - - - 0.16 - - - 0.16a 2016 Projected 0.53 0.77 - - 1.30 - - - - - Actual - - - - - - - - - - 2017 Projected - - - - - - - - - - Actual - - - - - - - - - - 2018 Projected - - - - - 34.94 - - - 34.94 Actual - - - - - - - - - -

Total Projected 67.60 Projected 35.10 Actual - Actual 0.16a

Q = quarter. a Contract for the transaction advisory group was rescinded by the executing agency when the loan was cancelled. Source: Asian Development Bank estimates.

28 Appendix 5

Tranche 2

Year At Effectiveness After Partial Cancellation

Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total

2012 Projected - 0.07 0.15 0.55 0.77 - 0.07 0.20 0.59 0.87 Actual - - - - - - 0.07 0.20 0.25 0.52 2013 Projected - - - - - - - - - - Actual - - - - - - - - - - 2014 Projected 23.50 - 0.02 - 23.52 - - - - - Actual - - - - - - - - - - 2015 Projected - - - - - - - - - - Actual - - - - - - - - - - 2016 Projected - - - - - 10.33 - - - 10.33 Actual - - - - -

Total Projected 24.30 Total Projected 11.20 Actual - Actual 0.52

Q = quarter. Source: Asian Development Bank.

Appendix 6 29

STATUS OF COMPLIANCE WITH LOAN COVENANTS

1. Tranche 1 - Bihar Covenant Reference in Loan

Agreement Status of Compliance

(a) The State shall carry out the Project with due diligence and efficiency, and in conformity with sound administrative, financial, engineering, environmental, and agriculture development practices.

(b) In the carrying out of the Project and operation of the Project facilities, the State shall perform all obligations set forth in the Loan Agreement to the extent that they are applicable to the State.

Article II, Section 2.01 of the Project Agreement

Partially complied. There were some inefficiencies during project implementation due to the State’s unfamiliarity and lack of experience in implementing foreign-assisted projects.

The State shall make available, promptly as needed, the funds, facilities, services, equipment, and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project.

Article II, Section 2.02 of the Project Agreement

Partially complied. The State made resources available; however, a full-time and dedicated PMU was not established to manage the resources for project implementation.

(a) In the carrying out of the Project, the State shall employ competent and qualified consultants and contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB.

(b) Except as ADB may otherwise agree, all Goods, Works and Consulting Services to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Schedule 4 to the Loan Agreement. ADB may refuse to finance a contract where Goods, Works or Consulting Services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB.

Article II, Section 2.03 of the Project Agreement

Partially complied. There was one consulting firm engaged for transaction advisory services. The consulting firm was recruited following ADB’s Guidelines. However, the contract was later rescinded after the loan was closed and cancelled on 12 August 2016.

The State shall carry out, and the cause the Concessionaire to carry out, the Project, in accordance with plans, design standards, specifications, work schedules and construction methods as agreed with ADB. The State shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

Article II, Section 2.04 of the Project Agreement

Not applicable. Works were not initiated.

(a) The State shall take out, and cause the Concessionaire to take out, and maintain with responsible insurers, or make other arrangements satisfactory to ADB for, insurance of the Project facilities to such

Article II, Section 2.05 of the Project Agreement

Not applicable. Goods were not procured for the Project.

30 Appendix 6

Covenant Reference in Loan Agreement

Status of Compliance

extent and against such risks and in such amounts as shall be consistent with sound practice.

(b) Without limiting the generality of the foregoing, the State undertakes to insure, or cause to be insured, the Goods to be imported for the Project and to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods.

The State shall maintain, or cause the Concessionaire to maintain, records and accounts adequate to identify the Goods, Works and Consulting Services financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.

Article II, Section 2.06 of the Project Agreement

Not applicable. No activity was initiated, and no disbursement was made under the Project.

(a) ADB and the State shall cooperate fully to ensure that the purposes of the Loan will be accomplished.

(b) The State shall promptly inform ADB, under intimation to the Borrower, of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under the Project Agreement, or the accomplishment of the purposes of the Loan.

(c) ADB and the State shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, the State and the Loan.

Article II, Section 2.07 of the Project Agreement

Partially complied. ADB conducted several review missions to discuss with the State the ways to move forward due to the slow progress of the project. However, because of the frequent changes in PMU staffing, there was no consistent support given to the Project.

(a) The State shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the Goods, Works and Consulting Services financed 3 out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of the State and the Concessionaire insofar as it relates to the Project; and (v) any other matters relating to the purposes of the Loan.

(b) Without limiting the generality of the foregoing, the State shall furnish to ADB quarterly reports on the execution of the Project and on the operation and

Article II, Section 2.08 of the Project Agreement

Not applicable. There were no disbursements for the Project.

Appendix 6 31

Covenant Reference in Loan Agreement

Status of Compliance

management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter.

(c) Promptly after physical completion of the Project, but in any event not later than 3 months thereafter or such later date as ADB may agree for this purpose, the State shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by the State of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan.

The State shall (a) maintain separate accounts for the Project, (b) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (c) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement as well as on the use of the procedures for statement of expenditures), all in the English language. The State shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Article II, Section 2.09 of the Project Agreement

Partially complied. The audit reports for FY 2012-2013 and 2013-2014 were waived due to the absence of financial activity for the project. Only the audit report for FY 2014-2015 (due on 30September 2015, and received by ADB on 20 November 2015) was submitted.

The State shall enable ADB's representatives to inspect the Project, the Goods and Works financed out of the proceeds of the Loan, and any relevant records and documents.

Article II, Section 2.10 of the Project Agreement

Not applicable. There were no goods and works procured under the Project.

(a) The State shall, promptly as required, take all action within its powers to carry on its operations, and to acquire, maintain and renew all rights, properties, powers,

Article II, Section 2.11 of the Project Agreement

Not applicable. There were no activities under the Project.

32 Appendix 6

Covenant Reference in Loan Agreement

Status of Compliance

privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business.

(b) Insofar as it relates to the Project, the State shall execute and implement the Project in accordance with sound administrative, financial, environmental and state development practices, and under the supervision of competent and experienced management and personnel.

(c) Insofar as it relates to the Project, the State shall at all times operate and maintain its plants, equipment and other property relevant to the Project, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, engineering, environmental, PPP, and agricultural development, maintenance and operational practices.

Except as ADB may otherwise agree, the State shall not sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.

Article II, Section 2.12 of the Project Agreement

Complied. Assets used (i.e., office space and office equipment) for the administration of the Project were retained by the State.

Except as ADB may otherwise agree, the State shall apply the proceeds of the Loan to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all Goods, Works and Consulting services financed out of such proceeds are used exclusively in the carrying out of the Project.

Article II, Section 2.13 of the Project Agreement

Not applicable. The loan was cancelled, and no disbursement was made.

(a) The Borrower shall cause the State to carry out the Project with due diligence and efficiency and in conformity with sound applicable technical, financial, business and development practices.

(b) In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loan Agreement and the Project Agreement.

Article IV, Section 4.01 Not applicable. The loan was cancelled and there were no activities under the Project.

The Borrower shall make available to the State, promptly as needed, the funds, facilities, services, and other resources, as required, in addition to the proceeds of the Loan, for the carrying out of the Project.

Article IV, Section 4.02 Partially complied. The State appointed staff to act as the PMU and provided office space and facilities for the operation of the PMU. However, the PMU staff were appointed on part-time

Appendix 6 33

Covenant Reference in Loan Agreement

Status of Compliance

basis and were thus divided between their performance of their regular functions as government officials and implementing the project.

The Borrower shall ensure that the activities of the State departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

Article IV, Section 4.03 Complied. The Borrower maintained oversight of administrative activities.

The Borrower shall take all actions which shall be necessary on its part to enable State to perform its obligations under the Project Agreement, and shall not take or permit any action which would interfere with the performance of such obligations.

Article IV, Section 4.04 Complied. Although there were no physical activities, the Borrower ensured that all actions were taken to support project implementation; however, the State did not perform as expected.

(a) In relation to the Project, the Borrower shall exercise its rights under the Financing Arrangements in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan.

(b) In relation to the Project, no rights or obligations under the Financing Arrangements shall be assigned, amended, abrogated or waived without prior notice to ADB.

Article IV, Section 4.05 Complied. There was regular coordination between the Borrower and ADB and no changes were made without prior notice to ADB.

The Borrower and the State shall ensure that the Project is implemented in accordance with the detailed arrangements set forth in the FAM. Any subsequent change to the FAM shall become effective only after approval of such change by the Borrower and ADB. In the event of any discrepancy between the FAM and this Loan Agreement, the provisions of this Loan Agreement shall prevail.

Schedule 5, para. 1 Complied. The Borrower and the State referred to the FAM during implementation.

Within 3 months from the Effective Date, the State shall establish a state-level empowered committee, chaired by the Principal Secretary (Agriculture), for the term of the Facility to advise on agricultural marketing, and to coordinate and monitor the implementation of the projects under the Facility.

Schedule 5, para. 2 Not complied. Only the PMU was established.

Within 3 months from the Effective Date, the State shall ensure that its PMU is fully staffed as agreed with ADB, and the recruitment of environment and social officers (either as own staff or consultants) is completed.

Schedule 5, para. 3 Partially complied. State appointed staff to the PMU and provided office space and facilities for the operation of the PMU. However, the PMU staff

34 Appendix 6

Covenant Reference in Loan Agreement

Status of Compliance

were appointed on part-time basis and were thus divided between their performance of their regular functions as government officials and implementing the project.

The Borrower shall enable ADB's representatives to review and examine the Project, the Goods and Works, and any relevant records and documents. The Borrower and the State shall ensure that all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to review and examine the records and accounts of the Borrower, the State, and all contractors, suppliers, consultants, and other service providers as they relate to the Project. The Borrower and the State shall allow and assist ADB's representatives to carry out random spot checks on the work in progress and utilization of funds for the Project.

Schedule 5, para. 4 Complied. The Borrower allowed and assisted ADB in conducting regular review and special administration missions.

The State shall ensure that (a) a specific division in the Project management unit is staffed for financial management; (b) transparent procedures are established for financial transactions; (c) the Project management unit follows government rules and procedures for all expense and revenue items including cash and for proper and accurate maintenance of financial records; and (d) a Project website is established to provide information on Project implementation including procurement.

Schedule 5, para. 5 Complied. A finance team under the PMU that has been staffed by the State that acted in compliance with para (b) and para (c). A website was established to provide information on procurement in November 2012.

The Borrower and the State shall ensure that all documents such as terms of references of the consultants and transaction advisors, detailed Project reports, request for qualification, request for proposal and Concession Agreement are in a form and substance acceptable to ADB and shall submit drafts of such documents to ADB for approval prior to issuance or execution.

Schedule 5, para. 6 Complied. The Borrower used templates provided by ADB and followed ADB’s guidelines. However, no contract was awarded due to the lack of participation from private sector.

The State shall include specific provisions acceptable to ADB in the bidding documents (request for qualification, and request for proposal) and the Concession Agreement to ensure compliance by the Concessionaire with relevant ADB policies and procedures, including those on procurement, safeguards, social dimensions, and anticorruption.

Schedule 5, para. 7 Complied. The Borrower used templates provided by ADB and followed ADB’s guidelines. However, no contract was awarded due to the lack of participation from private sector.

In the course of implementation of the Project, the State shall prepare a long-term plan on agriculture marketing.

Schedule 5, para. 8 Not complied. The State has an agriculture road map but it was not prepared

Appendix 6 35

Covenant Reference in Loan Agreement

Status of Compliance

through activities under the Project.

In the event of any change in the Borrower’s policy in relation to PPP projects in the agricultural sector, the Borrower, the State and ADB shall consult with each other to assess the impact on the Project, and evaluate any change in scope, termination or continuation, as appropriate, of the Project.

Schedule 5, para. 9 Complied. Regular review missions, participation in Tripartite Portfolio Reviews, and consultations were held to ensure that any change in PPP policy was discussed and agreed upon.

The Borrower and State shall ensure, and cause the Concessionaire to ensure, that all land acquisition and resettlement activities are implemented in compliance with (i) all applicable laws and regulations of the Borrower and the State relating to land acquisition and resettlement; (ii) the RF; and (iii) all measures and requirements set forth in the respective RP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.

Schedule 5, para. 10(a) Not applicable. No land acquisition or resettlement was done under this tranche.

Without limiting the application of the RF or the RP, the Borrower and State shall ensure, and cause the Concessionaire to ensure, that no physical or economic displacement takes place in connection with the Project until compensation and other entitlements have been provided to affected people in accordance with the RF or the RP.

Schedule 5, para. 10(b) Not applicable. No resettlement was done under this tranche.

The Borrower and State shall ensure, and cause the Concessionaire to ensure, that the preparation, design, construction, implementation, operation and decommissioning of the Project comply with (a) all applicable laws and regulations of the Borrower relating to environment, health, and safety; (b) the Environmental Safeguards; and (c) all measures and requirements set forth in the respective IEE and EMP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.

Schedule 5, para. 11 Not applicable. No physical activity requiring compliance to environment safeguards was done under this tranche.

The Borrower and the State shall ensure, and cause the Concessionaire to ensure that the preparation, design, construction, implementation and operation of the Project, and all Project facilities comply with (a) all applicable laws and regulations of the Borrower relating to indigenous peoples; (b) the Indigenous Peoples Safeguards; (c) the IPPF; and (d) all measures and requirements set forth in the respective IPP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.

Schedule 5, para. 12 Not applicable. No physical activity requiring compliance to IP safeguards was done under this tranche.

36 Appendix 6

Covenant Reference in Loan Agreement

Status of Compliance

Notwithstanding any other provision in this Loan Agreement, the Borrower and the State shall ensure, and cause the Concessionaire to ensure, that any activity under the Project that is likely to have significant environmental, involuntary resettlement or indigenous people impacts under the Safeguard Policy as described in the EARF, the IPPF and the RF shall not be undertaken and excluded from the Project.

Schedule 5, para. 13 Not applicable. No physical activity requiring compliance to safeguards policies and frameworks was done under this tranche.

The Borrower and State shall ensure that all bidding documents and contracts for Works contain provisions that require the Concessionaire and contractors to: (a) comply with the measures and requirements relevant to the Concessionaire and contractor set forth in the IEE, the EMP, the RP, and the IPP (to the extent they concern impacts on affected people during construction), and any corrective or preventative actions set out in a Safeguards Monitoring Report; (b) make available a budget and human resources for all such environmental and social measures; and (c) provide the Borrower with a written notice of any unanticipated environmental, resettlement or indigenous peoples risks or impacts that arise during construction, implementation or operation of the Project that were not considered in the IEE, the EMP the RP or the IPP.

Schedule 5, para. 14 Complied. The Borrower used templates provided by ADB and followed ADB’s guidelines. However, no contract was awarded due to the lack of participation from private sector.

The Borrower and State shall do the following: (a) submit semiannual Safeguards Monitoring Reports to ADB and disclose relevant information from such reports to affected persons promptly upon submission; (b) if any unanticipated environmental and/or social risks and impacts arise during construction, implementation or operation of the Project that were not considered in the IEE, the EMP, the RP or the IPP, promptly inform ADB of the occurrence of such risks or impacts, with detailed description of the event and proposed corrective action plan; and (c) report any breach of compliance with the measures and requirements set forth in the EMP, the RP or the IPP promptly after becoming aware of the breach.

Schedule 5, para. 15 Not applicable. No physical activity was done under the tranche. Therefore, there was nothing to report on.

Appendix 6 37

Covenant Reference in Loan Agreement

Status of Compliance

The Borrower and the State shall ensure that no proceeds of the Loan are used to finance any activity included in the list of prohibited investment activities provided in Appendix 5 of the Safeguard Policy.

Schedule 5, para. 16 Not applicable. There was no disbursement under this tranche.

Within 9 months from Effective Date, the State shall establish a grievance redress mechanism, acceptable to ADB, for the term of the Facility and appoint an existing Project management financial staff member in the Project management unit to receive and resolve complaints or grievances or act upon reports from stakeholders on misuse of funds and other irregularities, including relating to interactions with the Concessionaire.

Schedule 5, para. 17 Not applicable. There was no physical activity under the tranche. Therefore, there was no need to establish a grievance redress mechanism.

The State shall ensure that information dissemination, disclosure, and real time consultations with women cultivators and farmers will be systematically undertaken in accordance with the Public Consultation and Participation Framework referred to in Schedule 5 to the FFA.

Schedule 5, para. 18 Not applicable. There was no physical activity under the tranche.

The Borrower and the State shall ensure that the Concession Agreement and other Works contracts under the Project follow all applicable labor laws of the Borrower and the State and that these further include provisions to the effect that the contractors (a) carry out HIV/AIDS awareness programs for labor and disseminate information at worksites on risks of sexually transmitted diseases and HIV/AIDS as part of health and safety measures for those employed during construction; and (b) follow and implement all statutory provisions on labor (including not employing or using children as labor, equal pay for equal work), health, safety, welfare, sanitation, and working conditions. Such contracts shall also include clauses for termination in case of any breach of the stated provisions by the contractors.

Schedule 5, para. 19 Not applicable. There was no concession agreement or works contract finalized under the tranche.

2. Tranche 2 - Maharashtra Covenant Reference in Loan

Agreement Status of Compliance

(a) The State shall carry out the Project with due diligence and efficiency, and in conformity with sound applicable technical, financial, business, and development practices.

Article II, Section 2.01 of the Project Agreement

Partially complied. there were some inefficiencies during project implementation due to the State’s unfamiliarity and lack of experience in

38 Appendix 6

Covenant Reference in Loan Agreement

Status of Compliance

(b) In the carrying out of the Project and operation of the Project facilities, the State shall perform all obligations set forth in the Loan Agreement to the extent that they are applicable to the State.

implementing foreign-assisted projects.

The State shall make available, promptly as needed, the funds, facilities, services, land and other resources as required, in addition to the proceeds of the Loan, for the carrying out of the Project.

Article II, Section 2.02 of the Project Agreement

Complied. The State provided the necessary resources to carry out activities under the Project.

(a) In the carrying out of the Project, the State shall employ competent and qualified consultants and contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB.

(b) Except as ADB may otherwise agree, the State shall procure all items of expenditures to be financed out of the proceeds of the Loan in accordance with the provisions of Schedule 4 to the Loan Agreement. ADB may refuse to finance a contract where any such item has not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB.

Article II, Section 2.03 of the Project Agreement

Complied. The State followed ADB’s Guidelines on the Use of Consultants during the recruitment of the technical advisory services consultant and followed ADB’s advice on the procurement procedures used for the Concessionaires. However, no concession contracts were signed.

The State shall carry out, and cause the Concessionaire to carry out, the Project in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB. The State shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

Article II, Section 2.04 of the Project Agreement

Not applicable. There were no physical activities done under the Project.

(a) The State shall take out, and cause the Concessionaire to take out, and maintain with responsible insurers, or make other arrangements satisfactory to ADB for, insurance of Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice.

(b) Without limiting the generality of the foregoing, the State undertakes to insure, or cause to be insured, the Goods to be imported for the Project against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency

Article II, Section 2.05 of the Project Agreement

Not applicable. There were no concession contracts or goods procured under the Project.

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freely usable to replace or repair such Goods.

The State shall maintain, and cause the Concessionaire to maintain, records and accounts adequate to identify the items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.

Article II, Section 2.06 of the Project Agreement

Complied. The State and the EA maintained records and accounts. Audit reports were submitted for FY 2012-2013 (delayed by 3.7 months), FY 2013-2014, FY 2014-2015, and FY 2015-2016 (final audit report).

(a) ADB and the State shall cooperate fully to ensure that the purposes of the Loan will be accomplished.

(b) The State shall promptly inform ADB and the Borrower, of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement, or the accomplishment of the purposes of the Loan.

(c) ADB and the State shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, the State, the Concessionaire, and the Loan.

Article II, Section 2.07 of the Project Agreement

Complied. The State fully supported the consultation, regular review, and special administration missions to discuss ways forward and alert ADB of any matter that may affect project implementation.

(a) In so far as it relates to the project, the State shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of the State and the Concessionaire insofar as it relates to the Project; and (v) any other matters relating to the purposes of the Loan.

(b) Without limiting the generality of the foregoing, the State shall furnish to ADB periodic reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the period under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following period.

(c) Promptly after physical completion of the Project, but in any event not later than 3

Article II, Section 2.08 of the Project Agreement

(a) Complied. Audit reports were submitted for FY 2012-2013 (delayed by 3.7 months), FY 2013-2014, FY 2014-2015, and FY 2015-2016 (final audit report).

(b) Not applicable. There were no project activities to report on.

(c) Not applicable. There were no project activities to report on.

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months thereafter or such later date as ADB may agree for this purpose, the State shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by the State of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan.

The State shall (a) maintain separate accounts for the Project; (b) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (c) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of the Loan Agreement and the Project Agreement as well as on the use of the procedures for imprest account and statement of expenditures), all in the English language. The State shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Article II, Section 2.09 of the Project Agreement

Complied. The State and the EA maintained records and accounts of project expenditures. Audit reports were submitted for FY 2012-2013 (delayed by 3.7 months), FY 2013-2014, FY 2014-2015, and FY 2015-2016 (final audit report).

The State shall enable ADB's representatives to inspect the Project, the Goods and Works and any relevant records and documents.

Article II, Section 2.10 of the Project Agreement

Complied. The State fully supported the consultation, regular review, and special administration missions and allowed ADB to inspect and check their records and documents.

(a) In so far as it relates to the Project, the State shall, promptly as required, take all action within its powers to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its operations.

(b) Insofar as it relates to the Project, the State shall at all times conduct its operations in accordance with sound applicable technical, financial, business, development and operational practices, and under the

Article II, Section 2.11 of the Project Agreement

Complied. The State, through the established PMU, ensured that resources (physical and otherwise), permits, etc. necessary to carry out project activities were made available.

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supervision of competent and experienced management and personnel.

(c) Insofar as it relates to the Project, the State shall at all times operate and maintain its plants, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound applicable technical, financial, business, development, operational and maintenance practices.

Except as ADB may otherwise agree, the State shall not sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.

Article II, Section 2.12 of the Project Agreement

Complied. The State maintained its assets which were being used for project purposes.

Except as ADB may otherwise agree, the State shall apply the proceeds of the Loan to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all items of expenditures financed out of such proceeds are used exclusively in the carrying out of the Project.

Article II, Section 2.13 of the Project Agreement

Complied. The audit reports confirm that loan proceeds were used for the purpose they were intended.

(a) The Borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with sound applicable technical, financial, business, and development practices.

(b) In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loan Agreement and the Project Agreement.

Article IV, Section 4.01 of the Loan Agreement

Complied. The Borrower carried out the Project in accordance with sound practices as recommended by ADB and performed all obligations set forth in Schedule 5 of the Loan Agreement.

The Borrower shall make available to the State, promptly as needed, the funds, facilities, services, land and other resources, as required, in addition to the proceeds of the Loan, for the carrying out of the Project.

Article IV, Section 4.02 of the Loan Agreement

Complied. The Borrower allocated annual budgetary requirements for the project.

The Borrower shall ensure that the activities of the State departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

Article IV, Section 4.03 of the Loan Agreement

Complied. The Borrower ensured that State departments and agencies conducted and coordinated Project activities in accordance with sound administrative policies and procedures.

The Borrower shall enable ADB's representatives to inspect the Project, the Goods and Works, and any relevant records and documents.

Article IV, Section 4.04 of the Loan Agreement

Complied. The State fully supported the consultation, regular review, and special administration missions and allowed ADB to inspect and

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check their records and documents.

The Borrower shall take all actions which shall be necessary on its part to enable the State to perform its obligations under the Project Agreement, and shall not take or permit any action which would interfere with the performance of such obligations.

Article IV, Section 4.05 of the Loan Agreement

Complied. The Borrower ensured that State departments and agencies are able to conduct Project activities unhindered.

(a) In relation to the Project, the Borrower shall exercise its rights under the Financing Arrangements in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan.

(b) In relation to the Project, no rights or obligations under the Financing Arrangements shall be assigned, amended, abrogated or waived without prior notice to ADB.

Article IV, Section 4.06 of the Loan Agreement

Complied. The Borrower did not assign, amend, abrogate or waive any rights or obligations.

The Borrower and the State shall ensure that the Project is implemented in accordance with the detailed arrangements set forth in the Project Administration Manual. Any subsequent change to the PAM shall become effective only after approval of such change by the Borrower and ADB. In the event of any discrepancy between the PAM and this Loan Agreement, the provisions of this Loan Agreement shall prevail.

Schedule 5, para. 1 Complied. The PMU implemented the Project in accordance with the arrangements in the PAM.

Within 6 months from the Effective Date, the State shall establish and maintain the Project performance and monitoring system satisfactory to ADB.

Schedule 5, para. 2

Partially complied. A PPMS was prepared in 2013 but was not submitted to ADB and, due to lack of project activities, was never used during project implementation.

The Borrower and the State shall enable ADB's representatives to review and examine the Project, the Goods and Works, and any relevant records and documents. The Borrower and the State shall ensure that all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to review and examine the records and accounts of the Borrower, the State, and all contractors, suppliers, consultants, and other service providers as they relate to the Project. The Borrower and the State shall allow and assist ADB's representatives to carry out random spot checks on the work in progress and utilization of funds for the Project.

Schedule 5, para. 3 Complied. The State fully supported the consultation, regular review, and special administration missions and allowed ADB to inspect and check their records and documents.

The State shall ensure that (a) a specific division in the Project management unit is staffed for financial management; (b) transparent procedures are established for financial transactions; (c) the Project management unit follows government rules and procedures for all

Schedule 5, para. 4 Complied. The PMU was established in 2012, staffed with a finance officer.

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expense and revenue items including cash and for proper and accurate maintenance of financial records; and (d) a Project website is established to provide information on Project implementation including procurement.

The Borrower and the State shall ensure that all documents such as terms of references of the consultants and transaction advisors, detailed Project reports, request for qualification, request for proposal and Concession Agreements are in a form and substance acceptable to ADB, and shall submit drafts of such documents to ADB for approval prior to issuance or execution.

Schedule 5, para. 5 Complied. The transaction advisory services consultant was recruited through QCBS and followed ADB’s Guidelines on the Use of Consultants. Bidding procedures were also initiated following ADB’s procedures.

The State shall include specific provisions acceptable to ADB in the bidding documents (request for qualification, and request for proposal) and the Concession Agreements to ensure compliance by the concessionaire with relevant ADB policies and procedures, including those on procurement, safeguards, social dimensions, and anticorruption.

Schedule 5, para. 6 Complied. The draft RFQ and RFP issued by the State included specific provisions acceptable to ADB that ensured compliance by the concessionaire with relevant ADB policies and procedures, including those on procurement, safeguards, social dimensions, and anticorruption.

The Borrower shall ensure, or cause the State to ensure, that the preparation, design, construction, implementation, operation and decommissioning of the Project and all Project facilities comply with (a) all applicable laws and regulations of the Borrower relating to environment, health, and safety; (b) the Environmental Safeguards; (c) the Environmental Assessment Review Framework; and (d) all measures and requirements set forth in the respective Initial Environmental Examination and Environmental Management Plan, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.

Schedule 5, para. 8 Not applicable. Not due until PPP concessionaires were engaged and works commenced.

Borrower shall ensure, or cause the State to ensure, that all land is made available to the concessionaire for facilities to be constructed, extended or upgraded under the Project, free from any encumbrance whatsoever, such that there are no involuntary resettlement or indigenous peoples impacts, all within the meaning of the Safeguard Policy Statement (SPS). The Borrower and the State shall ensure that any activity that entails land acquisition or involuntary resettlement or has indigenous peoples impacts shall not be undertaken and be excluded from the Project. However, should land acquisition or involuntary resettlement or indigenous peoples impacts become unavoidable, the State shall (a) take all steps

Schedule 5, para. 9

Not applicable. Not due until PPP concessionaires were engaged and works commenced.

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required to ensure that the Project complies with the applicable laws and regulations of the Borrower, the State and with the SPS; (b) prepare and submit suitable resettlement plan and/or indigenous peoples plan in accordance with the Resettlement Framework and indigenous people planning framework, as applicable, to ADB for clearance and implement these in accordance with their terms; and (c) apply the requirements under paragraphs 10, 11 and 12 hereinafter of this Schedule 5 to the Loan Agreement to also cover such resettlement plan and indigenous peoples plan.

The Borrower shall make available, or cause the State to make available, necessary budgetary and human resources to fully implement the Environmental Management Plan.

Schedule 5, para. 10 Not applicable. Not due until PPP concessionaires were engaged and works commenced.

Safeguards-Related Provisions in Bidding Documents and Works Contracts. The Borrower shall ensure, or cause the State to ensure, that all bidding documents and contracts for Works contain provisions that require contractors to: (a) comply with the measures and requirements

relevant to the contractor set forth in the IEE and the EMP (to the extent they concern impacts on affected people during construction), and any corrective or preventative actions set out in a Safeguards Monitoring Report;

(b) make available a budget for all such environmental and social measures;

(c) provide the Borrower with a written notice of any unanticipated environmental, resettlement or indigenous peoples risks or impacts that arise during construction, implementation or operation of the Project that were earlier not considered;

(d) adequately record the condition of roads, agricultural land and other infrastructure prior to starting to transport materials and construction; and

(e) fully reinstate pathways, other local infrastructure, and agricultural land to at least their pre-Project condition upon the completion of construction.

Schedule 5, para. 11 Complied. The draft RFQ and RFP issued by the State included specific provisions on safeguards compliance that are acceptable to ADB.

The Borrower shall do the following, or shall cause the State to do the following: (a) submit semi-annual Safeguards Monitoring

Reports to ADB and disclose relevant information from such reports to affected persons promptly upon submission;

(b) if any unanticipated environmental and/or social risks and impacts arise during

Schedule 5, para. 12 Not applicable. Not due until there was physical progress to monitor and report on.

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construction, implementation or operation of the Project that were not earlier considered, promptly inform ADB of the occurrence of such risks or impacts, with detailed description of the event and proposed corrective action plan; and

(c) report any breach of compliance with the measures and requirements set forth in the EMP promptly after becoming aware of the breach.

The Borrower shall ensure, or cause the State to ensure, that no proceeds of the Loan are used to finance any activity included in the list of prohibited investment activities provided in Appendix 5 of the SPS.

Schedule 5, para. 13 Complied. Loan proceeds were not used to finance any activity in the list of prohibited investments as confirmed by the audit reports.

The Borrower shall ensure, or cause the State to ensure, that the Works contracts under the Project follow all applicable labor laws of the Borrower and the State and that these further include provisions to the effect that contractors: (a) carry out HIV/AIDS awareness programs for labor and disseminate information at worksites on risks of sexually transmitted diseases and HIV/AIDS as part of health and safety measures for those employed during construction; and (b) follow and implement all statutory provisions on labor (including not employing or using children as labor, equal pay for equal work), health, safety, welfare, sanitation, and working conditions. Such contracts shall also include clauses for termination in case of any breach of the stated provisions by the contractors.

Schedule 5, para. 14 Not applicable. Not due until PPP concessionaires were engaged and works commenced.

The Borrower shall ensure, or cause the State to ensure, that: (a) the GAP is implemented in accordance with its terms; (b) the bidding documents include relevant provisions for contractors to comply with the measures set forth in the GAP; (c) adequate resources are allocated for the implementation of the GAP; and (d) key gender outcome and output targets are monitored regularly and achieved.

Schedule 5, para. 15 Not applicable. Not due until PPP concessionaires were engaged and works commenced

Within 9 months from the Effective Date, the State shall establish a grievance redress mechanism, acceptable to ADB, and appoint an existing Project management financial staff member in the Project management unit to receive and resolve complaints or grievances or act upon reports from stakeholders on misuse of funds and other irregularities, including relating to interactions with the concessionaire.

Schedule 5, para. 16 Complied. A GRM was established and PMU staff was assigned to receive and resolve complaints or grievances.

The State shall ensure that information dissemination, disclosure, and real time consultations with women cultivators and farmers will be systematically undertaken in accordance

Schedule 5, para. 17 Complied. Public consultations were conducted during project implementation.

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with the Public Consultation and Participation Framework referred to in Schedule 5 to the FFA.

Each Executing Agency, through their PMU, will establish and maintain separate records for works, goods, and services financed out of loan proceeds under each tranche. Each EA will also maintain separate project accounts according to generally acceptable accounting principles for all expenditures incurred under the MFF and the projects, whether out of loan proceeds or other sources. Each EA will record in a transparent manner all funds received from the respective state governments and ADB. Detailed consolidated annual project accounts as maintained by the individual Executing Agency through their PMU will be audited annually by independent auditors whose qualifications, experience, and terms of reference are acceptable to ADB. The annual audit report will include the audit of the SGIA, and the SOE procedure, and will include a separate audit opinion on the use of loan proceeds, the operation of the SGIA, and compliance with SOE procedures and loan covenants. Detailed consolidated annual project accounts as maintained by the EAs through their PMU will be audited by independent auditors whose qualifications, experience, and terms of reference are acceptable to ADB, and will be submitted to ADB within 6 months of the end of each fiscal year. Each EA must be aware of ADB‟s policy regarding the delayed submission of audits and the requirements for a satisfactory and acceptable audit of accounts.

Framework Financing Agreement, Section 3,

para. 24

Complied. Submission of the first audit report was 3.7 months late, but subsequent reports were submitted on time. All audit opinions issued were unqualified. Specific opinions on the use of funds, and compliance with financial covenants, were issued.

ADB = Asian Development Bank; EA = executing agency; FFA = framework financing agreement; GAP = gender action plan; MFF = multitranche financing facility; PAM = project administration manual; PMU = project management unit; PPP = public-private partnership; SGIA = second generation imprest account; SOE = statement of expenditures.