Report and Recommendation of the President to the Board of Directors

Project Number: 51073-002 July 2020

Proposed Multitranche Financing Facility India: Delhi–Meerut Regional Rapid Transit System Investment Project Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB's Access to Information Policy after excluding information that is subject to exceptions to disclosure set forth in the policy.

CURRENCY EQUIVALENTS (as of 1 July 2020)

Currency unit – Indian rupee/s (₹) ₹1.00 = $0.01323 $1.00 = ₹75.5640

ABBREVIATIONS

ADB – Asian Development BankAIIB – Asian Infrastructure Investment BankCCTV – closed-circuit televisionCOVID-19 – coronavirus diseaseCPS – country partnership strategyEIA – environmental impact assessmentEIRR – economic internal rate of returnEMP – environmental management planFAM – facility administration manualFIRR – financial internal rate of returnJFPR – Japan Fund for Poverty Reductionkm – kilometerMFF – multitranche financing facilityMOHUA – Ministry of Housing and Urban AffairsNCR – National Capital RegionNCRTC – National Capital Region Transport CorporationO&M – operation and maintenancePPP – public–private partnershipRRTS – regional rapid transit systemSTI – sexually transmitted infectionTA – technical assistanceTOD – transit-oriented developmentVCF – value capture financing

NOTE

In this report, "$" refers to United States dollars.

Vice-President Shixin Chen, Operations 1 Director General Kenichi Yokoyama, South Asia Department (SARD) Director Ravi Peri, Transport and Communications Division (SATC), SARD

Team leader Sharad Saxena, Principal Transport Specialist, SATC, SARDa Team members Keerthi Kumar Challa, Associate Project Officer, India Resident Mission

(INRM), SARD Liming Chen, Young Professional, Economic Analysis and Operational

Support Division, Economic Research and Regional Cooperation Department

Mayank Choudhary, Principal Investment Specialist, Infrastructure Finance Division 1, Private Sector Operations Departmenta

Marie Kristine Estrella, Associate Project Officer, SATC, SARD Prabhjot Rehan Khan, Senior Social Development Officer (Gender), INRM,

SARD Sajid Khan, Financial Management Specialist, Portfolio, Results and

Quality Control Unit, Office of the Director General (SAOD-PR), SARD Laureen Laurito, Social Development Specialist, SATC, SARD Cheska Llamas, Senior Operations Assistant, SATC, SARD Joanne Pabis, Associate Operations Analyst, SATC, SARD Neeta Pokhrel, Unit Head, Project Administration, Urban Development and

Water Division, SARD Vankina Sri Rekha, Principal Counsel, Office of the General Counsela Satomi Sakaguchi, Transport Specialist, SATC, SARD Srinivas Sampath, Chief of Public–Private Partnership Thematic Group,

Office of the Head, Office of Public–Private Partnership Dinesh Shiwakoti; Procurement Specialist; Procurement Division 1;

Procurement, Portfolio, and Financial Management Department Francesco Tornieri, Principal Social Development Specialist (Gender and

Development), SAOD-PR, SARD Alexandra Vogl, Senior Urban Development Specialist, Urban

Development and Water Division, SARDb Karma Yangzom, Senior Environment Specialist, SATC, SARDc

Peer reviewer Jen-Pei Yang, Senior Railway Specialist, Transport Sector Group, Sustainable Development and Climate Change Department

a Outposted to the India Resident Mission. b Transferred to Strategy, Policy, and Partnerships Department on 3 February 2020. c Transferred to Sustainable Development and Climate Change Department on 1 April 2020.

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

Page INVESTMENT PROJECT AT A GLANCE

MAP

I. THE PROPOSAL 1

II. RATIONALE 1

III. THE INVESTMENT PROJECT 5

A. Impact and Outcome 5 B. Outputs 6 C. Summary Cost Estimates and Financing Plan 8 D. Implementation Arrangements 10

IV. DUE DILIGENCE 11

A. Technical 11 B. Economic and Financial 12 C. Governance 13 D. Poverty, Social, and Gender 13 E. Safeguards 14 F. Summary of Risk Assessment and Risk Management Plan 15

V. ASSURANCES 16

VI. RECOMMENDATION 16

APPENDIXES

1. Design and Monitoring Framework for the Investment Project 17

2. List of Linked Documents 20

Project Classification Information Status: Complete

INVESTMENT PROJECTa AT A GLANCE

Source: Asian Development Bank 13052020181919336545This document must only be generated in eOps. Generated Date: 23-Jun-2020 16:02:11 PM

1. Basic Data Project Number: 51073-002Project Name Delhi-Meerut Regional Rapid

Transit System Investment ProjectDepartment/Division SARD/SATC

Country India Executing Agency Ministry of Housing and Urban Affairs, National Capital Region Transport Corporation

Borrower IndiaCountry EconomicIndicators

https://www.adb.org/Documents/LinkedDocs/?id=51073-002-CEI

Portfolio at a Glance https://www.adb.org/Documents/LinkedDocs/?id=51073-002-PortAtaGlance

2. Sector Subsector(s) ADB Financing ($ million)Transport Transport policies and institutional development 14.50

Urban public transport 1,034.50

Total 1,049.00

3. Operational Priorities Climate Change InformationAddressing remaining poverty and reducing inequalitiesAccelerating progress in gender equalityTackling climate change, building climate and disaster resilience,and enhancing environmental sustainabilityMaking cities more livableStrengthening governance and institutional capacity

GHG reductions (tons per annum) 258,035Climate Change impact on the Project

Medium

ADB Financing

Adaptation ($ million) 3.07

Mitigation ($ million) 1,045.93

Cofinancing

Adaptation ($ million) 1.46

Mitigation ($ million) 498.53

Sustainable Development Goals Gender Equity and MainstreamingSDG 5.1, 5.4SDG 9.1SDG 11.2SDG 13.a

Effective gender mainstreaming (EGM)

Poverty TargetingGeneral Intervention on Poverty

4. Risk Categorization: Complex.

5. Safeguards Categorization[Tranche 1]

Environment: A Involuntary Resettlement: A Indigenous Peoples: C

.

6. Financing

Modality and Sources Indicative Tranches ($million) Amount($million)I II III IV

ADB 1,049.00Sovereign MFF-Tranche (Regular Loan): Ordinary capital resources

500.00 0.00 250.00 299.00 1,049.00

Cofinancing 1,003.00Asian Infrastructure Investment Bank - MFF-Tranche (Loan) (Partial ADB Administration)

0.00 500.00 0.00 0.00 500.00

Japan Fund for Poverty Reduction - Project grant (Full ADB Administration)

3.00 0.00 0.00 0.00 3.00

New Development Bank - MFF-Tranche (Loan) (Not ADB Administered)

0.00 0.00 500.00 0.00 500.00

Counterpart 1,897.70Government 799.60 799.60 206.00 92.50 1,897.70

Total 1,302.60 1,299.60 956.00 391.50 3,949.70

Currency of ADB Financings: US Dollar

INVESTMENT PROJECTa AT A GLANCE

Source: Asian Development Bank 13052020181919336545This document must only be generated in eOps. Generated Date: 23-Jun-2020 16:02:11 PM

7. Country Operations Business PlanCPS https://www.adb.org/sites/default/files/institutional-document/363331

/cps-ind-2018-2022.pdfCOBP https://www.adb.org/documents/india-country-operations-business-p

lan-2020-20228. Investment Program Summary

The investment project will finance the first of three prioritized corridors of the planned regional rapid transit system (RRTS)network in India's National Capital Region (NCR). The Delhi-Meerut RRTS will pass through the densely populated sections ofthe NCR, connecting Delhi to Meerut in the state of Uttar Pradesh. The 82-kilometer corridor will provide safe, reliable, andhigh-capacity commuter transit services between various locations along the corridor. The investment project will finance railtrack, signaling, station buildings, and maintenance facilities. It will also support capacity and institutional development of theNational Capital Region Transport Corporation (NCRTC), a joint venture company of the Government of India and states ofDelhi, Haryana, Rajasthan and Uttar Pradesh, that is mandated to implement the RRTS project across the NCR. A grant fromthe Japan Fund for Poverty Reduction will promote improved mobility and economic opportunities for women anddifferently-abled groups along the corridor.

Impact: Urban mobility in the National Capital Region improvedOutcome: Efficiency, safety, social inclusiveness, and environmental sustainability of transport in the Delhi-Meerut RRTScorridor improved

Outputs: (i) Delhi-Meerut RRTS corridor commissioned, (ii) Institutional capacity of the NCRTC strengthened, and (iii) Mobilityand economic opportunities of women and differently abled improved

Implementation Arrangements: Ministry of Housing and Urban Affairs and National Capital Region Transport Corporation willbe the executing agencies.

Project Readiness: Readiness is high as the complete scope to be financed by the MFF has been appraised by ADB.Environmental and social due diligence have been completed for the entire corridor. Geotechnical investigations have beendone and detailed design work is in progress. To minimize delays, preconstruction activities such as utility shifting for varioussections of the corridor are ongoing. The COVID-19 pandemic has not affected the project implementation arrangements or costestimate. The project implementation period of 7 years provides adequate cushion for some delays. Based on governmentorders, guidelines and standard operating procedures have been developed and are being strictly implemented for resumptionof regular works at various NCRTC site offices and construction sites. Strict compliance monitoring is to be ensured by chiefproject managers.

9. MilestonesModality Estimated Approval Estimated Completionb

Multitranche financing facility 13 August 2020 30 August 2027

Tranche I 20 August 2020 30 August 2023

Tranche II 30 May 2021 30 August 2024

Tranche III 30 May 2023 30 August 2025

Tranche IV 30 May 2025 30 August 2027

10. Project Data Sheet (PDS)PDS c http://www.adb.org/projects/51073-002/main

a Multitranche Financing Facility (MFF).b For MFF, this refers to the end of the availability period; for tranches, this refers to the tranche closing date.c Safeguard documents can be viewed by clicking the Document's hyperlink in the Project Data Sheet (PDS) page.

Hin

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Yamuna R

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Meerut

Modinagar

Hapur

Pilkhuwa

Noida

Ghaziabad

Loni

Dadri

SARAI KALE KHAN

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ANAND VIHAR

SAHIBABAD

GHAZIABADGULDAR

DUHAI

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MODINAGAR SOUTH

MODINAGAR NORTH

MEERUT SOUTH PARTAPUR

RITHANISHATABDI NAGAR

BRAHMPURI

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BHAISALIBEGUMPUL

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DAURLI

MEERUT NORTH

MODIPURAM

DEPOT

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ANAND VIHAR

SAHIBABAD

GHAZIABADGULDHAR

DUHAI

MURADNAGAR

MODINAGAR SOUTH

MODINAGAR NORTH

MEERUT SOUTH PARTAPUR

RITHANISHATABDI NAGAR

BRAHMPURI

MEERUT CENTRAL

BHAISALIBEGUMPUL

MES COLONY

DAURLI

MEERUT NORTH

MODIPURAM

DEPOT

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SARAI KALE KHAN

NEW ASHOK NAGAR

Lines � & � Connection

Line � Connection

Line � ConnectionLine � Connection

Lines � & � Connection

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Pink Line (Line 7)Pink Line(Line 7)

Boundaries are not necessarily authoritative.

Elevated

Underground

Proposed RRTS Lines

RRTS Station

MRTS Station

Connection

Underground Station

Regional Rapid Transit System

Mass Rapid Transit Systems

National Capital Territory

National Road

River

RRTS Alignment

RRTS

MRTS

NCT

HARYANA

RAJASTHAN

UTTAR PRADESH

NEWDELHI

Gurgaon

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Bhiwani

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Faridabad

Muzaffarnagar

Ghaziabad

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Hapur

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Alwar

Bharatpur

REGIONAL RAPID TRANSIT SYSTEM NETWORK

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6 PROJECT AREA

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DELHI-MEERUT REGIONAL RAPID TRANSIT SYSTEM

PROJECT

DELHI–MEERUT REGIONAL RAPID TRANSIT SYSTEM

INVESTMENT PROJECT

INDIA

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This map was produced by the cartography unit of the Asian Development Bank. The boundaries, colors, denominations, and any other information shown on this map do not imply, on the part of the Asian Development Bank, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries, colors, denominations, or information.

Kilometers

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I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on a proposed multitranche financing facility (MFF) to India for the Delhi–Meerut Regional Rapid Transit System Investment Project. The investment project will finance the first of three prioritized rail corridors of the planned regional rapid transit system (RRTS) network in India’s National Capital Region (NCR). The Delhi–Meerut RRTS will pass through the densely populated sections of the NCR, connecting Delhi to Meerut in the state of Uttar Pradesh. It will provide safe, reliable, and high-capacity commuter transit services along the corridor. The investment project is included in the country operations business plan, 2020–2022 of the Asian Development Bank (ADB) for India.1

II. RATIONALE

2. Development problem. The NCR, covering an area of over 58,000 square kilometers (km), is a coordinated planning region encompassing Delhi and several districts surrounding it from the states of Haryana, Rajasthan, and Uttar Pradesh. The NCR and the associated NCR Planning Board were created in 1985 to plan the development of the region and to evolve harmonized policies for the control of land use and infrastructure development. Prominent cities of the NCR include Delhi, Faridabad, Ghaziabad, Gurgaon, and Meerut. Contributing nearly 8% of India’s gross domestic product, the NCR’s importance has grown with the country’s economic growth. The NCR is the fastest-growing urban agglomeration in India, registering an average of 33% decadal population growth since 1980. From 46 million in 2011, the NCR’s population is increasing rapidly and is projected to reach 64 million by 2021, with an urbanization rate of 71% (45 million).2

3. The city of Delhi—accounting for 37% of the total NCR population while only covering 4.4% of the NCR area—has been facing unprecedented growth as it acts as a powerful national job magnet, particularly for neighboring states. The large influx of migrants has led to extreme traffic congestion, lack of space for development of essential basic infrastructure like water supply and sewerage, and lack of affordable housing. Congestion is estimated to cost $9.6 billion (about 12% of Delhi’s gross domestic product) annually in wasted fuel, reduced productivity, air pollution, and accidents.3 In 2017, 6,673 traffic accidents were recorded in Delhi—1,565 of which resulted in fatalities, the highest among cities in India with 1 million people or more. The growing traffic levels have also contributed to worsening air pollution levels, making Delhi one of the most polluted cities in the world.4

4. The unicentric development focus on Delhi, with a few satellite cities near Delhi emerging as business hubs, has prevented the NCR from realizing its true economic potential as it leaves other subregions to struggle.5 Eight districts in the NCR, covering nearly 15,000 square km, are part of Uttar Pradesh, which is one of the poorest states in the country with per capita incomes less than half the national average. In 2018, Uttar Pradesh registered the highest unemployment rate in urban areas, at nearly 16%. Women and differently abled people are often less well-placed

1 ADB. 2019. Country Operations Business Plan: India, 2020–2022. Manila. 2 Government of India, Ministry of Housing and Urban Affairs (MOHUA), National Capital Region Planning Board.

2005. Regional Plan 2021 for NCR. New Delhi; and Klynveld Peat Marwick Goerdeler (KPMG). 2017. Urbanisation in the National Capital Region. Delhi. The NCR recorded an urbanization rate of 62.5% in 2011.

3 N. Davis et al. 2017. Congestion costs incurred on Indian Roads: a case study for New Delhi. Chennai: Department of Electrical Engineering, Indian Institute of Technology Madras.

4 World Health Organization. Global Ambient Air Quality Database (accessed 2 January 2020). 5 National Capital Region Transport Corporation (NCRTC)-National Institute of Urban Affairs. India: Detailed Report

on Value Capture Financing: Implementation of Transit Oriented Development along Delhi–Meerut RRTS Corridor. Unpublished.

2

to take advantage of increased economic opportunities. The incidence of unemployment among female graduates in the state (14.7%) is double the national average (7.3%), and 65% of the state’s differently abled population do not have work.6 Special attention needs to be given to improving the safety and mobility of women and differently abled travelers to ensure that benefits of wider job opportunities and more controlled development of Delhi are shared across different groups of the population.

5. Coronavirus disease (COVID-19) pandemic. Plans for transport arteries to enhance regional connectivity have become critical for the inclusive and sustainable development of the NCR. This is further highlighted with the COVID-19 pandemic, which has exposed Delhi’s long-standing migration problem. As the country went into lockdown, millions of migrant workers in Delhi and its satellite towns were left stranded without immediate jobs and incomes, in very basic conditions away from their families. Good regional connectivity will allow workers to live with their families under better living conditions in other NCR towns, where the cost of living is lower and quality of life is better. Fast and comfortable commuting will bring about a paradigm shift in the way people travel and work in the NCR. The development of Delhi will be more controlled and regulated, relieving pressure on Delhi and leading to polycentric urban development in the NCR.

6. The NCR Regional Plan 2021 recommends integrating regional centers with each other and the capital through an integrated transport network to induce growth and development of settlements in the NCR.7 Regional connectivity enhancement, through mass transport systems which are well-integrated with land use patterns, will facilitate the outward pull of people from Delhi. The Functional Plan on Transport, 2032 was then developed to detail the specific policies of the regional plan related to the transport sector.8

7. Road map. The Functional Plan on Transport recommended an integrated multimodal transport system to improve the mobility of both people and goods in the NCR. The plan specifically includes a proposal for the construction of eight rail corridors to connect Delhi to other cities in the NCR with high-speed commuter trains under the RRTS. The government has prioritized three rail corridors for implementation. The first corridor will be the northeast Delhi–Meerut corridor (82 km) connecting Delhi to Sahibabad, Ghaziabad, Duhai, and Meerut in Uttar Pradesh, one of the most densely populated sections in the NCR.9 While the national railway system connects these towns to central Delhi, most of the existing track capacity is dedicated to long-distance express trains unable to serve commuters between Delhi and Meerut.10 The second corridor (180 km) will be the Delhi–Gurugram–Shahjahanpur-Neemrana-Behror–Alwar corridor, passing through urbanized and industrialized areas of Haryana and Rajasthan, and connecting to Delhi airport.11 The third corridor (103 km) will connect Delhi to Panipat in the state of Haryana. All three corridors will converge at the multimodal hub to be constructed at Sarai Kale Khan in Delhi. The three prioritized corridors will be integrated with the airport, eight Delhi Metro stations,

6 R. Mamgain and S. Verick. 2017. The State of Employment in Uttar Pradesh: Unleashing the potential of inclusive

growth. Geneva: International Labour Organization. 7 Government of India, MOHUA, National Capital Region Planning Board. 2005. Regional Plan 2021 for NCR. New

Delhi. 8 Government of India, MOHUA, National Capital Region Planning Board. 2013. Functional Plan on Transport for

National Capital Region—2032. 9 Government of India, MOHUA. Sanction Order of the President for Implementation of the Delhi–Meerut Regional

Rapid Transit System. Unpublished. Available upon request. 10 There are eight daily passenger train services, but these trains have low frequency and suffer from considerable

delays because of the low priority accorded to them versus the long-distance express trains. The scheduled travel time from Delhi to Meerut by rail is, on average, 2 hours but the actual time may be 3–4 hours since the line is extremely congested and operating at more than 170% of design capacity.

11 The Japan International Cooperation Agency, which has financed the Delhi Metro and other metro projects in India, is expected to finance this corridor.

3

three interstate bus terminals, and two Indian Railways stations in the capital, apart from several other towns in the NCR.

8. Implementation of the RRTS gained impetus with the establishment of the National Capital Region Transport Corporation (NCRTC), a joint venture company with equity investment of the Government of India (50%) and the states of Delhi, Haryana, Rajasthan, and Uttar Pradesh (each 12.5%). The NCRTC is mandated to implement the RRTS project across the four participating states.12 The operations of these corridors are expected to be undertaken by a private sector operator engaged by the NCRTC. The NCRTC board of directors is fully authorized to make technical decisions and the corporation depends on the government principally for funding and land acquisition. This arrangement has proven to be very effective in reducing political interference in other infrastructure projects in India. Apart from the construction and operation of these corridors, the NCRTC will also assist state governments to implement transit-oriented development (TOD) and value capture financing (VCF) schemes that will provide additional revenue streams to enhance the financial sustainability of such projects. Since the NCRTC is a relatively new organization tasked with implementing these innovative and transformational railway corridors, it will need considerable support for institutional and capacity building.

9. Policy framework. The development of rail-based mass transit systems is governed by three main policies. The National Urban Transport Policy (2006) of the government encourages the development of high-capacity public transport systems through special purpose vehicles and offers financial support either in the form of equity or one-time viability gap financing.13

10. The National Transit Oriented Development Policy (2017) supports the development of dense, mixed-use developments around strategically located transit nodes, preferably within a 5–10-minute walking distance. TOD focuses on creating development patterns that facilitate the use of public transit as a primary mode of transport.14 The proposed RRTS corridor will expand and integrate new areas and trigger spatial and economic development. This will help achieve sustainable development in the NCR through integration of land use and transportation. Real estate development activity will increase as newer areas are developed and real estate valuations and transactions increase. The preparation work for the investment project has identified “influence zones” of all the RRTS stations together with four “special development areas.”15 These are proposed to be earmarked as TOD zones in accordance with the TOD Policy, which envisages increased land use density along the influence area of the corridor and at all selected transit stations.

11. The Metro Rail Policy (2017) emphasizes the benefits of mass rapid transit systems, particularly in urban areas, and the state governments’ commitment to provide required support to metro rail companies and agencies to ensure financial sustainability during operations. The policy also mandates state governments to implement VCF. This is a mechanism for additional revenue generation through the recovery of some or all of the additional value that is generated by public infrastructure.16 While the concept is still at a nascent stage in India, some of the mass transit projects in different Indian states have successfully utilized at least one or two VCF

12 The NCRTC was incorporated on 1 August 2013. 13 Government of India, MOHUA. 2006. National Urban Transport Policy. New Delhi. 14 Government of India, MOHUA. 2017. National Transit Oriented Development Policy. New Delhi. 15 The “influence zone” forms a radius of 1.5 km around each of the proposed RRTS stations. The four “special

development areas” are proposed at Modipuram (346 hectares [ha]), Meerut South (400 ha), Duhai (400 ha), and Guldhar (250 ha).

16 Government of India, MOHUA. 2017. Metro Rail Policy. New Delhi.

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instruments to monetize the benefits.17 In this investment project, VCF instruments that can generate additional revenue streams have been identified and an action plan is being developed for their implementation.18

12. Strategic context. Strengthening urban mass transit systems and increasing the environmental sustainability of cities through the development of railways is well-recognized in India’s transport and regional plans and in ADB’s country partnership strategy (CPS) for India.19 The investment project is aligned with all three pillars of ADB’s CPS on (i) boosting economic competitiveness by expanding infrastructure networks and corridor development, (ii) providing inclusive access to these infrastructure networks, and (iii) addressing climate change. The investment project fits well with the emphasis of ADB’s CPS on transformative investments of a national flagship nature to deliver total solutions to the country’s burgeoning problems such as unorganized urbanization by adopting a cross-sector approach. ADB will support long-term urban development planning, which will ensure seamless travel between Delhi and other NCR cities and improve links across the NCR. 13. Post-COVID-19. The investment project remains highly relevant in a post-COVID-19 strategic context. Efforts are being made to restart the economy and to mitigate the adverse impact of the lockdown, particularly on employment of the vulnerable population. Investing in public transit infrastructure will create employment opportunities during construction and operation and also generate demand and kickstart the economy through the growth of businesses, improved quality of living, and equitable access to infrastructure. India’s economic survey estimates that an investment of ₹1 in railways has a multiplier effect of ₹5 in other sectors of the economy. The RRTS has the ability to create demand in various allied sectors of the economy and to provide employment opportunities in the form of direct, indirect, and induced jobs.

14. Alignment with ADB’s Strategy 2030. The project is aligned with ADB’s Strategy 2030 and explicitly focuses on key operational priorities (Table 1).20

Table 1: Alignment with Strategy 2030 Key Operational Priorities Project Contributions Addressing remaining poverty and reducing inequalities

Improving standards of living. The project will provide universal access to safe, reliable urban transport services that promote social inclusion and development particularly for vulnerable groups by facilitating mobility and improving accessibility to centers of job opportunities.

Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability

Reducing GHG emissions. The project will support climate change mitigation by encouraging commuters to shift from road-based public urban transport to the RRTS as a sustainable transport mode with lower GHG emissions. Ensuring climate and disaster resilience. The facility supports the implementation of climate- and disaster-resilient infrastructure, with designs addressing flooding risks during high rainfall periods.

Making cities more livable Providing integrated solutions. Through improved regional connectivity, the facility will ease population pressure on Delhi and provide the necessary incentive for other towns to develop sustainably. By supporting transit-oriented development, the project will facilitate well-organized development of urban areas with systematic land use planning and incentives to promote vertical and dense development of urban buildings, leading to an efficient and clean urban environment.

17 The most commonly applied value capture instruments are additional stamp duty charges and increased floor area

ratio. 18 Transit-Oriented Development and Value Capture Financing (accessible from the list of linked documents in

Appendix 2). 19 ADB. 2017. Country Partnership Strategy: India, 2018–2022—Accelerating Inclusive Economic Transformation.

Manila. 20 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific.

Manila.

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Key Operational Priorities Project Contributions Strengthening governance and institutional capacity

Enhancing service delivery. The operation and maintenance are expected to be undertaken by a private sector operator, which will promote more effective and timely service delivery and encourage greater accountability for the services provided. Improving management functions and financial stability. The project will provide capacity development support to uphold environmental and social safeguards, adhere to procurement and financial management standards, and implement anticorruption measures.

Accelerating progress in gender equality

Promoting women’s social and economic empowerment. The project will support initiatives to raise awareness on safe mobility and to provide entrepreneurial and employment opportunities. The explicit emphasis of the project on promoting physical and economic mobility of women and differently abled groups along the RRTS corridor will help address discrimination faced by these excluded groups.

GHG = greenhouse gas, NCR = national capital region, RRTS = regional rapid transit system. Source: Asian Development Bank.

15. Lessons. The importance of intracity urban transit has been recognized worldwide, and lessons can be learned from extended urban agglomerations in Hong Kong, China; the Republic of Korea; Taipei,China; and Thailand, where train systems serve as the main transport backbone.21 ADB’s initial involvement in the urban transport subsector in India was to assist in policy and strategy aspects in line with the National Urban Transport Policy. ADB has also supported the development of the Guidelines and Toolkits for Urban Transport Development in Medium-Sized Cities in India; the Jaipur Metro Rail Line 1-Phase B Project, where it financed the extension of the first metro train line in Jaipur and drew up plans to build a second line for the north–south corridor; and the Mumbai Metro Rail Systems Project to expand the metro network in India’s financial capital.22

16. Metro and railway projects financed by ADB in India have shown that the following are vital to delivering high-quality projects in a timely manner: (i) conducting advance planning and detailed project preparation; (ii) ensuring that executing agencies have strong capacity for project preparation, procurement, and implementation; (iii) ensuring multimodal integration; and (iv) considering operation and maintenance (O&M) requirements at an early stage. These lessons have been carefully incorporated. Additional training has been conducted to strengthen capacity in project preparation and procurement. Multimodal integration plans have been reviewed and necessary elements to ensure intermodal interchanges have been incorporated in the station designs.23 Through ADB technical assistance (TA), a “shadow operator” has been appointed at an early stage to review operational plans and provide recommendations.24

III. THE INVESTMENT PROJECT

A. Impact and Outcome

17. The investment project is aligned with the following impact: urban mobility in the NCR improved (footnote 13). With a design speed of 180 km per hour and high-frequency operations of every 5–10 minutes, this 82-km corridor is expected to reduce the journey time from 3–4 hours

21 International Experience from Regional Transit Systems (accessible from the list of linked documents in Appendix

2). 22 ADB. 2006. India: Urban Transport Strategy. Manila; ADB. 2013. Report and Recommendation of the President to

the Board of Directors: Jaipur Metro Rail Line 1-Phase B Project. Manila; and ADB. 2019. Report and Recommendation of the President to the Board of Directors: Proposed Loan to India for the Mumbai Metro Rail Systems Project. Manila.

23 Multimodal Integration and Last-Mile Connectivity (accessible from the list of linked documents in Appendix 2). 24 ADB. 2019. Technical Assistance to India for Preparing the Delhi–Meerut Regional Rapid Transit System Investment

Project. Manila. Seoul Metro has been selected as the shadow operator for the project. It will provide operational expertise during the design and construction phases of the project.

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to about 1 hour. The investment project will have the following outcome: efficiency, safety, social inclusiveness, and environmental sustainability of transport in the Delhi–Meerut RRTS corridor improved.25

B. Outputs

18. Output 1: Delhi–Meerut RRTS corridor commissioned. The investment project will help finance the construction of the 82 km Delhi–Meerut RRTS corridor, including civil works, railway tracks, station buildings, multimodal hubs, maintenance depots, and traction and power supply.26 The corridor will be built on elevated viaducts and will go underground (14 km) in heavily populated areas. It will connect Sarai Kale Khan in Delhi to Modipuram in Meerut.27 The viaduct will be built along the central median of the national highway connecting Delhi to Meerut, wherever feasible. The investment project also includes (i) construction of depots at Duhai and Modipuram for the maintenance of rolling stock and fixed assets, and an operation control center and stabling yard at Jangpura; (ii) 24 stations integrating design features that are friendly to the elderly, women, children, and differently abled (EWCD), at least five of which are to be developed as major multimodal hubs; 28 and (iii) closed-circuit television (CCTV) cameras installed to monitor coaches and public areas of all stations, and pick-up and drop-off areas.

19. Output 2: Institutional capacity of the National Capital Region Transport Corporation strengthened. Although the NCRTC’s scope as a special purpose vehicle is limited to implementing the RRTS, the large-scale nature of the investment project requires a high level of capacity in managing projects, contracts, and document flow, including financial reporting and auditing. The project will (i) develop an institutional strategy including an organizational, financial, and technology plan; (ii) develop training programs in project and contract management, financial management, procurement, and safeguards; (iii) adopt a gender-friendly workplace policy; (iv) support the NCRTC in developing a TOD action plan and VCF instruments for enhancing financial sustainability; and (v) strengthen the capacity of the NCRTC to undertake public–private partnership (PPP) initiatives.

20. Output 3: Mobility and economic opportunities of women and the differently abled improved. The investment project will ensure that the RRTS improves urban mobility, and its economic impacts will benefit women and the differently abled. The project will include (i) training; (ii) provision of mobility aids; (iii) safe mobility for EWCD; (iv) increased awareness on safe mobility, self-defense, and improved employability skills for selected female students along the RRTS corridor; and (v) provision of gender-inclusive, socially inclusive, and environmentally sustainable public toilets around RRTS stations. The project will also maximize the spillover effects of developing the RRTS and multimodal hubs, encouraging more women and differently abled people to engage in employment and other economic activities. 21. Finance-plus and value added by ADB assistance. The investment project provides a new type of rail-based regional urban transport system in India, combining high speeds, widely spaced stations, and metro-like operations. ADB will assist the NCRTC in developing the first of three prioritized corridors, which will have a substantial demonstration effect for future corridor development. ADB assistance will help develop innovative elements that require international

25 The design and monitoring framework is in Appendix 1. 26 ADB financing will not include rolling stock or the signaling and telecommunications system. 27 About 20 km of the RRTS line from Partapur to Modipuram will be used to run the proposed Meerut Metro, originally

planned as a parallel line to the RRTS. This section will have six stations dedicated for Meerut Metro. 28 Two stations are at-grade catering to depots. Major multimodal hubs are RRTS stations that will include easy

interchange to rail, metro, and bus stations for passengers.

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expertise, which will enhance and supplement the available skills of the executing agency. ADB support will also ensure that special attention is given to the following important areas:

(i) High-level technology. ADB will help develop the specifications for a modern signaling technology based on the European Train Control System Level II with automatic train operation functionality and platform screen door integration for the first time in India. It will also help implement the latest international best practice for mitigating noise and vibration on the corridor.

(ii) Station design. ADB will assist in designing stations using building information modeling. This follows an intelligent three-dimensional model-based process that will help to more efficiently plan, design, construct, and manage stations.29 The station designs will incorporate EWCD-inclusive features to provide universal accessibility.

(iii) Multimodal hubs and last-mile connectivity. The investment project will develop multimodal hubs for smooth interchange with other transport modes. Multimodal integration will be provided through elevators, walkways, escalators, and underpasses, depending on the location, to ensure seamless connectivity to metro lines, bus terminals, or other transport modes. The project will also ensure last-mile connectivity through nonmotorized transport options as well as electric feeder buses.

(iv) Transit-oriented development and value capture financing. ADB will support the NCRTC to develop an action plan for TOD in areas around the RRTS stations. The ADB TA will provide for a dedicated unit of experts to provide knowledge support and to help identify and apply VCF instruments (footnotes 18 and 29).

(v) Minimizing operational risks. ADB has engaged a shadow operator to review plans and designs to support decision-making, and to ensure efficiency and cost effectiveness (footnote 24). Appraisals by the shadow operator will help ensure that the designs integrate long-term O&M requirements.

22. Replication strategy. This is the first corridor of this nature, and the successful demonstration of the concept will help in the replication and scaling up of the RRTS network not only in the NCR but also in other similar urban agglomerations in India and other countries in Asia and the Pacific. This includes the work related to TOD and VCF that is closely associated with this project. To help in the process, a knowledge management system will be designed to ensure that (i) specifications for the technology used (signaling, rolling stock, civil structures) are standardized; (ii) procurement documents that were successfully used for contracts are made available; (iii) all three-dimensional models encapsulating civil, mechanical, and electrical design elements are shared with interested agencies; and (iv) all processes related to TOD and VCF are documented. In addition, knowledge dissemination workshops funded through the ADB TA will be organized for facilitating knowledge sharing and information exchange.

23. One ADB approach. ADB’s South Asia Department is working with ADB’s Public–Private Partnership Thematic Group in the Office of Public–Private Partnership to support the NCRTC in identifying the most appropriate PPP opportunities.30 The department is also coordinating with

29 ADB. 2019. Technical Assistance to India for Strengthening Climate Change Resilience in Urban India Subproject 3:

Strengthening Smart Urban Mass Rapid Transit and Climate Change Resilience in the National Capital Region. Manila. Building information modeling, universal access design features, TOD, and VCF instruments are being supported by the cluster TA funded by the Urban Climate Change Resilience Trust Fund under the ADB-administered Urban Financing Partnership Facility. Financing partners are the Rockefeller Foundation and the governments of Switzerland and the United Kingdom.

30 Public–Private Partnership Initiatives (accessible from the list of linked documents in Appendix 2).

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ADB’s Private Sector Operations Department to engage with the NCRTC in exploring additional nonsovereign lending, coinciding with the timing for the third tranche of the investment project.

24. Public–private partnership initiatives. Capital-intensive projects such as the RRTS are implemented as public services, and full cost recovery through user charges is not expected. The NCRTC is not operated as a commercial undertaking and is completely dependent on government funding. Hence, it is proposed that a model will be followed whereby the government finances the assets using its own funds and development assistance, and then outsources service contracts. This is the practice in most metros and new railway lines worldwide. The project will explore PPP in three major areas: (i) development of an operations contract through which the operations of the corridors are expected to be undertaken by a private sector operator engaged by the NCRTC; (ii) provision of logistics services to accommodate freight traffic, especially perishable commodities during the off-peak hours of passenger services (the service is likely to enhance supply chain operations in the catchment area and unlock additional revenue potential for the RRTS); and (iii) procurement of a rolling stock contract that will include 15-year performance-based maintenance obligations to improve asset quality and service levels. The payment to the rolling stock provider will be based on specified key performance indicators such as availability obligations and reliability. At least 30 train sets of six coaches each will be provided for the RRTS and 10 train sets of three coaches each for the Meerut Metro.

25. Use of multitranche financing facility. These outputs are best financed by an MFF to achieve the outcome.31 The investment project will be financed by an MFF with four tranches adopting the time-slice approach for large-scale stand-alone projects. At the time of MFF processing, the design, procurement, and safeguards have been appraised for the entire MFF. Developing sustainable transport systems in Indian cities is a growing challenge and ADB’s long-term involvement through an MFF can provide the support to develop infrastructure and institutions that can deliver these new types of transformational urban transport projects. In line with the Independent Evaluation Department’s recommendations,32 the MFF (i) is aligned with ADB’s Strategy 2030 to deliver integrated solutions and to realize its transformational development potential (public sector financing will be effectively used to develop PPP and private sector opportunities); (ii) introduces several measures, such as advanced procurement, to ensure that the MFF implementation schedule is realistic and all operations intended to be financed under the MFF program are completed on time; and (iii) will enhance the learning from prior tranches by ensuring it is captured, applied, and documented explicitly when the approval of subsequent tranches is requested.

26. Scope of project 1. The investment project will finance civil works, rail track, station buildings, and maintenance facilities. All contracts are expected to be awarded during project 1 implementation. Tranche 1 will finance the first slice of the contract packages under the investment project. It will also support various capacity building activities outlined in Output 2, and initiatives to improve the mobility and economic opportunities of women and differently abled people (Output 3).

C. Summary Cost Estimates and Financing Plan

27. The total project cost is $3,949.7 million. ADB, AIIB, JFPR, and the government are expected to finance $3,449.7 million, including taxes and duties, physical and price contingencies, interest, and other charges during implementation (Table 2). The New Development Bank will

31 Comparison of Financing Modality (accessible from the list of linked documents in Appendix 2). 32 Independent Evaluation Department. 2019. ADB's Multitranche Financing Facility, 2005–2018: Performance and

Results Delivered. Manila: ADB.

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also provide $500 million in parallel financing for systems packages, such as rolling stock, signaling, and telecommunications. These will be under separate contracts and will not be administered by ADB.

Table 2: Summary Cost Estimates ($ million)

Item Amounta,b

A. Base Costc 1. Output 1: Delhi–Meerut regional rapid transit system corridor commissioned 2,526.5 2. Output 2: Institutional capacity of the NCRTC strengthened 14.8 3. Output 3: Mobility and economic opportunities of women and the differently abled improved 2.7

Subtotal (A) 2,544.0 B. Contingenciesd 760.5 C. Financial Charges During Implementatione 145.2 Total (A+B+C) 3,449.7

NCRTC = National Capital Region Transport Corporation. Note: Numbers may not sum precisely due to rounding. a Includes taxes and duties of $197.6 million. With the exception of output 3, the government will finance taxes and

duties through cash contribution. b Non-ADB administered parallel cofinancing of $500 million from the New Development Bank is excluded from the

table, as per Staff Instructions on Business Processes for Financing Partnerships. c In mid-2019 prices as of 2 January 2020. Excluding contributions toward state taxes and government-owned land. d Physical contingencies computed at 17% for civil works and goods. Price contingencies computed at an average of

4.0% on local currency costs and 1.6% for foreign currency costs. e Includes interest and commitment charges. Interest during construction for the ordinary capital resources loan has

been computed at the 5-year United States dollar fixed swap rate plus an effective contractual spread of 0.5% and maturity premium of 0.2%. Commitment charges for the Asian Development Bank ordinary capital resources loan is 0.15% per year to be charged on the undisbursed loan amount.

Sources: Asian Development Bank and Asian Infrastructure Investment Bank estimates.

28. Financing plan. The government has requested an MFF of up to $1,049 million from ADB’s ordinary capital resources to help finance a part of the investment project. The MFF will consist of four tranches, subject to the government’s submission of related periodic financing requests, execution of the related loan and project agreements for each tranche, and fulfillment of terms and conditions and undertakings set forth in the framework financing agreement.

29. Project 1. The first tranche of the MFF will comprise a regular loan of $500 million; have a 25-year term, including a grace period of 8 years; an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility; a commitment charge of 0.15% per year; and such other terms and conditions set forth in the draft loan and project agreements. Based on the annuity type repayment method with a 10% discount rate, the average maturity is 19 years and the maturity premium payable to ADB is 0.2% per year.

30. The government has also requested (i) a loan not exceeding $500 million from the AIIB, and (ii) a grant not exceeding $3 million from the JFPR. The summary financing plan is in Table 3. ADB will finance the expenditures for civil works, traction, and consulting services. The AIIB will provide joint cofinancing and the loan will be partially administered by ADB.33 The JFPR grant, fully administered by ADB, will finance a range of pilot activities, including toilet blocks outside station areas, assistive aids for the differently abled, training for women and differently abled people on safe mobility and employment opportunities, and sensitization and behavioral change trainings of public transport providers. Counterpart funding will be provided by the government to

33 Under joint cofinancing, ADB and its financing partners finance a common list of goods, works, and services required

for the project. Under partial administration, the funds provided by the financing partner are not transferred to ADB. ADB will provide a range of services, including procurement and disbursement supervision.

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finance taxes and duties, and other in-kind contributions. Universal procurement applies to the components cofinanced by ADB and AIIB.34

Table 3: Summary Financing Plan ($ million)

Tranche

(estimated year of PFR submission) Share of Total (%)

Source 1

(2020) 2

(2021) 3

(2023) 4

(2025) Amounta Asian Development Bank

OCR (regular loan) 500.0 0.0 250.0 299.0 1,049.0 30.4 Asian Infrastructure Investment Bank (loan)b 0.0 500.0 0.0 0.0 500.0 14.5 Japan Fund for Poverty Reduction (grant)c 3.0 0.0 0.0 0.0 3.0 0.1 Governmentd 799.6 799.6 206.0 92.5 1,897.7 55.0 Total 1,302.6 1,299.6 456.0 391.5 3,449.7 100.0

OCR = ordinary capital resources, PFR = periodic financing request. Note: Numbers may not sum precisely due to rounding. a Non-ADB administered parallel cofinancing of $500 million from the New Development Bank is excluded from the

table, as per Staff Instructions on Business Processes for Financing Partnerships. b Partially administered by the Asian Development Bank. c Fully administered by the Asian Development Bank. d The government will provide contributions to cover (i) part of civil works, (ii) part of the signaling and

telecommunications systems and track works, (iii) procurement of rolling stock, (iv) taxes and duties, (v) land acquisition and resettlement, and (vi) part of contingencies.

Sources: Asian Development Bank and Asian Infrastructure Investment Bank estimates.

31. Climate mitigation is estimated to cost $3,439.6 million and climate adaptation is estimated to cost $10.1 million under the investment project.35 ADB will finance 30.4% of mitigation and adaptation costs while AIIB will finance 14.5%. Details are in the climate change assessment.36

D. Implementation Arrangements

32. The Ministry of Housing and Urban Affairs (MOHUA) acting through the NCRTC will be the executing agency for the investment project. The NCRTC has established project management offices in Delhi, Ghaziabad, Meerut, and Modinagar led by chief project managers directly responsible for the day-to-day implementation of the project. A general consultant has been engaged by the NCRTC using counterpart funds to support the executing agency in undertaking overall investment project management. Consultants, financed through TA grants funded by ADB and the Urban Climate Change Resilience Trust Fund, will also support the NCRTC (footnote 29). Capacity-building training and workshops have been organized to familiarize the NCRTC staff with ADB policies and procedures. Procurement (including consulting services) to be financed by ADB will follow the ADB Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers (2017, as amended from time to time). For consultancies financed by ADB, recruitment will be carried out using quality- and cost-based selection with a 90:10 ratio. ADB will review and partially administer procurement packages

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Pursuant to an ADB Board of Directors blanket waiver of member country procurement eligibility restrictions, universal procurement will apply, whereby (i) ADB administers cofinancing resources for ordinary capital resources-financed resources or (ii) ordinary capital resources and a cofinancier’s resources are used to jointly finance an individual procurement package. This applies to all packages except the first ADB-financed civil works package for which bids had been opened prior to reaching the cofinancing agreement. ADB. 2015. Enhancing Operational Efficiency of the Asian Development Bank. Manila; Co-financing Framework Agreement for Sovereign Operations between ADB and AIIB signed on 21 March 2019.

35 African Development Bank, ADB, European Bank for Reconstruction and Development, European Investment Bank, InterAmerican Development Bank, International Finance Corporation, and World Bank. 2015. 2014 Joint Report on Multilateral Development Banks’ Climate Finance. Washington, DC.

36 Climate Change Assessment (accessible from the list of linked documents in Appendix 2).

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financed by the AIIB loan in accordance with the ADB–AIIB cofinancing agreement. The implementation arrangements of the investment project are summarized in Table 4 and described in detail, including specific arrangements for project 1, in the facility administration manual (FAM).37

Table 4: Implementation Arrangements Aspects Arrangements

MFF availability period August 2020–August 2027

Grant implementation period February 2021–August 2025

Estimated completion date Tranche 1: August 2023; Japan Fund for Poverty Reduction grant: August 2025; MFF: August 2027

Management

Executing agency Ministry of Housing and Urban Affairs acting through NCRTC

Procurement OCB international advertisement 56 contracts $2,320,080,353

OCB national advertisement 22 contracts $27,496,917

Retroactive financing and advance contracting

The NCRTC will use advance contracting and retroactive financing for civil works, goods and services, and consultant recruitment. Retroactive financing will be up to 20% of the loan proceeds, to finance expenditures incurred prior to loan effectiveness but not earlier than 12 months from the date of the legal agreements.

Disbursement The loan proceeds will be disbursed following ADB's Loan Disbursement Handbook (2017, as amended from time to time) and detailed arrangements agreed between the government and ADB.

ADB = Asian Development Bank, MFF = multitranche financing facility, NCRTC = National Capital Region Transport Corporation, OCB = open competitive bidding. Source: Asian Development Bank.

33. Project readiness and impact of COVID-19. Readiness is high as the complete scope to be financed by the MFF has been appraised by ADB. Environmental and social due diligence have been completed for the entire corridor. Geotechnical investigations have been done and detailed design work is in progress. To minimize delays, preconstruction activities such as utility shifting for various sections of the corridor are ongoing. The COVID-19 pandemic has not affected the project implementation arrangements or cost estimate. The project implementation period of 7 years provides adequate cushion for some delays. Based on government orders, guidelines and standard operating procedures have been developed and are being strictly implemented for resumption of regular works at various NCRTC site offices and construction sites. Strict compliance monitoring is to be ensured by chief project managers.

IV. DUE DILIGENCE

A. Technical

34. The technical viability is sound, with use of proven technology. The technical designs and specifications for most of the civil engineering works are based on Indian standards, which are well proven and widely applied on Indian railways and other metro projects. For underground works, design–build contracts will be awarded to suitably qualified contractors having established experience in construction of similar works and who will be required to engage experienced and competent designers for the design of works. The design of various works shall meet the relevant standards for the seismic zone of the project area. The executing agency prepared project reports, detailed designs, and specifications. As per the specifications, the track will conform to international railway standards, with the rolling stock being of modern design, light weight, of stainless steel or aluminum construction, and fitted with a regenerative braking system. Modern signaling systems will be used that employ the European Train Control System Level II technology to enhance safety and efficiency. Platform screen doors will be installed to separate the station

37 Facility Administration Manual (accessible from the list of linked documents in Appendix 2).

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platform from the train to prevent accidents. Climate change risks have been addressed in the project design by (i) using head-hardened, continuous welded rail and concrete lining underground tunnels; (ii) raising underground station entrances to above surrounding ground levels; (iii) raising viaduct levels across major rivers to prevent flooding of the tracks during heavy floods; and (iv) installing rain water harvesting systems at various stations and at specified intervals along the elevated viaducts (footnote 36).

B. Economic and Financial

35. Economic analysis. The economic evaluation of the project was conducted in accordance with ADB guidelines, and compared the project costs and benefits in with-project and without-project cases with economic internal rate of return (EIRR) as the decision criterion.38 The project is expected to deliver significant benefits to society through savings in vehicle operating costs and travel time for both public transport and road users. The project will also deliver social and economic benefits from reduced carbon dioxide emissions and air pollution, which have been quantified in the analysis. All the benefits are calculated in market price terms and converted to economic prices using conversion factors as per the Appraisal Guidelines for Metro Rail Project Proposals by the MOHUA.39 The EIRR for the RRTS is estimated to be 11.3%, with a net present value of over $977 million. The evaluation included a sensitivity analysis to investigate the economic viability of the project assuming reduction in ridership and employment benefits. The EIRR was more than 9% under all scenarios, demonstrating that the investment project would remain economically viable given adverse changes in costs and benefits. The RRTS will also contribute significantly to the NCR’s economic growth by structuring land use and transport patterns. The project will directly and indirectly benefit the poor and vulnerable, and distribution analysis shows the project will have a poverty impact ratio of 0.27.

36. Financial sustainability. The financial evaluation of the project was conducted in accordance with ADB guidelines.40 It assessed the costs and earnings that would accrue because of the project using the discounted cash flow method and calculated the financial internal rate of return (FIRR) over a period of 36 years, comprising 6 years of construction and 30 years of operations. All financial calculations are made in 2019 Indian rupees with no adjustment for inflation. The base value of the FIRR is 2.5%, which is higher than the weighted average cost of capital of 2.4%. However, the FIRR is highly sensitive to project cost, ridership, and fare revenue assumptions. Any adverse change of about 10% in these assumptions will result in a lower FIRR than the weighted average cost of capital. The evaluation assumes traffic at commencement of operations as 25% of the forecast, which is increased to forecast estimates in the fifth year after commencement. The project revenues include ticket sales, advertisements, and rentals at stations. Earnings before interest, depreciation, tax, and amortization margin of the project (expressed as a percentage of revenue of the project) are about 19% in the first year of operation and increase thereafter. This implies that the project is expected to service its O&M obligations on its own. The debt service coverage ratio is less than 1.0 during the first year of operation, requiring an infusion of an estimated ₹2.7 billion to meet the debt obligations to ADB, AIIB, and the New Development Bank (interest).41 Any shortfalls in servicing the debt and O&M obligations of the project will be borne by the governments of Delhi and Uttar Pradesh in the ratio of route–km falling in their respective states, as per the government sanction order and related memoranda of understanding (footnote 9).

38 ADB. 2017. Guidelines for the Economic Analysis of Projects. Manila. 39 Government of India, MOHUA. 2017. Appraisal Guidelines for Metro Rail Project Proposals. Delhi. 40 ADB. 2019. Financial Analysis and Evaluation. Manila. 41 Financial Analysis (accessible from the list of linked documents in Appendix 2).

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C. Governance

37. Financial management. The financial management assessment was prepared following ADB’s Guidelines for Financial Analysis and Evaluation, Financial Management Assessment, and related technical guidance notes.42 The NCRTC (i) has sound financial and accounting systems; (ii) adheres to procedures, manuals, policies, guidelines, and reporting frameworks prescribed by the Comptroller and Auditor General of India; and (iii) has a robust internal control system with internal audit outsourced to a firm of chartered accountants whose reports are presented to the audit committee of the NCRTC. The NCRTC prepares its entity-level financial statements in compliance with the Indian Accounting Standards, with unqualified audit opinions. Measures identified to strengthen financial management include (i) training the NCRTC staff on ADB financial management requirements, since the NCRTC is implementing an ADB-financed project for the first time; and (ii) preparing and implementing a comprehensive financial management manual.43 The overall financial management assessment risk is moderate, with appropriate risk mitigation measures in place. Details of risks and key mitigating measures are in the FAM.

38. Procurement. The NCRTC is a new agency and is not experienced with procurement and consultant recruitment for ADB projects. Training and awareness workshops have been organized to familiarize the NCRTC staff with ADB policies and procedures. For this project, the use of the National Informatics Center’s e-procurement system has been approved to procure all major packages. Since July 2018, the NCRTC has been developing a procurement manual that is aligned with the policies of the Government of India, and outlines detailed processes and procedures to be adopted for all procurement. Advance contracting is being done to expedite project implementation, and the NCRTC has successfully awarded several government-funded contracts. Value for money is being implemented through strategic procurement planning and a risk-managed approach by applying appropriate procurement methods, contract forms, and review procedures.

39. The NCRTC shall generally adopt the guidelines of the Department of Public Enterprises, the Department of Economic Affairs, and the Central Vigilance Commission to strengthen corporate governance and shall be subject to parliamentary scrutiny. Integrity due diligence was conducted.44 No significant integrity risks were identified. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the government and the NCRTC. The specific policy requirements and supplementary measures are described in the FAM.

D. Poverty, Social, and Gender

40. Poverty. Uttar Pradesh is among the few states in India which has a higher proportion of urban poverty (37%) than rural poverty (29%) (footnote 6). As major RRTS nodes in the state, Ghaziabad, Meerut, and Modinagar are expected to benefit from the investment project through reduced travel time to Delhi, increased social mobility, and improved safety. The investment project will contribute to economic growth and employment by enabling better access to income-generating opportunities and basic services such as health care and education. Reduced travel time will alleviate disparity among urban, peri-urban, and rural areas of India’s NCR. The fares will be kept low (₹2 per km) to ensure affordability for even the low-income groups. There will be a separate class coach with much higher fares to target the upper middle class and rich segments of the population, thereby enabling the provision of much lower fares for the poor.

42 ADB. 2019. Financial Analysis and Evaluation. Manila; and ADB. 2015. Financial Management Assessment. Manila. 43 The financial management manual is being developed with KPMG and is expected to be completed by December

2020. 44 ADB. 2003. Enhancing the Asian Development Bank’s Role in Combating Money Laundering and the Financing of

Terrorism. Manila.

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41. Gender equality and social inclusion. The project is classified as effective gender mainstreaming. While there is limited data currently available on women’s travel patterns and perceptions along the future RRTS corridors, focus group discussions with women reveal that they are often discouraged from using public transport because of fears of harassment, lack of last-mile connectivity, as well as inadequate hygiene facilities. Consultations with organizations working with differently abled people also reveal that, in addition to inaccessible streets and transport vehicles, the behavior of transport service providers is one of the biggest obstacles in accessing public transport. The gender equality and social inclusion action plan provides activities integrated within the project design, including (i) implementing gender-responsive and socially inclusive design features across all infrastructure; (ii) incorporating affirmative measures to enhance women’s safe mobility, such as reserved coaches in RRTS trains; well-lit and CCTV-equipped coaches and public areas of all stations, and pick-up and drop-off areas; and patrolling by security guards in public areas; and (iii) pilot-testing modalities for improved mobility of women and the differently abled, including (a) improving employability and entrepreneurship opportunities for 1,400 women; (b) providing mobility, visual, and hearing assistive aids to 1,000 differently abled people in the urban areas of Ghaziabad, Meerut, and Modinagar; and (c) conducting gender equality and social inclusion sensitization trainings with 200 drivers and conductors of feeder buses to the RRTS.

42. Sexually transmitted infections and human trafficking. Sexually transmitted infections (STIs), including HIV, and human trafficking are risks in the project area. The influx of workers in the project area during construction could create additional risks for STIs. The project will mitigate these risks by providing STI awareness and prevention programs to construction workers, in line with good practices adopted by the National AIDS Control Organization, as set out in the environmental management plan (EMP) that will form part of the contractor’s obligations. Livelihood disruptions resulting from land acquisition and relocation may create additional human trafficking risks, which will be addressed by a detailed livelihood restoration and improvement program set out in the resettlement plan.

E. Safeguards

43. In compliance with ADB’s Safeguard Policy Statement (2009), the safeguard categories of project 1 are as follows.45

44. Environment (category A). Most of the alignment will be built along the center of an existing busy highway. Given the large scale of construction works involving the use of heavy equipment, health and safety risks are anticipated for the construction workers as well as existing road users and residents living near the alignment. Other anticipated environmental issues include removal of trees; disturbance from construction-related noise and vibration; generation of large quantities of waste, including excavated material; risks of health and communicable diseases from large numbers of workers; and generation of dust, air, and water pollution. While most risks are expected to be short-term and limited to the construction stage, the key long-term risks are noise and vibration impacts on residents and structures located along the project alignment. The NCRTC prepared an environmental impact assessment (EIA) including an EMP in accordance with ADB’s Safeguard Policy Statement. The draft EIA was disclosed on 9 October 2019.46 In addition to the EMP, the contractors are also required to follow safety, health, and environment guidelines for metro projects in India. Mitigation measures for all environmental risks identified for the project have been addressed through design measures and inclusion of

45 ADB. Safeguard Categories. 46 Government of India, NCRTC. 2019. Draft Environmental Impact Assessment: Delhi–Meerut Regional Rapid

Transit System Investment Project. Delhi. (prepared for ADB).

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appropriate actions in the EMP and the safety, health, and environment guidelines. The NCRTC held consultations with key project stakeholders throughout the EIA preparation and these will be continued during project implementation. A grievance redress mechanism will be implemented under the project to address complaints and grievances. To comply with the ADB Safeguard Policy Statement requirement for MFF investments, the NCRTC has prepared an environmental assessment and review framework.

45. Involuntary resettlement (category A). The project minimizes involuntary resettlement impacts by using elevated tracks on the carriageway of existing roads. Nevertheless, about 138 hectares of private land and 32 hectares of government land will be required for 17 stations and two depots. It is estimated that 813 households (5,453 people) will be affected by physical displacement (81 households) and economic displacement (732 households) because of land acquisition or restrictions on land use. Out of the total project-affected households, 571 households (3,997 people) will experience significant impacts. The NCRTC has drafted a resettlement plan and has consulted affected communities on proposed mitigation measures to address involuntary resettlement impacts on titled and nontitled households. The resettlement plan has been prepared for the entire Delhi–Meerut corridor based on resettlement surveys, social assessments, and consultations. The resettlement plan is in accordance with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act (2013); the direct purchase policies of the Delhi Development Authority (2014) and Uttar Pradesh (2015); and ADB’s Safeguard Policy Statement. The NCRTC has also prepared a resettlement framework to guide the assessment and mitigation of unanticipated involuntary resettlement impacts of the MFF.

46. Indigenous peoples (category C). The project alignment is generally in urban and peri-urban areas where scheduled tribes do not have cultural attachment to land, customary territories, and distinct livelihood systems. Hence, it will not affect indigenous peoples’ communities within the meaning of the ADB SPS.

47. The NCRTC will have a social and environment management unit for the overall management of social and environmental safeguards under the investment project. An external monitor both for environment and resettlement will be recruited by the NCRTC to conduct third-party monitoring and to verify the reports submitted by the general consultants.

F. Summary of Risk Assessment and Risk Management Plan

48. Significant risks and mitigating measures are summarized in Table 5 and described in detail in the risk assessment and risk management plan.47

Table 5: Summary of Risks and Mitigating Measures Risks Mitigation Measure Inexperience of the executing agency

The executing agency is a newly established organization, but many of the NCRTC’s officers come from the Indian Railways as well as metro corporations across India, including the DMRC, and, therefore, individually have sufficient experience in implementing railway and metro projects. The NCRTC has also hired consultants, comprising leading multinational engineering firms, to assist in ensuring high-quality project design and implementation.

Procurement delays

All contracts to be financed by ADB will be procured following the ADB Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers (2017, as amended from time to time), with major packages subject to prior review by ADB. Many of the NCRTC officers involved in procurement activities are familiar with multilateral development bank (e.g., JICA) procurement guidelines that are similar to those of ADB. ADB has also conducted procurement workshops for the NCRTC to enhance its understanding of ADB procurement

47 Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).

16

Risks Mitigation Measure policy, guidelines, and standard bidding documents. ADB will provide additional procurement training during the implementation period as necessary.

Financial sustainability

The financial sustainability assessment was done using conservative assumptions and rigorous efforts are under way to maximize revenue through TOD and VCF. The government has also provided assurances to ensure the financial sustainability of the project. In case of any shortfall in revenue and if the NCRTC is not able to service debt and operation and maintenance obligations of the project, then sufficient budget and timely releases of funds for operating the RRTS will be provided by the participating state governments, in accordance with the presidential sanction order.

COVID-19 pandemic

The NCRTC has developed a standard operating procedure based on central government guidelines for resuming work safely after the COVID-19 lockdown. Preparatory works have resumed and overall delay has been limited to less than 1 month.

ADB = Asian Development Bank, COVID-19 = coronavirus disease, DMRC = Delhi Metro Rail Corporation JICA = Japan International Cooperation Agency, NCRTC = National Capital Region Transport Corporation, RRTS = regional rapid transit system, TOD = transit-oriented development, VCF = value capture financing. Source: Asian Development Bank.

V. ASSURANCES

49. The government and the MOHUA through the NCRTC have assured ADB that the implementation of the investment project shall conform to all applicable ADB policies, including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, and disbursement as described in detail in the FAM and loan documents.

50. The government and the MOHUA through the NCRTC have given certain undertakings for the MFF, which are set forth in the framework financing agreement. Specific covenants agreed by the government and the MOHUA through the NCRTC with respect to individual tranches under the MFF are set forth in the loan agreement, project agreement, and grant agreement for the respective tranches.

VI. RECOMMENDATION

51. I am satisfied that the proposed multitranche financing facility would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve the multitranche financing facility to India for the Delhi–Meerut Regional Rapid Transit System Investment Project in an aggregate principal amount not exceeding the equivalent of $1,552,000,000, which comprises

(i) the provision of loans from ADB’s ordinary capital resources, in regular terms, with interest and other terms to be determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility;

(ii) the administration by ADB of the loan to be provided by the Asian Infrastructure Investment Bank; and

(iii) the administration by ADB of the grant to be provided by the Japan Fund for Poverty Reduction;

and is subject to such other terms and conditions as are substantially in accordance with those set forth in the framework financing agreement presented to the Board.

Masatsugu Asakawa President

22 July 2020

Appendix 1 17

DESIGN AND MONITORING FRAMEWORK FOR THE INVESTMENT PROJECT

Impact the Project is Aligned with Urban mobility in the National Capital Region improved (National Urban Transport Policy, 2006)a

Results Chain Performance Indicators with Targets and

Baselines

Data Sources and Reporting

Mechanisms Risks Outcome By 2028: Efficiency, safety, social inclusiveness, and environmental sustainability of transport in the Delhi–Meerut RRTS corridor improved

a. Travel time between Delhi and Meerut by train reduced to 1 hour (2020 baseline: 3–4 hours) (OP 2.4.1) b. 258,035 tons of CO2 reduced per annum (2020 baseline: 0) (OP 3.1, OP 3.1.3) c. At least 70% of riders, including EWCD, perceive the RRTS to be accessible, safe, and reliableb (2020 baseline: Not applicable) (OP 2.1.4)

a–b. NCRTC statistics c. RRTS user survey by NCRTC

Feeder connectivity issues impact ridership.

Outputs By 2027: 1. Delhi–Meerut RRTS corridor commissioned

1a. 82 route–km of standard gauge electrified rail track installed, with systems and signaling (2020 baseline: 0) (OP 1.3.1, OP 3.2.5, OP 4.1.2) 1b. 24 EWCD-friendly stations with climate- and disaster-resilient features constructed and operational (2020 baseline: 0) (OP 1.3.1, OP 3.2.5, OP 4.1.2) 1c. At least five RRTS stations developed as major multimodal hubsc (2020 baseline: 0) (OP 1.3.1, OP 3.2.5, OP 4.1.2) 1d. At least one carriage in every RRTS train reserved for women only (2020 baseline: Not applicable) (OP 2.2.3) 1e. CCTV cameras installed in all stations to monitor coaches, pick-up, drop-off, and in all public areas (2020 baseline: Not applicable) (OP 2.2.3, OP 2.4.1, OP 4.1.2)

1a–e. Progress reports

Unpredicted ground conditions, such as mixed strata, may delay tunnel boring works in the underground sections.

2. Institutional capacity of the NCRTC strengthenedd

By 2026: 2a. Recommendations and action plan on TOD, VCF instruments, and PPP initiatives finalized and approved by NCRTC (2020 baseline: Not applicable) 2b. A smart-technology-based platform (BIM) established and adopted for project design, implementation, and management (2020 baseline: Not applicable) 2c. Gender-friendly workplace policy developed and institutionalized within the NCRTC (2020 baseline: Not applicable) (OP 2.3.2)

2a–c. Progress reports

18 Appendix 1

Results Chain Performance Indicators with Targets and

Baselines

Data Sources and Reporting

Mechanisms Risks 2d. At least 50 NCRTC staff reported increased knowledge in project and contract management, financial management, procurement, and safeguards (2020 baseline: Not applicable) (OP 6.1.1)

2d. Post-training program reports and surveys of NCRTC staff

3. Mobility and economic opportunities of women and differently abled improvede

By 2025: 3a. At least 1,400 women received training for employment and/or entrepreneurial opportunities arising from improved RRTS corridors (2020 baseline: 0) (OP 2.1.1) 3b. At least 1,000 differently abled people received hearing, visual, and/or physical mobility assistive aids (2020 baseline: 0) (OP 1.3)

3a–3b. Progress and completion reports submitted to ADB and NCRTC by the contracted organization, including certificates issued on completion of training and/or receipt of assistive aids

Mobilization of target beneficiaries takes longer because of social behavior and perceptions.

Key Activities with Milestones 1. Delhi–Meerut RRTS corridor commissioned 1.1 Award and mobilize general consultants and detailed design consultants by Q2 2019.

1.2 Commence advance contracting by Q3 2019.

1.3 Award contracts by Q4 2020.

2. Institutional capacity of the NCRTC strengthened 2.1 Complete initial capacity-building plan and structuring by Q4 2020.

2.2 Award BIM platform support consultants by Q4 2020.

2.3 Award and mobilize consultants for TOD and VCF by Q4 2020.

2.4 Establish BIM platform for the project design, implementation, and management by Q2 2021.

2.5 Establish institutional capacity for project implementation and management using smart technologies by Q3 2021.

2.6 Develop gender-friendly workplace policy by Q4 2021.

2.7 Award training and capacity-building contracts by Q2 2022.

3. Mobility and economic opportunities of women and the differently abled improved 3.1 Establish GESI implementation unit by Q1 2021.

3.2 Award and mobilize national (nongovernment or consulting) organizations by Q2 2021. Inputs ADB: $1,049,000,000 (loan)

Government: $1,897,700,000

AIIB: $500,000,000 (loan)

JFPR: $3,000,000 (grant)

Assumptions for Partner Financing Outputs not administered by ADB that are necessary to reach the outcome include:

Part of rolling stock, S&T systems, construction of multistoried staff quarters, and connectivity from Mathura road to Jangpura stabling yard complex (NDB: $500,000,000)

ADB = Asian Development Bank, AIIB = Asian Infrastructure Investment Bank, BIM = building information modelling, CCTV = closed-circuit television, CO2 = carbon dioxide, EWCD = elderly, women, children, differently abled, GESI = gender equality and social inclusion, JFPR = Japan Fund for Poverty Reduction, km = kilometer, NCRTC = National Capital Region Transport Corporation, NDB = New Development Bank, PPP = public–private partnership, Q = quarter, RFI = results framework indicator, RRTS = regional rapid transit system, S&T = signaling train control and telecommunication, TOD = transit-oriented development, VCF = value capture financing. a Government of India, Ministry of Housing and Urban Affairs. 2006. National Urban Transport Policy. New Delhi.

Appendix 1 19

b The indicator follows the approach of another (and only) recently approved project from India, the Mumbai Metro Rail Systems Project, where the target is 60%. The target is based on extensive discussions with the NCRTC and reflects ADB’s experience in the design of the Mumbai Metro Rail Systems Project.

c Major multimodal hubs are RRTS stations that will include easy interchange to rail, metro, and bus stations for passengers.

d Output 2 to be supported by technical assistance funded by the Urban Climate Change Resilience Trust Fund. ADB. 2019. Technical Assistance to India for Strengthening Climate Change Resilience in Urban India Subproject 3: Strengthening Smart Urban Mass Rapid Transit and Climate Change Resilience in the National Capital Region. Manila.

e Output 3 to be supported by the attached grant funded by the Japan Fund for Poverty Reduction. Contribution to the ADB Results Framework: OP 1.3 Poor and vulnerable people with improved standards of living. Expected: 700,000 passengers daily. OP 1.3.1 Infrastructure assets established or improved. Expected: three assets (RRTS corridor, stations, smart-

technology-based platform). OP 2.1.1 Women enrolled in technical and vocational education and training and other job training. Expected: 1,400

women. OP 2.1.4 Women and girls benefiting from new or improved infrastructure. Expected: 150,000 (20% of estimated

ridership of 750,000). OP 2.2.3 Solutions to prevent or address gender-based violence implemented. Expected: two solutions. OP 2.3.2 Measures on gender equality supported in implementation. Expected: two measures. OP 2.4.1 Time-saving or gender-responsive infrastructure assets and/or services established or improved. Expected:

three assets (RRTS corridor, stations, smart-technology-based platform). OP 3.1 Total annual greenhouse gas emissions reduction. Expected: 250,000 tons of carbon dioxide per year. OP 3.1.3 Low-carbon infrastructure assets established or improved. Expected: two assets (RRTS corridor, stations). OP 3.2.5 New and existing infrastructure assets made climate and disaster resilient. Expected: two assets (RRTS

corridor, stations). OP 4.1.2 Urban infrastructure assets established or improved. Expected: three assets (RRTS corridor, stations, smart-

technology-based platform). OP 6.1.1 Government officials with increased capacity to design, implement, monitor, and evaluate relevant measures

Expected: at least 50 NCRTC staff. Source: Asian Development Bank.

20 Appendix 2

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=51073-002-3

1. Framework Financing Agreement

2. Periodic Financing Request for Project 1

3. Sector Assessment (Summary): Transport

4. Comparison of Financing Modality

5. Facility Administration Manual

6. Contribution to Strategy 2030 Operational Priorities

7. Development Coordination

8. Financial Analysis

9. Economic Analysis

10. Country Economic Indicators

11. Summary Poverty Reduction and Social Strategy

12. Environmental Assessment and Review Framework

13. Resettlement Framework

14. Risk Assessment and Risk Management Plan

15. Japan Fund for Poverty Reduction Grant

16. Climate Change Assessment

17. Gender Equality and Social Inclusion Action Plan

18. Environmental Impact Assessment

19. Resettlement Plan

Supplementary Documents 20. Financial Management Assessment

21. Multimodal Integration and Last-Mile Connectivity

22. Transit-Oriented Development and Value Capture Financing

23. Public–Private Partnership Initiatives

24. International Experience from Regional Transit Systems