World Bank, India, sign US$500m rural road financing deal

The loan agreement will provide additional financing for the Pradhan Mantri Gram Sadak Yojana (PMGSY) Rural Roads Project, which will build 7,000 km of climate resilient roads, out of which 3,500 km will be constructed using green technologies

May 31, 2018

The World Bank has supported PMGSY since its inception in 2004, so far investing over US$1.8 billion in loans and credits mostly in the economically weaker and hill states across North India - Bihar, Himachal Pradesh, Jharkhand, Meghalaya, Rajasthan, Uttarakhand, and Uttar Pradesh

The latest $500 million loan, from the International Bank for Reconstruction and Development (IBRD), has a three-year grace period, and a maturity of 10 years; World Bank has built and improved about 35,000 km of rural roads, benefiting about 8 million people across India

The additional finance will bring a new shift in construction technology using green and low carbon designs and climate resilient construction techniques; With an expanded road coverage, more rural communities will have access to better economic opportunities and social services

Improving road conditions alone can lead to an average direct savings of 2.7 million tonnes in greenhouse gas emissions annually in India, while minimizing yearly losses of about US$9 billion in national road asset value and an equal amount by way of high vehicle operating costs

The Government of India and the World Bank on May 31st signed a US$500 million loan agreement to provide additional financing for the Pradhan Mantri Gram Sadak Yojana (PMGSY) Rural Roads Project. The project, implemented by Ministry of Rural Development, will build 7,000 km of climate resilient roads, out of which 3,500 km will be constructed using green technologies. The World Bank has supported PMGSY since its inception in 2004, so far investing over US$1.8 billion in loans and credits mostly in the economically weaker and hill states across North India – Bihar, Himachal Pradesh, Jharkhand, Meghalaya, Rajasthan, Uttarakhand, and Uttar Pradesh. It has built and improved about 35,000 km of rural roads, benefitting about 8 million people with access to all-weather roads.

The PMGSY over the years has brought about a paradigm shift in the way rural roads are mapped, designed, monitored and built, involving communities especially women. The additional finance will bring a new shift in construction technology using green and low carbon designs and climate resilient construction techniques. With a more expanded connectivity coverage, more rural communities will have access to better economic opportunities and social services. Besides construction of new roads, adequate maintenance of the existing 4.6 million km of road network is emerging as a major challenge. Many parts of the existing road network are either vulnerable to or have already suffered damage from climate induced events such as floods, high rainfall, sudden cloud bursts and landslides.

Herein, to support the rural economy, that is communities and households that depend on rural livelihoods, it will be critical to ensure that infrastructure is built and maintained to withstand climatic changes. The latest World Bank-funded rural road project will show how climate resilient construction can be integrated in the strategy and planning of rural roads. This will be done through: 1) Climate vulnerability assessment; 2) Special treatment for flood-affected areas; 3) Use of sustainable road designs, building technologies and materials; 4) Construction of innovative bridges and culverts with prefabricated units; 5) Use of hill cutting material and equipment in hill roads. The new funding will also fill the gender gap by creating employment opportunities for women in construction and maintenance.

The earlier project had piloted community-based maintenance contracts through women self-help groups (SHGs) for routine maintenance of 200 km of PMGSY roads in Uttarakhand, Meghalaya and Himachal Pradesh. SHG-run maintenance contracts will now be extended to about 500 km roads over five states. The latest $500 million loan, from the International Bank for Reconstruction and Development (IBRD), has a three-year grace period, and a maturity of 10 years. All components of the project will have substantial climate benefits and help road agencies in India to substantially minimize greenhouse gas emissions. Improving road conditions alone can lead to an average direct savings of 2.7 million tonnes annually in greenhouse gas emissions and minimize annual losses of about US$9 billion in road asset value and an equal amount by way of high vehicle operating costs.

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