ADB approves $490m funding to upgrade roads in Madhya Pradesh, India


The Asian Development Bank (ADB) has approved $490m in financing for the $904m public-private partnership (PPP) project to upgrade roads in the Indian state of Madhya Pradesh.

The funding will be used for the PPP project, which aims to improve about 1,600km of state highways and major district roads in the state.

ADB South Asia transport specialist Kai Wei Yeo said: “State highways and major district roads are key links between the extensive web of rural roads and national highways.

“Increasing the capacity of the Madhya Pradesh road network will not only improve road conditions and safety but raise living standards by enabling better access to markets and better services.

“This project also introduces PPP arrangements through the hybrid-annuity model in Madhya Pradesh to bring private sector efficiencies for sustainable asset creation and maintenance.”

The PPP in Madhya Pradesh Road Sector Project involves upgrading at least 750km of state highways as well as 850km of major district roads to two-lane and all-weather standards with road safety features.

In addition to developing an e-maintenance system to record defects or required maintenance, the PPP project will develop a training programme required to advance capacity on contract implementation and project finance in the Madhya Pradesh Road Development Corporation.

ADB said it has provided five loans since 2002 to the state government to develop its road network, improving about 7,300km of roads.

Planned for completion in 2024, the PPP project will receive funding $286m from the private sector while the government will provide $128m.

The hybrid-annuity model is a mix of engineering, procurement, construction, and build-operate-transfer.

As part of the model, the government will be entitled to release 60% of the total cost of the project during the construction phase while the remaining 40% project cost will be arranged by the concessionaire in the form of equity and commercial debt.

The government, however, will repay the concessionaire’s financial investment and operation and maintenance over 10 years once the project is completed.

Image: The PPP project will improve about 1,600km of state highways and major district roads in Madhya Pradesh. Photo: courtesy of suwichan pralomram from Pixabay.

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