The Asian Development Bank (ADB) is extending a $300 million loan for road improvements that will lead to new economic opportunities and improve access to essential services in Madhya Pradesh, one of India's poorest states.

The ADB Board of Directors today approved the loan for the Madhya Pradesh State Roads Project III which will upgrade over 1,000 km of highway in poor eastern and west central areas of the state. An associated technical assistance grant of $1 million will support road safety and public private participation initiatives. The project falls under the state government's ongoing state road rehabilitation program, which ADB has previously assisted.

"About 38% of Madhya Pradesh's 77 million people live below the official poverty line and upgrading state highways which link to major national routes will sharply improve connectivity to markets and social services, increasing livelihood opportunities and incomes for the poor, particularly women," said Lee Ming Tai, Transport Specialist in ADB's South Asia Department.

Road transport accounts for the vast bulk of freight and passenger traffic in India, but the network is struggling to cope with rising use. In Madhya Pradesh, secondary highways are in poor condition resulting in congestion, high costs and increased accidents. About 7,400 km of the more than 10,000 km of state highways have been improved, and the new work will help complete the state road rehabilitation program.

The project will expand existing highways into two lane routes, and construct and strengthen bridges, culverts, and cross drainage structures, using environmentally friendly and climate proof designs. "Greening" of roads will be carried out with the planting of shrubs and trees to combat erosion. The Madhya Pradesh Road Development Corporation, set up with earlier ADB assistance, will get further support for road safety initiatives including an accident emergency response system.

The loan from ADB's ordinary capital resources has a 25-year term with a five-year grace period and interest set in accordance with ADB's LIBOR-based lending facility. The Government of Madhya Pradesh will provide counterpart funds equivalent to $75 million. The linked technical assistance grant will come from ADB's concessional Technical Assistance Special Fund, with Madhya Pradesh providing counterpart funds of $250,000 equivalent.

The Government of Madhya Pradesh is the executing agency for the project which will run for three years and is due for completion in December 2013.