Bihar, the country's third most populous state, is one of the poorest states in India. Its development is a key to the country's goal of regionally balanced growth. Many roads have deteriorated badly in the past. At the same time, demand for improved road transport has increased sharply in recent years due to India's strong economy.

"The project is a core investment of the state government to transform the state dependent on subsistence farming to a state built on market-oriented agriculture and tourism and to attract private sector investment," said Hiroaki Yamaguchi, a Senior Transport Specialist with ADB's South Asia Department. "It will improve access to socioeconomic services, increase employment opportunities and improve transport services which will reduce poverty in the region,".

Currently, large areas of Bihar were flooded due to a breach in the embankment of Kosi River on 18 August. Under the Project, two project roads have been affected. After the water level recedes, these roads will be reconstructed.

The project is the first in the state to adopt international best practices for procurement and contract management. Under the project, contracts are packaged into larger sizes to attract major companies which will then be able to sub-contract work to smaller local firms, on-passing expertise.

The technical assistance will help reform the state government's road construction department, which currently lacks modern project management and procurement systems, often resulting in cost and time overruns on projects.

The loan will run for four years with an expected completion date of January 2012