Report and Recommendation of the President

to the Board of Directors

INTERNAL

Project Number: 57133-001

September 2024

Proposed Loan
India: Sustainable and Inclusive Tourism
Development Project in Himachal Pradesh

Distribution of this document is limited until it has been approved by the Board of Directors.
Following such approval, this document will be reclassified as public and disclosed in accordance
with ADB’s Access to Information Policy.
 CURRENCY EQUIVALENTS
(as of 22 August 2024)

Currency unit – Indian rupee/s (₹)

₹1.00 = $0.011
$1.00 = ₹83.88

ABBREVIATIONS

ADB – Asian Development Bank

COVID-19 – coronavirus disease
DOTCA – Department of Tourism and Civil Aviation
EIRR – economic internal rate of return
GDP – gross domestic product
GOHP – Government of Himachal Pradesh
HPTDB – Himachal Pradesh Tourism Development Board
IEE – initial environmental examination
MICE – meetings, incentives, conferences, and exhibitions
MSMEs – micro, small, and medium-sized enterprises
O&M – operation and maintenance
PIU – project implementation unit
PMU – project management unit

NOTES

(i) The fiscal year (FY) of the Government of India and its agencies ends on 31 March.
“FY” before a calendar year denotes the year in which the fiscal year ends, e.g.,
FY2025 ends on 31 March 2025.

(ii) In this report, “$” refers to United States dollars.

Vice-President Yingming Yang, Office of the Vice-President (South, Central and
West Asia)
Director General Takeo Konishi, South Asia Department (SARD)
Deputy Director Cindy Malvicini, SARD
Directors Mio Oka, Country Director, India Resident Mission (INRM), SARD
Srinivas Sampath, Director, Water and Urban Development Sector
Office, Sectors Group (SG-WUD)

Project team leaders Vivek Vishal, Senior Project Officer (Urban), SG-WUD
Sanjay Joshi, Principal Urban Development Specialist, SG-WUD
Project team members Deepa Ahluwalia, Senior Social Development Officer (Gender),
INRM, SARD
Liming Chen, Urban Development Specialist, SG-WUD
Dawa Choki; Procurement Specialist; Procurement Division 2;
Procurement, Portfolio, and Financial Management Department
(PPFD)
Jogendra Keshari Ghimire, Principal Counsel, Office of the General
Counsel
Dhawal Jhamb, Principal Public–Private Partnership Specialist,
Advisory Division 1, Office of Markets Development and Public–
Private Partnership (OMDP)
Girish Mahajan, Senior Safeguards Officer (Environment), Office of
Safeguards (OSFG)
Praveen Manikipuri, Senior Project Officer (Skills Development),
Human and Social Development Sector Office, Sectors Group
Donna Marie R. Melo, Senior Operations Assistant, SG-WUD
Suhail Mircha, Senior Safeguards Officer (Social), OSFG
Brij Mohan; Senior Climate Change Officer; Climate Change,
Resilience, and Environment Cluster; Climate Change and
Sustainable Development Department
Jayanti Pandey, Treasury Specialist, Financial Policy and Planning
Division, Treasury Department
Pradeep K. Pandey, Associate Operations Analyst, INRM, SARD
Dhivya Ravikumar, Markets Development Advisory Specialist,
Special Initiatives and Funds, OMDP
Krishnendu Baran Sarkar, Senior Financial Management Officer,
Public Financial Management Division, PPFD
Deepak Bahadur Singh, Senior Safeguards Officer (Environment),
OSFG
Anurag Sinha, Senior Programs Officer, INRM, SARD
Sheryl V. Yanez, Project Analyst, SG-WUD
Peer reviewer Wouter Schalken, Senior Sustainable Tourism Specialist, SG-WUD

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
PROJECT AT A GLANCE
MAP
I. THE PROPOSAL 1
II. THE PROJECT 1
A. Rationale 1
B. Project Description 5
C. ADB Value Addition 7
D. Summary Cost Estimates and Financing Plan 8
E. Implementation Arrangements 9
III. DUE DILIGENCE 10
A. Technical 10
B. Safeguards 10
C. Economic and Financial Viability 12
D. Gender Equality 12
E. Poverty and Social Dimensions 13
F. Procurement, Financial Management, and Integrity 13
G. Sustainability 14
H. Summary of Risk Assessment 15
IV. ASSURANCES 15
V. RECOMMENDATION 15

APPENDIX
Design and Monitoring Framework 16

ANNEXES
1. Legal Agreements
2. Safeguard Documents and Plans
3. Economic and Financial Analysis
4. Climate Change Assessment
5. Gender Assessment and Action Plan
 Project Classification Information Status: Complete
PROJECT AT A GLANCE
1. Project Data
Project number 57133-001 Project name Sustainable and Inclusive Tourism
Development Project in Himachal
Pradesh
Country India Executing or Dept of Tourism & Civil Aviation, Gov't
Borrower India implementing agency of HP / Himachal Pradesh Tourism
Development Board
Sector office Water and Urban Development Geographical location Country
Sector Office
Sector Water and other urban infrastructure Subsector Other urban services
and services Renovation and protection of cultural
heritage
Country https://www.adb.org/Documents/Linke Portfolio at a Glance https://www.adb.org/Documents/Linke
economic dDocs/?id=57133-001-CEI dDocs/?id=57133-001-PortAtaGlance
indicators
Operational OP1: Addressing remaining poverty Sustainable SDG 1.2, 1.4
priorities and reducing inequalities Development Goals SDG 5.a
OP2: Accelerating progress in gender SDG 8.3, 8.5
equality SDG 12.2
OP3: Tackling climate change, SDG 13.a
building climate and disaster
resilience, and enhancing
environmental sustainability
OP4: Making cities more livable
OP6: Strengthening governance and
institutional capacity
Lending Project loan
modality
2. Financing
ADB Financing Amount ($ million)
Regular ordinary capital resources loan 162.00
Cofinancing Amount ($ million)
None 0.00
Counterpart Amount ($ million)
Government 40.50
Total 202.50
{ADB Climate Financing}
ADB
Adaptation 48.32
Mitigation 10.51
Cofinancing
Adaptation 0.00
Mitigation 0.00
Total 58.83
3. Climate Change
Absolute GHG emissions (tCO2e per year) 0
Relative GHG emissions (tCO2e per year) -2145
Climate change risk on the project without adaptation measures Medium
4. Private Sector Development
Private capital mobilized ($):
PSD Classification: Medium-PSD
5. Safeguards
Category Environment: ¨ A þ B ¨ C ¨ FI
Involuntary resettlement: ¨ A þ B ¨ C ¨ FI
Indigenous peoples: ¨ A ¨ B þ C ¨ FI
6. Gender Equality
Category ¨ GEN (gender equity theme) þ EGM (effective gender mainstreaming)
¨ SGE (some gender elements) ¨ NGE (no gender elements)
7. Poverty Targeting
Category ¨ General intervention ¨ Individual or household (TI-H)
þ Geographic (TI-G)
Source: Asian Development Bank
This document must only be generated in eOps. Generated Date: 19-Aug-2024 13:43:36 PM
 I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on a proposed loan to
India for the Sustainable and Inclusive Tourism Development Project in Himachal Pradesh.

2. The project will support sustainable and inclusive tourism development in the districts of
Hamirpur, Kangra, Kullu, Mandi, and Shimla in Himachal Pradesh by (i) improving and conserving
existing tourism sites, facilities, and destinations; (ii) developing new and diverse tourism facilities
and activities; and (iii) enhancing the institutional capacity of the Himachal Pradesh Tourism
Development Board (HPTDB), the Himachal Pradesh Tourism Development Corporation, and the
Department of Tourism and Civil Aviation (DOTCA), mandated to support tourism development
and local communities at the destinations in the five districts of the state.

II. THE PROJECT

A. Rationale

3. Country context. India has been one of the fastest-growing major economies. During
2000–2019, the country’s average growth in gross domestic product (GDP) was estimated to be
6.5%.1 However, amid the coronavirus disease (COVID-19) pandemic, GDP contracted by 5.8%
in 2020 before recovering to record growth rates of 9.7% growth in 2021, 7.0% in 2022, and 7.6%
in 2023.2 Economic growth has been driven largely by manufacturing, construction, and services.3
Growth is forecast to remain robust; however, it will be reliant on public and private investments,
increasing exports, and consumer spending, alongside developing climate-resilient infrastructure
and fostering inclusive growth to bridge income disparities, especially in the informal sector and
among women and marginalized groups.4

4. Tourism economy of India. In 2019, India had one of the largest tourism economies,
which contributed about $194 billion to the national economy and created about 40 million jobs.5
However, the onset of the pandemic in 2020 and the subsequent introduction of lockdowns and
travel restrictions brought tourism activities to a standstill: domestic and international tourist
arrivals dropped by about 80%–90% and contributions to GDP decreased by $70 billion.6 More
than 21 million jobs were lost in 2020–2021, and a high proportion of women who were engaged
in contractual jobs or were self-employed in the informal and related sectors, such as artisans
and food processing, became unemployed.7

5. India’s recovery from the pandemic has been swift, led by a revival of domestic tourism,
which exceeded pre-pandemic levels in early 2023. Pent-up travel demand, the rise of the flexible
independent traveler segment, and spiritual tourism have helped tourism in India bounce back. A
full recovery in value terms is still elusive as revival in foreign tourist travel still lags domestic
tourism. Foreign tourist arrivals in India declined from high of 10.9 million in 2019, to a low of 1.5

1 Government of India. 2023. Economic Survey 2022-23.

2 Asian Development Bank (ADB). 2024. Asian Development Outlook (ADO) April 2024.
3 Government of India, Ministry of Statistics and Programme Implementation. 2024. Press Note on Provisional
Estimates of Annual GDP for 2023-24 and Quarterly Estimates of GDP for Q4 of 2023-24.
4 ADB. 2023. Country Partnership Strategy: India, 2023–2027—Catalyze Robust, Climate-Resilient, and Inclusive
Growth.
5 Government of India, Ministry of Tourism. 2021. Tourism Has One of the Highest Job Creating Potentials Across All
Sectors.
6 World Travel and Tourism Council. 2022. India’s Travel and Tourism Could Surpass Pre-Pandemic Levels by End of
2022.
7 Economic Times. 2022. 21.5 Million People in Tourism Sector Lost Their Jobs Since COVID-19 Outbreak.
2

million in 2021 and has since recovered to 9.2 million in 2023. Inbound tourist expenditure has
declined from a high of $30.7 billion in 2019, to a low of $6.9 billion in 2020 and recovered to
$28.0 billion in 2023.8 The tourism sector has thus lost 4–5 years of its growth trajectory. To
achieve the ambitious target of $30 trillion national economy by 20479, in which the tourism sector
contributes about $3 trillion10, the tourism sector will need an accelerated pace of growth.

6. Tourism in Himachal Pradesh. Himachal Pradesh, a Himalayan state located in northern

India, is a popular tourism destination because it offers a cooler climate and views of snowcapped
mountain ranges. Its diverse tourism products include adventure and ecotourism, historical and
cultural attractions, and religious and spiritual retreats that are concentrated in the urban areas of
the Kangra, Kullu, and Shimla districts. The state recorded its highest tourist arrival of 19 million
domestic tourists and 0.47 million international tourists in 2017.11 A large share of the domestic
tourist volumes has been driven by budget travelers from the plains of north Indian states visiting
the hills to escape the extreme summer heat, as well as devotees visiting specific temples and
shrines driven by their religious beliefs. Tourist numbers declined from 2018 to 2019, which may
be attributed to the effects of overtourism and consequent deterioration of the tourist experience,
followed by a drastic reduction in 2020 because of the pandemic. 12 Although tourism has
rebounded, with Himachal Pradesh recording about 15.9 million domestic and 0.06 million foreign
tourist arrivals in 2023, these figures still fall short of the levels in 2017 (footnote 9). The tourism
sector contributed about 7.00% of the state’s GDP and 14.42% of direct and indirect employment
in 2023, second to the agriculture sector, which contributed 13.57% of the state’s GDP and
58.37% of employment in the same year.13

7. Government policies and strategies to promote tourism. The central and state
governments are focusing on developing tourist facilities and destinations across the country to
attract more domestic and international tourists. 14 Through investments backed by centrally
supported schemes such as Swadesh Darshan, the Ministry of Tourism encourages states to
adopt a comprehensive, sustainable, and destination-centric approach, with emphasis on
strategic planning, skills development, and technology use to improve the tourist experience and
destination management. The ministry has also outlined a national strategy for sustainable
tourism that lays out approaches for environmental sustainability, natural heritage preservation,
sociocultural and economic aspects, and sustainability certification systems aligned with global
standards.15 It also has strategies and guidelines for niche areas such as meetings, incentives,
conferences, and exhibitions (MICE), medical and wellness, rural, film, and adventure tourism.

8. The Himachal Pradesh Tourism Policy 2019 aims to position the state as a leading global
sustainable tourism destination for inclusive economic growth. The policy defines strategies and
action areas for diversifying tourism products and locations, enhancing the sustainability of
tourism operations, providing benefits to the host community, developing quality human
resources, making destinations more accessible, and promoting partnerships with the private

8 Government of India, Ministry of Tourism. 2022. India Tourism Statistics 2022.

9 Economic Times. 2024. India Will Be $30 Trillion Economy by 2047 – Finance Minister.
10 Government of India, Press Information Bureau. 2023. Bharat@2047: Making India A Global Adventure Tourism

Hub.
11 Tourism statistics compiled by the Department of Tourism and Civil Aviation of Himachal Pradesh.
12 Records from the Department of Tourism and Civil Aviation of Himachal Pradesh indicate that 16.1 million domestic

tourists and 0.35 million international tourists arrived in 2018, 16.8 million domestic and 0.38 million international
tourists in 2019, and 3.2 million domestic and 0.04 million international tourists in 2020.
13 Government of Himachal Pradesh (GOHP), Economic and Statistics Department. 2023. Himachal Pradesh Economic

Survey 2023-24.
14 Government of India, Press Information Bureau. 2023. Development of Tourist Destinations in the Country.
15 Government of India, Ministry of Tourism. 2022. National Strategy for Sustainable Tourism.
 3

sector.16 The Ecotourism Policy 2017 also aims to bring the wilderness of Himachal Pradesh
closer to tourists, while instituting safeguards and systems to preserve natural resources.17

9. Climate change and its implications on tourism. Himachal Pradesh is sensitive to key
climate change risks of reduced snowfall; change in precipitation (spatially varying monsoon rains
and water scarcity); heavy rainfall events (intensity and frequency); and associated impacts, such
as landslides and flash floods, including the residual impacts of snow ablation-linked runoff from
high hill regions. Recurrent events in the past decade, such as heavy rainfall and floods in the
2023 monsoon season, have had cyclical effects on tourism and associated livelihoods. Further,
rising summer temperatures and increasing thermal stress days (extreme heat) across north
Indian plains have led to higher levels of tourist influx to cooler hill regions, including Himachal
Pradesh. With prevailing infrastructure of constrained capacities, overcrowding at few
destinations contributes to rising mean temperatures because of the urban heat island effect,
deforestation, increased energy demands, vehicular emissions, and altered microclimatic
conditions. Consequently, these changes put significant stress on the carrying capacity of popular
tourism destinations within the state. Beyond the risks climate change presents to the natural
environment, its impact and the region’s poor disaster risk resilience pose significant threats to a
sustainable tourism economy.

10. Missed opportunities to capitalize on tourism potential. Himachal Pradesh attracts

two-thirds of its domestic tourists from Delhi, Haryana, Punjab, and Uttar Pradesh, who arrive in
private vehicles (taxis and own cars), especially during the peak season from April to June, when
visitor numbers double compared to the lean season (November–February). 18 The present
tourism infrastructure and bed capacity are not sufficient to meet the increasing tourist demand,
especially during the peak summer months.19 Despite the state’s abundance of natural beauty,
mountainous vistas, and traditional and cultural resources, tourism activities and attractions are
largely underdeveloped, hence discouraging extended tourist stays.20 To decongest the urban
tourist centers of the three main districts and to attract tourists year-round, there is a need to
develop tourism infrastructure across destinations in the five targeted districts. These districts
could create more opportunities for enhanced tourism spending and extended tourist stays by
developing adventure tourism facilities, rehabilitating heritage sites in different locations to create
new tourist attractions, establishing wellness centers for health tourism, and setting up convention
facilities for MICE tourism.

11. The concentrated tourism in Kangra, Kullu, and Shimla, limited to peak months only,
restricts the development of tourism-related livelihoods in remote areas and hinders improvement
in rural household incomes. About 70% of tourists’ expenses are for transport and
accommodation, and they spend less on activities such as shopping, dining, and local excursions
that contribute to the local economy. 21 Despite being a predominantly rural area (90% rural
population), with a literacy rate of 82.8% (national average of 74.04%)22 and significant female
labor participation, tourism sector employment beyond the major urban areas is limited. The
economic opportunity from local agricultural and horticultural produce, ethnic crafts, and textiles

16 GOHP, DOTCA. 2019. The Himachal Pradesh Tourism Policy 2019.

17 GOHP, Forest Department. 2017. Re-revised Policy on Development of Eco-Tourism in Himachal Pradesh.
18 About 16 million tourists visited Himachal Pradesh in 2023, with more than 30% of them visiting in the summer

months of May and June.

19 According to the official website of DOTCA, Himachal Pradesh has a total of 8,808 hotels and homestays with a total

bed capacity of 154,448 as of December 2023.

20 Average stay for domestic tourists was recorded at 1.4 days and foreign tourists at 1.6 days. ADB. 2016. Tourist

Survey 2014–2015. Consultant’s report.

21 National Council of Applied Economic Research. 2021. Tourism Satellite Account 2018-19, Himachal Pradesh.
22 Population Census. Literacy in India.
4

is limited to the sale of select value-added products to tourists, while the potential for enhanced
tourist spending through engaging and immersive tourist experiences that highlight local cuisines,
crafts, culture, and art forms remains largely untapped (footnote 21).

12. Weak governance and oversight of the tourism sector. HPTDB is the nodal agency
for tourism development, promotion, regulation, and overall sector governance, yet it faces
significant challenges in capacity and specialized skills, particularly in MICE, ecotourism, and
adventure tourism. Inadequate tourism data management hinders HPTDB in analyzing tourism
trends and consumer preferences, thereby hampering the agency’s capacity for informed policy
formulation and implementation. Gaps in detailed tourism insights from the government curtail the
private sector’s ability to anticipate market trends and opportunities, consequently deterring long-
term investments. In addition, HPTDB’s institutional structure needs strengthening to address the
issues of sustainable tourism, planning strategic destinations, framing and regulating service
standards, and adapting to trends in digital tourism.

13. HPTDB has yet to fully adopt lessons and best practices in enabling local enterprises in
tourism value chains and promoting gender-inclusive community-based tourism. Moreover, the
capacity of tourism development councils at the district level is inadequate, leading to poor
destination management and resulting in deterioration of heritage sites, unregulated growth of
built form, and loss of traditional architectural values, thereby diminishing the tourist experience.23
Training and skills development programs also do not sufficiently reach practitioners, especially
women and those in remote locations, and do not align with accreditation standards. Marketing
and promotional activities are uncoordinated and lack defined objectives, while tourism products
fail to innovate and leverage local community knowledge.

14. Gender concerns in tourism. The tourism sector has significant potential to provide
employment and entrepreneurship opportunities for women. While women make up 54% of the
tourism workforce globally, they are concentrated in lower-skilled, lower-paid, and often informal
employment. 24 Women also earn 10%–15% less than their male counterparts in the sector
(footnote 24). In India, women comprised only 22% of full-time jobs in tourism in 2015 (footnote
24). In Himachal Pradesh, an estimated 85% of women in tourist destinations such as Kullu Valley
are involved in tourism-related work, yet for most women the participation is limited to the informal
sector and unpaid activities. 25 Within the formal sector, there is a significant disparity in
employment and income levels between men and women. A wide gender gap exists, with only
0.43% of women employed in accommodation and food service sectors compared with 2.64% of
men. Even when women are highly involved in providing unpaid services as part of homestays,
most of the homestays are not registered in the names of women, depriving them of the benefits
of gaining business management and financial knowledge and support.26

15. While women are highly involved in crafts and agriculture enterprises, limited support,
credit constraints, and limited access to skills training restrict their ability to empower themselves
through emerging economic activities in the sector. Gender benefits can be amplified by creating
new jobs accessible to women, supporting community-based tourism led by women, providing
skills training, and offering financial support to women entrepreneurs for establishing or improving

23 Tourism development councils proposed under the Himachal Pradesh Tourism Development and Registration Act,
2002 are mandated to plan, develop, operate, and manage destination infrastructure and services, and regulate
tourism operators on behalf of HPTDB at the district level.
24 World Tourism Organization (UN Tourism). Women’s Empowerment and Tourism.
25 Unpaid refer to works that produces goods and services, but carries no direct remuneration or other form of payment.
26 Parsheera, C.M., & Sood, J. (2011). Participation of women in rural tourism in Kullu, HP. Tourism Development

Journal, 9(I), 102-111 report that, of the 100 registered homestays, only 19 were registered in names of women.
 5

businesses. Furthermore, women accounted for 48% of solo trips in India in 2014–2015. 27
However, less than 19% of domestic and foreign tourists in Himachal Pradesh in 2011–2012 were
women.28 Tourism infrastructure in the state has not fully adapted to capitalize on this growing
demography of women travelers. This requires greater participation of women in planning and
decision-making in the tourism sector, which is currently very limited.29

16. Limited private sector participation. Private sector participation in the tourism sector in
Himachal Pradesh primarily focuses on hospitality, food and beverages, private transportation,
and a few adventure activities. Driving this limited scope are the following factors: (i) short peak
season attracting domestic visitors for just 3 months, with visitors concentrating in Kangra, Kullu,
and Shimla, leaving limited opportunities for investment beyond this established hub;
(ii) government regulations restricting land transfer to non-permanent residents, which
discourages private investment in creating new assets, especially for long-term development
projects; and (iii) the state’s challenging terrain and fragile ecology necessitating government
expertise in identifying suitable development sites for tourism purposes. 30 Market research
undertaken for the project suggests that the private sector prefers operating and maintaining
existing tourism infrastructure and facilities, with a lower risk appetite for creating new assets
through capital expenditure. This highlights a potential model to deliver new tourism products:
public investment in core infrastructure, combined with private sector expertise in marketing and
managing these facilities (footnote 30).

17. Lessons. The Asian Development Bank (ADB) has been supporting the tourism sector of
Himachal Pradesh through the Infrastructure Development Investment Program for Tourism.31
This project builds upon the successes of the earlier project by taking a more holistic and
comprehensive approach to tourism development in the targeted districts. The project design
assimilates lessons from the earlier project, including (i) a ring-fenced resource pool and public–
private partnerships for the operation and maintenance (O&M) of tourism assets to facilitate
improved financial and operational sustainability of assets; (ii) advance actions on design,
procurement, statutory clearances, and consultant recruitment as critical steps to avoid project
delays; and (iii) asset transfer concurrent with project appraisal to help build agency capacity prior
to asset handover.32

B. Project Description

18. The project is aligned with the following impact: Himachal Pradesh established as a
leading sustainable tourism destination for inclusive economic growth (footnote 16). The project
will have the following outcome: inclusive and sustainable tourism promoted in five districts of
Himachal Pradesh.33

27 Government of India, Ministry of Statistics and Programme Implementation. 2017. Domestic Tourism in India July
2014–June 2015.
28 ACNielsen ORG-MARG for the Government of India, Ministry of Tourism. 2012. Tourism Survey for the State of

Himachal Pradesh (April 2011–March 2012) Final Report.

29 HPTDB, for example, has only 10 women compared to 40 men on their staff.
30 GOHP conducted a market sounding in June 2024, attended by 25 private players of hospitality and tourism industry.
31 ADB. 2010. Infrastructure Development Investment Program for Tourism. Recognizing the urgent need to unlock

Himachal Pradesh’s tourism potential, the investment program focused on responding to the need for developing
tourism infrastructure. However, a more strategic, long-term approach is crucial to maximize the economic benefits
and ensure sustainable growth in the sector.
32 ADB. 2021. Completion Report: Infrastructure Development Investment Program for Tourism – Tranche 1 in India;

and ADB. 2023. Completion Report: Infrastructure Development Investment Program for Tourism (Tranche 3) in
India.
33 The design and monitoring framework is in the Appendix.
6

19. Output 1: Tourism sites and facilities conserved and improved with integrated
adaptation measures. To improve the condition of key tourist attractions across the five districts
in the state, the project will enhance amenities at key landmarks and sites, focusing on heritage
conservation and accessibility improvements. It will expand and develop cultural centers in
Kangnidhar (Mandi) and Deotisdh (Hamirpur) to (i) promote their heritage and historical
significance; (ii) restore the historic Naggar Castle (Kullu), adhering to conservation principles;
(iii) enhance public open spaces for improved recreational benefits and develop leisure facilities
in Palampur and Nagrota Bagwan (Kangra); and (iv) upgrade and/or construct wayside
amenities 34 in Dhundi (Kullu), Naduan (Hamirpur), and Kunha (Kangra). To ensure proper
maintenance and quality of the infrastructure, the Government of Himachal Pradesh (GOHP) will
conduct biannual accessibility audits of all tourism sites developed under the project.35 The project
will incorporate green solutions (eg. solar energy) and universal access, ensuring accessibility for
all, especially for older adults, women, children, and persons with disabilities.

20. Output 2: Green, climate-resilient, and sustainable tourism facilities developed. The
project will promote green and sustainable tourism facilities to diversify offerings and boost the
local economy. The project will develop (i) five wellness centers in Nagrota Bagwan (Kangra),
Manali and Kullu town (Kullu), Nadaun (Hamirpur), and Banoti (Shimla); (ii) tourist recreation
facilities in Dharamshala (Kangra), Manali (Kullu), and Shimla town (Shimla); (iii) an adventure
sports center with a health center in Nadaun (Hamirpur); and (iv) a water park complex in Nadaun
(Hamirpur). It will also provide associated facilities (such as equipment and jetties) in all five
districts. Other initiatives for product diversification include (i) facilities for events and MICE
tourism in Dharamshala and Nagrota Bagwan (Kangra); (ii) green mobility (electric vehicle-based)
hop-on hop-off bus services connecting key places of interest in all five districts with priority entry
and sitting preferences for women and people with special needs to ensure safe and accessible
public transport facilities; (iii) mountain terrain biking trails and services in all five districts with
active engagement of young people, including women; and (iv) clean energy (rooftop solar)
installed on buildings, resulting in a reduction of greenhouse gas emissions.

21. Output 3: Institutional capacity, community engagement, and private sector

participation across tourism value chain enhanced. To complement the infrastructure
investments, the project will support key initiatives aimed at improving the enabling environment
and the government’s capacity for sustainable tourism service delivery. It will (i) improve the
operational capacity of HPTDB through process enhancements, data driven governance, benefit
monitoring, improved financial management, and preparation of long-term business plans; create
a gender equality cell and provide training and upskilling for HPTDB staff; (ii) strengthen district
tourism councils with 30% women’s representation to serve in destination management
organizations, develop capacity to prepare strategic and spatial destination development
perspective plans, and institute IT-enabled systems for operator registration, accreditation, and
certification; (iii) establish the Himachal Pradesh conventions bureau to promote MICE tourism;
(iv) engage with HPTDB to develop a tourism brand strategy and marketing plan, and develop
and launch a portfolio of curated tourism products across the five districts; (v) strengthen the
tourism industry ecosystem and host communities through human resource development
planning that includes certified training and skills development for micro, small, and medium-sized
enterprises (MSMEs), including enterprises led by women; (vi) mainstream community-based
tourism and develop skilled community members in tourism services delivery, with a focus on
promoting community-based tourism led by women through additional support to reduce their

34 Wayside amenities along highways include toilets, refreshments and/or roadside diners, and service stations.
35 A biannual accessibility audit will be undertaken for tourism sites developed under both outputs 1 and 2.
Representatives from local communities (with at least 50% women participation) will participate in the audit.
 7

care workload; (vii) establish a business linkage trust fund for women to establish or improve
businesses; 36 (viii) establish a public–private partnership framework and contracts to enable
sustainable O&M of tourism assets created; (ix) strengthen the Centre of Excellence for Tourism
and Hospitality, 37 making it a hub for training, skills development, and certification; 38 and (x)
provide training to MSMEs on adopting digital tools for tourism service provision.

22. Alignment with ADB’s strategic priorities. ADB’s country partnership strategy for India,
2023–2027 identifies tourism as a priority sector for growth led by the private sector and good
jobs, taking an integrated approach to urban infrastructure and tourist facility development.
Ecotourism-driven livelihoods are suggested for climate change adaptation and disaster risk
management. The project aligns with ADB’s Strategy 2030 operational priorities by aiming to
(i) address poverty and reduce inequalities; (ii) accelerate progress in gender equality; (iii) tackle
climate change, build climate and disaster resilience, and enhance environmental sustainability;
(iv) make cities more livable; and (v) strengthen governance and institutional capacity.39

C. ADB Value Addition

23. The project charts a comprehensive approach to sector transformation and building a
sustainable tourism economy, drawing on the insights, policy priorities, and key recommendations
from ADB’s past interventions, and ADB and the United Nations World Tourism Organization’s
regional tourism report.40 ADB has ensured a holistic design for the project that will support gender
equality, local community engagement, and private sector development including MSMEs, which
is aligned with and complements the government’s approach to destination-centric and
sustainable tourism development.41 More specifically, the project contributes to (i) enhancing stay
duration; (ii) increasing and diversifying spend patterns; (iii) promoting year-round equitable tourist
arrivals supporting economic growth; (iv) ensuring well-integrated roles for local communities,
women, and MSMEs along the tourism value chain; (v) addressing gender equality and women’s
empowerment by creating employment opportunities for women and MSMEs led by women; (vi)
improving financial sustainability of projects through inclusion of private sector participation; and
(vii) strengthening public institutions governing the tourism sector. Local communities with 50%
women participation will be involved in biannual accessibility audits of all tourism sites to ensure
maintenance and quality of the created infrastructure. The approach for design and
implementation of tourist facilities and infrastructure components integrated with initiatives on
women empowerment, skills development, strengthened district tourism councils, MSMEs, and
digital interventions could be replicated in other districts within the state, and other states in India.

24. The project promotes sustainable tourism in one of the Himalayan states in India and will
complement efforts undertaken to support cross-border tourism through the South Asia
Subregional Economic Cooperation program. The project supports learning from global good

36 The business linkage trust fund will provide financial assistance in the form of grants for setting up or improving their
businesses, preferably for facilitating value addition, product standardization, quality control and certification,
technology upgradation, packaging, marketing, and branding activities.
37 A training institution established under the ADB-supported Himachal Pradesh Skills Development Project. ADB.

2017. India: Himachal Pradesh Skills Development Project.

38 The sector transformation support consultant to be engaged under the project will provide capacity support and

empower the Centre of Excellence to function as the nodal agency, overseeing all aspects of capacity development
from mobilizing entrepreneurs, managing enrollment, delivering training programs, awarding certifications, and
facilitating job placement or entrepreneurship opportunities.
39 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific.
40 ADB and UN Tourism. 2022. COVID-19 and the Future of Tourism in Asia and the Pacific.
41 Government of India. 2022. Swadesh Darshan 2.0 Guidelines.
8

practices in sustainable and inclusive tourism through curated learning experiences, leveraging
the experience of industry networks and linkages with the tourism industry.

D. Summary Cost Estimates and Financing Plan

25. The project is estimated to cost $202.5 million (Table 1). The major expenditure items
include civil works, equipment, and consultancy services.

Table 1: Summary Cost Estimates

($ million)
Item Amounta
b
A. Base Cost
1. Output 1: Tourism sites and facilities conserved and improved with integrated adaptation 37.39
measures
2. Output 2: Green, climate-resilient, and sustainable tourism facilities developed 101.33
3. Output 3: Institutional capacity, community engagement, and private sector participation 20.86
across tourism value chain enhanced
Subtotal (A) 159.57
B. Contingenciesc 23.47
C. Financing Chargesd 19.46
Total (A+B+C) 202.50
Note: Numbers may not sum precisely because of rounding.
a In mid-2024 prices.
b Includes taxes and duties of $24.43 million, of which $1.44 million will be financed from government resources.
c Physical contingencies computed at 5% for civil works, equipment, and consultancy services. Price contingencies

computed in the range of 1.8%–2.0% on foreign exchange costs and 4%–5% on local currency costs; includes
provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate.
d Includes interest, commitment, and other charges on all financing sources. Interest during construction for the

ordinary capital resources loan has been computed at the 7-year United States dollar fixed swap secured overnight
financing rate for flexible loan products plus a spread of 0.5%, surcharge on funding cost margin of 0.3%, and a
maturity premium of 0.1%. Commitment charges for the ordinary capital resources loan are 0.15% per year to be
charged on the undisbursed loan amount.
Source: Asian Development Bank estimates.

26. The government has requested a regular loan of $162 million from ADB’s ordinary capital
resources to help finance the project. The loan will have a 24-year term, including a grace period
of 7 years; an interest rate determined in accordance with ADB’s Flexible Loan Product; 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 straight-line method, the average maturity is
15.75 years, and the maturity premium payable to ADB is 0.10% per year.

27. ADB will finance the expenditures in relation to (i) works, equipment and goods, and
consulting; (ii) part of taxes and duties; and (iii) physical and price contingencies. The GOHP will
provide $40.5 million to the investment costs of the project to finance (i) consulting services;
(ii) part of taxes and duties; (iii) resettlement and environment monitoring; and (iv) financing
charges during implementation. It will provide the loan proceeds and counterpart funds to the
implementing agency as a grant. The GOHP has assured that they will meet any financing
shortfall, including those required for sustainable O&M of assets, to ensure that project outputs
are fully delivered. The summary financing plan is in Table 2.
 9

Table 2: Summary Financing Plan

Amount Share of Total
Source ($ million) (%)
Asian Development Bank
Ordinary capital resources (regular loan) 162.00 80.0
Government 40.50 20.0
Total 202.50 100.0
Source: Asian Development Bank estimates.

28. The total climate finance for the project is $73.65 million, with an estimated $13.13 million
in mitigation costs and $60.52 million in adaptation costs. ADB will finance $10.51 million of the
mitigation costs and $48.32 million of the adaptation costs. 42

E. Implementation Arrangements

29. Oversight will be provided by the state-level empowered committee, and DOTCA will be
responsible for overall strategic planning, guidance, and management of the project, and
compliance with the loan undertakings and covenants. A project management and design and
supervision consultant team will (i) support the project management unit (PMU) and the three
project implementation units (PIUs)43 in overall project implementation and reporting; (ii) ensure
compliance with ADB policies and regulations, including safeguards requirements; and
(iii) support the PIUs in supervising works under the project. A sector transformation support
consultant team will support the PMU and PIUs in implementing output 3. The implementation
arrangements are summarized in Table 3.

Table 3: Implementation Arrangements

Aspects Arrangements
Implementation period October 2024–December 2031
Estimated completion date June 2031
Estimated loan closing date December 2031
Management
(i) Oversight body State-level empowered committee comprising the following members:
Principal secretary (tourism), GOHP, as chair
Administrative secretaries from finance, planning, PWD, forest, environment, urban
development, power, TCP, YSS, revenue, health, horticulture, excise, industries, law,
LAC, and transport, as members
Director (tourism and civil aviation), as member secretary
(ii) Executing agency GOHP acting through Department of Tourism and Civil Aviation
(iii) Implementing agency Himachal Pradesh Tourism Development Board
(iv) Implementing unit A project management unit: 63 staff (15 key staff and 48 support staff)
Three project implementation units: Kangra, Mandi, and Shimla: 81 staff (52 key staff
and 29 support staff)
Procurement Open competitive bidding 15 works contracts $120.04 million
(nationally advertised)
One force account for works 1 works package $2.63 million
QCBS (80:20) – (STSC) 396 person-months (key experts) $3.97 million
QCBS (90:10) – (PMDSC)a 1,151 person-months (key $9.42 million
experts)
Procurement of goods 2 contracts $10.55 million
Shopping 4 packages of multiple lots $3.23 million
Retroactive financing and Advance contracting is for the procurement of works and consulting services under the
advance contracting project. Retroactive financing will apply up to 20% of the loan amount for the above
contracts incurred prior to the signing of the loan agreement.

42 Climate Change Assessment (Annex 4).

43 The PIU in Kangra will cover both Kangra and Hamirpur districts and the PIU in Mandi will cover both Mandi and
Kullu districts. The PIU in Shimla will cover Shimla district.
10

Aspects Arrangements
Disbursement The loan proceeds will be disbursed following ADB’s Loan Disbursement Handbook
(2022, as amended from time to time) and detailed arrangements agreed between the
government and ADB.
ADB = Asian Development Bank, GOHP = Government of Himachal Pradesh, LAC = language and culture,
PWD = Public Works Department, PMDSC = project management design and supervision consultant, STSC = sector
transformation support consultant; TCP = town and country planning, QCBS = quality- and cost-based selection,
YSS = youth services and sports.
a PMDSC is fully financed by the GOHP.

Source: ADB.
III. DUE DILIGENCE

A. Technical

30. The project combines a balanced mix of infrastructure and non-infrastructure initiatives to
achieve its objectives. Project components across locations were selected to strategically extend
tourism benefits to less-developed areas (hinterland) to unlock their potential, while established
tourism destinations gain experience in new tourism offerings like mountain terrain biking and
water sports. These activities will enhance the overall tourist experience, encouraging longer
stays and increased spending. In addition, capacity building ensures these initiatives have a
lasting impact beyond the project’s lifespan.

31. Key climate change adaptation and mitigation measures have been incorporated in the
project, which will complement the state’s efforts to bolster India’s Nationally Determined
Contributions and support the acceleration of India’s long-term low-carbon development
strategy.44 The climate adaptation and mitigation measures incorporated into the design of green,
climate-resilient project facilities include (i) enhanced code-compliant structural designs of project
facilities to improve stability against landslides; (ii) integrated on-site stormwater runoff
management, including groundwater recharge structures and silt arresters to mitigate localized
flooding from heavy rainfall at all project facilities; (iii) embankment strengthening and slope
stabilization in cultural centers, wayside amenities, tourist recreation facilities, and structures
adjoining slopes; (iv) treated wastewater reuse in wellness, health, and convention centers to
address water scarcity; (v) use of fire-resistant materials and firefighting systems for all structures
to enhance resilience against wildfires exacerbated by extreme heat; and (vi) adoption of energy-
efficient climate control systems, low thermal conductivity building materials, waste processing,
rooftop solar panels, and green mobility through the use of electric vehicles for tourists and grid-
tied solar-powered charging stations. These measures align with sustainable and eco-friendly
tourism practices prioritized under the Himachal Pradesh State Action Plan for Climate Change
(2021–2030) and the State Tourism Policy 2019. Following the Joint Multilateral Development
Banks Methodological Principles for Assessment of Paris Agreement Alignment, the operation
has been assessed as aligned with the goals of the Paris Agreement. 45

B. Safeguards

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

33. Environment (category B). HPTDB has prepared 17 draft initial environmental
examination (IEE) reports, including environmental management and monitoring plans for all

44 Government of India. 2021. India’s Updated First Nationally Determined Contribution Under Paris Agreement (2021-
2030).
45 ADB. 2023. MDBs Agree Principles for Aligning Financial Flows with Paris Agreement Goals. News release. 20 June.
 11

project facilities, following ADB’s Safeguard Policy Statement.46 These have been cleared by ADB
and disclosed on ADB’s and HPTDB’s websites. The two sites for wayside amenities in Dhundi
and the wellness center in Nadaun are not within the core or buffer zones of legally protected
areas but will require clearances from the forest department before the commencement of
construction activities. The environmental clearance for the convention center in Dharamshala is
being obtained from the relevant regulatory agency. The IEEs demonstrate that the project is
unlikely to result in any significant adverse environmental risks and impacts that are irreversible,
diverse, or unprecedented. The anticipated risks and impacts are short term, localized, and site-
specific, and mainly at the construction stage so they can be mitigated or minimized with proposed
environmental management plans and good construction practices. The operational stage
impacts of increased tourist numbers and increased resource consumption will be mitigated by
sustainable tourism practices. Public consultations were carried out, and the inputs provided were
incorporated into the project design. These consultations will continue throughout implementation.
The IEEs will be updated based on detailed engineering designs, included in the bidding and
contract documents, and disclosed on ADB’s and HPTDB’s websites prior to the award of civil
works contracts. HPTDB will ensure compliance with ADB’s Safeguard Policy Statement and
government regulations at the national, state, and local levels. HPTDB will ensure that project-
specific grievance redress mechanisms as outlined in the IEEs are established and remain fully
functional during implementation, and these will be enforced by HPTDB during the O&M phase
of the project with the private sector players. The construction activities will commence only after
regulatory compliances, including environmental and forest clearances, have been obtained and
the site-specific environmental and health and safety management plans have been approved.

34. Involuntary resettlement (category B). The project is not anticipated to involve land
acquisition because all project facilities are proposed within the boundaries of government land
and along the edges of the available right-of-way. It is assessed that there will be temporary
livelihood impacts on 61 nontitled households (262 family members) under the project. The project
will provide alternate vending space to roadside vendors, compensate for the temporary loss of
income, and provide assistance prior to displacement and before starting civil works. HPTDB has
prepared 11 social safeguards documents (three resettlement plans and eight due diligence
reports), following ADB’s Safeguard Policy Statement (footnote 46). The documents have been
cleared by ADB and disclosed on ADB’s and HPTDB’s websites. These documents will be
updated during the final detailed design and detailed measurement survey. The proposed
mitigation measures and safeguard planning documents are adequate to address the assessed
impacts. The PMU will prepare semiannual social monitoring reports for ADB’s review and
disclosure until the project completion report is prepared. The project management design and
supervision consultant has proposed capacity development, through training and workshops, for
the HPTDB staff to understand and comply with ADB’s social safeguards requirements,
enhancing the implementing agency’s capacity to manage involuntary resettlement impacts.

35. Indigenous Peoples (category C). None of the project sites are in scheduled tribe areas.
The Census of India 2011 indicates that members of scheduled tribes account for 0.7% of the
population in Hamirpur, 1.1% in Shimla, 1.3% in Mandi, 3.8 % in Kullu, and 5.6% in Kangra. They
are assimilated into urban society and do not retain the defining characteristics of scheduled
tribes, such as distinctive culture, geographical or social isolation, or social and economic
backwardness. The project does not directly or indirectly affect the dignity, human rights,
livelihood systems, or culture of Indigenous Peoples; or affect the territories or natural or cultural
resources that they own, use, occupy, or claim as an ancestral domain or asset.

46 Safeguard Documents and Plans (Annex 2).

12

C. Economic and Financial Viability

36. Economic analysis. An economic analysis was carried out in accordance with ADB’s
guidelines. 47 The cost–benefit analysis shows that the project is economically viable with a
combined economic internal rate of return (EIRR) of 11.2%, with project district EIRRs of 10.1%
(Hamirpur), 11.4% (Kangra), 9.5% (Kullu), 12.4% (Mandi), and 10.5% (Shimla). All EIRRs are
above the economic opportunity cost of capital, estimated at 9.0%, indicating positive economic
returns. The project’s economic benefits include (i) increased spending by domestic tourists,
(ii) increased spending by foreign tourists, and (iii) incremental and non-incremental benefits for
residents from the tourism infrastructure developed under the project. The poverty impact ratio
for the project is estimated at 17.6% based on current definitions of the poverty line.48 Sensitivity
analysis shows that the project is robust to potential adverse scenarios.

37. Financial analysis. Financial evaluation (cost benefit analysis)49 was not conducted as
the project was not structured to achieve full cost recovery.50 The government intends to engage
private sector O&M operators for various project facilities, such as health centers, convention
centers, and adventure tourism facilities. Initial business models for these facilities indicate that
they would be self-sustaining to meet O&M costs. The government, however, is committed to
providing financing for any gaps to ensure that these facilities remain operational under the private
sector operators.

D. Gender Equality

38. The project is categorized effective gender mainstreaming and has potential to contribute
to gender equality and/or women’s empowerment under two of the five pillars of ADB’s Strategy
2030.51 It will focus on increasing employment and entrepreneurship opportunities for women in
the tourism sector by (i) targeting 30% of job opportunities for women of the 2,000 new full-time
jobs created under the project; and (ii) supporting 3,000 MSMEs in the tourism sector, of which
900 (30%) are led by women. The project will also support (i) certified training to MSMEs (2,000
persons) including 30% enterprises led by women; (ii) MSMEs, including 30% enterprises led by
women on digital tools for tourism service delivery; (iii) at least 30% of collectives led by women
for community-based tourism with support to reduce unpaid care workload; and (iv) organizing
outreach events for at least 2,000 women enabling compliance, clearing dues, permits, accessing
incentives and credit, and business linkage trust funds. The project will also promote and
encourage job opportunities for women in nontraditional roles in the sectors through the (i) career
counseling sessions in girls’ schools and colleges; (ii) paid internship opportunities for 50 women
in the HPTDB projects; and (iii) at least 10 young women engaged as mountain terrain biking
guides. The project will further promote gender-responsive tourism through integration of inclusive
design features for older adults, women, children, and persons with disabilities in infrastructure
and facilities, and will conduct biannual accessibility audits by involving the local community,
including at least 50% women, to ensure maintenance and quality of the created infrastructure.
Further, institutional measures will be undertaken to strengthen HPTDB as a gender-inclusive
organization by (i) establishing a gender equality cell within the agency; (ii) enabling adequate
representation of women in decision-making; (iii) establishing a business linkage trust fund in
HPTDB to benefit women in setting up or improving their businesses (footnote 36); (iv) providing
orientation to staff on safety and security of women in workplaces, including training on prevention

47 ADB. 2017. Guidelines for the Economic Analysis of Projects.

48 Government of India, NITI Aayog. Multi-dimensional Poverty Index. 2023.
49 Financial Analysis (Annex 3).
50 In accordance with ADB. 2019. Financial Analysis and Evaluation Technical Guidance Note.
51 Gender Assessment and Action Plan (Annex 5).
 13

of workplace harassment; and (v) capacity building of HPTDB and the Himachal Pradesh Tourism
Development Corporation staff on gender-responsive tourism planning and operation.

E. Poverty and Social Dimensions

39. As of 2019–2021, the poverty headcount ratio was 4.93% in Himachal Pradesh compared
to 14.96% in the rest of India (footnote 48). Himachal Pradesh recorded a noticeable reduction in
poverty (multidimensional poverty index value in absolute terms, with the proportion of
multidimensional poor decreasing from 7.59% in 2015–2016). There is a further drive to
strengthen social sector reforms through leveraging tourism for economic growth, employment
generation, and poverty alleviation in an environmentally sustainable manner. The project will
benefit MSMEs, community members and youths in the state by improving access to industry-
aligned skills and training, and entrepreneurship education and support services, thereby
enhancing their skills and chances of getting better employment and incomes. The project will
also benefit local communities, specifically in the targeted districts, by providing various business
opportunities. Ecotourism initiatives in the project (eg. mountain bike trails, water sports) will
create positive impacts by developing an appreciation of nature and traditional cultures among
tourists, providing economic benefits to local communities, generating revenue, and preserving
ecosystems and biodiversity.

40. The project supports inclusive and sustainable tourism with the aim of reducing poverty
by integrating disadvantaged groups into the tourism economy. Promoting local farm produce and
culinary specialties, handloom fabrics and handicrafts, performing arts, and other eco-products
provide an impetus to highlight the local culture and way of life. Other measures include prioritizing
residents in training and emerging employment opportunities, particularly women and
disadvantaged groups. Community-based tourism initiatives directly support rural poverty
reduction and reinforce measures that “develop and implement tools to monitor sustainable
development impacts for sustainable tourism.” Such approaches also align with Sustainable
Development Goal 12 aimed to “ensure sustainable consumption and production patterns.”

F. Procurement, Financial Management, and Integrity

41. Procurement. The assessed procurement risk is moderate, considering HPTDB’s lack of
a properly staffed procurement unit experienced with the ADB Procurement Policy (2017, as
amended from time to time) and the Procurement Regulations for ADB Borrowers (2017, as
amended from time to time). The procurement risks identified during the strategic procurement
planning exercise include lack of adequate competition, construction delays, and implementation
challenges because of geographical spread of project interventions and niche market capabilities
being required. The main actions to mitigate the identified risks include early engagement with
prospective or potential bidders, adoption of reasonable qualification criteria, and capacity
building of the implementing agency.

42. Financial management. The assessed overall pre-mitigation financial management risk
is substantial, mainly because of (i) an unclear organizational structure and lack of formal
oversight mechanism within HPTDB, (ii) incomplete accounting and delayed audit reports at the
entity level from fiscal year (FY) 2015 to FY2023, (iii) an inexperienced accounts and finance team
in managing externally financed projects, and (iv) the absence of an internal audit function in
HPTDB. To address these risks, the GOHP agreed to (i) establish an audit oversight
subcommittee, formalizing roles and responsibilities; (ii) conduct a high-level review of financial
management systems to develop rules for accounting and financial management functions,
establish internal audit systems, and create a framework and plan; (iii) hire a financial
14

management specialist in the PMU to supplement HPTDB’s accounting staff and provide
continuous training in ADB’s financial management, disbursement procedures, and systems; and
(iv) set up an internal audit function with external support. Additionally, separate project accounts
will be maintained using accounting software tools that enable automation and customization.

43. The project will provide financial management support to strengthen HPTDB’s currently
inadequate institutional capacity. Establishing an audit oversight subcommittee and an internal
audit framework will ensure rigorous financial monitoring for enhancing accountability within the
agency. The clearance of 7 years of pending financial audits in April 2024 highlights severe
weaknesses in HPTDB’s financial reporting. For the first time, with ADB support, comprehensive
financial and accounting rules have been developed. These will be further refined, approved, and
enforced according to HPTDB’s own enacted regulations to guide the finance and accounts
department in preparing timely financial statements. Engaging a financial management expert in
the project to support HPTDB will ensure robust monitoring to strengthen its external auditing
function. ADB will monitor the submission of audited financial statements annually.

44. Anticorruption and integrity. Integrity due diligence was conducted on HPTDB, its board
of directors, and key management members. They do not appear to constitute a significant or
potentially significant integrity risk to the project. ADB’s Anticorruption Policy (1998, as amended
from time to time) and relevant guidelines and procedures were explained to and discussed with
the government, DOTCA, and HPTDB.

G. Sustainability

45. To strengthen financial and operational sustainability of the assets created, long-term
O&M arrangements for the assets will be finalized, with appropriate private sector players
mobilized prior to completion of the construction of the project facilities.52 The project components
to be handed over to private operators for long-term O&M will be implemented based on rigorous
financial and technical due diligence of these entities. The GOHP will engage the services of
transaction (and legal) advisors to support the process of procuring private sector O&M for
selected project facilities.53 HPTDB has demonstrated sufficient financial capacity to commit to
the O&M costs (footnote 49). To cover eventualities, the GOHP has provided additional financing
assurance through budgetary support. Public infrastructure projects with no attributable revenue
models shall be handed over to appropriate public agencies, and HPTDB will enter into a detailed
memorandum of agreement (MOA). The MOA shall outline the operational modalities, asset
maintenance requirements, and institutional accountability to deliver intended services. Capacity-
building measures are integral to the overall project and will include targeted training and/or skills
development for operating teams.

52 HPTDP has carried out the feasibility assessments to identify potential public–private partnership options along with
a market sounding exercise to assess private sector interests on the project. One of the market sounding events the
GOHP organized was attended by the leading national and international hospitality chains, wellness players, local
private sector hospitality groups, and companies engaged in adventure activities. The private players showed a keen
interest in partnering with HPTDB for O&M of selected project facilities. The GOHP agreed to undertake similar
market sounding during the implementation of the project and will appoint transaction (and legal) advisors to develop
a balanced O&M contract structure to attract potential private players to support long-term sustainability of the assets
created under the project.
53 The transaction advisors will be responsible for detailed feasibility assessment, financial modeling, project

structuring, and preparation of O&M contracts. They will also assist in market outreach with the private sector, support
the GOHP in the selection of private sector partners, signing of contracts, and post award contract management until
the conditions precedent are satisfied for the start of the commercial operations by the private sector O&M partners
for each project facility.
 15

H. Summary of Risk Assessment

46. The key assessed pre-mitigation risks and mitigating measures are summarized in Table 4.

Table 4: Summary of Risks and Mitigating Measures

Risks Mitigation Measures
Lack of oversight and clear organization Approved HPTDB’s organizational structure will address gaps, specify
structure may lead to structural issues, clear roles and responsibilities at all levels and be supplemented with
inadequate capacities and unclear reporting training and skills development. Establish an audit subcommittee to
within HPTDB. review quarterly financial statements and report to the board.
Inadequate rules for the accounting and HPTDB to (i) engage professionals to conduct a review for identifying
audit function as per the Himachal Pradesh potential risk areas requiring regular monitoring; (ii) develop and
Tourism Development and Registration Act, enforce comprehensive rules and procedures pertaining to finance
2002; nonexistence of an internal audit and accounting processes consistent with the Himachal Pradesh
framework; and frequent changes in Tourism Development and Registration Act, 2002; (iii) engage a
HPTDB’s accounting staff and staff with dedicated chartered accountant as a financial management specialist
limited experience in ADB-assisted projects who will obtain e-learning training on ADB’s financial management and
may lead to incomplete accounting and disbursements; and (iv) appoint reputable firms for biannual internal
inaccurate reporting in financial statements, audits on a 2-year rotational basis and include the status of audit
as well as delays in preparing project paragraphs in the quarterly progress report.
financial statements.
Limited or nonparticipation of private sector Implement comprehensive marketing and timely outreach to identify
partners for the O&M of tourism key private sector partners to create value addition to tourism
infrastructure and facilities. infrastructure. Develop viable and balanced O&M contracts with clear
performance indicators, payment structure, and robust grievance
redressal mechanism to attract qualified operators. And ensure
necessary budgetary support for long-term financial sustainability in
case of no interest from the private sector.
ADB = Asian Development Bank, HPTDB = Himachal Pradesh Tourism Development Board, O&M = operation and
maintenance.
Source: ADB.

IV. ASSURANCES

47. The government and DOTCA have assured ADB that implementation of the project shall
conform to all applicable ADB requirements, including those concerning anticorruption measures,
safeguards, gender equality, procurement, consulting services, financial management, and
disbursement, as further mentioned in the loan documents.

48. The Government of India, GOHP, DOTCA, and HPTDB have agreed with ADB on certain
covenants for the project, which are set forth in the draft loan agreement and project agreement.

V. RECOMMENDATION

49. I am satisfied that the proposed loan would comply with the Articles of Agreement of the
Asian Development Bank (ADB) and recommend that the Board approve the loan of
$162,000,000 to India for the Sustainable and Inclusive Tourism Development Project in Himachal
Pradesh, from ADB’s ordinary capital resources, in regular terms, with interest to be determined
in accordance with ADB’s Flexible Loan Product; for a term of 24 years, including a grace period
of 7 years; and such other terms and conditions as are substantially in accordance with those set
forth in the draft loan and project agreements presented to the Board.

Masatsugu Asakawa
President
3 September 2024
16 Appendix

DESIGN AND MONITORING FRAMEWORK

Impact the Project is Aligned with

Himachal Pradesh established as a leading sustainable tourism destination for inclusive economic growth
(The Himachal Pradesh Tourism Policy, 2019)a
Data Sources
Risks and Critical
Results Chain Performance Indicators and Reporting
Assumptions
Mechanisms
Outcome By 2032:
Inclusive and a. Average duration of stay in five project a.–d. Baseline R: Public health
sustainable districts increased to 2.20 days for surveys (pre adverse events lead
tourism domestic tourists and 2.60 days for and post to travel restrictions.
promoted in five international tourists (2016 baseline:b 1.35 project), state
districts of days for domestic and 1.62 days for tourism statistics
Himachal A: Coronavirus
international tourists)
Pradesh disease (COVID-19)
b. 2,000 new direct jobs (full-time) are pandemic-induced
generated by project interventions, of impacts are
which 30% are for women (including in recovered rapidly, no
managerial levels or nontraditional roles), new major waves of
and 100 are for persons with disabilities infection.
(2023 baseline: Not applicable)
c. Tourism sector MSMEs increased by
3,000, of which 900 are enterprises led by
women (2023 baseline: 10,710)
d. Greenhouse gas emissions reduced by
2,145 tons of carbon dioxide equivalent
per year green mobility-based hop on-
hop-off services (2023 baseline: Not
applicable)
Outputs By 2031: A: Weather and
1. Tourism sites 1a. Cultural centers in Mandi and Hamirpur 1a.–1e geological factors
and facilities expanded and developedc as tourist Progress enable completion
conserved and attractions (2023 baseline: Not applicable) reports and and
improved with (OP1.2, OP4.1) project operationalization of
integrated completion projects as is being
adaptation 1b. Naggar Castle in Kullu restored conceptualized.
incorporating conservation and adaptation report
measures
principles (2023 baseline: Not applicable)
(OP1.2, OP4.1) A: Sufficient private
1c. Beautification of public spaces and sector interest to
modern tourist facilities provided at two operate the tourism
locations in Kangra, including EWCD- facilities.
responsive featuresd (2023 baseline: Not
applicable) (OP1.2, OP1.3, OP4.1)
1d. Improved wayside amenities in three
locations—Kullu, Hamirpur, and Kangra—
provided with built-in EWCD-responsive
features (2023 baseline: Not applicable)
(OP1.2, OP4.1)
1e. Biannual accessibility audit of all tourism
sites undertaken, involving local
communities (with at least 50% women
participation), and at least 70% satisfy
minimum standards (2023 baseline: 0)
(OP 1.3, OP 2.3)
 Appendix 17

Data Sources
Risks and Critical
Results Chain Performance Indicators and Reporting
Assumptions
Mechanisms
2. Green, By 2031:
climate-resilient, 2a. Wellness, ecotourism, and adventure 2a.–2f.
and sustainable tourism facilitiese developed across five Progress
tourism facilities project districts (five wellness centers, reports and
developed three tourist recreation facilities, two project
water-based adventure parks, water- completion
based leisure at all five districts) (2023 report
baseline: Not applicable) (OP1.2, OP3.2)
2b. Convention center for events, and
meetings, incentives, conferences, and
exhibitions tourism developed in Kangra
(Dharamshala) and Nagrota Bagwan
(2023 baseline: Not applicable) (OP1.2,
OP3.2)
2c. Hop-on, hop-off low-floor bus services for
tourists along popular and scenic routes
commissioned in the five project districts;
with priority entry/sitting preferences for
women and people with special needs
(2023 baseline: 0) (OP1.2, OP3.1, OP4.1)
2d. Mountain terrain biking trails for total
distance 170 kilometers in five project
districts with facilities for bicycle rentals
and basic amenities developed (2023
baseline: Not applicable) (OP1.2, OP3.3)
2e. At least 30 young people, including 10
women, engaged as biking guides for
mountain terrain biking in project districts
(2023 baseline: 0) (OP1.2, OP2.1.1)
2f. 857-kilowatt capacity of clean energy
(through rooftop solar panels) installed on
buildings (2023 baseline: 0 kilowatts)
(OP3.1, OP3.3)
3. Institutional By 2031:
capacity, 3a. Centre of Excellence for Hospitality and 3a.–3k. Annual A: Public agencies,
community Tourism strengthened, making it a hub for reports of the communities, and
engagement, training and skills development and HPTDB, other private sector
and private certification (2023 baseline: Not government players
sector applicable) (OP 2.1, OP 6.1) reports, and demonstrate
participation project commitment and
3b. Gender-inclusive HPTDB organizational
across tourism progress and participate in all
value chain structure at all levelsf adequatelyg staffed
(including 40% women), training imparted, completion project
enhanced reports components.
and long-term business plan prepared
(2023 baseline: Existing HPTDB
organizational structure) (OP 2.2, OP 2.3,
OP 6.1)
3c. District-level tourism management through
district tourism councils for destination
management established, with 30%
women representation in councils (2023
baseline: Not applicable) (OP 6.1, OP 6.2)
3d. Himachal Pradesh conventions bureau
established (2023 baseline: Not
applicable) (OP1.2, OP3.2, OP4.2, OP4.3,
OP6.1, OP6.2)
18 Appendix

Data Sources
Risks and Critical
Results Chain Performance Indicators and Reporting
Assumptions
Mechanisms
3e. Business linkage trust fundh established in
HPTDB, benefiting at least 300 women to
establish or improve businesses (2023
baseline: Not applicable) (OP1.1, OP1.2,
OP2.1.3)
3f. Certified training delivered to MSMEs
(2,000 persons), including enterprises led
by women (30%) (2023 baseline: Not
applicable) (OP1.1, OP1.2, OP2.1.1)
3g. Community-based tourismi services
launched in five districts, at least 30% are
collectives led by women with additional
support for reduction of unpaid care
workload (2023 baseline: Not applicable)
(OP2.1.3)
3h. Public–private partnerships established in
at least 12 projects for sustainable
operation and maintenance (2023
baseline: Not applicable) (OP 6.1, OP 6.2)
3i. 1,000 MSMEs (at least 30% women)
trained on the use of financial risk
management and digital toolsj in service
delivery (2023 baseline: Not applicable)
(OP1.2, OP2.1.3, OP6.1, OP6.2)
3j. At least 10 experiences curatedk across
each of five districts, and 50 young people
trained in each district (2023 baseline: Not
applicable) (OP6.1, OP6.2)
3k. Tourism brand strategy and marketing
plan prepared and launched (2023
baseline: Not applicable) (OP6.1)
Key Activities and Milestones
1. Tourism sites and facilities conserved and improved with integrated adaptation measures
1.1 Approve environment-friendly design and drawings (Q2 2025)
1.2 Update and approve safeguards documents and complete resettlement documentation/compensation
(Q2 2025)
1.3 Procure and award contract packages (Q1 2024–Q3 2025)
1.4 Implement civil works construction, safeguards, supervision, and commissioning (Q2 2028)
1.5 Prepare for operational handover, ensuring maintenance plans (Q3 2028)

2. Green, climate-resilient, and sustainable tourism facilities developed

2.1 Approve environment-friendly design and drawings (Q4 2024)
2.2 Update and approve safeguards documents and complete resettlement documentation/compensation (Q2
2025)
2.3 Procure and award contract packages (Q1 2024–Q3 2025)
2.4 Implement civil works construction, safeguards, supervision, and commissioning (Q4 2029)
2.5 Prepare for operational handover, ensuring maintenance plans (Q4 2029)
2.6 Install 857-kilowatt capacity of clean energy (through rooftop solar panels) on buildings (Q2 2029)

3. Institutional capacity, community engagement, and private sector participation across tourism value
chain enhanced
3.1 Mobilize project management design and supervision consultant to support HPTDB in project management,
design, and supervision (Q2 2024–Q4 2030)
3.2 Mobilize sector transformation support consultant for planning, oversight, and coordination of all activities
under output 3; procure and deploy benefit monitoring and evaluation for entire program (Q4 2024–Q4 2030)
 Appendix 19

3.3 Explore public–private partnership modality for operation and maintenance for 12 project facilities (Q2 2025–
Q4 2029)
Project Management Activities
(i) Establish project management unit and project implementation unit office with dedicated staff. (Q4 2023)
(ii) Appoint and mobilize PMDSC. (Q2 2024)
(iii) Appoint and mobilize STSC. (Q4 2024)
(iv) Conduct routine monitoring, reporting, and evaluation.
Inputs
Asian Development Bank: $162.00 million (regular ordinary capital resources loan)
Government: $40.5 million
A = assumption; EWCD = elderly, women, children, and persons with disabilities; HPTDB = Himachal Pradesh Tourism
Development Board; MSMEs = micro, small, and medium-sized enterprises; OP = operational priority; Q = quarter;
R = risk.
a Government of Himachal Pradesh, Department of Tourism and Civil Aviation. 2019. The Himachal Pradesh Tourism

Policy, 2019.
b Asian Development Bank. 2016. Tourist Survey 2014–2015. Consultant’s report.
c Cultural centers in Mandi and Hamirpur will be expanded and developed, and works may include (i) beautification

and landscaping; (ii) installation of site utilities and services; (iii) construction of a museum, open air theater, and
tourism information center; (iv) development of parks; (v) installation of lifts to improve accessibility; and
(vi) construction of parking zones and other tourist amenities.
d Infrastructure with EWCD-responsive features will include (i) street infrastructure (signages; adaptive sidewalks with

ramps and railings, lifts, pedestrian crossings and pathways, and adequate lighting; dedicated sitting areas with shed
for women, children, and older people; well-lit streets; CCTV cameras; and smart parking facility, including dedicated
parking for persons with disabilities and women); (ii) smart toilet blocks (separate for male, female, persons with
disabilities, and children-friendly toilets, affordable sanitary pad vending machines facilities with sanitary waste
disposal system, baby changing rooms, and spaces for lactating mothers with children); (iii) Wi-Fi zones; (iv) water
vending machines; and (v) emergency help desk/women emergency helpline numbers displays.
e The facilities to promote wellness, adventure, and ecotourism across the project districts are (i) five wellness centers

in Kangra (Nagrota Bagwan), Kullu (Manali and Kullu town), Hamirpur (Nadaun), and Shimla (Banoti); (ii) three tourist
recreation facilities in Kangra (Dharamshala), Kullu (Manali), and Shimla; (iii) a rafting center and water park complex
in Hamirpur (Nadaun); and (iv) water sports equipment, boats, and associated infrastructure (e.g., jetties and
equipment) in all five districts.
f Gender-inclusive organizational structure will be promoted by having 40% women staff and also representation of

women in committees at all levels (i.e., at board, department head, manager, and field staff levels), and creating a
gender equality and social inclusion cell integrated with the State Tourism Insights Unit in HPTDB. The unit will
mainstream sex-disaggregated data collection and reporting on gender, social inclusion, and community
development performance.
g To deliver the business plan, a sector transformation support consultant will assess a revised organizational structure

during implementation, and the resources will be provided accordingly.

h A trust fund shall be established to finance MSMEs led by women, and women-led collectives that undertake

Community Based Tourism initiatives. The fund shall flow similar to prevailing channels of Government support to
women-led self-help groups engaged in micro-credit, and other socio-economic upliftment programs.
i Support package comprising (i) facilitation of microfinance, market linkages, and fiscal incentives under the state

tourism policy; (ii) investments in development of tourist sites, excursion/guided trails, rural wellness units, and local
festivals; and (iii) training and employment particularly for women and disadvantaged groups (includes below poverty
line and persons with disabilities). Additional support to collectives led by women to include consultations and
household dialogues to identify constraints associated with unpaid work; linking with existing government programs
to provide access to water, sanitation, electricity, and cooking fuel; awareness of mechanization of domestic work
through promotion of household appliances; engaging men for supportive roles; and enabling access to creche/day-
care facilities where required.
j Digital business enabler tools that MSMEs should be trained and supported to adopt include digital billing, payments,

banking and financial services, social media marketing, customer relationship management, websites, online travel
aggregator platforms, online booking systems, energy-efficiency monitoring, and climate change and disaster risk
reduction measures, all of which are either mobile applications or ready-to-use software-as-a-service (SaaS)
solutions.
k Curated experiences are excursions developed for engaging tourists in activities that are hosted by local

communities, accompanied by interesting storytelling and creating lasting positive memories for the tourists.
Source: Asian Development Bank.