India - Education Project

FILE Copy DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. &-123) REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR AN EDUCATION PROJECT October 11, 1972 Th.s report was prepared for official use only by the Bank Group. It may not be published, quoited or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  INTTMATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMENDATION OF THE PRESIDINT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMT OF INDIA FOR AN EDUCATION PROJECT 1. *I submit the following report and recommendation on a proposed credit to India in an amount equivalent to US$12 million on standard IDA terms to help finance an Education Project in India for Agricultural Universities. PART I - THE ECONOMY 2. The most recent economic report, "Economic Situation and Prospects of India" (SA-32a, dated May 10, 1972) was distributed to the Executive Directors on June 2, 1972. This report indicated that the growth of the economy during the Indian fiscal year which ended on Parch 31, 1972, was about three to four percent conpared with an average of five percent during the preceding two years. Hopes for greater momen- tum in economic growth did not materialize, mainly because of the disappointing performance of the industrial sector, which continued to suffer from management inadequacies, lack of demand for capital goods, shortages of raw materials and labor unrest. 3. The current rates of investment and savings are a cause for concern. Investment as a proportion of national income has declined slightly since the beginning of the Fourth Five-Year Plan period (1969/70-1973/74), and savings, though up in the same period, are a long way from the goal set by the Plan. A lag in public savings has been a major cause for this shortfall. For the renaining two years of the Plan, the Planning Commission has projected an increase in invest- ment and savings rates to meet at least the original financial targets of the Plan. This should be feasible but given the increases in the price level over the Plan period would imply a shortfal1 in Plan expenditures in real terms in the order of 12 percent. 4. Among the major sectors, agriculture has done remarkably well. The satisfactory growth of agricultural production must be attributed mainly to large increases in foodgrain production, which has met or exceeded the Plan target of 5.6 percent annual growth. The growth of foodgrain output is firmly based, especially as the new technology is spreading from the cultivation of wheat to that of rice. The expansion of production during the last three years has been favored by good monsoon rains. Poor rainfall could easily cause setbacks. This year's monsoon rain came late and in inadequate quantities, which led to crop failures in Bihar and Rajasthan and may affect the important kharif crop. The rest of the agricultural sector has done less well, particularly the principal fiber crops of jute and cotton. Success in adopting the new technology has not been distributed evenly throughout India. States such  -2- as Punjab, Haryana, Mysore and Tamil Nadu have led the way; Assam and Bihar remain relatively backward. Bihar has long been a deficit State in food production, and Assam, while producing a surplus, registered the smallest increase in yields per hectare of any State in India over the past decade. Both States, therefore, attach high priority to increasing agricultural production, particularly foodgrains, by the use of modern farming methods. Along with such other components of moderm farming as an assured supply of water, credit, fertilizer, marketing facilities, high yielding variety seeds, comprehension of the new -technology and the ability to apply it through education, research and extension work are essential ingredients of the geographical spread of the "green revolution". 5. India's reserve position at the end of August was the equivalent of 38 percent of annual imports plus debt service payments, but reserves have fallen by more than US$100 million since the beginning of the Indian fiscal year for a variety of reasons including the Government' efforts to overccme industrial raw material shortages by imports. The rate of growth of exports has been slow, and uncertainty surrounds future levels of net aid. In view of India's generally satisfactory economic perfor- mance in recent years, the size of her population and the extent of her poverty, India should continue to receive substantial assistance from IDA. 6. A country data sheet is attached as Annex 2. PART II - BANK GRCUP CPERATIONS IN INDIA 7. Since 1949 the Bank has made 40 loans and 44 development credits to India totalling respectively US$1 ,110 million and US$2,021 million (both net of cancellations). Of these amounts US$ 545 million has been repaid and US$799 million is still undisbursed. Annex 1 contains a summary statement of disbursements as of September 30, 1972 and a des- cription of the status of currently active loans and credits. 8. Since 1957 IFC has made 13 commitments in India totalling US$42.3 million of which US$ 4 .3 million has been repaid, US$ 7.0 million sold and US$ 6.3 million cancelled. Of the balance of US$224.7 million, US$16.6 idl ion represents loans and US$8.1 million equity. A summary statement of IFC operations as of September 30, 1972 is also included in Annex 1 (page 2). 9. In line with the importance of agriculture, which contributes close to 50 percent of India's GNP, and the corresponding investment priorities of the Government, emphasis of Bank Group assistance has shifted increasingly to agriculture and agriculture-related projects in recent years. This trend is expected to continue in the current fiscal year. A number of projects in the areas of agricultural credit, agricul- tural markets and agro-industry development are under advanced preparation or appraisal. The project presented in this report is also designed to foster agricultural development; so is a fertilizer project which I  expect to submit to you before the end of this calendar year. In our lending we will endeavor to bring assistance to the more backward regions; thus, the agricultural universities project discussed here would benefit two major agricultural States whose output growth has fallen samewhat behind the national average. An increasing proportion of Bank Group assistance would be directed to the smaller and less affluent farmers through lending for agricultural credit schemes and through support of special Government programs such as for instance that for the drought- prone areas. 10. Assistance in the industrial field in the current fiscal year would be concentrated on the support of development finance institutions. A credit for the Industrial Development Bank of India for refinancing of lending operations by State finance institutions should be ready for your consideration within the next two months and would serve predominantly small enterprises. A further loan to ICICI later this fiscal year is under consideration. India's large cities, particularly Bombay and Calcutta. would require vast investment in public utilities to keep up with the rapid growth of their population. Bank Group assistance in this field is of high priority and is expected to represent a sizeable proportion of our total program in future years. A water supply project in Bombay and an urban development project in Calcutta are included in this year's program. 11. The urgent need for a substantial net transfer of external resources in support of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. We recognize that emphasis on lending for such critical sectors as agri- culture or urban development is inevitab2ly leading to a relatively slow transfer of IDA's resources. In order to balance our program we have in the past included lending for more rapidly disbursing projects, such as power transmission, teleconminications and industrial imports. We plan to continue to provide assistance for such projects in the current fiscal year. Because of the capacity of the capital goods sector of the Indian economy, India imports relatively few capital goods. As in the case of the credit now proposed, the Association should, therefore, be prepared to help finance the local costs of high priority projects in support of India's efforts to secure a transfer of resources adequate to sustain a satisfactory rate of growth. PART III - THE PROJECT 12. This credit, if approved, would be the Bank Group's first lending operation in India for education. The project was identified by an FAO mission which visited India in November/December 1970.. A joint FAO/Bank mission in July/August 1971 assisted the Government in its pre- paration. The project was appraised in November/December 1971. Nego- tiations took place in W2shington in September 1972. The Borrower was  -4- represented by Dr. 0. P. Gautam, Deputy Director General, the Indian Cduncil for Agricultural Research (ICAR), a division of the Ministry of Agriculture; Mr. Abu Hakim, Director, Department of Agriculture, GOI; Mr. G. Venkataraman, Deputy Secretary, Department of Economic Affairs, GOI; Dr. Chakravarty, Vice Chancellor, Rajendra Agricultural University, Bihar; Dr. Negi, Vice Chancellor, Assan Agricultural University; Mr. B. S. Sarao, Agricultural Production Commissioner, Assam; and Mr. Dulai Chandra Barau, Governnent of Assam. 13. In education, the Indian record is one of considerable achieve- ment, but the current structure of the education system raises questions for the future. Between 1950-51 and 1968-69 enrollment in schools trebled. While there was only limited expansion at the primary level, university enrollment increased more than five fold. This expansion, partlcularly in higher education, has been accompanied by unemployment among graduates, including those of agricultural universities, in part because they are poorly qua1ified, and has led to difficulties in maintaining academic standards. 14. In many states, the impact on agricultural prcduction of agriculturally-oriented education, research and extension workc has, until recently, been less effective than it could have been, largely because responsibility for these important inputs has been diffuse and uncoordi- nated. Most educational institutions at the secondary and university level have been administered by State Governments under their Departments of Agriculture and Animal Husbandry as relatively independent units; and Central Government and numerous State organizations responsible for research and extension have worked in isolation of each other and without necessarily involving the educational institutions in their programs. It was to remedy this situation that the Government of India designated ICAR in 1966 as the body responsible for coordinating and strengthening such programs throughout the country, primarily through the agency of the agricultural universities which were being developed on the basis of the American land-grant model, a pattern which has been successfully adapted to Indian conditions. These universities were to become the nuclei for advancing and disseminating agricultural technology in the States, and to this end substantial financial support was, and is being, provided from the Center to encaurage the States to integrate their various institutions within the new universities (of which some 16 have been or are being developed in 15 States). In a number of States where the universities have been firmly founded, this approach has already proved successful. 15. The proposed project is designed to assist in the development of the new agricultural universities in Assam and Bihar, which are being formed by merging existing agricultural and veterinary colleges into cohesive and more effective institutions in order to produce better trained graduates to contribute to agricultural development in these States- With increased responsibilities for research and extension, the two universi- ties will provide more institutional support for the technological demands of the "green revolution" and thus reinforce the efforts which GOI is  making to stimulate rural development. The project would also provide a new computer and ancillary equipment for the Institute of Agricultural Research Statistics (IARS) at Pusa, Delhi. The present computer capacity of IARS is severely overloaded on a two shift basis; the anti- cipated volume and complexity of work require a new and larger facility, which would serve the Indian Agricultural Research Institute (IALI3), several agricultural universities, the 28 research institutes of ICAR and IARS itself. Each of the two universities is to have two campuses, one for general agriculture and the other for veterinary science. Constniction under the project wouldinclude academic facilities such as laboratories, class rooms and lecture halls, dornitories, staff and faculty housing; it is expected to be completed by 1978. Each univer- sity would be responsible for agricultural research and extension educaticn within the State and for extension services within a limited area near the University. Responsibility for extension work is expected to expand and eventually encompass the entire State as each university develops. Total project costs are estimated at US$19.4 million. Construction cost estimates are based on recent costs of similar projects in India. The average cost per square metre for the universitie5 is estimated at US$65 ; it compares well with estimated figures of US$70 in Iran (1970) and US$65 in Thailand (1970). The credit of US$12 million would finance the foreign exchange costs of US$5.2 million plus about half the local costs. A project summary is attached as Annex 3. 16. The Education Division of ICAR would provide overall guidance and supervision for the execution of the project. ICAR is qualified and experienced in this regard, having been instrumental in establishing similar universities elsewhere in India. The Deputy Director General for Education of ICAR would be the Central Project Director; he would be assisted by a full-time Project Coordinator. A project unit would be established at the main campus of each university to coordinate project implementation at each site* It would be headed by the Vice Chancellor assisted by a Project Architect and a Procurement Officer. 17. Contracts for civil works at the four campuses at Gaubati., Jorhat, Dholi-Pusa and Ranchi would be grouped whenever their nature and timing mako it practicable to do so. Although most contracts are then expected to total more than US$100,000, they would nevertheless be relatively small and unlikely to attract the interest of foreign contractors. They would not warrant the effort and expeai of interna- tional advertising and tendering and would be let, therefore, on the basis of competitive bidding following advertisement in local and national publications. Instructional and computer equipment e:pected to cost more than US$100,000 would be procured through international competitive bidding in accordance with IDA guidelines for procuremn1t Items would be grouped to form sizeable bid packages for bulk purchasing. Local manufacturers would be allowed a preferential margin of 15 percent of the c.i.f. price or the existing rate of customs duty, whichever is lower. Equipment estimated to cost less than US$100,000 and all furniture, which is of unsophisticated design and of ample supply locally, would be  -6- procured locally. The project unit would be responsible for preparing and issuing tenders, evaluating bids and awarding contracts. Detailed master lists of furniture and equipment would be submitted for IDA review. 18. The proposed credit would finance a substantial amount for technical assistance to support the leadership of each university. This assistance would include: (a) for each Vice Chancellor, an advisor highly qualified in organization and administration, preferably a former Vice Chancellor or Dean of Agriculture with land-grant college experience; (b) advisers and specialists in Home Science; (c) advisers and specialists in Animal Husbandry and Veterinary Sciences; and (d) an architect for each project unit to assist the Vice Chancellor in carrying out the project. In selecting these experts, India may draw upon the staffs of the successful, well-established agricultural universities, such as those in Punjab and Uttar Pradesh, but foreign excperts may be required if qualified personnel are not available in India. A substantial Fellowship Program is also included in the project, 78 man-years for Assam and 40 for Bihar, in order to improve the qualifications of faculty and staff. 19. Because there is at present a surplus of agricultural graduates in India as a whole, the emphasis of the project is directed, not towards an increase in the output of qualified students (both universities have been formed by amalgamating existing colleges), but towards an improve- ment in the quality of the education received by students and in its relevance to agricultural development under local conditions. Although the better qualified agricultural graduates, especially from the established universities in the Punjab and Uttar Pradesh, readily find employment, there is some unemployment among agricultural graduates in Bihar. Assam, however, faces a current shortage of technicians trained in agriculture. Even in Bihar, however, there should be many opportunities for employment in view of the action being taken to improve and increase agricultural services. In both States, the demand for agricultural graduates within the private and cooperative banking sectors is increasing as these organi- zations step up their lending operations directed to farmers. We are convinced that the projected number of graduates from the two universities should find ready employment opportunities. 20. The research and extension work of both universities is of great importance. In other States, notably the Punjab and Uttar Pradesh, agricultural universities have been important instruments of agricultural development, particularly because they unite the inter-related functions of education, research and extension. It would be an important function of the proposed universities to develop research and extension education in Bihar and Assam. The project makes provision for assistance in the development of these services. 21. Assistance by the State Governments in support of these univer- sities will be important. The States would have to provide funds to meet recurring costs at a level sufficient to sustain the universities' programs. The burden of these expenditures should not prove onerous, since even when these costs increase under the project they would still represent less than 5 percent of State plan allocations for all  - 7 - agriculture and allied activities in both cases. The significant advantage of the land-grant type of university is the mutually reinfor- cing relationship between education, research and extension which it fosters. The benefits can only be realized if the universities work closely with other public and private institutions serving the farmers in the area. Undertakings to assure both provision of the necessary funds and for close cooperation between the universities and other agricultural institutions form part of the draft agreements with the State Governients of Bihar and Assam. In particular, certain research institutions in Assam would be transferred to the university. PART IV - LEGAL INSTRUMENTS AND AUTHORITY 22. The draft Development Credit Agreement between India and the International Development Association, the draft Project Agreement between Assam Agricultural University, and Rajendra Agricultural University of Bihar and the Association, the draft Assam and Bihar Agreement between the States of Assam and Bihar and the Association, the Recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement and the text of the Resolution approving the proposed Develop- ment Credit are being distributed to the Executive Directors separately. 23. The draft Development Credit Agreement, Section 7.01, includes as conditions of effectiveness: (a) the appointment of advisers to the Vice Chancellors, (b) the designation of the Deputy Director General for Education of ICAR as Director of the Central Project Unit, and (c) the appointment of a full-time Project Coordinator for the Central Project Unit. 24. I am satisfied that the proposed credit will comply with the Articles of Agreement of the Association. PART V - RECOMMENDATION 25. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara Attachments  Annex 1 Page 1 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of September 30, 1972) Loan or Undis- Credit No. Year Borrower Purpose Bank IDA Bursed Loans/Credits fully disbursed 876.4 1,241.1 307-IN 1961 IISCO Coal Mining 19.5 - 2.0 414-IN 1965 ICICI Industry DFC VI 48.3 - 1.3 89-IN 1966 India Beas Equipment - 24.3 5.9 515-IN 1967 ICICI Industry DFC VII 25.0 - 2.0 614-IN 1969 India Tarai Seeds 13.0 _ 10.3 615-IN 1969 India Telecommunications III 27.5 - 5.0 176-IN 1970 India Kadana Irrigation - 35.5 26.6 683-IN 1970 ICICI Industries DiC VIII 40.0 - 13.0 191-IN 1970 India Gujarat Agric. Credit - 35.2 32.4 203-IN 1970 India Punjab Agric. Credit - 27.5 27.5 226-IN 1971 India Andhra Pradesh Agric. Credit - 24e5 22.2 230-IN 1971 India Agro-Aviation - 6.0 6.0 241-IN 1971 India Telecommunications IV - 78.0 78.0 242-IN 1971 India Power Transmission II - 75.0 75-o 249-IN 1971 India Haryana Agric. Credit - 25.0 24.0 250-IN 1971 India Tamil Nadu Agric. Credit - 35.0 314.6 264-IN 1971 India Cochin II Fertilizer - 20.0 19.4 267-IN 1971 India Wheat Storage - 5.0 5,0