Mali - Second Mopti Rice Project

Report No. 1561c-MLI Appraisal of the MOPTI 11 Rice Project Mali FILE COPY November 2, 1977 Agriculture Projects Department West Africa Regional Office FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Currency Equivalents Currency Unit - Mali Franc (MF) US$ 1 - MF 490 MF 1 - US$ 0.0020408 MF I Million - US$ 2,041 Weights and Measures I hectare (ha) 2.47 acres 1 metric ton (t) - 2,205 lbs. Fiscal Year Government Jan. 1 - Dec. 31 ORM Jan. 1 - Dec. 31 Abbreviations ADF African Developmeiit Fund BDM Banque de Developpement du Mali DNAFLA Direction Nationale de l'Alphabetisation Fonctionnelle et de la Linguistique Appliquee EDF European Development Fund FAC Fonds d'Aide et de Cooperation GERDAT Groupement d'Etudes et de Recherches pour le Developpement de l'Agronomie Tropicale IDA International Development Association IER Institut de l'Economie Rurale IRAT Institut de Recherches Agronomiques Tropicales et des Produits Vivriers OACV Operation Arachides et Cultures Vivrieres OPAM Office des Produits Agricoles du Mali ORM Operation Riz Mopti RMWA Regional Mission in Western Africa (of the World Bank/IDA) RWD Rural Works Department SCAER Societe de Credit Agricole et d'Equipement Rural SCET Societe Centrale pour l'Equipement du Territoire USAID United States Agency for International Development WARDA West Africa Rice Development Association  Foa OFFIAL USE ONLY MALI MOPTI II RICE PROJECT Page No. SUMMARY AND CONCLUSIONS i-v I. INTRODUCTION 1........... . ............ . II. BACKGROUND .............. ...... 1 A. General ...............1...... B. The Rural Sector . 2 C. Institutions in Agriculture .... ...... 3 D. Development Potential and Development Objectives . 4 E. Cereals Consumption and Production ............... 5 III. THE MOPTI I RICE PROJECT .......... .................... 7 A. The Project Area ........ ......................... 7 B. Project Description ..o ........... ................. 7 C. Experiences and Conclusions .............. ........ 8 IV. THE PROJECT . 10 A. Description . ............... . . ....... . 10 B. Detailed Features .......... ....... 11 C. Organization and Management.. . 14 D. Environment and Health ................* ........ 16 V. PROJECT COSTS AND FINANCING ......................... 16 A. Project Costs ............ 16 B. Financing .... .00....... ...... 18 C. Procurement .......... .. ...... ........... 19 D. Disbursement ........... .......... .. ...... . . 20 E. Accounts, Audits and Reports ... . .................. 21 VI. PRODUCTION AND YIELDS; MARKETS AND PRICES; FARMERS' BENEFITS; ORM FINANCES; GOVERNMENT REVENUE ............ 21 A. Production and Yields ........................... 21 B. Markets and Prices ...................... 23 C. Farmers' Benefits ........ ....... ..... 24 D. Financial Implications for ORM and Government ..... 25 VII. BENEFITS AND ECONOMIC JUSTIFICATION .................. 25 VIII. AGREEMENTS REACHED AND RECOMMENDATION .............. .. 27 The doumeet ha a retric_e ditrbuom an may be use by rcipients only in the peftonce at * ociul duties I%s wefa y gm oewise be dit_osed without Wod Dek autborizution.   MALI MOPTI II RICE PROJECT ANNEXES 1. Rice Production and Consumption in Mali Table 1 - Development of Rice Consumption in Mali, Total and Per Capita Table 2 - Per Capita Rice Consumption (Kg) in West African Countries Table 3 - Regional Structure of OPAM Cereals Purchases and Sales (1000 t) Table 4 - Rice Milling Capacity (Tons of Paddy) 2. The Project Area 3. Rice Cultivation Under Controlled Flooding 4. The Mopti I Rice Project (Cr. 277-MLI) Table 1 - Development of Cultivable Area Estimates of Mopti I Rice Project Table 2 - Development of Attributed, Sown and Harvested Area, Yields and Paddy Production of the Mopti I Project Table 3 - Development of Equipment on Mopti I Rice Farms Table 4 - Mopti I Rice Project: Breakdown of Participants by Farmers and Non-Farmers Table 5 - Distribution of Holdings per Family in the Mopti I Rice Project (1975/76) Table 6 - Adoption of Cultivation Techniques in the Mopti I Rice Project Table 7 - Cultivated Area and Cultivation Techniques Used in 1976/77 in the Mopti I Rice Project 5. Project Components Table 1 - Program of Civil Works Table 2 - Program of Deep Ploughing (ha) Table 3 - Construction of Offices, Houses, Sheds and Stores Appendix I - Functional Literacy Campaign Table 1 - Costs of Adult Literacy Program Appendix II - Applied Agricultural Research Appendix III - Agricultural Credit Table 1 - Agricultural Credit Needs Appendix IV - Terms of Reference for Technical Assistants  6. Assistance to the Rural Works Department, Bamako Table ' - Budget of Study Bureau, Rural Works Department Table 2 - Assistance to Rural Works Department - Proposed Utilization of Funds 7. Project Cost Estimate Table I - Project 'ost - Summary Table Table 2 - Project :.ost - Civil Works Table 3 - Project 'ost - Deep Ploughing Table 4 - Project ost - Buildings Table 5 - Project Cost - Engineering and Supervision Table 6 - Project (:ost - Vehicles and Equipment Table 7 - Project 'lost - Adult Literacy Campaign and Audio- Visual Program Table 8 - Project lost - ORM Staff and Technical Assistance Table 9 - Project Cost - ORM Operating Costs Table 10 - Project (ost - On-Farm Investment Table 11 - Project Cost - Assistance to Study Bureau of Rural Works Department Table 12 - Project (ost - Price Contingency Factors 8. Financing Plan and SchedlIe of Disbursements Table 1 - Financinc Plan Table 2 - Estimatec Schedule of Disbursements 9. Cultivated Areas, Yields, Production Table I - Development of Area (ha), Yield (t/ha) and Productioa (t ) - with Project Table 2 - Developmeat of Area (hectares), Yield (t/ha), and Production (t) - without Project Table 3 - Adoption Rates of Cultivation Techniques Table 4 - Cultivate: Areas and Paddy Production with and without tie Project 10. Market Prospects for Maliin Rice Table 1 - Estimate :)f Domestic Paddy Requirements in Mali, 1970/71 - 1985/86 Table 2 - Estimate of Domestic Production of Paddy 1968/69 1985/86 (wvithout the Project) Table 3 - Estimate of Prospective Demand and Supply Relations on Mali R:.-ce Market, 1975/76-1987/88 (in 1000t of paddy) Table 4a - Export Paiity Price Table 4b - Import Sulstitution Price Table 5 - Developme t of the Rice Marketing Bareme for ORM, 1974/75 - 977/78  11. Farm Budgets Table 1 - Unit Costs of Farm Inputs (FM) Table 2 - Labor and Equipment Input of Farming Operations (days/ha) Table 3 - Inputs, Yields, and Revenue per Ha at Successive Stages of Cultivation Techniques Table 4 - Land Rent and Development Levies - Rent Recovery Rates 12. Financial Implications for ORM and Government Table 1 - Projection of ORM Revenue and Expenditure, 1978-1987 Table 2 - Import Subsidies Saved by Incremental Production (in FM/t) Table 3 - Impact of Project on Government Revenue Table 4 - Cost Recovery Index and Fiscal Ratio 13. Economic Justification Appendix I - Conversion Factors for Costs in Local Currency Table 1 - Correlation of Input Costs and Yields per Hectare Table 2 - Incremental Production Costs Table 3 - Incremental Farm Labor Inputs Table 4 - Rate of Return Calculation Implementation Schedule, Project Works Project Map   MALI MOPTI II RICE PROJECT SUMMARY AND CONCLUSIONS Background (i) The Government of Mali has requested IDA, the African Development Fund (ADF) and French aid (FAC) to finance a rice development project in the Niger flood plains around Mopti. The project will build on the on-going Mopti Rice Project (Credit 277-MLI), which will terminate in mid-1978. (ii) Mali is one of the least developed countries in the world. Popula- tion is 6 million and per capita income about US$95. The economy, dependent on crop production (cotton, groundnuts, cereals) and animal husbandry, suffered severely from the droughts of the early seventies; in recent years, exports of groundnuts and cotton have increased considerably while the livestock subsector has not yet overcome the effects of the drought years. Production of food crops (coarse grains and rice) has responded vividly to better weather conditions and higher producer prices. Over the last few years, Mali has not been in need of cereals imports and has even exported modest amounts of coarse grains and rice to neighboring countries. Mali has a heavy deficit both in its national budget and in its balance of payments and no fundamental change is foreseen in this situation over the medium term future. The First Mopti Rice Project (iii) The First Mopti Rice Project, which became operational in 1972, aims at the improvement of rice cultivation conditions and techniques in the Niger flood plains. Main project components are the construction of polders (13,000 ha) along the Niger and Bani rivers, the rehabilitation of existing polders (18,000 ha), construction of offices, stores, workshops, etc. and technical assistance for the project authority, the Operation Riz Mopti (ORM). Total project cost was estimated at US$9.4 million at appraisal; the partici- pation of IDA was US$6.9 million, the participation of FAC 0.7 million. A supplementary IDA credit of US$2.6 million was approved in 1975 to offset the effects of the dollar devaluation and to finance changes in project design and certain cost overruns. FAC also increased its contribution by US$0.5 million. (iv) Civil works were virtually completed in early 1977 but the drought years demonstrated the need for a revision of design standards which led to a reduction of the cultivable area from 31,000 ha to 26,000 ha. ORM's performance, satisfactory in other respects, needs to be improved for exten- sion work, applied research, farm machinery use and seed farm management. Yield increases have been attributable mainly to the rapid adoption of improved rice varieties while cultivation techniques, in particular weeding practices, have remained close to the traditional extensive style the farmers  - ii - practised before joining the proje:zt. The 1976/77 campaign brought some en- couraging progress, however. The reduction in cultivable area and increase in project cost have been offset b7 a substantial increase in the economic price of rice and tLe project is eepected to show a rate of return close to the 14% estimated at appraisal. Tie project has a substantial impact on the region's economy, and demands "or land allocation far exceed the avail- able areas developed under Credit 277-NLI. Description of the Mopti II Rice P::oject (v) The project aims at a modest expansion of the area under cultiva- tion through construction of new p.lders; the improvement of rice cultivation conditions and techniques in the new polders as well as in the existing ones; and the strengthening of the projec.t authority ORM. At full development, it would reach a population of about 10,000 in an area with few alternative economic opportunities. The proje:t consist of: - constructi.on of four polc!ers with a total area of 8,800 ha; - some improvements of polcers developed under Credit 277-MLI; - deep ploughing of the neu polders as well as of about 14,300 ha in existirng polders; - construction of storage facilities for paddy, farm inputs and farm equipment, of wcrkshops, training centers, offices and staff houses; - acquisition of farm machinery, civil works maintenance equipment, ferries, vehicles, workshop and office equipment; - establishment of an adult literacy program for villages in the project area and an aidio-visual program to be used by extension services; - applied agricultural reseairch; - agricultural credit for fErtilizer and farm implements; and - technical assistance for -project management, and ORM staff and operating costs to the extent that they are attributable to the expansion of the p:-oject area. The project will also provide for arsistance to the Study Bureau of the Rural Works Department (RWD) in Bamako, c nsisting of an extension to existing offices, acquisition of equipment, (.nd funds for irrigation project studies. The project will begin in mid-1978 znd extend over 5 years. Cost Estimates and Financing Plan (vi) Total project cost including taxes is estimated at US$31.2 million of which the foreign exchange comporent would be US$19.0 million or 61%;  - iii - project cost net of taxes is estimated at US$26.3 million. Physical and price contingencies amount to 35% of base costs estimated in prices of December 1977. (vii) The IDA credit would be for US$15.0 million and would finance 57% of project costs net of taxes. It would cover 59% of foreign exchange costs and 53% of local costs net of taxes. Mali will receive further assistance from FAC (US$2.0 million; joint financing with IDA) and ADF (US$6.0 million; parallel financing). A condition of effectiveness of the Credit is the ful- fillment of all conditions precedent to the initial disbursement of the FAC grant. The IDA credit would be made to Government, who would pass it on to ORM as a grant. Government would finance part of staff and operating ex- penditure, subsidies on farm inputs, and taxes evaluated at US$4.9 million. Without taxes, Government's contribution would be 5% of project cost. Farm- ers would contribute US$1.9 million for farm inputs. In order to expedite project implementation, a revolving fund of US$0.6 million will be set up at the Banque de Developpement du Mali for the prefinancing of project expenditure to be financed by IDA. Retroactive financing of up to US$70,000 would be provided for the extension to the building of the RWD Study Bureau, which will be constructed before signature of the Credit Agreement. Procurement and Disbursement (viii) Contracts for vehicles and equipment and for civil works and deep ploughing to be financed jointly by IDA and FAC would be awarded on the basis of international competitive bidding in accordance with IDA guidelines. Con- tracts for the construction of houses, offices, workshops and stores would be awarded on the basis of competitive bidding advertised locally in accord- ance with local procedures acceptable to IDA. Miscellaneous items of equip- ment and furniture up to a contract value of US$50,000 would be procured on the basis of local competitive bidding. For contracts of less than US$20,000 direct procurement on the basis of several quotations would be used. Items financed by ADF would be procured according to ADF procedures. (ix) The IDA credit would be disbursed to cover civil works and deep ploughing not covered by the ADF credit, buildings, vehicles and equipment, engineering and supervision, technical assistance, assistance to RWD, agri- cultural credit and part of incremental staff and operating expenditure of ORM. Organization and Management (x) Except for the assistance to RWD, the project will be carried out by ORM. Technical assistance would be increased to its 1976 level of four professionals but the profile of technical assistance will be redefined to ensure maximum support for the critical areas of ORM activities, such as extension work, use of farm machinery, seed farm management and applied research. (xi) The adult literacy program will be implemented by ORM with the support of the Direction Nationale de l'Alphabetisation Fonctionnelle et de la Linguistique Appliquee (DNAFLA). Agricultural research will be carried out  - iv - by ORM with scientific guidance from the Institut d'Economie Rurale and the West Africa Rice Development Asscociation. The agricultural credit fund will be administered by ORM once responsibility for providing farmers with inputs and credit is transferred to that agency in the first half of 1978. Execution of civil works, deep ploughing and constrction of buildings will be supervised by the Rural Works Department (RED) which has worked out an agreement with ORM spelling out arrangements for precurement of equipment, hiring of personnel and schedules of disbursements to ORN to RWD. This agreement has been approved by IDA. Assistance to RAD will be implemented directly through the Ministry of Rural Development, of which RWD is a part. Production, Yields, Markets (xii) The project would lead to an incremental production of 34,000 tons of paddy, of which 15,000 tons would originate from the new polders and the remainder from existing polders that would be improved under the project. Yields would rise, on average, to 2.00 t/ha while without the project, yields would be 0.7 t/ha in traditional zultivation and about 1.8 t/ha in the Mopti I polders. The project would help to fill the supply gap projected for the early 'eighties; until that time, it would provide a desirable safety margin against shortfalls in domestic supplies that are likely to occur from time to time, with varying severity, because of poor rainfall and flood levels. Any remaining surplus that would not be absorbed by domestic demand could be accumulated for the reserve stock which Government plans to build up as a protection against future droughts. In consequence, the economic price of rice has been based on the import substitution price. The share of produc- tion marketed by official channels (45 percent) would be consumed in Bamako while the remainder would be home--consumed or sold through private trading channels. Farmers' Benefits, ORM Revenue, Government Budget (xiii) Farmers would benefit from the much higher security of flooding in the polders compared to cultivation under uncontrolled flooding. Farmers' income from rice cultivation woulc. rise from US$100 per family in traditional cultivation to US$370 in the most representative case and up to US$500 if fertilizer is used. Without the project, most farmers in the Mopti I project area would stagnate at incomes of about US$300. This projection is based on Government's assurance that the producer price of paddy will be increased from MF 45/kg to MF 50/kg in 1978 and will thereafter be periodically re- vised so as to provide sufficient incentive to farmers. (xiv) Government agreed to gradually raise the development levy from presently 160 kg of paddy per ha to 240 kg/ha in 1982. With these levies and with statutory reimbursements from the rice marketing agency, ORM is expected to meet its recurrent expenditure including equipment renewal and to recover about 35% of investment. (xv) Government would save important consumer subsidies on rice imports which would become necessary, without the project, towards 1983. The net  v savings would amount to US$1.1 million annually at full development. If Government's net savings on subsidies are taken into account, 90% of total project cost would be recovered. Economic Justification and Risk (xvi) The economic rate of return of the project is estimated to be 18% over 25 years. (xvii) The project's main risk is inherent in the system of controlled flooding which depends both on sufficient and timely rainfall and on sufficient and timely flooding. Although the flooding probability will be much enhanced as a consequence of the project, a residual uncertainity remains. This is the price to pay for an otherwise very economic production system. The sensitivity test shows that the rate of return would still be acceptable even if benefits were 20% lower than projected. Recommendation (xviii) With the assurances and condition indicated in Chapter VIII, the project is suitable for an IDA credit on standard terms of US$15.0 million equivalent to the Government of Mali.  I  IALI MOPTI II RICE PROJECT I. INTRODUCTION 1.01 The Government of Mali has requested IDA assistance for the financ- ing of an extension to the on-going Mopti Rice Project (Credit 277-MLI) which is scheduled to terminate on May 31, 1978. The Mopti II Rice Project was pre- pared by the Institut d'Economie Rurale (IER) of the Ministry of Rural Devel- opment in Bamako with funds made available for this purpose under Credit 277- MLI and with the assistance of the Bank's Regional Mission in Western Africa (RMWA). The feasibility study prepared by IER was submitted in August 1975. It comprised an area of 40,000 ha; however, because of possible market limi- tations over the medium term, the project aims at an expansion of only 8,800 ha besides consolidation of areas developed under Credit 277-ELI and strength- ening of the project authority. It would benefit a population of 90,000 in an area with few alternative employment opportunities. 1.02 The project would be the sixth IDA credit to Malian agriculture. Progress of the five on-going projects is satisfactory. Implementation of the first Mopti Rice Project is discussed in paras. 3.01 - 3.12 below. 1.03 This report is based on the findings of an appraisal mission com- prising Messrs. R. Gusten and P. Streng (IDA), H. Boumendil and R. Chateau (Consultants), which visited Mali in November 1976. II. BACKGROUND A. General 2.01 Mali has a popula5ion of 6.0 million (1976) distributed over a large area (1.24 million km ) of which more than half is desert. Less than 25 percent of the territory receives more than 500 mm of rainfall in normal years and is suitable for crop production. About 75 percent of the population lives in this area; the remainder is concentrated in the Niger flood plains or consists of cattle-rearing nomads. 2.02 With a per capita income of US$95 (1975), Mali is one of the 25 least developed countries. Real growth of GDP averaged 3.7 percent annually in the four pre-drought years 1969-1972. As a consequence of the drought, GDP fell in 1973 and stagnated in 1974 but production recovered in the fol- lowing two years; for the period 1973-1976 which covers the drought and post- drought years, real growth of GDP again averaged 3.7 percent annually. Pop- ulation growth being officially estimated at 2.7 percent annually, this corresponds to an increase in GDP per capita of only 1 percent annually.  - 2 - 2.03 While production and ex3orts, with the exception of cattle, reco- vered satisfactorily from the drolght years, the country's balance of pay- ment deficit gap widened as a consequence of international inflation and in 1976 was US$33 million. The budget deficit also has increased in recent years and was nearly US$21 million in 1975 and US$20 million in 1976. This persistent disequilibrium makes it difficult for Mali to make a significant contribution to the financing of development projects. Since no fundamental change can be anticipated for the next few years, it is imperative that agri- cultural development projects are financially as selfsufficient as possible. B. The Rural Sector 2.04 About 90 percent of Mali's population depends for its livelihood on agriculture and allied pursuits, which accounted for 38 percent of GDP in 1975. Agriculture contributes half, animal husbandry two-fifths, and forestry and fisheries combined one tenth of the value added in the primary sector. Exports consist almost ertirely of raw or processed agricultural commodities and livestock. Cottorn, the single most important foreign exchange earner, accounts for more than 30 percent of the value of exports, which is nearly as much as the combined exyort proceeds from groundnuts and livestock, the other major export commodities. 2.05 There are some 2 millior, ha under permanent cultivation, 90% of which is rainfed, the rest irrigated. Rainfed cultivation is practiced on small family farms. About 80% of the 435,000 farms have 5 ha of land or less. About 90% of the area under rainfed cultivation is under cereal crops (millet and sorghum); most of the rest is allocated to cotton and ground- nuts, the main cash and export crops. Of the 200,000 ha under irrigated cultivation, some 100,000 ha are cultivated traditionally by unassisted farmers and the rest within "Operations de Developpement" (para. 2.09) where improved methods are applied. The oldest of these production schemes is the "Office du Niger", originally established in 1929 for the production of irri- gated cotton to supply the French textile industry; at present all irrigated lands in the Office du Niger (40,000 ha) are under rice save 1,300 hectares, which are under sugar cane. No cotton is presently grown under irrigation. 2.06 Until recently, development efforts were directed mostly at export crops while cereals, particularly millet and sorghum, suffered from compara- tive neglect. Adequate extension services were organized for cotton and groundnuts which were also provided with marketing facilities, fertilizers and other improved inputs. Only a small portion of the area under rainfed cereal crops benefited from similar development programs. Producer prices for export crops too were set at more remunerative levels than those for cereals. Past emphasis on cotton and groundnuts is reflected in production trends during recent years: Production of cereals declined from 1.1 million tons in 1967/68 to an average of 0.8 million tons ,luring the drought years 1972/73 and 1973/74 while seed cotton output increased from 42,000 to 65,000 tons and the ground- nut crop fell slightly from 118,000 tons to 104,000 tons.  -3 - 2.07 Agricultural production increased substantially over the last three years as a result of good rainfall and higher producer prices for both cash and food crops. Total rainfall was above average in 1974/75, average in 1975/76 and about average, but with an unfavorable distribu- tion, in 1976/77. Production of cereals, including paddy, is estimated to have risen to 1.15 million tons in 1974/75 and 1.2 million in 1975/76 and 1976/77. Cotton and groundnut crops in 1975/76 reached the unprece- dented level of 103,000 and 200,000 tons, respectively. Cotton production in 1976/77 maintained the preceding year's level in spite of less favorable weather conditions while groundnut production fell by some 15% as a conse- quence of the decreasing attractiveness of the official producer price. 2.08 Mali's livestock population (some 5.5 million cattle and 11 million sheep and goats in the early seventies) was reduced by 15-20 percent as a consequence of the drought years of 1972/73 and 1973/74. Losses were most severe in the eastern part of the country. Herds are being rebuilt but exports are not expected to reach pre-drought levels before the mid- eighties. C. Institutions in Agriculture 2.09 Agriculture is the responsibility of the Ministry of Rural Devel- opment. Since 1969, the Ministry has delegated important functions to the so-called Operations de Developpement, institutions charged with agricul- tural development in specific regions and enjoying a considerable amount of financial and managerial autonomy. They distribute inputs to farmers and provide extension services, training and credit as well as marketing services for export crops and part of the food crops. Operations may be crop-specific, as in the case of rice or cattle, or deal with all major crops grown in a region. In the case of crop-specific Operations, there may be several Opera- tions for the same crop, each of them responsible for a certain area. 2.10 Rice development is mainly in the hands of the Operation Riz Segou (financed by EDF), the Operation Riz Mopti (financed by IDA) and the Office du Niger, which is not an Operation but enjoys an even larger degree of autonomy. Minor rice developments are under way in the IDA-financed Mali Sud agricultural project and the USAID-financed Action Riz-Sorgho in the 6th Region (Gao). 2.11 Marketing of cereals is the responsibility of OPAM (Office des Produits Agricoles du Mali) which has the monopoly for domestic and foreign trade with cereals. However, OPAM is not able to enforce its monopoly in the domestic market; it handles most of the marketed quantity of rice but only a fraction of the marketed surplus of coarse grains. Until 1974, offi- cial producer prices were well below the free market price; as a consequence, OPAM purchased only marginal quantities of coarse grains and most of the rice originating in the Office du Niger, where farmers cannot escape the official  -4- marketing channel. Private trader, are officially banned from wholesaling cereals but have been tolerated recently as attempts to eliminate them have failed. OPAM buys rice from the Of-fice du Niger and the Operations according to price schedules established annually in a negotiation process between the rice producing entities and Governmient agencies. These schedules ("baremes") specify the charges for collection, bagging, losses, and milling which are reimbursed to the selling entity. 2.12 Supply of farm inputs anc farm equipment is the responsibility of SCAER (Societe de Credit Agricole et d'Equipement Rural). Both annual inputs and equipment have been sold at subsidized prices, the subsidy being financed mainly from levies on cotton and groundnuts exports. As indicated by its name, SCAER also provides agricultural credit for the purchase of farm equip- ment, but only to farmers covered by the activities of Operations de Devel- oppement. SCAER does not maintain field offices but relies on the Operations for the distribution of inputs, the sale of equipment and the recovery of credit extended. The Operations perceive a percentage of the turnover as a fee. The steep rise in the price of farm implements over the last few years forced SCAER to end subsidization of equipment sales in 1976 and to reduce subsidies on annual inputs such as fertilizer. Because of budgetary diffi- culties, Government considers further reducing and eventually eliminating subsidies on farm inputs. 2.13 Because of SCAER's difficulties, in recent years, in carrying out the functions assigned to it, Government envisages transferring responsibil- ity for the supply of inputs and equipment to the individual Operations de Developpement before the 1978/79 caripaign. The Association has been asked to advised Government on this issue and on related matters such as agricul- tural credit and the restructuring of output and input prices. 0- 2.14 Agricultural research in k[ali is coordinated by the Institut d' Economie Rurale of the Ministry of Rural Development. Most agricultural research is carried out by French research institutes organized in the Groupement d'Etudes et de Recherches pour le Developpement de l'Agronomie Tropicale (GERDAT). Rice research was, until 1976, the responsibility of the Institut de Recherches Agronomiques Tropicales et de Cultures Vivrieres (IRAT), which operated two research stations for floating rice and non-floating rice, respectively. As from 1976, the West Africa Rice Development Association (WARDA) has assumed responsibility for research on floating rice varieties. D. Development Potential and Development Objectives 2.15 In terms of domestic resources spent per unit of foreign exchange earned or saved, Mali has a clear comnparative advantage in the production of cattle, cotton, and groundnuts (in that order). Compared to other Sahelian countries, Mali has a well above ave:-age endowment of cultivable land with more than 800 mm of rainfall (90 percent probability) where rainfed cotton and  -5- groundnuts can be grown under satisfactory conditions, and nearly two thirds of the country's area outside the Sahara is suitable for animal husbandry of varying intensity. Foodcrops like millet and sorghum can also be grown with a reasonable degree of security in the zone with more than 800 mm of rainfall which covers 5.5 million hectares of cultivable land. 2.16 The Government of Mali has decided to give increased attention to the promotion of food crops in order to achieve self-sufficiency not only in normal years but also in years of insufficient rainfall. The current Five Year Plan (1974-1978) reflects the Government's determination to prevent a recurrence of the food shortage experienced in 1972/73 and 1973/74. The plan's development objectives with regard to agriculture are: - to achieve self-sufficiency in food production; - to generate adequate supplies of agricultural raw materials for industrial processing; and - to ensure increasing surpluses of primary products for exports. Food crops are to take first place in public investment. The emphasis on protecting producers and consumers against climatic hazards has resulted in a strong bias towards irrigated agriculture i.e. rice production: not less than 85 percent of total allocations for food production are set aside for rice and only 15 percent for millet and sorghum, by far the country's most important food crop (80 percent of cereal consumption). 2.17 The plan's emphasis on food production projects follows from the decision that security of food supplies ranks higher than optimal allocation of resources from a strict domestic resource cost point of view. However, the long-term rice requirements have been overestimated (para. 2.21). E. Cereals Consumption and Production 2.18 Mali produces, and consumes, 1.1 - 1.2 million tons of cereals (including seed requirements and losses) in years of normal rainfall, of which about 80 percent are millet and sorghum, about 10 percent rice, and the remainder maize and wheat. Millet, sorghum and maize are grown exclu- sively under rainfed conditions. Except for drought years, Mali is self- sufficient in these staple crops. Wheat requirements (12,000 tons of flour annually) are now covered by imports, but wheat cultivation is under way, on an experimental basis, in the Zone Lacustre in the Niger Delta. 2.19 Most of the country's one million tons of coarse grains produced in normal years are home-consumed by growers or exchanged at the local level. About 15 percent are estimated to enter the market which is shared by OPAM and private traders. Per capita consumption of coarse grains is 150-160 kg  -6- on average, but only about half that amount among nomads, rice growers, and the higher income groups in the few major towns. The last two groups sub- stitute rice for coarse grains (btLt mostly only to the extent of one meal out of two) while the nomads complement millet by milk products. 2.20 Rice consumption is estimated at 120,000 tons in 1976. Rice costs more than twice as much as millet or sorghum and is still a luxury or semi- luxury for a large part of Mali's low-income population. Overall per capita consumption has remained stable at a level of 20 kg/year over the last 15 years; in most of the country, however, annual consumption is in the range of only 3 - 5 kg/head, i.e. at the same level as in neighboring Upper Volta and Niger, countries with comparalle per capita income levels but without significant domestic rice production. Rice consumption and production are further discussed at Annex 1. 2.21 The Five Year Plan projects an increase in per capita consumption of rice from the pre-drought level of 20 kg to 28 kg in 1978, 48 kg in 1983, and 79 kg in 1990. The implicit annual growth rate of 8 percent (per capita) is incompatible with the increases in real income that appear possible in Mali over this horizon, and with accepted orders of magnitude of income elasticity of demand. Per capita rice consumption may be expected to grow by not more than 2 percent annually, and total rice consumption, consequently, by less than 5 percent annually. This corresponds to some 6,000 tons of rice annually at the 1976 level of consumption. 2.22 Paddy production has increased steeply in the post-drought years as the consequence of three factors: - some 55,000 ha of polders have been developed by the Operation Riz Segou and Operation Riz Mopti; these polders, vulnerable to law river water levels, have come into full productioa for the first time in the post-drought year 1974/75; - the Office du Niger has achieved an increase in effi- ciency and output; - finally, the 1974 increase in the producer price by 60 percent (from MF 25 tn MF 40 per kg of paddy) in- duced farmers to expand sowings and increase their efforts. 2.23 As a consequence, Mali reached self-sufficiency in 1975/76 and 1976/77 and even produced a surplus estimated at 20-25,000 tons of paddy in each of these years. Most of this surplus could be disposed of in 1977 when a drought in the Sudano-Guinean zone provided an opportunity to export Malian rice, and even paddy, to Ivory Coast and Togo. 2.24 Without the proposed pro;ject, a deficit in domestic paddy production is projected to emerge not later than 1982, well before the project would have reached full production; in the short run, Mali could remain self-sufficient in rice and, under continuously favorable conditions, even produce a marginal  -7- surplus. This is not likely to happen, however, because of the various contingencies surrounding this hypothesis: - fluctuations in the unstable Malian weather condi- tions may cause shortfalls in production well before the early eighties and are almost certain to do so at least in one or several years; - incremental production may be less than projected due to possible delays in the implementation of ongoing projects; and - projected production trends are based on the hypothesis that Government keeps official producer prices at a level which maintains farmers' economic incentive. Thus, while the proposed project would help to fill the gap in domestic supplies forecast for the early 'eighties, it would, at the same time, provide a desirable safeguard against production shortfalls in the near future. Market prospects for rice are further discussed at Chapter VI B. III. THE MOPTI I RICE PROJECT A. The Project Area 3.01 The project is in the Niger flood plains which extend over more than 500 km with widths varying between 150 km and 200 km. Flood levels are sufficiently shallow to allow cultivation of submerged rice. Farmers culti- vate about 2 ha of rice and on average 1.4 ha of rainfed land for millet and some secondary crops. About 100,000 ha of paddy are estimated to be culti- vated by traditional extensive methods in the flood plains. A description of the project area is at Annex 2, and a description of cultivation methods under uncontrolled and controlled flooding at Annex 3. B. Project Description 3.02 The first Mopti Rice Project aims at the increase of rice produc- tion through the construction and rehabilitation of polders along the Bani and Niger rivers, and at the improvement of rice cultivation techniques through the introduction of successive packages of improved inputs, imple- ments and practices. At appraisal the project was expected to cover 31,100 ha and to reach 7,300 farm families. For details of project content and project execution, see Annex 4. 3.03 At appraisal, total project cost including taxes was estimated to be US$9.4 million; the IDA contribution was US$6.9 million while French aid (FAC) financed technical assistance (US$0.7 million) provided by consultants  - 8 - (SCET International of France). A supplementary IDA credit of US$2.6 mil- lion was ma