Nepal - Sunsari - Morang Irrigation and Drainage Development Project

Document of d 4 The World Bank FOR OFFICIAL USE ONLY f1t Report No. 1949a-NEP NEPAL STAFF APPRAISAL REPORT SUNSARI-MORANG IRRIGATION AND DRAINAGE DEVELOPMENT STAGE I PROJECT May 12, 1978 South Asia Projects Department Agriculture Division C 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 US$1.00 = NRs 12.00 WEIGHTS AND MEASURES (METRIC SYSTEM) 1 meter (m) = 3.28 feet 1 kilometer (km) = 0.62 miles 1 hectare (ha) = 2.47 acres 3 1.50 bighas 1 million cubic meters (Mm = 810 acre-feet I cubic meter per second (m Is) = 35.31 cubic feet per second 1 metric ton = 2,205 pounds FISCAL YEAR July 16 - July 15  FOR OFFICIAL USE ONLY PRINCIPAL ABBREVIATIONS AND ACRONYMS USED ADBN - Agriculture Development Bank of Nepal AIC - Agriculture Input Corporation AW - Agriculture Wing CE - Certainty Equivalent CMC - Chatra Main Canal DA - Department of Agriculture DADO - District Agricultural Development Office DIHM - Department of Irrigation, Hydrology and Meteorology EPAD - Evaluation and Project Analysis Division ERR - Economic Rate of Return EV - Expected Value EW - Engineering Wing FGD - Farm Group Development GOI - Government of India HMGN - His Majesty's Government of Nepal HYV - High Yielding Variety ICB - International Competitive Bidding JT - Junior Technician JTA - Junior Technician Assistant LCB - Local Competitive Bidding MFAI - Ministry of Food, Agriculture and Irrigation NFC - Nepal Food Corporation NZ-I - Birganj Irrigation Stage I Project Narayani Zone O&M - Operation and Maintenance OER - Official Exchange Rate PLA - Panchayat Level Assistant PCW - Planning and Control Wing PM - Project Manager REC - Rice Export Co. RVPD - River Valley Projects Department (Bihar) SAO - Senior Agriculture Officer SCF - Standard Conversion Factor SMS - Subject Matter Specialist T&V - Training and Visit WUG - Water User's Group GLOSSARY Main Canal - supplies water to the whole system Branch Canal - supplies water to 2 or more secondary canals Secondary Canal - serves about 1,000 - 7,000 ha Tertiary Canal - serves about 200 - 500 ha Field Canal - serves about 50 ha Irrigation Ditch - serves about 10 ha Paddy - unhulled rice Panchayat - village Nala - natural drain 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.   NEPAL SUNSARI MORANG IRRIGATION AND DRAINAGE STAGE I PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. BACKGROUND ........................................... 1 The Development Scene ..... .............. 1 The Agricultural Sector .................. 2 The Irrigation Sub-Sector ....................... 4 II. THE PROJECT AREA ..................................... 6 The Chatra Canals Project ..... ........... 6 Natural Resources ..... ................ 7 Socio Economic Conditions .... ............ 9 Cultivation Practices ..... ............. 9 Agricultural Supporting Services ................ 10 III. THE PROJECT .......................................... 12 Project Concept ................. ................ 12 Main Project Features ............ .. ............. 12 Detailed Features ................ ............... 13 Water Demand and Supply and Quantity ............ 17 Engineering Designs and Construction Methods .... 18 Implementation Schedule ....................... 19 Environmental Effects .............. ............. 19 IV. COST ESTIMATES AND FINANCIAL ARRANGEMENTS .... ........ 20 Cost Estimates .................................. 20 Annual Expenditures ............................. 21 Financing Plan .................................. 22 Procurement ..................................... 22 Disbursement .................................... 24 Accounts and Audit .............................. 24 This report is based on the findings of a Bank mission which visited Nepal in September 1977, composed of Mr. C.M. Bolt and Ms. M.C. Nguyen (Bank); and Messrs M. Barber and R. Baskett (Consultants). Mr. K. Mahmood (Con- sultant) visited Nepal in November 1977 to appraise the Kosi river training and sediment control proposals.  -2- Table of Contents (Cont'd) Page No. V. ORGANIZATION AND MANAGEMENT .......................... 25 Project Organization ............................ 25 Staffing and Training ........................... 26 Operation and Maintenance ....................... 27 Monitoring and Evaluation ....................... 28 VI. AGRICULTURAL PRODUCTION, MARKET PROSPECTS AND PRICES . 29 Cropping Pattern and Yields ..................... 29 Incremental Production .......................... 30 Input Requirements .............................. 30 Market Prospects ................................ 31 Prices .......................................... 31 VII. FINANCIAL ANALYSIS ................................... 33 General ......................................... 33 Farm Budgets .................................... 33 Distributional Effect ........................... 34 Cost Recovery ................................... 35 VIII. BENEFITS AND JUSTIFICATION ........................... 37 General ......................................... 37 Economic Evaluation of Investment Package ....... 37 Economic Evaluation of Project Components ....... 37 Sensitivity Analysis Risks ..................... 39 IX. RECOMMENDATIONS ......... ............................ 41 LIST OF TABLES 2.1 Record of CMC Breaches and Closures 3.1 Irrigation and Drainage Works 3.2 List of Equipment and Vehicles 3.3 Estimate of Irrigation Requirements 3.4 Estimate of Irrigation Efficiencies 4.1 Summary of Estimated Project Cost 4.2 Estimated Annual Cost of Operation and Maintenance 4.3 Estimated Annual Expenditure 4.4 Disbursement Schedule and Credit Allocation 6.1 Cropping Pattern, Yield and Production 6.2 Crop Input Requirements 8.1 Economic Evaluation  Table of Contents (Cont'd) LIST OF FIGURES 2.1 Kosi River Channels 3.1 River and Sediment Control Arrangements 3.2 Historical and Projected Canal Closures 3.3 Implementation Schedule 5.1 Organization Chart 5.2 Coordinating Activities 6.1 Crop Calendar LIST OF ANNEXES 1. Draft Provisional In-Service Training Programs 2. Monitoring and Evaluation 3. Farm Budgets and Project Rent 4. Basis for Economic Analysis 5. Related Documents and Data Available in the Project File LIST OF MAPS IBRD 13469 Project Location IBRD 13526 Chatra Main Canal Command Area   NEPAL SUNSARI-MORANG IRRIGATION AND DRAINAGE DEVELOPMENT STAGE I PROJECT STAFF APPRAISAL REPORT I. BACKGROUND The Development Scene 1.01 Nepal is confronted by a formidable set of development constraints. The problems of a rapidly growing population (2.1% annual growth rate) and limited exploitable resources are compounded by the difficulty of being land- locked. The country is divided physically into three broad ecological zones: the Mountains, the Hills, and the Terai, a northern extension of the Indo- Gangetic Plain. These three zones cover respectively 15, 68 and 17% of the total land area of 141,000 km . The steep topography of most of the country has severely limited the availability of land for productive farming. Per capita production in the Hills has declined due to the extension of cultiva- tion to marginal land. This has increased the rate of migration to the Terai. Pressure on land has, therefore, been rising at an alarming rate, and the Terai's grain exports have declined from an annual 500,000 tons in the early 1960's to 200,000 tons during the last few years. In 1977/78, rice exports are expected to reach only 70,000 tons. 1.02 Population of Nepal is now estimated at about 13M, of which 96% are in rural areas. About 60% of the population live in the Hills, which contain only 30% of the agricultural land and where the density (930 persons/ per arable km ) is higher than in neighboring Bangladesh. In contrast, the Terai is only one-third as densely populated as the Hills, the average farm (2.3 ha) is almost six times the size of that in the Hills (0.4 ha). Poverty remains acute, and per capita income is estimated at US$120 (in 1977 prices). Although nutritional levels are low in the Hills and Mountains, they are much higher in the Terai. In 1975, local production of major crops was sufficient to maintain minimum subsistence standards 1/ for only about six months in the Mountains and eight months in the Hills. In the Terai, production was sufficient for about eighteen months. Health and education facilities are generally inadequate. At present, only about 19% of the population are literate. 1.03 The major objectives of the agricultural development efforts of His Majesty's Government of Nepal (HMGN) are to raise agricultural production, to increase employment opportunity for the rural poor and to accelerate the coun- try's export earnings. Although long-term development plans aim at reducing income inequality between the Mountains, Hills and Terai, in the near term 1/ Estimated at 2,000 calories per person per day for the Hills and Terai, and 2,200 for the Mountains because of higher altitude.  -2- there is a more urgent need to increase agricultural production, particularly of foodgrains, to feed the growing population.' Because of their isolation, the Hills and Mountain areas present particular difficulties in the achieve- ment of these short-term aims. The scope for agricultural development is much more favorable in the Terai, where there is considerable irrigation potential, communications are relatively well developed, and farm holding sizes are sufficient to enable a marketable surplus to be grown. The Agriculture Sector 1.04 Agricultural Development. Nepal's economy is largely dependent on the agricultural sector. Farm production and related activities account for about 65% of GDP, 89% of the labor force and 80% of all exports, mostly food- grains. Nepal has a gross area of 14.1 M ha of which only about 2.3 M ha is cultivable. Paddy accounts for 51% of the total cropped area; maize 19%; wheat and other cereals 16%; and other crops including oilseeds, pulses, jute, potatoes, sugarcane, tobacco and horticultural crops 14%. Performance over the last twelve years has been disappointing. Growth in agricultural production, hardly above the rate of population increase, came primarily from area expansion, which was limited, rather than from improvements in land pro- ductivity. The most noticeable area increases have been in wheat (10% p.a.) and potatoes (5.4% p.a.), mostly in the Terai. Yields of all crops have either stagnated or declined over the last few years. This is due to (i) increasing cultivation in areas of marginal productivity; (ii) soil denuda- tion; (iii) the lack of suitably adapted technology, prepared for extension to farmers; and (iv) institutional constraints such as lack of trained man- power. In view of the limited scope for further area expansion, future growth in agricultural production will depend virtually on yield improvement. This is attainable, particularly in the Terai, provided there are effective exten- sion services, reliable irrigation supplies and adequate drainage at the farm level. 1.05 Agricultural Institutions: HMGN has three Ministries dealing with agriculture: Ministry of Food, Agriculture and Irrigation (MFAI); Ministry of Land Reform; and Ministry of Water and Power. Irrigation projects are the responsibility of the MFAI which includes the Department of Irrigation, Hydrology and Meteorology (DIHM), the Department of Agriculture (DA), and the Department of Food and Agriculture Marketing Services. The Ministry also has overall responsibility for a number of public sector corporations which include Agricultural Input Corporation (AIC), Agriculture Development Bank of Nepal (ADBN), Nepal Food Corporation (NFC), and the Groundwater Development Board. In general, like many other government agencies, agricultural insti- tutions suffer from lack of trained staff and poor distribution throughout the country. 1.06 Agricultural Extension Service: The DA's Division of Agricultural Extension and Training operates a countrywide agricultural extension service through offices located at regional, district and panchayat (village) levels. The extension staffs' main functions are to provide farmers with advice on improved farming practices, to introduce high-yielding improved varieties (HYV), and to guide farmers in the selection of suitable cropping patterns. Their effectiveness is seriously hampered by inadequate agriculture training,  -3- and the lack of communication, transportation, and housing facilities at the village level. In addition, there is little coordination between research and extension activities and, as a result, the extension service has little to offer. A pilot agricultural extension project employing the Training and Visit system (T&V) in Bara and Parsa districts in Nepal has demonstrated that extension effectiveness can be improved through strengthening the organization and the linkages with research. In consequence, HMGN intends to undertake a nationwide agricultural extension project based on similar concepts. 1.07 Agricultural Research and Training: The DA carries out research mainly in food crop production in a large research complex near Kathmandu and twelve smaller stations dispersed throughout Nepal. Some agriculture research stations are also national crop development headquarters 1/. The United States Agency for International Development (USAID) has supported research in cereal improvement based on high yielding wheat from India and rice from the Philippines. The United Nations Development Program, in conjunction with the International Maize and Wheat Improvement Center, is also assisting with a high protein maize program. With the technical assistance from USAID, the Institute of Agriculture and Animal Science of Tribhuvan University is respon- sible for formal agricultural training of extension workers. The Institute also provides vocational training for agricultural teachers and in-service training for leading farmers. Recently, research stations have also been involved in training activities for extension workers and farmers. This service is generally inadequate, however, due to the lack of experienced instructors and training facilities. 1.08 Agricultural Inputs Supply: The AIC is mainly responsible for the marketing of fertilizers, seed, pesticides, and agricultural equipment. The AIC distributes these inputs to cooperative societies, village committees or other public organizations and private traders, fixes retail prices for all inputs, and is responsible for input storage. Sales have, however, been sporadic due to poor distribution, and the need for more timely supply of basic inputs and services at village level is recognized. The Sajha (coopera- tive) movement established in 1975 has been entrusted with the task of under- taking sales of agricultural and general merchandise as well as marketing and credit services for its members. On average, each Sajha serves about 2-3 panchayats and is assisted by a paid manager, trained and seconded by ADBN. 1.09 Agricultural Credit: The ADBN is the main source of institutional credit. ADBN provides short, medium and long-term loans to individual farmers, cooperatives and dealers engaged in agricultural production. Farmers owning 6 ha of land or more can go directly to ADBN for seasonal loans, while those owning less can obtain such loans through Sajha cooperatives. Current annual interest rates vary between 2% and 14% depending on the category of borrower and purpose. ADBN's performance has been satisfactory, and in FY76, overdues 1/ The national development programs for paddy, maize, jute and wheat have their headquarters at Parwanipur, Birganj Irrigation Project Narayani Zone, Rampur, and Tarahara (in the proposed project area) Agriculture Stations, and Bhairawa Agriculture Farm (in Bhairawa-Lumbini Groundwater Project), respectively.  -4- amounted to about 20% of demand. Until recently the two commercial banks in Nepal (The Nepal Bank and the Rastriya Varijya Bank) had not been lending for agriculture. Although they were directed in 1974 to invest at least 50% of their total deposit liabilities in agriculture, their current involvement is still limited. Lending from private sources is widespread, providing about 80% of the total agricultural credit, often at much higher interest rates. 1.10 Marketing and Transportation: Domestic marketing services in Nepal are not well developed, due to the lack of roads, telecommunication systems, and warehouses. Since the late 1960's, several public sector organizations have been established for marketing major farm products. These include Nepal Food Corporation (NFC), Rice Export Companies (REC), National Trading Ltd., and Jute Development and Trade Corporation (JDTC). Officially, export of farm produce is exclusively the responsibility of these organizations which also fix export and domestic prices. In practice, however, since the Indian border is open, extensive free trading occurs, for which no reliable data is available. The Irrigation Sub-Sector 1.11 Water Resources Utilization: Nepal has abundant water resources, i3cluding major rivers with average annual discharges totalling 150 billion m , and capable of irrigating 6 to 8 M ha. However, there are only about 1.3 M ha of land suitable for surface irrigation by canal in the country. Exploitable groundwater resources, which are largely concentrated in the Terai, could provide tubewell irrigation for about 0.4-0.6 M ha. The total irriga- tion potential is therefore less than 2 M ha. Utilization of water resources is limited by a number of factors: (i) there are few reliable sources of perennial surface water for year-round irrigation except for the eight major rivers 1/; (ii) these large rivers are costly to develop particularly for relatively small command areas which are typical in the Terai; (iii) heavy sedimentation in riverbeds creates considerable problems in construction, operation and maintenance of irrigation systems; and (iv) power supplies to energize tubewells are severely restricted in extent and amount. At present, only about 300,000 ha (about 23% of the potential irrigable area) are pro- vided with some form of irrigation, of which about 140,000 ha are under public schemes. 1.12 Irrigation Development: Before the launching of Nepal's first Development Plan in 1957, few substantial irrigation works had been undertaken by HMGN. The main reasons were limited financial resources and shortage of trained manpower. Nevertheless, with schemes such as the 11,000 ha Chandra Project (1922), farmers' stream diversions, bucket-lift, and other traditional methods, irrigation had been provided to an area of 154,000 ha, mainly in the Hills. During the First and Second Development Plans (1957-62 and 1962-65 respectively), HMGN's irrigation programs were concentrated on the building of large systems in Kathmandu Valley, Eastern and Mid-Western Terai. In the 1/ The Mahakali (Sarda), Karnali, Babai, Rapti, Narayani (Gandak), Baghmati, Kosi and Kankai Rivers.  - 5 - Third Plan, however, a program was launched for construction of minor irriga- tion projects, to encourage greater farmer participation and to expand irri- gated areas rapidly. Due to poor investigations and construction, many of these projects fell short of expectations, which resulted in discouraging response from farmers. HMGN then switched back in the Fourth Plan to a policy of constructing medium-sized irrigation projects, mainly in the Terai. In keeping with the priority given to quick yielding investments, the emphasis has shifted in the Fifth Plan towards the completion of on-going schemes and new investment in projects with short gestation periods and high returns. 1.13 Bank Group's Participation in Irrigation Development: (Map IBRD 13469) The Bank Group is presently involved in three on-going projects and acts as executing agency for preparation of three further major projects. Birganj Irrigation Project (Narayani Zone), (NZ-I) (Cr. 373-NEP, US$6.0 M, 1973), under construction, was originally designed to improve and upgrade the Nepal Eastern Canal and 28,700 ha of its irrigation command area, as well as to install a 2,700 ha pilot tubewell scheme. In November 1977, IDA agreed to reduce the scope of the surface irrigation area to 16,000 ha, to accommodate a 50% cost overrun during 1974/77. After a slow start due to procurement and staffing difficulties, project implementation has steadily improved. All civil works and equipment contracts have been awarded, and construction has started on most contracts. The present number of staff is adequate to design and supervise the works. Irrigation operations were started in the tubewell area in 1976 and in 1,000 ha of the surface irrigated area in 1977. Water charges have been collected in the tubewell area where 95% of the beneficiaries have paid a higher rate (about NRs 100 per ha per crop) than elsewhere in Nepal. The project is now within 18 months of com- pletion. The Bhairawa-Lumbini Groundwater Project (Cr. 654-NEP, US$9.0 M, 1976), the first full-scale tubewell project in Nepal, provides for con- struction of 63 deep wells, detailed development of the 7,500 ha command area, and agricultural supporting services. The project had a slow start due to delays in procurement of equipment, but is now almost on schedule. Drilling of tubewells is proceeding with existing rigs until new rigs are delivered later this year. Construction of the irrigation and drainage networks is about to be started for the nine wells already completed. Power supplies are adequate for operating these nine wells, but future availability may be limited until the power supply agreements with India are fully implemented. A component under the first Rural Development Project (Credit 617-NEP, US$8.0 M, 1976) is providing assistance for improvement of small scale hill irriga- tion schemes and development of a high lift pump scheme on Batar plateau in Nuwakot District; progress is satisfactory. The UNDP-financed Major Irrigation (Far West Region) Project, for which the World Bank is executing agency, seeks to prepare three irrigation projects in the Mahakali Zone (12,000 ha), Bheri Zone (Babai) (13,500 ha) and Seri Zone (Jamuar Nala) (13,500 ha). Reconnaissance reports have been produced, and feasibility studies have been started on the first two projects. 1.14 In line with HMGN's objectives of upgrading and exploiting existing irrigation schemes, the proposed project was identified by a 1975 IDA mission. HMGN later engaged the consultants' services of Nippon Koei (Japan) to assist in the project feasibility study. During IDA appraisal in September 1977, a careful review of implementation capacity, project organization, and farmers'  participation was carried out, utilizing experiences gained from NZ-I, to determine an appropriate project design, including the construction schedule. II. THE PROJECT AREA The Chatra Canals Project 2.01 Nepalese-Indian Agreements. The proposed project would rehabili- tate the existing Chatra Canals Project (CCP), lying in the administrative districts of Sunsari and Morang on the left bank of the Kosi river (Map IBRD 13469). In 1964, HMGN entered into an agreement with the Government of India (GOI) under which GOI undertook to construct the CCP as part of the overall aid made available by India to Nepal. Headworks for the with- drawal of water for the project were constructed at Chatra, immediately down- stream of the gorge from which the Kosi debouches on to the Terai plains (Map IBRD 13526). Under the Kosi Project Agreement of 1954, as amended in 1966, Nepal has the right to withdraw any required quantity of water from the Kosi and its tributaries, and India has the right to regulate the balance and to generate power at the Indian-built Kosi Barrage about 30 km downstream of Chatra. 2.02 Construction. The GOI entrusted the construction of the CCP to the State of Bihar's River Valley Projects Department (RVPD), which started work in 1964. It included a gravity canal taking 2ff from the river at Chatra, and commanding a gross area of about 1,000 km . Bihar's RVPD substantially completed the Chatra Main Canal (CMC) in 1970, while the project's branch, secondary and some tertiary canals 1/ were constructed by 1974. Trial ope- rations of the canals were carried out between 1970 and 1975, when GOI handed over all the works to HMGN. The cost to GOI was originally estimated at NRs 58 M, but the completion cost is understood to have been about NRs 200 M (US$16 M equivalent). 2.03 CMC runs along a contour 100 m above sea level and commands the area limited by the Bakra river to the east, the boundary between Nepal and India to the south, and by a flood bund on the left bank of the Kosi to the west (Map IBRD 13526). The irrigation scheme is about 45 km from east to west, and varies in width between 20 and 25 km from north to south. The irrigation system consists of the 50 km long CMC with its intake on the Kosi River at Chatra, 17 km of branch canals, 210 km of secondaries, and only 105 km of tertiaries. The system is designed to irrigate an area of 66,000 ha. 2.04 Defects of the Chatra Canals. Downstream of Chatra the Kosi flows across an alluvial fan, at the head of which it divides into two channels (Figure 2.1). The main stem flows on the right of the river, and a subsidiary channel supplies the CMC intake on the left. The main channel has recently 1/ A tertiary serves about 200-500 ha, a secondary about 1,000-7,000 ha and a branch canal supplies two or more secondaries.  - 7 - been shifting further to the right, resulting in increased sediment deposi- tion on the left, thus extending a large shoal which is progressively restricting flow in the subsidiary supply channel. As this trend is likely to continue, the intake may be completely isolated from the river by the shoal during the dry season within the next two to four years. In addition, the bed level of CMC intake channel has been set 2 m lower than the present bed level of the river supply channel, and this has induced the movement of gravel and coarse sand into the canal at all flow levels, but particularly during the monsoon. Mainly for this reason, the CMC intake is routinely closed whenever the suspended sediment content in the intake channel exceeds 3 gram/liter. This regulation gives rise to 22 days of canal closure during an average monsoon, and over 80 days in a season of particularly heavy rains. 2.05 Below the intake, CMC passes through a 9-km long headreach in 10-m deep cutting. It is crossed by 6 large superpassages (cross drainage struc- tures) in the headreach for disposal of flood flows from the foothills. Due to inadequate design of these structures, flood flows have occasionally spilled into the canal, causing considerable damage and interrupting irriga- tion supplies. Other more frequent causes of canal closure are breaches which occur through weak embankments. This weakness is aggravated by the high water levels at which the CMC has to be operated due to heavy sediment deposits. Removal of sediment requires canal closure for maintenance to be lengthened from one month to at least 4 months, thus limiting the dry season irrigation period. Records of canal closure due to all the above causes are presented in Table 2.1. 2.06 Beyond the distribution outlets from CMC, there are no flow regu- lating structures in the secondary and tertiary canals. The distribution system is therefore uncontrolled. Construction of distributar canals was terminated wherever each canal decreased in capacity to 0.14 m /sec (5 cusecs), and the system is therefore incomplete. Because of this as well as structural weakness and damage, considerable waste presently takes place. As a result, only about 35,000 ha (53% of the command) receives some irrigation supplies. Drainage in the system is limited to local cross-drainage syphons, many damaged beyond repair. Overland drainage is field-to-field and discharges to natural drainage lines. Inundation of crops frequently occurs in low-lying areas (15% of the command) and along river banks (15%). Natural Resources 2.07 Topography. The irrigated area slopes from north to south with moderately steep gradients of 1 in 600 to 700. Elevations range from 115 m above mean sea level at the CMC intake to 60 m at the international border. The area is intersected by a natural north-to-south surface drainage pattern of numerous nalas (drainways), streams, and several rivers. Four of the rivers are shallow-cut in their alluvial fans, and frequent spills present flood hazards. In some cases the nalas and streams do not connect to the  - 8 - rivers but terminate in flooded areas. Nevertheless, the area is topographic- ally suitable for irrigated farming. 2.08 Soils. The alluvial soils of the project area comprise clay loams (26%), loams (50%) and coarse loams (24%). Soils are rather low in organic matter, nitrogen and phosphate, and moderate in potassium. Soil reaction varies from slightly acid to slightly alkaline, and with proper irrigation and drainage, there is little salinity hazard. Soils are moderately to well drained, and water-holding capacities vary from rather low to high. Most of the lands are suitable for growing paddy and upland crops with proper water management, including drainage (paras 3.09 and 3.18). 2 2.09 Surface Water. The Kosi river has a catchment area of 58,000 km of which almost a third lies in China. The river is notorious for its high sediment content which rises to about 20 gram/liter (2% by weight) during mon- soon floods (June-August). It is reported to be the fourth most sediment- laden river in the world. One of the causes of sediment is believed to be soil erosion occuring in China. In Nepal, most of the sediment problem in the Kosi cannot be prevented since it largely originates from fast flowing major tributaries, which scour out large quantities of gravel from their beds and banks. Landslides due to frequent earth tremors are also sources of sediment, while soil erosion from terraced farms makes a relatively minor contribution. The 12-year streamflow recor s at Chatra show that av rage monthly flows in the Kosi ranged from about 350 m /sec ij March to 4,500 m /sec in August, with mean annual run-off of 55 billion m . The maximum recorded flood (13,400 m / sec) occurred in August 1970, while the minimum run-off of 280 m /sec was recorded in February 1971. Four local rivers traverse the project area and two are reported as perennial. 2.10 Groundwater. The project area is underlain by thick alluvial depo- sits, water-saturated to within a few meters of ground surface, and forming part of the immense alluvial aquifer system of the Ganges basin. To the north, below the Mahabarat range, coarse deposits predominate, consisting mainly of outwash fan material. Sediments become finer to the south until, in the CMC command area, there is a larger proportion of clay beds. Although data is scarce, the area's similarity to places with known groundwater re- sources elsewhere in the Terai indicates the existence of a large aquifer potential. 2.11 Climate. The semi-tropical climate in the two Districts is charac- terized by two distinct seasons: wet (May through October) and dry (November through April). The annual rainfall in the CMC command area ranges between 1,200 mm and 2,500 mm, of which about 97% occurs during the wet season. Due to uneven rainfall distribution, supplemental irrigation is invariably neces- sary for high and stable crop yields. Rainfall during the dry season occurs in occasional showers. The mean monthly temperature ranges from 160 - 27 C during the dry season and 250 - 30 C in the wet season. The relative humidity is about 30-50% during the dry season and 60-75% during the wet period. Sun- shine hours average about 7-8 hours per day, and wind velocity about 7 km/hr.  -9- Socio-Economic Conditions 2.12 Population. There are about 600,000 inhabitants in Sunsari and Morang Districts and 285,000 in the command area of the Chatra Canals Project. The total number of households is estimated at 75,000 in the two Districts and 44,000 in the command area, with an average family size of 6.4. Farm households account for about 80% of the total, of which about one-third are landless. Most of the command area has recently been transformed from forest to cultivated land. The level of agricultural development is, therefore, relatively low, and per capita income is about half of the national average (US$120 in 1977 prices). 2.13 Land Tenure. The average landholding is estimated at 3.3 ha. "Small" and "marginal" farmers (less than 3.0 ha) account for over 69% of the total number, but control less than 23% of the cultivable land. On the other hand, farmers with 7.0 ha or more (11% of the total number) control about 50% of the area. Tenancy accounts for about 21% of the cultivated land. Fees are officially fixed according to the grade of the land, and in the project area they are generally equivalent to about 640 kg of paddy per ha. At present level of yields, this accounts for approximately 50% of the gross value of production. Provision of inputs is generally shared between land- lords and tenants. 2.14 Communications. The project area is centered on Biratnagar, an important administrative, marketing and processing center, and the second largest city in Nepal. The East-West National Highway and the Dharan- Biratnagar Road pass through the project area. Another road connects Birat- nagar with Rangelee, an Eastern Region township, located adjacent to the project area. The area is served by a small airport at Biratnagar. A branch line of the main Calcutta railway reaches Jogbani, located on the Nepal-India border. 2.15 Public Services. Only four main towns (Biratnagar, Inarwa, Ithari, Dharan) in the two Districts have access to electricity provided from the 33 kv transmission line originating from Jogbani and Kosi Barrage (para 2.01). Potable water supplies are available only in the main towns, and most vil- lages rely on open ponds which become contaminated and often empty towards the end of the dry season. Health clinics and schools are limited to towns and a few of the larger villages. Cultivation Practices 2.16 Present Cropping Pattern. In the project area paddy, jute, wheat, oilseeds, sugarcane, pulses, and vegetables are grown. In rainfed areas, the predominant cropping pattern is a paddy-fallow rotation, and in areas where water supplies are available, a cropping pattern of jute-paddy-fallow is practiced. Present cropping intensity is about 117%, of which paddy and jute account for 72% and 30% of total cropped area, respectively. Wheat is usually grown in rotation with paddy during the dry season but accounts for only 6% of the crop area, some of it irrigated. Sugarcane is an important cash crop, but due to limited milling capacity, it only accounts about 2% of the area. Oil- seeds and pulses are grown in rotation with jute on a limited area (4%). Some vegetables (2%) are also grown from home consumption in both wet and dry seasons.  - 10 - 2.17 Crop Yields. Local varieties of paddy are mostly grown in the area, producing low yields (1.1 tons/ha for rainfed paddy and 1.5 tons/ha for irrigated paddy). Improved varieties such as IR-8, Parwanipur No. 1 and Masuli are also used, but yields (2.0 tons/ha) are below their potential because of greater susceptibility to deficiencics of fertilizer ^ d water. Improved varieties of wheat such as RR-21, HD 1982, and NL-30 were first introduced into the area about ten years ago, and farmers usually rely on the soil moisture for germination and on the sporadic winter rains for growth. Some wheat is also grown under irrigation but due to the unreliable water supply, yields are generally low (about 1.1 tons/ha). Jute, usually planted at the onset of the wet season, is the most important cash crop in the area, and average yield is about 1.0 ton/ha. Sugarcane yield is extremely low (about 17 tons/ha) due to poor practices, unreliable water supplies and lack of drainage. Other minor crops such as pulses and oilseed are grown mostly under rainfed conditions and their low yields offer much scope for improvement. 2.18 Inputs Used. At present, practically no chemical fertilizers and insecticides are applied to crops grown in the project area. Those few farmers who apply fertilizers use insufficient amounts. Animal power is used extensively for farming activities such as plowing, harrowing, puddling, and for threshing. Farm mechanization is rarely seen in the area. Agricultural Supporting Services 2.19 Extension, Research and Training. Extension services in the project area falls under the technical command of two District Agriculture Develop- ment Officers (DADOs) of Sunsari and Morang Districts, who report to the Regional Director of Agriculture, Eastern Region. The existing staffing pattern is inadequate as a field level worker serves, on average, 2,000 farm families. In addition, insufficient technical back stopping, poor training, lack of systematic diffusion of farming technology, as well as shortage of transportation and housing facilities, further reduce the effectiveness of extension workers. The Tarahara Agriculture Research Station, situated 13 km north from Biratnagar, is the main jute research station for Nepal and provides technical support to the extension services in Sunsari and Morang. It also conducts various agronomical trials on paddy, wheat, maize and vege- tables. Most of the research work is not particularly adapted to the pro- ject area. Consequently, there is no basis for extending research results to the farmers. 2.20 Credit and Input Supply. ADBN has established Regional and Branch Offices at Biratnagar and one Sub-branch in Sunsari District. There are also about 80 Sajhas (Cooperatives) spread throughout the two Districts, each serving about 800-1,000 farm households. Although the coverage of credit ins- titutions is impressive, the performance has been less so, due to inadequately trained field staff, lack of supervision and poor discipline. For the period of 1972/73-1975/76, the weighted average recovery rate was only about 60%. However, this is expected to improve since ADBN has recently received assis- tance from the Asian Development Bank in organization and management, and particularly in staff training. Commercial banks involvement in agricultural  - 11 - lending has been limited. Lending from private sources is widespread though there is no reliable data to indicate its extent. AIC has a Regional Office in Biratnagar, and there are some 29 dealers handling inputs. Additional storage buildings are being built in the project area, in response to the increase in sales of modern inputs such as fertilizer and pesticides. 2.21 Marketing. Marketable surplus from the Terai is mostly exported to India. A study on the trade flow of cereals in Nepal (1971/72) showed that about 50% of total cereal production is marketed, of which about 70% left the country as compared to 30% traded within the country. Most of the important agricultural products in the project area are likely to be marketed in India through both official and/or informal channels, in view of the proximity and ease of access to India as compared to the other regions within Nepal.  - 12 - III. THE PROJECT Project Concept 3.01 The proposed project would rehabilitate the largest existing irri- gation scheme in Nepal with the objectives of (a) restoring the system to its original scope and capability; (b) improving the reliability of water deliveries, and therefore to increase farmers' confidence in the system; and (c) accelerating agricultural development and thus increasing farmers' incomes and rural employment. 3.02 To achieve the above objectives, the project is designed to (i) re- duce the incidence of frequent canal closures (paras 2.04-2.05); (ii) eliminate severe sediment deposition in the canal (paras 2.04-2.05); (iii) restore the conveyance capacity of the canal system and reduce waste (paras 2.05-2.06); (iv) ensure adequate flow into the CMC from the Kosi in the dry season (para 2.04); (v) intensify agricultural extension, research and training (para 2.19); and (vi) initiate extension of the distribution system down to 10-ha groups of farm, and drainage improvements (para 2.06). 3.03 Since implementation capacity would be constrained by availability of staff and funds, the project would include all priority works (i) through (v), and as much of (vi) as can reasonably be carried out in a five-year period between 1978/79 and 1983/84, by which time the whole system would be restored. The proposed project would accordingly involve the restoration and upgrading of the existing system throughout the whole of the CMC command area (66,000 ha), extending the canal network down to groups of farms of 10 ha in 6,400 ha, and improving drainage in about 12-15,000 ha within the CMC command. Main Project Features 3.04 The main components of the project would be: (a) river control and flood protection works on the Kosi river in the vicinity of the Chatra Main Canal (CMC) intake (para 3.05); (b) sediment control arrangements at the CMC intake and along CMC (para 3.06); (c) restoration and improvement of the canal system and provision of about 180 new structures throughout 66,000 ha (para 3.07); (d) planning and design of complete minor distribution canals extending to outlets serving 10 ha groups of farms throughout an area of about 18,000 ha and, within this area, construction of canals and drains serving 6,400 ha (para 3.08);  -13 - (e) drainage improvements covering 12-15,000 ha (para 3.09); (f) pilot schemes for tubewells, improved water management and canal micro-hydroelectric developments (para 3.10); (g) streng.nening agricultural extension, research and training activities throughout Sunsari and Morang Districts (paras 3.11 - 3.13); (h) equipment and vehicles for construction, survey and laboratory activities, and project operation and maintenance (para 3.14); (i) buildings for engineering and agricultural activities, and staff housing (para 3.15); (j) technical assistance (paras 3.16, 3.17, 3.18). The project would have an estimated cost of US$37.5 M, including US$0.5 in taxes and duties, and would be executed over a five-year period by the Sunsari-Morang Irrigation and Drainage Development Board (SMIDDB). Detailed Features 3.05 River Control Works. To prevent further restriction of the sub- sidiary supply channel on the left side of the Kosi river (para 2.04), it is tentatively proposed that a guide island would be constructed at the up- stream tip of the shoal (Figures 2.1 and 3.1). The island would stabilize both the river approach and the shoal, by fixing the point of bifurcation between the main channel and the subsidiary channel supplying the project, so that about 20% of the river discharge would always flow towards the CMC intake. With the construction, proper operation and maintenance of a gated sluice bay (Figure 3.1, para 3.06) as well as the guide island, ample dry season water supplies for the project would be secured. The most effective configuration of the guide island and the sluice bay would be fixed by con- sultants, following hydraulic model tests. To prevent the possibility of inundation of the CMC headreach during floods, and consequent widespread damage to the project, a protective embankment would be built on the left bank of the Kosi near the intake (Figure 3.1). 3.06 Sediment Control. The control and disposal of excess sediment entering the CMC from the Kosi would be achieved by three measures (Figure 3.1), depending upon the findings of surveys, model tests and designs: (a) by constructing a sluice bay in the river to reduce sediment inflow; (b) by dredging coarse sediment from a settling basin; and (c) by extracting medium- grained material through a sediment ejector in the canal bed. The sluice bay, consisting of a gated weir and a training wall, would be located on the Kosi river supply channel. The settling basin, located a short distance below the intake, would enable inflowing sand and gravel to be excavated by a dredger. Sand and silt would largely be discharged through a slotted conduit (vortex ejector), installed across the bed of the canal headreach, and returned back to the river through a nala. Excavation of the existing 100,000 m of deep  - 14 - deposits in the first 15 km of CMC rould be carried out as soon as possible. Remaining deposits (about 200,000 m ) would be cleared after completion of the new sediment control arrangements and low-level sluices for rapid dewatering of the main canal. These works would restore canal capacity, reduce the number and duration of supply interruptions by 80-90% (Figure 3.2) and shorten the annual maintenance closure period from 4 months to 4 weeks. 3.07 Restoration and Improvements (Table 3.1). The works would include (a) strengthening CMC embankments to prevent frequent breaches and canal closures; (b) repair or reconstruction, where necessary, of about 70 main canal structures to prevent leakage and improve flow control; (c) strengthen- ing embankments of all secondary and tertiary canals to avoid overflow; (d) repairing 200 existing regulating structures and constructing about 35 new secondary canal regulators and 1,000 tertiary outlets to control water flows. In addition, improved protection of the system against storm drainage would be provided by construction of about 20 cross-drainage structures and 14 escape spillways on the secondary canals. 3.08 Farm Group Development (FGD). Under present conditions, water dis- charges from canals through unregulated outlets commanding about 100 ha, and its distribution to farms is extremely haphazard. Under the project, water distribution and drainage would be improved by the construction of about 150 field canals (supplied from tertiaries) commanding blocks of about 50-ha and equipped with regulating outlets each serving groups of farms of 10 ha, as well as tertiary drains. Within the farm groups, irrigation ditches and drains to farms would be installed by cooperative action of local farm labor under the supervision of project staff. This arrangement has worked satis- factorily in NZ-I Project. Implementation constraints would limit the area thus improved to about 6,400 ha during the 5-year project period (Map IBRD 13526). A further 12,000 ha would however be surveyed, planned, designed and ready for construction by 1983. It is expected that FGD would be completed throughout CMC command by 1990-92. 3.09 Drainage improvement. To ensure proper drainage of the 6,400 ha selected for FGD, natural drains serving that area would be improved where necessary, starting from their outfalls near the lower boundary of the proj- ect and covering about 12,000 ha. Works would include straightening and in- creasing the capacities of natural channels, excavation of new secondary and tertiary drains, and control structures. Other priority drainage works would be constructed to reclaim about 3,000 ha of low-lying areas which are subject to inundation. Limited works would also be constructed to protect canals from flood damage by minor rivers crossing the project area. Road drainage would be improved where necessary by construction of culverts, using labor organized by the panchayats and with materials supplied under the project. 3.10 Pilot tubewells. The project would install and operate 25 tube- wells, energized from the existing 33 kv transmission system, to test the technical, economic, and organizational feasibility of supplementing surface water supplies with groundwater, in areas such as in the tail of the canal system where irrigation water supplies are limited. Five deep wells, located  - 15 - along the East-West Highway, would test the aquifer characteristics under production pumping. Of 20 proposed shallow tubewells, 10 would test their effectiveness in subsurface drainage and the control of waterlogging in low- lying areas, and 10 would provide reliable irrigation supplies to farmers in selected tail areas, to test the application of improved water management practices. Three small hydroelectric plants (micro-hydels) would be installed at canal falls, to test the feasibility of generating local power in remote areas. 3.11 Agricultural Extension, Training and Research. Under the project, agricultural extension would be reorganized in both Sunsari and Morang Districts, and the link with research and training would be strengthened through better organization, regular staff training, and technical back- stopping. Extension services in each district, modelled after the T&V system, would be headed by a District Agricultural Development Officer (DADO) who would supervise field staff, comprising Junior Technicians (JTs), Junior Technician Assistants (JTAs) and Panchayat Level Assistants (PLAs). Field staff coverage and responsibility in each district would be as follows: No. of Villages/ No. of Farm Staff Staff Panchayats Area (ha) Families Designation Supervised Supervised Supervised Advised JT 4-5 JTAs 30-40 50,000-68,000 9,000-16,000 JTA 5-6 PLAs 5-6 8,000-10,000 1,500-2,500 PLAs - 1 1,700-2,000 500-700 This intensity would permit visits by PLAs on fixed days of every week to each farmers' group, as well as strict supervision of all activities. 3.12 In support of staff training, five additional Subject Matter Specialists (SMSs) for Agronomy (paddy), Agronomy (other cereal crops), Irri- gation, Plant Protection, and Agriculture Economics would be appointed. JTs and JTAs, who are high school graduates with 1 to 2 years of formal training in agriculture, would attend refresher courses once a month. PLAs, who are selected farmers in the area with 3 weeks of initial intensive training, would attend one week courses on major crops prior to each season, and regular fortnightly classes on various cultivation practices and use of inputs. In addition, seasonal seminars would be organized for the JTs, JTAs, and graduate staff. Visits to other project areas in Nepal and India, where extension services are working effectively would form part of the training. 3.13 In addition to basic research support from the Tarahara Agriculture Station, the project would benefit from applied research, such as field trials on foodgrain and cash crop varieties suitable for the area, conducted at Jhumka Seed Multiplication Farm and on selected farms in the area. These trials would also be used as demonstration for extension workers and contact farmers. In support of the extension, training and research activities, the project would provide vehicles for staff (para 3.14), equipment (para 3.14), training centers, housing, offices and other buildings (para 3.15). During  - 16 - the project implementation period, most of the extension, training and research efforts would be concentrated in the CMC command area to ensure effective utilization of irrigation supplies. 3.14 Equipment and Vehicles. The project would provide equipment and vehicles needed for force account construction; for survey, supervision, operation and maintenance of the works; for agricultural extension, research and monitoring; and for technical supporting services, as well as workshop equipment for maintenance and repairs. Most of the equipment and vehicles would have to be imported, together with spare parts and assemblies, and a list of the estimated requirements is presented in Table 3.2. 3.15 Buildings and Facilities. Additional low-cost technical and admin- istrative offices, a laboratory, and a workshop would be built at the exist- ing project headquarters in Biratnagar. Five additional construction-cum- operations subcenters would be built in the CMC command area including offices, equipment maintenance facilities, stores and housing. For the project and regional engineering and administration training program (Annex 1), a train- ing center with rooms (to seat 25 and 100), dormitories (total 25 beds) and associated buildings would be built at Biratnagar. Ten sub-district centers as well as two district offices and 31 quarters of inexpensive construction would be built for some of the agricultural extension and research staff in the Districts. To ensure effective operational control of the distribution canals, an assurance has been obtained from HMGN that telecommunications facilities would be installed and made operational not later than December 31, 1979. 3.16 Air Photography and Mapping. The 20-year old, 1:15,840 scale maps available for the project area are inadequate for detailed project planning. To avoid a one-year delay, DIHM has already a arded a contract for 1:20,000 scale air photography covering about 1,100 km of the project area, and new 1:5,000 scale maps of 6,400 ha for the initial farm group development (FGD) works. The mapping, financed from the on-going, IDA-assisted Bhairawa-Lumbini Groundwater Project, is being carried out by Certeza (Philippines) at a cost of US$0.2 M. The work is expected to be completed by September 1978. The project would provide for additional 1:5,000 scale mapping of 12,000 ha for planning FGD works. In addition, some US$0.25 M would be provided under the project for air photography and mapping of further irrigation projects in Nepal. 3.17 Consultants. To avoid delays in starting high-priority works, DIHM has already negotiated agreements with consultants for detailed engineering of the CMC restoration works, sediment control arrangements and Kosi river train- ing works. Surveys and designs of the CMC works are to be carried out by Sir Murdoch MacDonald and Partners Ltd (UK), and their activities would be financed from the on-going, IDA-assisted Bhairawa-Lumbini Groundwater Project. Design of the river and sediment control works will be the responsibility of Coode & Partners (UK). Their work would be financed from the IDA-assisted Technical Assistance Project, except for the hydraulic model studies of the river, which will be financed by a grant from the UK. The proposed Credit would include funds for project consultants (about 130 man-months at about US$6,500/m-m).  - 17 - The latter would provide inservice training, advice and guidance to project staff in project planning; preparation of bidding documents and bid evaluation; modern construction techniques; construction quality, progress and cost control. These consultants would also advise HMGN staff during the preparation of fea- sibility studies for further development of the project area. An assurance has been obtained from HMGN that the project consultants would be employed whose qualifications, experience and terms and conditions of employment shall be satisfactory to IDA. Their selection by SMIDDB in a manner satisfactory to IDA would be a condition of credit effectiveness. 3.18 Future Feasibility Studies. The subsequent stage of the Sunsari- Morang Irrigation and Drainage Development Project would focus on detailed development of the project area, which would be less complicated than the first stage. An assurance has been obtained from HMGN that the DIHM and DA would complete the feasibility studies of the subsequent stage of the devel- opment, with assistance and advice from the project consultants (para 3.15), by December 31, 1981. With the extension of the irrigated paddy area in the wet season under the project (Figure 6.1), the watertable which is presently between 0.3 and 4 meters from ground level may rise close to the surface in about 3 to 5 years, causing temporary waterlogging of some land used for the following dry season crops. Although soil drainage characteristics are satis- factory in much of the area, in some of the command where waterlogging may occur during the early part of the dry season, alternative cash crops with lower irrigation requirements such as groundnuts and soybeans may have to be planted on a larger scale during the wet season. However, little research is being done on the feasibility of processing and marketing of these crops. An assurance has been obtained from HMGN that the Department of Food and Agricul- ture Marketing Services would complete a feasibility study of processing and marketing for cash crops grown in the Terai, particularly in the project area not later than December 31, 1981. Water Demand, Supply and Quality 3.19 Irrigation Demand. The controlling factor in irrigation demand is t e conveyance capacity of CMC which, when it is restored, will be 45 m /sec. This design discharge may be exceeded by 10% for short periods to meet peak requirements without damage to the canal. The extent of the area which could be irrigated in the wet season would be mainly limited by the canal capacity in relation to irrigation requirements of HYV and local paddy, jute and sugarcane crops; in the dry season, limiting factors would not be water supplies so much as the farming system and the availability of well-drained land for HYV wheat. Table 3.3 shows the estimated irrigation requirements for the main crops, using the modified Penman method. The resultant monthly crop irrigation demands per hectare for the projected cropping pattern (Table 6.1) are summarized below. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ---------Cubic meters per hectare of cultivated area-------- Monthly irri- gation demand at the field 296 219 - 463 1,014 813 698 311 723 405 194 242  - 18 - Gross monthly diversion demands, and areas irrigable, are derived by taking into account the overall irrigation efficiency estimated to vary from 29% at present to 55% at full development (Table 3.4). On this basis, the resultant net areas irrigable from the CMC during the wet season, with a peak water requirement in May, would be about 35,000 ha at present and 66,000 ha on com- pletion of the project. About 4,300 ha are irrigated during the dry season at present, and about 14,000 ha would be under irrigation with the project. 3.20 Supply. The Kosi river is subject to flash floods but has a reliable dry season discharge. The flows in the river measured over the last 12 years near the CMC intake at Chatra provide the following data: Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -------------------Cubic meters per second ------------------------ Average Flow 473 394 349 430 717 2,237 4,432 4,499 3,532 1,942 879 593 90% Pro- bable Flow 399 327 278 359 608 1,884 3,698 4,201 2,960 1,532 736 503 Require- ment at CMC in- take 13 10 Clsd. 21 45 36 31 41 32 18 9 11 River flows would therefore be much more than sufficient to meet project requirements at all times. In addition, under the Kosi Project Agreement with India, Nepal has the right to divert as much water as is needed for any purpose (para 2.01). Difficulties in supply which are anticipated due to shoaling in the river would be rectified under the project (para 3.05). Analysis of Kosi water samples taken at Chatra indicate that the supply is of good quality throughout the year. Conductivity is about 100 micromhos per cm, and pH is between 7 and 8, which classifies the water as suitable for pro- longed use for irrigation. Engineering Designs and Construction Methods 3.21 The design of river works and sediment control arrangements by con- sultants would be based on modern hydraulic and fluvial process technology. However, the structures would involve only traditional stonework and concrete construction. For canal restoration and improvement works, designed by consultants, cost-saving techniques would be used where appropriate, including cementation of foundations (to avoid reconstruction), well-point dewatering (in high watertable areas), and in-situ lining of leaking cross-drainage syphons (to avoid dewatering the canals). Wet or heavy earthworks, including canal embankments and sediment excavation, would be constructed mainly by machinery, while most other works would be labor-intensive. Compaction of earthwork would be mostly by machine. Innovations to be tested in pilot schemes would include construction of seepage-proof irrigation channels in  - 19 - lime-stabilized earth; field irrigation structures designed for prefabrication and low-cost installation; and small-scale, low-head hydro-electric units (hydels) for installation at canal falls and prefabricated for assembly at remote sites. Implementation Schedule 3.22 The project would be implemented between 1978 and 1983. The pro- posed construction program (Figure 3.3) takes into account existing irrigation operations which must be continued during project implementation. The project consultants and staff required for the first year's construction program would be in post by October 1978. Basic accommodation and office buildings would be constructed by June 1979. Subcenters and agricultural buildings would be built in 1979/80. High priority works, such as sediment control, and CMC restoration and improvements, would be started in early 1979 and completed in 1980 and 1982, respectively. Next highest priority would be given to the restoration of all distribution canals and structures, and construction of additional control structures down to 100-ha outlets. These works, which would be carried out progressively from CMC headreach to tail, would be started in late 1979 and completed in 1983. Drainage improvements would have to be started in late 1978, to ensure adequate drainage for farm group devel- opment works scheduled for construction between 1980 and 1983. Equipment and vehicles would be procured for delivery in 1979/80 to meet the requirements of construction works as well as project operation. The rate of construction expenditure is expected to increase from US$2.7 M equivalent in FY79 to US$5.3 M in FY81. These rates lies within the planning, supervision and control capacity of the estimated staff requirement and availability for the project. Based on experience elsewhere in Nepal, including the NZ-I Project, the construction program is realistic. Environmental Effect 3.23 With the redistribution of irrigation supplies which the project is designed to achieve, there will be less ponding of waste water in the upper reaches of the distribution system. In addition, drainage of low- lying areas would be improved. As a result, some of these areas would be brought under cultivation and there would be a reduction in locations which are malaria-prone.  - 20 - IV. COST ESTIMATES AND FINANCIAL ARRANGEMENTS Cost Estimates 4.01 The total project cost, estimated at US$37.5 M equivalent, including about US$0.2 M in taxes and duties, is summarized below and detailed in Table 4.1. The foreign exchange component would be about US$20.5 M equivalent, or 55% of the project cost. Annual operation and maintenance costs on completion of the project have been estimated and are presented in Table 4.2. The esti- mated cif costs of equipment and vehicles needed for project construction, operation and maintenance are listed in Table 3.2. 4.02 The estimated costs for civil works are based on recent contract awards in the Terai, and unit prices for equipment and materials are based on 1977 quotations from suppliers, cif Calcutta, with an allowance for trans- portation to Biratnagar. Allowances have been included for four years' supply of spare parts and assemblies, variously estimated at 10% to 60% of the equip- ment value depending on its utilization factor, and with a weighted average of 35% for mobile plant. Physical contingencies have been allowed for in construction costs, varying from 10% to 30% depending on the state of pre- paration of designs, with a weighted average of 18% (Table 4.1). Price contingencies are estimated at about 18% of the project cost based on the following inflation rates: 1978/79 1979/80 1980/81 - 1982/83 ------------------ %0 ------------------ Civil Works and Services 8 7.5 7 Equipment 7 6.5 6  - 21 - Summarized Cost Estimates (Exchange rate, NRs 12 = US$1.00) Foreign Local Foreign Total Local Foreign Total Exchange ------NRs million---- -----US$ million