Docment of The World Bank FOR OmCAL USE ONLY Report No. 14160 PROJECT COMPLETION REPORT INDIA NARMADA RIVER DEVELOPMENT - GUJARAT WATER DELIVERY AND DRAINAGE PROJECT (CREDIT 1553-IN) MARCH 29, 1995 Agricultural Operations Division Country Department II South Asia Regional Office This document has a restricted distribution and may be used by recipients ondy in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Equivalents Name of Currency: - Rupee (RpJRs.) Rate of Exchange: - At Appraisal (August 1984) USS 1.00 = Rs. 12.00 - During Implementation, (FY 1988 - FY 1993) US$ 1.00 = Rs. 18.72 - At Completion (Closing Date July 1,1992) USS 1.00=Rs. 25.60 Fiscal Year of Borrower: April I to March 31 Abbreviations NCA Narmada Control Authority BOC Board of Consultants NDD Narmada Development Department CAD Command Area Development NPG Narmada Planning Group CADA Command Area Development Authority NRD Narmada River Development CCA Cultivable Command Area NWDT Narmada Water Disputes Tribunal CHPH Canal Head Powerhouse OD Operational Directives CWC Central Water Commission ODA Overseas Development Agency CPU Central Procurement Unit OMS Operational Manual Statement DCA Development Credit Agreement O&M Operations and Maintenance D,M&I Domestic Municipal and Industrial ORG Operations Research Group DOA Department of Agriculture PCR Project Completion Report ED Executive Director of the Bank PFP "Planning for Prosperity" by SSNNL EIA Environmental Impact Assessment QC/QA Quality Control/Quality Assurance ERR Economic Rate of Retum RWS Rotational Water Supply EL Elevation SA Service Area FSL Full Supply Level SAR Staff Appraisal Report GAU Gujarat Agriculture University SDR Special Drawing Rights GDP Gross Domestic Product SDV Supplementary Data Volumes of the SAR GOG Govemment of Gujarat SMS Subject Matter Specialist GOI Government of India SSP Sardar Sarovar Project GOMP Government of Madhya Pradesh SSNNL Sardar Sarovar Narmnada Nigam Limited GOM Government of Maharashtra TDS Total Dissolved Salts GOR Government of Rajasthan' UK United Kingdom ICA Irrigated Command Area UNDP United Nations Development Program ICB Internal Competitive Bidding VEW Village Extension Worker MAF Million Acre Feet (1,235 Mm3) VSA Village Service Area MIS Management Information System WALMI Water and Land Management Institute MOEF Ministry of Environment and Forests WUA Water Users' Association Glossary Chak - Irrigation service area of about 40 ha in size below the outlet from the minor Distributary - Irrigation channel, offRaking from the main or branch canal, with capacity greater than 700 liters/second Field Channel - Irrigation channel offlaking from a minor to irrigation farms in the chak Ha - Hectare (approx. 2.5 acres) Hot Season - April to June Kharif - Wet season; June to October Minor - Irrigation channels with capacity less than 700 I/s and serving chaks Nigam - Sardar Sarovar Narmada Nigan Limited Rabi - Winter season/dry season; November to March Taluka - Sub-division of a district FOR OMCIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT Subject: Project Completion Report on India - Narmada River Development (Gujarat) Water Delivery and Drainage Project (Credit 1553-IN) 1. Attached are Parts I and II of the Project Completion Report (PCR) on the Narmada River Development (Gujarat) Water Delivery and Drainage Project (Credit 1553-IN). Part I was prepared by the South Asia Regional Office. The Borrower contributed Part II; in addition, many of the Borrower's comments on Part I are recorded as footnotes to the relevant paragraphs. Four supporting annexes and Part III (133 additional pages) are not included but are available on request. This PCR should be read in conjunction with the PCR on the parallel Sardar Sarovar Dam and Power Project-SSDPP (Credit 1552-iN/Loan 2497-IN). 2. This project and SSDPP form part of the Narmada River Development Plan (NRDP) which aims to harness the Narmada River through a series of dams and associated investments for irrigation, energy and domestic/municipal/industrial (DMI) benefits, largely in three states-Gujarat, Maharashtra and Madhya Pradesh. Through the deliberations of the Narmada Water Dispute Tribunal (NWDT) in December 1979, the Government of Gujarat (GOG) would have a 32 percent share of the water, receive nearly all of the NRDP irrigation benefits (Rajasthan receiving a minor allocation at the northwest extreme of the main irrigation canal), and correspondingly assume most of the direct irrigation and DMI development costs, as well as 50 percent of the Sardar Sarovar Dam costs. The project encompasses a three-year time slice of the development program which includes main canal excavation and lining, installation of a water regulation system, seven river cross-drainage structures, construction of 13 branch canals, and development of 12 land blocks with associated distributory canals and drainage. Partial construction of most of these investments was envisaged in the time slice. Training and technical assistance components were also included. The credit was approved in March 1985 and closed in July 1992, 39 months behind schedule. 3. Initial implementation was delayed by lack of GOI forestry and environmental clearances. By the final closing date, the planned construction of the main canal had been realized and installation of regulators had met 88 percent of target. However, branch canal construction was less than 60 percent of target, and hydraulic structures only 35 percent of target. Construction in the development blocks had not begun due to delayed designs and high-priced tenders. A comprehensive operation and maintenance manual for the canal operation was prepared; bids were invited for the detailed design, 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. 2 installation and commissioning of a remote control monitoring system (financing of this was transferred to the continuing SSDPP Loan, but this too was canceled prior to contract financing); and a practical computerized management information system (MIS) was developed and used (as for SSDPP). The project set fully satisfactory engineering and construction standards for all major works. However, project implementation delays continue to this day (see Memorandum on SSDPP). 4. The 1979 NWDT made no reference to canal-affected families (CAFs). During project preparation and appraisal, both the Borrower and the Bank apparently assumed that CAFs would be treated as in previous Bank-financed infrastructure projects, i.e. through cash compensation for lost assets in accordance with the Land Acquisition Act, as amended in 1984. Accordingly, no reference was made to CAFs in either the SAR or legal documents. However, during implementation it became clear that in many cases the compensation paid to CAFs did not fully cover the cost of new land (with land value appreciating due to prospects for irrigation access) let alone the value of lost fixed assets. A Bank mission in 1989 confirmed that the existing arrangements would not ensure that all CAFs would be able to recover a living standard at least equal to that before displacement (as required by the 1980 OMS 2.33). In 1991, the GOG, in response to Bank recommendations, engaged a local management institute to assess the number of CAFs and their needs. This report indicated that a very high number of persons would be affected, and recommended a compensation policy which was more than GOG had considered. In response, GOG undertook to do its own in-house investigation rather than accept the consultant's report. 5. An independent review (IR) of SSDPP and this project was commissioned by the President of the Bank in 1991 in response to serious criticisms of resettlement (R&R) and environmental aspects of the projects by non-governmental organizations. The ensuing June 1992 report criticized the Bank for its lack of adherence to OMS 2.33 and the GOG for lack of a reliable database and inadequate compensation arrangements. A Bank mission in July 1992 confirmed these findings and proposed a number of measures to address the R&R problems. Arrangements for treatment of CAFs became part of the action plan stipulated by the Bank in October 1993 as a condition for continued funding of SSDPP (see Memorandum on SSDPP). The required socioeconomic survey of CAFs has been completed and will firm up final figures when published. Indications are that 68,000 people have so far been affected by canal construction; 230,000 people are likely to be affected (about 7 percent of the command area population) by the total program (which compares with about 130,000 persons to be affected by SSDPP). An interim R&R policy has been issued providing market value compensation and allocation of a 0.5 ha of replacement irrigated land for those losing more than 50 percent of their land and who are left with less than 1.0 ha. 6. It is clear that the Bank did not follow its own environmental guidelines, which came into existence before the final appraisal mission in August 1984 (OMS 2.36 of May 1984). The 1984 OMS was explicit in its requirement that, at appraisal, staff should assess environmental findings, evaluate the magnitude and timing of any adverse effects of the project, and specify environmental measures to be undertaken during the project; legal agreements would covenant these actions to meet the objectives of OMS 2.36. A number of ad hoc environmental studies on the possible effects of the irrigation and drainage networks were undertaken by GOG in preparation for the required GOI clearance. Based on these findings, the SAR referred to the need to prepare, during implementation, a comprehensive environmental assessment and an action plan for any necessary mitigatory measures. In the Project Agreement with GOG, action on the health measures was covenanted, but specific reference was not made to the overall environmental plan which was an obligation under the Project 3 Agreement with GOG for SSDPP, where an overall plan was to be produced by December 1985. The absence of an environmental plan by Board presentation meant that OMS 2.36 was not satisfied. In practice, the plan was not submitted in December 1985, nor by an extended deadline in 1989. As in the case of SSDPP, the GOI forestry clearance was still pending at Credit approval; GOI environmental and forestry clearances were obtained in 1987, conditional on specific enviromnental studies and plans being completed by 1989 (see Memorandum on SSDPP). Ultimately, the required plan was submitted in August 1993. 7. Coordination by the Narmada Control Authority of the environmental work under the two parallel projects was weak. Bank staff gave more emphasis to environmental issues after 1987 but even then health issues and environmental training programs did not receive adequate attention. The 1992 IR report criticized the lack of compliance with GOI and Bank environmental guidelines and regulations and the futility of the Bank's "incremental" approach. It expressed concem about the probability of soil and water-logging problems in coastal areas and the lack of adequate studies to support the assumptions on soil and drainage conditions. It also maintained that the Bank and GOG had not adequately addressed the public health issue. The Bank agreed with the criticisms on the absence of environmental plans and slow progress on health issues, but asserted that the long gestation period of the project meant that any identified untoward effects could be managed, and contended that the concerns regarding waterlogging and salinity were not as serious as suggested. 8. The July 1992 Bank mission confirmed that delays in environmental plans and actions had not caused serious consequences to date, but reported that GOG was cognizant of the urgent need for action as identified by earlier Bank missions and the IR. The completion of an Environmental Impact Assessment for the command area and adequate implementation of Gujarat's malaria control program were subsequently included as benchmarks to be achieved by March 31, 1993 to enable continued funding of SSDPP (para. 5). With the help of ODA-funded consultants a plan was produced, but GOG in September 1993 indicated that the final product for the command area would not be available until December 1994 as studies on ground water modelling, drainage and secondary salinization still had to be completed; this plan is only now nearing completion. Staffing and funding of the general health program operations continued to be problematical. 9. The IR also raised questions regarding the project's hydrological asumptions. These related to the validity of river flow calculations used to allocate water shares among the states, and the capacity of the system to meet the planned water requirements of the command area The Borrower's Central Water Commission (CWC) and a Bank consultant subsequently reviewed the project's hydrology. Both the CWC and the consultant confirmed the adequacy of the flow series used in the model. However, a 1994 review by an independent team of experts appointed by the GOI could not come to a firm conclusion on the hydrology and recommended a reexanination of the "dependable water availability" issue. Thus, apart from reduced energy considerations, there remains concern about the reliability of the estimates for water availability for the intended irrigation program in the command areas. In a simplified operational study, the consultant projected that, although the risk of shortages increased in drier years after the year 2000, dependability was high for DM1 and irigation requirements until the year 2024 when the NWDT would revisit awards to the riparian states; adopting a lower level in the irrigation by-pass tunnel in the Sardar Sarovar dam would ensure demands were met in full to 2024 (but this has not yet been agreed by Madhya Pradesh - see SSDPP Memorandum); and after 2024 dependability would be significantly reduced, with dry season crop requirements being met only in 50 to 60 percent of years. Bank staff, however, consider the consultant has overestimated 4 water availability and underestimated crop water requirements, and therefore the PCR analysis uses the coefficients assumed at project appraisal. The PCR concludes that, in practice, it is likely that the available water for irrigation will not permit the complete coverage of the command area as planned, and recommends that the best option would be to proceed in a step-by-step fashion, giving priority to the development of irrigation in areas yielding better agricultural returns, and the delivery of only DMI water to the areas less suited to irrigation. A detailed updating of the operational model is being undertaken by an Indian consultancy. 10. An economic rate of return (ERR) was not calculated separately for the Water Delivery and Drainage Project, but was estimated for the combined irrigation, power and DMI investments in the first phase of the NRDP (see Memorandum on SSDPP). The reestimated ERR in the PCR was 12 percent and a series of sensitivity calculations, including the impact of substantial delays in the completion of works and commencement of benefits and reductions in command area irrigation, continued to yield an ERR in excess of 10 percent. The analysis shows that the economic benefits resulting from power are higher than from irrigation, and the benefits from DMI will be higher than initially anticipated. If less water than originally projected is available for irrigation in the command area, this should lead to a more rational program of irrigation which avoids high cost development or maintenance options associated with difficult drainage or existing or potential salinity. It is also plausible that the areas which initially receive irrigation will adopt a higher irrigation intensity and a higher-value cropping pattern than assumed in the extensive, thinly spread distribution envisaged in the GOG plan. Although this would increase incremental crop production, and hence the ERR, the GOG continues to place very high value on the social/equity benefits of the extensive plan and remains committed to that design. Water availability and farmer responses, however, may dictate otherwise. When all ongoing studies and the Environmental Impact Assessment are completed, an updated economic analysis of practical options in the command area would be beneficial to guide further command area development and avoid unnecessary investment expenditure. I1. Taking account of initial conditions, the institution-building aspects of the project have been substantial. To be sure, a capacity to implement the designed operation, maintenance and water management plans (para. 3) has yet to be developed. But as for SSDPP, the improvement in engineering design and construction quality control standards in local institutions has been a major accomplishment. In R&R, GOG has been ahead of the other participating states in adopting and implementing enhanced R&R policies. Despite a piecemeal approach to environmental studies before and during most of the project period, capability in integrated environmental impact assessment and planning is now emerging. GOG is committed to mitigating any unfavorable health effects, although staffing and funding need to be improved. 12. In sum, achievements have been mixed, and many uncertainties regarding final outcome remain. Fiscal constraints could be binding. Engineering and institutional accomplishments are substantial, but the project is still in its initial construction stage and no productive components have been put into operation, while the ultimate command area program is likely to be modified. Nevertheless, the project promises to have a major impact on most of the 30 million people in the command area through irrigation and DMI water or DMI alone. A marginally satisfactory rating appears warranted for the expected outcome of the project based on the PCR analysis and the assumption that, despite the delays, SSDPP will be implemented, funding will be secured and the social and environmental aspects will finally be mastered. 5 13. Project sustainability is rated as uncertain. O&M has not had a good history in India, and the O&M wing of the development corporation will have to be strengthened in staffing, training, equipping and funding if O&M plans are to be effectively implemented. Implementation of the findings of the pending Environmental Impact Assessment will be crucial to sustainable irrigation development, both in its impact on decisions concerning the extent of irrigation coverage and in the management of mitigatory measures. 14. Bank appraisal and supervision performance has been unsatisfactory. Quality at entry was weak with respect to the social and environmental dimensions and hydrological parameters may not have been assessed with sufficient rigor. 15. The PCR is comprehensive and provides a detailed review of the project from the design phase, through implementation to the situation existing in 1994. The PCR correctly reports on the scrutiny exercised by the Board at project presentation, frankly points out the deficiencies of the Bank in not adhering to its own operational guidelines and those of the Borrower in not meeting legal covenants, and records the mixed results of a Bank-specified remedial action plan undertaken in 1992/1993. 16. In Part 11 of the PCR the Borrower insists that, although Bank guidelines on environmental planning may not have been fully met, GOI guidelines were applied, and a comprehensive environmental management plan is nearing completion and will provide for any necessary mitigatory measures. The inadequacy of the compensation for CAFs is contested, and the land consolidation around the canal-affected areas which is suggested in Part I is not considered feasible. The high social benefits of providing water for irrigation and DMI in the drought-prone zones of Gujarat are reiterated, and the future problems in supplying DMI water caused by a decline in the water table that would occur in the absence of the scheme are emphasized. 17. An extraordinary amount of retrospective evaluation and lesson learning has already taken place in connection with the environmental and resettlement aspects of the project. As indicated in the Memorandum on SSDP, a performance audit is planned to assess the realism and the sensitivity to risks of the reestimation in the PCR of the total scheme costs and benefits. Once the energy and water distribution systems are in operation, and irrigation has commenced, OED also plans to undertake an impact evaluation of selected aspects of the projects. This is likely to be directed at the project's socioeconomic impact (including health aspects) on non-CAF families receiving irrigation, on families receiving only domestic water supplies, and on CAFs. It will be linked with an impact evaluation on the SSDPP which is expected to focus on the oustees from the dam construction and submergence areas. 6 Note on the Calculation of Economic Rate of Returns for Investments Under the Filrst Phase of the Narmada Development Plan 1. PCR base case seenano. A. Yielding 12 percent ERR Actual costs for completed investments are used, and projected costs and benefits are revised. Seventeen percent of the costs of the upstream Narmada Sagar Dam are included, as at appraisal. A 1989 revision of the construction schedule was further adjusted to allow for the consequences of delays which were apparent in 1993 at the time of the recalculation of the ERR. The projection assumes some irrigation and DM1 will commence in 1995 in a small area, with full development of the 1.79 million hectares of irrigation in the command area program by 2006. Significant power benefits would commence in 1997. In view of existing and likely delays in the construction of the Narmada Sagar dam, a 25 percent reduction in power supply for the first five years is introduced to compensate for reduced flows available to the riverbed power house (RBPH). Comment: At least one more year (after 1995) will be needed before irrigation commences, so that part of the sensitivity calculation for irrigation delay (see below) must be consumed in the actual base case. The 25 percent reduction in power for five years is likely to be on the low side considering the progress in construction of the Sardar Sarovar and anticipated future constraints. On the positive side, however, energy and DMI values could be conservative (see below), and the Bank commodity price projections for the 1995-2000 period are higher than that assumed in the PCR analysis. 2. Scenario B This examines the impact on Scenario A of delaying the RBPH for up to four years. Assuming that investment costs in the RBPH and transmission systems are delayed accordingly, this reduces the ERR by less than one percentage point. Comment: Delays may occur in the RBPH as financing of the necessary turbines is still in question. 3. Scenaro C This assumes that the Narmada Sagar Dam is substantially delayed (or not completed) so that it does not contribute to the scheme. In this event, some suboptimal alternative investments in upstream storage would probably occur, requiring a new hydrological modelling exercise to determine water availabilities. In the absence of this, a proxy was used: the 25 percent reduction in power generation which is assumed for the first five years in the base case scenario is extended through the project life; similarly, the command area irrigation/DMI benefits are reduced by 30 percent, with the main canal being fully costed but with branch canals and other development investments being reduced by 15 percent and 25 percent respectively. The 17 percent of the Narmada Sagar costs previously allocated to the project is removed. This reduces the ERR by a little over 1 percent. 7 Comunent: Although construction of the Narmada Sagar Dam has commenced, there are many uncertainties (in funding and resettlement requirements) concerning its progress, despite the government's stated commitment to its completion. Construction costs are likely to be progressively incurred but any benefits may be seriously delayed. The rationale for the proxy assumption is not explained in the PCR: the same proxy at the time of appraisal was apparently based on simulation studies. While planning for resettlement related to Narmada Sagar has been elaborate, implementation problems may well arise given the sheer scale of the effort needed. 4. Scenario D This examines delays in the command area development compared to scenario A, with simultaneous reduction in benefits and costs, but with the main canal being completed as planned. A two year delay reduces the ERR by 0.7 percentage points, a four-year delay by 1.4 percentage points, and a six-year delay by 2 percentage points. Comment: Significant delays in the command area development appear likely, and at least a one- year delay in the commencement of irrigation development is certain. The total plan, however, envisages development of some areas with a poor benefit/cost ratio (for social/equity reasons) and a relatively traditional cropping pattern. In practice, restricted water availability (see below) and farmer practices may force more profitable investmnent and water use than envisaged in the model. 5. Scenario E This assumes that the command area would be reduced by up to 40 percent. On the assumption that this makes the equivalent amount of water available for power, this increases the rate of return slightly, again allowing for reduced command area development costs excepting the main canal. Comment: A reduced availability of water for irrigationlDMI need not make the equivalent water available for energy. First, there is still some doubt about the total water availability in the system, and second the actual water consumed by irrigators is likely to be more than anticipated in the plan. Concerning total water availability, the most recent hydrological model (in 1993 by the Central Water Commission-CWC) estimates a 75 percent dependable flow of 27 MAF. This is based on "observed' flows in the basin from 1948 to 1990 (43 years) and "generated" flows from 1891 to 1947 (56 years). Although CWC insists on the validity of these calculations, there is some question concerning the reliability of 'hindcasting' to generate flow data from available rainfall records in the period to 1947. Use of only the period with 'observed' flows lowers the 75 percent dependable volume by about 18 percent. Within Madhya Pradesh, there is politial pressure not to fill the reservoir to its 'full reservoir level'-FRL of 138.7m by some groups who will lose good cropping land when this level is reached; this, despite the NWDT agreement to the 138.7m FRL. This issue was heavily debated and eventually resolved during the NWDT proceedings. Recently, 8 however, renewed pressure for review of the FRL has been very strong in Madhya Pradesh, in part encouraged by a Supreme Court Bench of Justices, which accused the GOI of not responding adequately to a review at the project by the expert Patil Committee. For the volume of water actually diverted at Sardar Sarovar for irrigation and DMI, the planned water use per hectare may not eventuate, and more water is likely to be used on less hectares than intended in the plan. The PCR calculation assumes reasonable crop yields (e.g. 4 tons paddy HYV and 3.5 tons wheat HYV on irrigated higher potential soils), an average cropping intensity of 1.37, an irrigation intensity of 1.06, an irrigation efficiency of 48 percent at headworks, and a five-year adoption curve for enhanced inputs and outputs on each block to receive irrigation; all of these coefficients are acceptable considering experience in India. However, the PCR (and the SAR) assumes that the crop water requirement will be reduced by 10 percent 'because of water scarcity;" in practice, this is unlikely, as farmers in the earlier serviced areas are likely to assume higher irrigation intensity and use much more water than envisaged in the plan. This implies that less of the command area will be irrigated, but it also suggests that investment in the least productive areas may be avoided. The latter is made even more likely in the Rann of Kutch where a recent study by the Wildlife Institute of India has indicated that the proposed irrigation canals would endanger the habitat of the wild ass (an endangered mammal), particularly in waterlogged and saline areas. A more rational irrigation plan and the adoption of a higher-value cropping pattern would be conducive to increasing the rate of return. Consequently, while reduced total water availability would have a negative effect on the scheme benefits through reduced energy generation (scenario C), the likely pattern of development and water use in the command area under circumstances of reduced supply may not reduce the returns to irrigation investment. 6. Unit Value of Benefits DMI water values can decrease by 19 percent or power energy values by 6.6 percent without taking scenario A to below 10 percent ERR. Comment: The economic price of power (at about 4.6 US cents/kWh) is conservative and is based on a 'willingness to pay" concept using a methodology which adds the economic value of the average tariff for each consumer category to half the additional cost of the alternative of private supply to account for a consumer surplus. This methodology appears somewhat arbitrary, but is said to be conservative and has been used in the appraisal of other recent projects in India. Account is not taken of the higher peaking power value which would increase the ERR if it were included. The DMI value at about 15 US cents/mi is 60 percent higher than that assumed at appraisal. With one exception, the SAR methodology was adopted, in which demand from different categories of consumers was calculated and the DMI water was valued as the savings in cost realized by supplying estimated demand from the project rather than other sources; the latter were individual water facility investments, except for some more difficult areas in the later stages of development where the cost of trucked water was used. 9 The PCR assumed one third of the alternative source water would have to come from desalinization (which causes the increased DMI value) on the grounds that the value previously ascribed was extremely conservative considering the impact of recent droughts in the command area. Although appearing reasonable, this valuation warrants further investigation, as the contribution of DMI to the benefit stream in the first 15 years after DMI commences increases from 4 percent at appraisal to 11 percent in the PCR ERR analysis. 7. Component Analysis The PCR states that the ERR (using scenario A assumptions) for investment in power alone is 14.2 percent, in irrigation alone is 10.8 percent and in irrigation and DMI is 12.4 percent. Comment: The methodology used to separate out benefits and costs to attain these estimates is not presented, but it is assumed that the PCR uses the same dissections as those made at the time of appraisal. PROJECT COMPLETION REPORT INDIA NARMADA RIVER DEVELOPMENT - GUJARAT WATER DELIVERY AND DRAINAGE PROJECr (Credit 1553-IN) TABLE OF CONTENTS PREFACE .................................................................i EVALUATION SUMMARY ................................................................ iii PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE ....................... ..................... 1 1. Project Identity .1 2. Background .1 3. Project Objectives and Description .2 4. Project Area .4 5. Project Design and Organization .5 6. Project Implementation .14 7. Environment .18 8. Canal Affected Families ................ 27 9. Project Achievements 29 10. Project Sustainability .34 11. Bank Performance .35 12. Borrower Performance .37 13. Project Relationships .38 14. Consulting Services .38 15. Project Documentation and Data .38 16. Lessons Learned .39 PART II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE .............. ................. 42 The above parts of the PCR have been distributed to the Board and to the President. Thefollowving parts are available to authorized persons on request. This measure hzas been adopted because of the length of the report. Thefour annexes pertain to Part I. ANNEX 1: Hydrology and Water Management ................................................................ 67 ANNEX 2: Environmental Impacts and Management ....................................................... 77 ANNEX 3: Resettlement & Rehabilitation of Canal Affected Persons .............. ............... 99 ANNEX 4: Revised Cost-Benefits Analysis ................................................................ Ill PART m. STATISTICAL TABLES ................................................................ 183 1. Related Bank Loans and Credits .184 2. Project Time Table .190 3. Schedule of Cumulative Disbursements .191 4. Project Implementation .192 5. Project Costs .194 6. Project Financing .195 7. Status of Covenants .197 8. Staff Inputs .201 9. Bank Missions .202 MAPS (IBRD 17939,17940) PROJECT COMPLETION REPORT INDIA NARMADA RIVER DEVELOPMENT - GUJARAT WATER DELIVERY AND DRAINAGE PROJECr (Credit 1553-IN) PREFACE This is the Project Completion Report (PCR) for the Narmada (Gujarat) Water Delivery and Drainage Project for which Credit 1553-IN for SDR 149.5 million (US$150 million equivalent) was approved on March 7,1985. An amount of SDR 4.8 million was canceled from the Credit on December 5, 1991. The Credit closed on July 1, 1992, 39 months behind schedule, after an initial 3-month extension followed by three extensions of one year each. The Credit was fully disbursed on September 17,1992. The PCR was prepared by the New Delhi Agriculture Unit of the Agriculture Operations Division of the India Department, South Asia Regional Office (Preface, Evaluation Summary, Parts I and IE). The Borrower has submitted Part II, and also provided extensive comments on the draft PCR which were incorporated in Parts I and III of the present document Whenever there was a major disagreement between the PCR and the Borrower's comments, these were flagged in form of footnotes in Part I. Preparation of this PCR was initiated during the Bank's supervision mnission in January 1992. However, its completion was delayed on several occasions pending the submission in June 1992 of an Independent Review Report comnmissioned by the Bank, the findings of a Bank review mission in July 1992, discussion of these two reviews by the Board on October 23, 1992, and GOI's compliance with benchmarks that were to be fulfilled on March 31, 1993 but that were actually submitted on August 5, 1993. The present PCR is based, inter alia on the Staff Appraisal Report (SAR), legal documents, supervision reports, correspondence between the Bank and the Borrower, discussions with the Sardar Sarovar Narmada Nigam (SSNNL) engineers, the Independent Review Report, Government of India's (GOI) compliance with the benchmarks internal Bank memoranda and reports, and various non-Bank documents. .. PROJECT COMPLETION REPORT INDIA NARMADA RIVER DEVELOPMENT - GUJARAT WATER DELIVERY AND DRAINAGE PROJECT (Credit 1553-IN) EVALUATION SUMMARY Background and Objectives 1. The Gujarat Water Delivery and Drainage Project and the Gujarat Dam and Power Project form part of the Narmada River Development Plan, whose overall objective is to harness the Narmada River through a series of dams, for irrigation, water supply and energy. The arrangements for sharing and utilizing water by the four benefitting states (Madhya Pradesh, Gujarat, Maharashtra and Rajasthan) were defined by the Narmada Water Dispute Tribunal (NWDT) in December 1979. Under this award, Gujarat was allocated 11,100 Mm3 (9 million acre feet [MAF]) representing about one third of the annual water flow, and was authorized to implement a project comprising: (i) the Sardar Sarovar Dam, (ii) a 1,200 megawatt (MW) riverbed powerhouse (RBPH), (iii) a 250 MW canal head powerhouse (CHPH), (iv) a canal system to irrigate 1.87 M ha in Gujarat and 70,000 ha in Rajasthan, and (v) a water supply system for about 30 millon people in the command area with emphasis in the drought-prone areas of Saurashtra and Kutch. On that basis, Gujarat prepared the Sardar Sarovar Project in 1980, which was to be implemented in various phases over a period of about 20 years. Phase I comprised: (a) the Sardar Sarovar Dam, (b) the RBPH, (c) the CHPH, (d) the first 144 kcm of the main canal up to the Mahi River, and (e) a network of branch and distribution canals and drainage system to irrigate about 450,000 ha. 2. The Water Delivery and Drainage Project (Credit 1553-IN) encompassed a 3-year time slice of the Phase I Sardar Sarovar Project, including partial construction of: (i) the main canal up to Mahi; (ii) seven major hydraulic structures (aqueducts and syphons) on the main canal, (iii) thirteen branch canals; and (iv) twelve irrigation and drainage blocks representing about 96,900 ha. In addition, the project was to: (v) install a state-of-the-art remote control and communication system; (vi) provide technical assistance and training for the implementing agency; and (vii) promote conjunctive use of surface and underground water within the irrigation and drainage blocks. 3. The Dam and Power Project (Credit 1552-IN/Loan 2947-IN) for the Sardar Sarovar Dam was processed in parallel, and is the subject of a separate Loan/Credit Completion Report. The two projects were presented to the Board concurrendy on March 7, 1985. The Staff presentation highlighted the R&R program for the projects. The Directors queried the institutional arrangements for that program and the relatively undefined state of the environmental studies. Their other concerns related to the project size, future Narmada Basin development, and being kept informed (during implementation) about the projects' social and environmental effects. Taken together, these Board concerns revealed the early exposure of all parties in the Bank to the R&R and environmental issues, and the attention given to them by the EDs. Management agreed and complied to a specific Board request to keep it informed of the projects' progress on social and environmental issues through many written responses to questions and a number of briefings of EDs. Project Design and Organization 4. Project preparation took four years from identification in 1979 to pre-appraisal in 1983. The project was prepared by the Narmada Planning Group (NPG) with assistance from the United Nations Development Program (UNDP) and the Bank. Project concept and design closely follows the NWDT award. NPG conducted supporting studies and analyzed the project's financial and economic benefits. The Narmada Development Department (NDD), in charge of project implementation, prepared detailed designs and cost estimates for the major project structures. 5. Appraisal took a lengthy 17 months (March 1983 to August 1984) and several Bank missions, due to the scope and complexity of the twin Canal and Dam Projects, and the need for agreement on treatment of persons affected by the Dam Project. Negotiations took place in November 1984 and Board approval, in March 1985. The SAR noted the need to prepare an Environmental Impact Assessment (EIA) during implementation, but the Legal Agreementsspecified only the need to minimize the risk of malaria and provide training in environmental sciences. 6. In May 1988 responsibility for project implementation was transferred from the Narmada Development Department, a government agency, to the Sardar Sarovar Narmada Nigam Ltd. (SSNNL), a parastatal corporation organized along functional lines. Hydrology 7. The mean water availability created by the project was estimated at 17,700 Mm3 (14.3 MAF) per year, while the average irrigation requirements of the 1.87 M ha command area and the D,M&I requirements were estimated at about 17,100 Mm3 (13.9 MAF). Little or no shortage of water is anticipated until 2024 when the NWDT water allocation may be revised. However, there is some risk that the project may need more than the present 9.0 MAF allocation before that date.1 Project Implementation 8. The Credit became effective in January 1986, nine months after Board approval, but construction was delayed until July 1987 when the Ministry of Environment and Forests (MOEF) gave environmental clearance for the project. Because the project timetable was soon deemed too ambitious, in December 1989 a more realistic schedule was established for completing the works by July 1992. 9. The project's slow start was caused by transition to new management under the SSNNL and unavoidable delays related to the introduction of new construction technologies. In a Memorandum of Understanding (March 1989) the Borrower agreed to remedial measures identified by a GOT-appointed Team of Experts, and thereafter project performance improved. 10. The Credit closed on July 1, 1992 after four extensions totalling 39 months. Civil Engineering 11. The civil works component began slowly but gained momentum as govemment officials and contractors became more familiar with the advanced technologies introduced by this project. Initial implementation delays were not viewed as criticaL given the need to set high administrative I 'nw Borower is Of the opinion that the project water requirements will not exceed the allocated 9.0 MAF. iv and engineering standards for the project's duration. Ultimately, due in part to the establishment of a computerized management information system, the project conformed to intemational standards. Environment 12. The Board approved the project in 1985 in the absence of formal forest clearance from India's MOEF, which had requested additional environmental studies. In June 1987, the MOEF issued a conditional environmental clearance, pending still further studies. 13. By March 1991 serious difficulties in the environmental and R&R components of both projects led the Bank to commission an Independent Review. The Review was critical of Bank and Borrower handling of environmental, health and R&R matters, charging that the completed studies did not constitute a full EIA, that the Borrower's approach to environmental protection was incremental rather than preventive, and that serious waterlogging, soil and health problems would result from the project. 14. Accepting some, though not all, conclusions of the Independent Review, the Bank secured the Borrower's assurance that a comprehensive environmental action plan would be prepared, that GOI would promptly correct weaknesses in its environmental program, and that the Government of Gujarat (GOG) would implement Bank recommendations on health issues. In October 1992 the Board agreed to continue support to both projects, subject to Borrower's compliance by March 31, 1993 with benchmarks related to both environmental issues and resettlement of canal affected persons (though the Water Delivery and Drainage project had been closed since July 1, 1992). 15. On March 29, 1993, shortly before the benchmarks were to be met, the Borrower requested the Bank to cancel the Loan for the Dam and Power project. In its statement to the Board, however, the Borrower reaffirmed its commitment to sound environmental and R&R practices. In August 1993, the Narmada Control Authority (NCA) requested and the Bank agreed to extend the date of completion of the command area EIA to December 31, 1994 as several important studies remained to be carried out. Canal-Affected Families 16. The SAR and Legal Documents described no special R&R needs for canal-affected families (CAFs). As in previous irrigation projects, these were to receive cash compensations under the Land Acquisition Act of 1894. During implementation, however, it became clear that this compensation level would not cover the replacement cost of land nor the additional costs of developing replacement land. 17. In addition to analyzing general environmental and R&R aspects of the Sardar Sarovar Project (SSP), the Independent Review criticized the Bank for failing to address the displacement of CAFs during appraisal and to introduce provisions for CAFs in the legal documents. It also was critical of the incremental approach followed by the Bank for not yielding the expected results in a timely manner. GOG was criticized for not having prepared a reliable database for failing to adequately compensate and rehabilitate the CAFs, and for failing to prepare a policy regarding their displacement. The Bank's Management response acknowledged that adequate resettlement plans had not been prepared by the Borrower or appraised by the Bank under the project. Management also agreed that the strategy for incremental progress on balance had yielded results too slowly. 18. The Bank mission of July 1992 reviewed the status of R&R implementation and proposed a number of actions to be taken by the Borrower in light of the Independent Review report and the prevailing situation. The mission's findings and the Bank's Management response were discussed by the Bank's Board during their meeting of October 23, 1992. The Board agreed with the Management's assessment and established 19 benchmarks relating to R&R, including one that v addressed the CAF issue specifically. The Board requested that by March 31, 1993, GOG should: (i) conduct a socioeconomic survey of CAFs and formulate a final policy package, (ii) identify the CAFs who had been made landless, marginal farmers, and those who had lost more than 25% of their land, and (iii) announce an interim policy for small and marginal farmers whose land had already been acquired. Though these benchmarks were established after the closure of the Water Delivery and Drainage project, the extent of compliance with them would have an effect on the Dam and Power project which was still continuing at that time. 19. In September 1992, shortly after the return of the Bank review mission, GOG produced a document in which the number of CAFs was reassessed at 169,500, of whom only 24,000 would be losing more than 25% of their land (with most of these actually benefitting from the irrigation). At the same time, GOG issued an interim R&R policy for CAFs stipulating that: (i) compensation for land lost would be based on market value determined by Land Purchase Committees, and (ii) CAFs who had lost more than 50% of their land and were left with less than 1.0 ha in the command area would be allocated 0.5 ha in addition to compensation. On August 5, 1993, the Borrower indicated that it was implementing a socioeconomic survey of CAFs and that a final policy would be based on the findings of the survey. The Borrower has recently informed the Bank that the survey of CAFs had been completed and that the results together with a final policy would be issued shortly. Project Achievements 20. The project achieved nearly all objectives regarding construction of the main canal and structures, setting standards that are now a model for other projects in India. Other SAR targets were met to varying degrees: 88% on the construction of main canal head regulator and the gated cross regulators; 35% on seven major hydraulic structures; and 60% on branch canals. The twelve irrigation and drainage blocks were not constructed because design worzk was delayed and SSNNL then rejected all bids on account of high cost. Terms of Reference (TORs) were finalized and bids invited for the design, installation and commissioning of a remote control and monitoring system for canal operation down to the 8.5 m3/s level. A three-volume Plan of Operation and Maintenance (POM) for the canal system and headworks was prepared. 21. Notwithstanding some shortfalls in SAR targets, the project set excellent engineering, construction, and management standards by introducing many innovative features. Highlights include the mechanization of canal lining and construction of major structures; guidelines for the design of distribution systems using the principles of rotational water supply (RWS); a comprehensive operation and maintenance (O&M) manual; development and implementation of a comprehensive computerized management information system (MIS); use of a Board of Consultants to review the plans, drawings and construction techniques of major structures; and a master plan for a state-of-the art remote control and monitoring system, using a fiber optics communication technology, to operate the canal system. 22. At appraisal the total project cost up to Orsang Aqueduct, including physical and price contingencies, was estimated at Rs. 6,251 million (US$ 520.9 M). The three-year time slice was to be Rs 3,059 M (USS 254.86 M), or about 50% of total cost. At project closure, the revised estimate for total costs had risen to about Rs. 13,720 million, and the Borrower had spent Rs. 6,613.35 M (USS 289.60 M) or 48% of the total revised cost for completing about 60% of all physical targets for the three-year time slice. Thus, price escalation was about 100% over the estimated total cost at appraisal, but this escalation was offset by the larger than expected devaluation of the Rupee against the US Dollar. 23. The SDR 149.5 M Credit disbursed slowly during the first four years. During the last two years, however, the sum of SDR 101.5 M, representing 70% of the revised Credit amount, was disbursed. Due to the Rupee's devaluation against the US Dollar, SDR 4.8 M were canceled from vi the Credit in 1992. At project closure, the revised Credit amount of SDR 144.7 M (USS 196.6 M equivalent) was fully disbursed. If the same level of funding could be maintained after Credit closure, the main canal as well as distribution works up to Orsang (km 49 of main canal) could be completed and 30,000 ha could be ready for irrigation by July 1, 1995, the scheduled date for the release of water from Sardar Sarovar Dam into the main canal. Revised Economic Analysis 24. The revised analysis covers the project's irrigation, power and the domestic, municipal and industrial (D,M&I) components. It reflects changes in quantities, prices and phasing since 1984, and pays particular attention to environmental costs and benefits (such as estuary changes, fisheries costs and benefits, fuelwood, and wildlife) which might have been underestimated or omitted in the original analysis. The revised analysis has an Economic Rate of Return (ERR) of 12% -- marginally lower than the 13% in the original SAR, but within the acceptable range for a project of this type. The scale of benefits is large relative to any feasible alternatives, with substantial multiplier effects as well. Had the SSP been conceived as a power project alone, the ERR would have been 14%. The command area alone exhibits a somewhat marginal ERR. If expenditure to date is treated as a sunk cost, the ERR is 17%.2 25. The economic analysis indicates that power generation produces greater economic benefits than irrigation and that extensive irrigation -- while raising equity and social benefits - yields a marginal ERR. Conversely, the benefits from domestic and industrial water are likely to be more substantial than anticipated initially. Sustainability 26. As construction standards were good to excellent during implementation, the irrigation infrastructure created so far should provide long and reliable service. If infrastructure quality is maintained, project sustainability appears guaranteed for 40 to 50 years. However, even if funding constraints force the adoption of lower construction standards, ultimate sustainability depends heavily on ensuring adequate O&M for the irrigation and drainage systems. Though India's track record on O&M is not good, the exceptional standard of excellence developed by SSNNL may be able to set a new trend in O&M, for this project. 27. The detailed EIA that is now underway will further improve the project's prospects for environmental sustainability. Waterlogging and salinity will be mitigated through drainage and conjunctive use, and is not expected to develop on a large scale. The Borrower's Environmental Management Plan should prevent the degradation observed in some other projects. 28. To minimize the risk of exceeding NWDT water allocations in later years, the Borrower should monitor water utilization closely and consider limiting the size of the command area initially to the more profitable branches and shift to more efficient irrigation methods such as sprinkler and drip irrigation thereafter. Final size of the command area could then be based on actual usages and efficiencies.3 This approach would substantially improve the project's economic viability and long-term sustainability. 2 lIh Borrower notes that SSP wu designed as a muiti-pupose project, therefore, a separate onOmic analysis of the power nd irrigSation components is not wrantod. 3 In line with footnote (1), the Borrower empauizes that there is no question of reducing the comman area. vii Bank Performance 29. Overall, the Bank's performance was excellent in the engineering fields, where high standards of construction were developed and implemented. In the R&R, environmental and health fields, however, Bank performance was mixed or poor particularly in the early stages. This initial wealness continued during project implementation, and the Bank iniially failed to take the measures required to assist the Borrower in preparing an environmental management plan for the command area. When it finally did so in 1992, it was too late to act within the framework of this projecL 30. The Banlk demonstrated its willingness to respond to outside criticism when it appointed an Independent Review of the project. This unprecedented decision has had positive repercussions in the way business is conducted within the Bank particularly with regard to monitoring and evaluation of R&R and environmental activities and also on the Bank's policy on disclosure of information. Although the findings and recommendations of the Independent Review were not fully accepted by either the Bank or the Borrower, both recognized a number of shortcomings in their actions and did their best to address problems that had been identified. 31. Throughout the project cycle from preparation to completion, the Bank made a large commitment of staff. Project appraisal required 191 staff weeks and supervision 269 staff weeks, i.e., an average of 38.4 staff weeks per year for portfolio management This latter figure may be underestimated in view of the large staff input that was required following the publication of the Independent Review report and the various actions to monitor the implementation of the bench- marks after project closure. With this high level of staff input, the Bank has had a positive impact on project formulation, planning and implementation in many fields such as hydrology and hydraulics, structural designs, irrigation and drainage system design, institutional planning, cost estimates, R&R, environment and health. However, it should be noted that throughout the project cycle, Bank missions showed some bias, largely shared by the Borrower as well, toward the engineering aspects of the project To be sure, many supervision missions included an environ- mentalist and eventually both R&R and malaria specialists. However, their recommendations never achieved as much impact as those of the engineers.4 32. In retrospect, the Bank may have been over-ambitious in attempting to finance a project of such scope and complexity. In its eagerness to proceed quickly with this large project, the Bank considered the project in its entirety, as it resulted from the NDWIr, without making a sufficiently critical review of shorter term viable sub-projects. The Bank was unrealistic in thinking that the partial completion of Phase I could be accomplished in only three years. The overall job was large and complex, not only by Indian standards, but by any standards.5 Borrower' Performance 33. Overall, the Borrower's performance was satisfactory in the engineering and irrigation works, but much less satisfactory in implementation of the R&R of CAFs, environmental and 4 The Borrower observes that the last three sentences of this para give a distorted image of enviromental and R&R implementation when compared to progress in the engineering aspects of the project. 5 The Borovwer indicat the Bank bad no ason to consider shortwer term viable projects since the NWDT bd reviewed all project development optioos before giving its rnal decsions. 6 In actual facts, 001 is the Borrower, Gujat is the impkmenting State nd SSNNL ir the implementing Agency. Rather than to differentiate the roles played by eaco entity, the generic term 'Borrower' wu usd io this Sectio. yi. health aspects of the project. With regard to these latter project components, however, the Borrower has argued that it can not be accused of doing an improper job since these aspects were not adequately described in the original project and legal documents. Throughout the project cycle, the Borrower was over-optimistic about its capacity to implement the project within the proposed time frame. Even after the two-year delay due to Indian environmental clearance and the other implementation impediments, the Borrower was stiWl optimistic about completing the whole project by the year 2000. At present, the Borrower may have revised its optimism in light of current financial constraints, and may realize that the completion of this large project will take many more years. During project implementation, the Borrower took a number of positive decisions which helped project implementation. Among the most noteworthy was the creation of the Sardar Sarovar Narmada Nigam, a public corporation with considerable flexibility in dealing with administrative, personnel and financial matters. 34. Throughout project implementation, the Borrower was responsive to the Bank's suggestions regarding the engineering aspects of the project and at a later date to those relating to the environmental, R&R and health aspects of the project. When the Independent Review mission was in the field, the Borrower did its utmost to satisfy its demands in all respects and with genuine openness. The Borrower was disappointed by the Independent Review report and, although publicly muted in its response, felt that this report was biased. Nevertheless, the Borrower responded positively to the Independent Review's findings and recommendations by recognizing many shortcomings and doing its best to meet the benchmarks set by the Board of Directors. However, at the end of March 1993 the Borrower requested the cancellation of the remaining Dam and Power Loan. Lessons Learned A General Lessons 35. The fit lesson is the need to set realistic implementation schedules: not according to the most desirable implementation pace but according to the most probable pace - one that assumes day-to-day difficulties and innumerable physical, administrative and financial setbacks. The Bank appraisal team was unrealistic in estimating the Borrower's ability to complete the project works within three years. The Borrower was also unrealistic in agreeing to such a tight work schedule, lnowing the likelihood of frequent administrative and financial difficulties. In addition, in a drought-prone area like Gujarat, the occurrence of severe droughts usually upsets any pre- established implementation plans. The appraisal team did not make sufficient allowance for predictable delays in the finalization of designs, procurement, non-performing contractors, re- bidding, land acquisition, and introduction of new technologies. 36. The second lesson is one that applies to many irrigation and drainage projects: the need to complete the final designs for all major structures and distribution networks as early as possible in the project cycle so the irrigation system can be substantially constructed by the time the dam is completed and water becomes available. In the case of this project, the designs of some major structures, as well as those of the irrigation and drainage blocks, were not ready until several years after project inception. Due to procurement and other delays, the basic field irrigation systems were not started during project implementation and therefore only a marginal area will be ready for irrigation. The failure to prioritize designs and construction of lower level irrigation systems will have a negative impact on the economic returns of the project's irrigation component 37. The tird.j though not a direct lesson from project implementation (since irrigation has not yet started), relates to the need to be cautious in the design of extensive irrigation schemes, because of their special managerial requirements and marginal ERR. Tbough the design of SSP reflects a deliberate decision aimed at increasing equity and meeting widespread needs for domestic water, higher retums would probably be achieved through the use of more intensive irrigation within a ix smaller command area. As there is still time to make this adjustment, a gradual approach to developing the command area would be wise, given the uncertainties about ultimate efficiency levels, the unknowns about upstream storage and utilization and the fact that the economics do not require rapid establishment of the full command area. Fifteen years after the project was originally conceived, a mid-term review of the initial assumptions should be conducted and adjustments made to the present project design, consistent with current Bank practice.7 Such adjustments should integrate the findings of the ongoing environmental impact assessment which is due in December 1994. 38. The fourth lesson concerns the need for the Bank to rely on the Borrower's commitment and capacity for effective implementation of the R&R and environmental components of major projects. Assessment of these aspects should be given the highest attention during appraisal. No project should go to the Board unless the Bank is satisfied beforehand that the Borrower has fully developed sound strategies and policies for dealing with key issues like R&R and environment. The implementation of the SSP projects has clearly demonstrated the Bank's limited ability to make up for the wealnesses of the Borrower in these fields in spite of a supervision input about ten times the Bank average. B. Lessons on Environment 39. The fLk lesson relates to the need for ensuring that all the Government clearances have been obtained before negotiations, particularly in such sensitive areas as environmenL The lack of environmental clearance by the MOEF led to a two-year delay in project implementation. This situation has damaged the project's image considerably, although it has not affected the possibility of ameliorative action in the future. 40. The eond lesson relates to the need for projects with environmental ramifications to have a proper Environmental Impact Assessment as part of the normal feasibility studies, and to ensure that corresponding mitigative measures are adequately integrated in the project design. One of the major criticisms that emerged from the Independent Review Report was that the project was approved without a proper Environmental Impact Assessment for the command area. Undertaking an EIA, as required under the present more rigorous Bank guidelines, and including a separate environmental component in the project's design are the best ways of ensuring that the requisife environmental mitigating measyres will be implemented in an adequate and timely manner. 41. The ihid lesson relates to the need for the Bank to use highly qualified environmental specialists to supervise the environmental component and, as needed, to provide guidance to the Borrower in the resolution of special environmental issues. 42. The fQUr lesson relates to the need for a separate health component in large irrigation and drainage projects. Though this aspect was covered to some extent in the SAR and legal documents, it is essential for the Bank and the Borrower to consider the inclusion of a separate health component and employ qualified health specialists to supervise, monitor and evaluate its implementation. C. Lessons on Canal-Affected Families 43. The flmx lesson is that projects involving R&R require considerable preparatory effort, including affected persons' involvement, a sound policy base, adequate budgeting and financing, good R&R component design, precise and detailed legal document conditionality and consistently 7 As indicted previously, the Borrower reiteaes its position that it would not be posible to reduce the command sa as al upects mentioned in the PCR have been considezd while fusing its size. x good supervision to increase the chances of success. Particular attention should be given to the application of the prevailing Bank guidelines during preparation, appraisal and negotiatons of large multi-purpose projects (and others). If the guidelines change during project implementation and supervision, the Bank should approach the Borrower to see in what way the new guidelines can be applied. 44. The second lesson is that canal-affected persons need to be adequately compensated and provided with the additional resources for purchasing land to replace what they have lost Special attention should be given to the impacts of canals, drains or roads on the viability of farm holdings. Finally, alternative solutions such as land consolidation and field boundary realignment should be considered, at least in a pilot form, to minimize land acquisition and facilitate access of holdings to irrigation, drainage and roads. 45. The thir lesson is that there are some differences between canal-affected and reservoir- affected persons. In the canal-affected case, persons are usually partially affected and villages often not at aL. whereas in the reservoir-affected case, persons and villages are fully affected and must be relocated often in a completely different environment and habitaL Though the basic objectives and principles should remain the same in each case, the substance of such policies may differ. I PROJECT COMPLETION REPORT INDIA NARMADA RIVER DEVELOPMENT - GUJARAT WATER DELIVERY AND DRAINAGE PROJECT (Credit 1553-IN) PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE 1. Project Identity Project Name : Narmada (Gujarat) Water Delivery and Drainage Project Credit NoiLoan.No. : Credit 1553-IN RVP Unit : South Asia Region Country : India State : Gujarat Sector : Agriculture Subsector : Irrigation 2. Background 2.1 When this project was apprised in August 1984, India had a population of over 700 M, growing at an annual rate of about 2.4%. Although more than two-thirds of the labor force was employed in agriculture, which accounted for about 40% of gross domestic product (GDP), agricultural growth averaged only a sluggish 2.3% a year. Accordingly, agricultural growth and the expansion of irrigation, along with the development of energy and infrastructure facilities to raise economic growth and alleviate poverty, became the comerstones of India's development strategy, as reflected in the nation's Five Year Economic Development Plans. More specific development objectives flowing from this strategy included investment in irrigation systems, storage reservoirs, extension and on-farm developmenL Special emphasis was put on making the water conveyance systems more efficient, to ensure reliable delivery to fields, and on strengthening the ability of water management systems to respond to water demand in the command areas. Finally, investment in the development of large river basins was considered essential for the expansion of irrigation. 2.2 Today, almost ten years later, India's population has increased to about 870 M and the annual rate of population growth has decreased to 2.0%. Agriculture's share in GDP has fallen to about 30%, while agricultural growth has risen to 3.2 % per year. However, per capita food production is still sluggish at 1.6 %, and India's top development priorities continue to be to agriculture, irrigation, rural development and energy. As indicated in the India Irrigation Sector Review (Report No. 9518-IN) of December 20, 1991, however, emphasis within the irrigation sub-sector has shifted from the development of new and particularly large schemes, to the completion and rehabilitation of existing schemes. There is also a new trend toward greater involvement of beneficiaries in irrigation schemes through the privatization of groundwater and, to a lesser extent, of the lower sections of irrigation distribution networks. 2.3 The state of Gujarat covers an area of 19.6 M ha and, at Appraisal, had a population of about 36 M that was growing at an annual rate of 2.5%. Although Gujarat was relatively urbanized and had a large manufacturing sector, its economy was also highly influenced by agriculture. In a normal rainfall year, agriculture contributed some 33-35% of the state's income and employed about 60% of its labor force. With many regions experiencing low and highly variable rainfall and with only about 18-20% of the cultivated area under irrigation, Gujarat had long been susceptible to drought and famines. For example, from 1900 to project Appraisal (1983/84), the state suffered at least 25 severe food shortages and water scarcity due to drought. 2 In 1983, drought affected some 30 million people with serious economic, social and health implications. People and livestock often depended on water trucked in by the state, and many diseases endemic to the rural population were traceable to malnutrition and unsafe drinking water. In addition, the economic costs of dealing with these droughts, constituted an increasing drain on Gujarat's budget 2.4 The combined demand for industrial, irrigation, livestock, ruraL and municipal water in Gujarat, one of India's fastest-growing industrial states, was simply outstripping groundwater resources and existing reservoirs. At the same time, investments in irrigation began to decline as older projects were coming to completion, and new areas for agricultural development - except for the vast, unexploited areas of the Narmada Basin - were becoming scarce. However, even as the population continued to grow, the share of labor force employed in agriculture was declining, thus allowing some consolidation of holdings and the release of some land for resettlement activities. 2.5 At Appraisal, the Government of Gujarat (GOG) estimated that it would exhaust the potential for all further surface water irrigation schemes, with the exception of the Narmada Basin, within the next ten years or so. Thereafter, the development of the Narmada Basin would become the only feasible means of simultaneously assuring sustainable agricultural growth, and meeting the pressing domestic, municipal and industrial needs for water. Consequently, GOG accorded high priority to irrigation development programs, including construction of storage reservoirs through the implementation of major and medium projects, in line with the priorities fixed by GOI. 2.6 It was against this background that GOG embarked upon the planning of the Nannada River Development (NRD), one of the most ambitious water resources development project ever attempted. It accorded the highest priority to beginning with the Sardar Sarovar Projects (SSP) which comprised the construction of the Sardar Sarovar dam, power complex and canal network. In view of the immensity and complexity of SSP, the Government of India (GOI) sought Bank Group assistance in financing the first stage of SSP. These projects were to be among the first in a series of some 30 major projects planned to develop the Narmada Basin. Given the projects' potential for benefitting the basin region and the entire nation, the Bank agreed to finance simultaneously two key components of SSP: a. an IBRD LoanIDA Credit of USS 300 M towards the cost of constructing the dam and power complex; and b. an IDA Credit of USS lS0 M towards the cost of constructing the canal network in the 3 year time-slice. 3. Project Objecdves and Description 3.1 The Narmada (Gujarat) Water Delivery and Drainage Project (Credit 1553-IN), Phase I is interdependent with the Narmada (Gujarat) Dam and Power Project (Credit 1552-IN/Loan 2497- IN). The overall long-term objectives of these projects, together with the subsequent phases of the Water Delivery and Drainage project up to the Rajasthan border, are to create a modern multipurpose agricultwal and power production system to benefit the growing rural population and assist the economic growth of Gujarat as a whole. More precisely, the objectives of the Narmada Sardar Sarovar Projects are to provide storage and regulation of Narmada River flows for: L establishing an efficient, reliable, and equitable supply of irrigation water, coupled with conjunctive use of groundwater and effective drainage services, over about 1.79 M ha of command area in Gujarat, (ii) supplying municipal, industrial and domestic water to a population of about 30 M people in Gujarat, and (iii) creating the potential to irrigate about 70,000 ha and provide domestic, municipal and industrial water supplies in Rajasthan; and 3 b. establishing an efficient and reliable power generation capacity of 1,450 MW through the Riverbed Powerhouse (1,200 MW) and the Canal Head Powerhouse (250 MW), and (ii) distributing hydro-electric energy, including peaking capacity, to the western region power grid serving the States of Gujarat, Madhya Pradesh and Maharashtra. 3.2 The Water Delivery and Drainage Project (Cr.1553-IN) was conceived as a system encompassing one main canal and three major branch canals. Its objectives were to: (i) finance a three-year time slice of the Phase I water delivery and drainage project through partial implementation of irrigation infrastructure between the Main Canal head and the Mahi River, and (ii) establish the institutional framework required for project implementation and operation. The detailed project components as per the DCA, Schedule 2 are: Part [Conveyance, Delivery and Conveyance Systems), (i) Lining of the section of the Narmada Main Canal between km 9 and 21.4 [full completion in time slice]; (ii) Partial construction of the section of the Narmada Main Canal between km 21.4 and 143.7 including earthworks, lining and related structures [55% completion in time slice]; (iii) Partial construction of the Main Canal head regulator and of about ten gated cross- regulators to be located between the Narmada Main Canal head and Km 143.7 t70% completion in time slice]; (iv) Partial construction of seven major cross drainage structures to be located on the Heran, Orsang, Deo, Karad, Meshri, Kun and Mahi Rivers [55% completion in time slice]; (v) Partial construction of the Miyagam Branch Canal between Ikm 0 and 72 [70% completion in time slice]; (vi) Partial construction of the Por, Khundela, Untiya, Amleshwar, Sinor, Luwara, Dora, Mandwa, Jamnbusar, Sakarda, and Ranoli Branch Canals [40% completion in time slice]; (vii) Partial construction of the Vadodara Branch Canal between kan 0.0 and 102 [35% completion in time slice]; (viii) Partial construction of about twelve distribution and drainage system development blocks (blocks 6A-1, 6A-2, 6A-3, 6A-4, 6b,6C, 7C, 9A-1, 9B-1, 9B-2, 9C-1 and 9C-2) located in the command area between the Sardar Sarovar Dam and the Mahi River, including conveyance channels, surface drains and service roads within each block [25% completion in time slice]2; Ihe wording In between bracketa [..J is from the SAR pan. 5.02 and 5.03 andlor from the Ageed Minutes of Negotiations pwa. 6. 2 Mhe twelve development blodus reprent a cultivable commad Aea (CCA) of 96,900 he out of a tota of fity-two blocks of 448,190 ha CCA cAded between the Main Canal hed and the Mahi River. 25% completion repesents about 24,100 ha to be implemented during the project period. 4 (ix) Partial construction of the Distributaries to service each of the twelve distribution and drainage development blocks under Part A (viii) of the Project [45% completion in time slice]. part B. [Training] (i) Implementation of a suitable training program for the project staff in: (a) environmental sciences and related mitigating measures; (b) field survey, layout, design and estimating activities for block development of minor irrigation and drainage networks; and (c) operation and maintenance of the facilities under the Project, including computer based centralized data information systems, and communication and remote control operation and maintenance systems; (ii) Establishment of a training facility for operation and maintenance, including construction of the required buildings and provision of training equipment. part r. Provision of technical assistance for. (i) the overall design, construction and quality control of the works under Part A of the Project, including computer based centralized data and information systems; (ii) the planning and design of a system for the operation and maintenance of the water delivery and drainage project components of the Sardar Sarovar Project, including plans and studies needed for annual, seasonal and daily operation and technical evaluations to support design requirements; and (iii) the selection, design and installation of the communication and centralized computer-based remote control systems for the operation and maintenance of the water delivery and drainage project components of the Sardar Sarovar Project. 3.3 As per the SAR (para. 3.27 and Table 1) the preparation of a work plan including studies and investigations of the project's effects on the environment and project affected persons was to be carried out and fmanced directly by the Borrower with the Bank's technical assistance. In particular, Table I specified that the following studies, among others, were to be carried by NPG: (i) Rehabilitation and resettlement plan for the Sardar Sarovar Reservoir and other oustees in the command (emphasis added); (ii) Detailed environmental assessment and necessary actions for protective measures for the command area; and (iii) Afforestation plan for the command area, including special use zones. 3.4 In addition to the construction of the twelve blocks mentioned in Part A (viii), partial construction of seven additional distribution and drainage development blocks (CCA = 52,600 ha) in the initial 49 Ikm reach of Narmada Main Canal up to Orsang Aqueduct were also included in the project scope through the September 29, 1991 amendment of Development Credit Agreement 1553-IN. 4 . Project Area 4.1 The irrigation scheme starts in the lower south-eastem part of the state where the Sardar Sarovar Dam is located across the Narmada River, about 150 km upstream of the Gulf of 5 Khambat. The main canal takes off at a right angle from the Narmada River and runs northwards over 460 km until it reaches the border with Rajasthan. The first major branch canal will irrigate the fertile plains of Vadodara where the annual rainfall varies between 700 and 800 mm. The branch canals of this region will also provide water to the coastal lands along the Gulf of Khambat, known for their salinity. The second major branch canal will take water to the central part of the Saurashtra Peninsula through a series of lifts. The Saurashtra Branch Canal will then continue toward the Arabian Sea to provide domestic, municipal and industrial water to towns, industrial centers and villages through a system of pipe lines. The Saurashtra Peninsula is semi-arid, with annual rainfalls ranging from 400 to 600 mm, and has relatively fertile soils except in the low lands along the Gulf of Khambat. The third major branch canal will lead the Narmada waters over a narrow strip of land located between the Rann of Kutch (desert with saline soils) and the Gulf of Kutch. This region is known for its arid climate, with rainfall around 200 mm per year, and its relatively poor soils. The main canal will then continue in northern Gujarat toward the Rajasthan border, across patches of fertile and saline soils. The climate is also arid, with an annual rainfall around 200 mm. (See Map IBRD 17940.) 5. Project Design and Organization Origins of Proiect Design - The Narmada Water Dispute Tribunal 5.1 The project's design and organization were affected by various political and social as well as technical considerations. In 1965, GOI appointed a committee to prepare a master plan for the development of the Narmada Basin, which included sections of four Indian states: Gujarat, Madhya Pradesh (MP), Maharashtra, and Rajasthan. When the riparian states failed to accept the Commission's recommendations, GOI -- in accordance with the provisions of the "Inter-State Water Dispute Act of 1956" -- appointed the Narmada Water Dispute Tribunal (NWDT) to adjudicate. Following ten years of deliberations, the NWDT gave its final award in December 1979. According to the data then available, the annual 75% dependable quantum of water available for the project was estimated at 28 million acre feet (MAF), of which approximately two-thirds (18.25 MAF, or 22,500 MxM3) was allocated to MP, and most of the remainder (9.0 MAF, or 1 1,100 Mm3) to Gujarat. Rajasthan and Maharashtra were allocated minor amounts (0.5 MAF, or 600 Mm3 and 0.25 MAF, or 300 Mm3. respectively). The NWDT also issued orders regarding the major characteristics of the projects to be developed, including: a. proportionate sharing of water in surplus and deficit years; b. elevation of the full reservoir level (FRL) of the Sardar Sarovar Dam; c. elevation of the main canal at the Rajasthan boarder, d. sharing of power benefits from Sardar Sarovar among Gujarat, MP and Maharashtra; e. resettlement and rehabilitation of the people living in the reservoir, f. concurrent construction of the Narmada Sagar Dam in MP; g. regulated releases from the Narmada Sagar Dam in MP; h. sharing of costs for the Sardar Sarovar and Narmada Sagar dams, Sardar Sarovar riverbed and canalhead hydropower plants, and Narmada main canal; and i. setting up of the NarTnada Control Authority (NCA) to coordinate the implemen- tation of the NWDT award. 6 5.2 It apepars from the Project design that Gujarat's &f objective was to ensure the project would benefit the maximum number of people by spreading water over the largest command area possible. This strategy, which gave higher priority to the project's equity and social aspects than to economic considerations, was accepted by the Bank as consistent with the goal of reducing poverty. It was also consistent with India's long tradition of building irrigation systems primarily for famine relief, rather than for productive and commercial purposes. 5.3 Gujarat's second objective appears to have been its desire to be awarded the largest amount of water possible since its share of the Narmada Basin is relatively small when compared to that of Madhya Pradesh. Gujarat's strategy, therefore, appears to have been to present the largest multi- purpose project possible including a very large command area of 1.79 million hectares net, an ambitious water supply scheme for domestic, municipal and industrial uses for 30 million people, and a power generation component of 1,450 Megawatts. In addition, to satisfy the water requirements of such a large project, a second large reservoir, known as the Narrnada Sagar Dam, was to be constructed simultaneously upstream in MP. The concept of a large multi-purpose project prevailed during the NWDT proceedings, and was finally accepted after the distribution of water, costs and benefits satisfied the party states. EProi Preplaration and Apprabial 5.4 When the NWDT finally rendered its decision, the major characteristics of project design had already been deternined directly or indirectly by the NWDT, or were part of the basic assumptions. These included such matters as water allocation, height and storage capacity of the Sardar Sarovar Dam, power generation, length and elevation of the main canal, expected size of the command area, and number of beneficiaries. These questions had already been settled through the considerable discussions and technical work (for example, on various dam sizes, dam locations, and water usage) that had been carried out during the NWDT's ten-year deliberations. 5.5 Project preparation took four years from project identification in 1979 to preappraisal in 1983, well after the NWDT decision. The Narmada Planning Group (NPG) and the Bank's appraisal team did not attempt to change the basic concept, scope and design of the project. In retrospect, smaller viable sub-projects within the framework of the NWDT award might have been considered at this stage. For instance, financing the Sardar Sarovar Dam for power generation only or the funding of a smaller command area which initially did not rely on the construction of the Narmada Sagar dam upstream. Because the appraisal team took for granted the concept of water spreading which prevailed at that time for social reasons, it did not consider the more intensive irrigation options which were known to yield higher rates of return. Critics have often raised the issue of options. Alternative options such as constructing a large number of small reservoirs or to give more emphasis to groundwater development - to minimize the impact on affected persons and the environment - have not been comparable in terms of scale of benefits and generally have been very weak technically and economically.3 In addition, there does not appear to be any suitable altemative especially for the D, M&I water in northern part of GujaraL 5.6 The NPG comprised a multi-disciplinary team of national experts to which UNDP and the Bank provided extensive technical and financial assistance. Emphasis was placed on studies for Phase I (450,000 ha up to Mahi) which were carried out at feasibility level, while those of the subsequent Phases (1.4 million ha up to the Rajasthan boarder) were carried out at reconnaissance 3 lbe Bonowe indicates th the Bank had no reao to consider sborter Wmn viable projects since the NWD bad reviewed al project development options before giving its final decision. In addition, priect auLborities had stU;ed cropping patterns aN water requimments to malch the NWDT award aNd, terefome, there wa no reaon to consider a smaller command are. 7 stage. The Narmada Development Department (NDD), in charge of project implementation, had the task of preparing the detailed designs and cost estimates of the major structures, in association with the Central Water Commission, such as the Sardar Sarovar Dam and its powerhouse, the main canal and its appurtenant structures, the branch canals and the distribution systems. Another important task for NPG, to which the Bank staff contributed actively, was the analysis of the financial and economic benefits of the project. In addition to this enormous task, both the NPG and the NDD devoted some time to the study of environmental and resettlement concems. 5.7 Appraisal was carried out in 17 months, from March 1983 to August 1984, by several Bank missions. The protracted period of appraisal was due to the scope and complexity of the twin Canal and Dam Projects, and also to the need to reach agreement on the treatment of people affected by the Dam Project Negotiations took place in November 1984 and Board approval in March 1985. The SAR and its two Supplementary Data Volumes give a detailed and exhaustive description of the Sardar Sarovar Project as a whole, and of the 3-year time-slice of the Water Delivery and Drainage project in particular. There are also large quantities of unpublished back-up material. The project documents give a good description of the various components eligible for financing, with particular emphasis on the irrigation and drainage aspects, as well as the institutional and training requirements, for implementing this large and innovative project. The SAR also addressed the risk of water-borne diseases due to the project. However, by the time appraisal was completed, it became apparent that more detailed studies would have to be prepared during project implementation by the NPG. The SAR, in its Table 1, gives a list of additional priority studies which relate to hydrology, groundwater, soils, crop water requirements, drainage requirements, agricultural production, management information systems, and also the modeling of the Narmada River flows under various development options and the modeling of groundwater abstraction. Among these studies, the most important was the preparation of a resettlement and rehabilitation (R&R) plan for the persons affected within the command area. The list also indicated the need to prepare: (i) a detailed Environmental Impact Assessment (EA) and necessary actions for protective measures for the command area; and (ii) an afforestation plan for the command area. The project concept and design were well understood by the Borrower. 5.8 The legal documents also gave a thorough description of the project and components eligible for financing. The covenants covered the usual conditionalities, including availability of funds, timely implementation even after Credit closure, adequate staffing, proper O&M, need for water charges, training of staff, and maintenance of the NPG and other inter-state institutions. Among the 23 covenants of the Development Credit Agreement (DCA), one required that land for canal construction and structures should be acquired in a timely manner, and another required GOG to undertake all measures considered necessary to minimize the risk of malaria, filaria, schistosomiasis and other water-related diseases. However, no covenants covered the preparation of an R&R plan for canal oustees, or a command area EA. The Legal Agreements spoke only of a suitable training program in environmental sciences and mitigating measures. Board Presentation 5.9 On March 7, 1985 Bank staff presented the Water Delivery and Drainage Project in conjunction with the Dam and Power Project to the Board, referring to them as one of the largest multi-purpose schemes ever planned and designed as one unit, and making special note of the R&R program for Sardar Sarovar Dam and Reservoir. They argued that the objectives and principles embodied in this R&R program were a significant improvement on standard Indian practice: (i) the program's intended provision of land and employment was superior to the practice of cash compensation; (ii) its emphasis on resettling communities au communities would accelerate oustees' rehabilitation; and (iii) its planned intensive follow-up M&E by independent agencies would set the standard for similar schemes in the future. Staff pointed out how well the two projects supported the Bank's lending strategy for India and how their innovative concepts in 8 design, construction, and management practices would serve to catalyze progress in these areas as well. 5.10 Four Executive Directors spoke and raised issues, though each supported the proposals. Their main issues related to project size, the prospects for Bank involvement in future Narmada catchment projects, and social and environmental effects. 5.11 Regarding Wtsize, one Director asked why the Bank had divided an obviously unified investment into two projects? Was it because of the customary limit of US$300 M on Bank loans/credits? Management's response assured the Board that the preference for two projects had nothing to do with such limits which were in any case, flexible. A single project would have simplified Board documentation, but would have complicated implementation, which involved different agencies. Staff added that a further consideration in the choice of two projects was the distribution of benefits among the states. The set of beneficiary- states for power differed from that for irrigation. 5.12 Regarding future Narmada Basin Development, a question was asked whether the Bank was considering additional projects, given the large size of these first two. Staff responded by referring to one large and two smaller dams then under appraisal in Madhya Pradesh; only the construction of the large Narmada Sagar reservoir in Madhya Pradesh upstream would optimize the power benefits of Sardar Sarovar. In addition, the Bank was considering involvements in power transmission and in the canal network. 5.13 Regarding social and environmental effects, a Director queried: (i) whether there were still any ill-defined areas of responsibility among states and GOI for implementing and monitoring resettlement that could cause delays in resolving problems; and (ii) whether the relatively undefined environmental studies and potential problems arising made future consideration and implementation of study recommendations too uncertain. He also asked if the Bank's semi-annual reports on project status and execution could note the state of progress with these aspects. Another Director supported this sentiment to keep the Board informed. Yet another Director, voicing similar concerns about social and environmental effects, expressed concern that the Bank was paying insufficient attention to issues like resettlement at the earlier stages of project preparation. 5.14 Management responded that each state had established a resettlement wing, staffed with responsible and experienced officers, to conduct the program. The states were also expected to contract with independent research institutions that would monitor and evaluate its implementation. Furthermore, the Central Government and the interstate Narmada Control Authority would coordinate overall monitoring and evaluation of the resettlement plan. Management also indicated that although a full environmental impact assessment had not been completed, a comprehensive first-stage assessment had been conducted by the University of Baroda and then examined by members of the Bank appraisal team. That study had covered public health, flora and fauna, fisheries, wildlife and archeology and had determined that there were no endangered species in the area. Management said that by the end of the calendar year, each state govermment was expected to prepare an environmental work program, which would be submitted to the Bank for approval. Under covenants in the Loan/Credit Agreements, these programs would include training for environmental staff. Sufficient time (15-18 months) would be available before the commencement of construction to remedy any defects in the environmental work program. 5.15 Management also promised to cover the social and environmental aspects explicitly in the semi-annual reports and to keep the Board informed of progress - especially if difficulties in need of remedy emerged'. Staff expressed the view that institutional arrangements and responsibilities 4 Reference to this promise was found in the verbatim trmnscript of the March 7. 1985 Board meeting, but wa not specifically indicated in the Summary of Board Discussions (SD85-10) of March 21, 1985) 9 for resettlement were firm enough at that pointL They admitted that there was no full environmental impact assessment, but they felt that legal covenants covered these aspects adequately. In this view, there was sufficient time to complete studies before construction commenced. 5.16 Other issues discussed were electricity tariffs for satisfactory ERRs, financial analysis of power projects and the sensitivity of the economic analysis to cost estimates. After a thorough discussion by Board members, the two projects were approved unanimously. The discussion flagged significant concerns about R&R and the environmenL 5.17 In sum, these Board concerns are important because they reveal the early exposure of all parties in the Bank to the R&R and environmental issues, and the attention afforded to them. The Bank not only kept the Board informed through regular semi-annual reports, but as critics were becoming more vocal, it held briefing meetings from 1990 onwards at the request of the most concerned EDs, in particular those of Netherlands, UK, US and Germany. In addition, Bank staff responded to a large number of queries by many EDs throughout implementation. Organization 5.18 Initially, the Narmada Development Department, a GOG agency, was responsible for project implementation. In May 1988, however, this responsibility was transferred to a para-statal corporation called the Sardar Sarovar Narmada Nigam Ltd. (SSNNL) to deal more efficiently with the complex technical, financial and administrative requirements of the project, and to allow the necessary funds to be raised in the financial markets. SSNNL was organized on a functional basis: under the Chairman there was a Director for the Dam, a Director for Canals, and a Director of Administration for personnel and finance. Procurement was centralized in a Central Procurement Unit, and designs of all canals, concrete structures and mechanical installations were centralized under an Engineer-in-Chief for Designs. A separate R&R wing was created with a General Manager to oversee the R&R of project-affected persons. SSNNL also established a comprehensive computer-based Management Information System (MIS) that allowed efficient control and monitoring of all operations, including contractors' performance. Finally, SSNNL turned over the operation and maintenance (O&M) of village service areas to water users' associations with the objective of having these associations construct the distribution and drainage systems on behalf of SSNNL to give their members a sense of participation and ownership. 5.19 In view of the unusual magnitude, complexity and highly specialized nature of the water delivery and drainage project, involving special design and construction problems, the GOG accepted a Bank recommendation to create a Board of Consultants (BOC) to review technical designs, criteria, standards and specifications prepared by the Central Designs Organization . The BOC utilized both local and foreign consultants and held meetings at regular intervals, to independently review and resolve special technical issues. 5.20 In view of the multi-state nature of the project, and in accordance with the rulings of the NWDT, a number of multi-state agencies were also established: the Narmada Control Authority (NCA), to ensure compliance with the decisions of NWDT and coordinate the SSP project activities among the party states; the Sardar Sarovar Construction Advisory Committee (SSCAC), to supervise the planning, design and construction of the dam and power complex; and the Narmada Review Committee (NRC), comprising the Chief Ministers of the four state governments, to rule on any decisions taken by NCA. Design of the Irrigation System 5.21 The entire project was divided into 13 agro-climatic zones, with each zone sub-divided in turn into irrigation and drainage development blocks ranging from 4,000 ha to 10,000 ha. There were 52 development blocks in Phase I which were sub-divided into village service areas (VSAs) 10 of about 500 ha each, the VSAs were then divided into Chaks of about 40 ha each. A key feature of project design was the integration of various components such as irrigation, drainage and road networks within development blocks, in order to improve agricultural productivity and minimize construction works. The project design envisioned a canal system that would be lined from the headworks down to the 8 ha sub-chak, to minimize water losses in the conveyance system. In addition, the plan was to operate the main canal, branch canals and distributaries down to the 8.5 m3/sec level on the concept of control volume, which automatically balances inflows with outflows. For that purpose, the conveyance system was to be equipped with cross-regulators and control gates operated by a state-of-the-art remote control and monitoring system, involving a central control unit linked through a fiber optic communication system to a large number of remote control units distributed throughout the command area. In a second phase, the plan was to extend the remote control system from the 8.5 m3/sec level down to the heads of the village service areas. Within the VSA, a system of rotational water supply (RWS) was to allocate water to farmers by turn and in proportion to the size of individual holdings. Under this system, the distributory and minor canals were to be ungated and operate "On" and "Ofr under a free flowing concept. Water users associations at the VSA level were also to be formed. Hydology and Water Availabilityl 5.22 The mean water availability for irrigation and D,M&I water was estimated at 17,900 Mm3 (14.5 MAF) per year of which 13,800 Mm3 (11.2 MAF) from the Narmada River, 3,700 Mm3 (3.0 MAF) from groundwater in the command area, and 400 Mm 3 (0.3 MAF) from en route rivers in the command ara The average water requirements were estimated at 17,100 Mm3 (13.9 MAF) per year of which 15,800 Mm3 (12.8 MAF) for irrigation and 1,300 Mm3 (1.1 MAF) for D,M&I. The irrigation water requirements were based on an irrigation intensity of 106% -- i.e., the irrigation of about 52% of the total CCA in kharif (monsoon season), and 54% in rabi (winter dry season). Overall irrigation water use efficiency was estimated at 48% for surface water and 60% for groundwater irrigation. As indicated previously, the size of the command area of 1.79 M ha was determined in accord with the objective of spreading project benefits as widely as possible. Consequently, at no time will the full CCA be irrigated. Overall, the amount of water will not be large in relation to the area and the number of persons to be served at full development -- about 8,450 m3/ha on average for the kharif and rabi crops, and about 95 I/day per inhabitant for domestic and municipal uses at head works. 5.23 A number of questions relating to the project hydrology were raised by the Report of the Independent Review6 commissioned by the Bank. These questions concerned: (i) the accuracy of flow measurements and the integrity of flow records, both measured and hindcast series; (ii) the accuracy of dependable flows derived from the flow series and used by the NWDT in 1979 for allocating water shares among the four states; and (iii) the ability to meet the planned water requirements of the SSP command area 5.24 In response, the Borrower requested the Central Water Commission (CWC) to review the project's hydrology and the Bank engaged in consultation with and on behalf of the Borrower a consultant firm to prepare a status note on the validity of the questions raised by the Independent 5 See Annex I on Hydrology and Wte Manage.nnt for more details. 6 See Section on Environmot below for deails on the events that pvceded nd followed the publication of the Independent Review Repost in June 1992. 11 Review, and their likely impact on the project performance7. This step was taken even though a review of the project hydrology and water resources was not part of the benchmarks; the consultant worked in conjunction with the CWC. The findings of the consultants, which do not agree with all the findings and recommendations of the Independent Review, are summarized below. 5.25 With respect to questions (i) and (ii), the consultant's report noted that the NarTnada River has been gauged at Garudeshwar, a few kilometers below the Sardar Sarovar Dam since 1948, and at 32 other gauging stations upstream set up after 1948. It concludes that the primary flow records are sound overall and adequate for the project. This conclusion is based on a comparison of hindcast and actual flows series and tests of the data sets to check inferred water balance in nearby catchments. The CWC has also analyzed the data set, including both measured flows from 1948 to 1990 and the series of hindcast from 1891 to 1948. The 42 year-long measured series yields values slightly lower than the combined hindcast/measured 100 year series. An analysis of the rainfall records shows that the lower flows since 1948 do not constitute an emerging trend but are a consequence of natural variability. The 100 year series is, therefore, considered representative of the Narmada River flows and yields a 75% dependable annual flow of 32,900 Mm3 (26.6 MAF), which confirms the value of 27 MAF used by the NWDT. 5.26 Question (iii) concerned the SAR estimates for the SSP project, which were based on operational studies carried out by an Indian consultant firm working for NPG in 1983. The consultants carried out simplified operational studies to verify the match between demand and supply during the 1948-1990 period of observed flow records. Their findings can be summarized as follows: 5.27 From 1995 to 2005 i.e., between the early years of development and completion of the SSP command area as currently planned, the Sardar Sarovar Dam alone will be sufficient to provide the necessary regulation and storage to supply the irrigation and D,M&I demands of the project. However, from about 2000, as the SSP and upstream demands build up, the risk of shortages in the drier years increases progressively. A ten-year delay in the construction of the Narmada Sagar Dam, which assumes completion by 2002, will have little impact on irrigation and D,M&I but will reduce power generation. Provision of a lower level Irrigation By-Pass Tunnel (IBPT)s, as recommended by the Bank to increase live storage, will allow increased flexibility during the dry years. Beyond year 2005, the Narmada Sagar reservoir becomes a necessity, if the command area develops to the size planned. 5.28 From 2005 to 2024 i.e., between completion of the SSP command area and the date at which the Tribunal award may be revised, the increase in demand comes primarily from upstream development in MP and Maharashtra. At this level of development: (i) the DM&I demands can be met every year, except in the severest droughts such as that of 1899/1900; (ii) the demand of kharif crops will be met with a 100% dependability except in the severest drought year; and (iii) the demand of rabi crops will be met with a 90% dependability. The lower level EBPT would ensure that these demands are met in full. 5.29 By 2024, i.e., the date at which the NWDT award may be revised, the kharif crops demand will be met with a 80% dependability and that of rabi crops with a 85% dependability. However, in the long tern, if MP and Maharashtra make use of their full allocation, the frequency 7 Ihe consullay was fiance out of an Oversu Development Agency (ODA) of United KGngdom Trust Fund managed by the Bank. Its purpose was to usist the Borrower in meedng the benchmarks set by the Board by March 31. 1993. S Refer to the Dam and Power PCR for mom details on the IEPT. 12 impact on the kharif crop will remain about the same but the proportion of years in which the rabi demand can be met in fuU falls to between 50 and 60%. 5.30 In their simplified operational studies, the consultants made some reasonable assumptions with regard to water availability. In particular, they assumed that, by 2024 - the date at which the NWDT award may be revised - the demand from MP is likely to lie between 12,000 and 18,000 Mm3 (10 and 15 MAF) as against 18.25 MAF assumed by the NWDT. The consultants have therefore used the figure of 16,000 Mm3 (13 MAF) or about 70% of the NWDT aUlocation. However, with regard to water availability and water requirements in the command area, the consultants were clearly over optimistic for various reasons: (i) they assumed that the invert level of the IBPT would be fixed at its lowest elevation; (ii) they used NPG figures which are based on an irrigation intensity of 84.5% and an overall irrigation efficiency of 60%, as against more realistic assumptions of 106% and 48%, respectively, made in the SAR; (iii) they used the average monthly crop water requirements by region instead of actual requirements; and (iv) they assumed that groundwater was uniformly distributed over the entire command area and could be mined to meet annual deficits. As a result, the consultants have overestimated water availability and underestimated crop water requirements, and in the end, Gujarat is likely to require more water than its allocation under the NWDT unless certain steps described in para. 5.23 below are taken. A sensitivity analysis carried out by the consultant shows that, with a possible 20% increase in water requirements, by 2005 there will be insufficient water in an average year without Nannada Sagar, and with the Narmada Sagar Dam, the 75% dependability would not be meL However, it should be noted that these assumptions are only of relevance if it is assumed that Gujarat is limited to 9.0 MAF regardless of flow, whereas the reality will be that for many years a much larger flow will be availablc. Recognizing the limitations of their rapid analysis, the consultants have recommended that these defects be redressed in the detailed updating of the operational model that an Indian consultant firm is undertaking on behalf of NPG. 5.31 There are several reasons to assume that actual irrigation water requirements will be higher than those estimated by the NPG and the SAR. Ei= the crop water requirements were based, in both cases, on averages rather than on actual requirements calculated upon a monthly analysis of effective rainfall and consumption as recommended by FAO; second the gross water requirements at headworks estimated by NPG were based on an overall irrigation efficiency of 60%, whereas the usual estimate for such projects is less than 50% as in the SAR; 1hidb in the case of the SAR, crop water requirements were reduced by 10% on the assumption that fanners will use less irrigation water than the estimated amount, due to the limited quantities of water to be supplied; fourihb due to the fact that the main canal and also the Saurashtra and Kutch branch canals will be flowing across hundreds of kilometers of drought-prone areas, it will be very difficult - if not impossible - to control authorized and unauthorized diversions of water to irrigate areas outside the cultivable command area. To remedy this problem it would have been advisable to increase the estimated irrigation water requirements by 10%, as has been done in many other projects in India; fiLh, and most importantly, experience shows that irrigation projects, designed for a low irrigation intensity and for which construction is not completed when water becomes available, tend to consume more water in the initial years than the design allocation. Thereafter, it is difficult to reduce water allocations when the project becomes fully developed. This difficulty stems from the fact that farmers want to continue to apply water to the areas designed for rainfed crops - 30% in the case of SSP - and any reduction in water allocations automatically results in a loss of income.9 9 The Borrower notes that the possibility of higher irrigation water requirements is a practical problem wing not only in this project but also in other projects in India. However, with the controlled volume concept of water supply, the lining of canals, involving farmen in tbe uLilization of water, the project efficiency (60%) can be achieved and upsuram abstraction, misuse, etc. can be controlled to a great extent. The actual requirement could be contained well within the designed requirements. 13 5.32 When taking into account the above observations, the project as currently designed to the full command area is likely to require more water than the share allocated to Gujarat by the NWDT before year 2024.10 Since Madhya Pradesh is not likely to use its fullwater allocation, before that date some arrangements could be made between Gujarat and MP on the use of excess waters. If Gujarat is forced to limit its demands to its present allocation, the SSP command area will face increasing significant shortages as water demand builds up. The options for Gujarat will be to: (i) hope for an increased allocation when the Water Tribunal is reopened; (ii) cut back on the irrigation of rabi crops and give more importance to the kharif irrigated crops; (iii) reduce the size of the command area; or (iv) gradually pursue greater water use efficiency through the adoption of modern on-farm water application methods, and a shift toward less water-demanding crops. Since cutting back on irrigation is likely to be resisted by farmers, the best option initially, which is immediately feasible, would be to develop the command area step-by-step by giving priority to the development of irrigation in the areas yielding the best returns, and the development of D,M&I in the areas less suited for irrigation. Given the low rate of return from the least economic parts of the command and the high value of D,M&I water, this option is likely to improve the returns. However, in the long run, the best option would be to develop sprinkler and drip irrigation and promote less water-demanding crops through additional investments and agricultural extension. Groundwater and Cogjunctive Use 5.33 At full development, groundwater is expected to contribute about 3,700 Mm3 or about 25% of the total water availability for the project This amount is based on the natural annual recharge from rainfall and the additional recharge from irrigation. The Phase I areas around the Vadodara branch have a good aquifer, except for zone 4 along the Gulf of Khambat. The areas around the Saurashtra branch have an average aquifer, with some patches of brackish water (particularly in zone 7 along the Gulf of Khambat). The tail end of the main canal and the Kutch branch have poor and generally brackish aquifers. Groundwater is not uniformly distributed throughout the command area, and it is estimated that about 40% of the groundwater is slightly brackish and will have to be blended with fresh canal water to be useable for irrigation. 5.34 Groundwater development is expected to be implemented by private and public sector enterprises. The private sector is expected to represent about 60% of all groundwater development It will develop mostly the fresh water aquifers. The public sector will develop the remaining 40% of mostly brackish waters through augmentation tubewells. Public wells will also be developed for drainage purposes, in areas where the groundwater table rises within 5.0 m of the ground level. Groundwater development is expected to take place progressively over a period of 10 years, beginning about 5 years after the first irrigation. 5.35 The Gujarat Groundwater Development Corporation (GWRDC) is the government agency in charge of investigations and monitoring of groundwater development. It has prepared groundwater models with the assistance of local consultants for various parts of the command area The model for Phase I area is the most detailed. However, the various existing groundwater models need to be consolidated into one general model, as Bank consultants have recommended, using the same methodologies, recharge principles and boundary conditions. This new model is being developed and should become available by December 1994. 5.36 Though the theory of conjunctive use and vertical drainage has been well thought out, it must now be translated into specific guidelines for the design and construction of the irrigation blocks. The PCR mission noted that groundwater development was not yet integrated in the design of the initial 52 irrigation blocks. This omission needs to be redressed soon through a 10 Ibe Borrower is of the opinion that the unau(orized ure of water in excess of the volume allocatd by the NWDT to Gujarat would not arie since NCA is to monitor the allocation of water to each state. 14 detailed groundwater survey of each of the initial blocks, indicating where private and public groundwater developments are expected to take place and the amounts of water which are expected to be extracted. Conclusion 5.37 The above points demonstrate the need to further refine and adjust the initial assumptions and basic data used by the project designers and the appraisal team some 15 years ago. The revision of the initial studies is all the more needed when taking into consideration: (i) the slower development of water resources upstream of the SSP dam than anticipated by the NWDT, (ii) the changing attitudes of farmers toward more intensive and remunerative agriculture than initially anticipated, (iii) the need to reduce water use to remain within the frame work of the NWDT award, unless some special arrangements are negotiated with the riparian states, and (iv) the need to build into the project design the results of the Environmental Impact Assessment which is expected to be completed by December 1994. These points will require the preparation of more refined simulation studies to establish the magnitude of regulated flows obtainable from the Sardar Sarovar reservoir, the groundwater availability in various locations, the en route rivers, and also to make better estimates of actual water requirements. These studies should: (a) adjust the water allocations policies among the various users in accordance with any subsequent agreement that may be reached among the riparian states; (b) define the groundwater development and conjunctive use policies in the various regions of the command; (c) refine the groundwater models to determine the quantity of groundwater usable and amount of mining possible for each project location; (d) refine the river flow and dam operation simulation model, based on realistic development scenarios upstream, realistic return flows and updated water flow, groundwater availability and water requirements; (e) review the water use policies and the design of the distribution networks on the basis of findings of the simulation model; (f) proceed with the required adjustments in the initial project design wherever still possible; and (g) revise the economic analysis on the basis of the proposed adjustments. Most of these measures and studies are underway or being considered. 6. Project Implementation General 6.1 The Credit became effective in January 1986, nine months after Board approval, but construction could start only in July 1987 after G01 released its environmental clearance for the projecL This delay of about two years resulted in a late award of contracts for the initial reaches of both the main canal and the major branch canals, and it soon became apparent that the project targets could not be completed within the expected three-year period. Therefore, a more realistic implementation schedule was drawn up in December 1989, with a completion date of July 1992. Subsequently, the Credit closed on July 1, 1992 after being extended 39 months, first through an extension of 3 months, followed by three extensions of one year each. These successive extensions were used as leverage to improve overall project performance not only of the irrigation and drainage components, but also of the R&R component implemented under the Dam & Power project. For example, one of the main conditions for extensions in July 1989 and July 1990 was the release of about 2,700 ha of forest lands for the resettlement and rehabilitation of project- affected people from Maharashtra at Taloda. Civil Eng ng 6.2 The project experienced serious start-up problems relating to quality and construction slippages. On August 31, 1988, the Bank communicated to GOG and GOI a list of 'critical implementation steps' that were to be taken by NDD to meet the project objectives. These included: 15 a. implementing a comprehensive Management Plan to demonstrate SSNNL's institutional and technical capability for caffying out SSP; b. establishing an adequately staffed and computerized MIS, including a fully operational multi-calendar scheduling package; c. preparing a master PERT-type Revised Implementation Schedule (RIS) for the entire SSP, reflecting realistic physical and financial implementation schedules; d. strengthening the independent technical review capability of the BOC to address the canal design and constuction deficiencies; e. completing an independent and comprehensive review of the present designs of major canals and related structures; f. undertaking a complete review of all works to determine their acceptability in terms of relevant contract provisions, and initiating actions to remove contractors whose work was found in violation of contract specifications; g. reviewing the suitability of contractors' acquisitions of equipment and their equipment planning; and h. enforcing all existing contract requirements on the contractors. 6.3 In October 1988, the Ministry of Water Resources (MOWR) set up a six-member Team of Indian Experts (TOE) to review and address the serious technical, organizational, iuplemenational and quality control problems highlighted by the Bank Thereafter, in December 1988 a Bank team met with officials of GOI (MOWR, CWC, DEA, and NCA), GOG, GOMP and SSNNL to review the actions taken by the Borrower. This meeting resulted in a Memorandum of Understanding (MOU) on additional steps to be taken by the Borrower. Another important outcome of the MOU was a GOI agreement to add three expatriate consultants to the TOE. The TOE's terms of reference were to: a. examine construction quality, adequacy of quality control and supervision arrangements; b. review construction methods and the adequacy of construction equipment with contractors, and their overall capability of achieving the desired progress; c. identify bottlenecks and suggest measures for accelerating progress; d. examine the fulfillment of stipulations made in the Bank's letter of August 31, 1988; e. recommend organizational and institutional improvements; f. review and evaluate all aspects of construction supervision; and g. examine the project's planning and design for the canals and distribution system, with particular reference to, inter alia, the design of a selected number of major canal structures, sizing and operational control of the water delivery and drainage system, altemative types of structures for major river crossings of the main canal and branch canals, the practicability of designs and sequencing of construction, uniformity of design standards, and procedures for intemal checking of designs. 16 6.4 On March 23, 1989, the nine-member TOE finalized its report after visiting the project areas. The TOE found construction of the main canal to be substantially behind schedule because of "teething problems" encountered with the machine lining equipment. However, it expressed hope that such problems would soon be resolved, and felt that the recently expanded SSNNL would be able to handle the increased work load. The team also declared that work quality on the canal structures was generally satisfactory and that the quality of canal lining had been improved considerably. The team concluded that the Nigam staff had the necessary capability to implement the project, and made a number of recommendations to further enhance project implementation. 6.5 From 1990 onwards, after the initial start-up problems were overcome and the TOE recommendations were implemented, construction quality improved significantly and high quality standards were maintained for the construction of the main canal and major concrete structures, including bridges, regulators, cross-regulators and aqueducts. Construction quality on branch canals also improved substantially over time, and could be considered good at the time of the PCR. The introduction of mechanized concrete lining for the main and branch canals, along with PVC insertion in the longitudinal and transverse contraction joints concurrent with concrete placement, helped to achieve good progress and excellent quality. Mechanizing the construction of the major hydraulic structures also helped to accelerate the pace of implementation. Because hand placement of concrete was eliminated, the quality of concrete lining on the main canal and the quality of cons- truction on major hydraulic structures were both higher than normal for Indian irrigation schemes and could meet international standards. 6.6 By the time of the PCR mission, the performance of the Borrower was encouraging. Performance of contractors had improved considerably, the overall pace of implementation was good in relation to Indian standards, and the institutional arrangements for quality control and quality assurance were in place and staffed by competent engineers. These achievements were due to the introduction of several innovative features relating to: a. the mechanization of canal lining, which included the use of: (i) cement in bulk, conforming to upgraded standards recommended by an Experts Committee on Cement and Concrete (ECCC), (ii) centralized concrete batching plants, (iii) transit mixers, (iv) paver machines, (v) PVC water stops in contraction joints, and (vi) chemical compounds to ensure the proper curing of concrete; b. the construction of major hydraulic structures, which benefitted also from innovative and state-of-the-art technologies; c. the establishment of a competent Quality Control and Quality Assurance organization with well equipped laboratories to supervise and control the use of these technologies; and d. the development of an MIS that allowed tight control of operations and contract performance. 6.7 In September 1991, the Credit Agreement was amended to include the partial construction of 7 additional blocks (52,600 ha) within the initial reach of the main canal. This was done because of concem that the 12 irrigation and drainage blocks financed by the Bank might not receive water when completed, due to delays in the construction of the Orsang Aqueduct. Although construction work could not be initiated by the Nigam before the Credit closed, in February 1993 the PCR mission leamed that the Nigam had let the contracts for the construction of both the 7 additional and 12 original blocks, representing 52,462 ha out of a total CCA of 9,900 ha. 17 6.8 The pace of project implementation was reduced somewhat after the Credit closed, due to shortage of funds, it was further reduced after the Borrower requested the Bank, on March 29, 1993 to cancel the undisbursed balance of the Loan for the Dam and Power project. In any case, the record pace of construction achieved in 1992 could not be maintained, and many ongoing contracts began to suffer from lack of payment. Only a few essential contracts were kept active on the main and branch canals and in the development blocks, in order to have a minimum of 15,000 to 20,000 ha ready for irrigation by June 1995, when water is expected to be released for the first time in the main canal. All contracts on the main canal beyond the Mahi River (kam 144) and on the Saurashtra branch, which were to form part of the project's Phase lI, were suspended. These contracts were in the process of being reinstated in February 1994, after the Nigam was able to raise additional funds from the financial markets. 6.9 The SSNNL was timely in its preparation of the 3-volume draft plans of operation and maintenance (POM) for the canal system and head works. In addition, the drafts of this document, compiled in loose binding, were periodically revised and updated by the Nigam through the incorporation of Bank comments, review and comments of Engineer-in-Chief Designs, and suggestions given by BOC from time to time. The Nigam's Mechanical Consultant estimated the equipment and personnel requirements for establishing workshops in the various areas of the canal system. Once the remote control and monitoring system for canal operation is fixed, the Nigam wilU need to update the POM again to incorporate al the specifications of this state-of-the-art system involving fiber-optic telecommunications, computers operating in real time, sensors, and electrical equipment for gate operation. This would include the establishment of a special O&M wing within the O&M unit, and intensive training for specialized Nigam staff. Procurement 6.10 There were no major procurement issues during project implementation. The SAR gave a clear description of the packaging of works, and there was clear agreement regarding the prequalification of contractors. Initially, there were some problems in finalizing the model bidding documents, but these were discussed and resolved satisfactorily. The Borrower followed the Bank's guidelines diligently and most contracts progressed well, with two exceptions ( Main Canal from 58 to 82 km, and 4 Main Canal Structures). In these cases, the contracts were foreciosed and alternate contractors were hired. 6.11 Local shopping was provided for in the Credit Agreement but force account was not contemplated. For future irrigation projects, it would be better to provide for force account for at least 10 to 15% of civil works. The reason being that, in India, the Irrigation Departments are geared to carry out some of the civil works departmentally. The Irrigation Departments can in many cases implement special works for which contractors have no experience or are not responsive, or complete works on behalf of contractors when these fail. Natural calamities, such as floods during the monsoon season, may require emergency works to be carried out at short notice with departmental equipment and staff. Project Cost Budgeting and Financing 6.12 The project cost estimates and expenditures, component-wise, are presented in Part m, Table S. At appraisal, the total project cost - including the completion of the Main Canal up to Mahi Aqueduct, branch canals, and the 12 irrigation and development blocks (96,900 ha), as well as physical and price contingencies -- was estimated at Rs. 6,251 million, the cost of the 3-year time slice was Rs. 3,059 M, or about 50% of total costL At Credit closure, the revised estimate for total project costs had increased to about Rs. 13,720 million, a 220% increase over the appraisal estimates. By the Credit Closing Date, the sum of Rs. 6,613.35 million had been spent, 48% of the revised total cost, to complete about 60% of the SAR physical targets for the 3-year time slice. 18 A balance of Rs. 7,106.65 M remains to be spent for achieving the SAR physical targets. In dollar terms, the revised project cost is estimated at US$486.4 M, compared to the appraisal cost of USS520.9 M. This reduction in dollar costs is due to the devaluation of the rupee against the dollar, from Rs.12 at appraisal to about Rs.36 expected at completion in June 1995. 6.13 Financial implementation of the project, component-wise, is indicated in Table 6, Part Im. An IDA Credit of SDR149.5 M (US$150.0 M) was signed on May 10, 1985 and became effective on January 6, 1986, to finance about 30% of total project cost, net of taxes and duties. No co- financing arrangements were made for the canal project. On December 5, 1991, the Credit amount was reduced to SDR 144.7 M, through the cancellation of SDR 4.8 M. On September 17, 1992, the Credit balance was fully disbursed. An expenditure of Rs. 6,613.35 M (approx. US$289.60 M) was incurred by the Credit Closing Date, compared to the SAR estimate of Rs. 3,058.72 M (USS254.86 M). Though in rupee terms this expenditure represented an increase of 116% as a result of the higher cost of project components mostly due to the high quality standards applied in civil works. The effect in dollar terms was small - an increase of only 13.5% - due to continued depreciation of the rupee against the dollar. On September 1, 1990, the disbursement percentage for the civil works category was increased from 60% to 90%. Actual disbursements for other Credit categories are given in Part Ell, Table 6. The civil works category was fully drawn down, but only 36% of the technical assistance category was spent. This under-utilization was due chiefly to the Borroweres administrative difficulties in recruiting international consultants, and also to the fact that the major consultancy for the design and installation of a remote control and monitoring system for canal operation could not be implemented during the Credit disbursement period. The financing of this consultancy was then transferred to the Dam and Power Project, because of its importance for the project's overall operation. However, on March 30, 1993, just a few days after the technical and financial proposals were evaluated and submitted to the Bank, the Borrower decided to cancel the Dam and Power Loan. The training component was not adequately disbursed, due to delays in finalizing the training programs, the construction of buildings, the procurement of training equipment for O&M (including the remote control and monitoring system), and in implementing the R&R and environmental project components. 6.14 Disbursements were slow during the first four years of project implementation but picked up at the end of the project. In fact, during the last two years SDR 101.5 M was disbursed, representing 70% of the revised Credit amount. However, the fast pace of implementation could not be maintained for lack of funds, particularly once the Dam and Power Loan was closed. In view of this shortage of funds, the Borrower appears to have given priority to the completion of the Sardar Sarovar Dam and, therefore, only 20,000 to 40,000 ha will be ready for irrigation by July 1995, the scheduled date for the release of water from Sardar Sarovar Dam into the main canal. In October 1993, after a long delay, the SSNNL issued bonds at an attractive rate of 17.5% over 30 years on the local market. The bond issue succeeded in raising Rs. 3,700 M (USS 120M). This amount, though small when compared to total requirements, should alleviate the shortage of funds and allow project implementation to regain momentum in the short-term. In view of the success of its first fund raising operation, SSNNL intends to issue bonds on a yearly basis. 7. Environment Backgtound 7.1 The environmental aspects of this project received an unusual amount of attention from its inception and particularly from 1989 onwards. More specifically, the project came under heavy criticism by advocacy groups and NGOs, first within India and then from abroad, who charged the Bank with failing to address important environmental concerns or to satisfy the R&R needs of project-affected people. 19 7.2 At the time the project was being prepared and appraised, forest clearance was required under the Indian Forest Conservation Act of 1980. Shortly after the Board approved the project, India passed the Environmental Protection Act of 1986 which required that an Environmental Impact Assessment be prepared as part of the environmental clearance process. During the period leading to project approval by the Bank in March 1985, a number of environmental studies were prepared by the Borrower to obtain the required environmental clearancell. During the protracted identification phase of the project and for most of its preparation stage, Bank environmental guidelines were practically non-existent. The Guidelines prevailing at the time of project Negotiations (November 1984) and Board Presentation (March 1985) were those contained in Operational Manual Statement (OMS) 2.36 issued in May 1984 entitled "Environmental Aspects of Bank Work". Evolution of Bank Environmental Policies 7.3 OMS 2.36 recognized that the Bank's environmental policy was still evolving. Nevertheless, the basic environmental concerns and principles for processing projects were well covered. In particular, OMS 2.36 required that projects with unavoidable adverse effects on the environment should contain a compensatory component adequate to mitigate these effects. It indicated that at the identification stage, such projects should be identified and the investigations needed to prevent or mitigate the adverse effects should be determined. During preparation, the Borrower was to carry out the necessary enquiries, and Bank staff was to outline in the Project Brief the measures needed to avoid or mitigate serious environmental risks or enhance environmental benefits and point out any problems that merited further studies at this stage. At appraisal, Staff was to assess the environmental findings, evaluate the future magnitude and timing of adverse effects, and assess whether the preventive, mitigatory or remedial measures recommended were adequate. The SAR was to describe the environmental measures being provided. At Negotiations, the environmental aspects were to be discussed with the Borrower and the legal agreements could contain covenants or other provisions concerned with these aspects. Finally, OMS 2.36 indicated that supervision missions were to routinely review the environmental aspects with the Borrower and must ensure that the measures agreed upon were adequately and responsibly administered. 7.4 Thereafter, the Bank issued in October 1989 Operational Directive 4.00 with an Annex A on "Environmental Assessment". Annex A outlines the Bank's policy and procedures for the environmental assessment (EA) lending operations, and related types of environmental analysis. The purpose of EA is to ensure that the development options under consideration are environmentally sound and sustainable, and that any environmental consequences are recognized early in the project cycle and taken into account in the project design. The Annex states that the detail and sophistication of the analysis should be commensurate with the expected impacts and that there could be either project-specific EAs or regional and sectoral EAs. It recommends institutional strengthening, staff training, involvement of affected groups and NGOs, and for major projects with serious multi-dimensional environmental concerns, the recruitment of an Environmental Advisory Panel of independent, internationally recognized, environmental specialists to review and advise on, inter-alia, the TOR and findings of the EA. Each project is to be screened in four categories (from A to D) based upon the nature, magnitude, and sensitivity of environmental issues. Category A, under which the SSP falls, requires the preparation of a detailed EA prior to appraisal and the inclusion of an environmental annex in the SAR summarizing the EA. The Annex specifis that the detailed EA should comprise, inter alia, a mitigation plan and a monitoring plan to be carried out during project implementation. Furtlhermore, Category A projects requires a formal clearance from the Regional Environment Division before Negotiations can proceed 11 The lst of envirnmental studies cuned out by the Bonower is outlined in the Environmental Inlormation Volume prepuWd by T.P. Whittington, July 1992. 20 7.5 In July 1991, the Bank published an Environmental Assessment Source Book in three volumes to provide guidance throughout the EA process described in OD 4.00. This Source Book is comprehensive and provides checklists, outlines and samples for a number of typical environmental studies and EAs. FinaUy, on October 1991 the Bank issued Operational Directive 4.01 to replace OMS 2.36 that confirms the policies and guidelines provided in Annex A of OD 4.00 and the Source Boolc 7.6 Thus, the Bank policies and procedures became more stringent between Board Presentation and Project Completion of the project. In a sense, the SAR was ahead of its time when it specifiedl2 that the Borrower (NPG) was to prepare, during project implementation, a detailed environmental assessment and necessary actions for protective measures for the command area as well as an afforestation plan for the command area, including special zone use. However, the Legal Documents failed to mention the need to prepare a detailed EA within a fixed time-frame but required that Gujarat should take all such measures as shall be necessary to minimize the risk of malaria, filaria, schistosomiasis, and other water-related diseases that may result from the implementation of the project"3 Thme Boffowers Environmental Cearce 7.7 The Water Delivery and Drainage project and the Dam and Power project were approved together in March 1985 and became effective on January 6, 1986, without the Borrower's formal forest clearance as per the stipulations of the Forest Conservation AcL Thereafter, the Ministry of Environment and Forests (MOEF) gave a conditional environmental clearance for the canal and Dam Projects on June 24, 1987, while noting at the same time that existing surveys were incomplete and that full details would have to be submitted by 1989 as per an agreed schedule. The additional studies related to the preparation of a: (i) rehabilitation master plan, (ii) phased area catchment treatment scheme, (iii) compensatory afforestation plan, (iv) command area environmental assessment, (v) survey of flora and fauna, (vi) report on the carrying capacity of surrounding areas, (vi) report on seismicity, and (vii) report on health aspects. The clearance also indicated that the Narmada Control Authority (NCA) "will ensure that environmental safeguards measures are planned and implemented pari pasu with progress of work on projects". SSNNL, NCA and NPG interpreted this to mean that all further environmental studies needed were to be finished as and when required and in any case not later than the dam's completion date. Finally, the clearance emphasized that it did not cover the release of forest lands, which would be subject to a separate clearance in line with the Forest Conservation Act of 1980. 7.8 Subsequently, on September 8, 1987 the MOEF gave the requisite forest clearance for the submergence of 13,385 ha by the Sardar Sarovar Dam, subject to the following conditions: (i) detailed compensatory afforestation plans would be submitted by September 30, 1987; (ii) compensatory afforestation would be double the area affected in degraded forest and once the area in non forest areas; (iii) a catchment area treatment plan would be prepared by November 30, 1987; and (iv) no forest lands would be utilized for the resettlement of project-affected people -- even though this condition contradicted Legal Agreements with the Bank under the project stipulating that forest lands could be released for the settlement of people forced to relocate. Finally, in October 1988, te Government of India Planning Commission also gave its formal endorsement to the project, again subject to several conditions relating to envirounment and R&R. 12 See pam. 3.3 above 13 Gujat Project Ageement. Section 2.16 of May 10. 1935. 21 7.9 The Borrower's coordination of environmental work, under the aegis of NCA, remained weak through-out project implementation. Many individual studies and plans were completed by the Impact Division of MOEF and the implementing agencies and were reviewed by the Environmental Sub-group of NCA. These studies concerned compensatory afforestation, catchment area treatment, fisheries, wildlife and archaeology in the upstream part of the project, and groundwater modeling and drainage in the first phase command area up to Mahi'4. However, these efforts were not directed in a coherent manner towards the preparation of a detailed EA as requested in Table 1 of the SAR. As a result, there exists at present a provisional EA prepared with the assistance of consultants as part of the benchmarks that were to be met by March 31, 1993. However, the final detailed EA is expected to be completed by December 31, 1994. 7.10 In 1987, the Bank commissioned an Overview of the environmental aspects of the project, leading to a report and recommendations published in 1989 Is. The Bank's Consultant recommen- ded, in particular, that the Bank intensify its supervision and enter into supplemental agreements to strengthen the environmental aspects of the project. The report also stressed the need to better define the usable groundwater resources, determine the recharge quantities, develop techniques to successfully manage water table levels (to mitigate the potential impacts of surface water irrigation including the effects of water logging), and sharpen the policies for conjunctive use. 7.11 Bank supervision missions concentrated their reviews on upstream and downstream impacts, and also on the waterlogging, salinity and drainage problems in the command area. They repeatedly stressed the need to recruit technical assistance in the environmental field and to strengthen the NCA. The missions also noted that the lack of an environmental work plan was hampering the monitoring of environmental studies. Initially, little attention was paid to health impacts or to environmental training programs. In these two areas, the Bank missions relied heavily on the reports of the Borrower. It was only at the end of the project that the Bank engaged a malaria specialist, who concluded that this component had not been treated adequately and made recommendations to correct the problem. 7.12 In response to project critics, the Bank staff answered a large volume of queries from NGOs as well as from member-countries through the Bank's EDs. The Staff also organized regular briefing meetings with the Bank's EDs and participated in a number of hearings in the US and abroad to give an account of the situation. Despite such efforts, pressure mounted. Finally in 1991, the Bank commissioned an Independent Review of the project, directing an Independent Review team to provide an objective account of project implementation in the R&R, environmental and health fields. The Indendent Review 7.13 The Independent Review team, headed by Mr. Bradford Morse, ex-Administrator of the United Nations Development Program (UNDP), initiated its field work in September 1991 and submitted its report in June 1992. With regard to the Water Delivery and Drainage project, the Review Team's report made a number of points. First, it noted that by the time of the review, most of the Bank's 1985 legal requirements and most of the conditions attached to MOEF's 1987 14 [bese studies with their date of publication ae listed in the Sadw Savw PFoject Environmetal Overview and Priondzed Action Plan ppaed by the Narnada Control AntAidty with the uasiae of Environmental Resoumes Limrited, Marc 1993. 15 Overview Evironmental Aswessment Serdar Sovwr and Nsmna Sagw Pojcts, Nams River Basin India by a Consultant to the World Bank 1919. 22 environmental clearance had not been met. This situation was unacceptable by any standards, and existed despite the fact that by late 1988, all required agreements had been reached between the GOI, the States, the implementing agencies including NCA, and the Bank to ensure that an adequat assessment of the environmental impact of the Sardar Sarovar Projects would be made by 1989. Second, the report criticized the "pari pasu" approach, on grounds that it subverted any acceptable notion of environmental planning and defeated the purpose of preparing environmental assessments, namely, to anticipate negative impacts and prevent them by incorporating remedial measures in the project design. Third, with respect to technical studies made under the project, the report noted that several good studies had been prepared by consultants worling on the first reach of the main canal up to the Mahi River - but that pre-feasibility studies beyond the Mahi indicated that serious soil and water-logging problems will be encountered in the coastal Bhal areas, in the north Gujarat areas as well as along the Saurashtra and Kutch branches. It also indicated that water- logging, salinity and drainage problems had not yet been addressed through adequate drainage and groundwater studies, as indicated by the Bank's own supervision mission reports. The report added that though conjunctive use is proposed to be one of the most important mitigative measures to counteract water logging in the command area, the detailed information needed (relating to water quality, mixing regimes and private sector pumping) was not yet available. Fourth, the team concluded that some good work had been done on specific topics in Phase I of the command area, but that it fell short of the requirements of a good environmental assessment. Finally, the report expected this project to replicate the deficiencies of previous projects in India. 7.14 On health aspects, the report stated that at the time of the project appraisal, the dangers of water-borne diseases in irrigation projects were well known and documented, particularly those related to malaria and schistosomiasis. The report quotes a status report on malaria and other health-related aspects prepared by the Bank's consultant in January 1992, stating that the project had been planned, designed and executed without incorporation of health safeguards and that the incidence of malaria in villages near the dam site was nearly double that of the other villages served by the health center in that area The report concludes that the Bank and the state governments had failed to adequately address the issue of public health. Management's and Borrower's Response 7.15 On June 23, 1992 the Bank issued a Management Response to the Independent Review Repor. The Management agreed with the Independent Review report on the description of the delays in completing the mandated environmental studies, and on the need for a more effective central management and coordination function in the Narmada Basin on environmental impact studies and mitigation programs. The Management also agreed on the need to accelerate work on health matters in Gujarat. However, there were major points of disagreement as well. The Management did not share the conclusions about the severe environmental consequences of the study delays. In particular, the Management noted that the pari-pasu approach to environmental assessment was adequate in view of the long gestation period of the project and the difficulty of assessing impacts that will develop over time. The Management believed that, with adequate environmental monitoring systems, most impacts would be identified and mitigated long before reaching significant dimensions. Bank staff also rejected the idea that black cotton soils would inevitably lead to water logging and salinity, and noted that the Independent Review team appeared to be unaware that water logging problems had been tackled successfully in the neighboring Mahi command area. As for the saline soils of regions 3, 7, 10, 11 and 12, Bank staff believed that these could be developed adequately through leaching and drainage, and if the more detailed surveys revealed particular problem areas, that these areas could still be omitted. On health aspects, Bank staff argued that there was still adequate time to deal with health aspects before irrigation began. 7.16 Thereafter, the Bank mounted a major mission in July 1992 to review the status of implementation and compliance with the Bank's Legal Agreements, in light of the Independent 23 Review findings. The mission reported that the Borrower had completed 22 environmental studies prior to the MOEF environmental clearance in 1987, that 11 had been completed since then, and that 15 more were underway or proposed. The mission concluded that the study delays had not caused severe environmental consequences to date. Nevertheless, the mission provided terms of reference and recommended that a detailed Environmental Management Plan be produced as soon as possible. It also noted that the SSNNL was embarling on an Environmental Impact Assessment for the command area, in accordance with Bank current guidelines, in view of a possible Phase II Canal project. On health aspects, the mission noted that the Government of Gujarat had accepted the findings and recommendations of the January 1992 mission, which included setting up a Health Planning and Monitoring Cell in SSNNL, preparing an environmental health management plan, and setting up an anti-malaria unit at the dam site (Kevadia), to be followed by others in the command area later. 7.17 The Borrower, in a letter of September 1, 1992, ensured the Bank it would address with urgency the concerns raised by the Independent Review and Bank missions, and that management and organizational weaknesses in the R&R program would be corrected. The attachment to the letter indicated that a comprehensive environmental action plan had been prepared and was currently under review by NCA. Also attached was a bar chart showing a list of environmental studies completed, ongoing and proposed. However, the preparation of an EA specifically for the command area was not mentioned at that stage. ne Benchmarks 7.18 The Management Response, the mission's findings, and the Borrower's action plan were presented to the Board, together with three options for action, in a document entitled Review of Current Status and Next Steps. On October 23, 1992 the Board discussed this document and agreed with the analysis of the Independent Review, which had identified a number of deficiencies in the Bank's appraisal and the Borrower's implementation of the projects. The Board also agreed to Management's third option of continuing to support the projects, subject to the Borrower's compliance with a series of benchmarks by March 31, 1993. Though the Water Delivery and Drainage project had been closed since July 1, 1992, the Board fixed three benchmarks relating to the environmental aspects of this project: (i) completion of a prioritized environmental overiew report for the Sardar Sarovar Projects; (ii) satisfactory progress in completing an Environmental Impact Assessment for the Gujarat command area; and (iii) adequate implementation of Gujamt's malaria control program at the SSP project site, in line with the specific recommendations of the July 1992 Bank mission. The Board also requested that a special review mission visit India during April 1993 to assess progress in implementing the agreed action plan, and indicated that continuation of the Bank's support after April 1993 would depend on meeting the agreed benchmarks. 7.19 The Overseas Development Agency (ODA) of UK then opened a Trust Fund with the Bank of
World Bank Group · Project Completion Report
India - Narmada River Development, Gujarat Water Delivery and Drainage Project (Vol. 1 of 2)
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Organisation
World Bank Group
Document type
Project Completion Report
Country
India
Source
World Bank