India - Madhya Pradesh Forestry Project

Document of The World Bank Report No. 13408-IN STAFF APPRAISAL REPORT INDIA NADHYA PRADESH FORESTRY PROJECT FEBRUARY 28, 1995 South Asia Department II Agricultural Operations Division  CURRENCY EQUIVALENTS Currency Unit = Rupees (Rs.) US$1.00 = Rs.32 WEIGHTS AND MEASURES The metric system is used throughout this report GOVERNMENT FISCAL YEAR April 1 to March 31  ABBREVIATIONS ACF Assistant Conservator of Forests ANR Assisted Natural Regeneration CCF Chief Conservator of Forests CF Conservator of Forests DCF Deputy Conservator of Forests DGS&D Directorate General of Supply and Disposal DEA Department of Economic Affairs DFO Divisional Forest Officer EDP Ecodevelopment Program EDSF Ecodevelopment Support Fund ERR Economic Rate of Return FPC Forest Protection Committee FRR Financial Rate of Return FWP Forest Working Plan GIS Geographic Information System GOI Government of India GOMP Government of Madhya Pradesh HRD Human Resource Development ICB International Competitive Bidding ICFRE Indian Council for Forestry Research and Education IDA International Development Association ILU Industrial Liaison Unit JFM Joint Forest Management LCB Local Competitive Bidding MFPF Minor Forest Produce Federation MIS Management Information System MPFD Madhya Pradesh Forestry Department MPFDC Madhya Pradesh Forest Development Corporation NGO Non-Governmental Organization NTFP Non-Timber Forest Product NVDA Narmada Valley Development Authority OCC Opportunity Cost of Capital ODA Overseas Development Administration OPM Orient Paper Mills PA Protected Area PAU Policy Analysis Unit PCCF Principal Chief Conservator of Forests PU Project Unit PME Planning, Monitoring and Evaluation PRA Participatory Rural Appraisal RDF Rehabilitation of Degraded Forest SCF Standard Conversion Factor SFRI State Forest Research Institute SOE Statement of Expenses USAID United States Agency for International Development VRDP Village Resource Development Program VRSF Voluntary Relocation Support Fund WL Wildlife   INDIA MADHYA PRADESH FORESTRY PROJECT Table of Contents CREDIT AND PROJECT SUMMARY ................................. i I. THE FORESTRY SECTOR ................ ..1..................... A. Forestry in the National Economy ............................. 1 B. Forestry in the State of Madhya Pradesh ......................... 3 C. Lessons from Past Bank Lending ............................. 15 II. FUTURE DEVELOPMENT OF THE FORESTRY SECTOR ...... ........ 17 A. Objectives ............................................. 17 B. Strategy .............................................. 17 III. THE PROJECT .............................................. 22 A. Rationale for Bank Involvement ............................. 22 B. Project Objectives and Design .............................. 22 C. Summary Description ............ ......................... 23 D. Detailed Features . ....................................... 25 IV. PROJECT COSTS AND FINANCING ........... .. ................ 31 A. Project Cost Estimates ........... ......................... 31 B. Proposed Financing Plan .................................. 32 C. Procurement ............................................ 32 D. Disbursements . ......................................... 37 E. Accounts and Audit ............. ......................... 39 V. PROJECT IMPLEMENTATION ................ .................. 40 A. Sector Strategy . ....................................... 40 B. Project Organization and Management ......................... 41 C. Project Supervision . ....................................... 49 E. Reporting, Mid-Term and Completion Reviews. .................. 49 VI. PROJECT BENEFITS AND JUSTIFICATION ........ .. ............. 51 A. Benefits .............................................. 51 B. Economic and Sensitivity Analysis ............................ 51 C. Financial Analysis . ...................................... 52 D. Environmental Effects . .................................... 52 E. Impact on Women . ...................................... 53 F. Tribal Peoples Development Strategy .......................... 54 G. Institutional Benefits ...................................... 54 H. Project Risks ........................................... 55 VII. ASSURANCES AND RECOMMENDATION ........................ 56  FIGURES 1 Elements of GOMP strategy for the future development of the forestry sector 2 Planning, Monitoring and Evaluation. Structure and Linkages 3 Project Unit. Structure and Linkages 4 Extension, Technology and Research. Structure and Linkages ANNEXES 1 The State of Madhya Pradesh. Natural and Human Resources 2 Technologies for Forest Management 3 Institutions 4 Forest Development on Private and Community Lands 5 Village Resource Development Program 6 Conservation of Biodiversity 7 Issues and Actions 8 Management Development 9 Monitoring and Evaluation 10 Information Systems 11 Extension and Research Centers 12 Planting Stock Improvement Program 13 Adaptive Research 14 Project Costs 15 Procurement 16 Six-Monthly Project Report Format 17 Schedule of Estimated Disbursements 18 Project Committees 19 Project Implementation Schedule 20 Project Supervision 21 Economic and Financial Analyses 22 Environmental Review 23 Tribal Development Strategy 24 Documents Available in Project File MAP 1 The State of Madhya Pradesh (IBRD 26171) The report is based on the findings of an appraisal mission that visited Madhya Pradesh in March, 1994, with a follow-up mission in June, 1994. The mission comprised I Hill (Mission Leader), P. Guhathakurta (Forestry Specialist), M. Jansen, R. Crooks (Environmental Specialists), G. Morgan (Planning and GIS Specialist), P. Francis (Rural Sociologist), K. N. Venkataraman (Procurement Specialist), Ms. A. deLigne (Consultant Agroforestry Specialist), M. Varadan (Consultant Institutional Specialist) and D. Shields (Consultant Economist). Messrs. Jones, Asibey and Contreras were peer reviewers for the project. The report is endorsed by Mr. H. Vergin (Department Director) and Mr. S. Barghouti (Division Chief).  INDIA MADHYA PRADESH FORESTRY PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, Acting by its President Implementing Agency: Madhya Pradesh Forestry Department (MPFD), Government of Madhya Pradesh (GOMP) Amount: IDA Credit of SDR 39.4 million (US$58.0 million equivalent) Terms: Standard, with 35 years maturity On-Lending Terms: From GOI to GOMP as part of central assistance to the state for development assistance on standard terms and conditions applicable at the time Poverty Category: Program of Targeted Interventions The project main beneficiaries, tribal peoples and forest fringe villagers, belong to the poorest sections of society. Tribal development concerns are central to the project and are addressed in an integral fashion under the rubric of social impact, participation and equity, rather than as a subsidiary tribal development plan. The project also incorporates specific measures to safeguard the interests of the landless and women, through participation in village committees, employment preference, and gender sensitive monitoring. Project Description: Objectives and Design. The main objective of the project would be to assist with the implementation of the GOMP strategy for development of the forestry sector in Madhya Pradesh. Future development of the forestry sector in Madhya Pradesh will involve long-term programs, so a strategic plan is needed for the provision of IDA support to the sector over a period of about ten years. Given the area of forest in Madhya Pradesh and its economic and environmental importance to both the state and the nation, investments over a ten-year period could total more than US$200 million. However, the GOMP strategy for the sector, described above, involves substantial change in the way the sector is managed and the introduction of innovative programs for participatory management of forests. Lessons from previous Bank lending show that these changes take time and may slow implementation.  ii Consequently, strategic planning for the provision of IDA support to the sector, is based on a two-stage approach. The first stage would be a project of four years duration, which is described below. Approval for a second-stage project of up to five years duration would be sought during the last year of implementation of the first stage. This flexible design allows MPFD to develop the new processes, systems and skills required for implementation of the National Forest Policy and to modify these in the light of experience as necessary. Project Components. The project would have four main components as follows: (i) Management Development to improve the management of the sector through: changing the approach of MPFD from a predominantly regulatory role to one in which communities are treated as partners in the management of forest resources; increasing policy analysis capabilities; and improving the management skills of senior MPFD staff, supported by the introduction of improved management systems, for planning, implementation, monitoring and evaluation procedures, together with improved management information and geographical information systems; and (ii) Forest Development involving: (a) the promotion of natural forest regeneration, supported by enrichment planting, improved silvicultural practices, and forest floor management over an area of about 160,000 ha; and (b) a Village Resource Development Program based on participatory planning, and management and protection of forest resources, integrated with activities to generate alternative incomes or resources, to reduce the pressure on the forests. A total of about 1,140 villages would be involved, managing an area of about 74,000 ha of forest land, in which silvicultural improvements would have been started during the project period. The phasing of activities for this component would be determined by progress in training staff in participatory planning; (iii) Extension, Technology and Research programs with provision of necessary infrastructure and facilities for the development of extension and research service centers in each ecological zone, coupled with staff training, providing a base for improved forestry extension services, tree seed improvement programs, demonstration nurseries and adaptive research trials; and (iv) Biodiversity Conservation through improved management of 12 high priority Protected Areas (PAs) by providing support for development of management plans, staff training, equipment and facilities. Special Funds would be created to support the development of alternative resources or income for communities resident within PAs and in areas peripheral to them. A lower level of project funding would be available for 12 lower priority PAs, whilst the identification and planning of linkages to complete the PA Network would be financed.  Estimated Project Costs: Component Foreign Local Total ........... .US$ million. Management Development 1.7 3.4 5.1 Forest Development 2.9 33.4 36.3 Extension, Technology and Research 2.1 6.8 8.9 Biodiversity Conservation 1.2 8.4 9.6 Total Baseline Cost 7.9 52.0 59.9 Physical Contingencies 0.6 2.5 3.1 Price Contingencies 0.6 3.7 4.3 Total Project Costs 1/ 9.1 58.2 67.3 1/ Including duties and taxes of US$2.4 million Financing Plan: Soure of Finance Foreign LOcW Total ........... US$ million. IDA 9.1 48.9 58.0 GOI 1/ 0.0 9.3 9.3 Total 9.1 58.2 67.3 I/ Including duties and taxes of US$2.4 million Estimated IDA Disbursements: (US$ Millions) FY96 FY97 FY98 FY991 Annual 7.8 12.8 17.0 20.4 Cumulative 7.8 20.6 37.6 58.0  iv Economic Rate of Return: 11.5 percent Benefits: The project would increase, directly or indirectly, the production of wood, NTFP, and animal products which would benefit the rural poor and improve the supply of wood to forest-based industries. The project would support a program of assisted natural regeneration in about 160,000 ha of forest. About 1,140 village communities, of which a very high percentage would be tribal peoples, participating in the management of about 75,000 ha of forest would receive direct benefits from the project. The benefits include not only the improved access for communities to forest products, but also the benefits of improved agriculture and alternative income generating activities generated through the Village Resource Development Program and the Ecodevelopment Program. The project would have important benefits in terms of equity as about 18.3 million person- days of employment would be generated, a benefit which would be almost wholly captured by the poorest and landless households. Processors and marketers of wood and NTFPs would also benefit through increased supply of raw material. The direct and quantifiable economic costs and benefits of the project are mainly due to investments in both closed and open forests. The Economic Rate of Return (ERR) for the project as a whole, in terms of direct forestry outputs, and excluding the biodiversity and research components, is estimated at 11.5 percent. However, this understates project benefits as significant indirect and environmental benefits have not been included. These are benefits such as: protection and management in watershed and other areas, including measures to reduce soil erosion and improve moisture conservation; maintenance of biodiversity, including conservation of endangered plant and animal species and critical habitats; and increased productivity of the forest to reduce pressure on the environment. Other environmental benefits may include CO2 absorption, river flow regulation, and meso-climatic and other effects. These were calculated by means of an environmental premium, associated with each hectare included in the project, to reflect the flow of external benefits, which is estimated to be about US$12 per hectare per year. Risks: The main risks facing the project are: (i) the degree of commitment within GOMP to make the necessary policy and institutional changes that would be necessary for the implementation of the agreed strategy for the sector; (ii) the effectiveness of participatory arrangements for the management of forest resources; (iii) the ability of MPFD to provide the private sector with technological advice, in order to take advantage of a changed policy environment. The first  v risk is being addressed through agreement on a sectoral strategy with associated policy changes formalized through the issue of necessary Government Orders. In addition, as this four-year project forms the first stage of a planned phased approach to sectoral development, it provides a means for GOMP to demonstrate commitment to change. The project would minimize the second risk through an intensive program of training for staff in the principles and practice of participatory forest management, through building links with NGOs and other government departments involved in village development, and by rigorous monitoring and evaluation of the program. Project support for forest extension programs, research programs targeted on the needs of producers, and the creation of an Industrial Liaison Unit within MPFD would reduce the third type of risk associated with the project.   INDIA MADHYA PRADESH FORESTRY PROJECT I. THE FORESTRY SECTOR A. Forestry in the National Economy 1.1 In 1991, the recorded area of forest in India was 77 million hectares, but only about 64 million hectares, or about 19 percent of the land area of India, is covered by forests. The distribution of forest cover is uneven, with more than 50 percent in five states: Madhya Pradesh, Arunachal Pradesh, Andhra Pradesh, Orissa and Maharashtra. More than 80 percent of Arunachal Pradesh is forested, while the forest cover amounts to less than 4 percent in Rajasthan and Punjab. Forest cover is concentrated in the northeast, in the Himalaya and Siwalik ranges, the central belt, along the Western Ghats and in patches of mangroves. 1.2 Forested areas play an important role in the conservation of environmental quality through conservation of soil and water resources and biological diversity. They are the principal source of timber and wood, for which the demand in 1988 amounted to 260 million m3. About 90 percent of this demand was for fuelwood. Forests are also the main source of fodder and non-timber forest products. The contribution of the forestry sector to GNP has been estimated at less than 2 percent, but this does not take into account the numerous non-market and external benefits, nor the fuelwood and timber that are harvested illegally and, therefore, unrecorded. Nor does it reflect the great importance of the forests to supporting the enormous cattle population. 1.3 Most of India's forests are degraded and productivity is poor. Only about half the forests have a crown density of over 40 percent and the resources are under pressure due to over-exploitation and encroachment. Forest degradation and deforestation are due to the severe land scarcity in India, which is increasing with the rising population. Poor farmers and the landless sometimes encroach on forest areas, whilst many derive their income from the sale of fuelwood and other forest produce. Other important pressures on the forests are the demands for timber, pulp and fuelwood to supply industries and urban consumers. Over-exploitation of grazing resources in forested areas may further accelerate degradation.  2 1.4 Government is addressing the problems of the forestry sector through policy reforms, legislation and afforestation. Historically, Indian national policy focused on forests as a resource to be managed by government as a source of wood products and to raise revenue. The new National Forest Policy, issued in 1988, is to treat forests: first as an ecological necessity; second a source of goods for use by the local populations, with particular emphasis on non-timber forest products; and only thirdly as a source of wood and other products for industries and other non-local users. The Policy encourages industries to obtain raw materials from farm forestry. Forestry activities are regulated by the Indian Forest Act, the Wildlife Act and the Forest Conservation Act. A number of states have introduced Orders to regulate Joint Forest Management and define benefit sharing arrangements. GOI has sought to increase the area of forest by planting on wastelands and encouraging tree planting on private lands. It is estimated that, since 1985, about 5 million hectares have been developed from a total of about 74 million hectares of wastelands and marginal agricultural lands, paralleled by an increase in agroforestry activities. However, much of the land identified as wasteland may be used by local populations for other purposes, particularly seasonal grazing. The Eighth Five Year Plan (1992-97) further emphasizes investments for rehabilitation of degraded forests and farm forestry. 1.5 A World Bank review of India's forest sector ' endorses the need to improve forest protection and management as the most important forest policy goal for the next decades. This will require the cooperation of local populations and agencies in forest protection, management and development, which will depend on improving incentives for local participation, the technological means of production and the effectiveness of public sector forest management, and on prioritizing the areas to protect and develop. The report highlights the need to improve the productivity of the sector, through improved planting materials and practices, a strengthened research system and an effective forestry extension service. 1.6 Forestry was the sole responsibility of state governments until 1977, when it was classed as a concurrent subject, that is, GOI and the state governments share responsibility and control over forestry matters. However, management responsibility remains with the states, which decide on the staffing and resources required to implement policies. Whilst India. Forest Sector Review. World Bank Report No. 10965 - IN. 1992.  3 the National Forest Policy emphasizes the environmental importance of forests, state governments are faced with pressures for forest products, land to satisfy a growing population and industrial interests, and revenue constraints. However, state forestry departments have generally introduced programs and schemes that respond to the objectives of the new forest policy, but a number of issues remain to be addressed. These may vary from state to state, but as recognized in the World Bank Review (op cit), can be grouped into four categories: (a) local people have not been sufficiently motivated to cooperate in forest protection and development and the staff of forestry departments need to be oriented to work closely with local people for this purpose; (b) government regulations and procedures discourage the private sector from engaging in farm forestry and agroforestry and make these activities less profitable than they could be; (c) technological development in forestry operations has not kept pace with the investment in afforestation programs, so the productivity of plantations is below the optimum; (d) traditional forest administrations and arrangements for human resource development need change for the efficient implementation of the new forest policy; and (e) the prominent position of forest departments has discouraged other public and private sector agencies from sharing responsibility for sector development. Issues which pertain more specifically to Madhya Pradesh are discussed in the following section. B. Forestry in the State of Madhya Pradesh Factors of Production 1.7 Natural and Human Resources. The State of Madhya Pradesh has an area of 44.3 million ha, or about 14 percent of the geographical area of India. It encompasses the major part of the highlands of central India and constitutes parts of the upper catchments of five principal river systems, the Yamuna, Ganga, Mahanadi, Godavari and Narmada (Map 1). Maintenance of the ecological balance in the State is of critical importance to the nation as a whole. Rainfall varies from less than 800mm per year in western parts of the state to about 1500 mm in the east and south east. About 19.6 million ha, or 44 percent of the area of the State, are classed as agricultural land, of which 4.3 million ha are irrigated. In 1987, the livestock population was estimated at 45 million head, and migratory herds are thought to number about 2 million head during the year. The total human population of the State was estimated as 66.18 million in the 1991 census, growing at a rate of 2.6 percent per annum between 1981 and 1991. Of the total, 15.3 million are  4 tribal peoples and 9.6 million scheduled castes. Poverty in rural areas is a concern as almost 41 percent of the rural population is below the poverty line, compared to 20 percent in urban areas. Average population density is 149 persons per square km. More information on the natural and human resources is presented in Annex 1. 1.8 Forest Resources. Legally designated forest lands, amounting to 15.4 million ha, are under the control of the Madhya Pradesh Forestry Department (MPFD) and are classified as Reserved Forest (8.3 million ha), Protected Forests (6.6 million ha), and Unclassified (0.5 million ha). Forest vegetation types vary with agro-climatic zones and include dry thorn, dry and moist deciduous, sub-tropical semi-evergreen, and tropical moist evergreen forests. Canopy closure varies greatly with human interference. Closed forests, that is, with canopy density greater than 40 percent, cover 9.5 million ha, or about 60 percent of the total. The remaining four million ha are referred to as open forest, with canopy density of between 10 and 40 percent. Three main forest types are distinguished for management purposes: (i) Teak dominated (2.7 million ha) in which the predominant species is Tectona grandis; (ii) Sal dominated (2.5 million ha) in which the main species is Shorea robusta and; (iii) Mixed hardwoods (10.2 million ha). Bamboo, mainly Dedrocalamus strictus, occurs as an under-story in dry to moist deciduous forests. 1.9 A total of 305,000 ha of forest plantations have been developed in Madhya Pradesh of which about half were planted prior to 1975. The remainder were mainly developed by the Madhya Pradesh Forest Development Corporation (MPFDC) between 1976 and 1990. Most of the earlier plantations were of teak and mixed species, whilst the later plantations were mainly teak and bamboo. About 5,000 ha of eucalyptus plantations have been developed privately. 1.10 About 2.2 million ha of forest land was legally excised from the forest estate between 1957 and the present. This represents an annual loss of 0.4 percent of the current area, or 61,500 ha per year. This is probably an underestimate, as much land is deforested before it's change of status is recognized legally. There is little data on degradation of existing forests, though the high proportion of forested land with crown density less than 40 percent points to degradation.  5 1.11 Planning, Monitoring and Evaluation. Forest Working Plans (FWPs) provide the basis for planning the management and development of the forest sector, containing baseline data and management prescriptions. FWPs often provide only a poor reflection of conditions on the ground, severely limiting their usefulness as practical tools for forest management. This is, in part, due to the fact that inventory and survey teams are often inadequately staffed and equipped to work effectively in the field. However, there are also problems associated with the nature and content of FWPs, which are not oriented toward multiple objective management and rarely address resource conflicts. The system for monitoring the progress of investment programs and special schemes focuses on the achievement of physical targets. 1.12 Forest Development Technology. The prescriptions of FWPs can be grouped into four silvicultural systems, described in more detail in Annex 2. They are applied to teak- dominated, sal-dominated, and mixed hardwood forest types: - Coppice with reserves on short rotations for all three types; - Shelterwood on long rotations in teak and sal types; - Selection and selection cum improvement in all three types. - Conversion by clear felling into plantations of mixed hardwoods in either short or long rotations. This system is no longer practiced; 1.13 The main issues related to forest development technology include: The fact that the prescriptions of the FWP have, in many cases, not been implemented, as reflected in a drop in roundwood production. This is partly due to unrealistic assessments of sustainable production, but also due to lack of funds for proper implementation of the FWPs; Management of plantations has also suffered from establishment at too high a density, and a neglect of thinning and other silvicultural practices;  6 The need to develop technologies and management practices focused on regeneration of natural forests, with the active participation of communities; The need to address the problems of the impact of livestock on forests, in particular the supply of fodder and grazing; The need to increase the role of the private sector in forest production. 1.14 Planting Material Production. Records indicate that survival of planted trees is sporadic and often poor by international standards. There are many reasons for low survival rates, but the poor quality of planting stock is a major contributory factor. This starts with poor quality of seed, due to the lack of properly identified seed sources, and inadequate seed harvesting and cleaning procedures. Vegetative propagation is increasingly important in forest tree establishment, but is constrained by the lack of properly selected parent trees. The quality of seedlings produced from forest nurseries is a further limitation. Procedures tend to be standardized for all species in all ecological conditions and nursery managers have little access to modern nursery technologies. 1.15 Research. The State Forest Research Institute (SFRI) was established at Jabalpur in 1963, with a large campus and generous provision of buildings, and ten regional sub- centers. Decisions on research priorities are mainly based on experience of regional needs and constraints, and the needs or returns to particular species or groups of users. The main constraints affecting forestry research in Madhya Pradesh, in particular within SFRI, relate to: the lack of any strategic medium or long-term research strategy; the lack of a career structure for scientists with specialist skills, coupled with the poor support and status offered to research activities; the transitory nature of many research appointments;  7 The Market for Forest Produce 1.16 Supply. The total growing stock in Madhya Pradesh is estimated to be about 600 million in3, corresponding to an average of about 47 m3 per hectare of forest land. This is lower than the average in India of 65.4 m3 per hectare, due to the degraded nature of much of the forest. Recorded annual wood production is about 1.6 million m3 and the unrecorded production, which includes fuelwood and headload removals, is estimated to be about 3.0 million m3, giving a total production of about 4.6 million m3. In addition, there is a large production of Non-Timber Forest Products (NTFP). 1.17 The total quantity of logs and poles supplied from MPFD has declined from over 1 million m3 in 1982 to about 650,000 m3 in 1992. A further 100,000 m3 is estimated to be derived from private farmland. Data on the supply of pulpwood and bamboo for paper manufacture are uncertain. It is known that little pulpwood is available and it is estimated that about 170,000 tons of bamboo were supplied from within the State in 1992. A further 110,000 tons of bamboo were supplied for civil works and the urban markets. Fuelwood supplied by MPFD has decreased from over 2 million m3 in 1982, to less than 1 million m3 in 1992, though the total supply is probably maintained through unrecorded collection. Quantitative data are only available for certain types of NTFP, but the collection of tendu leaves has shown a steady increase. Demand 1.18 The demand for forest products comes from industries, primary processors, forest based cottage industries, and domestic users. Demand for forest products considerably exceeds supply as the actual capacity utilization of most of the forest based industries is only about 50 percent, due in large part to shortages of raw material. The demand for forest products is further demonstrated by the fact that many industries only achieve the present production by the import of raw materials, either from other parts of India, or from abroad. The two paper mills in Madhya Pradesh each have agreements with MPFD to supply 100,000 tons of raw material, mainly bamboo. In 1992, only 30 percent of the agreed total was supplied to the Government owned Nepa Mills and about 85 percent to the Orient Paper Mills, and the supply has declined further in the last year. The remain4der of the raw material is imported, mainly from Assam. Only 5 percent of logs used by the veneer industries are of local origin and most are imported from Burma. On  8 a national basis, demand for forest products is enormous and growing. The paper industry alone provides a vivid illustration. Present national production of paper is about 1.5 million tons. The targeted production of the paper industry in the Year 2000 is 2.5 million tons, requiring at least another 2.5 million tons of raw material, 60 percent of which will be bamboo and 40 percent wood. 1.19 Marketing Arrangements and Pricing. MPFD plays a significant role in the marketing of both timber and NTFP, resulting in a number of market distortions and inefficiencies. The reasons for MPFD involvement have little to do with comparative advantage in marketing and more to do with previous industrial policies, the desire to provide forest produce as a social necessity, or prevent exploitation of segments of the population, or revenue collection. Thus, MPFD is contracted to provide supplies to industry at concessional rates, though in recent times contracts have not been fulfilled. Timber is sold by MPFD at auction. Fuelwood is sold at 80 percent of the market price, at MPFD depots, to meet the needs of the urban population. MPFD also have the responsibility of providing Nistar rights, which ensure a supply of forest produce to populations in forest fringe areas. The most time-consuming marketing activity for MPFD is, however, tendu leaf collection. This absorbs virtually all the Territorial Wing of the Department for three months from April to June. MPFD is involved in marketing of trees grown on private land only through the fact that the Department endorses felling and transit permits issued by the Collector. The main issues affecting marketing and pricing are thus: The sale of forest produce at below market price, which is a dis-incentive for communities and individuals to protect and invest in forest management; The need to abolish the felling and transit regulations, at least for selected species, and to simplify the process for other species; The involvement of MPFD in collection and sale of NTFP requires review as it effectively halts the Department's program of forest management. Alternative mechanisms to provide protection for collectors and to ensure revenue is collected on behalf of the State could be developed;  9 Legislation 1.20 The control, protection and use of forest land and forest resources in Madhya Pradesh is governed by a legislative framework that sets out the rights of central and state governments, the rights of people, and the rights of nature. The need for review of some of these laws is presently being discussed by GOI and the State Government, in the light of the requirements of the National Forest Policy (1988). The main issues relate to: the fact that the National Forest Policy is not legally binding on either the central or state governments and there is a need to reform the Indian Forest Act (1927) in accordance with the new policy; the need to amend the Madhya Pradesh Panchayat Management of Government Lands Rules (1964) to include important features of the National Forest Act and the Forest Conservation Act, and to ensure consistency between this legislation and the Government Order on Joint Forest Management. Such changes are necessary to resolve institutional issues concerning the relationship between statutory bodies, such as the panchayats, and non-statutory bodies, such as Forest Protection Committees, to clarify peoples rights to forest resources, particularly nistar rights, and peoples rights to reside in forests, particularly in national parks and sanctuaries. Public Sector Institutions 1.21 The main public institutions in the forest sector in Madhya Pradesh are the Madhya Pradesh Forestry Department (MPFD), the Madhya Pradesh Forest Development Corporation (MPFDC), and the Minor Forest Products Federation (MFPF). Government is involved with forest based industries through its ownership of a paper mill and the Narmada Wood Processing Complex, which is managed by MPFDC. Other institutions that have an important role to play include the District Rural Development Agencies, the Tribal Development Department, the Narmada Valley Development Authority, NGOs, and the Panchayats. Activities of the Departments of Agriculture and of Animal Husbandry also impact on the forest sector, through their involvement in reclamation of non-forest wastelands and livestock programs. More details of these agencies are presented in  10 Annex 3. MPFD is the agency with primary responsibility for protection, conservation and production in forest areas, for the promotion of social forestry programs outside the forests, and for legislation affecting the forest sector. Its role and that of the MPFDC are evolving in the light of changes required by the National Forest Policy. The main institutional issues relate to the way in which the organizations are responding, or not, to these new requirements. They include: The need for management procedures and structure of MPFD to be adjusted to facilitate the implementation of the new forest policy, improve the use of staff and resources, and provide a consistent approach to individuals or communities participating in the management of forests and social and farm forestry programs. The need for training, promotion criteria, and policies on staff postings, to support the increasing needs of MPFD for staff specialization; The need to link budgetary allocations to revenue generated from the forests, with an explicit percentage of revenue generated to be reinvested in management and afforestation; The future role and institutional structure of MPFDC, whose original mandate to convert forests into high value, mainly teak and bamboo, forests is inconsistent with the changed emphasis of the National Forest Policy and is prohibited under the Forest Conservation Act; The need to develop improved mechanisms for coordination between MPFD and other agencies that impact on the forest sector. This should include specific means to involve NGOs and local government authorities, possibly through budgetary support.  11 The Private Sector 1.22 Production. The private sector is not involved in production in a major way, but provides support to farm forestry programs. Orient Paper Mills (OPM) supports entrepreneurs to establish nurseries, and subsidizes the sale of seedlings to private growers. OPM also run an extension service that promotes the concept of planting trees for profit, and provides technical advice to growers. The scheme does not involve any buy-back contracts, and the grower is free to sell produce on the open market, though OPM will buy material at market prices. MPFD has also provided support to the private sector growers through social forestry programs (See Para. 1.23) and the decentralized nursery scheme, which was brought to a close in 1993. 1.23 Industries. Forest based industries in Madhya Pradesh can be grouped into those utilizing round wood, those based on processed wood, and non-wood based industries. Of the round wood based industries, there is one private paper mill, over 4,000 tiny or very small saw mills, five slicer mills and one peeler mill for production of veneer, four plywood mills, two particle board mills and a parquet factory. The Narmada Wood Processing Complex is state owned and operated by MPFDC. Non-wood based industries include beedi production using tendu leaves, agarbatti production and oil extraction from sal seed. Many of the wood-based industries use only a fraction of their installed capacity due to inadequate and irregular raw material supplies. 1.24 The main issues relating to private sector involvement in the forestry sector concern the agreements on the supply of raw materials by MPFD at preferential prices, and the involvement of private agencies in plantation scale production. Past Development Strategies 1.25 Demand for timber during World War II meant that the prescriptions of working plans were suspended, so that at the time of independence many forests had been heavily exploited. During the early five-year plan periods, priority was given to survey and demarcation, preparation of working plans, plantation establishment and forest utilization. Subsequently, the policy was to maximize timber production and enforce forest protection. In 1972, the National Commission on Agriculture recommended that "there should be a change over from conservation oriented forestry to more dynamic program of production  12 forestry. The future production program should concentrate on clear felling of valuable mixed forests, mixed quality forest and inaccessible hardwood forests and planting these areas with suitable fast growing species yielding higher returns per unit area". The Madhya Pradesh Forest Development Corporation was set up in 1975 to assist with the implementation of this strategy by attracting institutional finance. By the Sixth Five Year Plan period (1980-85) ecological balance, economic stability for the poor and greater forest protection were being given emphasis. The failure to control unauthorized exploitation and a growing realization of forests as a biological necessity and major part of the nation's natural resource heritage led to the formulation of the National Forest Policy in 1988. 1.26 Social Forestry. The introduction of social forestry in Madhya Pradesh, during the early 1980s, was supported by a USAID project. The principle objective was to make it possible to meet the needs of the rural population for forest products from readily accessible community and private lands, not forest lands, thereby reducing the pressure on productive forests. The work of the project was continued through a number of government-funded social forestry programs (Annex 4), consisting of individual, community and village beneficiary schemes. The individual schemes include the payment of subsidies: for seedling production in private nurseries; for farm forestry involving the planting of trees on field boundaries or other private lands; and for planting of trees in public lands. Community beneficiary schemes include the creation of demonstration plots and village orchards. Village beneficiary schemes were largely focused on the creation of smokeless chullahs. 1.27 Although the social forestry programs have succeeded in making the forest service more aware of the needs of people they have not resulted in sustainable plantations, nor solved the problem of continuing deterioration of the forests. There were a number of reasons for this, including: (i) people were not sufficiently involved because the panchayats did not take on responsibilities for planning or management, the poor and in particular women, were not consulted, and issues related to control of grazing were not resolved; (ii) land for development was not identified early enough and was frequently in small isolated blocks that made management almost impossible; (iii) government officials focused on targets rather than quality; (iv) the programs did not provide sufficient forest produce and it remained cheaper to harvest from natural forests than to contribute to social forestry programs; and (v) the focus on social forestry may have meant that  13 funding for maintenance and protection of forests was reduced. 1.28 Joint Forest Management (JFM). JFM has been defined as "the sharing of products, responsibilities, control, and decision making authority over forest lands between forest departments and local user groups. It involves a contract specifying the distribution of authority, responsibility, and benefits" 2, The first major initiative to involve people in JFM in India was started in the State of West Bengal in 1972. Initial success led to the formation of over 1,700 Forest Protection Committees covering some 237,000 ha of forest. Similar programs have been started in a number of other states and more details of these experiences are presented in Annex 5. In June 1991, GOI issued a circular supporting joint planning and management of degraded forests in all parts of India. 1.29 JFM arrangements have been initiated in several parts of Madhya Pradesh and over 200 Forest Protection Committees (FPCs) had been established by 1993. The Government of Madhya Pradesh has issued an order providing the framework for implementation of the policy, entitled "Community participation in preventing illicit felling of the forests and rehabilitation of the forests", (Order No. 16/4/10/2/91 of December, 1991). The order is currently being revised and would prescribe the formation of two kinds of village committees: Forest Protection Committees (FPCs) would be constituted in sensitive forest areas where villagers are willing to participate in forest protection; while in degraded forest areas, Village Forest Committees (VFCs) are to be formed. In both cases, the committee would consist of a member from each resident family of the village. An informally constituted executive committee would include, as ex officio members, all the Panchs of the village Panchayat, the members of the Antyodaya Samiti, and the village Kotwar, teacher and Mukhia. The Forester or Forest Guard is to serve, ex officio, as the Secretary. The Divisional Forest Officer has the power to dissolve both kinds of committee, or to terminate the membership of specific members. A number of issues relate to the implementation of the Government Order: Institutional and legal arrangements for JFM need attention as viable and sustainable local institutions are essential; The traditional approach of the MPFD with its emphasis on forest 2 Training and Planning for Joint Forest Management. M. Moench. (Undated). Working Paper No. 8. Ford Foundation, New Delhi.  14 protection and enforcement has left a legacy of hostility and mistrust in some communities which will have to be overcome; The management of the MPFD has been hierarchical and suited to the downward transmission of orders and directives. Effective implementation of participatory programs will require a change in this culture, accompanied by decentralization to enable site-specific programs to be developed; 1.30 Ecodevelopment Annex 6. The term ecodevelopment has been used in India since the 1980s and a number of different definitions have been proposed. Most commonly, and in this report, it is used in connection with protected areas such as national parks or sanctuaries to define a strategy for protecting ecologically valuable areas from unsustainable or otherwise unacceptable pressures resulting from the needs and activities of people living in and around such areas. It is based on the assumption that if alternative natural and social resources are created in areas peripheral to the PAs, exploitation of resources within the PAs will be reduced. There is also the assumption that the involvement of the PA management in the creation of employment opportunities or fringe area resources, that may include fodder, veterinary services, water supplies, and other village infrastructure, will motivate communities to collaborate in the protection of forested areas. Ecodevelopment involves participatory management of resources, but is not identical to JFM, as communities do not receive direct benefits of forest produce from the PA. 1.31 Village Resource Development Annex 5. In Madhya Pradesh the term ecodevelopment has been used in a more general way to denote economic development of villages close to forest lands. This more general usage is referred to here as a Village Resource Development Program (VRDP). It is similar to ecodevelopment in trying to reduce pressure on forest land by providing alternative incomes or resources. It is also similar in assuming that provision of the alternative resources by the MPFD will generate a willingness to cooperate in forest management. It differs from ecodevelopment in that it explicitly involves communities in protecting neighboring forest areas through Joint Forest  15 Management arrangements, with the associated sharing of benefits. There are a number of issues related to both ecodevelopment and VRDP: mechanisms to ensure that communities link the provision of alternative incomes or resources with their participation in the protection of PAs, or the management of forest resources, are not well developed; experience with participatory management of resources in Madhya Pradesh is limited; MPFD does not have all the necessary skills or experience to implement programs outside the forest sector, and the necessary coordination mechanisms are not well developed. C. Lessons from Past Bank Lending 1.32 The World Bank has supported ten projects in the field of forestry and resource conservation in India with lending amounting to about US$500 million. Experiences gained through project supervision, project completion reports and reviews of the sector in India, the Asia region, and worldwide, have been assessed. In the past, forestry projects in India mainly provided support for social forestry and watershed protection activities and have had mixed success. The involvement of local people in some of these projects was inadequate. Many of the projects encountered implementation problems due to slow project start-up, institutional weaknesses and insufficient local funding. The major lessons from the early projects was that the programs were inadequate to address the complex issues affecting the forest sector. Other important lessons include: the need for production of improved planting material; better extension services; more emphasis on the planning and management of plantations and natural forests in the light of environmental concerns, including the conservation of biodiversity; better processes to involve local communities in the planning and management of forest resources and; inter- agency coordination in project implementation. These lessons have been taken into account in the design of the proposed project.  16 1.33 State-wide forestry projects have been recently approved by the Board for the States of Maharashtra (Cr. 2328-IN), West Bengal (Cr. 2341-IN) and Andhra Pradesh (Cr. 2573-IN). The proposed operation would build on the concepts developed for these projects, adapting them for the particular conditions in Madhya Pradesh. It would also be consistent with the findings of the Forest Sector Review (Report No. 10965-IN) which indicates that the strategic focus for forestry development in the next decade will be to improve forest protection and management through greater participation of communities and the introduction of technologies to improve productivity and permit better land use. Implementation of the strategy will be supported by redefining the role of government and revising regulatory and pricing policies to stimulate more effective private and public investments in the forestry sector.  17 II. FUTURE DEVELOPMENT OF THE FORESTRY SECTOR A. Objectives 2.1 The objectives of the future development of the forestry sector in Madhya Pradesh would be, in accordance with the National Forest Policy of 1988: to ensure environmental stability and maintain ecological balance; to conserve the national biological heritage; to increase substantially the forest and tree cover in forest and farm lands; to increase the productivity of forests; and to ensure the participation of the people in the management of forests and trees to achieve these objectives. B. Strategy 2.2 Since these objectives represent a major change from the traditional objectives for the forest sector, a new strategy for the future development of the sector has been formulated by GOMP and involves: changes in the sectoral policy framework and the approach of MPFD; changes in sector management; and changes in program implementation. To realize the changes will require training for staff and communities, so human resource development is a crucial element of the strategy. The GOMP statement of strategy is presented below. The linkages between the various elements of the strategy are illustrated in Figure 1, and presented in relation to issues and actions in Annex 7. Framework 2.3 The strategy would involve changes in the framework governing the management of the sector. These would include changes in sector policy which would focus on creating a market-oriented environment and an appropriate legislative and administrative framework for increasing participatory management of forest resources. The strategy would also involve a change in the traditional culture and approach of MPFD, from a predominantly regulatory role, to one in which communities are treated as partners in the management of forest resources.  18 Framework Sector Programs Management __________ l Strategic Planning Conservation Policy Analysis Areas Departmental Approach Closed Forests Sectoral Management Policy System Development Open Decentralization Forests Planning Monitoring Evaluation Technology Private and Community Administrative Lands Procedures Institutional Structures Human Resource Development FIGURE 1. Elements of the GOMP strategy for the future development of the forestry sector in Madhya Pradesh.  19 Sector Management 2.4 Changes in management of the sector would support the development of the sectoral framework through the introduction of strategic planning linked to policy analysis. Staff orientation programs would promote changes in the approach of MPFD. Other changes would relate more specifically to the development of management systems. This would include a focus on decentralization of planning that would ensure programs are linked to site-specific conditions and priorities, and the needs of participatory forest management. Budgetary allocations would be linked to these plans. Monitoring and evaluation would be an iterative process, contributing to both planning and implementation. Technologies and silvicultural practices would be suited to management objectives, supported by adaptive research programs. Administrative procedures and institutional structures would be reviewed and changed as necessary, to meet the requirements of the changed management priorities Programs 2.5 The strategy would be to develop implementation programs related to a classification of the state based on management objectives as follows: Area Primary Management Objectives 1. Conservation Areas Conservation of biodiversity 2. Closed Forests (i) Maintenance of forest cover. Enrichment of stocking by natural regeneration to eventually increase production (ii) Timber and NTFP production 3. Open Forests (i) Increase in forest cover (ii) Production of local community requirements for forest products 4. Private and Community Lands Commercial forestry and involvement of forest-based industries 5. Village common lands in forest fringe Production of local community requirements areas for forest products 3 Management changes are discussed in more detail in Annex 3, monitoring and evaluation in Annex 7 and silvicultural practices in Annex 2.  20 2.6 Conservation Areas. The strategy for the conservation of biodiversity would be to focus improved PA management on a number of priority areas of biological importance, in which human impacts are readily manageable. Management of sites of lower priority would be maintained, though with fewer resources. PA management would be complemented by an Ecodevelopment Program (EDP) in areas peripheral to the PA. The PA Network, in particular, linkages between existing PAs, would be developed through identification of relatively undisturbed satellite areas and, for the intervening zones, the preparation of management plans that are compatible with biodiversity conservation 4. 2.7 Closed and Open Forests. Many aspects of the strategies for these areas are similar and there is a gradation from one to the other. Both would be based on the full spectrum of forest products, including minor forest products, fruit, fodder and fuel, as well as timber s. Community involvement in detailed planning and implementation of proposed forestry programs, with an agreement clearly setting out the obligations of, and benefits to, the communities and MPFD, that is, Joint Forest Management, would be a cornerstone of the strategy in both areas. In closed forest, improved productivity would be achieved through natural regeneration and enrichment planting with a variety of species, including those of importance to local communities, and by adopting soil and moisture conservation measures. In open forest areas, the species providing benefits to the community would be given priority. JFM arrangements would be integrated with activities that would include measures to provide alternative resources and income to reduce unsustainable exploitation of the forest. Together, these activities would form part of an integrated Village Resource Development Program (VRDP) 6, 2.8 Private and Community Lands. The strategy would focus efforts on promoting tree planting on private lands. Forest based industries would also be involved in promoting tree farming on private land to ensure availability of raw material. Development of the village commons in forest fringe villages would be based on JFM 4 The strategy for conservation of biodiversity is further discussed in Annex 5. 5 Appropriate technologies for natural forest management are discussed in Annex 2. 6 The Village Resource Development Program is discussed in more detail in Annex 4.  21 arrangements as part of a VRDP 7. 2.9 The Role of the Private Sector. The private sector in Madhya Pradesh includes village communities, graziers, and small farmers as well as large industries. The future role of the private sector will be to extend their involvement in farm forestry and agro- forestry in a more meaningful manner. In farm forestry programs farmers would continue to take full responsibility for production and management. Forest-based industries would take a more proactive role in securing raw material supplies by providing credit, material, technological support and buy-back guarantees to small producers. The private sector would also take a leading role in developing small rural nurseries, and provide industrial support to farm forestry programs with a view to producing quality planting materials. Livestock are entirely controlled by private sector owners and their impact on the forest sector through the enormous demand for grazing and fodder is severe. The future strategy to minimize grazing pressures would involve the improvement of livestock productivity through breeding, and an increase in the production of cultivated fodder; 2.10 The Role of the Public Sector. In the future, the role of public sector agencies would be mainly regulatory and supportive, rather than involved in direct marketing, or processing. Thus, they would restrict their activities to the formulation and monitoring of the necessary policy and regulatory framework for the sector, and provide supporting research and extension services for the development, introduction, and dissemination of new technologies and management practices. The implementation of this strategy would require: (i) a review of all the many tasks for which MPFD is responsible; (ii) the identification of those which can be handled by private sector agencies, including NGOs; (iii) the introduction of improved management procedures and structures in public sector agencies to meet the needs of their redefined role; and (iv) staff training and development to enable the agencies to fulfill their role. Programs to support tree planting on private and community lands are discussed in Annex 4.  A  22 III. THE PROJECT A. Rationale for Bank Involvement 3.1 Future development of the forestry sector in Madhya Pradesh in accordance with the National Forestry Policy will require long-term commitments. The Bank is one of the few institutions that could provide the necessary continuity of support. In addition, the Bank's involvement in similar state forestry projects provides a mechanism for transferring up-to-date practical experience with project implementation. This experience enables the Bank to engage in a constructive dialogue on sector management issues with both state and central governments. The Bank is also in a position to ensure that improved technology will be made available to MPFD in a timely manner, both through its support for the national Forestry Research, Education and Extension Project, and through linkages with international forestry research organizations. The proposed project would be consistent with the overall country assistance strategy, including the strategy for Bank assistance to the agricultural sector in India, which seeks to promote increased productivity through better selection of investments, product diversification, and more efficient public sector management. It is also consistent with the objectives of the Bank's forestry policy and the Asia Region's strategy for lending, which links policy dialogue with major investments in the forest sector. B. Project Objectives and Design 3.2 The main objective of the project would be to assist with the implementation of the GOMP strategy for development of the forestry sector in Madhya Pradesh. More specifically the objectives are: to develop the necessary human resources for the planning, implementation and monitoring of the strategy; to ensure that management procedures and the structure and resources of MPFD are appropriate to its role as the nodal public sector agency in the forestry sector; to assist with the prioritization of various types of land through improved planning at a macro-scale; to increase both forest cover and productivity through development of participatory processes for management and use of forest resources, taking special account of the interests of tribal peoples and other disadvantaged groups; to adapt and improve existing technologies and to provide technical and management advice; to improve incentives for forest management and the cultivation of trees; and to promote the conservation of biodiversity.  23 3.3 Future development of the forestry sector in Madhya Pradesh will involve long- term programs, so a strategic plan is needed for the provision of IDA support to the sector over a period of about ten years. Given the area of forest in Madhya Pradesh and its economic and environmental importance to both the state and the nation, investments over a ten-year period could total more than US$200 million. However, the GOMP strategy for the sector, described in Chapter II, involves substantial change in the way the sector is managed and the introduction of innovative new programs for participatory management of forests. Lessons from previous Bank lending (Para. 1.27) show that these changes take time and may slow implementation. Consequently, strategic planning for the provision of IDA support to the sector, is based on a two-stage approach. The first stage would be a project of four years duration, which is described below. This is designed to allow MPFD to develop the new processes, systems and skills required for implementation of the new GOMP strategy and to provide for necessary investments in the sector. Project support for improved management would have an impact on the sector as a whole. Investments in forest development and management would be initiated throughout the state, but in a small proportion of the 15.4 million ha of forest land and in a representative number of the 30,000 villages located in forest fringe areas. These would form the basis of larger scale investments that could be provided in a second-stage project, that would build on experience gained, and incorporate any necessary modifications to programs and processes initiated during the first stage project. Approval for such a second stage project could be sought during the fourth year of implementation of the first stage. It is not possible to be precise about its magnitude as it would depend on implementation experience. However, it can be assumed that successful forest development programs would grow exponentially, so investments would be correspondingly greater. C. Summary Description 3.4 The project area would cover the entire State of Madhya Pradesh which has been described briefly in Chapter I and in more detail in Annex 1. The project would be implemented over a four-year period, from January 1995 to December 1998, and would have four main components, listed below with the main activities in each: Management Development. Development of the management of the sector through: changing the approach of MPFD from a predominantly regulatory role to one in which communities are treated as partners in the management of forest resources; increasing policy analysis capabilities; and improving the management skills of senior MPFD staff, supported by the  24 introduction of improved management systems, for planning, implementation, monitoring and evaluation procedures. The project would finance the introduction of improved management information and geographical information systems, linked to a program of training for all levels of staff. Forest Management. This would have two main thrusts: (i) A program of assisted natural forest regeneration (ANR), supported by enrichment planting, improved silvicultural practices, and forest floor management over an area of about 160,000 ha; and (ii) A Village Resource Development Program involving community based participatory planning, and management and protection of forest resources, integrated with activities to generate alternative incomes or resources, to reduce the pressure on the forests. A total of about 1,140 villages would be involved, managing about 74,000 ha of forest land. Staff training in participatory planning would be provided and the availability of trained staff would determine the phasing of activities. Extension, Technology and Research. Provision of necessary infrastructure and facilities for the development of extension and research service centers in each ecological zone, coupled with staff training, would provide a base for improved forestry extension services, tree seed improvement programs, demonstration nurseries and adaptive research trials. Biodiversity Conservation. Improved management of 12 high priority Protected Areas (PAs) through provision of support for development of management plans, staff training, equipment and facilities. Special Funds would be created to support the development of alternative resources or income for communities resident within PAs and in areas peripheral to them. A lower level of project funding would be available for 12 lower priority PAs, whilst the identification and planning of linkages to complete the PA Network would be financed.  25 D. Detailed Features Management Development 3.5 Sector Management Annex 8. The project would finance measures to improve management of the forestry sector in three main ways: changing the approach of MPFD, improving the management system and increasing policy analysis capabilities. The project would provide funds for reorientation and training of staff at all levels. Local and international management training would be financed for senior MPFD staff. Through the provision of consultancy funds, the project would also assist the Department to review management procedures and structures, staffing levels and skills, determining whether any modifications are necessary to enable the Department to meet the demanding role required by the proposed strategy. Finance would also be available for the operation of a small Policy Analysis Unit, responsible directly to the Principal Chief Conservator of Forests (PCCF), with resources to commission specific policy studies. Short international utdining courses for present and possible future heads of this unit would be financed, together with longer Masters or Diploma courses for staff of Deputy Conservator of Forests (DCF) level. Computing and other necessary supporting equipment would be provided. The project would further support staff development by providing resources for in-service technical and management training for officers of Assistant Conservator of Forests (ACF) rank and above at SFRI, which would fulfill the function of a staff college. Funds for rehabilitation of the hostel, for training materials and equipment, and for recruitment of resource persons for specific training activities would be available. Support for the training of foresters and forest guards would be provided through financing curriculum development, training of trainers and rehabilitation of facilities at forest colleges 8. 3.6 Planning, Monitoring and Evaluation (PME). Annexes 9 and 10. The project would finance measures to improve the capabilities of MPFD for PME at both macro- and micro-levels. Consultancies to assist with the design and introduction of improved PME procedures and supporting systems would be financed as part of the development of sector management. Funds would also be available for the development of a Management Information System (MIS) and related Geographical Information System (GIS). The MIS would be based on PME cells that would be developed at headquarters, territorial circle, 8 Training forms an important part of each project component. An outline training plan is presented in each of the relevant Annexes.  26 and divisional levels, and in five zonal wildlife offices. These cells would provide information services to all MPFD activities, that would ensure the conclusions from monitoring and evaluation work are incorporated in future planning. GIS service units would be created at headquarters and in four zones, corresponding to FWP circles. The position of the planned PME Units and Cells and functional linkages within MPFD are illustrated in Figure 2. Project funds would be available for purchase of computer equipment and software. Advanced training in MIS and GIS applications would be provided for selected staff and general computer literacy courses for a much wider range of staff. The project would also support improvements in MPFD capacity for resource assessment and inventory through provision of field survey instruments, equipment and vehicles for FWP survey teams and technology development studies to identify and implement improved forest survey techniques. 3.7 Project Unit. Project funds would be available for the operation of a Project Unit (PU). The staffing and structure of the unit is illustrated in Figure 3, together with the linkages to operational units of MPFD. The project would provide necessary computers, equipment and vehicles for the PU. Forest Development 3.8 Assisted Natural Regeneration (ANR). Annex 2. The project would support a program of assisted natural regeneration of forests, linked to forest ecotypes, rather than oriented to particular species. Based on improved inventories (Para. 3.6), the program would include improved management of the forest floor, through control of grazing and fire protection, and improved soil and moisture conservation to enhance ground vegetation and humification. Natural regeneration from seed would be supported by enrichment planting where necessary, and improved silvicultural practices. A total of about 160,000 ha would be treated during the course of the project, including the rehabilitation of some 21,000 ha in which bamboo has flowered. The forest development program would be supported by staff training and the provision of staff housing and vehicles. 3.9 Village Resource Development Program. Annex 5. The project would finance a program for joint forest management, integrated with activities to promote the sustainable use of forest resources. This would be based on village area plans, developed through a participatory process, leading to agreements that would set out the rights and obligations of local communities and the MPFD. Success would be in large part dependent on the availability of trained staff with a genuine commitment to the participatory process. The  27 project would, therefore, fund orientation workshops and the training of staff and community members. It would also provide for plan formulation through the formation, training and operation of a VRDP Planning Team in each Division, that would include at least one woman, who would meet the criteria for selection as a ranger. It would be difficult for MPFD to recruit women rangers by the date of project effectiveness, so the project would provide funds for special contracts with suitably qualified women, possibly recruited through NGO involvement, as members of the VRDP Planning Teams. 3.10 As part of an integrated program for village resource development, project funds would be available for JFM activities in forest areas used by the communities. A total of about 1,140 villages would be involved over the project period, managing and protecting about 75,000 ha of forest land, for which detailed microplanning would have been completed, and in which silvicultural improvements aimed at the rehabilitation of degraded forests (RDF) would have been started. This would include planting of bamboo in selected areas, totalling just over 8,000 ha. The phasing of the program would be mainly determined by the availability of trained staff. Management practices would involve new plantings of a variety of species according to ecotype, coppice management, and silvipasture. Integrated with this JFM program, the project would provide for investments in schemes to generate alternative resources or incomes, linked to community protection of the forest. Extension, Technology and Research 3.11 Extension and Research Service Centers. Annex 11. The project would finance the development of twelve service centers and one sub-center, one in each of the major ecological zones of the state. Buildings, equipment, vehicles and other facilities would be provided. The centers would provide a focus for extension programs, for seed improvement programs, for demonstration nurseries, for demonstrations of new technologies, and for applied research. The centers would also provide facilities for training of MPFD staff in extension methodology. The linkages between the centers and these activities, and the way in which these support MPFD programs are illustrated in Figure 4.  28 3.12 Extension. Annex 4. Project support for forestry extension programs, focused on farm and community forestry, would be provided in 40 priority Forest Divisions, selected on the basis of proximity to markets for farm and community forest products, the amount of irrigated land, population density and the success of previous social forestry programs. Funds would be available for extension materials and equipment, farmer training, demonstrations and vehicles or motorcycles. The project would finance training of DFOs and Rangers in extension techniques. 3.13 An Industrial Liaison Unit would be created under the Chief Conservator of Forests (CCF) for Industries. Its function would be to ensure forest based industries are aware of tree improvement programs, technology advances, supply and demand projections, and market identification for both wood and non-wood forest products. The head of the Unit, a Conservator of Forests (CF), would be supported by a DCF and staff in the E&R centers, responsible for collection of data. The project would finance the provision of a computer, training for staff of the Unit, and special contract studies of market forecasts or industrial technology. 3.14 Seed Improvement. Annex 12. The project would finance a program to improve the quality of seed used in all forestry activities in Madhya Pradesh through financing the identification of superior mother trees, the collection of seed, the development of Seedling Seed Production Areas, and the development and operation of Clonal Seed Orchards with supporting shade/mist houses, for those species of greatest importance to the sector. Project funds would be available to provide facilities for drying, processing, and storage of seeds. Basic facilities would be provided at each R&E center. A cool store and seed testing laboratory would be provided at SFRI. As the basis for improvement of exotic species, project funds would be available for the import of high quality germ plasm. The project would support staff training in seed technology and tree improvement, and provide for short-term international technical assistance for the development of seed facilities at SFRI and the substantial tree improvement program. 3.15 Nursery Demonstration. Annex 12. Project funds would be available for the development of nurseries in each of the E&R Centers, that would demonstrate modem nursery techniques. These would act as models for private sector nurseries of a capacity of between 10,000 and 100,000 seedlings. Construction of the nursery and purchase of necessary irrigation and ancillary equipment would be provided for.  29 3.16 Research. Annex 13. Due to lack of staff, SFRI research capabilities are severely constrained. However, the establishment of SFRI as an autonomous agency would provide greater flexibility in staff recruitment. The project would, therefore, provide a limited amount of equipment to upgrade key laboratories supporting the seed and tree improvement programs. Other project support for research would take the form of funding for contract research programs, to be commissioned by SFRI in universities and other agencies. In addition, the project would finance consultancies to assist with the development of a strategic research plan for the State, based on a systematic assessment of research priorities, that would complement national research programs being undertaken in Institutes of the Indian Council for Forestry Research and Education (ICFRE). Biodiversity Conservation. Annex 6. 3.17 PA Management. The project would support improved PA management planning by financing the operation of five zonal teams, that would provide specialist advice to PA managers, responsible for developing PA management plans. In addition, the project would provide funds for information centers, other necessary buildings, communications equipment, office and field equipment, and vehicles for 12 PAs, selected on the basis of their biological significance and in which human pressures on the PA are readily manageable. A lower level of support would be provided for 12 lower priority PAs. Development of the PA network would be supported through the provision of funds for the identification and survey of important undisturbed satellite areas, and the preparation of strategic plans for the management of these areas and the inter-linking, more disturbed areas. In addition, project funds would be available to contract research on aspects of biodiversity and PA management, and of the impact on biodiversity, of communities resident within the PAs. 3.18 Ecodevelopment Program (EDP). Finance would be made available for the establishment of an Ecodevelopment Support Fund (EDSF), to be used for sustainable management of forests and for the development of alternative resources or income generating opportunities, in village areas peripheral to the PA. This program would be supported through financing the training and operation of five Ecodevelopment Planning Teams, who would, in turn, provide on-the-job training and assistance to Wildlife Rangers, Foresters, and Forest Guards planning and implementing village ecodevelopment programs.  30 3.19 Project Preparation Facility (PPF). An advance of approximately US$275,000 was approved from the PPF. This was to enable MPFD to: (i) initiate orientation and training of staff, particularly of staff involved in the VRDP and Ecodevelopment Program; (ii) recruit consultants to assist with the management review; and (iii) establish a Project Unit (See Chapter V). These measures were designed to ensure rapid start-up of project activities   31 IV. PROJECT COSTS AND FINANCING A. Project Cost Estimates 4.1 Total project costs are estimated at US$67.3 million (Rs.2459.4 million), inclusive of duties and taxes in the amount of US$2.4 million (Rs.85.7 million). Of this 14 percent or US$9.1 miillion are foreign exchange costs. Investment costs amount to 94 percent and recurrent costs to 6 percent of base costs. The base costs are those obtained at the time of appraisal and have been adjusted for inflation to the time of negotiations. Physical contingencies amount to 5 percent. Price contingencies of 2.2 percent per year were added for the foreign exchange component. For local costs, price contingencies were added at 8.0 percent for 1995, at 7.0 percent for 1996, and at 6.0 percent for 1997 and 1998. 4.2 The table below gives a summary of project costs by component. Additional summary tables of project costs by year, by component and by summary accounts are presented in Annex 14. Project Cost Summary Component Foreign Local Total FE ........ .US$ million. Management Development Sector Management 0.8 1.4 2.2 35 Planning, M and E 0.9 2.0 2.9 32 Forest Development Natural Forest Regeneration 1.0 17.9 18.9 5 Village Resource Development 1.9 15.5 17.4 11 Extension Technology and Research E and R Service Centers 0.4 2.2 2.6 14 Extension 0.1 0.3 0.4 16 Seed Improvement 0.8 3.1 3.9 20 Nursery Demonstration 0.6 0.8 1.4 23 Adaptive Research 0.2 0.4 0.6 33 Biodiversity Conservation 1.2 8.4 9.6 13 Total Baseline Costs 7.9 52.0 59.9 13 Physical Contingencies 0.6 2.5 3.1 20 Price Contingencies 0.6 3.7 4.3 14 TOTAL PROJECT COSTS 1/ 9.1 58.2 67.3 14 1/ Including duties and taxes of US$2.4 million.  32 B. Proposed Financing Plan 4.3 The proposed IDA Credit of US$58.0 million equivalent would finance 89 percent of project costs, net of taxes, or 86 percent of total project costs, including taxes. The credit would finance 100 percent of the direct and indirect foreign exchange costs and 84 percent of local costs. Incremental recurrent costs amount to 7 percent of total costs, including contingencies. These would include the operation and maintenance costs of civil works, vehicles and equipment financed by the project. IDA would fund an average of about 50 percent of the incremental recurrent costs, declining from 60 percent to 50 percent over the life of the project (See Para. 4.15). There would be no incremental staff so salaries and allowances are not included in project costs. The financing plan below presents IDA and GOI contributions for the four year project period. Proposed Financing Plan by Foreign Exchange and Local Costs (US$ million) Source of Financing Foreign Local Total IDA 9.1 48.9 58.0 GOI 1/ 0.0 9.3 9.3 Total 9.1 58.2 67.3 1/ Including duties and taxes of US$2.4 million C. Procurement 4.4 Civil Works (US$9.6 million). Works would be procured following Local Competitive Bidding (LCB) or Force Account procedures as follows: LCB. Civil works in the project consist mainly of the construction of buildings for eco-centers, residential quarters for Forest Guards, Foresters and Range Officers in remote forest areas, a few quarters for Forest Officers in Divisional headquarters, and repairs to forest roads. Works to an aggregate value of US$1.6 million equivalent would be procured under contracts awarded on the basis of LCB procedures acceptable to IDA. The justification for the proposed LCB for civil works is that they consist of rehabilitation of existing buildings, or the construction of new buildings in  33 widely scattered interior locations, during the first four years of the project. The works would be grouped together into convenient packages for bidding, but the largest contract is likely to be less than US$150,000 so it is unlikely that foreign firms would find such contracts attractive. Nonetheless, bids from foreign contractors would not be precluded. Arrangements for procurement are presented in Annex 15 and a detailed procurement schedule in Attachment 1 to the Annex. Force Account, including direct contracting and on the basis of quotations from a list of at least three contractors, would be used for all small civil works located in remote areas and valued at less than US$20,000 equivalent or less, up to an aggregate amount of US$8.0 million and would be undertaken by MPFD. This would include materials for works carried out under Force Account, valued in aggregate at US$3.3 million, to be procured following local shopping procedures acceptable to IDA. The works are not suitable for competitive bidding due to the small amounts and remoteness of location. Monitoring of works carried out under Force Account would be done using procedures acceptable to IDA. 4.5 Forest Operations (US$20.8 million). Force account would be used for most forest operations, including the cost of establishing identified seed production areas, clonal seed orchards, seedling seed production areas, and multiplication gardens. This is due to the operations being located in remote areas and MPFD having the necessary personnel and skills in place. 4.6 Goods, Equipment, Furniture and Supplies (US$6.0 million). Goods, in particular, computers to an estimated value of US$1.7 million, would be procured using International Competitive Bidding (ICB) procedures. However, equipment estimated to cost less than US$200,000, up to an aggregate of US$0.8 million would be procured using LCB procedures acceptable to IDA. Small items of equipment, and some field and laboratory supplies, would be procured in small lots over the five-year period. As individual contracts are not expected to exceed US$20,000 they will be procured using local shopping procedures satisfactory to IDA, up to an aggregate amount of US$2.6 million. Directorate General of Supplies and Disposal (DGS&D), New Delhi, rate contracts would be acceptable for procurement under local shopping only. Satellite imagery, aerial photography and maps, valued at about US$0.2 million, would be procured directly from GOI agencies such as the National Remote Sensing Agency or the Survey of  34 India. Similarly, books and periodicals, extension and publicity materials, valued at about US$0.7 million, would be obtained under direct contracting procedures. Arrangements for procurement are presented in Annex 15 and a detailed procurement schedule in Attachment 2 to the Annex. 4.7 Vehicles (US$3.4 million). Vehicles for the project consist of four-wheel drive vehicles, cars, motorcycles, light trucks, minibuses, and boats. Vehicles to an estimated value of US$1.8 million would be procured using ICB procedures. However, some vehicles and boats would be needed immediately and others would be required in small numbers in different locations at various times throughout the project period. To meet these requirements, contracts of less than US$100,000 to an aggregate value of US$1.6 million, would in the case of vehicles be procured through local shopping, using DGS&D rate contracts. In the case of boats local shopping procedures based on quotations from at least three suppliers to ensure competitive prices would be used. 4.8 Consultancies, Studies and Training (US$5.7 million). Consultancy services estimated at US$1.2 million would be contracted on terms and conditions in accordance with IDA guidelines for the use of consultants 9. Technical assistance estimated to cost US$1.2 million and training, including a service contract for placement and support of trainees, to a total of US$3.3 million would be procured using procedures and institutions acceptable to IDA. A summary of TA arrangements, studies and consultancies is presented in Annex 15 and detailed training plans are presented in Annex 15, Attachments 3A and 3B. 4.9 Forest Protection (US$14.7 million) are funds available to village communities for satisfactory protection of forest land undertaken as part of JFM arrangements agreed with MPFD. The funds, administered by the DFO, would be utilized to finance the creation of alternative resources, income, or community assets under the VRDP, in accordance with procedures and criteria agreed with IDA (Annex 5). 4.10 Ecodevelopment Support Fund (US$2.2 million) is designed to provide support for ecodevelopment activities. The Funds would finance small works and income generating activities in about 100 widely scattered village locations over the four-year project period. Procedures for management of the Fund, acceptable to IDA, would be utilized (Annex 6). 9 Guidelines: Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency. August 1981.  35 4.11 Operating Costs (US$4.6 million) include incremental operating and maintenance costs of vehicles and equipment, and the purchase of office and computer supplies. Costs of field experimentation and trials, including labor, seed or other planting materials, fertilizers, and chemicals are also considered as operating costs to be disbursed following procedures acceptable to IDA. 4.12 Contract Review. All ICB contracts, and civil works, goods and equipment contracts valued at US$200,000 and above, and the first two civil works and the first two goods contracts, regardless of value, would be subject to prior review by IDA. For consultancies, model documents for inviting proposals, terms of reference for consultants irrespective of value, all single source contracts regardless of value, all contracts for assignments of a critical nature, and all contracts valued at US$100,000 or more awarded to firms, or US$50,000 or more awarded to individuals would be subject to prior review by IDA. This would result in prior review of about 80 percent of all contracts procured under ICB or LCB procedures. Contracts below the threshold levels would be subject to selective post-review by visiting missions. AlLhough this would result in only about ten percent of project procurement expenditures being subject to prior review, the nature of the project, with its emphasis on forest operations, is such that a higher level of IDA review would not have a significant impact on procurement quality. 4.13 Procurement information will be collected and recorded as follows: (i) Contract award information will be promptly reported by the borrower; (ii) Comprehensive half-yearly reports will be prepared by the borrower in the format presented in Annex 16 indicating: Revised cost estimates for individual contracts and the total project; revised timing of procurement actions, including advertising, bidding, contract award, and completion time for individual contracts; compliance with aggregate limits on the specified methods of procurement. (iii) Preparation of a completion report by the borrower within three months of the loan closing date.  36 4.14 The project elements, their estimated costs and proposed methods of procurement are summarized below: Summary of Proposed Procurement Arrangements Project Element Procurement Method J Total ICB LCB Others |_Cost ............ .US$ Million. Works Buildings 1.6 8.0 9.6 (1.4) (6.8) (8.2) Forest Operations 20.8 20.8 (18.8) (18.8) Goods Equipment/Supplies 1.7 0.8 2.6 5.1 (1.6) (0.7) (2.3) (4.6) Maps, Aerial Photographs 0.2 0.2 (0.2) (0.2) Books, Periodicals, extension and 0.7 0.7 publicity materials (0.6) (0.6) Vehicles 1.8 1.6 3.4 (1.7) (1.4) (3.1) Consultancies, Studies, Training Technical Assistance - Project Implementation i.2 1.2 (1.2) (1.2) Studies and Consultancies 1.2 1.2 (1.2) (1.2) Training 3.3 3.3 (3.3) (3.3) Miscellaneous Forest Protection 14.7 14.7 (I 1 .9) (I 1.9) Ecodevelopment Support Fund 2.2 2.2 (1.8) (1.8) Operating Costs 4.6 4.6 (2.8) (2.8) Project Preparation Facility 0.3 0.3 (0.3) (0.3) TOTAL 3.5 2.4 61.4 67.3 (3.3) (2.1) (52.6) (58.0) Note. 1. Figures in parentheses are the respective amounts financed by the IDA Credit. 2. Other methods include force account, shopping, engagement of consultants and training.  37 4.15 Although the Department has some experience of IDA procurement procedures, assurances were obtained at negotiations that a DCF had been appointed to the PU, in charge of procurement, with responsibility of coordinating procurement requirements and prepare equipment specifications, procurement schedules, and bidding documents. Assurances were also obtained at negotiations that procurement plans would be in accordance with the Procurement Schedule presented in Annex 15, Attachment 1 and that standard procurement documents as already agreed with GOI would be used. Progress with procurement would be reported in the six-monthly project report, in the format presented in Annex 16. D. Disbursements 4.16 Disbursements under the Credit would be made for: (a) 85% of civil works for buildings (including construction of nurseries and provision of water supplies); (b) 90% of expenditures on forest development; (c) 100% of expenditures on forest protection; (d) 100% of foreign expenditures, 100% of local ex-factory costs or 80% of other local costs of equipment, vehicles, construction materials and operating costs; (e) 100% of expenditures on consultant services, training, and studies; (f) 100% of foreign expenditures and 80% of local costs of equipment, construction materials, and operating costs financed through the Ecodevelopment Support Fund; (g) IDA would finance 60% of incremental recurrent costs, other than staff salaries and allowances, until June 30, 1997, to enable programs to be initiated successfully. This contribution would be reduced to 50% thereafter, representing a phased increase in Government's contribution to  38 incremental recurrent costs. All incremental staff salaries and allowances would be financed by GOMP so the IDA contribution to incremental recurrent costs would amount to an average of about 50% of expenditures on operating costs. These would include the incremental recurrent costs of operation and maintenance of vehicles and equipment, and field expenses of programs supported through the project. 4.17 Disbursements against civil works and equipment, seeds, fertilizer, construction materials and supplies, on contracts exceeding US$200,000 equivalent and consultant contracts exceeding US$100,000 equivalent for firms, and US$50,000 equivalent for individuals, would be fully documented. Disbursements for other expenditures would be made against Statements of Expenditure (SOEs). Supporting documentation for SOEs would be retained by GOI and GIMP and be made available to Association staff during supervision. Forest development costs eligible for reimbursement include costs of nurseries, land preparation, including labor inputs for tree planting, maintenance and protection. Expenditures for project activities incurred after July 31, 1994, would be eligible for retroactive financing, up to a maximum of SDR 3.4 million (US$5.0 million equivalent). All contracts and items to be financed retroactively will have been procured in a manner acceptable to the Association. Disbursements are projected over a period of five IDA fiscal years, from 1995 to 1999. The disbursement schedule is presented in Annex 17. The closing date of the Credit is June 30, 1999. 4. 1 8 To facilitate project implementation and to reduce the volume of withdrawal applications, a Special Account in US dollars would be established in the Reserve Bank of India, with an authorized allocation of US$5.0 million, which is equal to the estimated four monthly average disbursement. Assurances were obtained at negotiations that GOI, and GOMP would implement a system satisfactory to IDA for channelling funds required for carrying out the project. An understanding was reached at negotiations that GOI would release about three months anticipated project expenditure in advance to GOMP, and that upon receipt of funds from GOI, GOMP will immediately transfer such funds, together with quarterly counterpart contributions, to project accounts of MPFD as the implementing agency.  39 E. Accounts and Audit 4.19 MPFD would establish a separate Project Account. This account, together with supporting documentation, including contributions from GOI and the Credit, would provide a comprehensive record of project financing and expenditures. Assurances were obtained at negotiations that this account and the Special Account would be subject to normal GOI and GOMP accounting procedures and controls. Project accounts would summarize project expenditures under categories to be agreed with IDA, showing: (a) actual versus planned expenditures for each quarter (b) actual versus planned expenditures accumulated to date; and (c) financing source for the quarter, and accumulated, by IDA and GOMP. The summaries, which would provide information for the SOEs would form part of the project account, including those expenditures for which reimbursement would be claimed with full documentation. The project accounts would be supported by a listing with the withdrawal applications submitted for the period. They would be audited annually in accordance with appropriate auditing principles. The Controller and Auditor General and his Accountants General at the State level would be considered acceptable auditors. The consolidated audited project accounts, including the Special Account and SOEs, and the auditor's report, which would include a separate statement on the SOEs and certified copies of the SOEs, would be submitted to IDA not later than nine months after the close of each fiscal year. The audit report on SOEs would specifically comment on their usage and the controls established to ensure their accuracy. The Special Account which would be maintained by the Department of Economic Affairs (DEA) would show all withdrawal requests disbursed, amounts advanced and reimbursed by IDA, and the balance at the end of each accounting period. Auditors' reports would reflect the certification of the balance held by the Reserve Bank of India. MPFD would prepare a project report on a bi-annual basis, in a format to be agreed with IDA, summarizing project progress in physical terms by project component, linked to financial terms, which would be based on the bi-annual unaudited project accounts.   40 V. PROJECT IMPLEMENTATION A. Sector Strategy 5.1 The GOMP strategy for development of the forest sector has been presented in Chapter 2 and issues and changes identified in the matrix presented in Annex 7. At negotiations it was confirmed that this statement of strategy for the future development of the forest sector in Madhya Pradesh, and the proposed sector reforms presented in the associated matrix has the approval of GOMP. Additionally, it was confirmed that GOMP had issued Orders to: Change pricing policy so that: in rural areas less than 5km from the forest MPFD would charge no more than 50 percent of the market price; in all other rural areas and urban areas of more than 10,000 population, full market prices would be charged; Abolish transit regulations for 31 species of importance for farm forestry, and provide for panchayats to issue transit passes for other species, with the exception of nationalized species, which remain under the control of MPFD; Amend the Government Regulation on Joint Forest Management in accordance with the draft prepared by MPFD, June, 1994, to ensure the representation of women and landless in the village committees; Phase out MPFD industrial supply contracts by June 30, 1997; Establish SFRI as an autonomous institution. 5.2 It would be a condition of project effectiveness that all necessary actions for removing restrictions on felling of trees on private land would be taken. It would also be a condition of project effectiveness that a contract based on terms of reference agreed with IDA, would be agreed with consultants, acceptable to IDA, to assist with the proposed review of the management of the sector. Assurances were obtained at negotiations that the review would be completed by June 30, 1996, its findings discussed  41 with IDA, and agreed modifications to management procedures and structures implemented not later than June 30, 1997. B. Project Organization and Management l Project Coordination Committees Annex 18 5.3 Project Steering Committee. A Project Steering Committee would be established under the Chairmanship of the Secretary of Forests. The Project Director would be Member Secretary, and members would include the PCCF, CCFs Development, Social Forestry, and Wildlife, Director FDC, and representatives of the Departments of Planning, Finance, Tribal Development, Agriculture, Horticulture, Animal Husbandry, Rural Development and Rural Industries. The committee would meet bi-annually. Assurances were obtained at negotiations that the Project Steering Committee had been established. Details of the membership and functions of this and other project committees and working groups are presented in Annex 18. 5.4 Regional Project Coordination Committees. These committees would be established for each Territorial Circle and would be chaired by the Commissioner of the region. The CF (HQ) Territorial would be Member Secretary and members would include the CFs Territorial, Wildlife, Working Plans, Regional Manager FDC, and representatives of the Departments of Tribal Development, Agriculture, Horticulture, Animal Husbandry and the District Rural Development Agency. The Committee would meet biannually, or more frequently if the membership agrees this to be necessary. 5.5 District Project Coordination Committees. These committees would be chaired by the Collector and the Territorial DFO (HQ) would be the Member Secretary. Other members would be all other DFOs in the district and district level representatives of the departments involved in the Regional Committees, together with representatives of other departments as necessary. Regional and District Project Coordination Committees would be established for areas as project activities are initiated and would meet biannually. [0 Responsibilities are identified according to the present structure of MPFD. Changes will result from the planned review and development of the management of the sector.  42 Project Implementation Responsibilities Annex 18. 5.6 Project Unit. MPFD would be the main implementing agency for the project under the overall leadership of the Principal Chief Conservator of Forests. A Project Unit (PU) would be established, headed by a CCF, assisted by a small staff. Assurances were obtained at negotiations that the PU had been established and that the CCF (PU), the CFs (Project Planning) and (PME) and the DCFs responsible for human resource development and procurement in the PU had been appointed. Other staff of the PU would be appointed and in post by July 31, 1995. The PU would be responsible for coordination of all project-financed activities, in accordance with the summary implementation schedule presented in Annex 19. The project is, however, designed to ensure that project activities are integrated into the normal operations of the MPFD, and that the PU does not become a parallel operational structure. This is illustrated in Figure 3, showing the structure of the PU and linkages with other functional units of MPFD. These linkages would be reinforced by the creation of Departmental Technical Working Groups to ensure the technical quality of project-financed programs. The following Working Groups would be established: PME Working Group to review the development of improved PME procedures and ensure that such procedures are followed; Forest Development Technology Working Group to ensure that silvicultural practices are appropriate and kept up-to-date; VRDP Working Group to review VRDP plans approved by DFOs and provide a focus for exchange of experiences; Human Resource Development (HRD) Working Group to review the development of an HRD plan and approve annual training plans; and the Conservation of Biodiversity Working Group to review PA Management Plans and the development of the PA network. Further details of the responsibilities and composition of these Working Groups are presented in Annex 18. 5.7 The PU would be responsible for the preparation of annual Project Implementation Plans (PIP). Assurances were obtained at negotiations that the PU would, by each December 31, starting December 31, 1995, prepare in consultation with IDA a PIP for the following financial year. However, for the first year of the project the PIP would be prepared not later than July 31, 1995. The PU would coordinate the recruitment of consultants and the commissioning of special studies. The PU would also be responsible for project-related procurement and accounting and would be the main contact for project supervision by the World Bank.  43 Management Development 5.8 Sector Management. In addition to project support for the consultancy to assist with the review of the management of the sector (Para. 5.2), an important focus of this sub-component would be management training and this would be arranged through the PU as discussed in Para. 5.10. The Policy Analysis Unit (PAU) reporting directly to the PCCF, would be responsible for commissioning policy studies. Assurances were obtained at negotiations that the PAU, headed by a CF, would be established by December 31, 1995, with staffing and responsibilities agreed with IDA. Four studies are of particular importance: the role of MPFD in the collection and marketing of NTFP, particularly tendu leaves; and the economic and environmental effects of the restrictions on clear felling, on the introduction of exotic species, and on private investment in forest lands. 5.9 Planning Monitoring and Evaluation. Overall responsibility for the Planning Monitoring and Evaluation (PME) activities would rest with the CCF Working Plans. At headquarters, the PME Unit would form a nodal point for system development, the provision of technical advice, quality control and coordination of training. Changes in management of the sector for implementation of the agreed strategy would require changes in the approach to monitoring and evaluation to ensure that these functions become an integral part of the planning and implementation of the work of MPFD. The flow of information is illustrated in Figure 2 and discussed in Annexes 7 and 9, in which a preliminary list of indicators to be monitored is presented. These, together with monitoring and evaluation procedures, and the development of improved procedures where necessary, would be reviewed as an integral part of the overall management review referred to above. The design of PME systems and the choice of hardware and appropriate software would be dependent on the PME procedures developed and no new systems would be introduced until the completion of the review. 5.10 Human Resource Development (HRD). Although there is no separate project component for human resource development, it is an extremely important aspect of the project, with substantial funding in each component allocated to staff training. The responsibility for coordinating the selection of staff to be trained, identifying suitable training institutions or courses, and ensuring timely placement would lie with the PU, specifically with the DCF (HRD). It was confirmed at negotiations that a training plan for the first year of the project had been prepared and agreed with IDA. Assurances were  44 obtained at negotiations that annual training plans, acceptable to IDA, would be prepared not later than July 31 of each year, starting July 31, 1995, in order to ensure placement of students in academic institutions in the following October. In addition, a Human Resource Development Plan, setting out a staffing policy linked to proposed changes in the management system would be completed and reviewed with IDA by June 30, 1996. The HRD Plan would take account of any necessary reviews of curricula at forest colleges ". The costs of overseas training include funds for student placement services, to facilitate timely placement of students in appropriate courses. Assurances were obtained at negotiations that a contract for placement and support of overseas trainees, with an institution acceptable to IDA, would be agreed by July 31, 1995. Forest Development 5.11 Natural Forest Regeneration. Responsibility for implementation of this component would lie with the Territorial Wing of MPFD. Areas treated under the project would be identified according to coup number. The DFO would be responsible for an assessment of the initial status of the area, and ensuring that treatments are linked to ecotype, that appropriate silvicultural practices are employed, and that data to monitor growth and productivity are collected regularly. 5.12 Village Resource Development. Annex 5. Implementation of this component would be through the Territorial Wing of MPFD. In each Circle, the CF would have overall responsibility for the program. At the Divisional level, the DFO would take a lead role in developing the participatory approach, by building divisional teams across the hierarchical structure of the MPFD. He would also, through the operation of the District Project Implementation Committee, ensure coordination with other government agencies. The VRDP Planning Team, that would include women recruited through NGOs or other institutions, would provide introductory courses and practical on-the-job training in the principles and practice of participatory village planning and program implementation to Rangers, Foresters and Forest Guards within the Division. Once trained, these staff would play a continuing advisory role within the community, with a major responsibility for timely and appropriate implementation of the agreed plan. At the community level, responsibility would lie with the village Forest Protection Committee (FPC), which "1 A review of curricula in forest colleges is presently being undertaken by GOI.  45 includes representatives from every household in the village, and more specifically, with the members of the Village Executive Committee. The VRDP Departmental Working Group would have a key role in ensuring consistency of approach in various parts of the state. The PU, specifically the CF Project Planning would monitor micro-plans and expenditures and would be a focal point to ensure that the concerns of tribal peoples are adequately addressed. 5.13 Assurances were obtained at negotiations that implementation of the program under the project would be in accordance with procedures and criteria agreed with IDA and that the first three proposals for funding under the VRDP would be submitted to IDA for approval. Agreed procedures and criteria are summarized in Annex 5. In particular: An integrated plan for both the village area and the surrounding forest used by the community would be prepared by the community with the assistance of trained staff, using Participatory Rural Appraisal (PRA) techniques. It would be targeted to meet the needs of the principal users of the forest resource; A formal Memorandum of Understanding between the VFC and MPFD endorsing the agreed VRDP plan would be finalized, prior to the start of implementation of the village program; The amount of investment available to the village would be linked to the cost of protecting the forest in the absence of community participation in their protection and management. An explanation of the way in which the amount of the investment to be made available to a village has been calculated, mechanisms for its management at government and community levels, and criteria for the types of investments to be financed are presented in Annex 5. It was agreed at negotiations that the implementation of the VRDP would be in accordance with procedures and criteria agreed with IDA, and that the first three proposals for funding under the VRDP would be submitted to IDA for approval.  46 An independent review of the program would be undertaken in Project Year 3, against the criteria presented in Annex 5. If the criteria are not met, project funds would be reallocated to other forestry activities within the state. 5.14 Non-Governmental Organizations (NGOs) could make a major contribution to the implementation of the VRDP, and the Ecodevelopment Program, as many NGOs have experience of participatory processes. Suitably experienced NGOs would be sought to assist with the orientation and training of MPFD staff and with the implementation of village level programs. It was confirmed at negotiations that suitable institutions or NGOs had been identified to: assist with VRDP workshops for the orientation of senior MPFD staff; wherever possible, to provide women staff to work in VRDP Planning Teams; and to provide training in PRA and other necessary skills, to members of the Divisional VRDP Planning Teams during the project. Technology, Extension and Research 5.15 R&E Service Centers. The centers would be established to provide supporting facilities and services to research, technology improvement, and extension programs. Each of the service centers would be managed by a DFO under the coordination of the CCF (Social Forestry), though for daily operational matters reporting to the CF in charge of the relevant Territorial Circle. Technical advice and supervision would be provided by SFRI. 5.16 Extension. Coordination of the extension program would be the responsibility of the CCF (Social Forestry). Implementation of the extension programs would be the responsibility of the DFO in 40 selected priority Divisions. The Industrial Liaison Unit would report directly to the CCF (Industries). Assurances were obtained at negotiations that the ILU would be established by December 31, 1995, headed by a CF with staffing and responsibilities agreed with IDA. 5.17 Seed Improvement. Planning and technical supervision of the seed improvement program would be the responsibility of the Seed Technologist and Tree Improvement Specialists in SFRI. Implementation of the program in the field would be undertaken at the E&R Service Centers and Range Officers would have specific responsibility for  47 operations, under the guidance of the DFOs in charge of the Centers. Assurances would were obtained at negotiations that consultants to assist with the development of the seed improvement program would be recruited by December 31, 1995, with terms of reference agreed with IDA. 5.18 Nursery Demonstrations. SFRI would coordinate the development of demonstration nurseries at each of the E&R Service Centers. As with the seed improvement program, field operations would be under the charge of the DFOs and a specially trained Range Officer would be appointed, with responsibility for day-to-day operations. Assurances were obtained at negotiations that consultants to assist with the development of the nurseries would be recruited by December 31, 1995, with terms of reference agreed with IDA. 5.19 Applied Research. Responsibility for research would rest with the Director, SFRI. Applied research trials undertaken at E&R Service Centers would be supervised by the DFOs in charge of the Centers, but their design and interpretation would be an SFRI responsibility. Assurances were obtained at negotiations that by December 31, 1995: SFRI would be established as an autonomous agency with objectives and responsibilities agreed with IDA; the Research Advisory Committee would be established with a membership agreed with IDA, as presented in Annex 18; research posts at SFRI for a tree improvement specialist and a seed technologist would be filled; and that consultants to assist with the development of a research strategy would be recruited. Assurances were also obtained at negotiations that the objectives and terms of reference for contract research would be agreed with IDA, not later than June 30, 1997. Biodiversity Conservation. Annex 6 5.20 PA Management. Overall responsibility for this component would lie with the CCF(WL). Five CFs (Wildlife) would coordinate the preparation of management plans for each of the PAs in their respective zones, providing assistance to the responsible PA managers through the zonal PA Management Planning Teams. The CFs (Wildlife) would also be responsible for monitoring and evaluation activities within the zone, for the identification and survey of links in the proposed PA network, and for preparation of plans for management of the various types of land in these links. The managers of each of the priority PAs supported through the project would be responsible for  48 implementation. Assurances were obtained at negotiations that the five CFs (Wildlife) would be appointed no later than September 30, 1995. The management of contract research on biodiversity and aspects of PA management would be the responsibility of a Wildlife Research Coordinator, to be appointed in SFRI. Research programs would be decided by a Sub-Committee of the SFRI Research Advisory Committee. Assurances were obtained at negotiations that the coordinator would be appointed no later than December 31, 1995. 5.21 Assurances were obtained at negotiations that there would be no involuntary relocation of communities resident within PAs. Any proposals for relocation would be preceded by a study of the impact of the resident communities on the conservation of biodiversity. All proposals would be consistent with GOI provisions and would be agreed with IDA in the light of the recommendations of the Bank's Operational Directives 4.20 (Indigenous People) and 4.30 (Involuntary Settlement). The main recommendations are summarized in Appendix 3, Annex 6. In addition, an independent monitoring program would be established. 5.22 Ecodevelopment. Activities financed under this component in areas peripheral to PAs would be the responsibility of the PA manager. Assurances were obtained at negotiations that: areas which impact on the PAs would be identified on the basis of criteria agreed with IDA; PA managers would have the responsibility and sufficient staff to undertake ecodevelopment programs in these areas; at least two trained Ecodevelopment Planning Teams would be appointed not later than September 30, 1995; and that responsibilities are defined to avoid duplication of the work of Territorial staff. Assurances were obtained at negotiations that implementation of the ecodevelopment program under the project would be in accordance with procedures agreed with IDA and summarized in Annex 6, that presents details of the approach to ecodevelopment, participatory village level planning, and the management of the Ecodevelopment Support Fund. Proposals for funding would be selected in accordance with criteria agreed with IDA. It was also agreed at negotiations that the first three proposals for funding under the EDSF would be submitted to IDA for approval.  49 C. Project Supervision 5.23 Project Supervision would be closely linked to the implementation schedule discussed above and would involve monitoring a number of key indicators. Details of the timing of supervision missions, the key indicators and the skills that are likely to be needed for supervision are presented in Annex 20. There would be two missions during each year of the project, and the first mission would correspond with a project launching workshop, to provide assistance during the critical start-up period. Subsequently, the main supervision mission would coincide with the review of annual plans for the various project activities, taking place early in the fourth quarter of each year. In the second year of the project this main mission would coincide with a project review. There would be one additional supervision mission in the second quarter of each year. In addition to the usual indicators of physical and financial progress, which are related to the implementation and disbursement schedules and to the detailed cost tables, supervision would monitor key indicators of development impact in relation to the primary management objectives for the sector, as discussed in Chapter 2. MPFD staff, in particular, PU staff responsible for monitoring and evaluation, would play a key role in these supervision activities. Supervision missions would also monitor the planning and implementation of ecodevelopment programs and PA management, assessing the need for the application of the requirements of relevant Bank Operational Directives (Para 3.41). E. Reporting, Mid-Term and Completion Reviews. 5.24 The PU would be responsible for preparing six-monthly progress reports to be submitted not later than January 31 and July 31 of each year for the preceding six months, in the format presented in Annex 15. It was agreed at negotiations that no later than December 31, 1997, a project review would be held and the recommendations of the review would thereafter be implemented. The review would involve MPFD and IDA and would establish progress towards the main project objectives and not merely an inventory of disbursements. To this end, the review would focus on the key indicators presented in Annex 20, though the more detailed monitoring and evaluation data (See Annex 9) would also be utilized. The review would pay particular attention to changes in the approach of MPFD to the management of the sector and to the success of human resource development programs. Another important aspect would be the impact of VRDP and EDP on the condition of forest lands and PAs and the socio-economic conditions of  50 participating communities. The operation and management of supporting funds would be closely examined by the review team. Successful operation of the monitoring and evaluation system would be an important input to the review. To facilitate the review, the PU would take the lead in the preparation of project status reports. The reports would be distributed to all participants four weeks prior to the start of the reviews. 5.25 The project completion report would focus on the achievements of the project and its impact in relation to its objectives. In particular, consideration would be given to the development impact of the project, and changes in the management of the sector. In the light of the findings, recommendations would be made for future development of the forestry sector in Madhya Pradesh. The report would also examine the successes and shortcomings of the VRDP and EDP and make recommendations as to how the programs could be improved. Terms of reference for the review team and its composition would be agreed with IDA, and the report submitted to IDA no later than six months after completion of the project.   51 VI. PROJECT BENEFITS AND JUSTIFICATION A. Benefits 6.1 The project would increase, directly or indirectly, the production of wood, NTFP, and animal products which would benefit the rural poor and improve the supply of wood to forest-based industries. The project would support a program of assisted natural regeneration in about 165,000 ha of forest. Some 1,140 village communities, of which a very high percentage would be tribal peoples, would receive direct benefits from the project, managing about 75,000 ha of forest. The benefits include not only the improved access for communities to forest products, but also the benefits of improved agriculture and alternative income generating activities generated through the VRDP. The project would have important benefits in terms of equity, discussed in more detail in Annex 5, as about 18.3 million person-days of employment would be generated, a benefit which would be almost wholly captured by the poorest and landless households. Processors and marketers of wood and NTFPs would also benefit through increased supply of raw material. B. Economic and Sensitivity Analysis 6.2 The direct and quantifiable economic costs and benefits of the project are mainly due to investments in both closed and open forests. Consequently, a time horizon of 135 years was used in the analysis, to reflect the long cycle of forest growth, and to be consistent with one of the environmental objectives of the project, that is, to conserve and increase the stock of natural capital for future generations to use for economic purposes. The Rate of Return (ERR) for the project as a whole, in terms of direct forestry outputs, and excluding the biodiversity and research components, is estimated at 11.5 percent. In order to conform with more traditional project analyses, an ERR was also calculated over a 45 year horizon, giving and ERR of 11 percent. The ERR is less than the current Opportunity Cost of Capital (OCC) in India of 12 percent. However, this understates project benefits, as indirect and environmental benefits have not been included. A relatively small stream of environmental benefits would be sufficient to surpass the 12 percent threshold, as discussed later in this chapter. The project ERR is quite insensitive to variations in the costs and benefits: a 25 percent increase in costs and a 25 percent decrease in incremental benefits reduces the ERR to 10.4 percent. The ERR for each  52 component is sensitive to the shadow wage rate, with a switching value of Rs. 15 per day for the overall project. The analysis is highly sensitive to assumptions about existing productivity and land use, that is, the without-project situation. The analysis is discussed in Annex 21 and detailed in Working Paper 6 (Annex 24). C. Financial Analysis 6.3 Financial benefits to the communities arise from the VRDP, including the benefits of joint forest management and the benefits derived from improved village infrastructure and alternative income generating activities, financed from the VRDP Fund. Under joint forest management arrangements, benefit sharing between communities and government is based on the Government Order (See Para. 1.26). At the community level, the incentive to participate depends on the assumptions made about existing land-use and its productivity. Financial analysis was undertaken for those models involving JFM and on the basis of these models, there is a positive overall benefit flow from year 1. The rate of return to the community, after phasing activities over 7 years, is high (60%) with a negative cash-flow only in year 1. Incremental benefits in year 2 exceed foregone benefits in year 1. The silvi-pasture model requires 2 years before achieving a positive cash-flow. 6.4 Farm forestry is market oriented so that farmers would make their own choices as to whether to grow trees. In addition to direct financial returns, the farmers' decision is affected by factors such as labor availability and management. Consequently, direct analysis of the costs and benefits is unlikely to capture the decision-making process for these farmers. However, the models developed for the economic analysis, based on relatively poor quality land, show relatively high FRRs, and even on good land where the alternative uses of land are more attractive, the FRR remains at more than 12 percent. D. Environmental Effects 6.5 An environmental review undertaken during project appraisal is presented in Annex 22. The review concluded that the project would have beneficial effects on the environment and all project activities would have very low environmental impact potentials. The project addresses many of the priorities in the India Environmental Action Programme, 1993. Specifically, conservation and sustainable utilization of biodiversity in  53 selected ecosystems, including conservation of endangered plant and animal species and critical habitats; afforestation, based on community participation in forest protection and management in watershed and other areas; wasteland development involving private and community tree planting; and soil and water conservation. Other environmental benefits may include CO2 absorption, river flow regulation, and meso-climatic and other effects. 6.6 The benefits to be attributed to these externalities were calculated by means of an environmental premium, associated with each hectare included in the project, reflecting the flow of external benefits. Under the assumptions set out in Annex 21, the annual flow of environmental benefits required to obtain an Opportunity Cost of Capital (OCC) of 12 percent, the OCC for India, would need to be about Rs.376 (about US$12) per hectare per year. E. Impact on Women 6.7 Women are the predominant collectors of fodder, fuelwood and NTFPs and would benefit considerably from the project. The proposed JFM arrangements would significantly enhance the availability of many forest products that are collected to provide for household needs and secondary income. Effective participation of women in JFM arrangements would be critical to ensure sustained management of the resource. The project, therefore, includes a number of mechanisms ensuring the participation of women and the representation of their interests. These include: women would be full members of FPCs, encouraged by a change in rules allowing two members per household; village Executive Committees would include female representatives or a women's sub-committee would be established; criteria for selecting income generating activities to be supported under the VRDP would give priority to activities targeted at women; wherever possible VRDP Planning Teams would include a woman; VRDP training for MPFD staff, in particular for the VRDP Planning Teams, would include gender issues; MPFD would actively seek to increase the number of women on its staff; a coordinator for women's activities would be financed in support of the VRDP, until such time as MPFD can recruit a suitable woman.  54 F. Tribal Peoples Development Strategy 6.8 The population in and around the forests of Madhya Pradesh consists largely of tribal communities. Tribal groups would, therefore, be the main participants and beneficiaries in the VRDP and Ecodevelopment Program. Tribal development concerns are thus central to the project, and are addressed in an integral fashion under the rubric of social impact, participation, and equity, rather than as a subsidiary tribal development plan or component. Although tribal populations have in the past been bypassed by development efforts, experience with JFM in Madhya Pradesh has been encouraging, as the Forest Protection Commnittees functioning most effectively are those in tribal villages. Similar experiences have been noted in other states. This is probably mainly due to the social and economic homogeneity of tribal communities relative to non-tribal villages. 6.9 The project incorporates a number of activities and institutional mechanisms intended to ensure the appropriateness of project activities for tribal communities, taking account of their high level of dependence on the forest; and their effective participation. These include: giving the CF Project Planning in the PU special responsibility for tribal issues; including modules on tribal social structures and livelihood systems in the training of VRDP Planning Teams; participation of the Tribal Development Department in Project Coordination Committees at all levels. The Tribal Peoples Development Strategy is discussed further in Annex 23, together with details of specific activities, outline organization and management, and impact monitoring arrangements. G. Institutional Benefits 6.10 The project would foster a major change in the approach of MPFD to the management of the sector, resulting from a strategy based on cooperation with local communities, rather than on enforced protection. Implementation of this strategy would also require changes in planning, decentralization of authority, and the contribution of monitoring to revised implementation programs. The project would support any necessary institutional reorganization, and the development of improved procedures and information systems to facilitate the introduction of these changes. Policy changes associated with the strategy for the sector would provide greater incentives for private sector participation and project support for an Industrial Liaison Unit, and for a Policy Analysis Unit, would assist MPFD to encourage the contribution of private entrepreneurs to improved productivity in the forest sector. Arrangements for project coordination would also serve to create stronger linkages with other government agencies.  55 H. Project Risks 6.11 The main risks facing the project are: (i) the degree of commitment within GOMP to make the necessary policy and institutional changes that would be necessary for the implementation of the agreed strategy for the sector; (ii) the effectiveness of participatory arrangements for the management of forest resources; (iii) the ability of MPFD to provide the private sector with technological advice, in order to take advantage of a changed policy environment. The first risk is being addressed through agreement on a sectoral strategy with associated policy changes formalized through the issue of necessary Government Orders. In addition, as this four-year project forms the first stage of a planned phased approach to sectoral development, it provides a means for GOMP to demonstrate commitment to change. The project would minimize the second risk through an intensive program of training for staff in the principles and practice of participatory forest management, through building links with NGOs and other government departments involved in village development, and by rigolous monitoring and evaluation of the program. Project support for forest extension programs, research programs targeted on the needs of producers, and the creation of an Industrial Liaison Unit within MPFD would reduce the third type of risk associated with the project.   56 VII. ASSURANCES AND RECOMMENDATION Assurances 7.1 Conditions of Project Effectiveness (a) All necessary actions for removing restrictions on felling of trees on private land would be taken (Para 5.2); (b) A contract based on terms of reference agreed with IDA, would be agreed with consultants, acceptable to IDA, to assist with the proposed review of the management of the sector (Para. 5.2); 7.2 Other Assurances (a) Procurement plans would be in accordance with the Procurement Schedule presented in Annex 15 and that standard procurement documents as already agreed with GOI would be used. Progress with procurement would be reported in the agreed format in the six-monthly project progress report (Para. 4.15); (b) GOMP would implement a system satisfactory to IDA for channelling the funds required for carrying out the project (Para. 4.18); (c) MPFD would maintain separate project accounts, which together with the Special Account to be established by GOI, would be subject to annual audit (Para. 4.19); (d) The consultancy to assist with the review of the management of the sector would be completed by June 30, 1996, its findings discussed with IDA, and agreed modifications to management procedures and structures implemented not later than June 30, 1997 (Para. 5.2);  57 (e) All staff of the PU would be appointed and in post by July 31, 1995 (Para. 5.6). The PAU and the ILU would be established by December 31, 1995, each headed by a CF, and with staffing and responsibilities agreed with IDA (Paras. 5.8 and 5.16); (f) The PU would, by each December 31, starting December 31, 1995, prepare in consultation with IDA a Project Implementation Plan (PIP) for the following financial year. However, for the first year of the project the PIP would be prepared not later than July 31, 1995 (Para. 5.7); (g) A Human Resource Development Plan for MPFD linked to proposed changes in the management system, would be developed and reviewed with IDA by June 30, 1996. In addition, an annual training plan would be prepared not later than July 31 of each year, starting July 31, 1995 (Para. 5.10). A contract for the placement and support of trainees in overseas establishments, would be agreed with an institution acceptable to IDA by July 31, 1995 (Para. 5.10); (h) Implementation of the VRDP would be in accordance with procedures and criteria agreed with IDA. The first three proposals for funding under the VRDP would be submitted to IDA for approval (Para. 5.13); (i) Seed and nursery specialists would be recruited not later than December 31, 1995 with terms of reference agreed with IDA (Paras. 5.17, 5.18); () By December 31, 1995: SFRI would be established as an autonomous agency with objectives and responsibilities agreed with IDA; the Research Advisory Committee would be reconstituted with a membership as agreed with IDA; research posts at SFRI for a tree improvement specialist and a seed technologist would be filled; and that consultants to assist with the  58 development of a research strategy would be recruited (para. 5.19). The objectives and terms of reference for contract research would be agreed with IDA not later than June 30, 1997 (Para. 5.19); (k) There would be no involuntary relocation of communities resident within PAs, and any proposals for relocation would be preceded by an independent study to assess the impact of the communities on the conservation of biodiversity. All proposals would be consistent with GOI provisions and would be agreed with IDA in the light of the Bank's OD 4.20 and OD 4.30. In addition, an independent monitoring program established (Para. 5.21); (1) The five CFs (Wildlife) would be appointed no later than Septernber 30, 1995 and the coordinator for wildlife research would be appointed in SFRI no later than December 31, 1995 (Para. 5.20). Areas which impact on PAs would be identified on the basis of criteria agreed with IDA; PA managers would have the responsibility and sufficient staff to undertake ecodevelopment programs in these areas; at least two trained Ecodevelopment Planning Teams would be appointed not later than September 30, 1995; and that responsibilities are defined to avoid duplication of the work of Territorial staff (Para. 5.22); (m) Implementation of the ecodevelopment program would be in accordance with procedures agreed with IDA. Proposals for funding would be selected in accordance with criteria agreed with IDA. The first three proposals for funding under the Ecodevelopment Support Fund would be submitted to IDA for approval (Para. 5.22); (n) Not later than December 31, 1997, a project review would be held and the recommendations of the review would be thereafter implemented (Para. 5.24).  59 7.3 An understanding would be reached that GOI would release about three months anticipated project expenditure in advance to GOMP. Upon receipt of funds from GOI, GOMP will immediately transfer such funds, together with quarterly counterpart contributions, to the project accounts maintained by MPFD (Para. 4.18). Similarly, it would be agreed that six-monthly progress reports would be prepared in a format agreed with IDA (Para. 5.24). Recommendation 7.4 With the above assurances, the proposed project would be suitable for an IDA Credit of SDR 39.4 million (US$58.0 million equivalent) on standard IDA terms with 35 years maturity. February, 1995 South Asia Department 2 Agricultural Operations Division  0 #~~~~~~~~~~~~~ Work ing -------- CF Plan Teff. Circle -Teams (22) -------------------------------- (22) ____________. Teffitorial fl ~~~~MIS/GIS X ___ Unit 5 1 # Fo~~~rest Divislional 0~~,___ Deparennt Forest Activities OfficeWs (79) . . . . . . . . . . . . Divisvities Administrative s:ructure - - - - --Informnation Linkage FIGURE 2. Planning, Monitoring and Evaluation. Structure and linkages.  CC WL - -- -- -- -- -- -- --- L,W I ZONAL I |CFs TERR --------------- CFL I~~~~~~~~__ I PROJECT PLANNING |CCF ADMi ------------------------ DCF HRD r---------------- DCF CCLP , - VRDP r CCF PU |CCF DEVT ----- - -----______------- DCF ADNIIN | CC WP-------r--------------- DC ---100038;XL |ALL CCF ---- |CFsFTERR| Direct Responsibility -------- Coordination FIGURE 3. Project Unit. Structure and linkages.  CCF CCF CCF IN1D SF DEVT 9 9 ~~~~~~~~~~~~CF --____------ --S---- - LTERR 0 0 9 DFO~~~~~~F DFO -------- --~~~~~ TER E&R ServiceEo Center Applied Research 9 Seed 9 Improvement 0 Nursery Demo 9 Demos Direct Responsibility 9 ------- Technical Advisory ________ _ FF - Extension Programs - VRD _J FIGURE 4. Extension, Technology and Research. Structure and linkages.   Annex I Page I of 3 INDIA MADHYA PRADESH FORESTRY PROJECT Natural and Human Resources Natural Resources 1. Area and Physiography. The geographical area of the state is 443,000 km2. It lies mainly on the central Indian tableland with altitude ranging from 50 m to about 1,400 m above mean sea level. The topography is strongly influenced by the underlying geology, in which basalts predominate, giving rise to large well defined plains, interrupted by undulating areas and deeply incised rivers in hilly areas. The state can be divided into five physiogrpahic regions: (i) the Gird region to the north and north east of Gwalior; (ii) the Malwa Plateau between the Vindhyan ranges and the area to the south of Gwalior; (iii) the Satpura ridge stretching across the state from the Maikal range in the east towards Nimar in the West; (iv) the Narmada valley, an area of gently undulating plains bounded by the Vindhyan Hills in the north and the Satpura range to the south; (v) the Chhatisgarh Plains lying to the east of the Satpurs Range. 2. Climate. Mean annual rainfall in the State varies between about 700 mm in the west to about 1,500 mm in the east and south east. Almost 90 percent of precipitation falls in the period June through September. Daily maximum temperatures exceed 40