Nepal - Irrigation Sector Project

Document of The World Bank Report No. 17104-NEP NEPAL PROJECT APPRAISAL DOCUMENT NEPAL IRRIGATION SECTOR PROJECT October 20, 1997 Rural Development Sector Unit South Asia Region  CURRENCY EOUIVALENTS US$1 = Nepalese Rupees (Nrs) 56.0 (at 1996-97) BORROWER'S FISCAL YEAR July 16-July 15 WEIGHTS AND MEASURES The metric system is used throughout the report ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank ADBN Agricultural Development Bank of Nepal AREP Agricultural Research and Extension Project CAS Country Assistance Strategy CBO Community Based Organization DAC District Appraisal Committee DDC District Development Committee DG Director General DHM Department of Hydrology and Meteorology DIO District Irrigation Office DOA Department of Agriculture DOI Department of Irrigation EIA Environmental Impact Assessment ERR Economic Rate of Return FMIS Farmer-Managed Irrigation Scheme HMGN His Majesty's Government of Nepal HYV High-Yielding Variety IDS Institutional Development Support ILC Irrigation Line of Credit IP Irrigation Policy MIT Mobile Irrigation Team M&E Monitoring and Evaluation MOA Ministry of Agriculture MOWR Ministry of Water Resources NGO Non-Governmental Organization NISP Nepal Irrigation Sector Project NPC National Planning Commission NSC National Steering Committee NWDC National Water Development Council NWPU National Water Planning Unit O&M Operation and Maintenance PAU Project Accounts Unit PCCC Project Central Coordination Committee PCO Project Coordination Office PEPHI Participatory Environmental Protection in Hill Irrigation Scheme PIC Project Implementation Committee PIU Project Implementation Unit PJM Participatory Joint Management RAAC Regional Appraisal and Approval Committee RID Regional Irrigation Directorate SIFT System Improvement and Farmer Turnover SMIP Sunsari Morang Irrigation Project TIU Tertiary Irrigation Unit TOR Terms of Reference VDC Village Development Committee WECS Water and Energy Commission Secretariat WUA Water Users' Association WUG Water Users' Groups Vice-President: - Mieko Nishimizu Country Director: - Hans M. Rothenbuhler Sector Managers: - Michael Baxter and Ridwan Ali Task Team Leader: - Ohn Myint  NEPAL NEPAL IRRIGATION SECTOR PROJECT PROJECT APPRAISAL DOCUMENT CONTENTS Project Financing Data ......................................................................I Block 1: Project Description ......................................................................2 1. Project Development Objectives ......................................................................2 2. Project Components .....................................................................2 3. Benefits and Target Population ......................................................................6 4. Institutional and implementation Arrangements ......................................................................7 Block 2: Project Rationale ...................................................................... 11 5. CAS Objectives Supported by the Project ..................................................................... 11 6. Main Sector Issues and Government Strategy ..................................................................... 12 7. Sector Issues to be Addressed by the Project and Strategic Choices .................................................. 12 8. Project Alternatives Considered and Reasons for Rejection .............................................................. 13 9. Major Related Projects Financed by the Bank and/or Other Development Agencies ........................ 14 10. Lessons Learned and Reflected in Proposed Project Design ............................................................. 15 11. Indicators of Borrower Commitment and Ownership ..................................................................... 16 12. Value Added of Bank Support ..................................................................... 16 Block 3: Summary Project Assessment ..................................................................... 17 13. Economic Assessment ..................................................................... 17 14. FinancialAssessment ...................................................................... 19 15. Technical Assessment ..................................................................... 19 16. Institutional Assessment ..................................................................... 20 17. Social Assessment ...................................................................... 20 18. Environmental Assessment ..................................................................... 21 19. Participatoly Approach ..................................................................... 21 20. Sustainability ...................................................................... 21 21. Critical Risks ...................................................................... 22 22. Possible Controversial Aspects ..................................................................... 23 Block 4: Main Loan Conditions ...................................................................... 23 23. Effectiveness Conditions ..................................................................... 23 24. Other ...................................................................... 23 Block 5: Compliance with Bank Policies ..................................................................... 24 Annexes Annex 1 Project Design Summary ..................................................................... 25 Annex 2* Detailed Project Description ..................................................................... 28 Annex 3* Estimated Project Costs ...................................................................... 64 Annex 4* Cost Effectiveness Analysis Summary ..................................................................... 83 Annex 5* Financial Summary ...................................................................... 94 Annex 6* Procurement and Disbursement Arrangements ..................................................................... 95 Annex 7 Project Processing Budget and Schedule ..................................................................... 101 Annex 8 Documents in the Project Files ..................................................................... 102 Annex 9 Status of Bank Group Operations in Nepal ..................................................................... 103 Annex 10 Country at a Glance ...................................................................... 105 * More details available in Project Implementation Volume - Annexes to PAD   Project Appraisal Document Page 1 Country - Nepal Nepal Irrigation Sector Project INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION South Asia Regional Office Country Department 2 Project Appraisal Document Nepal Irrigation Sector Project Date: October 17, 1997 []Draft [XI |Final Task Manager: Ohn Myint Country Director: Hans M. Rothenbuhler Project ID: NP-PE-10530 Sector: Rural Development Lending Instrument: Specific Investment Loan PTI: [X] Yes []No Project Financing Data [ Loan [X] Credit [ Guarantee [] Other[Specify] For Loans/Credits/Others: Amount (US$m/SDRm): US$ 79.77 million/SDR 58.7 million oposed Terms: [X] Multicurrency [ Single currency Grace period (years): 10 [] Standard [] Fixed [] LIBOR-based Variable Years to maturity: 40 Commitment fee: 0.5% Service charge: 0.75% Financing plan (US$m): Source Local Foreign Ttal Government 13.84 - 13.84 Beneficiary Farmers 9.41 - 9.41 IBRD/IDA 51.84 27.93 79.77 Cofinanciers Other (specify) .......I................................................................................................................................................................................................................................................. Borrower: His Majesty's Government of Nepal (HMGN) Guarantor: N/A Responsible agency(ies): Ministry of Finance, Ministry of Water Resources, Ministry of Agriculture, Ministry of Science and Technology Estimated disbursements (Bank FY/US$m): i998 1999 2000 2001 2002 2003 Annual 4.40 13.64 21.75 22.56 13.74 3.68 Cumulative 4.40 18.04 39.79 63.35 76.09 79.77 Expected effectiveness date: December 30, 1997 Closing date: June 30, 2002  Project Appraisal Document Page 2 Country -Nepal Nepal Irrigation Sector Project Block 1: Project Description 1. Project development objectives (see Annex 1 for key performance indicators): * To assist the Government in planning and utilizing its water resources in a harmonized, effective and sustainable manner. * To increase productivity and sustainability of irrigation systems on about 59,600 ha of land in the selected districts of the three Western and Eastern regions (based on the successful pilot experience in the Irrigation Line of Credit). 2. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The proposed Nepal Irrigation Sector Project (NISP) comprises three major components: (a) finalization of an on- going Comprehensive Water Resources Strategy and formulation of a Consolidated Water Policy; (b) implementation of a first-time slice of a long-term irrigation sector investment in private and public irrigation schemes covering about 59,600 ha; and (c) institutional strengthening to support the Government's new focus on carrying out the progressive turnover of operation and maintenance (O&M) responsibilities to user organizations, and on strengthening its technical and institutional capacity in water data collection, planning and management of irrigated agriculture. The project components are summarized as follows. A. Comprehensive Water Resources Strategy and Consolidated Water Policy (KISS 1.43 M. Balanced development of water resources requires a comprehensive and integrated multi-disciplinary approach. In Nepal, water resources from each river basin are utilized by the various agricultural, domestic, and industrial users without any special attention to river basin water availability and quality. Similarly, the planning of water resources has been addressed in a fragmented manner by different government organizations who, so far, have failed to address the full complexity and connectivity associated with water resources development. Realizing the need for a holistic approach to water resources development, HMGN has recently initiated the preparation of a Comprehensive Water Resources Strategy which is to lead to the formulation of a Consolidated Water Policy. The effort is led by a National Steering Committee (NSC) in which all concerned ministries are represented. This component includes the completion of the preparation of a Strategy, which is ongoing, and formulation of a Consolidated Water Policy along with institutional support for the establishment of a National Water Planning Unit (NWP1U). Formulation of a Comprehensive Water Strategy and Consolidated Policy (US$ 1.32 million). This component will finance technical assistance for the implementation of Phase-II of the Study: (a) Phase I was completed as part of NISP preparation and was financed from the project preparation fund. The objective was to (i) assess Nepal's water resources potentials, (ii) identify the major issues affecting water resources utilization and development, (iii) estimate the opportunities and potentialities for development, and (iv) define the national goals and principles required for the formulation of a Comprehensive Strategy leading to an integrated Consolidated Water Policy. Phase I report was discussed in mid-April 1997 at a public forum to obtain a consensus on the prioritization of development issues and follow-up actions. The consolidated Phase I report was submitted to the Bank prior to appraisal. The final report includes proposals and terms of reference for the formulation of Phase II. (b) Phase II is to (i) address the issues, (ii) prioritize the practical options, and (iii) recommend a comprehensive strategy for implementing the optimal development of Nepal's water resources. The strategy will review all existing policies, acts, and regulations on hydropower, irrigation, urban and rural water supply, industrial waste water etc. to ensure their compatibility and consistency with the proposed strategy. It will also provide guidance to HMGN on development assistance requirements consistent with the strategy. Phase II will include inter alia, the formulation of a Consolidated Water Policy, leading to the preparation of a National Water Resources Development Plan, and a Water Related Environmental Management Plan for the short, medium, and long terms.  Project Appraisal Document Page 3 Country - Nepal Nepal Irrigation Sector Project The project will assist HMGN in implementing the preparation of Phase II Strategy and the formulation of the Consolidated Water Policy. In view of the importance of this policy, endorsement of the development issues identified in the Phase I study and commitment for implementing the Phase II were obtained from the Government at appraisal. The formulation of the Water Resources Strategy is expected to be completed during the third year of the project. The draft outline of the Phase II strategy formulation submitted by HMGN is shown in Annex 2 Attachment 1. HMGN would have the prerogative to finance this component of the Credit with any bilateral grant or aid funds if they become available prior to or in the course of project implementation. This component would also finance (i) the review of HMGN's subsidy policy in irrigation development investment with a view to its gradual reduction over time, and (ii) the review of O&M requirements in different public irrigation systems and the associated water charges to cover full O&M in light of joint management of the systems with beneficiary farmers. Institutional Support (US$ 0.11 M) will be provided to the Ministry of Water Resources (MOWR) and the National Planning Commission (NPC) to: (i) establish a NWPU at the central level, and (ii) procure supporting office equipment, technology, transport, and other facilities includingthe development of computerized management information systems and GIS for the Unit. B. Irrigation Sector Improvement and Development (USS 83.63 M). This component is to improve productivity and sustainability of irrigation on 59,600 ha in accordance with HMGN's Irrigation Policy (IP) of 1988 (and as amended in 1992 and 1997). The focus of the IP is to develop and improve the management of irrigation schemes based on the "demand driven" principles and on "participatory management ", which promote local initiatives and active participation of beneficiaries. The IP encourages creation of legalized Water User Associations (WUAs) in private and public irrigation schemes, and allow WUAs to involve in the design and construction of irrigation facilities and, thereafter, to take over for full or joint O&M upon completion. The feasibility of the IP in the private farmer managed irrigation schemes and in turnover schemes in some small public systems has been tested satisfactorily through a US$ 20 million pilot ILC program financed under two ongoing Bank-funded projects: the Mahakali Irrigation II Project (Cr. 1924) and Bhairawa Lumbini Groundwater Irrigation III Project (Cr. 2144). Likewise, the practicality of participatory joint management (PJM) between the project authority and WUAs in large public irrigation systems has been satisfactorily implemented under the completed Mahakali Irrigation I Project (MIP-I) (Cr. 1055) and the Sunsari Morang Irrigation Project Phase -II (SMIP-II) (Cr. 1814). In these joint management projects, portions of the larger system, i.e tertiary canal network (less than 1000 ha blocks), were successfully turned over to WUAs: 4,800 ha in MIP-I and 16,700 ha of SMIP- II. To date, more than 300 small and medium surface farmer irrigation schemes on about 33,250 ha, and 217 medium and deep tubewell schemes covering about 4,220 ha in 18 clusters have been implemented successfully under the ILC pilot program. Also, full turnovers of small and medium schemes to legalized WUAs have been achieved in 20 small and medium public schemes covering over 2,000 ha. Based on these successful experiences, NISP would continue financing viable private and public irrigation schemes on 59,600 ha as a first stand alone project. In accordance with the IP principles, private and public schemes would be considered eligible for funding under NISP only upon written applications of beneficiary farmers backed up by their financial contribution to investment costs. The "no payment-no project" policy would be applied. However, prior to financing, viability of each scheme would be tested based on specific technical, economic, social, and environmental criteria. The minimum farmers' contribution either in the form of labor or cash or both would be as prescribed in the IP (see Annex 2 Attachment 2). These contribution rates vary according to the: (i) type of schemes (private or public), (ii) kind of development (rehabilitation or new), (iii) source of water supply (surface or ground water), and (iv) the location of schemes (Hill or Terai). This component comprises three different types of schemes as follows: (a) Rehabilitation, Improvement and Development of Small and Medium Scale Farmer Managed Irrigation Schemes (FMIS) on 39.500 ha (US$ 38.81 M). There are over 20,000 FMIS in the country which, if taken  Project Appraisal Document Page 4 Country - Nepal Nepal Irrigation Sector Project individually, are too small to justify investment, but as a whole constitute about 70 percent of the nation's one million hectares of irrigated land. The project would finance about 39,500 ha of surface or groundwater small and medium sized FMIS located in the three Western Regions of Nepal (see Map 1). The participatory approach would be implemented through legalized WUAs formed at each FMIS of surface water and groundwater schemes. This sub-component would include: (i) Rehabilitation and Improvement of existing FMIS on 31.500 ha in the Hill and the Terai including temporary headworks and intake structures, main and secondary canals, and conveyance systems of viable FMIS. The existing rudimentary headworks and related structures for surface water schemes built by farmers are vulnerable to the destructive torrential rivers of Nepal. The temporary nature of these structures necessitates their replacement more than two or three times a year costing the farmers labor, time, materials, and at times loss of prime cropping season. In addition, make-shift nature of brushwood diversion and intake structures pose a threat to the environmental sustainability of the region. The rehabilitation works to be financed under the project are those beyond farmers' technical and financial capacity to implement on their own. (ii) Rehabilitation and Development of New Tubewell Schemes on 8,000 ha in the Terai. Most of the lower Terai areas is underlain by more than 450m of alluvial deposits of clean sand forming high yielding acquifer. Properly designed shallow tubewells to depths of about 40m or less, yield about 12- 15 I/sec with modest drawdowns. But experience in Nepal with individually owned shallow tubewells is comparatively less encouraging than group-owned shallow tubewells mainly because of small and scattered land holdings. Clustered type shallow tubewells of 10 ha/well has proven successful in ILC and would be continued under the sub-component. (b) System Improvement and Farmer Turnover in Public Irrigation Schemes on 20,100 ha (US$ 40.65M). There are over 250 public irrigation schemes developed and managed by the Department of Irrigation (DOI), covering nearly 30 percent of the nation's irrigated area. The performance of these schemes without users' participation is comparatively poorer than FMIS, partly due to technical deficiencies in design, and partly due to inadequacy of O&M support. The IP mandates that, after reaching agreement with beneficiaries, larger public schemes (over 2000 ha in the Terai and over 500 ha in the Hills) be jointly managed by WUAs and DOI, and smaller public irrigation schemes are to be totally turned-over to beneficiaries. Turnover of all or part of the schemes to beneficiaries will improve the management efficiency, relieve public resources from O&M liability, and induce a sense of farmer ownership of the irrigation systems. This sub-component would finance both types of SIFT. Beneficiaries will provide their contribution to investment cost, participate in the design and construction of tertiary canal units, which in most cases are missing in the original systems, and take over O&M of such tertiary canal units after completion. Under this sub-component the project would finance: (i) Sunsari Morang System - Phase III (US$ 39.12 M). The objective of this sub-component is to rehabilitate and improve irrigation on 15,100 ha in continuation of the Bank-funded SMIP II (completed in March 1995) (see Map 2). Financing of the proposed Phase m would include: (i) improvement and rehabilitation of the main canal of the system beyond the completed Sunsari Morang Phase II area; (ii) rehabilitation and modernization of secondary canals and related structures, drains and inspection road networks; (iii) development of distribution networks through construction of sub-secondary and tertiary canal systems; (iv) construction of 5.5 km Kosi Flood Embankment on the east bank of the Kosi River; (v) technical assistance and institutional capacity-building for staff and beneficiary-WUAs in project implementation; (vi) other miscellaneous works and infrastructure necessary for proper O&M of the developed system, and (vii) institutional development to strengthen DOI central and, in particular, its project office, the WUAs, and local non-governmental organization in management transfer process of tertiary and higher order canals to users; and  Project Appraisal Document Page 5 Country - Nepal Nepal Irrigation Sector Project (ii) Other Turnover Irrigation Schemes (US$ 1.53 M) in the eastern and western regions over an area of about 5,000 ha. This component would finance full turnover and/or joint management of other medium public irrigation schemes based on the "demand-driven" principle. (c) Infrastructure Support Development (US$ 4.17 M). This sub-component would finance the following infrastructure and environmental protection measures required in the above FMIS: (i) construction of farm roads, river protection works. and environmental mitigation measures required in a number of FMIS in accordance with findings of the environmental impact assessments carried out in each scheme; and (ii) integration of micro-hydropower generation and water supply schemes on a pilot basis in irrigation schemes where and when there is demand, based on the "participatory" principle, and where such pilot efforts are technically and economically viable. Alternative average cost-sharing ratio of 50-50 between the Government and beneficiaries is applied. It is estimated that, in about 20 percent of FMIS, integration of rural water supply (for about 50,000 population) and/or hydro-power (about 10- 12 schemes of about 300 kW) generation would be feasible. The NISP program excludes four districts (Dailekh, Surkhet, Banke, Kalikot) in the Mid-Western Region where irrigation development is currently funded by other donors, and the entire Central and Eastern Regions for private FMIS currently funded by the Asian Development Bank's Second Irrigation Sector Project. C. Institutional Strengthening (US$ 17.96 M) This component would support the strengthening of the implementing agencies to ensure the proper implementation of components (A) and (B). It would finance consulting services for project implementation, training, investigation studies for investments, office buildings, equipment and vehicles, and limited incremental staff and O&M expenses on a declining basis for the following project implementing agencies: * Department of Irrigation (DOI) (US$ 9.55 M!. DOI will have primary responsibility for construction of project-related infrastructure. The project would finance consulting services for design and construction supervision, water planning and studies, O&M planning and scheme implementation, and strengthening of the DOI's Training Branch. It would also finance construction of buildings, procurement of equipment, vehicles and materials, and pilot on-farm water management activities in completed FMITS (covering about 10 percent of the developed area). Due to SMIP-III's location in the Eastern Region and the size of the tasks involved, consulting services for its detailed design, construction supervision, and O&M studies would, however, be arranged separately from FMIS component which generally are located in the Western Region. * Department of Hydrology and Meteorology (DHM) (US$ 5.52 M) DHM is the country's sole agency responsible for hydro-meteorological data collection, collation, and management. Currently, DHM is operating with sub-optimal facilities and observation sites. The project would finance the hardware and software required for improved data collection, processing, storage, and dissemination. It would also support the strengthening of DHM's data collection networks on a river basin basis, and resources inventory planning in 77 sub-basins within three of the four major country river basins which cover the three Western Development Regions. * Department of Agriculture (DOA) (US$ 2.03 M) In view of the recently approved Agricultural Research and Extension Project (AREP) which would cover a wider range of agricultural extension and related activities at the national level, NISP will provide only limited support to DOA. It would focus on the strengthening of the District DOA's capacity to prepare and jointly appraise NISP schemes with DOI and  Project Appraisal Document Page 6 Country - Nepal Nepal Irrigation Sector Project extend specific agricultural training services to NISP irrigated areas which are not covered under AREP (AREP covers 14 districts out of 36 districts under NISP). WUAs. Non Governmental Organizations (NGOs), and Community Based Organizations (CBOs) (US$ 0.86M). The project would finance training of staff in selected regional and district WUAs, NGOs, and CBOs in such topics as NISP principles and procedures, systems O&M, participatory environmental protection in hill irrigation schemes (PEPEH), irrigated water management, fanner organizations, financial management, credit accessing, and marketing. Training will be based on a program designed by the project consultants in collaboration with DOI's Human Resources Training Branch, DOA's Regional Training Center, Agricultural Development Bank (Nepal) (ADBN), FAO/CP special program and the on going German Development Service program for PEPHI. Summary component-wise project cost is as follows. Component Category Cost Incl. Contingent. % of (US$M) Total Water Resources Strategy & Policy 1.43 1.4 - Strategy Fornulation and studies Policy, Management 1.32 1.29 - Institution support Institution building 0.11 0.11 Irrigation Sector Improve. & Development 83.63 81.0 - Irrigation Improve. & Develop. FMIS Physical 38.81 37.60 - SIFT in Public Irrigation Physical, Project Management 40.65 39.40 (a) Sunsari Morang III (39.12) (b) Other public schemes (1.53) - Supporting Infrastructure Development Physical 4.17 4.08 Institutional Strengthening Institution building 17.96 17.6 Total 103.02 100.0 3. Benefits and target population: * The formulation of a National Water Resources Strategy and the resulting Comprehensive Water Policy would assist Nepal in laying the foundation for sustainable management of water resources through integrated river- basin planning. It would, in particular, provide the much needed basin-wise comprehensive water resources development and environmental management plans. The strategy would also guide bilateral and multilateral donors in directing development assistance in a more coordinated fashion consistent with the nation's short, medium, and long-term development objectives. In addition, the country will establish (or reorganize the existing Water and Energy Commission Secretariat (WECS)) a permanent NWPU to assist the existing National Water Development Council (NWDC) (chaired by the Prime Minister) in fornulating new policies and adjusting existing policies, and making planning, budgeting and management decisions related to execution of water resources activities. The existing water related sub-sector policies would be improved to ensure their consistency with the Comprehensive Water Policy. * The Infrastructure Development component, along with the associated institutional and operational measures to upgrade the quality of water data, water management and O&M, will enhance the sustainability of irrigation systems, and will ensure improved reliability and equitable distribution of water leading to increased agricultural production, creation of job opportunities, and increased farm incomes. It will, in particular,  Project Appraisal Document Page 7 Country - Nepal Nepal Irrigation Sector Project benefit about 132,200 small and marginal farners whose landholdings is less than 1.0 ha and 53,200 medium farmers whose landholdings are 1.0 to 3.0 ha representing a total population of about one million persons. Migration from the Hills to the Terai will gradually diminish as employment opportunities in the Hills are enhanced. Promotion of groundwater irrigation in the form of clustered tubewells will resolve the issue of underutilization of individual tubewells due to fragmentation of landholdings and exploit the rich Terai groundwater for production. * The project will benefit farmers of different ethnicity. Majority of the population in hill schemes come from diverse ethnic backgrounds, but are mainly from the Gurung, Magar Kami or Chhertri ethnic group. Brahmins and other castes are, to a lesser extent, also represented. In the case of Terai schemes, major groups of farmers are Tharu, Brahmin and Chhertri and the Occupational Caste represents less than 7 percent. Over 70 percent of farmers are owners and owners-cum-tillers. * The Institutional strengthening component will assist DOI in relinquishing some of its more traditional responsibilities for construction and O&M and is expected to result in increased mobilization of resources from the private sector and their active participation in water resources development. This component will also help to strengthen the central DOI in O&M planning and budgeting and resources allocation. Coordination between staff of DOI and DOA at the regional and district levels would be strengthened with respect to identification and operation of irrigation systems. WUAs in private and public irrigation systems would be legalized and their management, operational, production and marketing activities strengthened. 4. Institutional and implementation arrangements: Implementation period: The project will be implemented in five years. (FY 1997/98-FY2001/02) Executing agencies: Formulation of the Water Resources Strategy would be carried out under the overall responsibility of MOWR with direct guidance from the NSC. HMGN would establish a core unit (or reorganize the existing WECS) charged with the formation of a NWPU aloft from line agencies. At negotiations, it was agreed that NWPU would be formed by December 31, 1997. The NWPU would be assisted by a team of national and international consultants in developing the Water Resources Strategy. Implementation of the project's Infrastructure Development and Institutional Strengthening Component would be the main responsibility of the DOI under MOWR, DHM under the Ministry of Science and Technology, DOA under the Ministry of Agriculture, and the relevant WUAs. Project Coordination: Due to the involvement of various departments under different ministries, policy decisions would be taken by an apex body at the ministerial level and implementation would be carried out by a three-tiered management structure at the departmental level in accordance with Nepal's existing administrative structure in general, and the pilot ILC organization structure in particular. Project Central Coordination Committee (PCCC). Project policy decisions would be taken by a PCCC which has been established prior to the Negotiations. Chaired by the Secretary, MOWR, its members will consist of representatives of the Financial Comptroller General Office, Ministry of Environment & Population, and concerned ministries, and heads of the implementing departments. The PCCC will formulate policies on inter-ministerial and inter-departmental matters relating to project responsibilities of various departments, budget allocations, and major procurement issues. The Director General (DG), DOI, will act as member-secretary of the PCCC. Project Implementation Commitee (PIC) chaired by the DG, DOI, with members consisting of the Deputy Director Generals of the implementing departments, would be established and would have responsibility for coordinating with inter-departmental regional offices on matters related to budget preparation, disbursement compilation, progress reporting, and other project-administration related matters. A Project Coordination Office (PCO), headed by a high-  Project Appraisal Document Page 8 Country -Nepal Nepal Irrigation Sector Project ranking officer of Class I level, would also be established to serve as the secretariat of the PCCC and PIC. The head of the PCO would be empowered on behalf of the Regional Project Implementation Units, DHM, and DOA to submit progress reports and withdrawal applications to IDA. The PCO has been established and is the main government counterpart for Bank's missions. SlIflP III sub-component, however, will be implemented by the existing Sunsari Morang Irrigation Development Board (SMIDB), which is also chaired by the Secretary, MOWR, with participation of most of the members of the PCCC. Project Imlementation Units (PIUs). The four existing PIUs setup under the ILC pilot project in each of the three participating regions, i.e. Western, Mid-Western, and Far-Western Regions and in Sunsari Morang Irrigation Project in Eastern Region would be strengthened. Each PIU would be headed by the Regional Irrigation Director (RID) in the case of FMIS and turned over schemes, and by the project manager of the SMIDB in the case of the Sunsari Morang Irrigation System for the SMIP-III sub-project. The members of the PIUs would consist of the Regional Directors of DOAs, representatives of DHMs, ADBN, and NPC. The PIU would function as the NISP's Regional Appraisal and Approval Committee (RAAC) for the selection and approval of the schemes to be financed under the project. The RAAC would be responsible for submission of NISP's annual implementation program to the PIC and to the concerned District Development Committees (DDCs). District Appraisal Committees (DACs) Existing DACs will be strengthened as district supporting units to PIUs and these units will be chaired by District Irrigation Offices (DIO), with members consisting of the District's Agricultural Development Officer, and the district representatives of ADBN and the NPC. DACs are the working units for identification, preparation and submission of FMIS under NISP. A Regional Mobile Irrigation Team (MIT) comprising engineers, a hydro-geologist, environmentalists, an agro-economist, a sociologist, and the district agriculture officer, will assist DACs in the sub-project identification, design, approval, and implementation of schemes at the district level. Project Implementation Cycle NISP implementation will be in accordance with the rules and procedures outlined in HMGN's IP (as amended in 1997) and the "Procedural Guidelines for Surface Water and Ground Water Irrigation sub-projects" prepared by the ILC Technical Assistance team (attachment to Annex 2 and Schedule 6 to DCA). These guidelines require that: * The DAC, with the assistance of the regional MIT and Consultants would prepare the NISP individual schemes. Schemes costing up to NRs 1.0 M would be approved by RID, schemes costing between NRs 1.0 M and NRs 10.0 M would be approved by the concerned RAAC (PIUs) and schemes costing more than NRs 10.0 M would be approved by the DG of DOI upon recommendation of the PIC. * Implementation of sub-projects would only commence after receipt of beneficiary's written commitment backed by cash contribution in accordance with the schedule specified in the IP. * The cash collected will be deposited in the joint account of DIO/WJUA, and 0.5 percent of the estimated cost of schemes will be returned to the WUA upon successful completion of the scheme for the WUA's use as seed money for future O&M. * In the case of cost overruns of more than 10 percent beyond the agreed original estimate, the construction will be discontinued until the farmers' agree to additional contribution (in kind/cash/labor) on a pro-rata basis for their share of the cost overrun.  Project Appraisal Document Page 9 Country - Nepal Nepal Irrigation Sector Project * A register of completed schemes (ILC and NISP) will be prepared by the concerned RID and approved by the DG, DOI. Completed schemes shall not be eligible for further funding by the Governnent during the next fifteen years after its completion, except in cases of catastrophic acts of nature. Procurement Plan and Packages: Procurement of works, goods, and services would be carried out in accordance with the Bank's Procurement Guidelines and IDA's standard bidding documents for ICB and NCB tenders agreed with the Government. All implementing agencies have prepared draft procurement plans which were reviewed by the Bank. Minor civil works costing less than US$ 20,000 per contract but not exceeding an aggregate amount of US$ 5.0 million equivalent, and Minor procurement of spares, vehicles, goods and equipment amounting to less than US$ 10,000 per contract but not exceeding an aggregate amount of US$ 300,000, and various short-term consultancy services of less than six person months will be procured in accordance with local shopping procedures (such as force account, unit rate, NGO and beneficiary participation) acceptable to IDA. Medium size civil works under the FMIS sub-component which are geographically dispersed in nature and exceeding US$ 20,000 but less than US$500,000 per contract will be procured by National Competitive Bidding (NCB). Major civil works exceeding US$500,000 per contract will be procured in accordance with the ICB procedures. In particular, civil works for Sunsari Morang Irrigation III sub-project amounting to about US$ 24.3 million will be procured in one ICB package. Procurement would follow IDA's guidelines and standard procurement procedures. Detailed procurement arrangements are provided in Annex 6. Project oversight: (policy guidance, etc.): Water Charg. The current level of O&M of public irrigation schemes is sub-optimal resulting in unsatisfactory performance of public irrigation systems. Consequently, it is difficult to enforce water charges. This problem is endemic and cyclic. Unless the level of O&M is prioritized according to availability of funds and nature of irrigation systems, it is unlikely that the performance of public irrigation systems will improve and investments will provide meaningful returns. Studies would be carried out under the project to define: (i) the optimum level of O&M requirement for different types of public irrigation systems before and after hand over of parts of the systems to WUAs, (ii) the funding requirement to achieve the optimum level, and (iii) the appropriate level of water charges, and a plan for its collection. HMGN has increased water charges by 100 percent starting from FY 1997/1998 in major public irrigation systems. Irrigation Subsidies. HMGN's current level of subsidies for irrigation development in private and public irrigation schemes as per IP is high and government's capacity to finance such subsidies on a long-term basis cannot be sustainable. However, because of the country's geographic and economic diversity, a uniform subsidy for the whole country may not be applicable. A review of the subsidy policy will be carried out as an integral part of the project design. HMGN has agreed to revise the subsidy over time in accordance with the outcome of the study. Accounting, financial reporting and auditing arrangements: Each implementing agency will keep separate project accounts. All transactions will be compiled on a monthly basis and submitted to the PIC. During implementation, the borrower would submit periodic Project Financial Management Reports (four monthly basis). The financial management report would include: (a) project accounts based on Project Charts of Accounts grouped or classified according to expenditures by project component activities, disbursement categories and source of funds, and appropriate accounting standard and reporting formats; (b) arrangements for recording monitorable physical and other indicators for comparison with related costs; (c) procurement contract management information; and (d) internal control arrangements to ensure proper segregation of duties, documented procedures for authorizations, and levels of supervision.  Project Appraisal Document Page 10 Country - Nepal Nepal Irzigation Sector Project In accordance with the Bank's new guidelines on auditing, an assurance was obtained and covenanted that all implementing agencies would: (i) submit to IDA consolidated unaudited annual project accounts and financial statements within six months after the end of each fiscal year, (ii) have their accounts audited annually by independent auditors; (iii) submit to IDA a certified copy of the audited project accounts no later than nine months after the end of each fiscal year, and (iv) retain all supporting records and documentation for at least one year after IDA has received the audit report for review by supervision missions. In this regard, HMGN has submitted a Financial Management Plan to IDA. The Financial Management Plan is given in the PIP. In order to avoid delays in submission of withdrawal applications, the accounting functions of the PIC (in PCO) would be strengthened by the establishment of a separate Project Accounts Unit (PAU) headed by an Accounts Officer of at least Grade II level together with the required supporting staff. Additionally, an assurance was obtained from HMGN to avoid untimely transfers of senior accounts staff and project personnel and, in case of unavoidable transfers, reasonable overlapping period should be provided. The PAU in PCO would be responsible for compiling all project accounts and submitting the corresponding disbursement applications to IDA. Budgeting: Each implementing agency at the District level would submit, through regional PLUs, annual work programs and budget requests to the central PIC. The PIC would consolidate all programs and requests into an annual project work program and budget. The consolidated annual work programs and budgets would then be submitted for approval by the PCCC and funds would be allocated by HMGN's Ministry of Finance after necessary review by NPC to the implementing agencies. It is important that the formulation of annual work programs and budgets be based on real demand of farmers and should contain only the schemes which are technically and economically viable. It is also important that the process be transparent and involve all parties concerned. An assurance to this effect was obtained. An assurance was also obtained for providing sufficient budget allocated for the first year's project implementation program. Retroactive Financing: The ILC/IDS pilot operation currently financed under the ongoing Mahakali Irrigation II and the Bhairawa-Lumbini III Groundwater Irrigation projects have been expanded from 15,000 ha to 30,000 ha due to growing farmers' demand. It was agreed at the negotiations that incomplete subprojects under the pilot ILC would be carried over to the proposed NISP. As the funds allocated for the initial pilot operation were fully disbursed by July 15, 1997, retroactive financing in an amount of SDR 1.5 million would be provided to allow the continuation of these sub-projects. Retroactive financing would only be available for eligible expenditures incurred from July 16, 1997 up to signing of the proposed credit. A list of on-going ILC surface and groundwater schemes in three western regions which will be carried over to NISP are given in Annex 2 Attachment 3 (a) (b) (c) and (d). Monitoring and evaluation arrangements: The Management Information System established under the IDS Pilot project would be strengthened and utilized for the preparation of project progress and performance reports. The project's PCO would also submit, on a four monthly basis, Project Financial Management Reports consisting of: (a) Financial Statements of Project; (b) Project Progress; and (c) Procurement Management Report. Standard reporting formats for tracking on a monthly basis the project's physical and financial progress, have been developed by the ILC technical assistance team. At the regional level, DAC would be responsible for reporting to the RID on progress in NISP and RID will submit the progress reports to PCO regularly. A Regional Monitoring and Evaluation (M&E)Team under the Regional Director of Agriculture will monitor and evaluate performance of completed irrigation schemes. In the case of SMIP-III, a separate M&E unit would be established in the proposed Water Management Division of the sub-project. Similar monitoring and reporting systems would also be implemented for SMIP-II. It was also agreed that an independent consulting agency and NGO would be hired to carry out the external monitoring of land acquisition and resettlement procedures under SMIP III. M&E will be assessed on the basis of the project output indicators presented in Annex 1 and performance indicators mentioned under the PIP.  Project Appraisal Document Page 11 Country - Nepal Nepal Irrigation Sector Project Block 2: Project Rationale 5. CAS objective(s) supported by the Document number and date of latest CAS discussion: project 15508-NEP of April 30, 1996 and CAS Update of November 25, 1997 The Bank's Water Resources Management Policy (1993). In order to ensure the equitable, efficient, and sustainable development of water resources, the policy advocates the preparation of state and river basin water resources plans covering all aspects of water development including domestic, agricultural, and industrial uses. It also recommends that these plans be prepared in a participatory manner taking account of the fact that water should be considered as an economic good. Additionally, the principles of: (a) beneficiary contribution to the investment costs, (b) full recovery of O&M costs, and (c) turnover of O&M responsibilities to farmers' organizations are also recommended. These principles and recommendations have been covered under NISP through: (i) the preparation of a national water resources strategy and formulation of a comprehensive water resources sub-sector policies; (ii) the emphasis on farmers' participation and contribution in all proposed irrigation works, (iii) the formation of WUAs and the turnover of O&M responsibilities to WUAs, (iv) the setting up of a National Water Planning Unit at the central level, and (v) the strengthening of the hydrological data collection, collation and processing systems. The CAS for Nepal identifies poverty alleviation as an important strategy for the country's economic development. With low per capita income fairly evenly distributed and no surplus to redistribute, the CAS suggests that poverty alleviation can only be achieved through economic interventions that will result in more rapid income and output growth resulting in reduced population growth, and preservation of natural resources and enviromnental sustainability. The CAS identifies agriculture as the key sector presenting the highest potential for growth, as it accounts for almost 40 percent of gross domestic product and 80 percent of employment. The potential of agriculture has not been fully tapped as about 492,000 ha in Terai and 208,000 ha in the Hills still remain largely non-irrigated. The CAS has endorsed a package of policy reforms, technology improvements, and participatory investments in the irrigation sector. The project would contribute to the potential growth of agriculture by promoting efficient irrigation of existing and new irrigation systems. In particular, it would contribute to the assistance strategy in three key areas: (a) poverty alleviation through increased production in irrigated agriculture; (b) effective utilization of public resources by gradually transferring O&M responsibility from the public to the private sector; and (c) enhance participation of the private sector, NGOs, and farmer-beneficiaries in the investment decision process and systems' ownership. This will encourage private investment with greater assurance for the users to have control over natural resources management. IDA involvement. IDA has been a lead agency in helping Nepal develop its irrigation potential (accounts for more than 40 percent of investment) since the issuance of a new IP in 1988. Similarly, over the last five to six years, IDA was instrumental in increasing HMGN's emphasis on groundwater development based on beneficiary participation. The Bank's financial and technical assistance provided under the ILC, and other projects, have proven the viability of implementing the IP on the ground. The experience gained under ILC has led HMGN to revise the IP twice, in 1992 and in 1997. IDA has also contributed to IHMGN's effort to hand over O&M responsibility of tertiary units to beneficiaries in surface irrigation schemes. Much success has been experienced in the Mahakali, Bhairawa Lumbini and Sunsari Morang Projects. Under the proposed project, IDA would continue to assist HMGN to apply its IP to both groundwater and surface water irrigation schemes through improved beneficiary participation and cost recovery measures. By gradually handing over the higher order canal system, IDA is assisting enhancement of management transfer towards Self Financing Irrigation and Drainage Districts (SIDD) in large public irrigation systems. The project also supports HMGN's development focus on agriculture through, inter alia, facilitating investments in private farmer-managed irrigation systems, which are endemic in Nepal, and in improving water management in public irrigation schemes through greater reliance on user groups. Although the experience with farmer-managed irrigation systems is still evolving, many lessons have been learned from IDA's ILC pilot projects and ADBN's Irrigation Sector Project which have been incorporated in the design of NISP. Similarly, PJM is being tested in all large-scale public irrigation schemes, including those currently supported by IDA projects. The proposed project would carry this work further and expand into existing public irrigation systems. It can be expected that by the end of NISP about 30 percent  Project Appraisal Document Page 12 Country - Nepal Nepal Irnigation Sector Project of tertiary networks of major public irrigation schemes would be handed to farmers. The proposed project will also follow-up on the institutional development efforts undertaken in the ongoing Institutional Development Support Project (IDS) designed to orient DOI towards relinquishing part of its O&M responsibilities to the private sector. More importantly, the project will support training beneficiary farmers in water management and O&M of irrigation systems that are to be handed over to them after rehabilitation. 6. Main sector issues and Government strategy: * Among Nepal's few natural resources, water is the most promising resource for development. Because of the uneven spatial, temporal, and seasonal distribution of river flows on the one hand, and the riparian issues on the other, its development poses complex challenges. This is compounded by the country's lack of effective national level water resources planning and management initiatives. Each government department involved in water resource development operates in isolation of others, lacking coordination, but preparing policies and regulations based only on its own needs. Population pressure and the ad-hoc development of water resources have resulted in some adverse impacts on the country's ecological systems, e.g. groundwater mining in the Kathmandu valley, pollution of the Bagmati River, increased frequency of freak floods and droughts in many parts of the Terai. These adverse ecological impacts highlight the need for preparing a comprehensive and integrated water resources strategy to tackle the issues in a prioritized and an organized manner. Although HMGN has promulgated in the past many sub-sector policies and acts, these are to be reviewed in a comprehensive and integrated manner. The staff skills and capabilities required to implement the concept of multi-purpose and integrated river basin planning are lacking and sufficient and reliable data base are non- existent impeding the country's ability to achieve its development objectives. * Despite the Government's efforts in promoting beneficiary participation in irrigation development, the sector continues to rely heavily on subsidies which are not sustainable in the long-term. Under the project, HMGN would assess the level of subsidy required for different types of schemes and review its investment subsidy policy. The Government would also assess current water charges, determine the appropriate levels of beneficiary contributions, and establish a program for improved collection of water charges. In the case of jointly managed major public irrigation schemes, the Government has increased water charges by 100 percent before the start of NISP and agreed to include in NISP only those systems in which cost recovery rates have improved over time. * O&M of major public irrigation schemes is sub-optimal due to financial constraints. Collection of water charges is hampered by the systems' low operational efficiencies due to lack of minor distribution networks below the sub-secondary level. More than one-third of the irrigable area remains virtually rain-fed and are under mono-cropping. Turnover of tertiary systems to legalized WUAs would only be possible with the introduction of tertiary canal systems and rehabilitation of dilapidated irrigation structures. This would relieve HMGN of the financial burden that O&M entails and would forge a strong partnership with beneficiaries for more sustainable development. It is envisaged that the WUAs would be organized to take over higher order canals in the future. * The country has limited financial resources which need to be effectively utilized through prioritization of O&M funding in the public sector and by imposing strict regulation on public resources utilization. IDA's continued assistance is required to help redirect the country's supply driven irrigation development orientation towards a more demand driven farmer managed form of development. 7. Sector issues to be addressed by the project and strategic choices: * Integrated Water Resources Strategy and Comprehensive Water Policy Component: This component aims at addressing the country's lack of planning and coordination in the implementation of water resources development projects which have led to the deterioration of available water resources and the degradation of the  Project Appraisal Document Page 13 Country - Nepal Nepal Irrigation Sector Project environment. The project would finance HMGN's continuing effort to formulate a national water resources development strategy through identification of prioritized multi-sectoral development issues and integrated interventions. These would lead to major institutional reforms by instituting a national water planning unit, the revision of the country's water resources act, and its sub-sector policies, if necessary. * Water Rights with downstream riparian nations: The most difficult constraint facing HMGN's long-term irrigation strategy is the issue of water rights with the downstream riparian nations. This has prevented Nepal from fully developing its water resources and IDA from supporting promising investments on some major rivers. The preparation of the Water Resources Strategy and the fomulation of the Comprehensive Water Policy will enable Nepal to be in a better position when discussing water rights with its riparian states. The present project will involve rehabilitation and modernization of the existing surface schemes with no additional water withdrawn over the existing amount. Within the present diversion amount (as observed during scheme formulation), expansion of new irrigation area would be allowed using water savings from improvement under the project. New irrigation schemes would be allowed only in case of groundwater development. * Irrigation Sector Improvement and Development Component: This component would continue to support policy reforms in HMGN's Irrigation Sector through investments in infrastructure and O&M using the demand driven approach to ensure that the changes become irreversible. Poverty alleviation would be addressed through higher incomes resulting from the rehabilitation of existing systems and the construction of new ones. The issue of low water charges recovery would be addressed through the turnover of O&M responsibilities to WUAs including collection of water charges. * Institutional Strengthening and Development: This component would address the issues of inadequate cost recovery through a study of current subsidy policies in both the private and public sector irrigation. The expected outcome of the study would be to reduce: (i) the current investment subsidy level of 85 percent on average to a reasonable level over a period of time, and (ii) the current O&M subsidy level of over 90 percent in public irrigation systems to almost nil at least in the project supported subprojects. 8. Project alternatives considered and reasons for rejection: (a) Integrd Water Resources Strategy and Policy Development: The only option for Nepal's economic development is an integrated multi-sectoral strategy which revolves around water, the country's largest resource. The high level NWDC has not functioned for several years for lack of a technical advisory body dealing with the development of water resources in an integrated manner. The existing WECS attached to MOWR mainly concentrates on energy and irrigation issues. The role of WECS could be expanded to cover all water uses such as water supply, industry, health, environment, etc. so that it could provide adequate technical assistance to the NWDC. HMGN should have a clear and well articulated water policy for the short, medium, and long terms prior to making any further sizable investments in multi-purpose river development projects which will have far- reaching impacts on the regions. (b) Irrigation Sector Improvement and Development Component: Until the promulgation of the IP in 1988, no significant investment was made in FMIS. The only sensible approach to solve the inefficiencies of public irrigation systems is to involve beneficiaries in the systems' management and operation. Although FMIS is in existence since time immemorial in small scale village surface irrigation schemes in Nepal, the participatory approach and investments in FMIS were never promoted prior to the IP. Investment in FMIS was therefore a new approach to irrigation development in the country. In the case of public irrigation, sustainability has been thwarted by the proliferation of new construction, and inadequate attention to O&M. Irrigation development was caught in a vicious circle of "construction-destruction-and-rehabilitation". It is against this background that the SIFT component of the project was identified as the only viable solution for sustainable development. Involving farmers in the decision-making process of planning, design, construction implementation, and O&M of irrigation systems will help ensure this. This approach had been tested on the ground and found to be successful in achieving full  Project Appraisal Document Page 14 Country - Nepal Nepal Irrigation Sector Project privatization of public irrigation systems over time. Most public irrigation systems in Nepal are affected by various technical and design issues which have resulted in costly development and O&M interventions. For example, the inflow of sediments in the run-of-the-river surface irrigation systems is a serious problem because of Nepal's torrential and heavily sediment laden rivers. Unless important desilting operations are organized at regular intervals, the discharge capacity of canals are reduced. The problem of reduced canal discharge is compounded by system's design which was based on Western India's extensive irrigation concept that provides water far below the optimum irrigation requirements of fields. The problem of getting enough water is getting worse without irrigation systems at tertiary distribution level. Under these circumstances, different technical options were considered to resolve the problems of high silt inflow, expensive O&M, and inadequate supply of water to fields. In each case, the most technically sound and cost effective option was adopted such as: (i) the provision of large desilting basins equipped with sediment removing dredgers, (ii) the construction of irrigation canals below the tertiary level outlets, and (iii) the introduction of rotational water supply at the tertiary level outlets which allows for the doubling of specific unit discharge at tertiary outlets to satisfy peak demand. (c) Instittutional Strengthening and Development: The agricultural support component was designed to avoid any overlap and duplication with the recently-approved AREP (FY98 Lending). To this effect, the project will complement AREP and finance limited institutional support to DOA for: (i) the joint identification of irrigation schemes, (ii) farmers' training, (iii) vehicles, equipment, and (iv) on-farm water management extension work which has been specifically targeted to the completed ILC/NISP pilot schemes. In addition, the project will finance irrigated agricultural support and extension only in the Districts which AREP does not cover (AREP covers only 14 districts of NISP). 9. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). Sector issue Ongoing and planned Bank loans/credits Latest Form 590 Ratings IP DO. Bank finnced Mahakali krigation I (Cr. 1055-NEP, 1978-87 S S closed) (Retrofitted by MIP-II) Participatory Irrigation Development in Mahakali Irrigation II (Cr. 1924, US$ 42.5 S S public irrigation million on-going) Sunsari Morang Irrigation II (Cr.1814, US$ S S 42.5 million, closed in March 1995) Narayani Irrigation III (Cr. 1715, US$17 U U million, closed in June 1995) Bhairawa Lumbini Irrigation III (Cr. 2144, S S US$ 39.0 million, on-going) Participatory Irrigation Development in Irrigation Line of Credit sub-project (Under Cr. S S Private Sector 1924 and Cr. 2144)  Project Appraisal Document Page 15 Country - Nepal Nepal Irrigation Sector Project (Supplementary to Sunsari Morang 11) Sunsari Morang Headworks (Cr. 2430, US$ S S 28.0 million, on-going) Other development agencies ADB - Participatory Irigation in public Irrigation Management Transfer Project SDR sector 9.0 Mil Loan & US$ 3 mill Grant (1994-2001) involved 11 public systems. ADB - Participatory Irigation in private East Rapti Irrigation Project (1992-1998) SDR sector 7.53 million Rajapur rrigation Project (1992-2000) SDR 12.15 million, 15,000 ha FMIS Irrigation Sector Project - I (1989-1996) USS 33.1 million; 63,400 ha Irrigation Sector Project - II (1996-2002) US$ 33.0 mill. for 42,000 ha; European Union Irigation Development Project - MWR (ECU8.36 million (on going) (1997-2001) Participatory Irrigation Public Sector Bagmati Irrigation Project I (1988-1997) Saudi Fund Riyals 30 million for 30,000ha Bhaimati Irrigation Project II (1995-2000) Riyals 74 million for 30, 000 ha. IFAD Groundwater Irrigation Project (1994-2000) US$ 7.6 million for 4,800 ha UNCDF Marchawar Irrigation Project II (1992-1997) US$ 5.6 million with 5,600 ha Government of Netherlands Mechi Hill Irrigation Project (1992-1997) NRs 11.8 million for 1087 ha OPEC Chanda Mohana Irrigation Project (1995-99) US $ 8.5 mill. 10. Lessons learned and reflected in the project design: * The major lesson learned from previous IDA-supported projects in public irrigation sector was that the lack of participation of water users in project formulation, constructions, and operations led to schemes which did not respond adequately to the needs and local farming communities. This supply-driven approach hampered the development of irrigated agriculture and affected the sustainability of irrigation systems. Since 1988, all IDA- supported projects have assisted Nepal in implementing its new IP which promotes the participatory approach in public and private irrigation sectors. The pilot ILC programs have shown that this approach could be expanded to the country as a whole to reduce the burden of development and O&M costs on HMGN's budget and to improve the sustainability of systems. * Previous projects also demonstrated that self-standing, supply-driven projects did not adequately promote the new participatory approach in small and scattered FMIS and related technical improvement in the public irrigation systems throughout the country. As a result, the concept of self-standing project to implement Nepal's new IP was relinquished in favor of the sector program approach. In particular, the proposed project will cover public sector  Project Appraisal Document Page 16 Country - Nepal Nepal Irrigation Sector Project irrigation as well as private sector village irrigation and groundwater schemes under the same principle in both plains and hills. * Under the SMIP II, the concept of tertiary irrigation units (TTU) was introduced to facilitate the turnover to WUAs. The success of this operation has permitted this concept to be applied in a systematic manner to the project. As a result, TIUs of about 1000 ha and below will be constructed with their system of minor canals and watercourses to deliver water to each and every field. This will greatly facilitate water management by the WUAs and enhance system efficiencies. Ownership of such tertiary units as well as responsibility for O&M after a period of joint management will eventually be transferred to WUAs. * Riparian issues are avoided by financing only rehabilitation of existing surface subprojects with no additional water drawn over the original designed values. Limited number of new sub-projects will be allowed using groundwater. 11. Indicators of borrower commitment and ownership: [Note: Includes measures already taken by the borrower prior to Board presentation, as well as planned actions.] * HMGN is strongly committed to the formulation of a Water Resources Strategy to consolidate its water resources sector under one policy and one coordinated planning body. Phase I of this undertaking was completed and discussed at a public forum attended by representatives of government departments, international donor community, NGOs, community based organizations, and other stakeholders. Phase II preparation is included in the project. * HMGN has also agreed, in principle, to revise its subsidy policy in irrigation development based on a study to be funded under NISP. A time bound action plan terms of reference (TOR) has been proposed by HMGN. * HMGN increased the water charges by 100 percent in major public irrigation system prior to the commencement of NISP. 12. Value added of Bank support: * The Bank's involvement in the preparation of the National Water Resources Strategy and Comprehensive Water Policy will enable Nepal to have access to the best international experiences and practices in this field. As indicated previously, this will permit Nepal to open a dialogue with downstream riparian countries as part of the Bank's on-going "development triangle" sector work. This regionalization concept could be introduced only by an international organization like the Bank. * The Bank has been- involved with IMGN for the past years as a leading donor in developing Nepal's irrigation sector program. Although this program is still evolving, IDA will not only continue to be instrumental in promoting the participatory approach of the new Irrigation Policy, but also in introducing several technical innovations, such as introducing TIUs and other improved water management systems. In addition, with the lessons learned from the Bank's extensive irrigation operations in Pakistan, India, and Bangladesh, it can adjust and apply them to Nepal's irrigation sector.  Project Appraisal Document Page 17 Country - Nepal Nepal lTigation Sector Project Block 3: Summary Project Assessments (Detailed assessments are in the Implementation Volume. See Annex 8) 13.EconomicAssessment (see Annex 4): Prject costs: The total project cost is tentatively estimated at about NRs. 6,375 M (US$ 103 M equivalent) including physical and price contingencies of about NRs. 1,352 million (US$ 13.3 M equivalent). Cost estimates are based on 1996 prices and include physical contingencies ranging from 5 percent to 15 percent. Standard Bank's local and foreign inflation rates have been used. Of the total project costs, US$ 98.9 M would be for investment (development costs) and US$ 4.1 M for incremental recurrent costs. Project Benefits. Based on the ILC experience, the project will allow substantial increases in: (i) cropping intensity by at least 30 percent mainly in the dry season; (ii) the use of HYVs by 47 percent; (iii) the use of chemical fertilizer by 22 percent; (iv) average yields by 40 percent; and (v) farm incomes by 117 percent. Under FMIS, overall cropping intensities with the project have been estimated to increase by 20 percent to 60 percent, and yields of crops by 17 percent to 130 percent; e.g. 17 percent to 46 percent for paddy, 50 percent tolOO percent for wheat and 50 percent to130 percent for oilseeds. At full development, the FMIS component would increase paddy production by 76,500 tons, wheat 42,660 tons, oil seeds 3,130 tons, sugarcane 2,880 tons, lentils 3.310 tons, potatoes and vegetables to 54,280 tons annually. In the case of Sunsari Morang Irrigation III sub-component, it is expected that the cropping intensity will increase by 38 percent from 160 percent to 198 percent, and yields of crops by 40 percent to 150 percent; e.g. 40 percent for paddy, 67 percent for wheat, 14 percent for sugarcane, 63 percent for jute and 150 percent for oilseeds. Annual incremental production is estimated at 29,460 tons paddy, 13,140 tons wheat, 2,950 ton oilseeds, 1,815 tons lentil/pulses, 13,140 tons vegetables and potato and 16,610 tons of sugarcane. Economic Rate of Return (ERR). The economic analysis of the 10 FEMIS model schemes and SMIP III resulted in the following base case ERRs. Major Rehabilitation (Surface Irrigation Scheme) in Hill = 14.5% and in Terai = 19.2% Minor Rehabilitation (Surface Irrigation Scheme) - in Hill = 14.9% and in Terai = 16.0% Groundwater (shallow tubewell) cluster = 19.2% and (deep tubewell) 18.6%-20.3% Turnover schemes (hill) = 18.2% and in Terai = 19.0% Joint Management schemes = 18.0% SMIP III = 15.0% Based on possible unit and type of different schemes at the time of implementation, the estimated ERRs are all favorable, ranging from 14.5 percent to 20.3 percent for all FMIS sub-projects to 15.0 percent for SMIP III. Including sunk costs of SMHP and benefits from the hydropower and savings in O&M costs (desilting costs), ERR of the SMIP III is estimated at 13.3 percent. Extrapolation of the combined ERRs of the ten sub-project models and SMIP III have been used as a basis for the calculation of ERRs for the EMIS component and the whole project, which are estimated at 17.1 percent and 16.2 percent respectively. Including sunk costs of SMHP and benefits from the hydropower and savings in O&M costs, ERR of the whole project is estimated at 15.3 percent. The economic sensitivity and risk analysis of all schemes, including SMIP III, was carried out for the following scenarios: (a) decline of O&M level after implementation; (b) larger areas coming under paddy; (c) prices of major commodities dropped by 20 percent; (d) level of inputs reduced by 25 percent; (e) implementation delays resulting in 20 percent cost escalation; and (f) benefits lag by 1-2 years. In all cases, ERRs of most sub-projects are above the opportunity cost of capital (OCC) of 12 percent. However, ERRs of the hill major and minor rehabilitation sub- projects would fall slightly below the OCC of 12 percent when incremental yields of all crops decline by 25 percent, prices of all crops decline by 20 percent or irrigated areas decline by 40 percent due to inadequate O&M. It should be noted that the above risk assumptions are highly conservative because the project's incremental production is small and dispersed in the four regions. Therefore it is unlikely that prices of all crops and incremental yields of all crops would fall drastically at the same time. In addition, farmers are unlikely to increase paddy areas at the expenses of all other crops, particularly oilseeds and pulses as these crops are grown mainly for on-farm consumption.  Project Appraisal Document Page 18 Country - Nepal Nepal Irrigation Sector Project Although the risk of inadequate O&M of sub-projects is likely to occur, this would be minimized through WUAs organized under the project. The switching values for increased costs and reduced benefits were also tested. The analysis shows that in most cases benefits are more sensitive than costs. The results indicate that ERRs of sub-project, SMIP III, the FMIS component and the whole project would fall to 12% when incremental benefits decrease by 17%-38% or total costs increased by 20 percent to 62 percent. Details are shown in Annex 4. Fiscal impact. As per the project financing plan, the IDA Credit would cover 77.6 percent of the total project cost, the beneficiaries 8.6 percent, and HMGN 13.8 percent which is about US$ 14.1 M equivalent, inclusive of about US$4.3 M equivalent of duties and taxes, over five years. HMGN's net contribution would therefore be about US$ 2.0 M equivalent (about NRs 124 M) per year. In the last five years (FY93-FY97), annual development expenditures in the irrigation sector averaged 6.8 percent of the country's total annual expenditures. However, the fiscal impact of NISP on DOI annual development budget would be significant as per the Three-Year Rolling Budget projected by DOI. The estimated three year average of DOI's budget including NISP is about US$65 million (NRs 4,042 million). NISP's annual budget requirement is NRs 1,158 million on average per year and NRs 1,852 million in peak year. This would represent about 29% and 46% respectively of DOI projected annual development budget. Considering only HMGN's counterpart funds, annual budget requirement for NISP would be minimal, representing an increment of about 4.7 percent of DOI's annual development budget on average year and 7.5 percent in peak year. Annual development expenditures of DOA and DHM comprised less than 1 percent of the country 's total annual expenditures. Similarly, the fiscal impact of NISP project on DOA would be minimal, but for DHM it would be significant. Annual development budget, including NISP annual cost, is estimated to average.at NRs 765 million for DOA and NRs 248.9 million for DHM. NISP annual budget requirement of NRs 25 million on average year and NRs 30 million in peak year would add about 6% and 8% respectively to DOA annual development budget. For DHM, the average annual NISP budget requirement of NRs 68 million and peak year requirement of NRs 90 million in peak year would add about 16 percent and 22 percent respectively to its annual budget. Considering only HMGN's counterpart funds, NISP's annual budget requirement would represent an increment of only 0.4 percent of DOA's and 2.6 percent of DHM's annual development budgets. To ensure smooth project implementation with minimal financial burden on the Government, an assurance was obtained at Negotiations that HMGN would provide annual budget allocation and timely release of funds to the concerned implementing agencies,would compile project accounts in a timely manner and promptly submit withdrawal applications for reimbursements. During project implementation, a review of HMGN's irrigation subsidy policy of 1997 would be undertaken with the view to an eventual reduction of subsidies in a phased manner. The study will determine the adequacy of current and future levels of beneficiary contribution to investments in irrigation development on the basis of farmers' incomes and the different types of schemes. A detailed review of O&M contribution in jointly managed public irrigation system would also be carried out to reassess farmers' capacity to contribute to O&M for the portion maintained by them and for the portion maintained by the government agency. In public irrigation systems the current water rate of NRs 200 per ha is insufficient to cover full O&M. It is estimated that about NRs 550 per hectare would now be required even after the turn over of tertiary systems to farmers. The area-based water rates are assessed uniformly without taking into account the fact that many farmers are receiving little or no water due to system deficiencies and lack of proper maintenance. The present rate of collection nationwide is understandably low (about 5%). The water rates collected are deposited in the Treasury Department, with no effect on actual O&M expenditures. A study would explore the possibility to: (i) collect water charges on a volumetric basis at the head of the secondary canals  Project Appraisal Document Page 19 Country - Nepal Nepal Irrigation Sector Project covering the full O&M of the main and secondary distribution systems, (ii) keep in a separate account in the system area the amount collected less a suitable allowance for overhead, and (iii) impose penalties to WUAs in the rehabilitated areas that do not collect and pay adequate water charges. The penalties could be the cut off of irrigation water pending an agreement on the resolution of the arrears issue. While it is premature to predict how much of the desirable reforms of the O&M policies and practices can be achieved under this project, the Bank will push to obtain significant reforms in this area. 14. Financial Assessment (see Annex 5) NPV= ranges NRs 0.3-37.5 million per scheme; and FRR= 12% to 19% Although financial analysis is not applicable to public irrigation schemes to be financed under the project, such analysis has been carried out for private sector schemes based on project cost estimates. FRRs to all financial resources are estimated to range from 15 to 19 percent for all terai sub-projects and 12-13 percent for hill major and minor sub-projects and SMIP III as shown below. Major Rehabilitation (Surface Irrigation Scheme) in Hill = 11.9% and in Terai = 17.1% Minor Rehabilitation (Surface Irrigation Scheme) - in Hill = 13.2% and in Terai = 15.6% Groundwater (shallow tubewell) = 19.1% and (deeptubewell) =14.8%-18.9% Turnover schemes (hill) = 16.2% and inTerai = 16.6% Joint Management schemes = 15.4% SMIW = 12.0% The project will also increase beneficiary farmers' income thus enabling them to raise their incomes above the poverty line. A total of 52,930 farm families will directly benefit from the project. It has been estimated that farm incomes per family at full development would increase by 41 percent to 247 percent for farms in the Terai, 59 percent to 129 percent for farms in the Hills and 137 percent for farms in SMIP III. At full development, annual net farm incomes are estimated at NRs 30,610-NRs 49,400 for farms in the Terai, NRs 32,730-NRs 34,460 for farns in the Hills and NRs 57,415 for farms in SMIP III. 15. Technical Assessment: The design of the project is based on demand-driven principle which involves farmers' participation from project concept to implementation and takeover of O&M responsibilities. The design of the systems have been adjusted in such a way that the WUAs will be able to manage these in an efficient and productive manner. In the case of FMIS, the rudimentary headworks and intakes made of brushwood and direct open cut intake would be replaced with semi-permanent structures based on improved but not sophisticated materials such as masonry work, gabions, and other simple concrete works. In terms of distribution system improvement in FMIS, only excessive seepage and leakage in the hill schemes would be reduced by lining and dilapidated structures replaced or rehabilitated. No alteration or modification would be made to their well established distribution networks. Use of simple piped conveyance system would be encouraged to avoid induced pore pressure leading to land slides. Open cut benching canals would be avoided as much as possible and instead replaced with covered culvert or pipe outlets. In the plains, groundwater potential will be modeled and mapped and the minimum distance between wells would be determined. The issue of low hydromodulus (I/s/ha) in public irrigation would be partly resolved by introducing rotational water supply at the tertiary level. Conjunctive use through the development of shallow tubewells to irrigate clusters of farms would be promoted at tail ends of public irrigation systems where water supply is inadequate. Frequent fluctuations in water levels, which affect the discharge of outlets, would be reduced by the installation of composite gates and overflow cross regulators.  Project Appraisal Document Page 20 Country - Nepal Nepal Irrigation Sector Project The project would also intensify irrigated agriculture extension with the assistance of DOA to promote the benefits of the green revolution to the most remote regions of Nepal. This would include the extension of improved on-farm irrigation methods as well as the use of HYVs and increased amounts of fertilizers and pesticides. Water management at farm level would be introduced to pilot schemes in every district of the project. 16. Institutional Assessment: (a) Executing agencies: Coordination between implementing departments and organizations would be enhanced through: (i) the revival of NWDC headed by the Prime Minister, and (ii) the expansion of the role of WECS currently under MOWR as NWPU, to deal with all aspects of water development. (b) p ject Managemen: To avoid the excessive interference of district and village level political institutions (DDCNillage Development Committee (VDC) during the selection and approval of schemes the project implementation will be based on a three tier structure (i) a PIC to consolidate all project activities at the center, (ii) PIUs at the Regional level, and (iii) DACs. This arrangement worked well under the ILC pilot program. (c) Beneficiaries: Depending on the size and type of schemes, beneficiaries would be organized into one to four tier WUAs. For large schemes, WUAs include: (i) Water User Groups at the lowest level, (ii) Water User Committees at the tertiary canal level, (iii) WU Coordination Committees at the secondary canal level, and (iv) Central Water Users Committees at the subproject level. Smaller hill schemes or tubewell schemes would have only: (i) the Water User Groups at the watercourse level, and/or (ii) WUAs at the scheme level. 17. Social Assessment: Women in Development (WID): The new IP mandates that WUAs must have at least 5 percent women in executive committees. The actual average percentage under pilot ILC is about two percent. Further promotion in this area is necessary and will be addressed by the project. A WID program now being carried out under SMIP will also be continued. The creation of democratically elected WUAs with clearly defined rules and regulations will help in preventing the excessive appropriation of water by the large and powerful land holders located in the head reaches of schemes. The use of clear selection criteria and approval process will help prevent political and other interference. Finally, the development of a strong WUA system backed up by frequent dialogue between DIOs/District Agriculture Development Offices and WUAs will also prevent undue interference. However, the project will give recognition to existing water rights, and detailed discussions through WUAs will serve to clarify these rights. Any changes in water rights will have to be agreed to prior to sub-project implementation for greater social order and justice. Under the project, a social sector review would be carried out for every new FMIS and the results would be attached to the corresponding feasibility study of each scheme. Social Development Plan. Majority of the FMIS schemes are located in areas with ethnic diversity where the project will benefit farmers of different ethnic backgrounds and different size of landholdings. The Government has complemented the feasibility studies of NISP with a further social impact assessment for each of the ten model subprojects and SMIP III. A report was made available for IDA's review and comments. In future, a similar review would be carried out for every new FMIS and the results would be reflected in the final scheme design. Economic Rehabilitation of Project Affected Persons. As NISP is limited to rehabilitation of existing irrigation systems, and is based on the demand-driven principle, there will be no involuntary resettlement. However, there will be limited land acquisition for the SMIP III sub-component (about 382 ha, 2.5 percent of total SMIP III area), and most, if not all, of the families affected by land acquisition will benefit from the project. According to the field survey in the pilot area of SMIP III, there will not be any displacement of households since all the land to be acquired is  Project Appraisal Document Page 21 Country - Nepal Nepal Irrigation Sector Project already in existing irrigable area. It was estimated that about 123 families will lose more than 25 percent of their holdings. Irrespective of whether the system is public or FEMIS, DOI's current land acquisition policy has been reviewed by the Bank to ensure its consistency with the Bank's policy. A detailed land acquisition plan for SMIP Im was made available to IDA. Review and comments have been provided which were incorporated in the revised version, and a detailed Resettlement Action Plan and Framework for the pilot area of 1,350 ha was prepared and submitted to the Bank for review and comment In future, a similar review would be carried out for the remaining area of SMIP-III before the construction. The agreement was covenanted in DCA. 18. Environmental Assessment: Environmental Category [] A [X] B [] C Envirornental Impact Assessment (EIA). Majority of the FMIS schemes, particularly those in the hills, are located in environmentally fragile areas and inadequate investigation, design and construction may lead to adverse impact. To avoid this happening, all FMIS schemes, particularly in the hills, will be required to complete an EIA as per the country's environmental guidelines. The PCCC will have a member representative from the Ministry of Population and Environment to oversee implementation of policy on environmental assessment. Recently HMGN has adopted an EIA procedure for all types of infrastructure project in the country. An EIA report will be prepared following the procedure for every major hill rehabilitation scheme and submitted with the feasibility report for every major sub-project. The required mitigating measures will be defined and costed and will be financed under the project (Section 2 - Project Components). It was agreed that PEPHI program will be continued in every NISP district in collaboration with Hill Community Forest Program with the support of the project and INGO/NGOs involvement. The mobile irrigation team would also be strengthened with the inclusion of one environmentalist. 19. Participatory Approach: Identification/Preparation Implementation Operation Beneficiaries/community groups IS+COL CON+COL COL Intermediary NGOs IS COL COL Academic institutions CON CON IS Local government CON COL CON Other donors IS COL IS (a) Water Resources Strategy Formulation. The strategy will be approved at the highest level of the Government. Public consensus building including political commitment would be sought at every phase of the strategy formulation. For example, a public seminar was held in April 1997 to discuss development issues and formulate an appropriate plan for the development strategy under the project. The NWDC Council chaired by the Prime Minister will be revived to approve the Consolidated Water Policy. (b) Irrigation Schemes. The project will apply a participatory approach to the rehabilitation and construction of each and every irrigation schemes to be financed under the project. Throughout the project cycle farmers will participate through their WUAs. In addition, the concerned VDC and DDC will be informed for all FMIS and small and medium turned-over and JM schemes. For SMIP-III, a separate Irrigation Development Board has been in existence. 20. Sustainability: HMGN's current level of subsidy in private (FMIS), as well as public irrigation schemes is not sustainable in view of the Government's limited financial resources. For that a separate subsidy study has been proposed in the project to analyze the HMGN's fiscal sustainability. Likewise another study funded under the project will review HMGN's O&M policy and water charges. A risk analysis has been made for possible aspects that can affect to the sustainability of the project in medium term and are discussed in details in section 13 and in Annex 4.  Project Appraisal Document Page 22 Country - Nepal Nepal Irrigation Sector Project Furthermore, the infrastructure created or rehabilitated under the project is expected to be much more viable and sustainable than the earlier type of investments in the irrigation sector in view of the participatory approach followed under the project. Experience in the pilot ILC proves that the WUAs concept will also become viable and sustainable as they follow the traditional concept of village irrigation schemes which has existed since time immemorial in Nepal. Through the participatory approach, fanners are expected to develop a higher sense of ownership and protect the infrastructure to which they contributed either cash or labor. 21. Critical Risks (see fourth column of Annex 1): Project outputs to development objectives Risk Risk Rating Risk Minimization Measure See above (20.a). Unless there is serious Medium Scope of the NISP should be curtailed. In addition, the proposed commitment by the government the NISP is subsidy studies would reveal the fiscal sustainability of HMGN in not sustainable. long run. Based on the results, remedies can be suggested. See above (20.b) Farmers do not pay for the Medium Request the Government to enforce strict regulation. Gradually required charges after implementation move to bulk rate charges at the secondary intake level. Failure of DOI to develop the necessary Low Minimized by tailoring the project scope to realistic performance capacity to accommodate the major expansion standards for DOI and (insisting that DOI retains adequate of FMIS. technical assistance in both sector of FMIS and public schemes) Project components to outputs Delays in water resources policy reforms to Low The Government is aware of the necessity of the strategy, and be developed under the project understands the fact that regionalization approach is of utmost importance for effective utilization of its water resources potential development for the overall development of the country. Project implementation monitored closely. Delay in implementation Medium Technical complexity beyond the capacity of Low All major schemes designs are to be reviewed by the consultants. DIOs in the Hills. Due to multiagency involvement the project Medium Constant monitoring and guidance from PICIPIU would minimize implementation can be impeded by poor the risks. Slow disbursement and account compilation could be coordination. Moreover, expansion of FMIS rectified by proposed arrangement of having a separate account in many districts at the same time will create unit, headed by Class II account officer at PCO. delayed disbursement. Frequent turnover of key staff Medium Assurance was obtained and agreement minuted at Negotiations. Fanners' box cutting contribution is delayed Low Piloting on the sample 1350 ha will be carried out before full due to various reasons operation. Block by block construction /completion will motivate farmers to get water as quickly as possible. Only Subsidy and Water Charges may be the risky issues if the Overallproject risk rating Medium Government has no immediate actions due to political reasons. No scheme would be selected for financing unless 70 percent of the beneficiary farmers agree to contribute their shares at different stages. A small risk is still that some beneficiaries may not be willing or able (especially hill farmners) to contribute their shares of the upfront investment costs and thereafter to the O&M. This should be minimized by the participatory approach which will be reviewed under the subsidy study.  Project Appraisal Document Page 23 Country - Nepal Nepal Irrigation Sector Project 22. Possible Controversial Aspects: No major controversial aspects are expected on the physical implementation of the project as these are all rehabilitation schemes which are to be implemented in consultation with the majority of farmers. However, some controversial ideas could arise in finalizing the water resources policy and the water and enviromnent management plans which are sensitive issues in Nepal. Reduction of state subsidy and water charges may also prove to be controversial due to political sensitivity. Block 4: Main Loan Conditions 23. Effectiveness Conditions: The following events are specified as additional conditions of effectiveness of the Development Credit agreement: (a) that two project consultants for Part A and Part B of the Project respectively, each with qualifications acceptable to the Association have been appointed; and (b) that a farmer organization unit with objectives, functions and staffing acceptable to the Association has been established under SMIP. 24. Other: 24.1 Other Conditions At negotiations assurances were obtained that HMGN would: (a) carry out a study of the level of investment subsidies in the irrigation sector with TOR as submitted and as per agreed time schedule which include the preparation of an agreed action plan to reduce the subsidy level over time. (paras. 2 (a) and 4); (b) improve water charges collection of Sunsari Morang Irrigation System by July 31, 1998 through implementation of a revised water charges plan with remedies against defaulters are being enforced; (c) increase to appropriate level its water charges to be determined through an O&M study under the project. After the study, the water charges would be revised to take into account its findings; thereafter it would be reviewed every two years to take account of increases needed. (Water charges have been increased 100 percent in major public systems before the start of NISP in FY1998) (para. 4); (d) put into effect an O&M plan for water management in Sunsari Morang Irrigation System which will have been agreed with the Association by March 31, 1998. (para. 2 (b)); (e) have established a Water Users Coordination Committee for the whole of the Sunsari Morang area and a representative of the Committee of Morang District would be included in the SMIDB (para. 2 (b)); (f) submit a satisfactory time-bound Resettlement Action Plan including a Land Acquisition Plan and implementation arrangement for all remaining project areas every year before construction for SMIP III (para. 17); (g) maintain the established PCCC chaired by the Secretary, MOWR and represented by FCGO, concemed ministries and heads of the implementing departments as members (para. 4); and  Project Appraisal Document Page 24 Country - Nepal Nepal Imigation Sector Project (h) maintain the established PIC chaired by the DG, DOI and represented by all concerned departments as members (para. 4). Block 5: Compliance with Bank Policies [X I This project complies with all applicable Bank policies and in particular those relating water resources development, procurement, environment, and involuntary resettlement. Task Team Leader: Ohn Myint' Country Director: Hans M. Rothenbuhler Task team members included Messrs./Mmes. R. Robelus (ENV); H. Plusquellec (RDV); T. Lohavisavapanich, M. Smith (FAO/CP); R. Wiratunga (LOAAS); S. Gonzalez-Flavell (LEGSA); R.C. Mishra, S.S. Ranjitkar, N. Sharma, B. Pradhan, K. Gautam (SACNP); T. Estoque, G. Spencer, K. Jensen, M. Whiskey, D. Feerick (SASRD). Peer Reviewers: Messrs: W. Price, E. Kramer, R. Reidinger (EASRD), I. Serejski (SASRD), A. Subramanian (MNSRE).  Project Appraisal Document Page 25 Nepal Irrigation Sector Project Annex I Annex 1 Project Design Summary Narrative Summary Performance Indicators Monitoring and Critical Supervision Assumptions CAS/Sector-related Goal: To enhance food security, diversify 1. Agricultural production 1. I Central Bureau of agricultural production, maximize increased by about 10% by end of Statistics reports. productivity and increase farm project. income. 2. Yields of main crops increased 2.1. Crop cut survey by about 15-20% over the present reports. yield. 3. Increased fann income by at 3.1 Living standards least 20% by end of project. survey (periodic) Project Development Objective: (PDO to Goal) 1. To assist the Government in 1.1 By end of project, allocation 1.1.1 Project evaluation * Complimentary planning and utilization of its water of water resources in percent (mid-term and final activities to increase resources in a harmonized, effective realized for major sectors like evaluation) farm income develop and sustainable manner Irrigation, Water Supply, successfully. Hydropower etc., in each major river basin based on the strategy. 2. To increase productivity and 2.1. Increased cropping intensity 2.1.1 Project evaluation * Nepal's sustainability of irrigation systems by at least 40-50% by end of (mid-term & fnal) agricultural products on about 59,600 ha of land in the project. 2.1.2 Annual crop cut remain competitive. selected districts of the three survey reports. western and eastern regions (based 2.2. Yield increased by 20% in 2.1.3 Supervision reports on the successful pilot experience in rehabilitated schemes (above (semi-annual) the Irrigation Line of Credit). baseline) by end of Project 2.1.4 Project evaluation (mid-term & final) Outputs: (Outputs to PDO) 1. A consolidated National Water 1. 1 Emergence of consolidated 1.1.1 Consolidated and Resources Strategy and a Water National Water Resources updated basin planning * Complimentary Policy developed and adopted. Strategy and Policy by 08/99 and reports. irrigation sector adopted by HMGN. % project activities are 1.2. Revised sub-sector policies. 1.2.1. Project progress carried out through reports (semi-annual). ADB funding 2. National Water Planning Unit 2.1 National Water Planning Unit 2.1.1 Project progress * Political support created and operational established with subject reports (semi-annual). and commitment specialists by FY1999/2000. obtained from stakeholder groups at 3. Farmer Managed Irrigation 3.1 Irrigation systems 3.1.1 Baseline survey national and local Systems rehabilitated and rehabilitated serving on about 40 levels. functional. thousand ha in 3 western regions 3.1.2 Scheme completion * Other inputs by end of Project. report (M&E unit). such as fertilizer and pesticides are 4. Selected Public Irrigation 4.1 Handover to farmers O&M 4.1.1 Beneficiary survey available and used by Systems rehabiliated and tertiary carried out for 20 thousand ha. of (final, M&E unit) farmers. units handed over to user groups. public irrigation. Satisfaction of 4.1.2 Schemes completion * Agricultural farmers groups with system reports (M&E unit) extension activities improvements. adequately executed I__ _ _ _ _ _ _ _ _ _ _ I____________ and funded  Project Appraisal Document Page 26 Nepal Irrigation Sector Project Annex I 5. Water Planning and Management 5.1 At least 200 irrigation staff 5.1.1 Project training program implemented at national trained in O&M and water report (periodic) and local levels. management in 36 districts of 5.1.2 Project progress three western regions by the end reports (semi-annual). of project. 5.1.3 Supervision reports (annual) 5.1.4 Project evaluation (mid-term & final) 5.2. Adequate data collection, 5.2.1 Supervision reports collation, and water planning (annual) gomg on in 77 sub-basins by end 5.2.2 Project evaluation of project. (mid-term & final) 5.3. At least 100 district 5.3.1 Supervision reports agriculture staff trained in (annual) irrigated water management by 5.3.2 Project evaluation end of project. (mid-term & final) 5.3.3 Project training report (periodic) 5.3.4 Project progress reports (semi-annual) 6.Water management training 6.1 About 600 farmer 6.1.1 Project training program for farmer organiza-tions organizations trained in report (periodic) established and operational production, marketing, financial 6.1.2 Project progress and water manage-ment by end of reports (semi-annual). project. 6.1.3 Supervision reports (annual) 6.1.4 Project evaluation (mid-term & fmal) Components/Activities Inputs: 1. Progress reports and (Components to 1. Water Resources Strategy and 1. US$ 1. 43 million disbursement reports Outputs) Policy (4 monthly) * HMG continues a. Technical Assistance for to support and formulation of a compre-hensive implement policy water strategy and consolidated reform in the water policy sector b. Institutional support to MOWR * Counterpart and NPC funding available in a timely manner as 2. Irrigation Sector Improvement 2. US$ 82.63 million 2. Progress reports and specified in budget. and Development disbursement reports * User groups a. Rehabilitation, improvement and (4 monthly) formed in a timely development of farmer-managed a. US$ 38.81 million manner. private irrigation schemes (39,500 * Demand for ha.) irrigation improvements b. System improvement in public forthcoming from schemes and privatization through b. US$ 40.65 million user groups. farmer turnover (20,100 ha.) * Adequate TA is provided in a timely c. Other infrastructure support manner. (roads, river protection, * Adequate environmental protection of some c. US$ 4.17 million coordination between  Project Appraisal Document Page 27 Nepal Irrigation Sector Project Annex I schemes) and pilot water resources agencies. integration scheme * Key project staff retained. 3. Institutional strengthening a. Dept. of Irrigation b. Dept. of Hydrology and 3. US$ 17.96 million 3. Progress reports and Meteorology disbursement reports c. Dept. of Agriculture a. US$ 9. 55 million (4 monthly) d. Water User Associations, NGOs b. US$ 5. 52 million and CBOs c. US$ 2. 03 million d. US$ 0. 86 million Total: US$ 103.02 million October 1997.  I  Project Appraisal Document Page 28 Nepal Irrigation Sector Project Annex 2 Annex 2 Detailed Project Description 1. The proposed project to be implemented over a five year period will comprise the following components: A. Project Component 1. Development of Comprehensive Water Resources Strategy and Consolidated Policies and Plan (US$1. 43 million) 2. The component would be implemented by MOWR under the guidance of a NSC constituted for this purpose. The NSC would establish a core technical unit or reorganize the existing WECS to form a National Water Planning Unit (NWPU), which would carry out the task with the assistance of international and local consulting teams. 3. The task is divided in two stages: Phase I. completed during the project preparation, considered the national goals and assessed the water resources and potentialities; defined the opportunities and constraints affecting their development; and identified major issues requiring attention and action. Phase II would define practical options to address the prioritized issues of Phase I, and recommend a comprehensive strategy for implementing the optimal development. Completion of the Phase II Strategy Formulation is planned under the NISP. The details are provided in the borrower's Project Implementation Plan and the implementation schedule of the Phase II strategy formulation is shown in Attachment I of this annex. Al. Formulation of Water Resources Strategy and Development of Consolidated Policy (US$1.32 M!. 4. This sub-component would finance technical assistance for the Phase II strategy formulation. To facilitate budgetary management, the task would be carried out by the core NWPU. The NWPU will comprise a group of professional staff appointed by the Government, attached permanently either to a central governmental organization or to the existing NSC chaired by the Member of the National Planning Commission. A new NWPU can either be established or the existing WECS reorganized into an NWPU no later than December 31, 1997 to cover the whole scope of the water sector. It is ultimately aimed that the unit be attached to the National Water Development Council chaired by the Prime Minister. 5. The national consulting team will consist of about 220 person-months to cover an inter- disciplinary expertise in the fields of hydrology, engineering (civil, irrigation, environmental, water and energy systems, river management), hydrogeology, geology, economics (agricultural, energy and macro), regional planners, morphology, environment, information systems, geography, legal (resource law, international law), agronomy, rural sociology, political science, and business/finance. Until funding by an international donor of this sub-component is arranged, HMGN has agreed to use the credit for the consultancy services. The consulting team will then be recruited in accordance with IDA guidelines.  Project Appraisal Document Page 29 Nepal Irrigation Sector Project Annex 2 6. An expatriate consulting team would assist the national consulting team in seeking technical solutions. The team will comprise a small group of 8 to 10 expatriate personnel for about 35 mm and will be headed by an expatriate team leader/cum Water Resources Planner. The team's major responsibility is to bring in international experience in integrated water resources planning and management and to help develop the framework for policy and development strategy for water resources. The team leader shall be an internationally recognized senior expert on water resources planning. Other members will be experts in key areas of expertise to support national members. The services of these experts would be on an intermittent basis. Short-term consultants on some specific areas (e.g. resource economic, financing, energy pricing, information systems, institutional specialist, river basin planning etc.) would also be used as and when required. 7. The detailed TOR is attached to the Borrower's (PIP) Attachment 1. General scope of the study and methodology include the preparation of exhaustive studies and basin planning covering, but not limited to, the following: * review of sectoral goals to ascertain their adequacy and appropriateness in achieving the national objectives as defined in the 20-year development perspective outlined in the Ninth Plan Approach Paper; * assessment of sectoral goals in contributing towards water resources development as"an engine of economic growth"; * examination and analysis of forward and backward linkages of water resources development in their specific uses for integration of sectoral goals, policies and priorities into the overall development; * assessment of contribution of water resources in their specific use to economy in terms of overall GDP growth or sectoral GDP growth; * identification of stakeholders and mechanisms for their effective participation at appropriate levels of policy formulation, decision-making, implementation and feedback systems; * suggestion for rationalization of regulatory instruments and institutions, if needed, to ensure implementation of national and sectoral objectives and policies in a consistent and effective manner; * incorporation of new sectoral components such as the export of hydropower; * assessment of changes or improvements required to implement the suggested options - technical, legal, administrative, financial, institutional, environmental - with reference to the specific policies adopted by the Government; * adoption of a river basin approach to water resources planning and management while examining issues and assessing options. 8. The Study would be completed over a 27-month period. However, the target should be to get the bulk of the development completed within 24 months and to use the remaining 3 months for formulation of the National Water Plan. Around the end of 19 months, there should be a workshop, hosted by the  Project Appraisal Document Page 30 Nepal Irrigation Sector Project Annex 2 National Steering Committee, presenting the framework models of the system and initiating discussion within the Government of the National Water Strategy and Water Plan. 9. In addition, the component would finance special studies to revise sub-sector policies, (Water Resources Acts, Irrigation Regulation 2050, Irrigation Policy 1992 (revised 1997), Hydropower Development Policy 1992, Water Supply Policy, Industrial Waste Water Acts, etc.) and Regulations to ensure their compatibility and consistency with the developed comprehensive strategy. This component would also finance (i) a review of HMGN's subsidy policy for investment in irrigation development with a view to gradually tapering-off over time, and (ii) a review of O&M requirement in different public irrigation systems and its associated water charges to cover full O&M in light of joint management of the systems with beneficiary farmers. The detailed TORs for the subsidy study and O&M studies are given in the PIP Attachment 6, Annexes C and D. A2. Institutional Support to NWPU (US$0.11 M). 10. This sub-component would assist MOWR and NSC to finance (a) the establishment of a permanent central NWPU; (b) the procurement of support office logistics and transport facilities for NWPU's office; (c) the acquisition of computers and planning tools such as GIS and river basin economic decision modeling; and (c) miscellaneous expenses for printing and publishing of revised acts and regulations. II. It was agreed that HMGN would have the prerogative to use any bilateral grant or aid funding, if it becomes available in the course of project implementation, to finance this component . HMGN has agreed to inform IDA by no later than June 30, 1998 about availability of co-financing of the strategy formulation by bilateral donars. At the completion of the component, Nepal will have a permanent NWPU supporting the National Water Development Council (chaired by the Prime Minister) in water resources planning, budgeting and management. D. Project Component 2 - Irrigation Sector Improvement and Development Component on 59,600 ha: US$83.63 million (total cost of component). 12. This component consists of specific investments included in the overall application of IIMGN's irrigation policy. To improve productivity and sustainability, HMGN promulgated a new IP in 1988 which was revised twice in the last nine years, i.e., in 1992 and in 1997. The IP focuses on improving irrigation development and management based on "participatory approach" of local initiatives and active participation of WUAs. The practicality of IP in private farmer-managed irrigation schemes has been tested satisfactorily by an on-going ILC pilot project since the promulgation of the IP. Likewise, the practicality of joint management policy (joint management by WUAs and project authority ) in public irrigation schemes has been piloted successfully in the completed Mahakali Irrigation I Project (Cr. 1055) and Sunsari Morang Irrigation II Project (SMIP-II - Cr. 1814). 13. To date, 300 small and medium surface irrigation schemes on about 33,260 ha and 217 medium and deep tubewells in 18 clusters covering about 4210 ha, have been completed successfully under the ILC Pilot Project. Based on the successful pilot experience, NISP would continue financing viable private and public irrigation subprojects as a first stand alone project under the sector investment. Subprojects would be considered eligible for funding under NISP based on the written demand and financial commitment for investment cost sharing by beneficiary farmers as outlined in the IP (see Attachment 2). Viability will however be assessed based on specific technical, economic, social, and environmental merits and criteria.  Project Appraisal Document Page 31 Nepal Irrigation Sector Project Annex 2 The component will consist of the following types of sub-projects: B 1. Rehabilitation, Improvement and Development of Small- and Medium-scale Farner-owned and Managed Irrigation Schemes (FMIS) - 39.500 ha (US$ 38.81 M). 14. The component would comprise of the following sub-projects to be implemented based on the "demand-driven" principle as outlined in the IP: * rehabilitation of FMIS covering about 31,500 ha fed by surface water, estimated at 11,500 ha in the hills and 20,000 ha in the Terai, involving both major and minor rehabilitation works; * rehabilitation of existing shallow and deep groundwater tubewell systems covering about 500 ha (250 ha each); * development of about 7,500 ha of new shallow and deep groundwater tubewells (2950 and 4550 ha respectively). Out of the above areas, some 21,144 ha of surface water and 851 ha of groundwater systems which are currently being implemented under the on-going ILC pilot program (total about 68% of sub-component BI) will be carried-over for completion under NISP. Details of the carry-over sub-projects from ILC to NISP are given in Attachment 3. 15. The component would finance: * rehabilitation and modernization of temporary headworks and intake structures. The headworks and related structures are often built by farmers in such a rudimentary manner that these structures are vulnerable to destructive torrents experienced in rivers of Nepal; * repairs of main and secondary canals in cases of excessive leakage, and conveyance system structures such as flumes, culverts, outlets, spillways, etc. of viable FMIS fed by surface water; * rehabilitation of clustered tube-well schemes fed by ground water; and * development of new clustered tube-well schemes fed by ground water. All rehabilitation works to be financed are those beyond the beneficiary farmers' technical and financial capacity to implement on their own. The existing ad-hoc water user groups would be legalized as registered WUAs at each FMIS implemented under the project.  Project Appraisal Document Page 32 Nepal Irrigation Sector Project Annex 2 B2, System Improvement and Turn-over to Farmers (SIFT) of Public Irrigation Systems 20.100 ha (US$ 40.65 m! 16. This component would finance: (a) improvement, rehabilitation and turn-over of 15,100 ha of Sunsari Morang Iffigalion Phase III (SMIP-III) (US$39.12 m); and (b) 5.000 ha of fully or partially turned-over (TO) small and medium public irrigation systems (US$ 1.53M) within the three Western Regions of Nepal after reaching agreements with fanners to take over the systems after improvement. The rehabilitation and improvement are of a similar nature to FMIS under this category. Fully TO subcomponent will comprise of 500 ha in hills surface schemes, 1500 ha in Terai surface schemes and 500 ha in groundwater DTW and joint management of medium sized public irrigation covering 2500 ha in the hillsand the Terai. The schemes are to be identified based on written demand and financial commitment from farmers. 17. SMIPJIII . This sub-component would finance rehabilitation and improvement of the third phase Sunsari Morang System. This is a continuation of the Bank-funded Sunsari Morang Irrigation II project (Cr. 1814-NEP completed successfully in March 1995). This sub-component would comprise of: * improvement and rehabilitation of the main canal of the Sunsari Morang Irrigation System beyond the completed Sunsari Morang II area * rehabilitation and modernization of secondary canals and related structures, drains and inspection road networks * development of distribution networks through construction of sub-secondary, tertiary and water course canal systems * construction of 5.5km of the Kosi River Eastern flood embankment * technical and institutional capacity-building in project implementation and O&M to staff and beneficiary WUAs * works and infrastructure necessary for proper O&M of the developed system More details about the SMIP-III sub-project is provided in Attachment 4. 18. Other Turn-over schemes. Improvement of small, medium, and large public irrigation schemes with technical deficiencies, and turnover of full or part of the schemes to the beneficiaries. Thiswill improve the system management, relieve public resources on O&M liability and induce a sense of ownership. Beneficiaries will participate in the design and construction of tertiary canal units which in most cases are missing in the original systems under joint management schemes like SMIP-III. The IP mandates that, after reaching agreement with beneficiaries, larger public schemes (over 2000 ha in the Terai and over 500 ha in the Hills) will be jointly managed by WUAs and DOI (Participatory Joint Management - PJM) and smaller public irrigation schemes, are to be totally turned-over to the beneficiary farmers.  Project Appraisal Document Page 33 Nepal Irrigation Sector Project Annex 2 B3. Infrastructure Support Development for FMIS and TO schemes in the three Western Regions (US$ 3.11 M). 19. This component would finance other infrastructure support to be carried out in the FMIS areas such as: * construction of farm roads for Terai FMIS and groundwater schemes and trail improvements for hill FMIS on the basis of beneficiaries' demand and project viability on the basis of specific criteria.at the feasibility study stage. An estimate of some 45 Km will be financed under the project; * construction of river protection works where FMIS and TO sub-project river intake sites are threatened, or command areas are under attack through river erosion; * construction of environmental protection works to stabilize hill slopes, canal alignments, improve drainage, etc., associated with FMIS and TO sub-projects. Initial Environmental Examinations (IEE) will be incorporated in each sub-project's feasibility report to identify the mitigation measures required, and ascertain if a more comprehensive environmental impact assessment is required; * mechanical workshops at Biratnagar and Bhairahwa for maintenance and operation of heavy and mechanical equipment under different projects of DOI, provision pf tools, spares and equipment and continued support to SMBHP dredger operations; * construction of rural drinking water supply schemes on the basis of beneficiaries' demand and financial commitment and project viability at the feasibility study stage, particularly for hill FMIS and TO sub-projects where the participatory principle is applicable. An estimate of some 15,000 people within NISP areas are to benefit; * construction of localized micro-hydropower where the topography and site conditions are appropriate within hill FMIS sub-projects, based on the participatory principles, beneficiaries' demand and project viability at the feasibility study stage. An estimate of 300 kw will be newly generated within NISP areas; * construction or extension of Regional and District Irrigation Offices (12 Nos). Derivation of Costs of model sub-projects for FMIS, TO and PJM 20. As the project is demand-based, it is difficult to predict in advance the type of sub-projects that will be implementated. Therefore cost estimates of the project were based on different types of model sub-projects, and their costs were applied to the potential NISP sub-projects. The costs include civil works and other ancillary support works for surface sub-projects in Terai and Hills under major and minor rehabilitation,' groundwater in Terai under STW and DTW, as well as TO and PJM of surface sub- projects. The costs of the irrigation system for the selected model sub-projects were identified and estimated on the basis of actual requirements. The typical cost estimates of irrigation system were prepared from the costs of model sub-projects andapplied to the potential sub-projects. The cost estimates of the appraised 12 model sub-projects are summarized in Annex No 3. Based on the model  Project Appraisal Document Page 34 Nepal Irrigation Sector Project Annex 2 sub-project costs, the cost estimates of the various components of the irrigation infrastructure development were derived. The per hectare costs of irrigation system rehabilitation works were applied to alternative sub-project areas, for assessing the best combination of types of sub-projects. 21. Costs of improvements to Sunsari Morang III sub-project were derived from the detailed feasibility study of the project. The cost estimates of the sub-projects were prepared for a total area of 59,600 ha (including SMIP-III). 22. Other ancillary costs were included based on percentages of the project base costs for rehabilitating irrigation systems. The costs of rural farm roads, river training, environmental protection, micro-hydropower, and drinking water supply facilities were estimated in the same manner. The costs for planning, feasibility study, detailed design and supervision of irrigation system rehabilitation and other project related civil works were estimated at three percent of the total civil works cost. Provision was made for recurrent support costs for DOI and DOA during the five-year implementation period at NRs. 320/ha/year, based on the past expenditures. The incremental O&M costs were taken at NRs. 950 per hectare per year for the surface sub-projects, NRs. 2,45 1/ha/year for STW and NRs. 1,739/ha/year for DTW, based on the results of the model sub-project studies. The project base costs (including SMIP-III), for the irrigation infrastructure development component, were estimated at NRs 4,048.0 million. C. Project Component 3 - Institutional Strengthening US$17.96 million (total cost of the component) 23. This component would finance institutional strengthening and development to ensure achievement of the objectives of the project is met. It would finance consulting services for the project implementation, training, investigation and studies for investments, buildings, equipment and vehicles, and limited incremental O&M and staff support to the following implementing agencies of the project. Cost estimates for this component were derived from actual requirement for consultancy services, goods and materials, and training and studies. (a) Department of Irrigation (DOI) (US$9.55 million): DOI will have primary responsibility for implementing the project's infrastructure development. To support this component the project would finance institutional strengthening of DOI by providing: * foreign and local consultants to assist in the design and supervision of the NISP implementation and to monitor quality control. A total of 60 and 343 manmonths respectively for international and national consultants will be required over the full five year period of the project * funds for training at the central, regional, district and sub-project levels, with the supply of associated equipment, machinery and vehicles to make it effective * groundwater monitoring works in 8 districts involving investment costs for shallow (100 Nos) and deep (14 Nos) investigation bore holes, rehabilitation of investment in DTW (20 Nos) and STW (50 Nos) associated geohydrological survey equipment, training of operatives and recurrent costs for staff and machinery O&M, procurement of a drilling rig with supplemental machine and equipment.  Project Appraisal Document Page 35 Nepal Irrigation Sector Project Annex 2 * on-farm water management activities on a pilot basis within completed FMIS (to cover at least 10 percent of the developed area) in selected districts of NISP, to expand crop intensification. Included will be separate foreign and local consulting services, training, provision of vehicles and recurrent staff and operation costs * studies to determine the optimum level of O&M requirements for different public irrigation systems prior to and after handing over parts of the system to the beneficiaries, the funding requirement to achieve this optimum level, and the appropriate level of water charges to be implemented * a subsidy study to assessHMGN's financial burdenes and the capacity of the beneficiaries to pay in accordance with an agreed plan to reduce the subsidy over time to 50 percent * funds for improving the management information system within the central and regional offices through procurement of computers, software and hardware and training of staff. (b) Private Sector Strengthening (WUAs, NGOs and CBOs) (US$0.86 million): The project would finance training of selected regional and district staff and WUAs, NGOs, and CBOs in such topics as NISP principles and procedures, systems O&M, participatory environmental protection in hill irrigation (PEPHI), irrigated water management, farmer organization, financial management, credit accessing, and marketing. Training will be based on a program designed by the project consultants in collaboration with DOI's Human Resources Development Training Branch, DOA's Regional Training Center, ADBN, FAO/CP special program and on going program for PEPH[. (c) Department of Hydrology and Meteorology (DHM) (US$5.52 million):: DHM is the country's sole agency for-hydro-meteorological data collection, collation, and management. Currently, DHM is operating with sub-optimal facilities and a number of observation sites. The project would finance institutional strengthening in data collection, collation and dissemination functions, support the strengthening of DHM's data collection networks formed under basin-wise boundary, and basin-wise resources inventory planning in about 77 sub-basins (within three of the four major country river basins) covered in the three western development regions. (d) Department of Agriculture (DOA) (US$2.03 million): The project would provide limited support to DOA's intensified efforts to strengthen district DOA's capacity for preparation and appraisal of NISP schemes and extend specific agricultural training services to NISP irrigated areas which are not immediately covered by the recently approved Agricultural Research, and Extension Project ( AREP). The project would include the provision of improved planting materials, field trials, demonstrations, training, and purchase of vehicles (8 Nos), motorcycles (26 Nos) and bicycles (10 Nos).  Project Appraisal Document Page 36 Nepal Irrigation Sector Project Annex 2 Implementation Arrangements (a) Organizational functions of the project 24. Except for the Water Resources Strategy (WRS) and Integrated Water Resources Policy Development component which will be implemented under the overall guidance of NPC and the administrative responsibility of MOWR, DOI, DOA and DHM will implement their component of the project. 25. The Irrigation Sector Infrastructure Improvement and Development component and some of the sub-components under Institutional Strengthening and Development will closely involve the beneficiaries organizations (men & women farmers) in project implementation with assistance from CBOs/NGOs. The district level offices of DOI and DOA will be accountable and responsible for project requirements and implementation. Under District Agricultural Development Officers (DADO), the subject matter specialist (SMS) and JT/JTAs of Agriculture Service Centers and Sub-Centers (ASCs/ASSCs) working at village level will be the key players in irrigated agriculture extension activities, whereas the irrigation engineers, Overseers and Association Organizers under DIO will be the main actors for project preparation, design and rehabilitation and construction of sub-projects. The administrative and supervisory control will be under the organizational and managerial set-up of the implementing agencies through their regional offices. (b) Participating Agencies 26. The Water Resources Strategy and Integrated Water Policy Development (WRSF) component will be implemented by a NWPU to be established by MOWR under the guidance of NSC of NPC. The credit funds would be handled by MOWR. 27. MOWR would have overall responsibility for guiding and directing the implementation of project activities under DOI and SMIP-HI. Hydrological networks and water resources inventory planning will be implemented by DHM under the Ministry of Science and Technology (MST), and irrigated agriculture development activities will be implemented by DOA under MOA. 28. The SMIP-III sub-project will be implemented by the existing SMIP Board under the overall technical guidance of DOI. The role of SMIP Board infostering PJM will be limited to taking expeditious decisions related to procurement of ICB, LCB, etc and other project management matters. The RD/DOI of the eastern region will be consulted on who will be responsible for monitoring and will facilitate coordination with other regional offices, mainly Regional Agriculture Directorate. 29. Implementation of FMIS and TO sub-projects would under the guidance of the relevant divisions of DOI through RIDs, DIOs, GWFOs and/or through other project offices where appropriate. It is not envisaged that GWDB will be involved in the projects' management. If consultation with the Board is required, it will be done by DDG of GWD/DOI. 30. A PCO would be set up in DOI under the direct supervision of a Project Coordinator (PC). Full time coordinators of major components will assist the PCO in all project matters related to their respective components. The PC would be responsible for compiling the progress reports and project accounts of all the activities under the project.  Project Appraisal Document Page 37 Nepal Irigation Sector Project Annex 2 31. Hydrological studies including water resources data and monitoring (basin/sub-basin studies) would be implemented by DHM in close consultation with the Planning, Design Monitoring & Evaluation Branch of DOI which would function as co-implementing agency. The agricultural extension services and related training and other agricultural support required, i.e. sub-project preparation, base- line data collection, BME etc., would be provided by the DOA through their existing RADs & DADOs in close co-ordination with RIDs, DIOs/GWFOs. The DOA will function as co-implementing agency for agricultural extension and related activities. 32. The NISP organization chart is shown in Attachment 5. The functions of the various committees and implementing units are spelt out in the PIP and briefly described below: (i) Project Central Co-ordination Committee (PCCC) To liaise between project executing agencies and relevant Government agencies, an apex Project PCCC would be set up under the chairmanship of the Secretary, MOWR, and will include representatives from NPC, MOA, MOF, MOPE, MST, and the Directors-General (DGS) of implementing departments such as DOI, DHM, DOA. The PCCC will coordinate inter- ministerial and inter-departmental project activities relating to policy, budget and major procurement issues. The DG, DOI as Chairman of PIC, will function as secretary of PCCC assisted by PCO. (ii) Project Implementation Committee (PIC) For implementing the project components a PIC would be set up under the chairmanship of DG of DOI. Its members will consist of the DDGs/DGMs of the concerned divisions of the implementing departments along with representatives from ADBN and AIC. This committee will be responsible for assuring inter-departmental regional offices coordination on matters related to budget preparation, disbursement compilation, progress reporting, and other project management related matters. The PC will function as the secretary of this PIC. - Project Co-ordination Office (PCO) To assist the PIC, DOI at the center would establish a PCO headed by a full time senior first class officer, the PC. The PC would be staffed with representatives from implementing departments and a technical assistance team (the Consultants). The PC would be a senior qualified and experienced individual, capable of co-ordinating a vast number of activities in the three regions. The PCO will be the focal and contact point for all purposes, inter-alia the Bank, other donors and associated visiting missionsand will be responsible for compiling project accounts, expenditures, withdrawal applications, progress reports and audit reports of all the components of NISP. However, consolidated withdrawal applications, will be preparedby the concerned Project Managers (PMs). The PCO will function in close consultation with relevant divisions of DOI and would maintain regular linkages with them and co-ordination with other implementing agencies. A team of expatriate and national consultants will assist the PC in the implementation of the project's components in accordance to the PAD. The PC will be responsible for all matters related to procurement of goods and services and will be guided by the World Bank's procurement guidelines. This PCO will serve as a secretariat of the PIC for its meetings and transmission of its decisions.  Project Appraisal Document Page 38 Nepal Irrigation Sector Project Annex 2 For the SMIP-IHl sub-project, the PC of the SMIP project team will be responsible for maintaining separate project accounts, timely progress reporting, and submission of audit reports and withdrawals applications.. The PM of SMIP-III will function as PC of this sub-project. Similarly DHM and DOA will be resonsible for maintaining separate project accounts, timely progwess reporting, and submission of audit reports and withdrawal applications of their respective components. (iii) Project Implementation Units (PIU) and Regional Appraisal and Approval Committee (RAAC) PIUs would be established in each of the three Western regions. Its project activities would be coordinated by the Regional Irrigation Director (RID), who will be designated Project Manager of NISP. PIU membership will include the Regional Agriculture Director (RAD), the Director of National Planning Commission (Regional Office), the Regional Controller of ADBN and a representative of the regional office of DHM. The PIU will also serve as RAAC and as such may invite other relevant officials of regional/zonal level offices in the locality of the RID. This is deemed essential in order to establish good linkages and to assure their support at the required stages of the sub-project development. The main responsibility of the RAAC will be to appraise sub-projects that have been submitted by the DIOs/GWFOsafter scrutiny by MIT. The RAAC members should review and approve those aspects of the sub-project relevant to their area of expertise. Each member will provide written comments and recommendation separately. The RAAC members will in particular: * appraise and approve sub-projects of a minor rehabilitation type costing up to Rs. 1.0 million as defined in the PAD. * appraise and recommend to DG/DOI for approval all those sub-projects of major rehab type or deep tubewell clusters and those costing above the limit mentioned above. The individual TOR of members of the RAAC responsible for implementing respective components of NISP are provided in the PIP. Administrative Arrangements 33. Project implementation would require proper management and administration. The deployment and redeployment of staff and personnel would follow the normal administrative and financial rules and staff regulations of HMGN, but would need to abide by agreed legal covenants spelt out in the Development Credit Agreement (DCA) between the Bank and the Borrower (HMGN). The roles and responsibilities of implementing agencies and entities have already been discussed in detail in the PIP. It should be emphasized that for project-related procurement and disbursement, the Bank's procurement and disbursement guidelines should take precedence over rules and regulations followed by accounts staff deployed by the FCGO. In this regard, it is important that knowledge and skill in withdrawal application and accounts keeping need to be imparted to the designated accounts staff. It will also be critical for project accounts staff to be in place for the full term of the project and that they should be responsible to the implementing units and officials for timely submission of withdrawal applications.  Project Appraisal Document Page 39 Nepal Irrigation Sector Project Annex 2 Similarly engineers who will be trained in sub-project implementation based on NISP principles and procedures need to be in position for their full term as per administrative rules and staff regulations. Frequent transfers have hampered progress in the past. Implementation Plan (a) Time bound detailed implementation plan 34. The proposed project will be implemented over a five-year period. In the first year, completion ofsub-projects carried-over from the ILC will be continued, along with the preparatory work of selection, identification and feasibility studies for new pipe-line sub-projects in accordance with the guidelines for NISP implementation. Appointment of consultants, as well as procurement of equipment and vehicles and other logistic supports required for the effective implementation of the project, particularly for first year requirement, will be completed during the first year of the project as per the procedures specified by the World Bank guidelines. 35. Based on the overall implementation schedule (ref. Borrower's PIP Attachments 9 and 10), the estimated annual project expenditure, including physical and price contingencies are summarized below. Description 1 year 2nd year 3rd year 4th year 5th year Total (Period) 1998 1999 2000 2001 2002 I NRs x million 619.2 1410.4 2006.9 1675.2 663.3 6375.0 Implementation Schedule 36. The NISP components are to be implemented over five years. Implementation of FMIS sub- projects would normally be completed in two consecutive years after completion ofall the preparatory works, including WUA's organization. For budget programming purposes, construction works of FMIS would not normally be scheduled in the first year except where the WJUAs are already organized and have fulfilled their financial commitment and the DIO has prepared and received approved detailed designs. Typical implementation schedule for Surface Water (minor & major rehab) and Groundwater schemes are shown in Attachments 6, 7 and 8. Stages of Implementation 37. Each Sub-Project (schemes) under NISP will be implemented in the following stages. Quality has to be assured at all the stages. The process should strictly follow IP 1997 in general, and in accordance with the Procedural Guidelines for Surface Water and Groundwater Irrigation Schemes (Attachment 9) prepared by ILC TA Team, in particular, for the following stages of implementation. (i) Pre-construction stage (ii) Construction Stage (iii) Commissioning and Turnover (iv) Operation & Maintenance  Project Appraisal Document Page 40 Nepal Irrigation Sector Project Annex 2 Schedule of Procurement Actions 38. Procurement of goods and services required for different components are to be managed as shown below and details are discussed in Annex 6. Description Method Works (construction) International Competitive Bidding (ICB), National Competitive Bidding (NCB), Others Goods (equip., vehicles etc) ICB, NCB, Local Shopping Training HRDTB, RID/RAD, NGO/CBO Studies National Agencies Technical Assistance Expatriate Consulting Firm and National Agencies Works 39. The works related to the improvement/rehabilitation of FMIS and construction of Groundwater schemes are civil works in nature. The number and types of sub-projects are still not fixed as this would depend upon the demand of the farmers. It is anticipated that there will be almost 390 sub-projects in the three regions. The works will be very small in nature, scattered in several districts of the three regions and scheduled at various times over the five years. Therefore these works have to be executed through NCB procedures and wherever possible by the beneficiary groups. The works would consist mainly of diversion structures, water conveyance structures, canal excavation, canal linings, retaining walls and many other rehabilitation works required for irrigation systems, farm roads, river training, tubewell drilling, pump house, pumping installations, environmental protection measures, drinking water, micro- hydropower generation, etc. There may be some instances where works are situated in remote locationswhich may require that theworks are executed on a piece meal basis or by awarding the works contract on the basis of three quotations. 40. The works under SMIP-III would be divided into ICB and NCB and Farmers' contribution portions. The ICB works would be related to major works for rehabilitation of main, secondary and sub- secondary or tertiary canals and related structures. The water course networks each covering 28 ha to30 ha and below would be carried out by NCB contractors (procurement package are to be planned after obtaining farmers' agreement and final design in the course of implementation) up to filling of earth formation and construction of related structures. The farmers have to contribute their land for the water course constructions free of cost and participate in box cutting of the earth formation. Experience in the other projects (Mahakali Stage II, Bhairawa-Lumbini III) would be tested in the pilot area (1350 ha) in the first year. Based on that outcome, the remaining area would be developed in the following years. Goods 41. The goods to be procured under the project include vehicles, equipment, machinery and office equipment and accessories. These will be procured through ICB, NCB, LIB and local shopping procedures. Studies, Training and Services 42. All Consultants required for studies, training and other services under the different project components will be selected and appointed by the implementing agencies according to IDA guidelines.  Project Appraisal Document Page 41 Nepal Irigation Sector Project Annex 2 Technical Assistance 43. Consultant services totalling US$ 11.5 million I will be required toto assist MOWR, DOI and DHM in implementing the project. This would include both long term and short term expatriate and local consultants. Agreed TA staffing schedule is provided in the PIP. Contract Review 44. The details of the various expenditure categories' threshold for different procurement methods and limits that required standard IDA previews are provided in Annex 6 - Procurement and Disbursement Arrangement for sub-project preparation, hydrological studies, other studies, standard contracts for use with prequalified consultant frms will be based on agreed terms of reference and contract documents and will be pre-approved by IDA. Standards and Procedures specified in the Bank's "Guidelines for Procurement" will be followed. HMGN has developed standard ICB and LCB bidding documents for works and goods. These documents have been agreed with IDA. These will be used for procurement as well as for executing works. Standard IDA procurement preference will be given to domestic contractors and manufacturers when ICB procedures are to be used. Detailed Schedule of Disbursement of each component 45. The different components of NISP are planned to be implemented during the project period as explained above in section-I of this chapter. Based on the time-bound detailed implementation plan, annual expenditures required have been worked out and shownAnnex 6 Table A. Project Accounting and Financial Management Accounts and Audits 46. To facilitate disbursements IDA will establish a Special Account (SA) of (US$ 3.00 million) in the Nepal Rastra Bank after the Credit is declared effective. The funds from the SA will be used for project expenditures to the greatest extent possible. Expenditures less than US$ 300,000 equivalent, both foreign and local, under all categories for the project implementation, will be financed through this account. All other expenditures above US$ 300,000, may either be submitted directly to IDA for direct payment or may may be paid from the Special Account. All expenditures from the Special Account will be promptly reported to IDA. 47. The Auditor General of Nepal is responsible for auditing all accounts. All accounts will be maintained according to sound accounting principles and audited according to appropriate auditing standards and principles consistently applied by independent auditors acceptable to the Association. For NISP implementation, DOI, DHM and DOA will maintain separate records and accounts for all project expenditures, by individual project component and subcomponent, and in accordance with appropriate accounting principles. PCO will furnish to IDA the consolidated report on the Special Account, audited by an independent auditor appointed by Auditor General of Nepal and acceptable to IDA in accordance with accepted auditing standards. PCO will compile and forward to IDA such accounts, together with the auditor's reports, within 9 months after the end of each fiscal year. The report will also include separate opinion from the auditor as to whether the disbursements made on the basis of statements of expenditure were for goods and services received and incurred for the purpose and scope of the project. Agreement was obtained at the Negotiations that during project implementation, the Borrower would submit  Project Appraisal Document Page 42 Nepal Irigation Sector Project Annex 2 periodic Financial Management Reports(FMR) every four months during the fiscal year. The FMR consists of: (a) Financial Statements of the Project; (b) Project Progress; and (c) Procurement Management Reports. PCO will also furnish to IDA such other information concerning audits and accounts as IDA shall from time to time reasonably request, including unaudited project accounts and financial statements for each fiscal year, duly certified by an independent auditor as to their accuracy and authenticity within six months after the end of each fiscal year. Monitoring and Evaluation 48. Given the specific objective of developing efficient irrigation systems through participatory approach and providing agricultural extension to the newly-irrigated areas with active involvement of beneficiary farmers, and in order to continuously upgrade technical skills and management capabilities of project staff, a scientific system of M&E needs to be established under the project. Such a system must incorporate all the key processes, input and output indicators, and impact evaluation parameters for monitoring progress in achieving project development objectives. The following paragraphs briefly describe this process. 49. The project would attempt to design an M&E system that would enhance the M&E tools currently adopted by the implementing agencies, and the institutional arrangements presently operating under them. The ultimate aim of the M&E system to be installed under NISP should be to increase the opportunity to maintain continuity of the M&E process that would be sustainable in the Nepalese context. 50. For monitoring at program level, efforts will be made to increase the effectiveness of the role of DADOs which will monitor the project activities of ASCs/ASSCs from the-Sub-Projects feasibility at preconstruction stage and extension activities at post construction stage. Similarly the project will also emphasize building the capacity of the DIOs to supervise and guide WUAs in the O&M of their improved system and water management at farm level. 51. To further support program level monitoring, the roles of Regional Agriculture Directorates (RAD), and that of Regional Irrigation Directorates (RIDs) will be clearly defined. Under the chairmanship of RAD a regional PBME committee will be setup to continuously monitor the impact evaluation of completed NISP/ILC Sub-Projects. Required budget would be provided in the concerned DADOs along with the budget for extension activities for the completed Sub-Projects. 52. The M&E section under RIDs would monitor the progress of ongoing activities under the DIOs/GWFOs and would assist them in the performance evaluation of completed physical facilities at O&M stage. The DIOs would provide technical guidance to WUAs in the O&M of their completed systems. 53. At the Central level the PIC will be involved in monitoring. The roles of the different implementing units and agencies in this regard will complement each other. The M&E divisions of DOI and DOA will keep track of the progress made by the project. The PIC may direct any division of either department (DOI and DOA) to carry out special studies to measure the impact of the project. 54. Within their overall monitoring framework and on the basis of indicators identified for the assessment of project progress, DIO, DOA and DHM will supervise and monitor their respective activities. They will also take initiatives to carry out needed evaluation studies.  Project Appraisal Document Page 43 Nepal Inigation Sector Project Annex 2 55. The PCO will have a central role to play as far as M&E functions are concerned. It will drive all the involved agencies to timely and properly monitor project activities as planned and safeguard project interest using the indicators identified for the project impact monitoring. The PCO will also be mainly responsible of preparing periodical and annual reports of programs and expenditures. It will be fully involved in the mid-term review of the project. 56. Thetools that will be used for M&E at different levels would be as follows: - Semi annual/annual reports by DOI, DOA & DHM - Financial Management Reports - Audited annual financial reports - Review Meeting reports - Observation & supervision tour reports - Evaluation studies reports.  Project Appraisal Document Page 44 Nepal Iffigation Sector Project Annex 2/Attachment I Table 1: TASK SCHEDULE WATER RESOURCES STRATEGY FORMULATION - PHASE-Il STUDY Project Months Task Description 1 2 345 6 7891 1 112 4567812222222627890123 31333 3435 36 1 InceptionlMobiliization 2 Phase-I Review 3 Revised Pnoritization of Issues 4 Data Collection & Verification .. .... 5 Development of Strategic Options 6 Evaluation Criteria & Models 7 Evaluation of Options & Testing 8 Stakeholder Workshop (Review of Evaluation) 9Preparation of Recommendations 10 Review of Recommendations (NSC) 11 Review of Existing Environmental Strategy __ 12 Choice of Options (Government) 13 Finalization of Water Resources Strategy Doc. ........ ... __ 14 Integrated River Basin Plan (1-Basin) _ --- 15 TOR - National Water Plan 16 National Water Policy Formulation 10 17 National Water Plan 18 Regional Workshops/Presentations ....... 19 National Steering Commiftee Review, etc. Legend Continuous Activity .... Intermittent Activity V Inception Report ' Water Resoumes Strategy Report y2 Phase-I Review Report y8 Example Basin Plan Document (Draft) yO Summa,y Report of Options Evaluation Results iM Example Basin Plan Document (Finao VI Wbrkshop Proceedings TO Terms of Reference - National Water Plan VI Strategic Options Recommendations & Consultants Reports VI' Draft National Water Policy Document 18 Synthesis of Strategy Report (Draft) Y' NSC Start-up Meeting  Project Appraisal Document Page 45 Nepal Irrigation Sector Project Annex 2/Attachment 2 Minimum Portion orTotal Cost to be Rorne by the Users for Devefonment and Rehabifitanon of Irriation Systems' fI nranioon Policy - 1 007 revised) Type ot Schemes Mmmtmun Maxumum Percentage Permcage to be Borne to be Borne bv Users by HMGN 1. Imputinn rvitemn Msnared or to he Manaved by Users in the Future: 1.1 New Construction 1.1.1 Tam (a) Surfacc Irrigation & Groundwater (Deep Tube Wells) laigation 10 90 (b) Community Shallow Tube Well Irigation 40 .-60 1.1.2 H4ilSurfaee (a) Other Hills 7 93 (b) Himalavan Regions (as per Annex 2 IP) 5 95 1.2 Rehabilitation *1.2.1 Tm (a) Surface Irrigation & Groundwater (Deep Tube Wells) Irrigation 1 5 t5 1.2.X2 Hills Surkace Imrintion (a) Other Hills 12 88 (b) Himalayan Regions (as per Annex 2 IP) 7 93 2. Iimrtion ivsteins to he Turned Over to Water Users' Associations (a) Surface and Groundwater irrigation 5 95 3. lrImt,at,on Stems Under.Joint Manavemnent 3.1 New Contruction 3.1.1 Isi (a) Water Coumses (less than 10 ha.) 100 0 (b) Tertiary ( 10-30 ha) 2S 75 (c) Sub-Secondary (30-500 ha) 0 100 (d) Headworks. Main. Branch and Secondary Canals 0 100 3.1.2 H!S (a) Surface Irrigation 5 95 3.2 Rehabilithtion 3.21 Tmi 12 8S 3.2 I HLE 10 90 4. Private Irrnwvton System 4.1 Groundwater Shallow Tube Well Irrigation 70 30 4.2 Sprinkler/Drip irrigation 40 60 4.3 Lift Irrigation (a) Pump Set Lift Balance RIs. 8000 Account per project (b) Turbine/Solar Pump Lift 25 75 (c) Hydrulic Raim/Wind Pump Lift 40 80 4.4 Surface Irrigation 40 60  .8 ~ IRRIGATION LINE OF CREDIT PILOT PORJECT a WESTERN REGION '0 CARRY OVER SUB PROJECTS TO NISP Naine of Subproject Project Commnand Pro ject Status by July'97 Ilitial Cost Revised Expenditure as of July 1996 A nticipated Required budget Programme of compltion by es | Type Area Approved Unide | % Estimate Cost NRs. ('0001 expend. in 996-97 for NISP | la. Constiuct. |Compl. Nfis '00o NRls i'OOOI |FIA DOI i Total NTs('OO0 Nrsi'0O01 1997/98 1998/99 199912000 . KAStKI _ _ Clihelang Rehab 40 Ocet '92 Yes 62 905 1,745 179 1,852 2,031 700 600 600 Silibang Rehab 120 Dec '93 Yes 65 4,625 4,:309 232 2,322 2,664 1,200 1.930 1,930 PALPA Riahabas ehab 80 Mar '94 Yes 86 3,687 612 2, 430 2,942 100 1,660 1,660 Bafdale Rehab 100 Dec '93 Yes 86 4,499 5,614 1,030 3,579 4,609 300 2,260 2,250 Darpuk Rehab 80 Mar '94 Yes 87 3,690 4,711 427 2 794 3,221 300 1,700 1,700 SYANGJA Chhangchhangdi Rehab 260 Apt '93 Yes 5 7,369 . 300 300 1,600 8,100 4,100 4,000 Kainmika 11ehab 60 Nov '93 Yes 92 1,791 3,582 333 2,774 3.107 100 560 560 Pdkan Phant Rlehab 125 Nov '93 Yus 95 3,162 tl11 2,012 2,323 100 1,090 1,090 Sataun hab 60 Feb'94 Yes 'J 3 2,126 1I t I 1,692 1,803 too 270 270 LAMJUNG Muagoe Rehab 30 Mar '94 Yes 60 1,419 111 667 768 600 260 260 Mdhabir Rtehab 80 Dec '94 Yes 70 2,959 40 2,223 2,263 * 100 620 620 RUPANDEIII Giaghia fiehab 2000 Dec '92 Yes 79 8,084 12,200 1,213 7,952 9.166 1,200 2,607 2,507 Khadwa-Motipuf Rehab 1200 Dec'95 Yes a 10,086 . 3,030 3,030 4,600 11,620 7,000 4,620 KAPIltVASTU dliuraha Ftehab 2500 Mar 93 Yes 80 2,346 4,574 6 2,952 2.958 1,100 1,100 tiuda8iwa Rehab 350 Dec.'95 Yes 0 2,897 738 738 1,800 1,100 1,100 TOTAI. 707 15 116 69.335 4,505 37,307 41,812F 12.6001 36.3671 26.737 8,620 ..T ri w  IRRIGATION LINE OF CREDIT PILOT PROJECT MID WESTERN REGION CARRY OVER SUB PROJECTS TO NISP S iet I of 2 5 ; Nasiie ol Stibproject ; Coilaiiasid Stab project Statuis by July'97 Initial Cost Revised Expenditluo as ol: Judy 1996 Airtlcipated Required budget Prooramme ol completion by Type Area Approvedl Under % Estimate Cost NRs ('000) expend. by '96-97 for NISP z a. | Constr Cornpl NRs l'O0I NRs I'0OO) FIA 001 D Total Nra('ODO) Nra'000I 1997198 11998/99 J 199912000 SURKHET Metallkuna ReS 300 Mar '95 Yes 65 14,227 18,962 436 7,347 7,782 2.400 9,164 7.354 1,800 Mastin Patre 45 Jun. '96 1,836 400 1,436 1.43S DANG Dangall Chasp Kulo 6ehab 865 Mar'98 Yas I 27,998 I 11 1,000 27,000 16.000 12,000 .JAJAIIKOT Nalgad Roltab 80 Dec.95 yes 8G 2903 3387 436 1654 2089 509 769 769 Sirpageon tthab 46 Dec '95 yeas 22 2,845 83 290 373 628 1,647 1.847 SALtAN ltlreutka jolaa tetab 110 1993 Yes 38 3,186 7200 300 2,700 3,000 '1,400 2,800 2,800 ttlanikanda lReab 80 1993 Yes 4 5 2,395 7800 3,200 3,200 1,200 3,400 3.400 Daittdwali lab 160 Dec '95 Yes 15 4,073 100 600 600 1,500 2,000 2.000 talitchlaur i5ltb 82 Detc'94 Yea 87 1,660 2460 50 1.100 1,160 200 800 800 I PYUTtIAN Luogi Madi Rehab 400 May '96 Yas 10 61.461 78 4,173 4,261 3.200 33,700 14,200 12,000 7,500 RUKUM Machhami hab 302 Mar'94 Yes 70 9047 9443 709 4716 5425 1000 3.000 1,500 1,000 500 Atibish Danda Rebb 150 Mar '95 Yas 50 7,644 236 2,229 2,465 1.000 4,300 2,000 1,300 1,000 fuguru Jyla ehab 40 Dec'95 Yes 6 2,092 21 "113 134 1,000 800 900 San Chir Rehab 100 Mar '96 Yas 7 5,666 68 311 379 1,000 4,100 2,000 1.500 600C ROLPA Gaiattgam Oab 88 95796 Yas 40 3,185 6042 1,264 1,264 1.441 2, 337 2.337 Lodhchawr i 30 95196 Yes 37 2.311 3439 84 5 845 1,200 1.394 1,394 :tN ii  > _ _ _ _ __3.MCHui.lbl S1hirnt.2.9 2 N.661w ol Subgplairojo INujarI Eamunwi "ub r.O.U4l Staits by nduy'96 butial Cusl Ilovisudl Ca.wnildumu as ul: July I D99 AmHicIpalud Iubarud buduoa Piouurwmluo ul co.uplioliu by TIyit Aiua Apgoovuol Islt | EJt ibale Cost Nis l OeO} expend. by '96-97 fo0 NISP II.i Cuorst. Comipuluad NfHs p 00I NIUs I000 fIA DOI Total td q000 Nld OOq 1997198 1998/99 199912000 MUGU Kechtlw Rohab 1I Mar '96 Yes 24 1.263 . 301 301 400 400 400 Kawa Rehab 40 Mai '95 Yes 18 2,734 . 6 605 400 1.400 1,400 __ HUMLA Khu,woabh Rehab 140 1995 Ye 13 8,046 11.927 40 2,172 2.212 1.900 .,ooo 4.329 1.71 Kclagad Ra 226 Dec '95 Yeos 3 11,988 23.363 6 398 404 1,100 19,600 6.600 61,00 6.600 KALIKOT Kdapanl Rehab 82 Jun'96 6,058 . . , 1.000 4.058 3,068 1.000 BARDIYA tAwddbfwl Tasal luleab 382b foub 94 Yue 72 32.01 1 1, 700 21.287 22.987 2.360 3.600 3.600 Koutida LagaIsita Htbhb 400 Mut'96 Yes 29 6,900 8, 226 SOO I,GO 2,360 4.0SO 1.800 1,600 BANKE N1 Kula luhab 14b0 Dec. '95 Yes 2 28.827 . 666 668 2.400 26.000 16.600 10.600 TOTAL - 9,038 2 2i 96 024 49.271 StO @ Sub projects budgetted lor Feasibility study/new construction 'FlIE :ATTC1I-18.WKI ii  IRKIlATION lIlNE OF CREDIT PrILOT l'ROJLCT fAR WlESllERN RCIION CARRY OVER SUB P'ROJI:('IS t) NISI' P .;. Name s(Is8bisujecl I',q jct ' Cuonumal Sail, Poe'scl Silalis lby July '97 Jisilial (Cost Itcyisg4 I #laaldlCas * o JIJI.Y lJ)16 Aaalicipalesd Required bulgel Irogr.aalllC oi'coilclima by I I ype Ausa Aps1wove l JU:k. Ic jIsliaaalca Cost NRs (V001 cxt peald s '96-97 for NISI' 9 Ila. _Ctousinic. t onxil NRs (VWt0 Nlts (@tt0) I IA ItDOI Totd1 Ncs(WlM) Nrs(OO0) 1997/9S m19g9 |1999i20t0 U DADEI)IIItRA ilplugul chub 300 Nov93 Yes 79 ,9')S 17,150 1.000 t,090 9,090 3,300 4,330 4,330 O1 Sakuysl chab t0 Nov'93 Yes 43 2,395 5,524 450 2.763 3,213 m00 1.066 1,066 Sirse eb 300 Jan'96 Yes 5 22,611 29,500 145 872 1,017 1.200 28,t85 9,600 9,600 9,65 R Puttalu ew 200 Jau'96 Yes 5 13,726 19.500 62 527 589 1,200 14.810 7,500 7,310 I)Ddbab 140 Jan '96 Yes 5 10,659 13,000 60 545 605 1,200 9,SS2 5.000 4,552 DOTI LUmUndu 120 Apr ' 95 Yes 56 1,457 2,504 79 1,332 1,411 900 Kudmandu 140 Apr'95 Yes 63 3.538 4,807 173 2,865 3,038 3,413 3,413 3andgnusc ro 155 1995 Yes 58 981 1.93 72 1,023 1,095 Dipayal East O 55 1995 Yes 34 363 1,082 54 314 368 Giaodelsh bchab 50 Jan'96 Yes 41 4,861 219 1,781 2,000 900 1,500 1,500 G9sawligad Rehb ISO Jan'96 Yes 12 7,522 907 907 3,500 2,600 2,600 bArADI_. Dileswaui ro 330 Nov'93 Ycs 93 9,486 13,797 I,826 7,466 9,292 2,000 500 500 NuwiAkot Rcub 120 Jan'96 Yes 26 5,955 555 2,214 2,769 1,500 5.466 5.466 bAJIIANG Agrag- Reub 50 Jan'96 Yes 40 3,155 375 2,125 2,300 200 345 345 Jhupu K:s(clsci Rcub 100 Jun'96 Yes 16 9,636 375 2,125 2,500 3,400 2,241 2,241 DARCIIIII.A Sipsl hlb 200 Jun 96 Yes 10 17,296 519 1,436 1,953 3,000 10,40t 9,000 1,405 lude khub 206 Ju '96 Yes 7 5,972 99 99 3,000 3,226 3.226 UAJIIN _ t olIa clob 80 Jaun96 Yes 23 3,983 183 1,085 1,268 2,000 420 420 I;orda ew 100 KMi,96 Yes 27 4,'9') 1)0 1,146 1,336 2,400 558 588 I KAIIJALI mulwanw chub 650 Jan'%6 Yes 12 13,000 375 I,t07 1,5I2 4,068 7,500 7,300 IANCIIANPIIR sluapuni chub 400 1993 Yes 92 7,358 9,564 1,435 7.393 t,823 500 500 ualairys Nal chab 600 Mar '95 Ycs 72 8,664 1.236 6.257 7,493 700 700 IaiNala clb I50 Jan'96 Yes 43 3,565 270 1,049 1,319 1,000 2,500 2,500 latshi hula cw 100 Ju '96 Yes 40 2,966 150 *44 994 1,100 3,500 3.500 TOTAL | 24 4776 14 24 165,28i - 9'902 55,366 65268 36,76t 10J4050 71.49S5 12,870 9,685 i; -%5  H Polect AppWakal Doctmienl IRRIGATION LINE OF CREDIT CARRY OVER SUBPROJECTS TO NISP (GROUND WATER SCHEMES) NRs. Millions S.N. Region/ Cluster Tubewell Type Ha Incomplete Components Amount Remarks District units Pump House Dist.Syst Electri. Reqd in NISP WTERt . I Nawalparasi Jahda- Jamunia 2 DTW 60 2 2 2 4.472 2 Kapilvastu Patna Patraiya 3 STW 57 3 3 3 5.090 Motipur- Pipra 2 DTW 60 2 2 2 7.232 Sub Total 7 177 7 7 7 16.794 MWESERN 3 Dang Goberdiya 5 STW 56 5 5 - 3.000 Tarigaon 3 DTW 120 3 3 3 6.600 Sonpur 1 DTW 40 1 1 1 2.200 Lalmatiya 1 DTW 40 1 1 1 2,200 4 Banke Sitapur-Rathapur 2 DTW 75 2 2 2 3.968 5 Bardia Shantipur-Jamuni 3 DTW 96 3 3 1 2.588 Sub Total 15 . 427 15 15 8 20.556 FARWE_TERN 6 Kailali Rajpur 19 STW 189 - 19 - 3.950 7 Kanchaupr Jhallari 2 DTW 84 - 2 - 2.400 Subtotal 21 1 273 1 21 _ _6.35 -Grand Total 43 877 22 43 15 43.70 . _ . R~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 'SZ  Project Appraisal Document Page 51 Nepal Irrigation Sector Project Annex 2/Attachment 4 NEPAL - SUNSARI MORANG IRRIGATION III SUB-PROJECT Backgwund 1. The Sunsari Morang Irrigation System is the largest public irrigation system in the eastern region of Nepal. The Sub-project diverts water from the Kosi River and commands a net irrigable area of about 68,000 ha. The NRs 200 million worth of construction of the Sunsari Morang Irrigation System was started in 1964 by the Government of India (GOI) in accord with the Kosi Sub-project Agreement of 1954 between the GOI and the HMGN'. After trial operations starting in 1970, the Sub-project works were handed over to the HMGN in 1975. The original distribution system terminated at turnouts serving areas of over 200 ha (minor canals) and typically over 100 farmers. The lack of minor distribution networks below these turnouts of 200 ha meant the system was inefficient and could not irrigate the whole command area. Water distribution was unreliable and inequitable. 2. From inception, the Sub-project faced a massive siltation problem because the Kosi River carries a heavy load of sediment during the flood season. Hence, significant amounts of sediment settled in the newly opened canal systems and reduced their water carrying capacities to almost half in an irrigation season. The rate of siltation outpaced cleaning of watercourses by farmers. As a result of these deficiencies, the Sub-project did not fulfill its objectives and in 1975, HMGN requested IDA assistance to overcome these shortcomings. 3. IDA involvement in the Sub-project has been divided into stages: Stage I, known as SMIP-I, was approved in 1978 and provided US$30 million to rehabilitate and complete minor irrigation networks (known as command area development - CAD) on 9,750 ha and the Sub-project was completed satisfactorily in 1987. Later in 1987, IDA processed a second stage (SMIP II) in the amount of US$40 million for CAD on a further 16,700 ha, which was completed satisfactorily in 1995. Both of these credits provided infiastructure to eliminate the siltation problem. However, the steps taken were not sufficient and effective. In early 1991, while SMIP-II was under implementation, HMGN obtained advice of an international Panel of Experts (POE) to deal with the siltation problem. The POE recommended that the Sub-project be modified by: (a) moving the intake structure 1,300 m upstream of the existing intake site, (b) constructing a larger capacity desilting basin, (c) utilizing dredgers to remove silt from the desilting basin, and (d) constructing a micro-hydro unit in the headreach of the main canal to provide power for the dredger operations. 4. A new IDA credit, Sunsari Morang Headworks Sub-project (SMHP- Cr.2430) in the amount of US$28 million, to provide these additional works was approved in early 1993. The SMiHP is on track for completion in December 1997. The larger desilting basin constructed in 1992 under the SMIP-II has proven successful and been operating. well with dredgers taking out silts from the basin. At the same time the water management problems have been significantly reduced by introducing a simple structured irrigation design for SMIP-II and partly in the SMIP-I. The resulting layout has proved to be acceptable to farmers. The implementation of SMIP-I & SMIP-II is consistent with the HMGN`s Irrigation Policy of facilitating water users' participation in all stages of the Sub-project implementation. Legal WUGs have This bilateral agreement dated April 25, 1954, as amended on December 19, 1966, states that "HMGN shall have every right to withdraw for irrigation and for other purposes in Nepal water from the Kosi River and from the Sun-Kosi River or within the Kosi Basin from any other tributaries of the Kosi River as may be required from time to time. The Union shall have the right to regulate all the balance in the Kosi River at the barrage site thus available from time to time and to generate power in the Eastern Canal".  Project Appraisal Document Page 52 Nepal Irrigation Sector Project Annex 2/Attachment 4 been formed in every developed tertiary irrigation unit (mostly about 28-50 ha in size) in the SMIP-I and II areas. To date, the whole tertiary system of SMIP-IH has been turned over to the respective WUGs who has been successfully carried out O&M on their own. Higher order WUAs at the secondary canal level have been formed and a Water User Central Coordination Committee to represent beneficiary farmers at the Sub- project management level has been established. 5. The 1954 Kosi agreement does not limit water from the Kosi river for development works in Nepal. The soils of the Sunsari Morang Sub-project are good and the farmers are competent. Since the present technical solutions and the newly introduced Joint Participatory Management (JPM) operation have proven successful, completion of the system can proceed on the technically feasible portions of the remaining 41,500 ha of the system, which are still as originally designed and constructed. Hence, the proposed Sub- project would extend IDA support for CAD in the Sunsari Morang Irrigation Sub-project to a further feasible slice of the remaining command area. The technical feasibility study for the determination of a viable size of SMIP-III for another phase in the form of JPM has been completed since December 1995. The study includes a final design of first year pilot area and ICB tender document for the whole phase of 15,100 ha. Sub-proJect Objectives 6. The Sub-project would aim to (a) raise agricultural production and incomes through investment in rehabilitation and modernization of further 15,100 ha of the Sunsari Morang irrigation system, (b) further strengthen and firmly establish JPM of the large public irrigation system, (c) improve construction, operation and maintenance activities with beneficiary participation in every phase to increase productivity and sustainability of the irrigation system, (d) reduce public expenditures for O&M of the irrigation system, (e) strengthen the capacity of DOI for implementing the HMGN's irrigation policy for JPM in large public irrigation systems. Sub-project Description 7. The proposed Sub-project would finance (a) rehabilitation and improvement of a portion of the main canal and its appurtenant structures beyond that covered by Stages I & II and up to the tail end of the system, (b) rehabilitation and modernization of secondary canals and related structures, drains and inspection road networks covering a net command area of 15,100 ha of the Sub-project, (c) development of command area distribution networks through construction of Sub-secondary or minor canal system, (d) construction of 5.4 km of Kosi east embankment to protect the irrigable areas, (e) technical and institutional building assistance to beneficiary WUGs for construction of water courses and field channel systems, (f) other miscellaneous works and infrastructure necessary for proper operation and maintenance of the developed system, (g) technical support, through consulting services, during implementation, for monitoring and evaluation, and for strengthening DOI and WUGs by providing in-house and on-the-job training. Sub-project Size and Implementation Schedule 8. The technically and economically viable proportion of the remaining 41,500 ha of the system suitable to be covered by a Sub-project was determined by a feasibility study. The feasibility study examined issues of implementations capacity to determine the size of the Sub-project that can be effectively implemented within a 5 year construction period. However, based on past experiences, a Sub-project covering an area of 15,000 - 17,000 ha is anticipated due to capacity limitation, with the remainder of the  Project Appraisal Document Page 53 Nepal Irrigation Sector Project Annex 2/Attachment 4 suitable area deferred to SMIP IV and onward. The feasibility study included a review and assessment of the present irrigation system's performance under the facilities and CAD provided by the SMIP I, the SMIP II and the SMHP and was undertaken by a consulting team financed by a PHRD grant. The study also tested the economic viability of the proposed Sub-project, taking account of sunk costs, and of the larger SMIP program including the SMIP-I, the SMIP-I1 plus the SMHP. The output of the study also included a feasibility design, cost estimates, ICB bidding documents for a viable SMIP IH Sub-project and a sample detailed engineering design for a slice of the first year pilot civil works on 1350 ha to test the joint contractor-famiers construction. The study was completed in late November 1995. The details on the Sub- project costs and implementation schedule are shown in the attached tables. O&M Cost Recovery 9. The current water rate of NRs 200 per ha was established about 8 years ago on a national basis and has not been adjusted subsequently. It is estimated that NRs 530 would now be required to cover full O&M. With the WUGs taking over O&M of the tertiary distribution system in the rehabilitated portion of SMIP, about NRs 400 per ha could be required for the remaining expenses for adequate O&M. The area- based type of water rates are assessed uniformly to all beneficiaries, without taking account of the fact that many farmers are receiving little or no water due to system deficiencies and lack of prior maintenance. The present rate of collection nationwide is understandably low (about 5%). The water rates collected go to the Treasury, with no effect on actual O&M expenditures. HMGN under the NISP is requested to design an improved system to be applied to the rehabilitated portion of the SMIP Sub-project area under which (i) the water charges would be increased to cover full O&M of the main and secondary distribution systems, (ii) the rates collected by the WUGs, less a suitable allowance for overhead, would be kept in a separate account in the Sub-project area and would be used to finance O&M for the SMIP, and (iii) any WUG in the rehabilitated area that does not collect adequate water charges (minimum percent to be defined) would be cut off from receipt of irrigation water pending satisfactory resolution of the arrears issue. While it is premature to predict how much of the desirable reforms of the O&M policies and practices can be achieved under this Sub-project, it is an intention to try to obtain significant reforms in this area. A detailed O&M study for the whole country would be carried out under NISP. Sub-project Financing 10. The recently revised HMGN's IP introduced a 25 percent beneficiary contribution to capital costs of rehabilitation of the tertiary system. Therefore, SMIP III would only be implemented in areas where WtUAs have agreed and collected at least 70 percent of the required beneficiary cosharing of costs. The current cost sharing 25 percent by beneficiary farmers could perhaps be increased under future Sub-projects (particularly after the potential benefits of the SMHP Sub-project in reducing siltation and the effectiveness of the improved Joint Participatory O&M systems have been demonstrated). However, for the time being one should concentrate cost recovery efforts on the more crucial issues of O&M. The financing plan for the Sub-project assumes that IDA would provide 80 percent of the total Sub-project costs, with HMGN and the beneficiary farmers contributing 10 percent each. Sub-project Implementation 2 HMGN has asked IDA to execute the preparation of Sunsari Morang Irrigation III Sub-project for which purpose a PHRD grant of 108,200,000 Japanese Yen (about US$0.97 million equivalent) was approved in December 1993. A consulting firm, Nippon Koei Co. Ltd., was hired in July 1994 for a detailed feasibility study which is planned to complete in November 1995.  Project Appraisal Document Page 54 Nepal Irnigation Sector Project Annex 2/Attachment 4 11. The Sub-project would be implemented over a five-year period including one year for preparatory works to allow WUG formation and arrangements to be made for beneficiaries' participation in construction of water course systems. The Sub-project would be implemented by the existing Sunsari Morang Irrigation Development Board with support from DOI, MOWR, HMGN, with a joint participation of WUAs. The proposed Sub-project is consistent with IDA's country assistance strategy which emphasizes the role of the private sector farmers in agricultural development. Turn-over of tertiary systems to the farmers to relieve the Government of the O&M responsibility is impossible until and unless water course systems are introduced, the dilapidated distribution networks are rehabilitated, and beneficiary WUAs are formed and legally institutionalized for O&M. The proposed Sub-project also supports HMGN's irrigation development strategy, which gives priority to improving the performance of existing systems and improving water management in public irrigation schemes through greater reliance on WUGs -- the central objective of the HMGN's IP 2049. The WUGs would become the contact farmer group for extension services in irrigated areas and would be supported under an improved extension system currently being developed with support from the Agricultural Reaserch and Extension Project (FYI 998). 12. IDA has been involved with HMGN for many years as a leading donor in developing the modalities for efficient operation and maintenance of the country's public irrigation sector. Although the JPM program is still evolving, some of the schemes being tested under the on-going ILC program as well as the current performance of JPM in the Stage II area of SMIP show positive results. The proposed Sub-project would carry these innovative developments further with improvements designed to orient DOI and WUGs towards sharing joint responsibilities, not only in O&M but also during implementation. IDA has played a leadership role in the sector, has introduced CAD into the system, and has been instrumental in helping H1MGN design and implement its new irrigation policy. Riparian Issues and Actions 13. The extension of CAD to the Stage III area would not be affected by any developments in China, as the Kosi river rises in the high Himalayas where consumptive use is not possible and diversion unlikely. The proposed Sub-project is of a rehabilitation nature and is in accordance with the Kosi Project Agreement of 1954, as amended in 1975, between GOI and HMGN and would implement the original intent of the Agreement by making it possible to irrigate efficiently the area which was constructed by GOI. There would be no change of impact on Bangladesh as the dry season flow is already diverted by India at the Kosi barrage. For these reasons, the Sub-project which involves only the alteration to an on-going scheme, would not cause appreciable harm to the other riparian countries, nor would the Sub-project be so harmed by feasible use of the Kosi River water by such countries. 14. Under the SMIP, there will be two types of Sub-project affected families (PAFs) on about 380 ha of the land to be used for canal intensification. For all cases where PAFs are also Sub-project beneficiaries, the current arrangement whereby farmners voluntarily contribute portions of their land is satisfactory. In the case of non-beneficiary PAFs, irrespective of whether the system is public or FMIS, HMGN's current land acquisition action plan is being reviewed by the Bank to ensure its consistency with the Bank's policy. According to the field survey during FS it was observed that there will not be any displaced or affected household in the SMIP-III area since all are in the irrigable area. Anyhow a detailed Land Acquisition Plan (LAP) has been prepared and reviewed by the Bank. Based on the pilot area survey it was estimated that about 45 farm families could have loss of land more than 25 percent of their holding. It was agreed that the project management will submit to the Bank a satisfactory Resettlement Action Plan (RAP) for these SPAF in each year before the actual land acquisition and carry out the physical acquisition satisfactorily as per agreed RAP.  Project Appraisal Document Page 55 Nepal Irrigation Sector Project Annex 2/Attachment 4 Environmental Aspects 15. The Sub-project has been given a "B" rating for environmental purposes. The feasibility study has been charged with bringing the CAD design in line with the Bank's current environmental standards and ensuring conformity with the requirements of HMGN's environmental impact assessment guidelines. Compliance with this requirement will be ensured through a monitoring system to be established during implementation of the Sub-project. Benefits 16. Irrigated area, production, farm incomes and employment are expected to rise in the Stage III area, where about one third of the area commanded currently gets no irrigation due to system deterioration and inequitable distribution of water. Assuming that a viable size of SMIP III would be about 15,000 ha, the incremental food grain and oilseed production would be about 30,000 ton/year and 1600 ton/year respectively. Over 8,000 farm families would benefit by the Sub-project, while the construction would generate about 6,000 jobs per day during the five to six-year construction and about 25-30 man-days/ha increase at full development under farming. Operation and maintenance of the system are both expected to improve due to WUG responsibility and decreased government liability for O&M. A major institutional benefit would be a shift in DOI's orientation away from construction towards policy setting, planning and monitoring. The ERR of the Sub-project is found to be about 14.0 percent.  Project Appraisal Document page 56 Nepal Irrigation Sector Project Annex 2/Attachment 5 C.) 0~~~~~~~~~ 0~~~~~~0 0~~~~ ri~~~~~~4 ri~~~~nr 'a.- ~ ~ ~ ~ ~ -c~~~~~~~  PROJECT IMI'LEMENTATION SCIIEDULE FOR e0 MAJOR REHABILITATION PROJECT (SURFACE) ( _ 5. A C6ViI Iii IYaal _ __ Yua ....... ... Yaat ...........Yaw ......... Your ..... . uiawiks . I |olilb 1 i 2 3 ba. _ _ 9 U _2 . _4 ItG 17 _ _ 2t21 2223 24 2. 26L7 28 3031 .... 3 T 3 I. ApNwinStop -2 2. ktlieI SciOAfp aNW selocli ol tl Idunlalicalion Stop -3 3. Idonlficillon SvoSl -4 . F- 4. Classicauion as Mazot of Mum ot,lwab Stop .8 0 5. S|ub-powocl Phiollllion #la 12 Taibiby . wCon Slop 1. 8. Foosltli sludy Slop 17 7. MT vetillcallan eW aando(aonwn_ 8. Sub-paojoci AWatlsol and Appwoval slop -8.8 9. Fwm'sa Oaganlzelon and PaOpoualo,y wocll-- - 10. DoloilDoslgn slop-IA ll. F IA lloglsutallon & Fonted MOA and WOl AWgiocoto Stop - I 12. TnoruloW. Consltuclion AL Cl'Vc.Ps.. Sopogvkmsion Slop -12 --.Umc o -Mk 13. Ceomikmnsklwg awnd CF aco.uan F&Wo 1,0 Cou.plollon Ilapoil Slop -13 U4.. e.elw.,ko- 12 so )O WN.eoo 14. 05M Ilasponoibl8y LISI Tgoab** Slop -14 -- .-- - - 15. Pso*1e bonell It amo*Wll Slop -18 -h-6 lmpwAeiadtal PeldW 281to 2 moodh. a% -4  Project Appraisal Document Page 58 Nepal Irrigation Sector Project Annex 2/Atachment 7 A A A~~~~~~~~~~ lo= U. - : Cf_l 1: C. , ~- -l> z Q 0 *~ Ca oAZ .i A ,U U. - '