China - Water Conservation Project

Report No. PID7252 Project Name China-Water Conservation Project (@+) Region East Asia and Pacific Sector Agriculture, Irrigation Project ID CNPE56516 Implementing Agencie Ministry of Water Resources; Provinces of Liaoning, Hebei; Municipalities of Beijing, Qingdao Updated PID Date August 4, 2000 Appraisal Date May 1, 2000 Tentative Board Date September 14, 2000 1. BACKGROUND. Water Scarcity especially in Northern China is becoming an increasingly serious problem. In many areas, ever increasing demand for water for use in agriculture, industry and municipalities can no longer be met by increasing water supply through construction of hydraulic infrastructure such as storage reservoirs. In large areas of the North China Plain and in other northern areas, groundwater overexploitation is a continuing and increasing problem that is inherently unsustainable. Compounding the water scarcity problem are serious and increasing water pollution problems resulting from heavy industrialization and urban population growth. Demand for municipal and industrial (M&I) water is increasing steadily, putting water supply for irrigated agriculture under mounting pressure. China's total annual water use is currently estimated to be 520 billion m3, with agricultural use constituting about 70% of this amount. To enable further growth in agricultural production and to satisfy the anticipated growth in M&I demand, it is estimated that China's available water supply would need to increase to 670 billion m3 by 2010 if existing water use requirements are maintained. It is estimated that only about one half of this incremental demand can be met through additional development of water resources; the remainder will need to be met through water savings, demand management, and/ or "deficit irrigation". In recognition of these problems, the Chinese Government concluded that major water savings in agriculture is one of the important strategies to deal with water scarcity and to counteract growing water demands in the North China Plain. MWR took the initiative in the mid-1990s through the National Irrigated Agriculture Water-saving Program. Under that program, 300 pilot water saving counties were selected in 1996 and used to test different water savings technologies, such as canal lining, buried pipeline, sprinkler and drip irrigation. 2. Rehabilitation of irrigation systems and application of improved irrigation technologies (engineering measures) to increase agriculture production are priority objectives of the National Irrigated Agriculture Water-Saving Program. With 22% of the world's population, China has only 7% of the arable land, about 50% of which is irrigated and produces about 75% of national agriculture output. In addition, encroachment of urban and industrial areas continually reduces the land available for agricultural production. These circumstances require increasingly intensive use of irrigated agriculture. It is essential to increase output from irrigated land where yield potentials are highest. However, most of the irrigation systems  in China were built in the 1960s, in many cases with substandard designs and quality, many were left incomplete due to lack of resources. Furthermore, the traditional flood irrigation with very low field efficiencies is still practiced at the field level in most irrigated areas. In the North China Plain, the current overall irrigation water use efficiency is only around 35- 50% for surface systems (water conveyance efficiency 50-60% and field efficiency 70-80%), and for well systems about 70%. Most of these irrigation systems are in need of rehabilitation and upgrading including improvements of water conveyance and field efficiencies and of traditional irrigation technologies. In this regard, the National Irrigated Agriculture Water-saving Program has played an important role during the past five years. To further improve the program under the proposed Project, MWR reached agreement with the Bank that use of only engineering measures cannot fully reach the objective of increasing production while reducing water consumed, and decided to take this Project as a pilot project for the National Program in order to enhance the program in accordance with the government's strategy of agriculture water savings in the North China Plain. In some areas, flood control, drainage and salinity mitigation are also essential for raising agricultural productivity. Drainage works are essential to allow cultivation of low-lying areas subject to waterlogging and salinization. Since the 1960s, government programs in drainage works have helped control waterlogging on 19 million hectares and have reclaimed 4.8 million hectares of saline land. 3. Irrigation Institutional Reform has been also identified by MWR as an important goal for sustainable irrigation in China. A major problem faced by almost all irrigation and drainage systems in China is inadequate O&M which is due primarily to insufficient government budget and low water charges. It is also due to lack of direct farmer participation and feeling of "ownership" in project design, implementation and management. This has resulted in a vicious cycle of implementation, deterioration and rehabilitation of irrigation and drainage systems. Low water charges and the lack of accurate water measurement and volumetric water charging have resulted in inefficient use of water resources. Key issues for the irrigation subsector are how to pay for irrigation investments and make them sustainable, how to increase local participation and "ownership" in irrigation, how to implement irrigation investments to consistently higher technical and institutional standards as needed for agricultural intensification, and how to promote water savings and efficient water usage through water measurement and volumetric water charging. There is a strong need for institutional reform incorporating: (a) the user pays principle; (b) decentralization of services delivery; (c) market oriented development; (d) treatment of water as a valuable economic resource; (e) water measurement and volumetric water charging; and (f) participation of water users. Institutions responsible for operation and maintenance of irrigation and drainage systems need to be: (a) organized along hydraulic boundaries, (b) established with and organized to have legal personality to be able to enter into contractual relationships with other entities; (c) managed to be self- financing; and (d) designed to pay for bulk water deliveries on a volumetric basis. 4. PROJECT OBJECTIVES. The Government's primary objectives for the water resources sector are to encourage efficient use and comprehensive and integrated management of water resources at the river basin or aquifer level; promote financial self-sufficiency and cost recovery; reduce water pollution; improve flood warning and protection; and undertake priority water resource development projects. Key steps to be taken for the achievement of these - 2-  objectives are policy and institutional reforms to improve water resource management. 5. The project's objectives are to enhance beneficial use of water resources, agriculture production capacity and farmer incomes by: (a) increasing the value of agriculture production per unit of consumed water through increasing yields and reducing non-beneficial water losses; and (b) establishing mechanisms for sustainable use and management of water resources in irrigated areas. 6. PROJECT DESCRIPTION. The Project would support integrated improvements to irrigated agriculture in the Chinese provinces of Hebei and Liaoning, and in the municipalities of Beijing and Qingdao. Twenty seven counties from the provinces and municipalities have been identified and all of the subprojects have been prepared at the feasibility level. 7. "Real" Water Savings. Experience has shown in China and in other parts of the world that projects that only concentrate on improvements to physical irrigation and drainage systems may achieve improvements in water use efficiency, but may not result in much "real" water savings because return flows from existing inefficient systems return to the groundwater or surface water systems and become available for other users (are not lost to the hydrologic system). "Real" water savings results from reductions of non- recoverable losses such as evapo-transpiration (ET) or losses to non-usable water bodies such as saline aquifers or the ocean. This Project is designed to focus on three sets of integrated measures that when taken together will result in both "real" water savings and increased agricultural yields. The three sets of measures are: (a) physical improvements to irrigation and drainage systems mainly at the tertiary level and onfarm; (b) agronomic measures; and (c) management measures. 8. Physical improvements. The physical improvements included in the Project are: (a) canal lining; (b) placing small distribution systems in low- pressure pipe; (c) construction of well fields, groundwater recharge and conjunctive use of groundwater; (d) drainage systems and reuse of return flows; (e) improved surface irrigation systems onfarm; (f) sprinkler systems; and (g) micro-irrigation systems. These improvements taken by themselves will result in significant improvements in water use efficiencies but may not result in much "real" water savings unless they are combined with the other two sets of measures. 9. Agronomic measures. Agronomic measures include land leveling, non- tillage in the dry season, deep plowing in the rainy season, soil fertility improvements, organic and plastic mulching, seeds improvements and development of drought resistant varieties, balanced fertilization, improvements to planting and cultivation techniques, etc. Experiments and practice have shown in China and elsewhere that significant improvements in the amount of agricultural yield per unit of evapo-transpiration can be achieved through these types of measures. This is "real" water savings. 10. Management measures. Management measures can be broken down into to parts; (a) irrigation and drainage system management improvements; and (b) onfarm irrigation management improvements. Project system management improvements include: (a) measurement and volumetric pricing; and (b) SIDD. Onfarm irrigation management improvements include soil moisture management - 3 -  through irrigation scheduling. Experiments and practice have shown in China and elsewhere that significant improvements in the amount of agricultural yield per unit of evapo-transpiration can be achieved by soil moisture management through irrigation scheduling. This is "real" water savings. 11. It is important to point out that the physical improvements and system management improvements may improve water use efficiencies, but may not result in much "real" water savings in and of themselves. However, if designed and implemented properly, the physical improvements and system management improvements may significantly facilitate and improve the opportunity for "real" water savings from agronomic measures and soil moisture management through irrigation scheduling. For example, it may be much easier to apply a calculated uniform amount of water at a specified time (irrigation scheduling) with sprinkler and drip systems and with improved surface irrigation systems than it is without these improvements. 12. The design and implementation of an integrated Water Conservation Project that results in "real" water savings and increased yields is much more complicated than just designing and implementing physical improvements. The Project will be implemented using the program approach which means that only the first year's Project is prepared in detail prior to initiation of Project implementation. Subsequent year's Project would be prepared in detail during the year preceding its implementation. China has an existing large water savings program that has concentrated on physical improvements, but has also included some agronomic and management measures. Approximately US$3 billion have already been invested in this program during the last 5 years. The Water Conservation Project has the added purpose of acting as a demonstration program to improve the integrated application of the three sets of measures. The Project includes an important monitoring and evaluation program that when coupled with a program approach should result in a continuously improved set of measures and an improved Project, and that also can be replicated throughout China and through the ongoing water savings program. 13. The proposed project would contain the following components: (a) Irrigation and Drainage Works and Onfarm Systems. This component involves improvements in irrigation and drainage systems which are broken down into the following types of areas: (a) canal lining areas, 17,100 ha, which will involve lining of tertiary canals and laterals and onfarm surface irrigation and drainage system improvements; (b) low- pressure pipe areas, 47,800 ha, which will involve replacing tertiary canals and laterals with buried low-pressure pipes and onfarm surface irrigation and drainage system improvements; (c) installation and rehabilitation of wells, small headworks, small reservoirs and drains; (d) sprinkler irrigation areas 26,800 ha, which will involve replacing tertiary canals and laterals with buried pressure pipe and sprinkler irrigation systems mostly using semi-fixed technologies; and (e) micro- irrigation areas, 15,100 ha, which will involve replacing tertiary canals and laterals with buried pressure pipe and micro irrigation systems such as micro-sprinklers or drip systems with corollary filtration systems. Approximately 70t of the area will use groundwater as the water source and the systems in these areas also include well construction and pumping equipment, where these are not presently available or adequate. The improvements will be carried out in areas that are already irrigated, will be dedicated mainly to tertiary and - 4 -  onfarm systems. The improvements will also include gates and other structures, and measuring devices at key diversion points. The measuring devices are designed such that each operational unit (lateral) will have a measuring device at its head. Individual farm turnouts will not have measuring devices but will have water deliveries determined through gate calibrations and farmers best practices. Water pricing will be based on the volume of water delivered as measured with the measuring devices. The component will also include: (a) implementation of groundwater recharge schemes in areas where groundwater overdraft is a significant problem; (b) rural roads where necessary for irrigation system operation and maintenance; and c) small transmission lines and transformers where necessary for electrification of pumps. (b) Agriculture Support and Services. Agronomic measures include land leveling, non-tillage in the dry season, deep plowing in the rainy season, soil fertility improvements including incorporation of green manure and stalk, organic and plastic mulching, cropping pattern adjustments, seeds improvements and development of drought resistant varieties, balanced fertilization, improvements to planting and cultivation techniques, etc. The Project will include improvements to the extension system; development of seed improvement facilities; and procurement of farm machinery, fertilizer and plastic film. Land leveling will cover an area of about 70,900 ha; deep plowing about 47,700 ha; stalk shredding and incorporation, about 36,500 ha; and plastic mulching, about 12,900 ha. About 9300 tons of balanced fertilizer will be purchased and utilized. About 4600 ha of land will be developed for fine variety seed development and breeding. About 628 tractors, 215 stalk shredders, 735 fertilizers/tillers, 1021 seeders,198 harvesters and 23 accessories will be purchased. (c) Forestry and Environmental Monitoring. This component will involve forestry development for windbreak protection and soil conservation. Tree nurseries will also be included in the Project. In some cases trees for economic production of fruits, nuts and wood will be used. A total of about 1730 ha of land will be developed as windbreaks and an additional about 1000 ha will be developed for economic production of fruit, nuts and wood. Environmental monitoring systems will be established to monitor the Project's environmental impact on soil and water. (d) Institutional Development. This component will involve support to improvements in water conservation technologies and developments including training, technical assistance and research. The component will also include support to the establishment and strengthening of operation and maintenance entities made up mostly of water users, principally through the established Chinese mechanism of self-financing irrigation and drainage districts, or variations thereof. 14. The Project will emphasize training of agriculture, irrigation and water resources technicians at the township and county levels. The Project will also include a strong component of training of farmers. The training will be provided in integrated irrigation technology, agronomic and management measures to ensure an integrated approach to Project implementation. Demonstration households in each subproject area will be selected for intensive training and to be used as examples for the other farmers in the - 5 -  subproject area. Scientific Irrigation. Scientific irrigation will apply the following two water-savings oriented irrigation programs rather than the traditional inefficient irrigation program: (a) program for irrigation scheduling, which will be widely applied in all Project areas. Under this program, the soil moisture will be managed such that it will average the minimum level necessary to achieve full yields; investigations have shown that the lower limit of soil moisture for irrigation could be decreased on average by about 10. of field capacity without negatively impacting the normal crop photosynthesis such that the highest yields could be achieved; (b) program for deficit irrigation, which will be applied in a few subproject areas where groundwater overexploitation due to agriculture water use is most serious and a water balance cannot be reached even after applying irrigation scheduling. Under this program, less than optimum amounts of water for irrigation will be applied and only at critical demand periods such that maximum yields per unit of water are achieved, but yields are less than the highest possible. 15. Mobile Specialist Team. The Mobile Specialist Team (MST) will be established at the provincial/municipal level to assist the PMO in technical aspects during Project implementation. The MST will play a critical role in effective application of improved agronomic and scientific irrigation technologies and improvement of irrigation management at the grass roots level. The MSTs, employed at the provincial/municipal level, will have three primary functions: (a) providing specialized technical assistance and training to lower levels (county and township Water Resources Bureaus, Water Management Stations and Agro-technology and Service Centers and Stations, County Drought Fighting Centers, etc.); (b) providing technical assistance and training as necessary to WSOs, WUAs, and farmers, including assistance in setting up local demonstration and monitoring activities; and (c) carrying out appraisal of subprojects to be financed under the loan. The MST members will be employed as individual consultants selected based on the Bank guidelines, and each MST should be equipped with the necessary vehicles and equipment/tools in order to take field trips to provide hands-on training at the county, township and village levels. 16. SIDD. The Project is designed to incorporate institutional measures to ensure improved operational efficiencies in water use, and sustainability and self-financing of irrigated agriculture, improve irrigation system performance, and enable effective decentralization of irrigation services, cost recovery and farmer participation in line with Chinese and Bank water resources policy. An important component in the new institutional structure for improved water resources management is the implementation of institutional measures to address these operation and maintenance aspects. The Project incorporates the implementation of self-financed irrigation and drainage districts (SIDDs) or similar institutional measures in all subproject areas. Under the complete model, each SIDD comprises: (a) a Water Supply Organization (WSO) that will be formed to operate and maintain the main and branch canals and drains; and (b) Water User Associations (WUAs) that will be formed and managed by farmers to operate and maintain the lower-level irrigation and drainage systems and will purchase water from the WSO. In the Project, WUAs or similar organizations will be established in each subproject area. Each province/municipality will also pilot at least one complete SIDD including a WSO. Water deliveries to WSOs and WUAs and other bulk water users will be measured. Measuring devices will be included in the physical infrastructure - 6 -  where necessary. Water charges will be increased to cover the full cost of system operation, maintenance and replacement and will also partially cover investment costs. Higher water charge rates will be encouraged and promoted with farmers in order to provide incentives for improving water use efficiencies. Adaptations of the standard SIDD model will also be included for other types of irrigation investment under the Project. WUAs will be established by farmers to own, operate and maintain well, pipeline, sprinkler, and drip systems. In addition, the WSO will be adapted to become a "Water Services Organization" to provide assistance to WUAs in operating and maintaining their irrigation systems through provision of spare parts, repair services, rental of spare pumps for wells, technical guidance, training, etc. 17. Groundwater Management Plans. The Project will also include the development and implementation of groundwater management plans in one pilot county in each province/municipality. These plans will be implemented in counties with groundwater overdraft problems and will have the objective of achieving zero drawdown after a period of years as defined in the plan. The plans will include water licensing and use control, strict limits on new groundwater development, and integrated measures to achieve "real" water savings and thereby reduce consumption while at the same time maintaining or even increasing agricultural yields. 18. PROJECT COSTS AND FINANCING. The total cost of the Project is estimated at Y 1455 million (US$173 million equivalent), including physical and price contingencies of about Y 164.2 million. The direct and indirect foreign exchange component is estimated at about US$73 million equivalent, or about 42 percent of total costs. The base cost totals Y 1290 million (US$155 million equivalent), of which Y 980 million (US$118 million; 76 percent of the total base costs) is for the Irrigation and Drainage Works and Onfarm Systems component; Y 164.3 million (US$20 million; 13 percent) is for the Agriculture Support and Services component; Y 36 million (US$4.3 million; 3 percent) is for the Forestry and Environmental Monitoring component; and Y 109 million (US$13 million; 8 percent) is for the Institutional Development component. The interest during construction is estimated at about Y 98.6 million (about US$12 million). The front-end fee is Y 6.1 million (about US$0.74 million). This will result to a total financing required of about Y 1559.7 million (US$185.7 million equivalent). The project would be financed by a proposed IBRD loan of $74 million and local counterpart funding equivalent to $111.7 million (60w). 19. PROJECT MANAGEMENT STRUCTURE. Project management would be based on the successful implementation structure developed under earlier Bank projects. Leading Groups at the Central, Provincial/Municipal and County levels would establish the general policies and procedures and review work programs. The Central PMO and PMOs in each participating Province/Municipality and County would be responsible for overseeing project design, execution and supervision. The Central PMO would be located within MWR. Within the PMOs at the Provincial/Municipal and County levels, the Water Resources Bureau would be responsible for overall project management and would include participation of the Finance Bureau, the Agriculture Bureau and the Environmental Protection Bureau. 20. RATIONALE FOR BANK INVOLVEMENT. The Bank can help the Chinese Government to better orient the national water savings program on a sound economic and technical basis, specifically in the areas of "real" water savings, irrigation -7 -  technology selection, agricultural practices improvement, institutional reform and on-farm irrigation management. The Project can serve as a vehicle for undertaking sound economic and technical selection, design and implementation of integrated subprojects that will maximize the agriculture yields per unit of water (ET) consumed, be financially viable, have water user "ownership" and be sustainable. The Bank can also help introduce new technologies and improved designs in areas such as laser land leveling, improved surface irrigation methods, and better selection and design of sprinkler and drip systems, as well as improved agricultural practices. Operation and maintenance institutional development and volumetric water measurement and charging are relatively new to China. Bank support in these areas can bring both know-how and impetus for reform, which should result in improved operation and maintenance, and effective farmer "ownership" and participation in the management of water delivery systems. In addition, the Bank can help promote the sustainable use of groundwater resources, and protection of groundwater from overexploitation and pollution through Project design with strict water balance analysis; monitoring and control of salinity, pesticides and chemical fertilizers; and preparation and implementation of the County Groundwater Management Plans prepared under the Project. 21. LESSONS LEARNED. The Bank has assisted in financing 17 water resources and irrigation projects in China over the last 15 years, serving more than 5 million hectares of irrigated area. Generally, these projects have been implemented efficiently, and time and cost overruns have not been excessive despite periods of sharp price escalation. Likewise, rates of return have equaled or exceeded appraisal estimates. A notable feature of these projects in recent years has been the increasing level of local community involvement in planning, design, and implementation. The projects in which the Water Resources Bureau at all administrative levels has been fully responsible and accountable for project design, planning, and implementation of water conservancy components have generally performed well. 22. The Operations Evaluation Department of the Bank has identified O&M, water charges, financial autonomy and irrigators' ownership as key issues in irrigation system design and sustainability. The Bank's Rural Development Department, in its recent irrigation subsector portfolio quality assurance review, identified (inter alia) strong government commitment and ownership and beneficiary participation as important requirements for good performance of irrigation projects. On-going Bank-supported sector studies (Rural China: Transition and Development, and Water Strategy) have identified improved management of scarce water resources for irrigation and other uses as a key area requiring continued focus. Other key lessons from previous Bank-financed water resources projects in China are that: (a) detailed organizational and staff arrangements should be formulated and agreed before implementation; (b) counterpart funding should be committed before implementation, including the direct participation of the provincial Planning commissions and finance Bureaus; (c) project design should support the "user pays" principle, and user (farmer) participation should be explicitly built into project planning, implementation and operation and supported under the Project; (d) irrigation, drainage and flood protection investments should include cost recovery from beneficiaries; (e) irrigation and water conservancy projects should include provisions for unified irrigation system management based on hydraulic units and not on political or administrative boundaries; (f) projects should include institutional development support for the strengthening of provincial and local Water Resources Bureaus; and (g) agricultural support services should be - 8 -  included in irrigation and drainage projects to ensure realization of benefits. 23. The 1993 World Bank Policy Paper on Water Resources Management and Chinese Government policy are compatible and emphasize the following principles: (a) water resources should be managed and developed in a comprehensive integrated manner and consider cross-sectoral issues with the goal of ensuring the sustainability of the water environment for multiple uses as an integral part of the country's economic development process; (b) water resources planning and management should be carried out considering the interrelationships between water, land and human resources with the objective of enhancing economic growth and development in an environmentally sustainable manner; (c) water is an economic resource and therefore should be managed in an economically efficient manner; (d) the river basin should be the basic unit for planning and managing water resources; (e) water users should participate directly in water resources management and development; and (f) water use should be efficient and environmentally sustainable. 24. ENVIRONMENTAL AND SOCIAL ASPECTS. The project would have no major environmental issues. Minor issues include: (a) monitoring and control of water quality and groundwater as related to irrigated agricultural improvements; and (b) adequate drainage to control water table levels and secondary soil salinity in certain areas. The environmental review at the end of this PID presents a review of the environmental aspects of the Project. 25. During Project preparation, care was taken to ensure that the needs and aspirations of the Project beneficiaries and impacted peoples were taken into account in consideration of their economic, social and gender differences. This included: (a) investigating local socio-economic situations so as to make sure that the Project intervention is suitable for local development; (b) learning farmers' expectations and attitudes so as to ensure that the Project incentives for change as expressed in different irrigation and agriculture skills are acceptable and welcome to the target population; (c) adopting the participatory approach to Project management in order to encourage farmer involvement and assure farmers of their equitable access to Project activities in consideration of their economic, social, and gender differences; and (d) diagnosing social costs of the Project to mitigate negative impacts wherever they might appear. The project SIDD component (Self-Financing Irrigation and Drainage Districts) is designed to ensure direct participation of beneficiaries in aspects of the Project that directly affect them. 26. PROJECT BENEFITS. The Project would generate substantial benefits by: (a) implementation of water-saving facilities and technologies for irrigation and distribution system at the tertiary and on-farm level to enhance effective water supply and improve on-farm irrigation efficiency through reducing diversions and groundwater pumped (overdraft reduced), excess deep percolation, crop evapo-transpiration, and evaporative losses from canal system within the water scarcity areas of the four provinces and municipalities located in Northern China; (b) increasing water and agricultural productivity, and improving quality and production of a wide range of crops, mainly for cash crops of cotton, nuts, vegetables and fruits through enhancing the extension of irrigated agronomy, improving irrigation management, and replacing water-intensive crops (such as rice and wheat) with high-value cash crops that use less water (such as cotton, nuts, vegetables and fruits) to improve productivity per unit of water; (c) increasing per capita income and rural employment for about 2 million farm labors, and a -9-  smaller general increase in per capita incomes for other households which would indirectly benefit from increased agricultural production; (d) protecting and enhancing the ecological-environmental system of the Project area through forestation, protection of groundwater from overexploitation through County Groundwater Management Plans; protection of groundwater quality from salinization, chemical fertilizers and pesticides, and rational use of land and water resources; (e) developing and implementing a program approach for irrigated agriculture investment and development which will support sustainable use, development and management of water and land resources; and (f) developing and establishing SIDDs (WSOs and WUAs) which will contribute to a better link between the irrigation service, agricultural extension service and farmers participation, and help enable higher yields, farmer incomes, and farmer satisfaction through better irrigation management, more efficient water use, and reduced farm labor and energy requirements for management and maintenance of irrigation systems, and also contribute to better collection of water charges and lower fiscal burdens for irrigation O&M on local governments. 27. PROJECT SUSTAINABILITY. Project sustainability hinges first on the effectiveness of Project management arrangements to produce high quality, innovative designs for subprojects including integrated physical, agronomic and management measures, and to assure high quality of construction/implementation. Second, sustainability would be determined by how effective the introduction of institutional arrangements are in establishing effective and successful operation and maintenance institutions. Third, sustainability would be further ensured through the program approach to Project implementation which incorporates continuous improvement in design and implementation during the Project implementation period. Fourth, sustainability of Project physical works will be addressed through the development and implementation of operation and maintenance plans during Project implementation. And finally, the Project design based on the strict groundwater balance analysis, and County Groundwater Management Plans prepared under the Project would ensure the sustainable use of groundwater resources, which is the main source of water supply for irrigation within the Project areas. Contact Point: The InfoShop The World Bank 1818 H St. NW, Washington DC 20433, USA Tel. 1-202-458-5454; Fax: 1-202-522-1500 Environmental Review CHINA: WATER CONSERVATION A. Introduction Project Overview. The proposed Project is intended to complement an existing government-supported program which is promoting adoption of irrigation water saving technologies in 300 pilot counties spread across the water short areas of the country (central, western and northern regions). The government - 10 -  program focuses mainly on promotion of physical improvements and approximately US$3 billion has been invested over the last 5 years. Within the framework of the Government's overall water savings program, the proposed Water Conservation Project, which will be implemented in 27 counties, is intended to act as a pilot project to demonstrate an integrated approach to water conservation involving the application of the three sets of measures; physical works, agronomic techniques and improved management at both the level of the irrigation scheme and on-farm. Project investments will be made over an area totaling about 115,000 ha, almost all of which is presently irrigated. The main economic benefits of the investments will be derived from increased cropping percentages and there will be no significant changes in land use as a result of the Project. Environmental Assessment Process. Since the proposed Project concentrates mainly on rehabilitation and improvement of tertiary and on-farm irrigation and drainage systems in existing irrigated areas, involves no change in land use, includes no dams or other major hydraulic works, and because the investment areas are widely dispersed over 27 counties in four Provinces/Municipalities, the Project was assigned to environmental screening category B for the purposes of the Bank's Operation Policy 4.01 (Environmental Assessment). Nevertheless, Environmental Impact Assessments (EIAs) have been prepared for each province/ municipality in accordance with Chinese regulations and an integrated EIA covering the whole Project was also prepared. The Province/municipality EIAs and the integrated Project EIA were prepared by the Institute of Water and Hydropower Research (IWHR), of the Ministry of Water Resources (MWR) which is a Class 1 institute, accredited to conduct EIAs in China. IWHR has prepared the integrated EIA, which covers all four provinces and municipalities. The integrated EIA and the EIAs for each of the four provinces/municipalities are available in the Project files. The Project will be implemented as a program. Concept level designs are available for the entire program but detail designs are only available for the first year's investment program, which accounts for only about 15t of the total number of sub-projects likely to be eventually included in the Project. During the first year of implementation, detailed designs for the second year of investment will be prepared and so on throughout the Project. None of the sub-projects individually are of sufficient significance to justify preparation of an EIA but there was a concern as to the potential for cumulative impacts due to the combined effects of a large number of sub- projects at a regional scale. The focus of the integrated Project EIA was on the potential regional effects of the investment, with particular emphasis on regional water resources impacts (e.g. drawdown of groundwater levels, pollution of groundwater resources, etc.). The EIA was also used to develop environmental guidelines and criteria for design and implementation of projects in the sector. B. Description of Project Activities The Project will finance the introduction of integrated water conservation technologies within existing irrigation areas located in 27 counties in the Provinces of Hebei and Liaoning, and the municipalities of Beijing and Qingdao. The Project objectives are to improve water use efficiencies and - 11 -  promote sustainable use, development and management of water and land resources in irrigated areas. The Project is designed to focus on three sets of integrated measures that when taken together will result in both "real" water savings and increased agricultural yields: (a) physical improvements to irrigation and drainage systems mainly at the tertiary level and on-farm; (b) agronomic measures; and (c) management measures. Investments that only concentrate on improvements to physical irrigation and drainage systems may achieve improvements in water use efficiency, but may not result in much "real" water savings because return flows from existing inefficient systems return to the groundwater or surface water systems and become available for other users (are not lost to the hydrologic system). "Real" water savings results from reductions of non-recoverable losses such as evapo-transpiration (ET) or losses to non-usable water bodies such as saline aquifers or the ocean. Physical improvements which will be financed include some or all of the following (depending on local circumstances): (a) canal lining; (b) installation of low-pressure pipe for small distribution systems; (c) development of well fields, groundwater recharge and conjunctive use of groundwater; (d) construction of drainage systems and reuse of return flows; (e) improved surface irrigation systems on-farm; (f) installation of sprinkler systems; and (g) installation of micro-irrigation systems. These improvements taken by themselves will result in significant improvements in water use efficiencies but may not result in much "real" water savings unless they are combined with the other two sets of measures. Agronomic measures include land leveling, non-tillage in the dry season, deep plowing in the rainy season, soil fertility improvements, organic and plastic mulching, seed improvements (including development of drought resistant varieties), balanced fertilization, improvements to planting and cultivation techniques, etc. Management measures include improvements to both the management of irrigation and drainage systems (including water measurement, volumetric pricing, development of self financing irrigation and drainage districts), and to on- farm irrigation management (including soil moisture management through improved irrigation scheduling). The total area which will be treated with the water conservation technologies will be approximately 115,000 ha. (24,800 ha. in 7 counties within Beijing Municipality, 19,000 ha. in 6 counties within Qingdao Municipality, 39,000 ha. in 8 counties in Liaoning Province and 29,000 ha. 8 counties in Hebei Province). The mix of irrigation technologies, agronomic measures and management measures to be applied will depend on local circumstances. The total areas to which different technologies will be applied in all participating Provinces/ Municipalities are as follows: Irrigation and Drainage Works and On-Farms Systems This component will include canal lining, and replacement of tertiary canals and laterals with a variety of water saving technologies including low- pressure pipe, sprinklers and micro-irrigation (micro-sprinklers or drip systems). Approximately 70t of the treated areas would use groundwater as the water source and the systems in these areas also include well construction and pumping equipment, where these are not presently available or adequate. Irrigation and Drainage System Component - 12 -  (Area in ha) Agriculture Support and Services and Forest Development. Agronomic measures include land leveling, non-tillage in the dry season, deep plowing in the rainy season, soil fertility improvements including incorporation of green manure and stalk, organic and plastic mulching, cropping pattern adjustments, seeds improvements and development of drought resistant varieties, balanced fertilization, improvements to planting and cultivation techniques, etc. The forest development component will support tree planting for windbreak protection and soil conservation. Tree nurseries will also be included in the Project. In some cases fruit trees will be used. The quantities are shown in the table. Institutional Development. This component will involve support to improvements in water conservation technologies and developments including training, technical assistance and research. The Project will strongly emphasize training of agriculture, irrigation and water resources technicians at the township and county levels as well as farmers. C. Environmental Impact Potentials Tables 1 and 2 provide a summary of the issues, existing conditions, potential impacts, mitigation measures and residual impacts of the WCP. These are further described below. Key Environmental Issues. All regions involved in the WCP suffer water shortage problems and increasing problems related to lowering of the groundwater table and degradation of groundwater, surface water and soil quality. The Project activities may directly or indirectly affect these issues. All sub-project areas are located on lands that are already intensively cultivated and as such there will be no change in land use and no impact on sensitive ecological habitats. There are no significant atmospheric, solid waste, health, cultural, or socio-economic issues associated with the Project activities. Thus, the key potential adverse impacts relate to: - contribution to overdraft, should the proposed agricultural measures not be carried out properly; and, - degradation in groundwater, surface water and soil quality, if fertilizer and pesticide use increases and application is not well managed. The Project is also to have a number of positive environmental and social benefits including: - various agricultural measures will result in "real" water savings, through reduced ET, which could provide direct and quantifiable benefits to the severe groundwater overdraft problem in many of the Project areas; - proposed mitigation measures such as the introduction of management plans - 13 -  for pesticide and fertilizer use will help minimize environmental impacts of these chemicals on groundwater, soils and surface water and associated biota and users; - the Project will lead to increased crop yield, which will provide economic and social benefits to the villages, counties and Provinces/Municipalities participating in the Project; and, - the forest component will provide additional forest habitat and will provide wind shelters to help reduce erosion. Impact Assessment The potential environmental impacts associated with the main environmental issues described above have been assessed as follows: - Impact on groundwater tables - Water balance calculations have been done for all Regions, for conditions with and without Project implementation. In all cases, it is predicted that there will be savings in the amount of groundwater used for irrigation, as a result of changes to irrigation systems and the introduction of agricultural and management measures. These changes are predicted to eventually lead to stabilization of the groundwater levels if they are carried out on a wide scale; - Impact of fertilizer of groundwater quality : It is expected that the total amount of fertilizer applied in the project areas will increase as a result of the WCP. Nitrate is the key contaminant of concern, given its mobility and potential environmental and health impacts. An analysis of nitrate levels was done using the nitrate pollution index method proposed by Ramolino. That index ranks the potential for nitrate pollution based on 22 different variables, including crop conditions, fertilizer type and application conditions, and groundwater and soil conditions. Based on that assessment, it was concluded that the projected increase in nitrate use would not adversely affect groundwater quality; - Impact of pesticides on soil and groundwater quality : The potential impact of pesticides which may be used by farmers in the project areas was assessed using the Gustafson's GUS index, which classifies the leaching characteristics, and hence the mobility, of pesticides. This index is based on characteristics of the pesticide - organic carbon partition coefficient and half-life in soils. Analysis by these method of two pesticides widely used in China, methamdiphos and rogor, suggest that these chemicals are not highly mobile in soils, and will therefore not adversely affect groundwater quality. However, given the uncertainties associated with other pesticides in use in China, it was concluded that mitigation measure that focus on safe handling and use of pesticides should be integrated into the WCP; - Impacts during construction : Activities such as canal lining, pipe laying, road construction and related civil works may lead to short-term problems associated with dust, erosion, and noise. D. Environmental Mitigation and Monitoring Plan Proposed Mitigation Measures : The main mitigation measure is the design of the Project itself which is designed to promote adoption of sustainable conservation farming techniques for irrigated areas. Mitigation measures proposed to mitigate potential impacts associated with the Project (mainly effects of fertilizer and pesticide usage on groundwater, surface water and soil quality) include: - 14 -  - Ensure proper application of nitrogenous fertilizers, taking into account minimizing amount required and optimizing timing; and - Follow national standards for pesticide use Mitigation measures proposed to mitigate the potential impacts associated with construction activities include: - Remove spoil material and transport to an appropriate location for disposal; - Carry out civil works during dry season to minimize erosion; - Revegetate canal banks following construction to stabilize the banks and prevent erosion; and - Drive construction equipment at safe speeds through villages, and avoid unnecessary traffic through villages at night. Monitoring Program : The monitoring program is designed to monitor (1) change in groundwater levels, and (2) changes in groundwater, surface water and soil quality. A monitoring network will be established in each Province/Municipality. Data will be collected from each subproject area and reported to the county province office and then to the Provincial Project management office before being submitted to the central PMO. NOTE: This document contains tables that cannot be converted into text files. However, if you have MS Word or Word Viewer on your computer, you should be able to download the complete original version by going to: http://www.worldbank.org/pics/pid/cn56516.doc Processed by the InfoShop week ending August 11, 2000. - 15 -  Annex Because this is a Category B project, it may be required that the borrower prepare a separate EA report. If a separate EA report is required, once it is prepared and submitted to the Bank, in accordance with OP 4.01, Environmental Assessment, it will be filed as an annex to the Public Information Document (PID) . If no separate EA report is required, the PID will not contain an EA annex; the findings and recommendations of the EA will be reflected in the body of the PID. - 16 -