Announcement of Twenty Nine Million Dollars Lent to Ceylon for Agriculture and Electric Power on January 23, 1970

..~"-r,oNAt.a,,,_~ INTERNATIONAL BANK FOR /~"'o.,. • [[wo11LD~is~~1<Jl RECONSTRUCTION AND DEVELOPMENT i~»t. 9,._~l ">-_.ll ~.;.v"o r.-,.,ONt,ti.)o· INTERNATIONAL DEVEL()Pl\'.l]•~NT ASSOCIATION 18 1 8 H ST R EE T, N W. WASHINGTON D.C. 20433 TELEPHOl'IE. EXECUTIVE 3-6360 Bank Press Release No. 70/6 Subiect: $29 million lent to Ceylon for IDA Press Release No. 70/3 agriculture and electric power Jancary 23, 1970 The Mahaweli Ganga scheme for the development of agriculture and electric powe~ in Ceylon will be launched with the assistance of $29 million from the World Bank and its affiliate, the International Development Association (IDA). T~e scheme contemplates the progressive development of irrigation for some 900,000 acres and the generation of about 900 megawatts of hydroelectric power, • and may well become Ceylon's major development project during the coming decades • The Bank and IDA funds will assist the first stage which involves improved water supply for 127,000 acres and a 40-MW power plant. In announcing the transaction, Roberts. McNamara, President of the World Ba~k, said: "I am glad that the World Bank Group is to be associated with the Mah3weli Ganga development scheme. We regard the project as particularly signi- fi~anc, not merely because its multipurpose character will strengthen the whole P.conornic base of Ceylon, but because of the broad and beneficial impact it will have on the nation's social structure. It will bring new hope to the small farmer who -- given the technological advantages of adequate irrigation -- can acceierate both his own and his country's progress." Ceylon's land area is divided into distinct wet and dry zones. The wet zone, situated in the southwest, covers only about 30% of the land area but • supports more than 75% of the -p.opuiation and contains over 80% of the culti- vated land. In recent years the Government has concentrated on increasing /more Bank P.R. No. 70/6 - Ceylon-Agriculture and IDA ·P.R. No. 70/3 Electric Power • - 2 - agricultural production for the domestic market, both to accelerate economic develop- ment and to improve the balance of payments by reducing food imports, particularly rice. Its efforts have met with considerable success mainly through an increase in yields. The next step is to expand the acreage under cultivation and this is only possible on a large scale by utilizing land in the dry zone, which will require a reliable supply of irrigation water. The settling of landless people on new land and reducing population pressures in the urban areas are also important political and social objectives. The major source of water for the dry zone is the Mahaweli Ganga, Ceylon's largest river. Ceylon also has growing power needs which can be met in part by developing the hydroelectric potential of the river. The Master Plan for the development of the Mahaweli Ganga was prepared during the course of four years by a team financed by the United Nations Development Pro- grarmne with the Food and Agriculture Organization of the United Nations as Executing Agency. The main features of the first stage are two major diversion schemes, one on the Mahaweli Ganga at Polgolla near Kandy, and the other at Bowatenna on the Amban Ganga which will permit the water diverted at Polgolla to be shared between two separate areas in the dry zone of Ceylon. The 40-MW hydroelectric power plant will be installed at Polgolla which, upon completion, will be transferred to the Ceylon Electricity Board which is responsible for the generation, transmission, and dis- tribution of electricity throughout most of Ceylon. The improved water supply will • benefit about 127,000 acres of land already under cultivation mainly in rice, but including 4,000 acres of sugarcane. As a result of the project, rice production will increase by 83,000 metric tons, equivalent to a quarter of Ceylon's 1968 im- ports, and sugar production on the 4,000 acres will triple. The main irrigation works -- the diversion dams, tunnels, and main canals -- will be designed to meet the irrigation requirements of about 104,000 additional acres consisting essentially of new land to be subsequently developed. The project includes feasibility studies covering the next stage of development which would open up about half of this new land as well as provide for further improvement of existing land. The Bank loan and the IDA credit to Ceylon will amount to $14.5 million each. The Bank loan will be for a term of 30 years, including a 6-year grace period, and bear interest of 7%. The IDA credit will be for a term of 50 years, including 10 years of grace. It will be interest-free, but will carry a service charge of 3/4 of 1% to cover IDA's administrative costs. The first stage is scheduled for completion in five years at a total cost equivalent to $50 million. The Bank loan and the IDA credit will finance the foreign exchange requirements and the remaining costs will be met by the Govern- ment. The major civil works as well as the supply of equipment will be subject to international competitive bidding. To facilitate execution of the project, the Government will establish a Mahaweli Development Board and has retained con- sultants. The works will be carried out through special divisions within the Irrigation, Agriculture and other Departments concerned. To insure adequate coordination at the field level, special project units will be established • throughout the project area. - 0 -