Turkey - Ceyhan Aslantas Multipurpose Project

FILE COPY DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Pubhc Use Report No 16a-TU CEYHAN ASLANTAS MULTIPURPOSE PROJECT TURKEY January 31, 1973 Agriculture Projects Department Europe, Middle East and North Africa This report was prepared for official use only by the Bank Group It may not be pubhshed, quoted or cited without Bank Group authorzation The Bank Group does not accept responsilblity for the accuracy or completeness of the report  CURRENCY EQUIVALENTS US$1.00 TL 14.00 TL 1.00 = US$0.0714 TL 1 million = US$71,400 WEIGHTS AND MEASURES (Metric System) -1 millimeter (mm) 0.039 inches 1 meter (m) 5 3.28 feet 1 square meter (m2) = 10.76 square feet 1 cubic meter (m3) - 1.31 cubic yards 1 million cubic meters (Mm3) 810.7 acre feet 1 cubic meter per second (m3 per sec) = 35.35 cubic feet per second 1 liter per second (l per sec) - 0.035 cubic feet per second 1 kilometer (km) = 0.62 miles 1 square kilometer (km2) 0.386 square miles 1 decare (da) - 0.247 acres 1 hectare (ha) = 2.47 acres. 1 kilogram (kg) 2.205 pounds 1 metric ton (ton) = 2,205 pounds 1 kilovolt (kV) = 1,000 volts 1 kilowatt (kW) - 1,000 watts 1 kilowatt hour (kWh) = 1,000 watthours 1 megawatt (MW) - 1,000 kilowatts 1 gigawatt (GW) - 1,000 megawatts 1 gigawatt hour (GWh) = 1,000 megawatthours ABBREVIATIONS DSI - State Hydraulic Works, Ministry of Energy and Natural Resources TOPRAKSU - Soil Conservation Agency, Ministry of Village. Affairs ABT - Agricultural Bank of Turkey SPO - State Planning Organization YSE - Agency responsible for Village roads, water and electricity TEK - Turkish Electricity Authority CEAS - Cukurova Elektrik A. S. EIE - Electric Studies Institute THO - Soil Products Office CUKOBIRLIK - Union of Sales Cooperative FISCAL YEAR March 1 to last day of February  TURKEY CEYLAN ASLANTAS MULTIPURPOSE PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS ........................... I. INTRODUCTION ........ ............. ........... ... 1 II. BACKGROUND ............................ ,.......... 2 Agriculture .................................. 2 Energy and Power ............... -. 3 III. THE PROJECT AREA ................ .................. 4 Location .......,, 4 Climate ................. 4 Soils, Topography and Drainage ..............* 4 Population ..................... ...* 4 Land Tenure and Farm Size .................... 5 Communications ....5................*. 5 Power . ....................... ..***e*....***. 5 Present Land Use and Yields .................. 6 DV. THE PROJECT ..... , 6 Description 6 Proposed Works ............. . 7 W4ater Supply, Demand, Quality and Rights ..... 8 Floods and Flood Control 9 Status of Engineering 9 Cost Estimates ....10 Fi nancing ........................... 12 Procurement 12 Disbursement 13 Accounts and Audit .....14 Environment and Health 15 V. P01ER ..............*..... 16 The Power System .....16 Operation of the Project 16 Consideration of Alternatives ......16 Organization and Finance ..................e. 17 Cost Allocation ....... 18 Participation of CEAS in the Project 18 This report is based on the findings of an appraisal mission in April/Mlay, 1972, consisting of Messrs. M. D. ffrench-Mullen, M. Altaf Ilussain, B. Kanchanalak, S. Okabe, R. A. Stevenin of the Bank, and G. Post (Consultant) for the irrigation component and Hessrs. J. J. Fish and R. W. Bates of the Bank for the power component.  TABLE OF CONTENTS - Continued Page No. VI. ORGANIZATION AND MANAGEMENT ........... ............ 19 Project Coordination ...................., 19 Implementation of Project Works .............. 19 Operation and Maintenance ..................... 20 Extension Service ........ ................ .... 20 Training ., ..............................,... 21 Consultants ................... . - 21 Group of Specialists ................... 22 Safety of Dam ........... 22 Research *.........*........... ........... 22 Credit ...,22 Recovery of Cost ......................t.. . .. 23 VII. PRODUCTION, MARKET PROSPECTS, PRICES AND FARMERS' INCoME ...v*26 Production .................... 26 M4arket Prospects ... ...............*** 27 Prices ......* 28 Farmers' Income ......... ......... ..... . . ..... . 28 VIII. BENEFITS AND JUSTIFICATION ........................ 29 Economic Benefits ... * ** *....... ............. 29 Employment ................. 29 Income Distribution *000 .......... 30 IX. AGREEMENTS REACHED AND RECOMMENDATIONS .... ........ 30  ANN.EXES 1. Without and With Project Cropping Pattern, Area, Yields and g Production 2. Description of Works Chart 6946 (3R) - Schedule of Construction 3. Schedule of Construction for On-Farm Development 4. Water Supply, Demand, Quality and Rights 5. Flood and Flood Control 6. Organization, Contractors and Consultants 7. Land and Property Acquisition 8. Cost Estimates with Building and Equipment Lists 9. Schedule of Expenditure 10. Annual and Quarterly Credit/Loan Disbursement Schedules 11. Aslantas Power and TEK Development Program Chart 6925(R) - Project Organization Chart 6927 - Topraksu Organization Chart 6926 - DSI Operation and tMaintenance Organization Chart 6928 - Extension Service Organization 12. Credit Requirements 13. Farm Income and Repayment Capacity 14. Outlook for Cotton Exports 15. Rate of Return Calculations and Sensitivity Analysis 16. Labor Requirements NAPS 3219 R - Turkey Electrification Plan 10061 - Ceyhan Aslantas Multipurpose Project   TURKEY CEYHAN ASLANTAS MULTIPURPOSE PROJECT SUMMARY AND CONCLUSIONS i. Agriculture, which dominates the Turkish economy, contributes nearly one-third of the GNP; provides much of the raw material for industry; and employs 60% of the labor force. Of the total exports in 1971, agriculture accounted for 73%. Irrigation is important to Turkey's agriculture because normal rainfall is insufficient for optimum crop yields. Of the two million ha, or 12.5% of the planted area currently irrigated, about one-third is public sector schemes, which are better designed and more efficient than those in the private sector. In its development plans, Government has been increasingly emphasizing the improvement and extension of irrigation systems, in the first plan period (1963-1967) 60% (TL 3.5 billion) of the total public sector investment in agriculture was for irrigation and in the second plan (1968-1972) 65% (TL 7.2 billion) was similarly allocated. This policy has been endorsed by recent Bank economic missions. In furthering this policy, Government has requested IDA and Bank assistance in financing a multipurpose irrigation and hydropower project in the Eastern Mediterranean region in the south of Turkey. ii. IDA/Bank lending in the agricultural sector totals US$130.3 million equivalent (excluding IFC investments) and includes six credits and three loans. Two loans and two credits, totaling US$66.8 million, were made in 1952 (1 loan), 1963 (1 credit) and 1969 (1 credit and 1 loan) for the Seyhan Irrigation Project including the multipurpose dam; this project is one of Turkey's more successful irrigation developments. Progress is satisfactory on a 1971 credit of US$4.5 million for an Intensive Dairy Production Project and on a 1971 Credit/Loan totaling US$25 million for a Fruit and Vegetable Export Project. FY1972 credits of US$18 million for an Irrigation Rehabilita- tion and Completion Project and US$16 million for the Second Livestock Devel- opment Project became effective in April, 1972 and January, 1973 respectively. In the power sector, two credits and four loans have been made totaling US$93.7 million equivalent. Two power credits (1963 and 1964) and two loans (1969 and 1971) have been made to Cukurova Elektrik A. S., totaling US$44.7 million, for power facilities in the .project area. Two other loans (1968 and 1971) for US$49 million assisted the Turkish Electricity Authority to finance other power projects. All have been either satisfac- torily completed or are progressing satisfactorily. iii. The proposed Ceyhan Aslantas Multipurpose Project would provide irrigation and drainage systems for 97,000 net ha, flood protection for about one-third of the irrigated area and generate annually 500 GWh of electric energy. It would include: (a) an earthifill dam with hydroelectric plant; (b) flood protection dykes;  - ii - (c) irrigation and drainage networks to serve 97,000 ha of which 8,200 ha would be served by pumping; (d) feeder roads; (e) on-farm development on 97,000 ha; and (f) service buildings and houses. The following would also be financed: land acquisition for the reservoir and sites for the physical works; hydromechanical and electrical equipment; oper- ation and maintenance, on-farm development and extension service equipment, supplies and vehicles; and the purchase of dairy cattle for mixed farming demonstrations and on-the-job and overseas training of project personnel. Construction would be phased over eight years. Under the projecL, the State Hydraulic Works (DSI) would employ a consulting firm to assist in the con- struction of the dam and power plant and the Soil Conservation Agency (Topraksu) and the Extension Service would also employ consultants to assist with on-farm development and extension service to farmers. iv. Land within the project area is freehold. About 16,000 families are engaged in agriculture of which about 80% are farmers and the remainder farm laborers and herdsmen. The family averages 7.2 persons and the average size farm is 10 ha (sizes vary from less than 1 ha to more than 50 ha). About 17% of the families own about 62% of the land while more than half the fam- ilies own 12% of the land. This imbalance in land ownership is likely to be improved when the proposed Agrarian Reform Law is passed. V. Estimated total project cost is US$326.6 million, with an estimated foreign exchange component of US$104.2 million, or 32% of the total. The requested IDA credit of US$30 million and Bapi loan of US$44 million would finance about 23% of the project cost or 71% of the foreign exchange com- ponent. The remaining foreign exchange of US$30.2 million and local costs of US$222.4 million would be provided by Government through annual budget appropriations. vi. Civil Works contracts would be tendered totaling about US$143.3 million (excluding contingencies). The full foreign exchange component (excluding contingencies) of the dam and power plant and on-farm development would be financed by the Credit/Loan and 80% of the irrigation, flood protec- tion and drainage works as the funds available are insufficient to finance the entire foreign exchange requirements of both civil works and all equip- ment to be procured outside Turkey. Of this total, about US$106.4 million would be put to international competitive bidding, about US$19 million to local bidding and about US$17.9 million would be carried out by force account or by local contractors. Equipment totaling about US$35.4 million would be purchased of which US$21.8 million, involving equipment to be procured out- side Turkey, would be financed by the Credit/Loan and the remainder, US$13.6 million, to be purchased within Turkey, would be financed directly by the Borrower. The purchase of dairy cattle overseas (US$0.3 million) would be financed by the Credit/Loan. The remaining costs, excluding contingencies,  - iii - US$46.2 million would be for consultants, training, engineering and adminis- tration and land acquisition. The foreign exchange costs of consultants and training would be financed by the Credit/Loan and land acquisition costs would be financed exclusively by Turkey from its own resources. vii. Four agenzies of the Turkish Government would be responsible for im- plementing the project; DSI for construetion of the Aslantas dam and power plant, irrigation, drainage and flood protection systems; Topraksu for on-farm development; the Extension Services for assistance to farmers and the Agri- cultural Bank of Turkey for Credit. On completion of construction, DSI would be responsible for operation and maintenance of the project, save for the power plant for which the Turkish Electricity Authority (TEK) would be respon- sible. Because of the geological complexity of the dam site, DSI would employ a consulting firm to assist with construction of the dam and power plant and Government would also appoint a Group of Specialists to advise as needed on special problems which might arise during the design and construction of the dam. Topraksu and the Extension Services-would employ consultants for both on-farm development and advisory work amongst farmers. viii. At full development, the present range of crops, with the addition of fodder crops, would continue to be grown. Cotton would continue to occupy the largest area and seed cotton production would be increased by about 141,000 tons (from 53,000 to 194,000 tons). The incremental production of other crops would be substantial and fodder production with dairy demonstra-. tions should have a marked beneficial effect in time on livestock production. With these production increases, coupled with the annual production of 500 GWh of electric energy, the economic return is 13.4%. The rate of return for a single-purpose irrigation project would be 13%. On the other hand, a single-purpose hydroelectric project would not be justified. A multipurpose project is preferable because the economic rate of return on the incremental costs of the power component is at least 15.7% thereby increasing the overall rate of return to 13.4%. The project is also estimated to increase gross foreign exchange annual earnings by about TL 291 million (US$20 million). It would create about 14,000 additional man-years annually of direct employment and provide annually about 1,000 man-years of employment during 8 years con- struction. About 1,000 families would be displaced by the Aslantas reservoir, which is situated outside the project area and they would receive satisfactory compensation in accordance with existing law which would enable them to pur- chase land elsewhere and establish themselves thereon. The possibility of a resettlement scheme for the displaced families was considered. Government pointed out that the compensation paid was sufficient to enable families to establish themselves elsewhere, the law did not provide for resettlement and, in previous acquisitions for a similar purpose elsewhere in Turkey, no re- settlement schemes were provided and an exception could not therefore be made in this case. ix. As adequate assurances were obtained during negotiations, the proj- ect would be suitable for an IDA credit of US$30 million and a Bank loan of US$44 million repayable over 30 years with 9 years grace. The Borrower would be the Turkish Government.   TURKEY CEYHAN ASLANTAS MfULTIPURPOSE PROJECT I. INTRODUCTION 1.01 The Government of Turkey has requested an IDA credit of US$30 mil- lion and a Bank loan of US$44 million to help finance the Ceyhan Aslantas Multipurpose Project. The project is located in the Ceyhan River basin in southern Turkey, about 350 km southeast of Ankara near the provincial capital town of Adana. On completion, the project would irrigate 97,000 ha and generate annually 500 GWh of electric energy. 1.02 For irrigation, the Bank's 1970 economic mission recommended that Turkey should give priority to the completion and rehabilitation of existing irrigation schemes. It also recognized that the country would need to pro- ceed with new major irrigation wrorks associated with electric power generation. The 1972 economic mission also considers that additional investment for large- scale irrigation projects would be required over the long-term in view of growing domestic demand and foreign markets. Besides raising agricultural incomes, the expansion of the irrigated area would result in new employment opportunities in the rural areas. The Third-Five-Year Plan, commencing in 1973, continues to emphasize agricultural development and provides for the considerable local currency needed to finance this project and on-going ir- rigation projects. This project is in accord with Government's announced strategy for the agricultural sector. 1.03 The Bank and IDA have made the following loans and credits for agricultural development in Turkey: (a) The Seyhan Irrigation Project. The first Bank loan, 63-TU (1952 of US$22.8 million), assisted in financing construction of the Seyhan Multipurpose Dam. Credit 38-TU (1963 of US$20 million) helped to finance Stage I of the Seyhan Irrigation Project (57,000 ha) and has been completed. Stage II of the project (Credit 143-TU for US$12.0 million and Loan 587-TU for US$12.0 million, 1969) should be completed in 1975. Although many problems arose during the mid-1960's, they were resolved and the project is now regarded in Turkey as one of the country's more successful irrigation developments. (b) The Intensive Dairy Production Project. Credit 236-TU, (1971 of US$4.5 million) became effective, December 23, 1971. Progress is satisfactory. (c) The Fruit and Vegetable Export Project. Credit 257-TU, of US$15.0 million and Loan 762-TU, of US$10.0 million (1971) became effective on May 19, 1972. Progress is presently satisfactory after delays in appointment of consultants and i local staff.  - 2 - (d) The Irrigation Rehabilitation and Completion Project. Credit 281-TU (1972 of US$18.0 million) became effective in April 1972. Although delays occurred in appointment of consultants, preparation of work schedules and ordering of equipment, these should not result in any marked delays in construction. (e) The Second Livestock Development Project. This credit for US$16 million became effective in J;rnuarv, 1973 1.04 Credits and loans for power development include Credit 34-TU (1963) for the third generating unit at the Seyhan dam, Credit 59-TU (1964) and Loans 623 (1969) and 775-TU (1971). These, totaling US$44.7 million for power facilities in the Adana Region, were made to Cukurova Elektrik A. S. In addition, Loans 568-TU (1968) and 763-TU (1971) for US$49 million helped the Turkish Electricity Authority (formerly the Power Group of Etibank) finance other power projects in Turkey. All projects have been either satis- factorily completed or are progressing satisfactorily. 1e05 The Ceyhan project was studied for 10 years by Government agencies with the assistance of consultants; namely, Italconsult of Italy (Geology), TECO of U. S. (Financial and Technical Feasibility), Dapta and Gizbili of Turkey (Irrigation and Drainage Design), and Acres-Syndibel-Su Yapi of Canada-Belgium-Turkey. The final project feasibility report was prepared by the State Hydraulic Works (DSI) of the Ministry of Energy and Natural Resources, the Soil Conservation Agency (Topraksu) of the Ministry of Village Affairs and the Extension Services of the Ministry of Agriculture. 1.06 The project was appraised in April/May, 1972 by a Bank mission consisting of Messrs. M. D. ffrench-Mullen, M. Altaf Hussain, B. Kanchanalak, S. Okabe, R. A. Stevenin and G. Post (Consultant) for the irrigation component and Messrs. J. J. Fish and R. W. Bates for the power component. In addition to the findings of the appraisal mission, this report is based on documents submitted by Government agencies, the feasibility studies and final design reports for the dam and power plant, gravity irrigation, drainage and flood protection works. II. BACKGROUND Agriculture 2.01 Turkey has a land area of about 780,000 km2 and a population of 37.2 million (1972) increasing at 2.6% per annum. There are about 71 million ha of productive land of which 27 million ha, or two-fifths, is cultivated and the balance is in pasture or forest. GNP at constant (1965) prices rose on average by about 7% a year between 1962 and 1971. Agricultural production has grown at 3.1% per annum during the last decade, significantly less than the planned 4.2%. The agricultural sector growth has gradually improved during the last four years when the target rate of 4.2% was attained. The  low value of output per agricultural worker and sizeable unemployment during the winter months are key problems in this sector. 2.02 Agriculture contributes 28% of the GDP, provides much of the raw material for industry and employs 60% of the labor force excluding those employed in agricultural marketing and processing industries. Of the total exports of US$677 million in 1971, agriculture accounted for US$491 million or 73%,, excluding US$50 million for olive oil, sugar, and oil cakes. Agri- culture's contribution to exports has remained about 75% of total exports over the past five years. The main agricultural exports are cotton, hazel nuts, tobacco, animal products, and raisins; fruits, vegetables and fisheries are also important. Imports in the same year were only US$63 million; 75% of which were cereals. 2.03 Irrigation is important to Turkey's agriculture because normal rainfall is insufficient for optimum crop yields. Only about two million ha, or 12.5% of the planted area, are currently irrigated; about one-third of which are public sector schemes, which are better designed and more efficient than those in the private sector. Government investments in irrigation dur- ing the First Plan period (1963-1967) were TL 3.5 billion or 60% of the total public sector investment in agriculture. During the Second Plan (1968-1972), investments in irrigation were increased both in absolute amount and as a percentage of the total Plan investment, being TL 7.2 bil- lion and 65% respectively. 0 2.04 Fragmentation of responsibility and loose coordination and even friction among various agencies dealing with the agricultural sector are important constraints on agricultural growth. Irrigation projects have also been constrained by lack of financial resources, both to complete on-farm development of the irrigated areas and to provide adequate credit together with lack of a coordinated approach by the three Government agencies involved in irrigation development. To accelerate growth in Turkish irrigated agri- culture, the provision of physical facilities needs to be synchronized with on-farm development, the provision of adequate extension services, credit, input supplies, market outlets, and applied agricultural research. Energy and Power 2.05 Turkey has indigenous resources of coal, lignite, oil and hydro- electricity which supply about 70% of total primary energy requirements. The balance is met from imported petroleum (mainly crude oil). In 1971, an estimated 15% of primary energy was consumed in the form of electricity, supplied from plants having a capacity of 2,260 Mi. One-third of this capacity was hydro-based and the remainder used lignite, coal and oil. 2.06 Increasing population and economic development (described in para 2.01) have given rise to a growing need for energy supplies. Primary commercial energy consumption grew at an estimated rate of 7% per annum over the last five years. The consumption of electric power has grown even faster, showing an annual increase of 12% since 1960. About 75% of electricity sales are to industry, 18% to domestic and commercial consumers, 4% to Government offices and 3% to street lighting and traction.  - 4 - III. THE PROJECT AREA 0 Location 3.01 The project area of 97,000 net ha (108,000 gross irrigable ha) is part of the East Mediterranean region in the south of Turkey. It is located in the Ceyhan plain on both banks of the Ceyhan River immediately downstream of the Cevdetiye diversion weir which is about 25 km downstream of the pro- posed Aslantas dam site. The main town of the project, Ceyhan (population 51,000) is about 350 km from Ankara and 40 km from the provincial capital of Adana. To its immediate west is the Seyhan Irrigation Project financed by the Bank. The two Mediterranean ports of Iskenderun and Mersin are 70 km and 108 km, respectively from Ceyhan (see Map 10061). Climate 3.02 The climate is Mediterranean: hot and dry during the summers and mild and wet during the brief winters. Based on 1929 through 1964 records, annual rainfall is about 700 mm, the majority of which falls during the winter months. Rainfall is scanty during the main plant growth months, June through September. This rainfall and evaporation pattern is a limiting factor in the choice of crops and in yields in spite of a climate suited to a wide range of crops provided irrigation is available. Temperatures are moderate; ranging between 10