Nepal - Bhairawa - Lumbini Groundwater Project

Report No. 1093a-NEP L Nepal: Appraisal of the Bhairawa-Lumbini Groundwater Project June 17, 1976 Irrigation and Area Development Division South Asia Projects Department FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS US$1.00 = 12.50 Nepal Rupees (NRs) NRs 1 US cents 8.00 WEIGHTS AND MEASURES EQUIVALENT kV = Kilovolt = 1,000 volts kWh = Kilowatt hour = 1,000 watt hours  FOR OFFICIAL USE ONLY PRINCIPAL ABBREVIATIONS AND ACRONYMS USED ADADO = Assistant District Agriculture Development Officer AD Agricultural Department ADBN Agricultural Development Bank of Nepal AIC = Agricultural Inputs Corporation AJT Assistant Junior Technician BLGPO Bhairawa-Lumbini Groundwater Project Office CDO Chief District Officer DA Department of Agriculture DADO District Agricultural Development Officer DIHM Department of Irrigation, Hydrology and Meteorology FAMSD Food and Agriculture Marketing Services Department GDP Gross Domestic Product GRDB Groundwater Resources Development Board HMGN = His Majesty's Government of Nepal HYV High Yielding Variety ICB International Competitive Bidding I&D Irrigation and Drainage JT Junior Technician JTA = Junior Technical Assistant LCB Local Competitive Bidding IAAS = Institute of Agriculture and Animal Science MFAI = Ministry of Food, Agriculture and Irrigation MHP Ministry of Home and Panchayat MLR = Ministry of Land Reform MWP Ministry of Water and Power MWT Ministry of Works and Transport NEC = Nepal Electricity Corporation NFC = Nepal Food Corporation NZIDB = Narayani Zone Irrigation Development Board O&M = Operation and Maintenance PCC = Project Coordinating Committee PLAA = Panchayat Level Agricultural Assistant PM = Project Manager RD = Roads Department SMS = Subject Matter Specialist GLOSSARY Panchayat = Smallest subdivision of Government. FISCAL YEAR His Majesty's Government of Nepal - July 16 to July 15 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   NEPAL APPRAISAL OF THE BHAIRAWA-LUMBINI GROUNDWATER PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ................... .. . .......... i-iii I. INTRODUCTION ........................................... 1 II. BACKGROUND ............................................. 2 General ............................................. * ........*... 2 Agriculture ..* .. .*...... . ... . ......... . ........... ........... 3 Irrigation Development .............. .......*...... 3 III. THE PROJECT AREA ......... ............. . ................ . 4 General . .... ............ 4 Climate ......................................... 5 Topography and Soils . .................... ......... . 5 Hydrogeology ................................. ........ 5 Existing Irrigation ............. .0 ..... .... **.. 5 Farm Size and Land Tenure ............... ......... 6 Agricultural Production ... ........................ 6 Transportation and Marketing .... ............ 7 IV. THE PROJECT .......................................... ............... 7 General ..................... 7 Project Works and Other Project Components ........ 8 Water Supply, Demand and Quality .................. 9 Engineering Design ................. . . . ................ . 10 Consulting Services ... ...... ...... *.............. 10 Construction Schedule .................... ....... ... 10 Project Costs ..................... . ................ 10 Financing ........................................................ 12 Procurement and Contracts .............. ........... 12 Disbursements ............................................ ......... 12 Accounts and Audits ............................... 13 Environmental Impact .............. ................ 13 V. ORGANIZATION AND MANAGEMENT ............................ 13 Operation and Maintenance ........ ................. 15 Agricultural Supporting Services .................. 16 Farmers' Organizations . ............. 17 Monitoring the Project........ 18 Cost Recovery . ................. . 18 This report is based on the findings of an Appraisal Mission including Messrs. J.K. Lee, U. Hpu, and W.G. Rodger (IBRD) and W. Barber who visited the project area in Nepal, November/December 1975.  -2- Page No. VI. PRODUCTION, MARKETING, PRICES AND FARM INCOMES ... ...... 20 Crop Calendars and Cropping Patterns .............. 20 Yields and Production ............................. 21 Marketing and Processing ........... .. ............. 22 Prices ............................................ 22 Farm Income ........................... .. .............. 22 VII. BENEFITS AND JUSTIFICATION ............................. 23 General ........................................... 23 Foreign Exchange Earnings ............... . ...... 23 Income Distribution ...... .... .. ................. . 24 Employment Opportunities .......................... 24 Rate of Return ................ .. .................. 25 Sensitivity Analysis ....................................... 26 VIII. AGREEMENTS REACHED AND RECOMMENDATIONS .... ............. 26 ANNEXES 1. Agricultural Development 2. Climatic Data 3. Project Works 4. Hydrogeology of the Project Area 5. Irrigation Water Supply, Demand and Quality 6. Implementation Schedule 7. Cost Estimates and Schedule of Expenditure 8. Proposed Credit Allocation and Estimated Schedule of Disbursement 9. Agricultural Supporting Services 10. Present and Projected Cropping Patterns and Production 11. Prices for Economic and Financial Analyses 12. Crop Inputs and Farm Budgets 13. Farm Labor Analysis 14. Economic Analysis CHART Project Organization MAPS 12074 - Project Location and Civil Works 12075 - Project Area 12076 - Typical Irrigation Service Unit  NEPAL APPRAISAL OF THE BRAIRAWA-LUMBINI GROUNDWATER PROJECT SUMMARY AND CONCLUSIONS i. Agriculture dominates the economy of Nepal. It accounts for about 90% of the employment, 80% of the export earnings and 67% of the GDP which averages about US$100 per person. Nepal imports most of the industrial and manufactured consumer goods required by its population and it depends prima- rily upon the earnings from agricultural exports, the income from tourism and Gurka transfers to pay for such imports. In the last two years, the balance of payments has taken an adverse turn and the Government is re-examining its development and trade policies in an effort to identify action that can be taken to cope with recent trends. Increased development of small and quick maturing irrigation projects is one of the approaches being pursued. ii. The Terai, the southern lowland portion of the country, offers the greatest potential for such quick yielding irrigation projects. The Terai includes 68% of the cultivated land area, most of the 260,000 ha which are now irrigated, and it is adjacent to India where the surplus agricultural products can be sold. Moreover, much of the Terai is underlain with ground- water which can be quickly developed and put to use without the need to de- velop major hydraulic works normally involved in surface water development and which require long gestation periods. iii. This would be the second project involving groundwater on the Terai. The first was the Birganj Irrigation Project (Credit 373-NEP) granted in 1973 which includes 2,700 ha to be irrigated by tubewells and 28,700 ha by sur- face water gravity systems. The Bhairawa project would include an additional 7,500 ha. The two projects taken together would provide the opportunity to explore problems in development and management of the tubewell systems under the two different ethnic groups that inhabit the Terai. If these projects prove successful, they would open the way for much larger future developments. iv. The proposed project would involve the construction of 63 tubewells to serve the 7,500 hectares that are now limited to the production of one crop a year under rainfed conditions during the monsoon season. In addition, the project would include the construction and improvement of village roads, the construction of an 11 kV transmission system to electrify the wells, the pro- vision of additional grain storage capacity, strengthening of the agricultural supporting services--particularly the extension service and provision of agri- cultural production credit, the completion of a feasibility study for another tubewell project in adjacent areas, and a study of water charges in Nepal. v. The total project cost is estimated at US$13.7 million equivalent with a foreign exchange component of US$6.8 million. The major elements in the cost estimate include land acquisition of US$0.3 M, civil works (US$3.7 M), equipment and vehicles (US$3.0 M), consulting services (US$1.5 M), agricul- tural supporting services (US$0.2 M), engineering and administration (US$0.5  - ii - M), production credit to farmers (US$1.0 M) -- making the base project cost US$10.2 M. Physical and price contingencies (US$3.5 M) raise the total cost to US$13.7 M. vi. Project implementation would take four years. The Department of Irrigation, Hydrology and Meteorology of the Ministry of Food, Agriculture and Irrigation would be responsible for tubewell installation and construc- tion of irrigation and drainage networks for each well, the construction of village roads and the grain storage, as well as coordination of the other project components carried out by other participating agencies. The Nepal Electricity Corporation of the Ministry of Water and Power would be responsi- ble for the construction of the necessary transmission system for electrifying the wells. Other appropriate agencies of the MFAI would carry out the exten- sion program and the management of the agricultural production credit. The Project Manager would be assisted by a Project Coordinating Committee op- erating under the Chairmanship of the Chief District Officer and including representation of all agencies involved in the project at the local level. A consulting firm would be employed to assist with project implementation and the preparation of feasibility report for the next tubewell project and a study of irrigation water charges including their future recommended levels. The ir- rigation and drainage system under each well would be operated and maintained by a Water Users Group comprised of all cultivators receiving service from an individual well. vii. The procurement of well equipment including drilling rigs, pumps and motors would be by international competitive bidding while construction of those items that are small and would involve labor-intensive construction methods such as irrigation distributary canals, drainage networks and village roads would be through local competitive bidding. The drilling and installa- tion of the wells would be by force account. viii. At full development in 1985, it is anticipated that the incremen- tal production of milled rice would be about 11,000 tons and wheat about 16,000 tons over present production. The project related increases of about 27,000 tons of such foodgrains would result in annual net foreign exchange earnings of US$1.7 million. ix. The project would directly benefit some 4,500 farm families (22,500 persons), 60% of whom are currently living below the poverty level of US$50 per person (NRs 3,100/family). At full development and after paying the pro- posed water charges, the incomes of all farmers operating farms of 0.5 ha or more would be sufficient to provide the basic necessities for family living. The more intensive cultivation anticipated under the project would also double the farm labor requirements -- an increase in employment opportunity of 1.1 million man-days. x. The project's economic rate of return would be 19%. Sensitivity tests indicate that even under a variety of adverse conditions, the project would continue to be economically viable.  - iii - xi. The project is suitable for an IDA credit of US$9 million. The credit would cover the foreign exchange costs as well as 32% of the local cost of the project or 66% of the total project costs. The Borrower would be the Kingdom of Nepal.   NEPAL APPRAISAL OF THE BHAIRAWA-LUMIBINI GROUNDWATER PROJECT I. INTRODUCTION 1.01 His Majesty's Government of Nepal (HMGN) has requested IDA assis- tance in financing the Bhairawa-Lumbini Groundwater Project. Since the begin- ning of its operation in Nepal in FY1970, the Bank Group has extended nine credits totaling US$66.7 million. The Bhairawa Groundwater Project would be the Bank Group's second project in support of the country's irrigation devel- opment, the first being Credit 373-NEP for the Birganj Irrigation Project which was signed on April 18, 1973. That credit provided US$6 million to assist in completing the distribution networks necessary to provide surface irrigation to 28,700 ha and to install tubewells and other related facilities to irrigate an additional 2,700 ha. 1.02 Out of a total irrigable area of some 1.3 million ha in Nepal only 260,000 ha have been irrigated. Most of Nepal's undeveloped irrigable land is in the Terai -- the southern lowland part of the country. Because of numerous streams that dissects the area, easily erodable soil condition and the severity of the monsoon rains, the development of surface water gravity irrigation in the conventional manner in Nepal has limited potential. As a supplement to surface water schemes, HMGN is exploring the groundwater poten- tial of the Terai, and there is good reason to be optimistic about the availability of sufficient water to irrigate a large part of the irrigable lands in that region. 1.03 One of the major problems encountered in the development of ground- water projects is that of organizing the farmers using each well and the man- agement of the individual well systems. The Birganj and Bhairawa Groundwater Projects would serve as pilot developments under each of the two major ethnic groups (Aryan stock from India in the former case and a mixture of Aryan and Mongoloid people who migrated from the mountains in the present case) inhabit- ing the Terai. These projects would provide a sound basis for proceeding with the development of additional groundwater projects. 1.04 A feasibility study of this project, originally identified by IDA in July of 1974, was completed by Tahal Engineers Ltd. (Israel) in October, 1975, and appraisal was completed in November/December 1975 by a Bank Group mission comprising Messrs. J.K. Lee, U Hpu, and W.G. Rodger (IBRD) and W. Barber (Con- sultant).  - 2 - II. BACKGROUND General 2.01 Nepal is a landlocked country bounded by India on the east, south and west and China on the north. It is roughly rectangular in shape and ex- tends approximately 850 km from east to west and 180 km from north to south. The country divides naturally into three zones; the Terai, an extension of the broad Gangetic plain of India along the southern border ranging in eleva- tion from 100 m to 450 m; the hills, comprising the foothills of the Himalayas, ranging in elevation from 450 m to 3,600 m; and the rugged mountain regions of the Himalayas to the north with elevations above 3,600 m. 2.02 The Terai has a humid subtropical climate with rainfall varying be- tween 2,500 mm in the east to 1,400 mm in the west. The hill zone, particu- larly in the higher portions, has a temperate climate while the mountain areas have an alpine climate. Nepal has a typical monsoon wet season which extends from May through October, with the most rainfall occurring in July and August. 2.03 The total land area of Nepal is 14.1 million ha with only 2.0 mil- lion ha (14%) being cultivated and only about 260,000 ha (13% of cultivated land) being irrigated. Although the Terai includes only 17% of the total land area, it includes 68% of the cultivated land and most of the irrigated land. 2.04 Nepal's population, currently about 12.5 million, is increasing at the rate of 2.1% a year. Over 90% of the population depends upon agricul- ture for its livelihood. The annual gross national product in the country amounts to only about US$100 per person. The pressure of population on the cultivated land area in Nepal, particularly in the hill area, is among the most acute in the world. Following the control of malaria in the mid-1950s, many of the hill and mountain people migrated to the Terai in anticipation of a better life. However, this has done little to relieve the overall pres- sure on the land resource in the hill region. The birthrate has quickly overtaken any temporary relief that might have resulted from such migrations. 2.05 The terrain of the country as well as the mountain streams that debouch onto the Terai have made it extremely difficult to provide an effec- tive transportation system. However, within the last two decades, roads have been constructed on the north-south axis from Kathmandu to China and India. There is also a road extending from Kathmandu west to Pokhara and from there south to the Indian Border. HMGN is now in the process of constructing an east-west highway on the Terai, the eastern portion is completed and the middle section is under construction. In 1972, there were 1,250 km of roads in the country. Most of the Terai, particularly the western portion, is accessible only through India. The principal means of transport in the hill country is by human porters or pack animals utilizing trails and suspension bridges.  - 3 - 2.06 Nepal imports most of the industrial products, a significant por- tion of the manufactured consumer goods and all of its commercial fertilizer; it pays for these imports mainly through its exports -- mostly foodgrains -- and earnings from tourism. Because of its transport linkages, it is only natural that India should be Nepal's major market as well as source of imports. 2.07 Since the mid-1960s, foodgrain production has grown less than 1% annually, mainly due to expansion in the cropped area rather than increases in crop yields. Hence, during the last decade because of the growing popu- lation in relation to foodgrain production , Nepal's grain exports have fallen from about 500,000 tons per year to only about 200,000 tons -- or to only 10% of its annual production. Also, in the last two years, because of worldwide inflation, including particularly the high prices of petroleum products, Nepal's terms of trade have taken a decided turn for the worse. HMGN realizes that it must take drastic steps to increase exports of foodgrains and to in- crease the earnings from tourism. The Fifth Five Year Plan which began in FY1976 is aimed at expanding the irrigated acreage and increasing the genera- tion of hydroelectric power in order to make more effective use of the country's huge water resource as well as the road and power infrastructure that has recently been constructed. So far as irrigation is concerned, the primary emphasis is now upon quick-yielding projects. Agriculture 2.08 Agriculture is characterized by subsistence farming with much of the land under foodgrain production. Paddy accounts for 51% of the total cropped area; maize 19%; wheat and other cereals 16%; and other crops includ- ing oilseeds, pulses, jute, potatoes, sugarcane, tobacco and horticultural crops 14%. Even though the climate on the Terai is suitable for year-round crop production, because of lack of rainfall, farmers make very little attempt to produce crops during the dry season. Also because of frequent droughts during the wet season, they are reluctant to use improved seeds and to apply the necessary fertilizer required to produce high yields. Under the present system, they apparently consider the risks too great to justify the use of such inputs. The present cropping intensity is only 118% and.the yields of wheat and paddy are only about 0.8 tons and 1.1 tons per ha, respectively. The yields of paddy are significantly lower on the Terai than in the hill region of the country (Annex 1). Irrigation Development 2.09 Because of physical conditions, irrigation development in Nepal has been slow. As the rivers emerge from the foothills, their gradients flatten, resulting in the deposition of large fans of gravel and sediment. These fans, in turn, result in an unstable condition in the streambeds and, because of this, construction of diversion dams at such locations is both difficult and costly. To compound this problem, only small areas can be commanded by gravity diversions between the foothills and the Indian border, and also to permit year-round irrigation, storage is required to supplement the natural river flows during the dry months.  2.10 Prior to 1950 only about 15,000 ha were reported as irrigated by public projects although there were areas that were partially served during periods of high natural river flow by privately built works. By 1975, an estimated 260,000 ha were irrigated -- 156,000 ha by farmer-built projects and 104,000 ha by projects constructed by HMGN. During the 19-year period, from 1956-1975, large surface water irrigation projects with small hydro-power components were undertaken in cooperation with India. These included the Gandak, Kosi West and Kosi East. While such projects promise to be signi- ficant, they require long planning and gestation periods. 2.11 Between 1970 and 1975, HMGN has obtained assistance from IDA for the construction of 32,000 ha Birganj Irrigation Project and 17,000 ha at Chitwan and Kankai which are assisted by the Asian Development Bank. These projects are still on-going. In addition, HMGN is undertaking the develop- ment of 32,000 ha at Kankai and Mahakali with its own resources and it is completing groundwater reconnaissance studies on 300,000 ha in the western Terai Region. 2.12 Most of the Terai is underlain by a groundwater aquifer which drains the underground flows from the foothills to the Ganges River. Through the installation of tubewells, these aquifers can be tapped for irrigation pur- poses, thus avoiding the difficult problems associated with conventional surface water development. However, the development of groundwater is not entirely devoid of problems. Compared to conventional surface water devel- opments, the cost of energy for pumping and replacement of pumps, motors and wells results in high annual operating costs. To make such projects viable, the operating costs must be held to a minimum and water used efficiently. This requires effective management of the individual wells and adequate provision of agricultural inputs. 2.13 The present project would be the first medium-sized groundwater irrigation development in western Nepal and would include a feasibility study for a further groundwater development. With the removal of the water constraint, it is anticipated that farmers would demand the necessary produc- tion inputs to optimize crop yields. In addition to providing irrigation water, the project provides agricultural credit to facilitate the use of such inputs. III. THE PROJECT AREA General 3.01 The 20,000 ha gross project area is located within Rupandehi Dis- trict in the Western Terai at an altitude of about 100 m (Map 12074). It lies between the Dana River in the west and Rohini River in the east and the Churia (Siwalik) Hills to the north and the India/Nepal border to the south (Map 12075). The area is bisected by the north-south Butwal-Bhairawa road which connects to the major highway systems of Nepal and India. Bhairawa, the main town, has a population of about 30,000 and has air service.  -5- Climate 3.02 The project area climate is monsoonal with three distinct seasons: a warm wet season from mid-June through September, a cool dry season from October through February and a pre-monsoon hot season from March through mid-June. Average rainfall, about 1,400 mm with over 85% during June through September is erratic; dependable rainfall with a probability of 0.8 (four out of five years-) is lower and not more than 800 mm. Temperatures range from about 60C in January to over 38 0C in May; mean monthly temperatures are 21 C-290C in March-November and 15 0C-17 C in December-February. Daily sunshine occurs through the year; 8-10 hours daily in October-May and 5-7 hours daily during June-September (Annex 2). Topography and Soils 3.03 The topography is that of a flat plain sloping gently from north to south at about 1:800. Broad slightly elevated ridges and lower troughs dif- fering by less than 1 m characterize the area which is intersected by small deeply incised north-south rivers and streams. The soils are alluvial, mod- erately fine textured silty loams, silty clay loams and silty clays. They are non-saline, moderately alkaline and with proper irrigation and surface drain- age are suitable for growing a wide range of crops. Over 80% of the area has been classified by the US Bureau of Reclamation standards as Class II or III for irrigation. Hydrogeology 3.04 The Western Terai including the project area is underlain by deep alluvial deposits ranging from course, fragmented rock deposits in the out- wash fans of the Churia Hills (the Bhabar zone) to thicker clay beds in the south (the Gangetic zone). Both zones have high yielding aquifers which have been investigated by HMGN with US Geological Survey assistance provided under a USAID program and subsequently by consultants funded under the Birganj Irri- gation Project (para 1.04). Present groundwater development is limited to 3 about 160 widely scattered very small free-flowing wells yielding about 10 mm annually and serving a small area -- mostly south of the project area. Existing Irrigation 3.05 Farmers have constructed simple diversion works on the unstable Tinao River, which bisects the project area, to serve, with widely vary- ing success, up to 7,000 ha of land (of which 5,000 ha lies within the 20,000 ha gross project area). These cooperatively managed systems supply mainly supplemental irrigation during high-flow periods. The inadequate diversion and conveyance structures provide, at best, uncertain irrigation -- particu- larly to the lower reaches of the distribution system.  -6- Farm Size and Land Tenure 3.06 The cadastral survey conducted by the Ministry of Land Reform (MLR) indicates farm sizes in Rupandehi District, as shown below: Average Farm Size Farm Holdings Cultivated Areas Holding (ha) (no) % (ha) % (ha) Less than 0.68 15,154 37 5,152 7 ) ) 0.6 0.68 - 1.36 9,696 24 9,890 14 ) 1.36 - 2.72 9,375 23 18,275 25 1.99 2.72 - 6.80 5,139 13 24,462 34 ) ) 6.07 Over 6.80 1,199 3 14,029 20 40,563 100 71,808 100 3.07 The bulk of project beneficiaries would be small farmers. On the basis of the District data, the number of farm families in the project area is estimated to be around 4,500 with an average holding of 1.7 ha. About 61% of the families have an average size holding of only 0.6 ha, 23% about 2 ha and 16% about 6 ha. A farm survey of four villages in the project area indicates that 93% of all cultivators own all of the land they farm and 7% rent part of their land. The families cultivating up to 1.5 ha generally use their own family labor, but those cultivating from 1.5 to 5 ha may engage some hired labor while those cultivating above 5 ha do their cultivation mainly with hired labor. Agricultural Production 3.08 Paddy is by far the most important crop and accounts for 80% of the cropped area. There is only one crop of monsoon paddy, the climate being too cold to raise a second crop in winter. Nursery seedbed preparation begins with the onset of the monsoon in May and June. Early maturing coarse varie- ties are planted first and harvested in October and early November, and long- life fine varieties are planted later in June-July and harvested in November- December. Wheat is of next importance, accounting for 12% of the cropped area. It is the major dry season crop and is grown with residual soil mois- ture following paddy. Other crops include rainy season pulses, mainly pigeon peas, winter pulses, oilseeds and sugarcane -- each occupying about 2% of area. The present cropped area is about 9,600 ha which on a net cultivated area of about 8,100 ha 1/ gives a cropping intensity of 118%. 1/ With the project the area lost to irrigation and drainage networks including reservoirs and roads would be about 600 ha.  3.09 The HYV paddy (IR 20, IR 22 and Mashooli) has been introduced but so far accounts for only 300 ha or 4% of the area under paddy cultivation, although it is becoming increasingly popular in the neighboring areas where dependable irrigation is available. The HYV and local rainfed paddy presently give low yields -- 1.8 and 1.1 tons per ha, respectively. The yields of other crops are also low being only 0.8 tons for wheat (mainly RR 21), 0.4 tons for oilseeds, 0.5 tons for pulses and 25.0 tons for sugarcane. The total production is about 8,700 tons paddy, 900 tons wheat, 170 tons pulses, 200 tons oilseeds and 5,000 tons sugarcane. Transportation and Marketing 3.10 The farmers in the project area sell their surplus grain and oil- seeds to traders operating in Bhairawa. There are about 60 such traders and each of them has sufficient space to store about 25 tons. In total, they handle about 40,000 tons per year from the Rupandehi District. The farmer is free to sell to any trader he wishes, but as a matter of habit, he usually sells to the same buyer year after year and more often than not to one who has advanced him production credit. 3.11 The trader, in turn, sells the crops directly to the Indian agents or in the case of rice to the rice export companies. The export companies are required to sell a specified portion (25% in 1975) at a preferential price to the Nepal Food Corporation (NFC) for distribution in the food deficit areas within Nepal. The export companies are free to sell the balance to the Indian agents. Transport from the traders shop in Bhairawa to the railhead in India is by truck. From that point it is transported by road and rail to the destination in India -- usually the deficit areas in Uttar Pradesh, Bihar and West Bengal. The prices received by the Nepalese farmers are closely related to the prices in India. 3.12 Because of lack of storage, problems of transport during the mon- soon, and the need to sell the crop as soon as possible to repay creditors, most crops are marketed by the farmer immediately after harvest -- the paddy in October/November and the wheat in March/April. The concentration of the marketing in these few weeks has a depressing effect upon prices. IV. THE PROJECT General 4.01 The proposed project would be the first stage of a groundwater devel- opment program to provide irrigation for the Western Terai. The scope of the project was selected on the basis of need, accessibility to and agricultural potential of the project area, proven groundwater resources, and implementing capability of HMGN.  - 8 - Project Works and Other Project Components 4.02 Project Works: (a) installation of 63 deep tubewells varying in depth from 120 to 200 m, equipped with eiectric powered pumps capable of discharging 300 m /hour with 30 m lift; (b) construstion of 63 storage reservoirs, each with 2,000 m capacity for receiving discharges from the tubewells; (c) construction of irrigation and drainage networks equipped with control structures to serve 120 ha under each well; (d) construction of approximately 75 km of 11 kV trans- mission lines and stepdown transformers from 11 kV to 0.4 kV through which power would be delivered from the existing 33 kV Bhairawa-Butwal grid to the project pumps; (e) construction of approximately 70 km of village roads linking the major villages to the existing black-top road network; (f) construction of a 1,000 ton grain storage facility, enlargement of the existing offices of the Department of Irrigation, Hydrology and Meteorology (DIHM) and of the Department of Agriculture at (DA) Bhairawa, and construction of a small training facility and simple residential housing accommodations at the Bhairawa Research Farm. 4.03 Other Project Components: (a) two drilling rigs to be owned and used by the DIHM for drilling of the tubewells; (b) vehicles and equipment to be used for surveys, construction supervision, project administration, operation and mainte- nance, and research and extension; (c) about 235 man-months of consulting service to assist with project implementation and to prepare a feasibility report for a further groundwater development in adjacent areas and a study of irrigation water charges and their future recommended level;  -9- (d) an additional staff of 68 Nepalese agriculturists (extension) and technicians for a period of four years to carry out the intensified agricultural extension and training programs; and (e) NRs 12.5 million agricultural production credit to farmers managed by the Agricultural Development Bank of Nepal (ADBN) for financing the increased agricultural inputs (fertilizer, pesticides, seeds, and payment for hired labor and bullock teams) that would be required with an assured irrigation water supply. The project works and components are detailed in Annex 3. 4.04 Tubewells, Pumps and Motors. Motor starters on the tubewells would be activated automatically through electrical relays in response to variations in the reservoir water levels and an override control would be provided to shut the pumps off during periods of peak power demand (maximum five hours/ day). The tubewells, pumps and motors for individual wells would be housed in a single brick building. 4.05 Distribution and Drainage Networks. The canal and drainage system serving the 120 ha under each tubewell would be built with select fill materials and provided with both water control and crossing structures. The irrigation channels would lead from the storage reservoir down to 5 ha block turnouts. The drainage network would connect each block to the outfalls con- necting with the natural north-south rivers and streams. Within each 5 ha block, farmers would construct their own small water distribution and drainage channels and prepare the fields for irrigation under the technical guidance provided by the project office (Map 12076). 4.06 Village Roads. The village roads would be gravel surfaced to a width of 3.5 m and would be located mainly in north-south direction to mini- mize stream crossings. So far as possible, existing tracks and established rights-of-way would be utilized for these roads. Water Supply, Demand and Quality 4.07 Groundwater balance st.dies indicate an annual average recharge for the project area of about 150 Mm (Annex 4). Water requirements derived by the Blaney-Criddle method using project 3area data and experience in other Perai irrigation projects amounts to 12,000 m /ha/year in a dry year and 9,000 m /ha/ year in an average year (Annex 5). At Year Eight when all the wells would operate at fuli capacity and at full de3elopment, the extraction would amount to about 90 Mm in a dry year and 70 Mm in an average year, well within the annual recharge for the project area. Hence, it is assured that there will not be any mining of groundwater. Also because of the location of the project area, there is no possibility that future developments, either surface or groundwater, might adversely affect the groundwater supply. The presently irrigated lands immediately to the north of the proposed tubewell area act  - 10 - as a spreading ground for the recharge of the aquifers hence any increase in diversions to that area, particularly in the dry season, would improve the groundwater supply. There are no other potential surface or groundwater devel- opments upstream from the proposed tubewell project. 4.08 The groundwater has been extensively sampled, tested and found to be of good quality and satisfactory for continued irrigation use. Engineering Design 4.09 During 1975, surveys and designs were completed as follows: well field and tubewell design; village road network planning; irrigation and drainage networks for four typical irrigation service areas; drainage out- fall planning and preliminary designs of 11 kV electric power transmission networks. The DIHM, DA, and the Nepal Electricity Corporation (NEC) would complete detailed designs and contract documentation prior to construction of project works. The DIHM and DA would be assisted by project consultants. Consulting Services 4.10 A consulting firm would be retained: (a) to provide the project with technical assistance and advisory services in construction, procurement, general administration and operation and maintenance and monitoring project effects, and (b) to conduct feasibility studies for a further 15,000-20,000 ha groundwater irrigation project in adjacent areas of the Rupandehi District and a study of water charges for the country. Construction Schedule 4.11 In the prevailing monsoon rain conditions, the construction season is limited to eight months from November through June. Project implementa- tion would take four years and would be completed in 1980 (Annex 6). Detailed topographic mapping using the existing 1:12,000 aerial photography would be completed during the first working season. Sufficient survey and planning is already available to commence construction of eight wells and the asso- ciated irrigation and drainage networks, 10 km of 11 kV transmission net- work together with up to 10 km of village roads during the first year of implementation. Project Costs 4.12 Total project costs are estimated to be NRs 171 million (US$13.7 million equivalent) net of taxes. The foreign exchange component would be NRs 85 million equivalent (US$6.8 million) or 50% of the total project cost. Estimated costs are based on price levels prevailing in December 1975. Phy- sical contingencies at about 10% of basic costs have been included. Expected price increases for civil works begin at 14% and taper to 8% in the fourth year. Equipment and vehicles, project administration, supporting services and consultants have estimated price increases ranging from 10% to 8% over the same period. Project costs are detailed in Annex 7 and summarized below.  - 1l1 - % of Local Foreign Total Local Foreign Total Total -----(NRs Million)---- ----(US$ Million)--- 1. Land Acquisition 3.7 - 3.7 0.3 - 0.3 2 2. Civil Works Irrigation and Drainage Networks 20.0 5.0 25.0 1.6 0.4 2.0 Village Road Improvement 7.5 1.2 8.7 0.6 0.1 0.7 Tubewell Drilling 5.0 1.3 6.3 0.4 0.1 0.5 11 kV Trans- mission Line 2.5 1.2 3.7 0.2 0.1 0.3 Buildings 1.2 1.3 2.5 0.1 0.1 0.2 Subtotal 36.2 10.0 46.2 2.9 0.8 3.7 27 3. Equipment, Vehicles and Imported Mate- rials Tubewell Equipment 2.5 26.3 28.8 0.2 2.1 2.3 Other Equipment and Vehicles 1.2 2.5 3.7 0.1 0.2 0.3 Imported Materials and Equipment for Transmission Line - 3.7 3.7 - 0.3 0.3 Roads - 1.3 1.3 - 0.1 0.1 Subtotal 3.7 33.8 37.5 0.3 2.7 3.0 22 4. Consulting Services 1.3 17.5 18.8 0.1 1.4 1.5 11 5. Project Services Agricultural Supporting Services 2.5 - 2.5 0.2 - 0.2 Engineering and Administration 5.0 1.0 6.0 0.4 0.1 0.5 Subtotal 7.5 1.0 8.5 0.6 O.1 0.7 5 Subtotal Items 1-5 52.4 62.3 114.7 4.2 5.0 9.2 6. Agricultural Credit to Farmers 12.5 - 12.5 1.0 - 1.0 7 Base Cost 64.9 62.3 127.2 5.2 5.0 10.2 Physical Contin- gencies 5.0 6.2 11.2 0.4 0.5 0.9 7 Expected Price Increases 16.3 16.2 32.5 1.3 1.3 2.6 19 Total Project Cost 86.2 84.7 170.9 6.9 6.8 13.7 100 - - - - -~~  - 12 - Financing 4.13 The proposed IDA credit of US$9 million would finance the foreign exchange cost and 32% of the local costs, amounting to 66% of the total proj- ect costs. HMGN would contribute the balance (US$4.7 M equivalent) through annual budgetary appropriations. Assurances were obtained that HMGN would make adequate budgetary provisions to the agencies involved to cover their share of the project costs and that it would furnish to IDA annually a de- tailed plan for the implementation of the project with related financial requirements for the following fiscal year (July 16 to July 15 inclusive). Procurement and Contracts 4.14 All equipment, vehicles and imported materials (Annex 7, Tables 3, 4 and 5) for the project would be procured through international competitive bidding (ICB) in accordance with Bank Group Guidelines. Such materials and equipment would be grouped so far as possible in lots, each lot being of not less than US$100,000, and local manufacturers would be allowed up to 15% preference. Drilling and development of project wells would be carried out by force account. The consultant team would include two drilling foremen to assist the project engineers and technicians in carrying out the well program. 4.15 The irrigation and drainage networks, transmission systems, project buildings, and roads would be small, simple, suitable for the labor-intensive construction method, subject to seasonal weather interruption and, so far as possible, would be constructed at a time to minimize interference with farm- ing operations. These would not be attractive to international contractors and would, therefore, be procured by local competitive bidding (LCB) pro- cedures under arrangements which are satisfactory to IDA. To avoid delays which could be the basis of contractual claims, assurances were obtained that no civil works contracts would be awarded until the necessary land or rights-of-way (in case of transmission lines) had been acquired. Small off-the-shelf items costing less than the equivalent of US$10,000 which for reasons of economy and efficiency would be purchased through normal Government procurement procedures which are satisfactory to IDA, provided the total cost of such procurement would not exceed US$100,000. Disbursements 4.16 Disbursements from the proposed credit would cover: (a) 100% of foreign expenditures for directly imported construction materials, equipment, vehicles and spares; (b) 90% of local expenditures (ex-factory cost) for locally manufactured construction materials, equipment, vehicles and spares; (c) 75% of total expenditures for other construction materials, equipment, vehicles and spares (off-the-shelf);  - 13 - (d) 100% of foreign expenditures for consultant services; (e) 75% of local expenditures for civil works if carried out by force account, and 100% of foreign expenditures and 75% of local expenditures if carried out by local contractors. Disbursements for civil works carried out by force account would be made a-ainst statements of expenditures, the documentation for which would be retained bv the DIHM for review by supervision missions. All other disburse- ments would be made against full documentation. Disbursements are expected to be completed by June 30, 1981, which is approximately six months after the end of the four-year implementation period. Any funds remaining in the credit account after completion of the project would be cancelled. A semi-annual disbursement schedule and the proposed allocation of the proceeds of the credit are shown in Annex 8. Accounts and Audits 4.17 Assurances were obtained that HMGN would cause (a) the DIHM and other participating agencies responsible for carrying out the project to establish and maintain separate accounts for the project in accordance with sound accounting practices and that these accounts would be audited annually by an independent auditor acceptable to IDA, and (b) certified copies of the audited account and the auditor's report would be sent to IDA within six months after the close of each fiscal year. Environmental Impact 4.18 Gastro intestinal diseases resulting from polluted water used by the villagers are the most common public health problem occurring in the proposed project area. Water from tubewells in the project area is potable and the development would definitely help in reducing the incidence of these diseases. At one time malaria was very common in the area, but with the advent of DDT this disease was brought under control in the mid-1950s. Since DDT as well as pyrethrum are available for the control of mosquitoes, it is not anticipated that any serious water-related diseases would result from the project. V. ORGANIZATION AND MANAGEMENT 5.01 The implementation of the project would be carried out by existing line agencies of MOGN with special arrangements to insure coordination among these agencies. The DIHM of the Ministry of Food, Agriculture and Irrigation (MFAI) would be responsible for the topographic survey of the project area, ,he design and construction of tubewells, associated irrigation and drainage networks,the village roads, the grain storage and project buildings. It is crucial to the success of the project that the water users accept the res- ponsibility for the operation and maintenance (O & M) of the irrigation and drainage networks and for repayment. Prior to the initiation of the drilling of any individual well, the beneficiaries shall be signed up in a Water User  - 14 - group and agree to pay water charges. If drilling and well installation work were given out to contractors, this requirement could occasion delays in the drilling of some tubewells and thus provide a basis for contractors' claims. To avoid this possibility, it is necessary that the drilling and installation of wells be carried out under force account. The DIHM has had considerable experience in this kind of work; with the assistance of USAID, over the last decade, it has carried out a groundwater investigation on over 300,000 ha in the Western Terai. Assurances were obtained from HMGN that drilling of any individual tubewell would not begin until the potential beneficiaries repre- senting two-thirds of the service area had signed up in a Water Users group and agreed to pay water charges. 5.02 The construction of the electrical transmission system would be carried out by the NEC of the Ministry of Water and Power (MWP). The agri- cultural and extension and education components of the project would be carried out by the DA. The agricultural production credit component of the project would be managed by the ADBN. The mobilization of inputs would be the duty of the Agricultural Inputs Corporation (AIC). The DIHM would estab- lish the Bhairawa-Lumbini Groundwater Project Office (BLGPO) in the project area headed by a Project Manager (PM) to carry out DIHM's responsibility for the project and coordinate all the other project components with other line agencies. A condition of credit effectiveness would be that the PM, with qualifications and experience acceptable to IDA, shall have been appointed. 5.03 Coordination of the various project components would be achieved at two levels by two coordinating committees. The existing Groundwater Resources Development Board (GRDB) at the national level, would advise and coordinate on policy matters including programming, budgeting and finance. The present membership of the Board includes the Secretary of the MFAI who serves as Chairman and representatives of the Ministries of Finance (MF) and MWP, the National Planning Commission, the DA, the Director General of the DIHM and the Project Manager of GRDB who serves as Secretary. There is pro- vision in the order establishing the Board for the addition of other members as appropriate. For purposes of implementing the project, HMGN agreed that representatives of NEC and the Ministry of Home and Panchayat (MHP) would be added to the Board. 5.04 At the project level, a Project Coordinating Committee (PCC) under the chairmanship of the Chief District Officer (CDO) and including the Dis- trict level officers and representatives of participating agencies as members or associate members would advise and assist the Project Manager in the coor- dination of various components of the project, in particular in the siting of wells and the organization of Water Users groups which are the most crucial factors for the success of the project. Members of PCC would include the Assistant District Agricultural Development Officer (ADADO), a representative of NEC, and the PM as member and secretary. Associate members of PCC, to be called when needed, would include heads of the Bhairawa Agriculture Research Station, District Officers of the AIC and of the Food and Agriculture Market- ing Service Department (FAMSD), District Manager of ADBN, and a representative of the Soil Survey Division of DA. The project organization chart is presented at the end of this report. A condition of credit effectiveness would be that  - 15 - the PCC with the chairman, members and associate members as described above, will have been established. Judging from the working relationships among Government Agencies, there is good reason to be optimistic that the above organizational plan would work satisfactorily. 5.05 A firm of consultants would be employed to provide about 235 man- months of services to assist in project implementation (180 man-months) and to prepare a feasibility report (55 man-months) for a further groundwater irrigation project of approximately 15,000-20,000 ha in adjacent areas and a water charges study. In project implementation, the consultants would assist and advise in all activities that are the responsibility of the BGPO including topographical survey and mapping, planning and design of tubewells, reservoirs, irrigation and drainage networks and roads, preparation of tender documents and procurement of equipment, vehicles and imported materials, con- struction of tubewells, reservoirs, irrigation and drainage networks, roads and project buildings, accounting, reporting and monitoring of groundwater level and discharges and the agricultural impact of the project. They would also prepare the 0 & M manual for tubewells and advise the PM on the admini- stration and management during project implementation. A condition of credit effectiveness would be that a firm of consultants to perform these services has been selected. Operation and Maintenance 5.06 During project implementation, the 0 & M of all irrigation facili- ties down to 5 ha service blocks would be the responsibility of the BLGPO. Following completion of construction, the BLGPO would continue to be respon- sible for the 0 & M of tubewells and roads, but the responsibility for the reservoirs, canals and drainage networks would be turned over to the Water User groups served by each tubewell. The NEC would be responsible for the 0 & M of the transmission system. After transfer of the irrigation and drain- age networks to the Water User groups, each group would appoint a water master who would be responsible for the 0 & M of that particular system. Water would be turned out of the irrigation channels on a rotational basis during daylight hours to 5 ha blocks. The field irrigation and drainage channels within each 5 ha block would be constructed and operated from the outset by the water users within that block, with technical assistance from the BLGPO. Assurances were obtained that if any farmer has not carried out the construction of on-farm development works as contemplated in para. 4.05 within one year following the completion of the project water delivery and drainage networks, the DIHM would carry out such development work and charge the cost to the farmer involved, and until such work has been completed water would not be released to the farm unit involved. Assurances were also given that HMGN would make adequate pro- vision in the annual budgets to finance the 0 & M of the various project components in accordance with sound technical standards.  - 16 - Agricultural Supporting Services 5.07 Research. The existing program of applied research for both paddy and wheat would be continued and expanded. Mlore emphasis would be placed on irrigation practices for dry season crops such as wheat, oilseeds and pulses, and also upon the irrigation of HYV paddy. Four subject matter specialists (paddy, wheat, plant protection and on-farm water management) and supporting staff would be appointed and transport facilities would be provided under the project. The Rice Research Development Center at Parwanipur Research Farm and the W^Iheat Research Development Center at the Bhairawa Research Farm would continue to support the project by providing foundation seeds of HYV suitable for the project area and technical guidance relative to crop selection, im- proved cultural practices, application of agricultural inputs, plant protec- tion and on-farm water management. withl the assistance of the consultants, the Bhairawa Center would also provide training to extension staff and pro- gressive farmers. 5.08 Extension. Starting from 1975, HMGN has introduced a new type of agricultural extension service in the Birganj Irrigation Project. The service is modeled after those introduced on the Bank-assisted irrigation projects in nearby countries. The system involves the reorganization and strengthening of existing extension services, extension and demonstration, strict adherence to the schedule and concentration at the outset on important practices for the major crops. Close coordination with applied research and regular in-service training for extension staff is also emphasized. 5.09 The extension organization for the Bhairawa-Lumbini Project would be headed by a District Agricultural Development Officer (DADO) assisted by an ADADO with particular responsibility for the tubewell irrigated area. The gross project area of 20,000 ha would be divided into three extension subdi- visions each headed by a Junior Technician (JT). Each JT would be supported bv three Junior Technical Assistants (JTAs) who would each supervise seven Panchayat Level Agricultural Assistants (PLAAs). Each PLAA would provide extension to about 200 farmers through about ten contact farmers. The total extension staff for the project area would be about 98 persons. The 12 JTs and JTAs could be provided from the sanctioned extension staff for Rupandehi District. The 63 PLAAs would have to be recruited. Assurances were obtained that an ADADO, 63 PLAAs and four Subject Matter Specialists (SMSs) would be recruited and appointed to work for the project in addition to the existing staff (Annex 9). 5.10 Fertilizers. Although fertilizer is presently used mainly by the larger and progressive farmers, all cultivators are aware of the benefits. They would use close to the optimum dosage if irrigation water supplies were assured. Fertilizer supplies would be provided by the AIC with production credit supplied to farmers by the ADBN supported by a project credit component. 3.11 Seeds. Foundation Seeds for HYV wheat and paddy are produced at the 'Wheat Research Production Center at Bhairawa and the Rice Research Development Center at Parwanipur, respectively. Seeds which command premium  - 17 - prices are multiplied by selected farmers. As fresh seed to sustain yields is required for replacement only every three or four years, the 7,500 ha net irrigated area will require only 200 tons per annum of HYV paddy and 350 tons per annum of HYV wheat. The existing seed production system which could easily be expanded is capable of supplying the quantities needed with the added advantage that the seed production centers are located close to the development area. 5.12 Plant Chemicals. Under the direction of the reorganized extension service, farmers would be guided in the proper, and timely use of the neces- sary plant chemicals which would be supplied by AIC through the cooperative societies with credit provided by ADBN. It was agreed that the AIC would make agricultural inputs available in sufficient quantity to meet the needs of the project. 5.13 Agricultural Credit. Short-term (production) credit for the pur- chase of fertilizer, seeds, pesticides and payment for hired labor and bul- lock teams is provided to project farmers by the ADBN and private money lenders. The ADBN provides production credit directly to farmers at 15% interest and through its guided cooperatives to which money is loaned at 11% interest and passed on to farmers at 15% interest. The ADBN has a sufficient number of branches in the project area to serve the project and the guided cooperative system is being strengthened. While ADBN has been able to finance all approved loans in Rupandehi District during the past year, it has had a credit shortfall of about 20% at country level. Under project conditions, it is anticipated that the annual incremental requirement for production credit would amount to NRs 19 million. The farm operators could reasonably be ex- pected to provide one-third of this from savings or current income but it would be necessary for them to borrow the balance of about NRs 12,650,000 annually. To ensure that ADBN would be able to earmark the necessary produc- tion credit for the Bhairawa-Lumbini Groundwater Project, an amount of NRs 12,500,000 would be included as a project component. Assurances were obtained that HMGN would make funds available annually to meet the produc- tion credit needs of the project farmers. Farmers' Organizations 5.14 Existing farmers' organizations includes multipurpose, village coop- erative societies (now being reorganized as cooperatives by ADBN) and informal Water Users Associations on farmer constructed surface-water irrigation sys- tems. Under this project each farmer would be required to sign a contract issued by the DIHM under the general authority provided by the Irrigation Electricity and Related Water Resources Act of 1967, agreeing to join a Water Users group and to pay water charges. Such Water User groups for each well would elect their own officials including a water master and would be res- ponsible for the management of the water including the establishment of ro- tations among the water users and the release of water to the service blocks. The groups would also be responsible for the maintenance of the water supply and drainage systems (reservoirs, canals and drains) down to the individual service blocks.  - 18 - 5.15 Such Water User groups would provide a suitable organizational framework for execution of additional assignments as their management capa- bility develops. For instance, they could collect the electricity charges for pumping water which would be billed monthly, they could provide an avenue for channeling agricultural inputs to the project farms and they could provide storage, transport, milling and marketing services for the project farmers. Eventually they might even take over the operation of the indivi- dual wells. Looking towards more complete utilization of such groups, it is suggested that six be selected and given additional responsibilities as well as special training and support. If this program proves successful, it could be expanded to include the entire project. It would also provide an example for future irrigation projects. Monitoring the Project 5.16 The BLGPO would monitor the effect of pumping on the groundwater aquifers both during and following the completion of construction. In addi- tion, the ADADO would monitor the agricultural production and benefits that result from the project. Assurances were obtained that HMGN would institute such monitoring programs and that reports covering both activities would be submitted to IDA annually but not later than December 31. Cost Recovery 5.17 Farmers pay a land tax as part of general taxation. This tax has varying rates depending on classes of land; average land in the project area bears a tax of NRs, 75 per ha. The Nepal Irrigation, Electricity and Related Water Resources Act of 1967 authorizes a water cess on landowners served by licensed surface irrigation organization; it also provides HMGN with the legal authority to levy charges on users of publicly constructed surface and groundwater irrigation works. Thus, farmers in surface irriga- tion projects recently constructed by HMGN are charged about NRs 10.0 per ha for water; this rate is nominal and represents only a small fraction of actual O&M costs. Nepal has had no experience in the operation of state owned tube- wells or in charging farmers for groundwater. 5.18 In view of the rapidly increasing role of the public sector in developing the country's water resources, Government realizes the importance of mobilizing budgetary resources from the beneficiaries of irrigation projects and is committed to the gradual introduction of water charges. In pursuit of this policy, Government is proposing to introduce annual charges of NRs 160/ha for beneficiaries of the IDA-financed Birganj Project and over the next few years as the project area develops to its full potential to increase these charges to levels adequate to cover at least the full O&M costs plus a portion of the capital cost. 5.19 For the project under consideration, the capital cost of the ir- rigation works would amount to NRs 12,250/ha. The recovery of this cost in 30 years at 10% interest would require an annual payment of NRs 1,300/ ha. In addition, the total annual O&M costs (including the replacements for the motors and pumps) would amount to NRs 535/ha. As the labor for the  - 19 - maintenance of irrigation and drainage network, valued at NRs 75 per ha, would be provided by the beneficiaries, the full recovery of project costs would require an annual payment of about NRs 1,750. Such a charge would represent on the average about 55% of the net incremental farm family in- comes excluding the cost of family labor. 5.20 Analaysis of the farmers' ability to repay the project costs indi- cates 'project rents' varying between NRs 1,700 to 1,900 per ha i.e. approxi- mately adequate for full cost recovery. However, because of the heavily skewed land distribution a large majority of the farmers in the project area are subsistence farmers whose present income levels are about 40% of the national average. Even after the project, their incomes would remain below the national average and hence full cost recovery would impose an unduly heavy burden on them. On the other hand, the large and medium size farmers, owning some two-thirds of the cultivated land should be able to pay a higher level of charges 1/. Thus, there may be an opportunity for collecting water charges on a progressive basis, with the larger farms paying more per hectare than the smaller farms. There are numerous possibilities for varying the water charge to accomplish this objective, but, as a minimum, to assure the continued operation of the project and to encourage farmers to economize in the use of water, all beneficiaries should be required to pay at least the annual O&M cost of NRs 535/ha. Assuming that for socio-political reasons the maximum level of charges is constrained to be about twice that of the minimum level, the capital recovery component could be graduated on a straight-line basis starting at zero for the one hectare farm and increasing to NRs 365 for the 6 ha size farm and above. The revenue produced would be equal to that which would result from the application of a uniform capital recovery charge of NRs 265/ha. The average total annual charge, O&M cost plus capital recovery, of NRs 800/ha would amount to 45% of project rent or 26% of incre- mental net farm family income or about 10% of gross production value. Alter- natively this would mean recovering full O&M costs and about 20% of the annual capital cost of NRs 1,300/ha. Below, the water charges that would be levied under the system on farms of varying sizes is shown: Size of farm (ha) 0.68 1.0 2.0 3.0 4.0 5.0 6.0 Water charges % of gross production value 6.0 6.3 7.2 9.4 10.0 10.3 10.6 Water charge/ha NRs 535 535 615 800 850 880 900 5.21 While the graduation of water charges by size of farm would be worthy of consideration it must be recognized that it presents problems. The most obvious of these are: 1/ See para 3.06 for farm size distribution.  - 20 - (i) evasion through excessive fragmentation of holdings -- large extended families are usually associated with large farms; (ii) disruption of social harmony among project participants due to large farmers objecting to paying more than others with likely negative impact on the adoption of improved water management and cultural practices; and (iii) administrative complexity. 5.22 In view of the above, there is a need for a thorough study of water charges in Nepal including the levels required to recover the full operation and maintenance cost and a reasonable portion of the capital costs having due regard for farmer incentive and capacity to pay. Assurances were obtained from HMGN that such a study would be made as part of the feasibility study of the next groundwater development in the Terai. 5.23 In the absence of a Government policy on cost recovery and water charges, in this case it was agreed to assess water charges starting one year after completion of the works for each tubewell at the level required to cover the annual operating costs, which would assure the continued operation of the project after it is constructed, as well as a reasonable portion of the capi- tal cost (cost of irrigation facilities am rtized in 30 years at 10% interest), such water charges would be applied in progressive steps (incremental) over a reasonable period of time. Assurances to this effect were obtained from HMGN. It was also agreed that following the initial implementation of the plan, the Government, in consultation with IDA, would review and revise, as necessary, the level of charges and collection procedures at intervals of not more than three years. 5.24 In addition to the direct payments to be made by the water users, they would also make indirect payments through the rice procurement program (para. 6.04). At full development, the annual savings to HMGN through this procurement program (versus purchase at market price) would amount to NRs 825,000 or NRs 110/ha. This amount could be considered as indirect pay- ment by water users toward capital cost recovery. VI. PRODUCTION, MARKETING, PRICES AND FARM INCOMES Crop Calendars and Cropping Patterns 6.01 After completion of the project, paddy would continue to be the dominant crop in the wet season, and the area under wheat would greatly expand in the dry season. The availability of supplementary irrigation in the wet season would increase the comparative advantage of HYV over local paddy and together with intensified extension services would cause a shift from local to HYV paddy. The reliable water supply in the dry season would also ensure successful cultivation of HYV wheat. There would also be some  - 21 - increase in the area under pulses and oilseeds while potato cultivation would cover about 250 ha. On the whole it is estimated that the cropping intensity would increase from 118% at present to about 186%. 6.02 The present and projected cropping patterns are as follows (Annex 10): Crops Present Future Without Project Future With Project ----------------------('000 ha)----------------------- Paddy - local 7.4 7.2 0.5 Paddy - HYV 0.3 0.5 6.7 Wheat - HYV 1.1 1.1 5.5 Maize - - 0.2 Pulses 0.4 0.4 0.4 Oilseeds 0.2 0.2 0.3 Potatoes - _ 0.3 Sugarcane 0.2 0.2 0.1 Total Cropped Area 9.6 9.6 14.0 Net Cultivated Area 8.1 8.1 7.5 Cropping Intensity 118% 118% 186% Yields and Production 6.03 Estimated yields at present and at full development are summarized below: Crops Present Future Without Project Future With Project ----------------------(tons/ha)----------------------- Paddy - local 1.1 1.6 2.7 Paddy - HYV 1.8 2.4 3.5 Wheat - HYV 0.8 1.2 3.0 Maize - - 2.0 Pulses 0.5 0.5 0.8 Oilseeds 0.4 0.4 0.7 Potatoes - - 10.0 Sugarcane 25.0 30.0 50.0 Some minor yield increases of paddy, wheat and sugarcane are assumed possible without the project. With the project and at full development in Year Eight (Year Five for any individual well) it is assumed that the yields of HYV paddy would reach 3.5 tons/ha, wheat 3 tons/ha and sugarcane 50 tons/ ha. These yields reflect significant increases in the use of fertilizer and extension services following the provision of a dependable water supply. Production of paddy would increase from 8,700 tons at present to 25,000 tons, wheat from 900 to 16,500 tons, pulses from 170 to 300 tons and oilseeds from 80 to 200 tons. Also new crops of maize and potatoes would produce 400 and 2,500 tons respec- tively. Production of sugarcane would remain at 5,000 tons although the area would decrease from 200 to 100 ha.  - 22 - Marketing and Processing 6.04 The construction of additional grain storage which would be ope- rated by the NFC and the improvements of the feeder roads from the villages to the major road network would add some flexibility to the marketing process, but even with these improvements it is anticipated that the traditional mar- keting practices would continue to be followed. After harvest, the farmers would bring their crops to the market by pack animal or by ox cart. After sacking the crops, the traders would sell the rice to the export companies which would turn over a percentage (25% in 1975) to the NFC and sell the balance of the rice as well as other crops, to the agents of Indian import- ing firms. Transportation from Bhairawa to deficit areas in Nepal or to the railhead in India would be by truck. 6.05 The rice milling industry is the oldest industry in Nepal, and 126 mills are now operating in the Rupandehi District. Of these, 26 mills each have a milling capacity of 1/4 ton paddy per hour, 88 mills 1/2 ton paddy, 11 mills 1 ton paddy and I mill 2 tons paddy per hour. Currently there is a reserve capacity of about 40% which would be more than suffi- cient to cope with the expected increase in production from the project area. Moreover, two additional new mills are being constructed by the pri- vate sector. Prices 6.06 The farm gate prices used in the economic analysis were based on the Bank's 1985 projections for internationally traded commodities -- rice, wheat, maize and sugar; and the assumption that Nepal would continue to be an exporter of foodgrains. Appropriate adjustments were made for quality differences, handling and shipping to Northern India (Bihar, Uttar Pradesh and West Bengal). Additional adjustments were also made to reflect the cost of hulling, milling, transport and handling from the project farms to Bhairawa, the local market center, and from there on to the northern India market centers. The prices for those minor crops for which the long-term projections were not available were based upon the historical relationship between the local and international prices of rice and wheat. 6.07 The farm gate prices used in the financial analyses were based upon the retail price in the Rupandehi District during the 1974/1975 har- vest months, adjusted to the farm gate based upon published price spreads between the farm and retail outlet. The prices thus derived were then in- creased by 8% to bring them up to the December 1975 level (Annex 11). Farm Income 6.08 Farm budgets were prepared for four representative farm sizes -- 0.68 ha or one bigha, 1.0 ha, 2.04 ha or three bighas, and 6 ha or 9 bighas to represent both the present and the future with project condition (para 3.06). District representatives of the MLR, which is responsible for the administration of the land reform acts of 1959 and 1964, have indicated that the program was fully implemented in the project area. Therefore, after  - 23 - completion of the project, significant changes in sizes of farm operating units are not expected to occur. In preparing these budgets, it was assumed that subsidies for agricultural inputs would remain at current levels. The annual net income including off-farm earnings, but before deduction of irrigation costs, are shown below for the four representative farm sizes. Farm Size Present Future With Project Increase (ha) (NRs) (NRs) (%) 0.68 1,588 4,261 168 1.00 2,002 5,894 194 2.04 3,072 10,459 240 6.00 3,671 21,197 477 6.09 In calculating the farm family income, cash payments for farm inputs, hired labor (including that required for the maintenance of the irrigation systems) and the rental charge of bullocks were all included as production costs. Off-farm earnings which were included as income were based upon the availability of unused family labor during peak labor seasons when opportunities for employment on nearby larger farms would be available (Annex 12). VII. BENEFITS AND JUSTIFICATION General 7.01 The development of the project would be compatible with the objec- tives of the Fifth Five Year Plan. It would improve the incomes of those farmers and their families in the project area who are now living in con- ditions substantially below the poverty level, and it would increase the opportunity for farm employment of landless laborers and the operators of small farms in the project area as well as in Rupandehi District. Foreign Exchange Earnings 7.02 Most of the present production of paddy and wheat in the project area is used locally for food and seed; probably not over 1,000 tons goes into commercial channels. It is anticipated, however, that after full devel- opment a large part of the increase in production resulting from the project would move into the commercial channels and would mainly be exported to India. After taking account of the rice that would be acquired by the NFC under the present compulsory procurement system to be shipped to food deficit areas within Nepal, it is estimated that 3,400 tons of rice and 14,000 tons of wheat would be available annually for export. This would produce foreign exchange earnings of about US$2.4 million. After deduction of US$750,000 in foreign exchange for the purchase of fertilizer and pesticides required for produc- tion, the net foreign exchange earning due to the project would be about US$1.7 million.  - 24 - Income Distribution 7.03 The average annual per capita income, including off-farm earnings, for the people presently living in the project area is about US$37 compared to the national average of US$100. Moreover, depending upon the size of farm, there is a large variation in income within the project area. This is illus- trated in the table below. Income/Person /1 Farm Size Population Present FWP (ha) (no) (%) ---------(US$)--------- /2 /3 /2 /3 /4 0.68 8,325 37 17`- 25- 62-/ 68- 60- 1.00 5,400 24 25 32 91 94 83 2.00 5,175 23 48 49 167 167 144 6.00 3,600 16 59 59 339 339 269 TOTAL or Avr./5 22,500 100 32 37 137 140 121 /1 Future with project. /2 Excluding off-farm income. /3 Including off-farm income. /4 After payment of water charges (NRs 725/ha in cash and NRs 75/ha in labor) and including off-farm income. /5 Weighted. It is apparent from the table that the income distribution is badly skewed; over one-third of the people in the project area receive farm incomes of US$17 or less (US$25 with off-farm income) and an additional quarter receives annual incomes of between US$17 and US$25 (US$25 to US$32 with off-farm in- come). In all, about 80% of the farm population receive annual incomes of US$50 or less which is the minimum required to provide the basic essential for family living (NRs 3,100 for a family of five). This project is expected to have a major impact on the standard of living of project area farmers. Under conditions of full development with the project, the incomes of all families having farms of 0.50 ha or larger (about 75% of project area popu- lation) would exceed the poverty level of US$50 per person. Employment Opportunities 7.04 The large expansion of the wheat hectarage during the dry season and the shift from local to HYV of paddy during the wet season, as well as the expansion in the acreage of minor crops, would result in a substantial increase in the farm labor requirements and opportunities for employment on the project farms. It is anticipated that with the project there would be a requirement for about 2,260,000 man days of labor per year within the proj- ect area which would represent an increase of 100% over that which could be expected in the future without the project. Assuming 300 working days per  - 25 - workers would be hired. If valued at the opportunity cost of labor (NRs 4.7 per day) this would add the equivalent of about NRs 5 million annually to the farm labor payroll. It is anticipated that about 25% of this increased pay- roll would go to the operators of small farms, and that perhaps as much as 40% to other farmers within the Rupandehi District. The balance or about 35% would go to seasonal laborers brought in from India (Annex 13). (The returns to the operator and his family for the increased labor they would perform on their own farms is reflected in the increased farm income, Annex 12, Page 4). 7.05 The marketing, processing, transportation and distribution of the increased production of agricultural products that goes into commercial channels would also result in significant increases in opportunities for employment of the urban population, principally in Bhairawa. Rate of Return 7.06 The rate of return which is estimated at 19% is based upon the following: (a) benefits measured in terms of future increases in net farm income over that which would occur without the project; (b) a 30-year period of analysis; residual value of drilling rigs was recognized; (c) 1985 world market price expressed in 1976 currency values; (d) incremental farm labor valued at the alternative opportunity cost of NRs 4.7 per day; (e) price contingencies, production credit and the cost of the investigation of the second stage excluded from capital cost; (f) cultivators provide labor to maintain the irrigation and drainage system; (g) energy for pumping costed at the marginal cost of NRs 0.25 per kWh; (h) replacements for the pumps every five years and the turbines in 15 years; (i) a four-year construction period; (j) full agricultural production under each well in Year Five (Year Eight for total project); and (k) the benefits resulting from increased employment in agriculture and in the urban areas excluded.  - 26 - Sensitivity Analysis 7.07 Several tests were made to determine the sensitivity of the project to varying assumptions regarding both benefits and costs: Rate of Return (%) (a) a decrease of 20% in projected benefits 15 (b) an increase of 20% in the capital cost of the project 16 (c) a delay of one year in the reali- zation of benefits 16 (d) all incremental farm labor valued at going wage rate of NRs 6 per day 18 (e) combination of (a) and (b) 13 (f) combination of (b) and (c) 14 (g) combination of (a), (b) and (c) 11 (h) shadow pricing of exchange rate at NRs 15 to US$1.00 23 7.08 The project rate of return is more sensitive to the magnitude of the benefits than the increase in project cost or delay in the realization of benefits. A delay in the benefits by one year or an increase in the capital cost by 20% had less effect on the rate of return than a reduction of 20% in the project benefits. However, even if the benefits were to be reduced by 20% and delayed by one year and at the same time the capital costs were to be increased by a like percentage, the project would still be economically viable. The significance of the magnitude of the benefits in the analyses underscores the need to provide all the necessary inputs including extension on a timely basis (Annex 14). It should, however, be noted that the yields and production at full development, and hence the benefits, assumed in the analysis are conservative. VIII. AGREEMENTS REACHED AND RECOMMENDATIONS 8.01 Agreements on the following points were reached with HMGN: (a) it would make adequate budgetary provisions to the agencies involved to cover their share of the project cost and that it would furnish to IDA annually a detailed plan for the imple- mentation of the project with related financial requirements for the following fiscal year (para. 4.13);  - 27 - (b) contracts for civil works would not be awarded until HMGN had acquired the necessary land or rights-of-way (para. 4.15); (c) the DIHM and other participating organizations responsible for carrying out any part of the project would: (i) estab- lish and maintain separate accounts for the project in accordance with sound accounting practices. Such accounts would be audited annually by an independent auditor ac- ceptable to IDA, and (ii) certified copies of the audited accounts and the auditor's reports would be sent to IDA within six months of the close of each fiscal year (para. 4.17); (d) drilling of any individual tubewell would not be commenced until the potential beneficiaries representing two-thirds of the service area had signed up in a Water Users group and agreed to pay water charges (para 5.01); (e) for purposes of implementing the project, it would expand the GRDB to include representatives of NEC and the Ministry of Home and Panchayat (para. 5.03); (f) if any farmer had not carried out the construction of field channels, drains and land development as contemplated in para. 4.05 within one year following the completion of the project water delivery and drainage networks, the DIHM would carry out such work and charge the cost to the farmer involved and water would not be released to any individual farm unit until such work had been com- pleted (para. 5.06); (g) it would make adequate provision in the annual budgets to finance the 0 & M of the various project components in accordance with sound technical standards (para. 5.06); (h) it would recruit and appoint an ADADO and 63 PLAAs and four Subject Matter Specialists (SMSs) to work for agricultural extension services in the project areas in addition to the existing staff (para. 5.09); (i) AIC would make agricultural inputs available in sufficient quantity to meet the needs of the project (para 5.12); (j) it would make funds available to meet the agricultural production credit needs of the project farmers (para. 5.13);  - 28 - (k) the BLGPO would monitor the effect of pumping on the ground- water aquifers both during and following the completion of construction. In addition, the ADADO would monitor the agricultural production and benefits that result from the project. Reports covering both activities would be sent to IDA annually but not later than December 31 (para. 5.16); (1) it would make a thorough study of water charges in Nepal including the level of such charges required to recover the full operation and maintenance cost and reasonable portion of the capital costs, having due regard to farmer incentive and capacity to pay (para. 5.22); (m) beginning not later than one year after completion of the works of each tubewell, the Government should establish and collect water charges to recover the full annual operating costs --energy, operation, maintenance and contribution to replacement reserve-- and having due regard to the incen- tives and capacity of such farmers to pay, a reasonable portion of the capital cost of the irrigation facilities in progressive steps (incremental) over a reasonable per- iod of time (para. 5.23); and (n) the Government in consultation with IDA, would review and revise, as necessary, the level of charges and collection procedures at intervals of not more than three years (para. 5.23). 8.02 Conditions of credit effectiveness would be that: (a) a PM with qualifications and experience acceptable to IDA should have been appointed (para. 5.02); (b) the PCC chaired by the CDO with District level officers and representatives of all participating agencies as members or associate members shall have been established (para 5.04); and (c) a firm of consultants shall have been selected to assist with project implementation, preparation of a feasibility study for a further groundwater development and a study of water charges (para. 5.05). 8.03 With the above agreements, the proposed project is suitable for an IDA credit of US$9 million under standard IDA terms. The Borrower would be the Kingdom of Nepal. June 17, 1976  ANNEX 1 Page 1 NEPAL BHAIRAWA-LUMBI.NI GROUNDWATER PROJECT Agricultural Development The Role of the Agriculture Sector 1. Agriculture dominates the economy of Nepal. It provides employment to 94% of the population, generates two-thirds of GDP and accounts for about 80% of export earnings. The major exports are rice, raw jute and jute manu- facture. Foodgrain production has grown at less than 1% annually since the mid-1960s, while the population has been growing at 2% to 2.4% p.a. Accord- ingly, the near stagnant production and an increase in population, estimated at 12.6 million in 1975, has brought down the rice export surplus from a half million tons around the beginning of the 1960s to an estimated 200,000 tons at present. Production of other crops has also declined considerably. 2. Therefore, the Fifth Five-Year Plan of HMGN (1975-80) gives prior- ity to the agricultural sector for securing increased production, as agricul- ture in addition to provision of food, has potential for creating employment opportunities and generating foreign exchange. Agricultural Development Problems 3. The total area of Nepal is about 14.1 M ha of which only about 2 M ha are cultivated. Agriculture in general, is characterized by subsistence farming with much of the land under foodgrain production. The topography is most varied. Geographically, the country is divided into three roughly parallel strips, each running generally from east and west. The southern most strip called the Terai, an extension of the Gangetic plain of North India, covers about 17% of the total area, while the central strip or hills cover about 68%, and the northern most strip consisting of the great Himalayan Range, the re- maining 15%. About 70% of the cultivated area is located in the Terai Plains and only 30% in the Hills and very little in the mountains. Population pres- sure on the land resource is highest in hilly and mountainous areas which sup- port about 60% of the country's population. This pressure has forced people from the hills and mountainous areas to attempt to cultivate marginal land on steep hill slopes and/or to migrate to the Terai and beyond. 4. To increase agricultural production, the Fifth Five-Year Plan gives emphasis on intensive land use and higher yields. This is to be achieved by: accelerating the spread of seed-based technology involving improved cultural practices; increasing the use of HYV seed--particularly of paddy and wheat-- and of fertilizers and pesticides; and implementing the irrigation schemes for which feasibility studies were initiated during the Fourth Plan. 29  ANNEX 1 Page 2 Crops and Cropping Seasons 5. The total cropped area in Nepal is about 2.33 M ha which on a net cultivated area of about 1.98 M ha gives a cropping intensity of 118%. Paddy accounts for 51% of the total cropped area, maize 19%, wheat 10%, barley and millet 6%, and other crops comprising oilseeds, pulses, jute, potato, sugarcane, tobacco and horticultural crops the remaining 14%. The area under tea is negligible being only about 500 ha, and it is located in the eastern region. 6. There is only one crop of wet season paddy, the temperature in winter being too cold to raise a second crop of paddy. About 85% of the paddy area is located in the Terai and only 15% in the hills. Nursery and seed-bed preparation starts with the onset of the rainy season in May and June. Mostly traditional varieties are grown. Coarse varieties that mature in 120 to 150 days from seeding are planted first and harvested in October and early November. Long life fine varieties which have an average growth period of 150 to 180 days are usually transplanted in July and harvested in November-December. The early maturing varieties give lower yields (0.8 to 1 t/ha) because of lack of sunlight and heavier infestation of pests and diseases, while the long life varieties give higher yields (1 to 2 t/ha). 7. High yielding varieties of paddy have been introduced since the late 1960s and presently cover about 7% to 8% of the paddy area. They in- clude IR-8, IR-22, IR-20 and Mashowli for which particulars are given in Table 2. Their yields are two to three times that of the local variety. Expansion of HYV paddy is, however, mostly being done in the irrigated areas where reliable water supplies justify application of inputs and ensure good crops. 8. Maize is cultivated mostly in the hills which accounts for 65% of the area under maize while the Terai Plains account for only 35% of the area. In the Terai it is usually sown in March-April and harvested in June-July. The yield is about 1 to 1.2 t/ha. 9. The most important winter foodgrain is wheat which is usually grown with residual moisture after paddy or maize. It gives higher yields if two or three irrigations can be given after sowing. At present, about 48% of the area under wheat is located in the hills and 52% in the Terai Plains. But the area under wheat is expanding in the Terai with increased irrigation facilities e.g. from The Birganj Project and the ADBN financed artesian wells. It is usually sown in November-December and harvested in March-April in the Terai. The yield from the non-irrigated crop is low being only about 0.7 to 1.0 t/ha while the yield from the irrigated crop is two or three times as much. 30  ANNEX 1 Page 3 Agricultural Inputs 10. The distribution of improved seed has increased from practically nothing about ten years ago to about 300 tons HYV paddy, 50 tons of maize and 1,500 tons HYV wheat annually during the last three years. There is a good system of seed multiplication, procurement and distribution. 11. The fertilizer use has also increased from about 400 tons nutrient in 1964-65 to about 12,500 tons nutrient in 1974-75 as shown below: Fertilizer Use in Nepal (nutrient tons) Nitrogen Phosphate Potash Total 1964-65 342 90 12 444 Average 1965-66 to 1967-68 1,797 554 143 2,494 Average 1968-69 to 1970-71 4,348 1,360 277 5,985 Average 1971-72 to 1974-75 8,541 3,055 946 12,542 There has also been an encouraging improvement in the use of balanced fer- tilizer as the NPK ratio has increased from 100:31:8 in 1965-68 to 100:36:11 in 1971-75. 12. Records are not available to indicate the quantity of plant protec- tion materials used. But the expenditure on the plant protection materials has increased from NRs 21,000 in 1965-66 to NRs 610,000 in 1974-75. June 1976 31  NEPAL BiAIRAWA-LUMBINI GROUNDWATER PROJECT Area Under Main Crops in Nepali! ('000 ha) 1964-65 1965-66 1966-67 1967-68 1968-69 1969-70 1970-71 1971-72 1972-73 1973-74 1. Paddy 1,101 1,111 1,100 1,154 1,172 1,173 1,122 1,204 1,140 1,213 2 Maize 437 451 450 412 421 433 445 435 438 442 3. Wheat 100 118 126 192 208 208 228 247 260 270 4. Barley 24 27 27 23 26 26 27 28 27 28 5. Millet 96 100 100 102 109 112 115 115 121 124 6. Sugarcane 9 13 10 11 12 13 14 15 15 15 7. Jute 32 32 32 47 46 52 55 60 55 33 8. Oilseed 108 96 98 97 101 103 106 111 117 114 9. Tobacco 8 8 8 9 9 9 9 9 9 10 10. Potatoes 2 29 42 43 43 43 46 49 51 51 53 11. Others (Pulses.3 horticultural cropo, etc.) 95 100 100 110 110 110 120 120 100 130 Total cropped area 2,039 2,098 2,094 2,200 2,257 2,285 2,290 2,395 2,333 2,432 Net cultivated area 1,800 1,800 1,800 1,880 1,900 1,940 1,940 1,960 1,980 1,980 Cropping intensity 113% 116% 116% 117% 118% 118% 118% 122% 118% 123% Source: 1/ Agricultural Marketing Services Department, Nepal. 2/ Mission estimates. CD'  NEPAL BHAIRAWA-UIMBINI GROUNDWATER PROJECT Recommended HYV for the Terai Plains Days to Height Yield Eating Name of HYV Source Maturity (cm) (Kg/ha) Quality Remarks A. Paddy 1. Parwanipur 1 Nepal 125 86 7,800 Fair Susceptible to paddy blast and blight. 2. IR-8 IRRI 140 90 8,100 Coarse Susceptible to paddy blast and blight. 3. IR-22 IRRI 146 90 9,800 Good Susceptible to paddy blast and blight. 4. IR-20 IRRI 152 100 7,800 Good Good resistance to paddy blast and bacterial blight. 5. IR-22 India 165 142 8,500 Very Good Good resistance to paddy blast and bacterial blight. B. Wheat 1. RR-21 India 108-128 84-102 4,300 Very Good Less occurance of yellow smut but susceptible to loose smut. 2. Kalyan Sona India 115-134 75-87 4,200 Very Good Less susceptible to yellow and loose smut. 3. S 331 India 115-129 91-106 4,400 Good Less susceptible to yellow, but susceptible to loose smut. 03 4. Nt 30 Nepal 108-122 85-95 4,500 Good Less susceptible to yellow, &10 but susceptible to loose smut. * w  NEPAL BHAIRAWA-UMBINI GROUNDWATER PROJECT Climatic Data A. Mean monthly rainfall (mm) Record Station Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Total Years Sirha 24.3 10.1 15.4 23.h 96.7 227.4 367.0 367.5 118.6 75.8 15.6 1.6 1 343 19 Bairia 25.5 10.2 16.5 26.0 57.h 228.8 430.6 Woh.2 20o.1 52.4 11.0 10.5 1,477 11 Bhairawa 15.0 10.0 15.0 20.0 40.0 280.0 430.0 270.0 110.0 30.0 - - 1,220 6 Butwal 18.0 12.9 16.4 27.0 62.8 423.0 726.7 703.0 h03.4 116.0 11.5 h.7 2,525 17 Darbhan.a (India) 19.8 1L.5 10.0 20.h 57.3 190.4 329.4 291.2 2h6.7 69.6 6.5 1.7 1,257 10 Patna (India) 21.1 20.2 6.7 8.2 28.3 139.0 265.5 307.1 2112.5 62.8 5.7 2.4 1,109 30 Muzzafatpur (India) 15.0 16.8 8.h 13.7 51.3 178.1 315.0 322.6 223.3 58.h 7.1 3.1 1,212 5o B. Monthly rainfall at Bairia 80% dependable 0 0 0 0 35 180 195 220 180 15 0 0 825 (D> CD  NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Climatic Data C. Potential evaporation at Hardenath (mm) Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total 71.6 77.6 176.7 220.8 233.4 156.6 155.3 139.5 135.9 112.2 78.6 65.7 1,624 D. Monthly sunshine at Parwanipur (hr:min/day) Mean 8:03 8:49 7:50 8:48 10:18 5:14 5:o0 6:17 6:57 9:07 9:11 8:55 7:53 0 E. Air temperature at Bhairawa ( c) Mean monthly 16.0 17.0 21.0 26.0 30.5 29.0 28.5 28.0 28.0 27.0 24.5 15.0 Mean monthly 23.0 25.5 30.5 36.0 38.5 35.0 33.0 32.5 32.0 31.0 28,5 24.5 maximum Mean monthly minimum 6.o 8.0 11.5 19.0 22.0 23.0 25.0 24.5 24.0 23.0 19.0 7.5 F. Relative humidity at Parwanipur (% at 08:40 hrs) Mean 83.6 73.5 71.5 71.0 65.5 83.5 83.0 88.0 85.o 80.0 78.0 85.0 79.0 LO)  ANNEX 3 Page 1 NEPAL BHAIRAWA-LUMBINI GROUNDWATER PROJECT Project Works A. Past Development 1. Existing farmer--built and operated surface water development consists of a number of diversions from the right and left bank of the River Tinao along the reach just below the bifurcation of the Tinao and Dano rivers. The diversions lead into unlined and unregulated canal systems. The gross command area of the surface water system is about 7,000 ha of which some 5,000 ha lies within the proposed project area. During recent years, there has been minor public expenditure on the system, particularly in renovating and preserving the intakes. The existing private sector groundwater development consists of small diameter (1-1/2 to 3 inches) flowing wells in that part of the area where artesian pres- sures are adequate. The wells were drilied by hand to a maximum dSpth of 60 m. Discharges range from 0.5 to 20 m /hr and average about 6 m /hr; command areas are generally less than one hectare. The total area present- ly perennially irrigated by small diameter wells within the project area totals 80 to 100 ha while perhaps 300 ha are irrigated by this means in the general vicinity of the project area. 2. In the early 1960s, HMGN, completed a diversion weir on the River Tinao near Butwal together with a left bank canal to irrigate 12,000 ha in the southern part of the Lumbini Terai. However, the system never operated because the right bank approach embankment was breached and the river by- passed the structure, isolating it from the canal. The system has not been repaired. 3. During the past five years, the DIHM, Groundwater Division has carried out an exploratory drilling program to obtain data on the alluvial aquifer system which underlies the Lumbuni Terai. Wells range in diameter from 3 to 14 inches and the greater proportion were drilled in the flowing artesian zone. Some sixteen of the wells are located in the proposed project area. A few of the exploratory wells are utilized for public water supply and Government centers; the balance are not used. B. Present Problems 4. The farmers' existing surface water irrigation system depends on base flows in the River Tinao, an unstable spate stream, which decreases throughout the dry season. Moreover, there is considerable inter-annual 36  ANNEX 3 Page 2 variation in monthly flows. The intakes are capable of diverting only a small proportion of the low flows and are difficult to maintain under high flow conditions. Transmission losses in the conveyance systems are high. Actual flows in the canals are too small to serve adequately the nominal command areas. Thus, especially in the lower parts of the command areas irrigation becomes increasingly uncertain as the dry season progresses. 5. The small diameter flowing wells have a short life (maximum five years) and are subject to sudden failure due to collapse of clay around the entry point to the pipe. Their discharge varies over the year with the artesian headed by up to 30% to 50% of the high discharge. Their continued effectiveness is contingent on maintaining sufficient positive head to ensure the required discharge which limits extraction in any area. The wells cannot be shut down due to the possibility of well failure and part of the flow often escapes to the surface in the annulus between casing and formation; this leads to an extremely wasteful use of water. The small discharges, which are not regulated, can only be conveyed for short distances in the canal systems. C. Description of Project Works 6. The project which would be located to the south of the farmer's surface water irrigation area would include provision of: electrically operated deep tubewells with night storage reservoirs and irrigation and drainage networks for 63 individual 120 ha command areas; 75 km of 11 kV electric power transmission lines with stepdown transformers at each tube- well; approximately 70 km of village link roads; a 1,000 ton grain storage facility at Bhairawa; project offices, workshop, agricultural extension service training center buildings; and consulting services for technical assistance. These consulting services would: (a) assist planning and implementation of project works including detailed surveys and investigation, and (b) conduct feasibility studies for further groundwater projects. Irrigation and Drainage System 7. Well Field and Well Design. Some sixty-three wells are required at a spacing of 1,300 m. This would incur well interference, particularly in the artesian area. The additional drawdown accruing from interference and the drawdown with time which would occur as the piezometry adjusts to the new water balance has been allowed for in the well design which permits pump setting of 40 to 50 m. 37  ANNEX 3 Page 3 8. The wells would range in depth from 120 to 200 m, the shallower wells being in the north with increasing depth to the south as the propor- tion of clay beds in the section increases. For the purpose of cost esti- mates, the wells have been grouped into 120, 160 and 200 m depth groups with 6, 23 and 34 wells in each group, respectively. 9. The wells would be drilled by the direct circulation, rotary mud flush technique. Heavy mud would be required to control artesian flows while drilling in some parts of the area. A percussion drilling adaption could be required if boulders are encountered in the northern part of the area. 10. A typical well design consists of: an 18 inch diameter conductor pipe of mild steel to a depth of 10 m which would be grouted; a pumping chamber of 14 inches internal diameter to depth of 40 to 50 m of heavy duty casing American Petroleum Institute equivalent (API); the annulus between the drilled hole and the casing pressure grouted to prevent upward leakance of water under artesian pressure; a fiberglass liner of screen and casing of a 10 inch outside diameter, of the length of 80-160 m; design 30-40 m of screen with 2 mm slots and a minimum open area of 10%. Because the aquifer material contains a considerable proportion of gravel grade, natural develop- ment would be possible without gravel packing. Assuming a unit permeability of 100 m/dy and a screened length of 30 m, a 100% efficient well would pro- duce 300 m /hr for a drawdown at the well of about 3 m. Assuming a well efficiency of 70%, implies a drawdown at the well of 4.5 m. See Fig. 1. 11. Well Completion. After evacuating drilling mud from a completed well by circulation of clean water, development would proceed using the following techniques: (a) flushing and screen jetting using a proper chemical solution; and (b) pumping and surging using an airlift pump and the rig slush pump alternately. The wells would be pumped by airlift or by turbine pump at 350 m /hr until the water is sand-free to complete development. The following well tests would be carried out: (a) constant yield-drawdown and recovery test, the well being pumped at 300 m3/hr for 24 hours. (b) a step-drawdown test in three or four steps. 38  ANNEX 3 Page 4 12. A temporary arrangement of piping and valves could be required to control artesian flows in part of the area during the early stages of project implementation. 13. Pumping Equipment. The pump would be a vertical shaft turbine, water lubricated pump with a vertical drive head, a 12 incq diameter pump, barrel and a 10 inch diameter rising main to deliver 300 m /hr against a head of 30 m. The turbine would be selected to give reasonable efficiency over the widest possible range of working heads up to 30 m. The prime mover would be a 380/440 volt, 35 KVA, 50 cycle electric motor geared for vertical drive of the above pump. Ancillary equipment includes automatic control for starter, no-float control for starter, time control for starter and electrical relays and meters. 14. Pump House. The pump house would be constructed of brick walls and concrete slab roof of sufficient height to allow pulling of 1.5 m length sections of rising main using a traveling beam and chain block to be set permanently below the roof. The well head would be completed with a concrete plinth one meter square by 0.2 m thick. The building would have a concrete floor. 15. Night Storage Reservoir. The tubewell would pump directly into a 2,000 m3 capacity clay-lined earth reservoir which would fill automatically under the control of a non-flote system attached to the electric prime mover of the turbine pump. A pre-set time relay would cut out pumping during peak electricity system demand hours. 16. Irrigation and Drainage Networks (Map 12074). From the night storage reservoir, each typical 120 ha tubewell command area would be served by distributary canals built of selected earth fill material and earth drains, down to each 5 ha block of and. Within the 5 ha blocks farmers would, under the guidance of the project authority, improve their existing small ditch network (which was constructed to distribute and remove natural rainfall) to enable better distribution to each plot as well as for more effective drainage. The project distributaries would have a conveyance capacity of 1.3 1/s/ha to facilitate rotational irriga- tion. The drains which would have a 4 1/s/ha discharge capacity would remove excess monsoon flooding to the existing north-south rivers and streams and create conditions more suitable for higher paddy yields and for planting wheat after paddy. The average channel network density would be about 100 m/ha for distributaries and 60 m/ha for drains. The main distributary channels would be flanked by a 1.5 m wide access path suit- able for bicycles to enable operation and maintenance supervision. The drains would be provided with appropriate checks, falls, division, drain- age, water control structures and cattle crossings constructed of masonry and reinforced concrete. 39  ANNEX 3 Page 5 17. Because the irrigation and drainage channel works would be small in scale, scattered, labor-intensive and would have to be scheduled to suit weather conditions and farming operations, as far as possible, they would be constructed by small contracts. They would be designed and their con- struction supervised by project engineering staff assisted by the project consultants. Other Project Works 18. Village Roads (Map 12075). About 70 km of 3.5 m width village link roads would be improved, realigned and extended to improve access for project services, and to assist transport farmers' produce to market and import of agricultural inputs. The roads would be of selected earth fill and surfaced with 30 cm of graded gravel finish to enable year-round use for farm tractors and field vehicles. Whenever technically and economically possible, the improved roads would be located within existing HMGN road reserves. Roads would be constructed under small and medium contracts procured under LCB, and timed to suit weather and agricultural conditions. 19. Land Acquisition. The HMGN would acquire the necessary land for irrigation, drainage, road networks and would obtain way-leaves for the 11 kV electric power transmission line at least nine months ahead of the beginning of construction. 20. 11 kV Electric Transmission (Map 12075). About 75 km of 11 kV power line, with step down transformers (11 kV/0.40 kV) at each tubewell, would be extended from the existing 33 kV network to provide electric power to each of the 63 tubewells. These works would be planned, designed and constructed by NEC under LCB. 21. Project Equipment. Because most works would be constructed mainly under contract, vehicles and equipment would be needed only for surveys, investigations, supervision, operation and maintenance, and for the agricultural supporting services. These are listed in Annex 7. Vehicles for consultants are also included in the list. 22. Buildings. The project would construct a 1,000 ton capacity grain store near Bhairawa town. This would provide a central facility for NFC operations. As and when required, it would also provide overspill storage for other agricultural inputs such as fertilizers, improved seeds and plant chemicals. Other project buildings would include small extensions to the DIHM and DA Bhairawa Research Farm; the latter would be of inexpensive traditional construction and would include simple accommodation for farmers' and staff residential training courses. 40  ANNEX 3 Page 6~ 23. Monitoring. HMGN would direct ADADO and the Food and Agri-V culture Marketing Services Department in working with the BLGPO to monitgr project inputs, measure project benefits and to carry out reguar ,ecanomic evaluation of the project. Monitoring would include continuing 4soessmeqt of: project costs; crop yields and production; labor employmeit; ue and cost of agricultural inputs; supply and utililation of water, and i4entiif cation of constraints to fuller development. The BLGPO would alpo conttnr uously monitor the affect of pumping on the groundwater aqVdfer, D. Surveys, Investigations, Planning and Techni4c AsAistance Status of Engineering Design 24. During the 1975 studies which were adequate tO establish the feasibility of the project, the following were completed; area-wide plans ning of village roads networks and drainage outfalls; semi-detailed soils surveys; well field and tubewell design; irrigation and drainage network designs in four typical irrigation service areas; and preliminary dsi4ns of the 11 kV electric network and project buildings. 25. Prior to project execution, detailed surveys, planning, enait" neering designs, specifications, bidding documents and bid evaluation would have to be completed on a phased program (Annex 6) for all prqject works described in Section C. Civil, electrical and mechanical engineering of the irrigation and drainage networks, tubewells and project buil4in;* would be the responsibility of DIHM. The NEC would be responsible for 11 kV electric power transmission system. Consulting Services 26. Due to its extensive irrigation development program including complex projects scattered throughout the country (Appendix 1), HKGN i8 short of experienced technical staff for investigations? planning and construction supervision. The project would, therefore, prov