India - Punjab Irrigation Project

Document of FLE copy The World Bank FOR OFFICIAL USE ONLY Report N(,. P-2466-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELO]?MENT ASSOCIATION TO TIHE EXECUTIVE DIRECTORS ON Ak PROPOSED CREDIT TO INDIA FOR THE PUNJAB IRRIGATION PROJECT March 19, 1979 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may iaot otherwise be disclosed without World Bank authorizathin.  CURRENCY EQUIVALENT (As of March 8, 1979) US$1.00 = Rs 8.09458 Rs 1.00 = US$0.1235 Rs 1,000,000 = US$123,530 (Since September 24, 1975, the Rupee has been fixed against a "basket" of currencies. As these currencies are floating, the US Dollar/Rupee exchange rate is subject to change. Conver- sions in the Staff Appraisal Report were made at US$1.00 to Rs 8.60, which represents the projected exchange rate over the disbursement period.) FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS ARDC - Agricultural Refinance and Development Corporation FCSI - Financial Commissioner and Secretary, Irrigation and Power (GOP) G01 - Government of India GOP - Government of Punjab ID - Department of Irrigation (GOP) O&M - Operation and Maintenance PSTC - Punjab State Tubewells Corporation Limited  FOR OFFICIAL USE ONLY INDIA PUNJAB IRRIGATION PROJECT Credit and Project Summary Borrower: India, acting by its President. Beneficiaries: The State of Punjab for canal modernization and studies and pilot demonstration schemes; Agricul- tural Refinance and Development Corporation (ARDC) for refinancing loans by Lending Banks to the Punjab State Tubewells Corporation (PSTC) for modernization of watercourses. Amount: US$129 million. Terms: Standard. Relending Terms: GOI (i) to GOP: As part of Central Assistance to States for development projects on terms and con- ditions applicable at the time; and (ii) to ARDC: For loans to be repaid 9 years from withdrawal at not less than 6.75% per annum; and for loans to be repaid 15 years from withdrawal at not less than 7.25% per annum, both less 0.25% for prompt re- payment. Exchange risk to be borne by GOI. ARDC to Lending Banks: Annual interest rate of not less than 7.5% with repayments to coincide, approxi- mately, with expected collections from ultimate borrower. Lending Banks to PSTC: Annual interest rate of not less than 10.5% with a maximum repayment period of 10 years, including 1 year of grace. Project Description: The purpose of the project is to help Punjab imple- ment a five-year time slice of on-going irrigation development programs implemented by existing insti- tutions. The project would: increase quantity, reliability and equitable distribution of irrigation water through modernization of major and minor irrigation systems and undertake studies and intro- duce pilot demonstration schemes for on-farm works. In addition, it would provide funds to GOI for the preparation of irrigation projects throughout India. The project is designed to increase food production and the standard of living of the farmers in Punjab. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - The risks under the proposed project are those normally associated with irrigation projects in India. Estimated Cost: (US$ millions) Local Foreign Total Modernization of Canals 69.9 6.9 76.8 Modernization of Water- courses 79.8 6.0 85.8 Studies and Pilot Demon- stration Schemes 1.5 0.4 1.9 Engineering and Supervision 20.7 - 20.7 Base Cost 171.9 13.3 185.2 Physical Contingency 15.0 1.1 16.1 Price Contingency 52.0 3.5 55.5 Projection Preparation - 0.7 0.7 Total Project Cost 238.9 18.6 257.5 Financing Plan: (US$ millions) Local Foreign Total IDA Credit 110.4 18.6 129.0 Local Financing: GOI & GOP 67.1 - 67.1 ARDC 39.5 - 39.5 Lending Banks 21.9 - 21.9 238.9 18.6 257.5 Estimated Disbursement: (US$ millions) FY80 FY81 FY82 FY83 FY84 FY85 Annual 6.0 22.0 27.0 28.0 28.0 18.0 Cumulative 6.0 28.0 55.0 83.0 111.0 129.0 Rate of Return: 36%. Appraisal Report: No. 2339a-IN dated March 19, 1979.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR THE PUNJAB IRRIGATION PROJECT 1. I submit the following report and recommendation on a proposed development credit to India in an amount equivalent to US$129 million on standard IDA terms to help finance a five-year time slice of a program for modernization of canals and watercourses, and studies and pilot demonstration schemes to test advanced technologies for water distribution and on-farm works, in the State of Punjab. US$82.3 million of the proceeds of the credit would be channelled to the Government of Punjab (GOP) in accordance with GOI's standard terms and arrangements for financing State development projects. For modernization of watercourses, GOI would relend US$46 million to the Agricul- tural Refinance and Development Corporation (ARDC) for 9 and 15 years at not less than 6.75% and 7.25% per annum, respectively. ARDC would in turn on-lend the funds to lending banks participating in the project at annual interest of not less than 7.5%. The lending banks would relend the funds to the Punjab State Tubewells Corporation (PSTC) at not less than 10.5% annual interest with repayment within 10 years, including 1 year of grace. The relending terms are in line with GOI's, ARDC's, land development banks' and commercial banks' normal terms for financing agricultural development works. The exchange risk would be borne by GOT. GOI would retain the balance of US$0.7 million from the proceeds of the credit to finance foreign costs of preparation of future irrigation projects throughout India. PART I - THE ECONOMY I/ 2. An economic report, "Economic Situation and Prospects of India" (2008-IN dated April 17, 1978), was distributed to the Executive Directors on April 18, 1978. Country data sheets are attached as Annex I. Background 3. India is a vast, continental country with over twenty States divided on linguistic and ethnic grounds with a population of over 640 million people, almost as many as live in Africa and Latin America combined. It has a dual economy. While 79% of its population lives in rural areas, their productivity is low. Agriculture's share in value added declined only gradually from about 50% to 43% over the last twenty years. The share of manufacturing has in- creased slowly and, since the late 1960s, has remained approximately constant at about 16%. Industry has a highly diversified structure with import substi- tution and self-sufficiency pushed to the point where India has the capacity 1/ Parts I and II of this report are substantially the same as Parts I and II of the President's Report for the Ramagundam Thermal Power Project (Report No. P-2407-IN), dated December 11, 1978.  - 2 - to produce virtually every type of consumer and capital good required for a modern economy. As in the case of many other large economies, the foreign sector plays a relatively minor role; both exports and imports represent about 7% of GDP; foreign saving has supplied only about 5% of gross investment in the recent past. 4. Even though growth has been slow in the past, the economy enjoys many of the prerequisites for sustaining faster growth and development. Although literacy is far from universal, India has large resources of well trained administrative, scientific and technical manpower and a dynamic entre- preneurial class. Per capita consumption of commercial energy is low by international comparison and power shortages are a way of life; but India is relatively well-placed with regard to primary fuel sources. There are very large reserves of coal and nuclear ores, and considerable hydro-electric potential. Recent petroleum and gas discoveries have begun to be exploited and prospects are bright for further discoveries. The basic elements of the infrastructure needed to serve the economy have been established; in absolute terms the irrigation, railway, telecommunication, road and power systems are each among the largest in the developing, and in some cases the developed, world. However, considerable gaps remain as the situation varies greatly from State to State. 5. Given the size of India's population, its annual increase of 13 mil- lion people is such as to absorb a large portion of any provision to increase standards of living. It is not possible to discern any significant increase in the incomes of the vast mass of the rural and urban poor, who number 250 million with a per capita income of US$70 per annum or less. Although food- grain production may be persistently underestimated, there has been no perma- nent increase in per capita foodgrain consumption recorded in aggregate statistics since 1960/61. Many years after the initial target, primary educa- tion is still not universal. The labor force has grown faster than employment and a considerable backlog of unemployed exists. Nevertheless, there has been progress, with per capita income increasing on trend 1%-1.5% per annum; birth rates falling to below 37 per thousand from levels of 45-50 per thousand at the start of the 1950s, life expectancy increasing from about 32 years in the 1940s to 45-50 years in the 1970s, school enrollment rising from 32% to 65% of children of primary school age and from 5% to 29% of children of secondary school age since 1950/51. 6. The rate of growth of GDP has been 3.5% per annum over the period since Independence and 2.8% per annum over the period 1969/70 to 1976/77. These low rates of growth are only partly due to low availability of inves- tible resources, although there have been times that foreign exchange was a severe bottleneck. The net transfer of resources from abroad has never been above 3% of GDP and fell to as little as 0.8% between 1969/70 and 1973/74. India's saving effort has grown steadily since the beginning of planning in 1951, when it was 9% of GDP, to its recent level of 20% of GDP, which compares well with other countries' saving performance at the same level of per capita incomes. Despite a doubling in the rate of investment, from about 10% of GDP in the early 1950s to about 20% at present, the trend rate of GDP growth has  not increased. This marks a decline in the efficiency of capital use which transcends fluctuations due to weather, war or international terms of trade shifts. Recent Trends 7. In many respects economic conditions during the last three years have been significantly different from those prevailing in previous years. In the late 1960s and early 1970s, the economy faced several shortages-- foodgrains, agricultural and industrial inputs and foreign exchange--which retarded production and investment and often led to price increases. An ad- verse shift in terms of trade, starting with the oil price hike in 1973 and continuing with the foodgrain and fertilizer price rises in the following year, greatly increased the cost of acquiring these essential commodities abroad. These external shocks combined with a spate of bad weather played havoc with the economy through 1974/75, causing slow growth in production and investment and a record level of inflation. 8. Since the excellent monsoon in the summer of 1975, a new situation has arisen. The period 1975 to 1978 has been characterized by much greater price stability, enhanced agricultural and industrial output and comfortable foodgrain and foreign exchange reserves. The new situation was a combined result of domestic policies and fortuitous circumstances. The increase in foodgrain stocks was only in part due to improved policies and programs. The more decisive factor has been the three good-to-excellent monsoons coming on top of substantial foodgrain imports in 1975 and 1976. Industrial output increased on average by 7% a year in 1975-1978 compared to 3% in 1970-75, due to greater power availability, better management in the public sector, improved labor relations, better transport and some increase in demand derived from increased incomes due to improved harvests, greater exports and higher levels of public investment. The most dramatic turnaround occurred in the balance of payments, with a sharp real reduction of the import bill helped by good harvests and increased domestic production of iron and steel, fertilizer and oil, which reduced demand for imports. The supply of foreign exchange was also greatly increased by a significant step-up in the volume of exports, an increase in foreign aid and a substantial jump in remittances from Indians working in the Middle East, Europe and America. 9. In 1977/78, the growth of GDP was about 5%, a recovery over the rate of 1.6% in 1976/77 but less than the 8.5% reached two years earlier. Prices, which had been rising during 1976/77 after a decline in 1975/76, were stabilized; wholesale prices at the end of March 1978 stood at about the same level as in March 1977, and the yearly average was only 5.4% above that of the previous year. Exports in 1977/78 are estimated at US$6.4 billion and imports at US$6.6 billion. The inflow of invisibles from abroad at US$1.4 billion and net aid disbursements of US$1.2 billion more than offset the small trade deficit of US$200 million and IMF repurchases of US$330 million to in- crease reserves by US$2.1 billion to US$5.8 billion by end of March 1978. 10. The 1977/78 foodgrain crop of 126 million tons exceeded the previous record level of 121 million tons in 1975/76 due to very good weather and  - 4 - increased input use. Support purchases have resulted in large foodgrain procurement, but high offtake through the public distribution system has kept foodgrain stocks near the previous peak level of over 20 million tons in 1977. In addition to ample and evenly distributed rainfall, more intensive and wide- spread use of three crucial inputs--irrigation water, fertilizer and extension advice--contributed to the bumper harvest. Fertilizer consumption surged 30% in 1977/78, continuing its recovery from the depressed level of 1974/75. Annual additions to irrigated area have averaged 2 million hectares since 1975/76 compared with 1.3 million hectares per annum achieved from 1969 to 1975. An improved extension system, which has been getting heartening results, has been introduced in several States and is slated for further coverage. Development Prospects 11. India faces the future with large stocks of foodgrains, high and rising external reserves, excellent crop expectations, price stability and good prospects for sustaining the improved supply of foreign exchange. The circumstances present a great opportunity for further promoting the develop- ment of the Indian economy. The Draft Five Year Plan for 1978-83, discussed though not yet approved by the National Development Council, responds to this challenge by projecting a rapid growth in real terms of both overall invest- ment and public Plan expenditures. Investment is to rise on average by 10.7% per annum and the economy is expected to grow on average by 4.7% per annum during the years 1978-83. 12. The new Draft Plan reveals an intention to reorient the country's development toward improving the living conditions of the poor. This is reflected in its principal objectives: (i) the removal of unemployment and significant underemployment; (ii) an appreciable rise in the standard of living of the poorest sections; and (iii) the provision of basic needs to low-income groups. To achieve these objectives, the Government proposes to emphasize agricultural development, cottage and small-scale industries, area planning for integrated rural development and the provision of minimum needs. As a first step toward complete removal of unemployment, the Plan envisages the creation of a large number of new jobs through a considerable expansion of construction activity as well as a boost in the consumption levels of the poor--which in turn would require the production of the necessary wage goods, largely in small-scale, labor-intensive units. Specific programs to achieve these objectives are still in the making. 13. In order to achieve a sizable rise in the income of the poorest classes of society, the Draft Plan--in conformity with the Janata Party policy-- places prime emphasis on the development of rural areas. A major impulse for agricultural development will be provided by the expansion of irrigation and related agricultural inputs, such as fertilizers and better farming techniques. The Draft Plan argues that efforts to increase productivity should be sup- plemented by measures with a redistributive impact such as supporting small farmers and small industry with institutional credit and material supplies and assistance for marketing. The Draft Plan also intends to complement the creation of employment and the increase in rural productivity by providing  - 5 - basic services to those groups which have so far been unaffected. For this purpose, the minimum needs program launched at the onset of the Fifth Plan is being revitalized and accelerated. 14. The allocation of the Draft Plan outlay for the next five years reflects these priorities. Out of a total expected spending of US$81 billion, US$35 billion--43%--has been earmarked for rural development programs includ- ing agriculture, irrigation, fertilizer and social infrastructure expenditures directly benefitting the rural areas. The share of these sectors amounted to 37% during the Fifth Plan period and to 40% in the Annual Plan for 1978/79. It can thus be expected to rise further during the next four years. Similarly, spending on the minimum needs program in 1978-83 will absorb 6% of the Plan resources, as compared to less than 3% in the Fifth Plan. On the other hand, the shares of industry and of transport and communication have been reduced. 15. There is considerable scope for stepping up growth in agriculture. The most promising development is the sharp increase in government outlays and improved project implementation for irrigation. There are also indica- tions that private investment in tubewells is picking up again after a slump in the early 1970s. Other favorable indicators include the spread of an improved system of extension to more States and the recovery of fertilizer demand. With regard to more productive use of existing capacity, there is an increased awareness in the Government that the benefits of irrigation projects can be much increased, not only through command area development, but also through improved design standards in major surface irrigation infrastructure. Nevertheless, comprehensive improvement in water management remains a distant goal, particularly in existing systems and where farms are small and frag- mented. The bulk of the increase in private tubewell development in the last few years has come from the Eastern Region, where more and more farmers are sinking wells to enable them to grow a winter crop of wheat in addition to providing better water control for the summer rice crop. Improved water man- agement would make such investments even more productive. Increased farmer incomes from the recent good harvests, somewhat lower fertilizer prices, and grain prices supported at. incentive levels have encouraged farmers to apply considerably more fertilizer. Finally, the reorganized and improved extension and research system which has been introduced recently in several States in northern and eastern India holds out the hope that sound advice will reach many more farmers in both irrigated and rainfed areas and will raise their productivity significantly. The improved extension system is an excellent example of how the growth effort can and must be structured so as to increase the incomes of small and marginal farmers, who work 25% of the cultivated land and account,, for somewthat more than 25% of production; more importantly, these farmers make up about 70% of the rural population and constitute the majority of those living below the poverty level in India. 16. Industrial prospects are somewhat more difficult to discern. Moderate growth in 1977/78 after an excellent year in 1976/77 suggests the persistence of problems plaguing the sector since the mid-1960s--large un- utilized capacity, stagnant capital formation in the private sector and low productivity growth. Lower investment than expected, of course, is one of  -6- the reasons for low capacity utilization in capital goods industries, which make up a significant portion of the sector. Sluggish demand for industrial products from all sources--not only from investments but also from agricul- ture, exports and import substitution--has been a basic constraint. Further import substitution cannot be a major source of growth for manufactured goods in the future because most opportunities for efficient import substitution have been exploited. Increased growth of real incomes from greater produc- tivity in both agriculture and manufacturing, sustained increases in exports and increased investment, particularly by the public sector, all can raise demand for industrial production. 17. The new industrial policy of the Janata government and the orienta- tion of the Draft Five-Year Plan emphasize small-scale industry over heavy industry and have accordingly promoted such measures as product reservation, credit rationing and, within the small-scale sector, plans to initiate special efforts for the growth of the "tiny" sector. While the priority accorded to the small-scale sector is laudable, there are doubts about the efficacy of the policy measures chosen. Past experience indicates that other factors are also crucial to its development, particularly effective demand, quality control, prices and marketing techniques. Some small-scale industry is cap- ital intensive and not well suited to as rapid employment generation as is hoped; nor can all goods be efficiently produced using small-scale technology. 18. India's population growth rate of about 2% is not high in comparison with that of most developing countries. Moreover, the rate is on the decline, after growing steadily census to census from 1920 through 1970, both because the birth rate continues to fall and because mortality is not falling as steeply as in the past. Family planning acceptor rates slowed down in the wake of the abandonment of the 1976 population policy after the 1977 general elections and the momentum of the program has yet to be recaptured, particu- larly in Northern India. However, the new Government has reaffirmed its com- mitment to a voluntary family planning program and has budgeted the resources to carry it out. Over the longer term, with a sustained family planning effort, it should be possible to bring the birth rate down from its 1970-75 level of about 37 per thousand to about 23 per thousand by the end of the century, implying a population growth rate somewhat under 1.1%. Our "best guess" projection of India's population in the year 2000 is 885 million. Many of the benefits of family planning policy will only be felt beyond the turn of the century; the decline in fertility will, however, bring about an earlier change in the age structure of the population. The school age group will grow more slowly or not at all after 1981, thereby reducing the pressures on the primary and secondary education systems. However, the labor force will con- tinue to grow at a faster rate -- 2.5% per annum -- until well into the 1990s, resulting in an increasing proportion of the population in the labor force from 40.8% to 45% in 1991. 19. The Government's goal of eliminating unemployment in 10 years implies an expansion of the number of jobs at the rate of 9 million per annum -- 7 million new entrants to the labor force and the absorption of 2 million or so formerly unemployed. The majority of these will have to continue to be  absorbed -- judging from the prevailing composition of the labor force -- in agriculture and the unorganized small-scale sector. The absorptive capacity of the modern organized sector is unfortunately low; its employment elasticity is expected to be no more than 0.5. Given its low current share of output, even rapid growth of this sector would not make much of a dent in the backlog of the unemployed. Employment in the organized sector has been growing at about 2.2% per annum in the past ten years, less than the labor force growth rate, and all of this in the public sector. Private sector employment has not grown at all since 1966. While the labor absorption elasticities of the small- scale sector may be higher in some cases than that of the large-scale sector, a major effort to expand production must succeed before an appreciable employ- ment impact will materialize. 20. In the short run India's balance of payments should not be a con- straint on growth and development. With good medium-term prospects for India's exports, the expected continuation of growth in invisible receipts and the potential for an increase in net aid disbursments, the net availability of foreign exchange to finance merchandise imports is projected to rise over the next five years, in current prices, from US$8.7 billion in 1977/78 to US$16.7 billion in 1982/83, an average of 14% per annum. Given the unlikely need to increase rapidly imports of some traditionally important items -- e.g., petroleum, fertilizer, foodgrains, edible oil and cotton -- other imports can increase at the rate of 20% a year over the next five years. 21. Altogether, these currently favorable circumstances present the opportunity to double India's trend rate of growth of per capita income from the average annual rate of 1.5% that prevailed for the last thirty years to 3% over the next five, and thereafter. This requires a continued fall in the rate of population growth to below 2% per annum and a rise in the growth of GDP from the historical rate of 3.5% to 5.0% per annum. Both of these targets are within reach. The first should be achieved barring a total abandonment of the family planning program. The second requires improved efficiency and increased investment by both the public and private sectors; it also means more fully harnessing the gains from trade through international specializa- tion, implying a strong export effort and continued easier access to imports. In addition to enabling a faster rate of per capita income growth, the pre- sent situation allows for increasing the coverage of the population's minimum needs. This requires formulating and administering effective, efficient programs of public investment and, of course, requires larger public outlays. 22. With the enhanced resources at India's disposal, the economy is poised for a higher rate of economic growth. The Government is moving to take advantage of this opportunity with increased public expenditure envi- sioned over the next five years, and the liberalized trade policies recently announced. It is yet too early to know whether the moves made so far will be sufficient to achieve the desired targets or whether additional steps will be necessary. Assured international support for India's development effort will be an important factor in moving the Government to take greater risks in pursuing a dynamic development program directed at meeting the huge needs of its large and impoverished population.  - 8 - PART II - BANK GROUP OPERATIONS IN INDIA 23. Since 1949, the Bank Group has made 56 loans and 112 development credits to India totalling US$2,285 million and US$6,618 million (both net of cancellation), respectively. Of these amounts, US$964 million had been repaid, and US$2,797 million was still undisbursed as of January 31, 1979. Annex II contains a summary statement of disbursements as of January 31, 1979, and notes on the execution of ongoing projects. 24. Since 1957, IFC has made 15 commitments in India totalling US$64.0 million, of which US$15.3 million has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$34.2 million, US$26.1 mil- lion represents loans and US$8.1 million equity. A summary statement of IFC operations as of February 28, 1979, is also included in Annex II (page 2). 25. In recent years, the emphasis of Bank Group lending has been on agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit opera- tions. Major irrigation, marketing, seed development, and dairying are other agricultural activities supported by the Bank Group. Also, the Bank Group has been active in financing the expansion of output in the fertilizer sector and, through its sizeable assistance to development finance institutions, in a wide range of geographically scattered medium- and small-scale industrial enterprises. IDA financing of industrial raw materials and components for selected priority sectors has been instrumental in facilitating better capac- ity utilization in industry. The Bank Group has also been active in support- ing infrastructure development for power, telecommunications, and railways. Family planning, education, water supply development, and urban investments have also received Bank Group support in recent years. 26. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Government's priorities. The emphasis of the program on agriculture, industry, power, urban development and water supply remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs such as credit for on-farm investments, command area development of existing irrigation schemes, intensification and streamlining of extension systems, and seed production form an important aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefitting small farmers. Projects supporting water supply, sewerage, and urban development also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of infrastructure and industrial investments will focus on agriculture-, export- and energy-related projects. 27. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. Thanks in large part to the response of the aid community, India has success- fully adjusted to the changed world price situation. However, the basic need  - 9 - for foreign assistance, to augment domestic resources, stimulate investment and accelerate economic growth, remains. As in the past, Bank Group assist- ance for projects in India should include, as appropriate, the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Con- sequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture, irrigation, rural water supply and medium- and small-scale industry. 28. Although the growth prospects of the economy have improved, India's poverty and needs are such that as much as possible of India's external capi- tal requirements should be provided on concessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support, and India may be regarded as creditworthy for some supplemental Bank lending. As of January 31, 1979, outstanding loans to India totaled US$1,366 million, of which US$599 million remained to be disbursed, leaving a net amount outstanding of US$767 million. 29. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with an estimated 62%, 27% and 38%, respectively, in 1977/78. On March 31, 1977, India's outstanding and dis- bursed external public debt was US$13.3 billion, of which the Bank Group's share was 28%. Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1977/78, about 16% of India's total debt service payments were to the Bank Group. PART III - AGRICULTURE AND IRRIGATION IN INDIA General 30. Agriculture is the most important sector in India; it engages 70% of the labor force, has recently contributed about 43% of value added and accounts for a major share of exports. Investments in agriculture have been given priority by GOI and the State Governments, especially since the mid- 1960s, and deserve continued emphasis in the future. 31. Since independence, the overall growth rate of agricultural pro- duction has averaged about 3% per annum. This low overall rate of growth obscures considerable variations over shorter periods of time, between crops, and between regions. The overall rate is very much affected by the serious droughts in 1965 and 1966 and again in 1972 and 1974. At the same time, the success of high yielding varieties of wheat led to annual increases in wheat production of about 20% between 1967 and 1971, and three consecutive favorable  - 10 - monsoon seasons in 1975, 1976 and 1977 resulted in bumper crops in these years. Other foodgrain crops have not enjoyed anything like the same success as wheat, mainly because of the difficulties of developing high yielding seeds adapted to local conditions. The effects of the green revolution have been concentrated in northwestern India. 32. Despite the progress made in many aspects of food production India's agriculture remains heavily dependent upon the weather. A major factor in reducing this dependence is the expansion of irrigation and the extent to which more effective use can be made of existing investment in irrigation facilities. The Government is also placing emphasis on the improved supply of inputs such as seeds and fertilizer, agricultural credit, and extension services. Irrigation 33. Up to 1964/65, the irrigated area in India increased at a rate of only 2.1% per year, of which about two-thirds was from surface water resources and one-third from groundwater. Since then, the rate of increase has about doubled, mainly through an accelerated program of groundwater development. At present, the total irrigated area is approximately 50 million ha, of which about three-fifths is irrigated from surface sources and two-fifths from groundwater. 34. The pace of surface water development remained roughly constant at about 0.5 million ha per year until the end of the Fourth Plan (1969/70- 1973/74). During this period, actual increases in the surface irrigated area lagged behind GOI's physical plan targets for more rapid development. A major problem was the continuing tendency of the States to start a large number of projects, which, given the limited financial resources, could only be con- structed slowly so that benefits accrued with much delay. However, in recent years, budgetary allocations have grown rapidly and the authorities have in- creased their efforts to complete on-going projects. As a result, the new area brought under command in 1976/77 was 1.1 million ha or about twice that achieved in any single year before the start of the Fifth Plan in 1974/75. However, while the increase in area brought under the command of new surface irrigation projects is impressive, the increase in area actually irrigated has been more modest than the figures imply, particularly in the case of major and medium irrigation schemes, due to incomplete distribution and inadequate drainage systems. In areas actually receiving water, irrigation efficiencies remain low and water supply is unreliable. 35. The Second Irrigation Commission of 1972 and the National Commis- sion on Agriculture, which reported in 1976, also found that the underutili- zation of irrigation potential was attributable to the lack of integrated development in the irrigation areas, insufficient farmer training, lack of effective extension services and poor administrative coordination. It has been estimated that the majority of recently completed irrigation projects  - 11 - require additional investments up to US$600 per ha to make them fully pro- ductive. Accordingly, GOI and the State Governments have adopted various measures to improve utilization, and a Command Area Development Department has been set up in the Ministry of Food and Agriculture to coordinate work on selected high priority projects. Such measures for command area devel- opment (CAD) include public investment in irrigation-associated infrastruc- ture - such as drainage, roads, markets, agricultural extension and research - and private investments, mainly at the farm level - such as land shaping and leveling, watercourse lining, field channels and drains. 36. In view of the emergence of high productivity farm technologies dependent on effective water control - and given India's already substantial investment in surface irrigation - the economic return on investment that improves water delivery or facilitates better use of the water provided, can be very high. Consequently, rehabilitation and modernization of irrigation infrastructure as well as command area development are being given high priority by GOI, and a relatively large proportion of public sector invest- ment in irrigation has been allocated for these purposes. Plan allocations have been supplemented by the resources of agricultural and commercial banks participating in financing command area development programs through farm credit. In addition, major institutional changes have been introduced affect- ing the coordination of services in command areas and the administration of credit. Moreover, new projects are being designed, implemented and operated on the basis of improved irrigation technologies. 37. While emphasizing the need to improve water utilization through command area development, the Government is at the same time pursuing the objective of increasing the area under irrigation, in particular where relatively small incremental investments are required. Thus, modernization of existing irrigation infrastructure and development of groundwater are given equally high priority as command area development. Agriculture and Irrigation in Punjab 38. The modern State of Punjab in North West India came ieto existence in 1966, when Haryana seceded. With an area of about 50,000 km and a population of about 15.5 million, it is one of the smaller states of India. It is predominantly agricultural. About three-quarters of the population is living in rural areas, two-thirds of the labor force is employed in agri- culture and the agricultural sector contributes about one half of the State's income. 39. The State consists of two distinct geographical areas: the sub- montane strip located along the foothills of the Shivalik range in the north- east of Punjab, and the alluvial plain occupying the central and southwestern parts of the State and forming part of the western portion of the Indo-Gangetic plain. Soils in the sub-montane region consist of beds of sand alternating with loams, clay and loose gravel, and have relatively low fertility. The alluvial plain has more fertile land, varying from sandy loam to loam, with some heavy clay occurrences in limited areas.  - 12 - 40. Punjab has a sub-tropical monsoon climate characterized by wet, hot summers and cool, dry winters. The average annual rainfall is 600 mm, ranging from 900 mm in the northeastern parts of the State to 320 mm in the southwest. About 85% of the annual rainfall occurs in the kharif or monsoon season (June to early October). The rabi or winter season is cool (mid-October to early April). Some cyclonic rainfall occurs from January to March, producing about 50 mm of rain in the southwest to about 100 mm in the northeast. This rain is valuable for winter crops, especially where irrigation supplies are scarce. The zaid or hot weather season (mid-April to mid-June) is dry with desiccating winds and occasional dust storms. Temperatures in the State can rise as high as 460C in the summer and fall to as low as 0 0C in the winter. 41. Of the 5.0 million ha area of Punjab classified for land utilization, about 4.2 million ha (84%) are under cultivation. The forest area covers only about 0.2 million ha (4%) and cannot be reduced further without seriously disturbing the ecological balance. About 0.6 million ha (12%) are uncultivable or put to non-agricultural use. Thus, there is little scope for increasing the net cultivated area in the State. The cropping intensity, 150% in 1975/76, is among the highest in India and results in an annual cropped area of 6.3 million ha. Of this, about 4.1 million ha (65%) is under foodgrains, 1.0 million ha (16%) under cash crops, 0.04 million ha (1%) under fruits and vegetables and the remaining 1.2 million ha (18%) under fodder. In 1975/76, the State produced about 7.2% of India's total foodgrain production, while its net cultivated area was only about 3% of that of India. Productivity per hectare of cultivated land (and per agricultural worker) is the highest in India. The State led India in the "Green Revolution". 42. Punjab's labor force constitutes about 29% of the total population. Farmers and agricultural laborers account for 43% and 20%, respectively, of the labor force. About one quarter of the population belongs to Scheduled Castes. Unlike in other parts of India, they are widely dispersed in Punjab and have shared relatively well in the benefits of economic growth. The average farm size in Punjab is about 2.9 ha. Due to variations in rainfall and population density throughout the State, farms in the sub-montane parts of Punjab are generally smaller (2.1 ha average) than those in the alluvial plain (3.7 ha average). The rapid agricultural growth in the late sixties has accelerated the subdivision of the traditional family farm. Between 1961 and 1971, the number of larger farms (3 ha and above) has been reduced by about one half while the number of farms below 1 ha has about quintupled. Tenancy legislation, implemented since 1953, has been strictly enforced and guarantees the security of tenants. About 93% of holdings are fully owned and self operated while 7% are partly owned and partly rented. The land ceiling regulations in Punjab, introduced in 1972, provide on average that a family unit of five persons can have either 7 ha of land with assured irrigation for at least two crops a year, or 11 ha of land with one irrig- ated crop a year, or about 21 ha of rainfed land. 43. In Punjab, all villages are electrified. Agriculture accounts for 42% of total electricity consumption. Annual per capita power consump- tion is the highest in the country (about 230 kWh compared to a national  - 13 - average of some 156 kWh). The railway and highway systems are well developed. About 77% of the villages are already connected by all-weather roads. 44. Punjab's development efforts are heavily concentrated on agricul- ture, in particular irrigation and power, which together account for about two thirds of outlays allocated to the various sectors in the State's 1977/78 development plan. The State Government's strategy for the next five years is to complete on-going programs in the agriculture sector. In the early sixties, prior to the Green Revolution, the cropped area expanded slowly at about 1% per year. During the Green Revolution (about 1965-70), there were significant increases in the areas under rice, wheat, maize and bajra, and foodgrain pro- duction grew by almost 15% per annum as a result of major technological break- throughs in wheat and rice varieties. The tempo achieved during the peak years of the Green Revolution has slowed considerably in recent years due to a variety of reasons including weather, increased energy cost for well irri- gation, increased cost of fertilizer and nearly full utilization of the groundwater potential. Although the slow growth in agricultural production in recent years can be explained in fact as a result of unfavorable exogenous factors, there is no doubt that the easy benefits of the Green Revolution have already been reaped. Thus, further increases in the intensity of cultivation and crop yields largely depend on better utilization of irrigation supply and improved drainage in areas subject to seasonal flooding and waterlogging. 45. Because of the generally low and unreliable rainfall in Punjab, irrigation development is a prerequisite for a significant increase of agri- cultural production and consequently has traditionally been given high priority by GOP. In 1960/61, the net irrigated area in Punjab was 2.0 million ha, or about 54% of the net area sown. By 1975/76, it had risen to 3.1 million ha, or about 75% of the area sown. Of this area, 1.4 million ha are irrigated by surface water and 1.7 million ha from groundwater. The primary source of surface water in Punjab are the three Indus tributaries: the Sutlej, Beas and Ravi Rivers. The Indus Water Treaty of 1960 between India and Pakistan allo- cated the total supply of these rivers to India. Since 1960, two major storage dams have been built: Bhakra Dam on the Sutlej and Pong Dam on the Beas. The Thien Dam on the Ravi River is under construction. Irrigation intensities in all surface systems are low as a result of the original design of the schemes, which were to provide "drought insurance" for as wide an area as possible. By 1977/78, groundwater resources were being extracted by about 475,000 tubewells and open wells. Most wells are privately owned. The water table has remained constant during the last few years, except for the southern part of the State where there are localized areas of overexploitation. 46. The Bank Group has been directly involved in agricultural develop- ment in Punjab since 1961, first through the Punjab Flood Protection and Drainage Project, for which a US$10 million credit was approved in that year (Cr. 15-IN dated November 22, 1961) and fully disbursed by September 30, 1966. Funds were made available to provide flood protection and surface drainage in an area of about 3.3 million ha throughout Punjab (including Haryana which has since seceded). This project has successfully achieved its limited objec- tives: most areas in Punjab which were subject to prolonged flooding and  - 14 - water logging are now protected sufficiently to ensure timely planting of the winter crop following floods in the monsoon season. In 1970, a US$27.5 mil- lion credit was made available to the State for the Punjab Agricultural Credit Project (Cr. 203-IN of June 24, 1970) to help finance a program for farm mechanization including tractors, harvesters and farm implements. After initial delays over tractor procurement culminating in an amendment of the credit to allow financing of domestic as well as imported tractors, good progress was made and the credit was fully disbursed on schedule. The US$38 million credit for the Punjab Water Supply and Sewerage Project (Cr. 848-IN dated October 27, 1978) is designed to help finance improvement and expansion of water supply and sewerage facilities in eight towns in Punjab. This credit was declared effective on January 25, 1979. PART IV - THE PROJECT Project Formulation 47. Expansion of agricultural production is the cornerstone of Punjab's development strategy. Since both surface water and groundwater resources have been nearly fully utilized, GOP recognized that expansion of agricultural production would depend upon improved efficiency of water use and is consequent- ly devoting an increasing proportion of its budget to that end. GOP's program to improve the efficiency of water use is focussing on modernization of exist- ing canals, distributaries and watercourses, mainly by lining channels and improving structures. Suitable technical practices including improvements agreed during appraisal would be adopted. The proposed project would support a five-year time-slice of this program. It would also undertake studies and pilot demonstrations in selected areas in the State to test and evaluate more advanced irrigation technologies. In addition it would provide assistance to GOI for the preparation of irrigation projects throughout India. 48. The project was prepared by GOP with assistance from the FAO/IBRD Cooperative Program and appraised in July 1978. A supplementary Project Data Sheet is attached as Annex III. A report entitled "India - Staff Appraisal Report - Punjab Irrigation Project", Report No. 2339 IN, dated March 19, 1979, is being circulated separately to the Executive Directors. Negotiations were held in Washington in February/March 1979. The Borrower, GOP and ARDC were represented by a delegation headed by Mr. S.C. Jain. The Project 49. The Project was formulated with the following objectives: (a) to reduce seepage losses, improve operations and simplify maintenance in the existing irrigation systems; (b) to improve water deliveries to farms and minimize inequities in the distribution of water to farmers within the com- mand of the watercourses; (c) to introduce advanced irrigation technologies on a pilot basis to enable future developments on a project scale; and (d) to increase local capabilities in planning, implementing, monitoring and evaluation.  - 15 - 50. In support of GOP's irrigation development program (para 47 above), the proposed project would help finance a five-year time-slice of canal and watercourse modernization programs together with studies and pilot schemes to test advanced methods of water distribution and on-farm works. Canals would be modernized by lining of about 21.4 million m of canal surface, equivalent to about 4,060 km of distributaries and minors, and by improving related structures within a command area of about 1.2 million ha in the southwestern part of the State. Because of the relatively high cropping intensities which require continuous irrigation, existing earthen channels cannot be closed for construction purposes. Consequently new lined channels would be built adjacent to the existing unlined sections. Lining would consist of two different layers of cement and mortar protected by a single layer of common bricks or baked clay tiles. Previously completed lining works are of high technical standard. Concurrent with the canal lining program, about 3,500 canal structures and 5,000 outlets to watercourses will be remodelled or replaced to improve operational control. 51. About 2,820 watercourses would also be modernized by lining. From experience gathered in the ongoing lining programs, and from studies carried out on the effect of lining, a set of design criteria for lining have been developed, which would be applied to watercourses covered by the project. Normally, the lower limit for lining would be about 75% of the length of the watercourse. However, if farmers request it, the whole length of the water- course would be lined. The Punjab State Tubewells Corporation would prepare and submit to the Association, by December 31, 1979, for its review and comments, a design manual based on the established criteria suitable for use by field staff responsible for design and implementation of the watercourse lining program (Section 3.05 (a) of the Project Agreement). A typical water- course section would have vertical walls of brick masonry on a brick slab over a sub-grade of a lean mortar mix. Field testing of various types of lining would continue through the project period, and specifications would be modified if improvements to the design or implementation procedures are developed. 52. On-going modernization programs for canals and watercourses, includ- ing those to be financed under the project, are based on established irriga- tion technologies and operating practices presently used in Punjab. They constitute an intermediate technology, which can be implemented without sig- nificant risk or difficulty. However, when these programs are completed and the known surface and groundwater resources in the State are fully developed, new technologies will be needed to further improve the efficiency of irri- gated agriculture. To assist GOP in planning ahead for such future develop- ments, the project would include studies and pilot schemes designed to intro- duce and test advanced irrigation technologies and techniques, which are either untried in Punjab or have only been attempted on a minimal scale. Such advanced techniques would include sprinkler irrigation, buried pipe distribu- tion systems, water storage in the watercourse command, and studies of con- junctive use of saline or marginal groundwater with fresh groundwater or surface water supplies. In addition to technical considerations, such studies  - 16 - and pilot demonstrations would also examine the social, legal and institu- tional problems which need to be solved before introducing the works on a project scale. Each individual pilot demonstration scheme under the project would be approved by the Association prior to implementation (Section 3.08 of the Project Agreement). Project Implementation 53. Overall responsibility for project implementation would rest with the Financial Commissioner and Secretary for Irrigation and Power (FCSI) in GOP. Two agencies under his jurisdiction would implement the project: the Irrigation Department (ID) - modernization of canals, and studies and pilot demonstrations of advanced irrigation technologies; and the Punjab State Tubewells Corporation Limited, strengthened by staff seconded from GOP's Soil Conservation Department - modernization of watercourses. A Project Co- ordinator, reporting directly to the FCSI and assisted by a small Project Coordinating Unit, would be responsible for day-to-day operations and co- ordination at the working level between the agencies. GOP will establish the Project Coordinating Unit and appoint a suitably qualified and experienced Project Coordinator by July 31, 1979 (Section 3.01 of the Project Agreement). 54. The Irrigation Department (ID), with a staff of some 300 senior engineers, is responsible within GOP for the planning, design, construction, operation and maintenance of dams, hydro-electric power plants, irrigation systems, drainage, and flood protection works along rivers. Completed projects are functioning effectively. The ID consists currently of six Administrations, each headed by a Chief Engineer, and two additional Adminis- trations are about to be set up. Of these, the Canal Modernization Adminis- tration, to be formed from 5 canal lining circles in the existing Canal Administration and up to 6 newly created circles, would be in charge of implementing the canal lining component of the project. Operation and main- tenance of the canal systems down to the watercourse outlets will remain the responsibility of the (old) Canal Administration. Irrigation supplies are allocated to the farmers within the canal command on a rotational basis, following well established procedures. In order to ensure continued adequacy of O&M, GOP would make adequate arrangements for the efficient operation and preventive maintenance of irrigation works under the project (Section 3.06 of the Project Agreement). The Water Resources Administration, also to be set up within ID partly from existing units, would implement the studies and pilot demonstration component. GOP will establish, by July 31, 1979, a special wing within ID responsible for the studies and demonstration pilot schemes (Section 3.04 of the Project Agreement). 55. The Punjab State Tubewells Corporation (PSTC) would be responsible for modernization of watercourses under the project. At present, PSTC oper- ates ongoing programs satisfactorily, but substantial improvements in man- agement and organization, in particular financial control, and staffing would be required to handle the expanded work program under the project. To this end, PSTC would be reorganized for project implementation on the basis of a financial management plan acceptable to the Association. PSTC would, by August 31, 1979, appoint a Financial Advisor, establish a Management  - 17 - Information Unit for modernizing accounting and budgeting procedures, and submit to the Association for review and comments a financial management plan, detailing the setting up of effective accounting, budgeting and inventory control systems for its implementation (Section 3.03 of the Project Agreement). To finance its watercourse lining operations, PSTC borrows funds from parti- cipating Lending Banks on behalf of the farmers. The Lending Banks would finance at least 80% of lining cost at not less than 10.5% annual interest with a maximum repayment period of 10 years, including 1 year of grace. Lend- ing Banks would be identified in a Banking Plan to be formulated by ARDC and to be submitted to the Association for approval as a condition of disbursement for the watercourse modernization component (Paragraph 4(b) of Schedule 1 to the Development Credit Agreement). Loans provided by the Lending Banks would be refinanced by ARDC up to 80%, partly from the proceeds of the credit, at not less than 7.5% annual interest with repayments to coincide approximately with expected collections from the ultimate borrower. After a watercourse has been modernized, GOP's Revenue Department would recover the cost of this investment from benefitting farmers as arrears on land taxes, and from the collections reimburse PSTC for its advance. Project Monitoring and Evaluation 56. By January 31, 1980, monitoring and evaluation units would be established in three agencies responsible for project implementation (Canal Modernization Administration, Water Resources Administration, and PSTC) to check project performance (Section 3.02 of the Project Agreement). In addi- tion, special studies such as on cost effectiveness of alternative construc- tion techniques and the evaluation of various contracting methods under the project would be carried out by these units. Project Cost and Financing 57. The estimated total cost of the project is US$257.5 million equiv- alent. Taxes and duties included in the cost estimate are negligible. The foreign exchange component of project cost is estimated at US$18.6 million (7%). The principal cost components, net of physical and price contingencies, are modernization of canals (US$76.8 million) and modernization of water- courses (US$85.8 million). The balance is made up by studies and pilot demonstration schemes (US$1.9 million), engineering and supervision (US$20.7 million), physical contingencies (US$16.1 million), price contingencies (US$55.5 million) and preparation of future irrigation projects (US$ 0.7 million). 58. The proposed credit of US$129.0 million would cover 50% of project cost, including all foreign exchange cost and 46% of local costs. GOI and GOP would finance 26% of total project cost. The balance would be contributed by ARDC (15%) and participating Lending Banks (9%). Of the proceeds of the credit, GOI would channel US$82.3 million to GOP according to the standard terms and arrangements being used by the Center to channel development funds to state governments. US$46 million would be passed on by GOI to ARDC with 9 and 15 years maturity (depending on maturities of loans to be refinanced)  - 18 - at not less than 6.75% and 7.25% annual interest, respectively. ARDC in turn would onlend the funds to participating Lending Banks at not less than 7.5% annual interest. The Lending Banks would relend the funds to PSTC at not less than 10.5% annual interest with repayment periods not exceeding 10 years, including 1 year of grace. 59. The proceeds of the proposed credit would be used to finance: modernization of watercourses (US$46.0 million), other civil works (US$71.0 million), vehicles and equipment (US$7.4 million) and preparation of future irrigation projects throughout India (US$0.7 million). The remaining US$3.9 million would be left unallocated. Procurement and Disbursement 60. The proposed project includes US$159 million worth of civil works (net of contingencies, and engineering and supervision). Of these, the main structures in the modernization of canals totalling about US$3 million would be procured on the basis of international competitive bidding. The tender for this contract would be divided in up to ten sub-contracts and tenderers would be permitted to bid for one or more sub-contracts or for the whole works. For bid evaluation, a preference of 7.5% would be granted to Indian contractors. Tender documents would specify this preference and the manner of its applica- tion. The remaining civil works on canals (US$54 million) would be indivi- dually small and scattered over a large area. They might have to be carried out intermittently as determined by seasonal weather conditions and by the on-going agricultural activities. It is therefore proposed that they be carried out by local contractors after local competitive bidding (LCB). A working group, with representatives from GOI, State Governments and some con- tractors, has developed standard competitive bidding procedures and guidelines satisfactory to the Association to be used in all future Bank Group financed irrigation projects in India. Until these procedures have been finalized and adopted by GOP for the proposed project, the Bank's normal procurement guidelines would be followed. Modernization of watercourses and some minor canals have to be implemented on a command area basis over a short period of time to limit interference with crop production. Such works (totalling US$102 million) would be awarded under small unit price contracts. Special works, where quantities are difficult to measure, would be executed departmentally; such execution, however, would be limited to a maximum of 10% of all civil works. 61. The estimated cost of vehicles and equipment to be procured under the project is US$5.2 million net of contingencies. Of this total, about US$1.2 million worth would be procured through international competitive bid- ding. A preference limited to 15%, or the prevailing customs duty if lower, would be extended to local manufacturers in the evaluation of bids. Of the balance of US$4.0 million, US$1.4 million worth of field vehicles, trucks and standard equipment would be procured locally, since they depend on exist- ing servicing and spare part facilities. The remaining US$2.6 million worth of equipment represents groups of contracts costing less than US$100,000 each. For these, international competitive bidding would not be practical. These  - 19 - items would therefore be procured locally through normal procurement proce- dures of GOP which are acceptable to the Association. 62. The proceeds of the credit would be disbursed against the foreign exchange cost of directly imported equipment. For locally procured items, disbursements would be against the ex-factory price, or where the ex-factory price is not readily available, against 70% of expenditure. Disbursements for civil works would also be on a percentage basis (55% of ARDC's refinance for works financed through institutional credit, and 65% of cost for other civil works). For project preparation, disbursements would be made against foreign expenditures. Full documentation would be required for all disburse- ments, except for payments of up to Rs 100,000 for civil works and Rs 50,000 for equipment and vehicles, and for force account work, for which disbursements would be made against certificates of expenditure. The supporting documents for these payments would not be submitted to IDA but would be retained by GOP and ARDC for inspection by IDA review missions. It is expected that disburse- ments would be completed by June 30, 1985, about twelve months after project completion. Benefits and Economic Justification 63. The proposed project would help modernize existing irrigation systems. It would result in an expansion of the net area under irrigation by 196,000 ha. The irrigated crop area would increase by 284,000 hIa. At full development, the project would increase annual production of foodgrain by 489,000 tons, of cotton by 83,000 tons, and of sugar by 55,000 tons, resulting in net foreign exchange savings of about US$160 million annually. The project would generate farm employment for about 40,000 people and non-farm employment for some additional 30,000 workers. Net farm incomes would rise by about 25-35% for the 340,000 directly benefitting farm families. Without the project, farm incomes are estimated to be about Rs 4,000 per ha in paddy areas with wide variations, however, depending on farm size and location. Organizational arrangements under the project would strengthen local capabilities for plan- ning, designing, monitoring and evaluating irrigation and drainage project components. The studies and pilot demonstration schemes would provide valuable information for planning future irrigation works. 64. For the modernization of canals, costing US$76.8 million, or 41.5% of project base cost, the economic rate of return is estimated at 43%. Addi- tional unquantifiable benefits from this component are reduction of water- logging problems, reduction of weed growth and other maintenance problems, and improved canal operation. For the modernization of watercourses costing US$85.8 million or 46.3% of project base cost, the economic rate of return is estimated to be 28%. Discounting costs and benefits over a 30 year period, the overall economic rate of return of the proposed project is 36%. Cost Recovery 65. Modernization of irrigation would increase annual farm incomes by Rs 700 to 960 per cropped ha depending on farm size and location. The corres- ponding "project rent" (net incremental income less the necessary rewards to  - 20 - the farm family for its labor, entrepreneurship and cultivation risk) is esti- mated to range from Rs 300 to Rs 470 with an average of about Rs 400 per ha. Direct water charges alone averaging Rs 35 per cropped ha, would recover about 9% of the project rent. Annual payments on loans for watercourse lining are estimated at about Rs 245 per ha of cultivable command area. In addition, farmers would pay about Rs 15 per ha annually for O&M of watercourses. In areas covered by both on-farm and infrastructure works, the water charges and payments on loans and O&M for watercourses alone account for about 74% of the project rent or about 40% of the incremental income. Thus, further increases in water charges may discourage farmers from participating in the project. 66. The adequacy of GOP's cost recovery policy must be evaluated in terms of the need to generate public savings for financing future modernization works in the State, usefulness of water charges to promote efficient use of water, and equity within the command areas. While water charges in Punjab are rela- tively low and contribute little to the State's revenue, GOP has made a strong effort in resource mobilization by other means. Its revenues per capita are the highest in the nation at about Rs 207 in 1976/77, or more than double the national average. Its tax revenues have increased from 7.8% of the State's total income in 1970/71 to 8.4% in 1974/75. Taken together with tWe central taxes originating in the State, total taxes collected at present in Punjab are estimated at about 20% of State income. If indirect taxes generated by the project, in particular the sales tax, are taken into account, the overall cost recovery level of the project amounts to about 75%. Under existing irrigation practice in Punjab, each farmer is allocated a fixed amount of water based upon the size of his holding. Taking into account his water ration, each farmer selects his crops and his intensity of irrigation so as to optimize his return to water. As land is not a constraint, this allocation system generally leads to an economically efficient use of water. If water charges are based on irrigated area, a significant increase in the rate would result in a less than optimal production. A more efficient method of cost recovery could, however, be achieved through the introduction of volumetric charges. But this would only become technically feasible after watercourses have been modernized. In any case, for water charges to be politically feasible, all farmers in the project area have to be treated in an equitable manner. Consequently, if the water charges are to be increased, they have to be applied to all farmers in the command. However, this would not be politically acceptable to farmers who do not benefit proportionately by the incremental water supply resulting from the project. As GOP will face this situation in all future irrigation modernization projects, the system of water charges needs to be analyzed on a statewide basis and within the framework of the State's agricultural taxation system, rather than in patchwork fashion. To this end GOP will undertake, and submit to IDA by August 31, 1981 for review, a study which would analyze alternative methods of collecting water charges in modernized irrigation projects with special emphasis on volumetric pricing, the adequacy of the direct or indirect taxes generated from the project, and the effects of the irrigation sector on the State's budget. It would also take account of farmers' ability to pay water charges and other related taxes and the need for farmers' production incentives (Section 3.09 of the Project Agreement).  - 21 - Project Risks and Uncertainties 67. The overall risks associated with the project are those normally associated with irrigation projects in India. All components to be financed under the project would be implemented by agencies with proven experience. Where weaknesses have been identified, the project provides for measures to strengthen the capabilities of the participating agencies. PART V - LEGAL INSTRUMENTS AND AUTHORITY 68. The draft Development Agreement between India and the Association, the draft Project Agreement between the Association and the State of Punjab, the draft ARDC Agreement between the Association and the Agricultural Refinance and Development Corporation, and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement are being distri- buted to the Executive Directors separately. 69. Special conditions of the project are listed in Section III of Annex III. The receipt of a Banking Plan prepared by ARDC would be a condition of disbursement for the watercourse modernization component (Paragrah 4(b) of Schedule 1 to the Development Credit Agreement). 70. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 71. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President March 19, 1979   .ANWYI TABLE 3A Page 1 of 5 INDIA - SOCIAL INDICATORS DATA SBET REFERENCE GROUPS (ADJUSTED AVERAGES LAND AREA (THOUSAND SQ. Ml.) IDIA - MOST RECENT ESTIMATE) L TOTAL 3280.5 SAME SAME NEXT HIGHER AGRICULTURAL 1797.5 NDST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 Lb ESTIMATE Lb REGION Le GROUP Id GROUP Le GNP PER CAPITA (US$) 60.0 90.0 150.0 167.4 182.9 432.3 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 142.0 181.0 221.0 65.7 88.9 251.7 POPULATION AND VITAL STATISTICS TOTAL POPULATION, MID-YEAR (MILLIONS) 434.9 547.6 631.7 /f URBAN POPULATION (PERCENT OF TOTAL) 17.9 19.8 20.6 12.8 15.0 24.2 POPULATION DENSITY PER SQ. RM. 133.0 167.0 193.0 85.2 46.8 42.7 PER SQ. EM. AGRICULTURAL LAND 247.0 308.0 351.0 322.6 254.1 95.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 41.0 41.6 40.1 44.0 43.6 44.9 15-64 YRS. 55.9 55.3 56.7 52.9 53.3 52.8 65 YRS. AND ABOVE 3.1 3.1 3.2 2.9 2.9 3.0 POPULATION GROWTH RATE (PERCENT) TOTAL 2.0 2.3 2.1 2.2 2.4 2.7 URBAN 2.5 if 3.2 3.1 4.2 4.0 8.8 CRUDE BIRTH RATE (PER THROSAND) 43.2 41.0 37.0 45.1 44.3 42.2 CRUDE DEATH RATE (PER THOUSAND) 23.9 19.0 17.0 17.3 19.7 12.4 GROSS REPRODUCTION RATE 3.2 2.9 2.8 3.2 2.9 3.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 3782.0 6821.0 USERS (PERCENT OF MARRIED WOMEN) .. 12.0 16.9 13.7 14.6 14.2 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1970-100) 98.1 100.0 96.2 /h 95.6 96.4 104.3 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 95.0 92.0 89.0 91.1 92.3 99.5 PROTEINS (GRAMS PER DAY) 51.0 53.0 48.0 49.6 50.0 56.8 OF WHICH ANIMAL AND PULSE 19.0 16.0 12.6 12.6 13.9 17.5 CHILD (AGES 1-4) MORTALITY RATE 44.0 .. .. .. .. 7.5 HEALTH LIFE EXPECTANCY AT BIRTH (TEARS) 41.7 47.2 49.5 43.1 45.8 53.3 INFANT MORTALMI RATE (PER THOUSAND) 139.0 /R 122.0 130.0 99.5 102.7 82.5 ACCESS TO SAFE WATER (PERCENT OP POPULATION) TOTAL .. 17.0 31.0 30.0 26.4 31.1 URBAN .. 60.0 80.0 66.3 63.5 68.5 RURAL *- 6.0 18.0 17.2 14.1 18.2 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 18.0 20.0 15.7 16.1 37.5 URBAN *- 85.0 87.0 66.9 65.9 69.5 RURAL *- 1.0 2.0 2.5 3.4 25.4 POPULATION PER PHYSICIAN 5840.0 Li 4890.0 4220.0 8830.8 13432.7 9359.2 POPULATION PER NURSING PERSON 5310.0 Lt 5220.0 3680.0 8479 6983.3 2762.5 POPULATION PER HOSPITAL BED TOTAL 2590.0 /1 2020.0 .. 1624.5 1157.6 786.5 URBAN .. .. .. .. 183.3 278.4 RURAL .. .. .. .. 1348.8 1358.4 ADMISSIONS PER IOSPITAL BED .. .. .. .. 19.5 19.2 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 *- 5.2 *- 5.2 URBAN 5.2 .. 4.8 .. 4.8 RURAL 5.2 .. 5.3 .. 5.3 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.6 2.8 12 URBAN ... ... 1.8 2.3 RURAL .. .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. .. .. 25.9 28.3 URBAN .. .. .. RURAL .. .. .. .. 8.7 10.3  ANNEX I TABLE 3A Page 2 of 5 INDIA - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES INDIA - MOST RECENT ESTIMATE) SAME SAME NEXT HIGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 b 1970 lb ESTIMATE Lb REGION .Lc GROUP /d GROUP /e EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 41.0 63.0 65.0 59.1 62.9 75.8 FEMALE 27.0 48.0 52.0 38.4 45.9 67.9 SECONDARY: TOTAL 23.0 30.0 29.0 19.9 14.4 17.7 FEMALE 11.0 18.0 18.0 9.9 8.8 12.9 VOCATIONAL (PERCENT OF SECONDARY) 8.0 6.0 /k .. 1.5 6.6 7.4 PUPIL-TEACHER RATIO PRIMARY 29.0 38.0 40.0 38.2 38.5 34.3 SECONDARY 16.0 17.0 .. 23.5 19.8 23.5 ADULT LITERACY RATE (PERCENT) 28.0 33.0 36.0 35.6 36.7 63.7 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.7 1.0 1.0 2.2 3.1 7.2 RADIO RECEIVERS PER THOUSAND POPULATION 5.0 21.0 25.0 14.9 31.1 71.1 TV RECEIVERS PER THOUSAND POPULATION .. 0.1 0.5 .. 2.8 14.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPUIATION 11.0 16.0 16.0 6.4 6.0 16.3 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 4.1 .. 1.4 1.6 EMPLOYMENT TOTAL LABOR FORCE (THOUSANDS) 175000.0 218000.0 261000.0 /1 FEMALE (PERCENT) 31.3 32.6 32.2 21.3 24.2 28.0 AGRICULTURE (PERCENT) 71.0 69.0 69.0 62.8 60.7 54.1 INDUSTRY (PERCENT) 11.3 13.5 PARTICIPATION RATE (PERCENT) TOTAL 43.0 40.2 39.2 35.8 39.8 37.8 MALE 57.1 52.3 51.3 52.4 53.3 50.3 FEMALE 27.9 27.1 26.2 15.6 19.6 20.9 ECONOMIC DEPENDENCY RATIO 1.1 1.1 1.1 1.3 1.3 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OP HOUSEHOLDS 26.7 25.0/ .. 18.6 20.3 19.5 HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 53.1 /m .. 42.8 45.1 48.9 LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 4.7 /_ .. 7.3 5.7 5.9 LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 13.1 B .. 19.3 16.8 15.7 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 80.0 80.2 88.5 155.9 RURAL .. .. 65.0 67.2 71.9 97.9 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. .. 100.8 143.7 RURAL .. .. 41.0 39.8 42.0 87.3 ESTIMATED POPULATION BELOW POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 53.0 50.3 46.0 22.9 RURAL .. .. 46.0 44.6 48.0 36.7 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1973 and 1977. /c South Asia; /d Low Income ($280 or less per capita 1976); /e Lower Middle Income ($281-550 per capita, 1976); /f 1978 mid-year population is estimated at 640.4 million; a 1951-60; /h 1977; /i 1962; /i 1958; /k 1967; LI 1978 mid-year labor force is estimated at 261 million; /m 1967-68. September, 1978  ANNEX 1 DEFINITIONS OF SOCIAL INDICATORS Page 3 of 5 jg.,: The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. Due to lack of data, group averages for Capital Surplus Oil Exporters and indicators of access to water and excreta disposal, housing, income distribution and poverty are simple population-weighted geometric means without the exclusion of extreme values. LAND AMA (thousand sq. ke) Population per hospital bed - total, urban, and rural - Population (total, Total - Total surface ares comprising land are and inland waters, urban, and rural) divided by their respective number of hospital beds Agric ltural - Most recent estimate of agricultural area used temporarily available in public and private general and specislized hospital and re- or permanently for crops, pastures, mrket and kitchen gardens or to habilitation centers. Hospitals are establishments permanently staffed by lie fallow. at least one physician. Establishments providing principally custodial care are not included. Rural hospitals, however, include health and medi- GNP PER CAPITA (US$) - GNP per capita estimates at current market prices, cal centers not permanently staffed by a physician (but by a medical as- calculated by same conversion method as World Bank Atlas (1975-77 basis); sistant, nurse, midwife, etc.) which offer in-patient accommodation and 1960, 1970, and 1977 data. provide a limited range of medical facilities. Admissions per hospital bed - Total number of admissions to or discharges ENERGY CONSUMPTION PER CAPITA - Annual consumption of cousercial energy from hospitals divided by the number of beds. (coal and lignite, petroleum, natural gas and hydro-, nuclear and geo- thermal electricity) in kilograms of coal equivalent per capita. HOUSING Average size of household (persons per household) - total, urban, and rural- POPULATION AND VITAL STATISTICS A household consists of a group of individuals who share living quarters Total population, mid-year (millions) - As of July 1; if not-available, and their main meals. A boarder or lodger may or may not be included in average of two end-year estimates; 1960, 1970, and 1977 data, the household for statistical purposes. Statistical definitions of house- Urban population (Percent of total) - Ratio of urban to total popula- hold vary. tion; different definitions of urban areas my affect comparability Average number of persons per room - total, urban, and rural - Average nun- of data among countries. her of persons per room in all, urban, and rural occupied conventional Population density dwellings, respectively. Dwellings exclude non-permanent structures and Per sq. km. - Mid-year population per square kilometer (100 hectares) unoccupied parts. of total area. Access to electricity (percent of dwellings) - total, urban, and rural - Per sq. km. agriculture land - Computed as above for agricultural land Conventional dwellings with electricity in living quarters as percentage only. of total, urban, and rural dwellings respectively. Population age structure (percent) - Children (0-14 years), working-age (15-64 years), and retired (65 years and over) as percentages of mid- EDUCATION year population. Adjusted enrollment ratios Population growth rate (percent) - total, and urban - Compound annual Primary school - total, and female - Total and female enrollment of all ages growth rates of total and urban mid-year populations for 1950-60, at the primary level as percentages of respectively primary scho,ol-age 1960-70, and 1970-75. populations; normally includes children aged 6-11 years but adjusted for Crude birth rate (per thousand) - Annual live births per thousand of different lengths of primary education; for countries with universal edu- mid-year population; ten-yesr arithmetic averages ending in 1960 and cation enrollment may exceed 100 percent since some pupils are below or 1970 and five-year averagt ending in 1975 for mot recent estimate, above the official school age. Crude death rate (per thousand) - Annual deaths per thousand of mid- Secondary school - total, and female - Computed as above; secondary educa- year population; ten-year arithmetic averages ending in 1960 and 1970 tion requires at least four years of approved primary instruction; pro- and five-year average ending in 1975 for most recent estimate. vides general vocational, or teacher training instructions for pupils Gross reproduction rate s Average number of daughters a woman will bear usually of 12 to 17 years of age; correspondence courses are generally in her normal reproductive period if she experiences present age- excluded. specific fertility rates; usually five-year averages ending in 1960, Vocational enrollment (percent of secondary) - Vocational institutions in- 1970, and 1975. clude technical, industrial, or other programs which operate independently Family planning - acceptors, annual (thousands) - Annual number of or as departments of secondary institutions. acceptors of birth-control devices under auspices of national family Pupil-teacher ratio - primary, and secondary - Total students enrolled in planning program. primary and secondary levels divided by numbers of teachers in the corre- Family planning - users (percent of arried women) - Percentage of sponding levels. married women of child-bearing age (15-44 years) who use birth-control Adult literacy rate (percent) - Literate adults (able to read and write) as devices to all married women in same age group. a percentage of total adult population aged 15 years and over. FOOD AND NUTRITION CONSUMPTION Index of food production Per capita (1970-100) - Index number of per Passenger cars (per thousand population) - Passenger cars comprise motor cars capita annual production of all food comnodities. seating less than eight persons; excludes ambulances, hearses and military Per capita supply of calories (Percent of requirements) - Computed from vehicles. energy equivalent of net food supplies available in country per capita Radio receivers (per thousand population) - All types of receivers for radio per day. Available supplies comprise domestic production, imports less broadcasts to general public per thousand of population; excludes uolicensed exports, and changes in stock. Net supplies exclude animal feed, seeds, receivers in countries and in years when registration of radio sets was in quantities used in food processing, and losses in distribution. Re- effect; data for recent years may not be comparable since most countries quirenents were estimated by FAO based on physiological needs for nor- abolished licensing. mtl activity and health considering environmental temperature, body TV receivers (per thousand population) - TV receivers for broadcast to genera weights, age and sex distributions of population, and allowing 10 per- public per thousand population; excludes unlicensed TV receivers in coun- cent for waste at household level. tries and in years when registration of TV sets was in effect. Per capita supply of protein (prams per day) - Protein content of per Newspaper circulation (per thousand population) - Shows the average circula- capita net supply of food per day. Net supply of food is defined as tion of "daily general interest newspaper", defined as a periodical publi- above. Requirements for all countries established by USDA provide for cation devoted primarily to recording general news. It is considered to a minimum allowance of 60 grams of total protein per day and 20 grams be "daily" if it appears at least f4ir tinds a week. of animal and pulse protein, of which 10 grams should be animal protein. Cinema annual attendance per capita pet-year - Based on the number of tickets These standards are lower than those of 75 grams of total protein and sold during the year, includiag admissions to drive-in cinenas and nobile 23 grams of animal protein as an average for the world, proposed by units. FAO in the Third World Food Survey. Per capita protein supply from animal and pulse - Protein supply of food EDPLOYMENT derived from animals and pulses in grams per day. Total labor force (thousands) - Economically active persond, including armed Child (ages 1-i) mortality rate (per thousand) - Annual deaths per thous- forces and unemploved but excluding housewives, students, etc. Defini- and in age group 1-4 years, to children in this age group. tions in various countries are not cosparable. Female (percent) - Female labor force as percentage of total labor force. NEALTH Agriculture (percent) - Labor force in farming, forestry, hunting and fishing Life espectancy at birth (years) - Average number of years of life as percentage of total labor force. remaining at birth; usually five-year averages ending in 1960, 1970, Industry (percent) - Labor force in mining, constructior., manufacturing and and 1975. electricity, water and gas as percentage of total labor force. Infant mortality rate (per thousand) - Annual deaths of infants under Participation rate (percent) - total, male, and female - Total, male, and one year of age per thousand live birhts. 'emale labor force as peroencagen of their resoective poyplatie. Access to safe water (percent of population) - total, urban, and rural - These re ILO's adjrted partcitpation rates reflecting ace-se- Number of people (total, urban, and rural) with reasonable access to struoture of the population. nd lonp tine trend. safe water supply (includes treated surface waters or untreated but Economic dependency ratio - Ratio of poplaitos - udor - l ac- b- and "'r to uncontaminated water such as that from protected boreholes, springs, the labor force in age group of 15-64 --.. and sanitary wells) as percentages of their respective populations. In an urban area a public fountain or standpost located not more INCOME DISTRIBUTION than 200 meters from a house may be considered as being within rea- Percentage of private income (both in cash and kind) received by ricnest 5 sonable access of that house. In rural areas reasonable access would percent, richest 20 percent, poorest 20 percent, and poorest 40 poroent imply that the housewife or members of the household do not have to of households. spend a disproportionate part of the day in fetching the family's water needs. POVERTY TARGET GROUPS Access to excreta.diapusal (Percent of population) - total, urban, and Estimated absolute poverty income level (US$ per capita) - urban and rural - rural - Number of people (total, urban, and rural) served by emoreta Absolute poverty income level is that incone level below which a itimal disposal as percentages of their respective populations. Excreta nutritionally adequate diet pin.s essential non-food requirements IS not disposul may include the collection and disposal, with or without affordable. tre.tt-ot, of hunan escreta and waste-water by water-borne systems Ettimated relat-ve poverty income level (US$ per capota) - urban and rural - or the use of pit privies and similar installations. Relativ poverty intome level is that income level iess th-n urn-third Populatiun per physician - Population divided by number of practicing per capita personal ic.om of the country. physicians qualified from a medical school at university level. Estimated population below poverty income level (percent) - orban and rural - Ponularion per sues ing person - Population divided by number of Percent Of population (urban and rural) who are either "absolute poor" or practicing male and female graduate nurses, practical nurses, and "relative poor" whichaver is greater. assistant nursn. Economic and Social Data Div-s,cn Econo=ic Analysis and Prujectiors Department  ANNEX I Page 4 of 5 ECONOMIC D=VELOPMENT DATA GNP PER CAPITA IN 1976 -! US1 150 GROSS NATIONAL PRODiJCT IN 1976/77 ANNUAL RATE OF GROWTH (N. constant Prices) S/ us$ Bl. . 1960/61-1964/65 1965/66-1969/70 1970/71-1975/76 GNP at Market Prices 86.04 100.0 3.9 3.8 2.9 Gross Domestic Investment 16.62 19.3 Gross National Saving 18.18 21.1 Current Account Balance 1.56 1.8 Resource Gap 0-95 1.1 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1975/76 Value Added (at factor cost) Labor Force VL Per War er US Bln. % M9l. % o f N a t onel Average Agriculture 30.2 43 179.0 69 169 63 Industry 16.7 24 33.9 13 494 193 Services 23.4 33 48.0 18 488 133 Total/average 70.3 100 261 o0o 277 100 GOVERN9 FIEINCE General Government d/ Central Government (Re._Bln) ffi of GDP (Rsl. Bln % of GDP 1976/77 1976/77 197475-1976/ 77 1976 /77 1976/77 1974/75-1976/77 Current Receipts 147.46 19.1 17.9 83.78 10.9 10.4 Current Expenditures 140.18 18.2 16.2 84.25 10.9 9.6 Current Surplus/Deficit 7.28 0.9 1.7 - 0.47 - 0.8 Capital Expenditures A/ 59.05 7.6 7.1 40.39 5.2 5.0 External Assistance (net) 11.21 1.5 1.7 11.21 1.5 1.7 uOm * CREDIT AND PRICES 1970/71 E 973/74 1974/75Z .1976/77 September 1976 September 1977 TBillion Rs outstanding at end of period Money and Quasi Money 105.7 142.2 169.o 186.9 215.0 262.6 238.2 284.8 Bank Credit to Pablic Seotor(net) 56.9- 82.5 92.9 102.6 109.1 117.3 112.7 130.7 Bank Credit to Private Sector 56.7 76.o 90.1 109.5 127.5 161.0 144.0 170.0 (Percentage or Index Numbers) Jar 1977 January 1978 Money and quasi Money as % of GIP 24.5 27.3 26.4 25.5 27.6 31.3 Wholesale Price Index (1970/71 = 100) 100.0 116.2 139.7 174.9 173.0 176.6 178.8 183.3 Annual percentage changes ins Wholesale Price Index 7.7 10.0 20.2 25.2 -1.1 2.1 7.5 2.5 Bank Credit to Publio Sector (net) 8.6 19.6 12.6 10.4 6.3 7.5 4.71/ 15.8/ Bank Credit to Private Sector 17.3 18.0 18.5 21.5 16.4 26.3 24.9 11.9 a The per capita GNP estiuate is at market prioes, calculated by the conversion technique used in the World Atlas. All other conversione to dollars in this table are at the average exchange rate prevailing during the period covered. *k/ Quick Estimates. c/ Computed from trend line of GNP at factor cost series, including one observation before first year and one observation after last year of listed period. / Trnsnfers between Center and States have been netted out. / All loansnd advances to tbird parties have been netted out. 1/ Net bank credit to Government Sector. B1 Bank credit to Commercial Sector.  ANNEX I Pag 5 of 5 BhLAD OFUP= l'zLx 19 iJ .i It21dZi IV inuni* m MS} ( i974/75 - 16 7) Deports of Good. 4,174 4,665 5,760 6,400 Gd Goodo 515 11 IMports of Goods -5,665 _6,034 -5,950 -6,600 Sugr 379 8 Trede -1,491 -1,419 - 190 - 200 Te 296 6 Mrs (net) 213 310 485 500 Juts ra nu lturee 294 6 Leather and Leather Resource GaD -1,278 -1,109 215 300 Products 268 5 - 130 ~~~~clothing 257 5 Interetlk Poytmts (n tk) -L/ - 198 - 21 _ 135 - 130 IronOre 238 5 Other Psotor Payments (net) - - - Cott n Textiles 223 5 Net Pranfer J/ 257 470 730 1,000 Othr m26 49 yotea 4866 100 loano an Ourrnt Aeoust .1,2t7 - 855 810 1,170 Offlial Aid 12DAL T. MORCH 1 1977 -h/ Disbursnts 1,761 2.341 1,953 1,840 S Billion 1mrtimation -515 -531 -56S - 630 OutstandIng and Disbursed 13.6 Transactions with IMP 522 242 -536 - 330 diUsbursed 3.2 All Other Ite_ -588 -403 -595 2 23 Outstanding,ineluding Undisbursed 16. Increase in Reserve ) 58 -794 -1,575 -2,073 NM Sf C10 RO FMOD 1976/77 14.4 percent Gross Reere (td yer) 1,378 2T172 53747 5,830 Not Roeerve. (end year) / 758 1,365 3,276 5,870 INATM LDIGN3 December St. 1977 (US sun.) pool and Related Iteriel. IBRD IDA Imports 1,451 1,417 1,580 1,80O Outstanding and Diaburoed 489.0 3,560.5 of which. Petroleum 1,451 1,417 1,580 1,800 CdOured 674.9 1,257u0 1Eports 26 43 37 n.a. Undisbureed 1,163.9 4,817.5 of whichs Petroleum 17 22 21 n.a, Prior to uid-Deamber 197t 1 USt.00 - RH 7.5 After snd June 972 I Floating Rate De 1.00 = oD.1333335 Spot Rate January 31, 197T Mid-Doeember 1971 to a UtI.00 - RD 7.27927 approx. pSS1.00 = Rs 8.063 end June 1972 as 1.00 = US10.137376 approx. Rs 1.00 = US508 124 etimated. / Figus given cover all invotm t iono (not). Major payments a interet on foreign lae and ehage paid to IW, and mor receipt is interest earned on ferie sseots. j/ Figures given include wrkere' r_ittote but exlude oficial gnt easistene, whieh is iLsluded within official aid disbtonents. / uludes net use of 2W eredit. / A timation end iniset paymqnts foreign leas as a percentage af _1rag eport.  ANNEX II Page 1 of 15 THE STATUS OP BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of January 31, 1979) US$ Milliot Loan or (Net of Cancellations) Credit RN. YTar Borrower Puroose Bank IDA Undisbursad 40 Loans/ 1,100.6 55 Credits folly disbursed 3,338.6 267-IN 1971 India Wheat Storage -- 5.0 2.73 294-IN 1972 India Bihar Agricultural Miarkets -- 14.0 5.62 312-IN 1972 India Popolation -- 21.2 3.50 342-IN 1972 Iodi- Education -- 12.0 7.53 356-IN 1972 India IDBI -- 25.0 9.48 378-IN 1973 India Mysore Agricultural Markets -- 8.0 6.67 902-IN 1973 ICICI Iodustry DFC X 64.8 -- .31 390-IN 1973 India Bombay Water Supply -- 55.0 15.60 427-IN 1973 India Calcutta Urban Developmoent -- 35.0 4.61 440-IN 1973 India Bihar Agricultural Credit - 32.0 8.78 456-IN 1974 India NP Apple Processing & Markoting - 13.0 8.80 481-IN 1974 India Trorbay IV -- 50.0 6.73 1011-IN 1974 India Chambol (Rajasthan) CAD 52.0 - 28.82 482-IN 1974 India Karnataka Dairy -- 30.00 22.74 502-IN 1974 India Rajasthan Canal CAD -- 83.0 44.44 520-IN 1974 India Sindri Fertilieer -- 91.0 7.96 521-IN 1974 India RaJasthan Dairy -- 27.7 22.89 522-IN 1974 India Madhya Pradesh Dairy -- 16.4 12.68 526-IN 1975 India Drought Prone Areas -- 35.0 18.79 1079-IN 1975 IFFCO IFFCO Fertilizer 109.0 -- 36.06 1097-IN 1975 ICICI Indostry DFC XI 100.0 - 12.58 532-IN 1975 India Godavari Barrago Irrigation -- 45.0 18.21 541-IN 1975 India West Bengal Agricultural Develop. ent -- 34.0 22.02 562-IN 1975 India Cha-bal (S8adhy P-radeah) CAD - 24.0 12.36 572-IN 1975 India Rural Electrification -- 57.0 37.65 585-IN 1975 India Utter Pradesh Water Supply -- 40.0 32.12 598-IN 1975 India Fertilirer Industry -- 105.0 78.62 604-IN 1976 India Power Trans-iosion IV __ 150.0 111.57 609-IN 1976 India Madhyr Pradesh Forestry T.A. -- 4.0 3.20 610-IN 1976 India Intearared Cotton Developoent -- 18.0 16.45 1251-IN(TW) 1976 India Andhr- Pradesh Irrigation 145.0 -- 131.32 1260-IN 1976 India IDBI II 40.0 - 32.41 1273-IN 1976 India National Seeds 25.0 - 24.65 1313-IN 1976 India Telecommunications VI 80.0 -- 26.65 1335-IN 1976 BMRDA Bombay Urban Transport 25.0 -- 16.62 680-IN 1977 India Kerala Agricult-rl Develop.ent -- 30.0 29.94 682-IN 1977 India Orissa Agricultural Development -- 20.0 18.79 685-IN 1977 India Singrauli Thermal Power -- 150.0 134.57 687-IN 1977 India Madras Urban Development -- 24.0 19.36 695-IN 1977 India GuJarat Fisheries -- 4.0 4.00 1394-IN(TW) 1977 India Gujarat Fisheries 14.0 -- 14.00 690-IN 1977 India Weat Bengal Agricultural Development -- 12.0 12.00 712-IN 1977 India Madhya Pradesh Agricultural Development -- 10.0 10.00 715-IN 1977 India Second ARDC Credit -- 200.0 124.21 720-IN 1977 India Periyar Vaigai Irrigation -- 23.0 21.03 728-IN 1977 India Assma Agricultural Development -- 8.0 7.79 1473-IN 1977 India Bombay Nigh Offshore Development 150.0 - 81.99 736-IN 1977 India Msh-abnhtra Irrigatiar -- 70.0 70.00 737-IN 1977 India Rajasthan Agricultural Etension -- 13.0 13.00 740-IN 1977 India Orissa Irrigation - 58.0 56.25 1475-IN 1977 ICICI Industry DPC XII 80.0 -- 63.39 747-IN 1978 India Second Foodgrain Storage -- 107.0 104.55 756-lN 1978 India Second Calcutta Urbas Development -- 87.0 75.75 761-IN 1978 India Bihar Agricultur-l Extension 8 Research -- 8.0 8.0 1511-IK 1978 India IDBI Joint/Public Sector 25.0 -- 25.0 1549-IN* 1978 TEC Third Trombay Thermal Power 105.0 - 105.0 788-EN 1978 India Karnataka Irrigation -- 126.0 126.0 793-IN 1978 India Korba The rma1 Pawer -- 200.0 200.0 806-IN 1978 India Jau-Kashmir Norticultur -- 14.0 14.0 808-IR 1978 India Gujerat Irrigation -- 85.0 85.0 815-IN 1978 India Andhra Pradesh Fisheries -- 17.5 17.5 816-IN 1978 India Second National Seeds -- 16.0 16.0 1592-IN 1978 India Telecommunications VII 120.0 -- 104.82 824-IN 1978 India National Dairy -- 150.0 150.0 842-INa 1978 India Second Bombay Water Supply & Sewerag -- 196.0 196.0 843-IN 1978 India Oarysan Irrigation -- 111.0 111.0 844-IN5 1978 India Railway nodernization 6 Maint nance -- 190.0 190.0 848-IN 1978 India Punjab Water Supply And Sewerage -- 38.0 38.0 855-INa 1979 India National Agricultural Res arch -- 27.0 27.0 862-IN0 1979 India Composite Agricultural ERt nsion -- 25.0 25.0 871-IN* 1979 India NCDC - 30.0 30.0 1648-INA 1979 India R.ang.nda- Pauer 50.0 -- 50.0 874-IN0 1979 India Ranagundan Power - 200.0 200.0 Total 2,285.4 6,618.4 of which has been repaid 919.0 45.1 Total now ortotrsdiog 1,366.4 6,573.3 A-onut Sold 133.3 of which ban been repaid 111.5 21.8 Total now hbld by Bank and IDA 1,344.6 6,573.3 Total undiabhrsed (excluding 0) 598.62 2,198.49 Not yet effective 1/ Prior to exchange adjos.teet March 1979  ANNEX II Page 2 of 15 B. STATEMENT OF IFC INVESTMENTS (As of February 28, 1979) Fiscal Amount (US$ million) Year Company Loan Equity Total 1959 Republic Forge Company Ltd. 1.5 - 1.5 1959 Kirloskar Oil Engines Ltd. 0.9 - 0.9 1960 Assam Sillimanite Ltd. 1.4 - 1.4 1961 K.S.B. Pumps Ltd. 0.2 - 0.2 1963-66 Precision Bearings India Ltd. 0.7 0.3 1.0 1964 Fort Gloser Industries Ltd. 0.8 0.4 1.2 1964-75-79 Mahindra Ugine Steel Co. Ltd. 11.8 1.4 13.2 1964 Lakshmi Machine Works Ltd. 1.0 0.3 1.3 1967 Jayshree Chemicals Ltd. 1.0 0.1 1.1 1967 Indian Explosives Ltd. 8.6 2.9 11.5 1969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.9 1976 Escorts Limited 6.6 - 6.6 1978 Housing Development Finance Corporation 4.0 1.2 5.2 TOTAL 53.6 10.4 64.0 Less: Sold 6.0 1.6 7.6 Repaid 15.3 - 15.3 Cancelled 6.2 0.7 6.9 Now Held 26.1 8.1 34.2 Undisbursed 5.1 0.8 5.9  ANNEX II Page 3 of 15 C. PROJECTS IN EXECUTION 1/ Generally, the implementation of projects has been proceeding rea- sonably well. Details on the execution of individual projects are below. The level of disbursements was US$496.4 milliQn in FY78 or 39% of Bank Group com- mitments to India in that year. The undisbursed pipeline of US$2,797 million as of January 31, 1979, corresponds roughly to commitments over the preceding two-year period and reflects the lead time which would be expected given the mix of fast- and slow-disbursing projects in the India program. Ln. No. 1097 Eleventh Industrial Credit and Investment Corporation of India Project; US$100.0 million loan of April 2, 1975; Effective Date: July 1, 1975; Closing Date: December 31, 1980 Ln. No. 1475 Twelfth Industrial Credit and Investment Corporation of India Project; US$80.0 million loan of July 22, 1977 Effective Date: October 4, 1977; Closing Date: March 31, 1983 These loans are supporting industrial development in India through a well-established development finance company and are designed to finance the foreign exchange cost of industrial projects. ICICI continues to be a well-managed and efficient development bank financing medium- and large-scale industries, which often employ high technology and are export-oriented. Loan 1097-IN is fully committed and disbursements are slightly ahead of schedule. Disbursements under Loan 1475-IN (US$16.6 million) are also ahead of schedule. Cr. No. 440 Bihar Agricultural Credit Project; US$32.0 million credit of November 29, 1973; Effective Date: March 29, 1974; Closing Date: March 31, 1980 The project provides US$32.0 million in support of a lending program for 50,000 tubewells and pumpsets investment in the Tirhut Division of Bihar. Because of slow disbursements caused by a lower than estimated Dollar/Rupee exchange rate and by low unit investment costs compared with appraisal esti- mates, IDA agreed to extend the closing date to March 1980 and the project area to cover the whole State. Physical targets have now been achieved and the credit should be fully disbursed by the revised closing date. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 4 of 15 Cr. No. 715 Second Agricultural Refinance and Development Corporation (ARDC) Project; US$200.0 million credit of June 1, 1977; Effective Date: August 24, 1977; Closini Date: December 31, 1979 Credit 715 is designed to provide long- and medium-term credit to farmers through credit institutions, for on-farm investments, primarily in minor irrigation. The proportion of disbursements to'small farmers is currently estimated at about 60% compared with the appraisal target of 50%. Training programs for staff of the financing institutions are progressing satisfactorily. Cr. No. 267 Wheat Storage Project; US$5.0 million credit of August 23, 1971; Effective Date: November 14, 1972; Closing Date: September 30, 1979 Cr. No. 747 Second Foodgrain Storage Project; US$107.0 million credit of January 6, 1978; Effective Date: May 17, 1978; Closing Date: June 30, 1982 Credit 267-IN, which is being co-financed with Sweden, finances (i) the construction of bag and bulk grain storage and handling facilities, (ii) staff training, and (iii) an All-India Grain Storage Study. The government-owned Food Corporation of India is responsible for the storage construction. All the nine 10,000-ton-capacity bag warehouses envisaged under the project as revised became operational in 1975. The construction of five grain silos is progressing satisfactorily after delays due to cement shortages. The training component is being implemented. The All-India Grain Storage Study was completed in October 1976 and proved useful in formulating the proposal for the Second Foodgrain Storage Project (Credit 747-IN). The Second Project is proceeding satisfactorily. Cr. No. 456 Himachal Pradesh Apple Processing and Marketing Project; US$13.0 million credit of January 22, 1974; Effective Date: September 26, 1974; Closing Date: December 31, 1980 Cr. No. 806 Jammu-Kashmir Horticulture Project; US$US$14.0 million credit of July 17, 1978; Effective Date: January 16, 1979; Closing Date: June 30, 1984 Credit 456 includes grading and packing centers, cold storage facilities, a juice processing plant, road improvements and cableways. It also includes cold storage facilities and a pilot project to promote mush- room production. The project encountered initial delays due to managerial and technical problems; however remedial measures have been taken to overcome these difficulties. Land has been acquired for 8 to 10 packing and grading sites, and procurement and construction activities are well underway. The Project Preparation Report for the juice processing plant has been completed,  ANNEX II Page 5 of 15 and the equipment has been ordered. The road improvement program is progres- sing satisfactorily, and the feasibility reports on aerial cableways at the packing/grading sites have been completed. The Jammu Kashmir Horticulture Project was declared effective on January 16, 1979. Ln. No. 1313 Telecommunications VI Project; US$80.0 million loan of July 22, 1976; Effective Date: September 14, 1976; Closing Date: March 31, 1980 Ln. No. 1592 Telecommunications VII Project; US$120.0 million loan of June 19, 1978; Effective Date: October 30, 1978; Closing Date: March 31, 1982 Loan 1313 supports the expansion of the Indian telecommunications system through the provision of funds for the installation of 220,000 direct exchange lines and expansion of the trunk network. Project progress is satisfactory. Loan 1592 is providing further support to the development of India's telecommunication system through FY 1981. Cr. No. 604 Power Transmission IV Project; US$150.0 million credit of January 22, 1976; Effective Date: October 22, 1976; Closing Date: June 30, 1981 Under Credit 604-IN, contracts aggregating about US$65 million had been awarded by December 1978. This Credit included a supplementary Credit of US$30 million to meet increased costs of equipment scheduled under the Third Power Transmission Project; all but US$4 million of this amount has also been committed. Cr. No. 481 Trombay IV Fertilizer Expansion Project; US$50.0 million credit of June 19, 1974; Effective Date: August 21, 1974; Closing Date: June 30, 1979 Cr. No. 520 Sindri Fertilizer Project; US$91.0 million credit of December 18, 1974; Effective Date: February 27, 1975; Closing Date: March 31, 1979 Ln. No. 1079 IFFCO Fertilizer Project; US$109.0 million loan of January 24, 1975; Effective Date: April 28, 1975; Closing Date: March 31, 1979 Cr. No. 598 Fertilizer Industry Project; US$105.0 million credit of December 31, 1975; Effective Date: March 1, 1976; Closing Date: June 30, 1980 The Trombay IV project is now being commissioned, about 18 months behind schedule due to longer-than-expected delivery times for critical equip- ment. The Sindri project is also being commissioned. The IFFCO project was delayed by about a year as a result of a change in feedstock from fuel oil to  ANNEX II Page 6 of 15 naphtha and delays in completion of engineering contracts. However, project construction is now proceeding satisfactorily. Credit 598-IN is designed to increase the utilization of existing fertilizer production capacity. The project has encountered delays in sub-project preparation and investment approvals by the Government. Further, some of the sub-projects identified earlier may not materialize because of reconsideration by the Central and State governments. IDA has agreed to a list of sub-projects to replace the ones that are likely to be dropped. Because of the above, the project is likely to be delayed by 6-12 months. Cr. No. 294 Bihar Agricultural Markets Project; US$14.0 million credit of March 29, 1972; Effective Date: July 31, 1972; Closing Date: December 31, 1979 Cr. No. 378 Karnataka Wholesale Agricultural Markets Project; US$8.0 mil- lion credit of May 9, 1973; Effective Date: September 7, 1973; Closing Date: December 31, 1979 These projects were designed to help with establishment of whole- sale markets in a number of towns in Bihar and Karnataka. Progress under the Bihar project has generally been satisfactory. The project includes training of the Agricultural Produce Marketing Committee (APMC) staff and evaluation of the project's economic impact. Development plans have been completed for 53 market yards to ensure the project target of 50 markets is met. As of November 1978, the date of the last review, appraisals had been completed for 50, and loans approved for 49 markets. Construction had been completed for 19 and was in progress for 31 markets. Farmers and traders served by the 11 market yards now in operation report more efficient marketing activities and improved farmers' terms of trade. Progress under the Karnataka project is improving. As of October 1978, when the project was last reviewed, construc- tion was underway for 36 of the 39 project markets. Plans and land acquisi- tion are nearing completion at the remaining sites. Both projects are expected to be completed by their closing dates. Cr. No. 312 Population Project; US$21.2 million credit of June 14, 1972; Effective Date: May 9, 1973; Closing Date: June 30, 1979 This credit is designed to finance an experimental and research oriented population project in Karnataka and Uttar Pradesh. The project's infrastructure, which would provide the optimum facilities (buildings, equip- ment, staff and transport) according to GOI standards in selected districts in each state, is almost complete. The two Population Centers, which will design and monitor research aimed at improving the family planning program, are now functioning. To allow adequate time for the Population Centers to complete their evaluation of family planning strategies and the introduction of management information and evaluation systems, the closing date has been extended by one year.  ANNEX II Page 7 of 15 Cr. No. 342 Agricultural Universities Project; US$12.0 million credit of November 10, 1972; Effective Date: June 8, 1973; Closing Date: December 31, 1979 The project involves the development of the agricultural univer- sities in Assam and Bihar. The primary aim of the AUs project is to improve the quality and practical training of undergraduates and so the spectrum of their employment opportunities; and to strengthen university structure to enable it to give impetus to agricultural and rural development. Consider- able progress has been made in achieving the latter objective; but achieving educational objectives is more slowly attainable, constrained by traditional attitudes and structures where consistent effective leadership falters. Changes to a more functional orientation are now planned. The Project Director and others responsible are aware of the constraints and are support- ing efforts to remove them. Cr. No. 356 Industrial Development Bank of India Project; US$25.0 million credit of February 9, 1973; Effective Date: June 22, 1973; Closing Date: September 30, 1979 Loan No. 1260 Second Industrial Development Bank of India Project; US$40.0 million loan of June 10, 1976; Effective Date: August 10, 1976; Closing Date: June 30, 1981 Loan No. 1511 IDBI Joint/Public Sector Project; US$25.0 million loan of March 1, 1978; Effective Date: May 31, 1978; Closing Date: March 31, 1983 The first IDBI Project had a slow start mainly due to institutional problems in the participating State Financial Corporations. However, the credit is now fully committed. In order to continue the Bank Group's involve- ment in assisting small- and medium-scale industries and in strengthening the State Financial Corporations involved, a second operation (Loan 1260-IN) was approved in 1976, and disbursements have reached US$7.6 million by the end of January 1979. Loan 1511-IN is designed to encourage the pooling of private and public capital in medium-scale joint ventures. The project will also assist IDBI in carrying out industrial sector investment studies and in strengthening the financial institutions dealing with the state joint/public sector. Cr. No. 390 Bombay Water Supply and Sewerage Project; US$55.0 million credit of January 22, 1974; Effective Date: March 13, 1974; Closing Date: June 30, 1981 Cr. No. 842 Second Bombay Water Supply and Sewerage Project; US$196.0 million credit of November 13, 1978; Effective Date: February 13, 1978; Closing Date: March 31, 1985  ANNEX II Page 8 of 15 Cr. No. 848 Punjab Water Supply and Sewerage Project; US$38.0 million credit of October 27, 1978; Effective Date: January 25, 1979; Closing Date: March 31, 1983 Having overcome earlier difficulties, including cost overruns caused by inflation (requiring project redefinition in February 1975), re- design of major project components and the addition of a supplementary study on sewage disposal, Credit 390 is now progressing relatively well. All of the major contracts will be sufficiently advanced to permit the supply of additional water (455 mld) in the last quarter of 1978; completion of water treatment works for the whole supply by the end of 1979 is realistically forecast. Completion of additional sewage disposal studies (August 1977) has allowed engineering design of the project sewerage components to proceed, so that completion of construction of these works is now scheduled for mid- 1980, two years later than originally forecast. Financial performance of the project entity is satisfactory. Credit 848 was declared effective on schedule and preliminary work in connection with its implementation is progressing satisfactorily. Cr. No. 585 Uttar Pradesh Water Supply and Sewerage Project; US$40.0 million credit of September 25, 1975; Effective Date: February 6, 1976; Closing Date: June 30, 1980 The Project has had a slow start due to delays in the preparation of technical reports for regional and local water authorities and in the engagement of consultants. While improvements have been made in the physical execution, other aspects of project implementation continue to lag so that disbursements under the Credit have fallen short of estimates at the time of appraisal. In order to improve the situation, arrangements are being made to appoint a full-time management adviser to closely supervise and coordinate implementation. Cr. No. 427 Calcutta Urban Development Project; US$35.0 million credit of September 12, 1973; Effective Date: January 10, 1974; Closing Date: December 31, 1979 Cr. No. 756 Second Calcutta Urban Development Project; US$87.0 million credit of January 6, 1978; Effective Date: April 7, 1978; Closing Date: March 31, 1983 For the first of these projects, following considerable increases in project costs, GOI and IDA finalized a project redefinition in April 1976. It is now expected to be substantially completed by mid-1979. Credit 756-IN is designed to expand and upgrade the capabilities of Calcutta's administra- tive authorities, to strengthen the city's fiscal base, and to rehabilitate and extend its urban service system.  ANNEX II Page 9 of 15 Cr. No. 687 Madras Urban Development Project; US$24.0 million credit of April 1, 1977; Effective Date: June 30, 1977; Closing Date: September 30, 1981 The project is designed to develop and promote low-cost solutions to the problems of providing improved services to the urban poor in the Madras Metropolitan Area (MMA) and to strengthen metropolitan planning. Project components consisting of sites and services, slum improvement, small- scale and cottage industry, and maternal and child health are designed to benefit directly some 250,000 persons in low-income areas of the city. The water supply and sewerage, road and traffic, bus transport and technical assistance components are designed to eliminate bottlenecks in water supply and transport. Project implementation is proceeding satisfactorily, and disbursements are slightly ahead of appraisal estimates. Cr. No. 482 Karnataka Dairy Development Project; US$30.0 million credit of June 19, 1974; Effective Date: December 23, 1974; Closing Date: September 30, 1982 Cr. No. 521 Rajasthan Dairy Development Project; US$27.7 million credit of December 18, 1974; Effective Date: August 8, 1975; Closing Date: December 31, 1982 Cr. No. 522 Madhya Pradesh Dairy Development Project; US$16.4 million credit of December 18, 1974; Effective Date: July 23, 1975; Closing Date: June 30, 1982 Cr. No. 824 National Dairy Project; US$150.0 million credit of June 19, 1978; Effective Date: December 20, 1978; Closing Date: December 31, 1985 These four credits, totalling US$224.1 million, support dairy devel- opment projects organized along the lines of the successful AMUL dairy coop- erative scheme in Gujarat State. The Karnataka Project, which got off to a slow start, has begun to show considerable improvement under new management appointed recently. Farmer response has been good and over 700 dairy coop- eratives with small farmer participation are functioning effectively. All four dairy unions envisaged under the project have been established and are functioning satisfactorily. Karnataka's decision to procure plant equipment jointly with Rajasthan and Madhya Pradesh on the same tender should lead to a recovery of considerable time lost earlier in the Karnataka project. In Madhya Pradesh good progress has been made. About 252 new dairy cooperatives societies have been established. Detailed design studies for plant construc- tion are complete. The response of small farmers to the project is excellent. GOMP has plans to cover all districts in the State. Technical services in- vestments are being made. Contracts have been placed for livestock imports. The Rajasthan project is also doing well. Four milk unions have been formed and excellent progress has been made in organizing the servicing of nearly  ANNEX II Page 10 of 15 800 dairy cooperatives at the village level. Plant designs are ready, and procurement is making adequate progress. Based upon the good results expe- rienced, GOR is planning to expand the form of dairy development to all other districts of the State. Cr. No. 532 Godavari Barrage Project; US$45.0 million credit of March 7, 1975; Effective Date: June 9, 1975; Closing Date: June 30, 1980 Both the civil works and equipment tenders have been awarded after international competitive bidding. Work is in progress and is proceeding satisfactorily. Disbursements reached 60% of total credit amount as of January 31, 1979. Ln. No. 1011 Chambal (Rajasthan) Command Area Development Project; US$52.0 million loan of June 19, 1974; Effective Date: December 12, 1974; Closing Date: June 30, 1981 Cr. No. 502 Rajasthan Canal Command Area Development Project; US$83.0 million credit of July 31, 1974; Effective Date: December 30, 1974; Closing Date: June 30, 1981 Cr. No. 562 Chambal (Madhya Pradesh) Command Area Development Project; US$24.0 million credit of June 20, 1975; Effective Date: September 18, 1975; Closing Date: December 31, 1979 Ln. No. 1251 Andhra Pradesh Irrigation and Command Area Development (TW) Composite Project; US$145.0 million loan (Third Window) of June 10, 1976; Effective Date: September 7, 1976; Closing Date: December 31, 1982 Cr. No. 720 Periyar Vaigai Irrigation Project; US$23.0 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 736 Maharashtra Irrigation Project; US$70.0 million credit of October 11, 1977; Effective Date: January 13, 1978; Closing Date: March 31, 1983 Cr. No. 740 Orissa Irrigation Project; US$58.0 million of October 11, 1977; Effective Date: January 16, 1978; Closing Date: October 31, 1983 Cr. No. 788 Karnataka Irrigation Project; US$126.0 million credit of May 12, 1978; (expected) Effective Date: August 12, 1978; Closing Date: March 31, 1984  ANNEX II Page 11 of 15 Cr. No. 808 Gujarat Irrigation Project; US$85.0 million credit of July 17, 1978; Effective Date: October 17, 1978; Closing Date: June 30, 1984 Cr. No. 843 Haryana Irrigation Project; US$111.0 million credit of August 16, 1978; Effective Date: December 14, 1978; Closing Date: August 3121983 These projects, based on existing large irrigation systems, are designed to improve the efficiency of water utilization and, where possible, to use water savings for bringing additional areas under irrigation. Canal lining and other irrigation infrastructure, drainage, and land shaping are prominent components of these projects. In addition, provisions have been made to increase agricultural production and marketing by reforming and upgrading agricultural extension services and by providing processing and storage facilities and village access roads. Progress of these projects is generally satisfactory. Cr. No. 541 West Bengal Agricultural Development Project; US$34.0 million credit of April 28, 1975; Effective Date: August 28, 1975; Closing Date: March 31, 1980 The project provides financing over four years mainly for minor irrigation investments but also for development of markets, agro service centers, and support of related government extension services. Although dis- bursements have been slower than anticipated, there has been a considerable improvement in project organization and administration and disbursements are expected to improve considerably. The physical progress of shallow tubewells, and of deep tubewells for the Minor Irrigation Corporation, is satisfactory. IDA, GOWB and ARDC are combining efforts in order to solve difficulties such as organizational problems at the farm level; lack of demand for agro service centers; and completion of designs for water distribution systems and irriga- tion schemes. Positive results, particularly for the redesigned water distri- bution systems have been achieved. Cr. No. 682 Orissa Agricultural Development Project; US$20.0 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 Cr. No. 728 Assam Agricultural Development Project; US$8.0 million credit of June 30, 1977; Effective Date: September 30, 1977; Closing Date: March 31, 1983 Cr. No. 690 West Bengal Agricultural Extension and Research Project; US$12.0 million credit of June 1, 1977; Effective Date: August 30, 1977; Closing Date: September 30, 1982 Cr. No. 712 Madhya Pradesh Agricultural Extension and Research Project; US$10.0 million credit of June 1, 1977; Effective Date: September 2, 1977; Closing Date: September 30, 1983  ANNEX II Page 12 of 15 Cr. No. 737 Rajasthan Agricultural Extension and Research Project; US$13.0 million credit of November 14, 1977; Effective Date: February 6, 1978; Closing Date: June 30, 1983 Cr. No. 761 Bihar Agricultural Extension and Research Project; US$8.0 million credit of January 6, 1978; Effective Date: May 2, 1978; Closing Date: October 31, 1983 Cr. No. 855 National Agriculture Research Project; US$27.0 million credit of December 7, 1978; Effective Date: January 7, 1979; Closing Date: September 30, 1983 Cr. No. 862 Composite Agricultural Extension Project, US$25.0 million credit of February 16, 1979; Effective Date (expected): May 16, 1979; Closing Date: December 31, 1984 These projects, totalling US$123 million, finance the re-organization and strengthening of agricultural extension and the development of adaptive agricultural research services with the objective of achieving early and sustained improvements in agricultural production, particularly foodgrains. Arrangement for monitoring and evaluation of project progress and impact is an essential feature of these projects. The Orissa and Assam projects also provide funds for laying the basis for longer term improvements in ground- water development in the States. The projects' components include provision of additional staff, training facilities, housing, offices, laboratory facilities, equipment and transportation. Cr. No. 526 Drought Prone Areas Project; US$35.0 million credit of January 24, 1975; Effective Date: June 9, 1975; Closing Date: June 30, 1980 Overall physical progress of the Drought Prone Areas project (DPAP) continues to be satisfactory. The rate of disbursement is improving and implementation of most components is proceeding, by and large, according to schedule. Cr. No. 680 Kerala Agricultural Development Project; US$30.0 million credit of April 1, 1977; Effective Date: June 29, 1977; Closing Date: March 31, 1985 This project would improve tree crop production in Kerala and has particular emphasis on increasing benefits to small farmers. It comprises rehabilitation of 30,000 ha coconut and 10,000 ha pepper and 2,240 ha cashew, and new plantings of 5,000 ha coconut and 1,500 ha cashew. About 25% of the coconut area would be irrigated for intensive intercropping. Funds have been provided for development of a seed garden for tree crops and for strengthen- ing tree crops research. Ten crumb rubber factories would also be established to process smallholder rubber. Project implementation started slowly due to initial staffing and funding delays but has recently gained momentum. Project actions for 1978/79 have been rephased and advance action planned so as to make up for lost time.  ANNEX II Page 13 of 15 Cr. No. 871 National Cooperative Development Corporation (NCDC) Project; US$30.0 million credit of February 2, 1979; Effective Date (expected): May 2, 1979; Closing Date: December 31, 1984 This project is intended to strengthen the institutional framework responsible for promoting and financing development of cooperatives, partic- ularly village level multipurpose cooperative societies. Cr. No. 572 Rural Electrification Project; US$57.0 million credit of July 23, 1975; Effective Date: October 23, 1975; Closing Date: December 31, 1979 Credit 572 consists of a tranche of rural electrification schemes which, at about Rs 5 million each, would cover about 140 schemes. There are now thirteen States eligible for onlending (compared with six at the time of appraisal). The project got off to a slow start, due principally to the need to adapt the specifications and tendering procedures to international competitive bidding, but the position has now improved and the full amount of the Credit has been committed. Cr. No. 844 Railway Modernization and Maintenance Project; US$190.0 million credit of November 13, 1978; Effective Date: January 10, 1979; Closing Date: December 31, 1984 Credit 844 was designed to help the Indian Railways reduce manu- facturing and maintenance costs of locomotives and rolling stock and to improve their performance and availability. Cr. No. 609 Madhya Pradesh Forestry Technical Assistance Project; US$4.0 million credit of February 26, 1976; Effective Date: May 26, 1976; Closing Date: December 31, 1981 This project will identify a sound resource base for pulp and paper manufacture and related industries, develop suitable logging systems, and undertake a feasibility study to determine optimal use of the existing wood resources in the Bastar District of southern Madhya Pradesh. It also in- cludes a study of ways to integrate the area's tribal population with future development. Cr. No. 610 Integrated Cotton Development Project; US$18.0 million credit of February 26, 1976; Effective Date: November 30, 1976; Closing Date: December 31, 1981 The project finances equipment, civil works and crop production credit to support programs for cotton research and cotton production increase in three states. The project also provides credit for improving cotton gin- neries, new ginneries, cotton seed oil extraction plants and vegetable oil processing factories. Effectiveness was delayed by slow appoir;;.-nt of consultants, but the cotton extension services program was stalLed WiLiLuut delay and has now been in operation for two years. Disbursements have been  ANNEX II Page 14 of 15 small mainly due to poor demand to date for project credit. The last super- vision mission, working with technical consultants, has made detailed recom- mendations for more appropriate pest control practices and more adaptive research to identify and introduce better varieties. These measures are under discussion with GOI, and when agreed to and implemented, should speed up project disbursements. Ln. No. 1273 National Seed Project; US$25.0 million loan of June 10, 1976; Effective Date: October 8, 1976; Closing Date: June 30, 1981 Cr. No. 816 Second National Seed Project; US$16.0 million credit of July 17, 1978; Effective Date: December 20, 1978; Closing Date: December 31, 1984 Loan 1273-IN supports the first phase of India's national seed program, consisting of: seed industry expansion in the public and private sectors, improvements in seed quality control, strengthening of breeding and seed technology research, and development of a reserve stock scheme. Insti- tutional development and managerial arrangements, particularly at the state level, have proceeded fairly satisfactorily. Project implementation, however, slowed down after loan effectiveness mainly due to organizational problems. Project progress is now gaining momentum after GOI filled the two top posts of the National Seeds Corporation which were vacant for several months. A project supporting the second phase of India's national seed program (Credit 816-IN) is now effective. Ln. No. 1335 Bombay Urban Transport Project; US$25.0 million loan of December 20, 1976; Effective Date: March 10, 1977; Closing Date: June 30, 1980 Contracts for bodies and chassis for 325 single deck and 175 double deck buses have been awarded and some 144 buses have been delivered. Bids for an additional 200 buses are being evaluated. Civil works contracts have been awarded for 8 bus facilities, and 13 traffic engineering schemes. Delays are expected in implementing some BMC traffic engineering schemes and the BEST workshop schemes although steps are being taken to minimize such delays. Consultants in organization, administration, financial management systems, accounting and development planning are at work assisting the Borrower, the Bombay Metropolitan Regional Development Authority. Other beneficiaries of the loan, the Bombay Municipal Corporation and the Bombay Electric Supply and Transport Undertaking, have selected consultants in traffic engineering and operations and management assistance, respectively. Ln. No. 1394 Gujarat Fisheries Project; US$14.0 million loan and US$4.0 (TW) and million credit of April 22, 1977; Effective Date: Cr. No. 695 July 19, 1977; Closing Date: June 30, 1983  ANNEX II Page 15 of 15 Cr. No. 815 Andhra Pradesh Fisheries Project; US$17.5 million credit of June 19, 1978; Effective Date: September 19, 1978; Closing Date: September 30, 1984 These projects finance the construction of fishing harbors, seafood processing plants and other facilities required to assist the development of fisheries in the states of Gujarat and Andhra Pradesh. The projects also provide funds through ARDC to assist fishermen to purchase 9-15 meter vessels and 9 meter canoes. Preliminary work in connection with implementation of these projects is underway. Cr. No. 685 Singrauli Thermal Power Project; US$150.0 million credit of April 1, 1977; Effective Date: June 28, 1977; Closing Date: December 31, 1983 Cr. No. 793 Korba Thermal Power Project; US$200.0 million credit of May 12, 1978; Effective Date: August 14, 1978; Closing Date: March 31, 1985 Ln. No. 1549 Trombay Thermal Power Project; US$105.0 million loan of June 19, 1978; (expected) Effective Date: March 30, 1979; Closing Date: March 31, 1984 Credit 685-IN assists in financing the first stage of the 2,000 MW Singrauli development which is, in turn, the first of four power stations in the Government's program for the development of large Central thermal power stations feeding power into an interconnected grid. The second such station, at Korba, is being financed through Credit 793-IN. It is proposed that the Bank Group will have a continuing involvement in this development program. The National Thermal Power Corporation (NTPC) has been formed to construct and operate these power stations, and the development program got off to a good start. Organization and staffing of NTPC is proceeding satisfactorily, and the Singrauli project is proceeding on schedule. Civil works are in pro- gress and contracts have been awarded for major plant parts (turbo-generators, boilers, transformers). Loan 1549-IN is supporting the construction of a 500 MW extension of the Tata Electric Companies' station, in order to help meet the forecast load growth in the Bombay area. Ln. No. 1473 Bombay High Offshore Development Project; US$150.0 million loan of June 30, 1977; Effective Date: October 20, 1977; Closing Date: December 31, 1980 The project is progressing satisfactorily. Gas and oil pipelines from Bombay High to shore have been laid and were commissioned in June 1978. Disbursements stood at 45% of the loan amount on January 31, 1979.  ANNEX III Page 1 of 2 INDIA PUNJAB IRRIGATION PROJECT Section I: Timetable of Key Events (a) Time taken by the country to prepare the project About one year (b) The agency which has prepared the project Government of Punjab with assistance from IBRD/FAO Cooperative Program (c) Date of first presentation to the Bank and date of the first mission to consider the project June 1978; July 1978 (d) Date of departure of appraisal mission July 1978 (e) Date of completion of negotiations March 1979 (f) Planned date of effectiveness July 1979 Section II: Special Bank Implementation Action None Section III: Special Conditions (a) GOP to cause PSTC to prepare and submit to the Association, by December 31, 1979 for its review and comments a design manual for watercourse lining (para. 51); (b) GOP to make adequate arrangements for the efficient operation and preventive maintenance of irrigation works under the project (para. 54);  ANNEX III Page 2 of 2 (c) GOP to establish, by July 31, 1979, within its Irrigation Department a special wing responsible for works on the studies and pilot demonstration schemes (para. 54); (d) GOP to cause PSTC by August 31, 1979 to appoint a financial advisor, to establish a Management Information Unit for modernizing accounting and budgeting procedures, and to submit to the Association for review and comments a financial management plan (para. 55); (e) GOP to establish, by January 31, 1980, monitoring and evaluation units in three agencies responsible for project implementation (para. 56); (f) GOP to undertake, and submit to IDA by August 31, 1981 for review, a study which would analyze alternative methods of collecting water charges in modernized irrigation projects (para. 66).  IBRO 13875 aGuInt // AMMU AND y mbKASHMIR Chma INDIA ~aI~at / Da~,aode PUNJAB IRRIGATION PROJECT THE/N ~~~~~~~~AM ~~Modernization of Canal System and Modernization of Wotercourses athan ot Main & Branch Canoal - I Risers & Dom Sites 1 C:) G rdas rZ/s Modernization of Watercourses 7-7AModernization of Canals __ % t \ _ 9 \ 4yrs(Conal Command Areasj o Cities and Towns * Dittnct Capitals -1- Main Roads Htarnir,r District Boundaries Q, 5~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- tate Boundaries H.sh - ~~~~~~~~~~- - international Boundaries N1020 34 0 04 rPlsmeWhsJrf hrf@OmUdlbywrhhgrAwltSdf50a*h6f& 5xmd omPlymnfErBr9acdre