India - Cashewnut Project

Document of FILE CflPV The World Bank FOR OFFICIAL USE ONLY Report No. P-2770-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT AS SOC IAT ION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE CASHEWNUT PROJECT April 10, 1980 This document has a restricted distribution and may be used by recipients only in the performance of| their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT (as of April 1, 1980) US$1.00 Rs 8.278765 Rs 1.00 = US$0.12079 Rs 1 million = US$120,790 (Since September 24, 1975, the Rupee has been fixed against a "basket" of currencies. As these currencies are now floating, the U.S. Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1.00 to Rs 8.40, which represents the projected exchange rate over the disbursement period.) FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS USED IN THIS REPORT ARDC - Agriculture Refinance and Development Corporation Limited CCI - Cashew Corporation of India CNSL - Cashewnut shiell liquid CPCRI - Central Plantation Crops Research Institute GOI - Government of India ICAR - Indian Council for Agricultural Research LDB - Land Development Bank  FOR OFFICIAL USE ONLY INDIA CASHEWNUT PROJECT CREDIT AND PROJECT SUMMARY Borrower India, acting by its President. Beneficiaries: The States of Andhra Pradesh, Kerala, Karnataka and Orissa, the Agricultural Refinance and Development Corporation (ARDC) and participating banks, Andhra Pradesh Forest Development Corporation, Karnataka Cashew Development Corporation, Orissa Cashew Develop- ment Corporation, Plantation Corporation of Kerala, Indian Council for Agricultural Research (ICAR), and smallholder farmers. Amount: US$22 million equivalent. Terms: Standard. Relending Terms: GOI to the States and ICAR: Financing in accordance with Borrower's standard arrangements for development assist- ance. GOI to ARDC to refinance loans to farmers and the State Corporations: (a) GOI-to ARDC, interest rate at 6% per annum in respect of ARDC refinancing for up to 9 years and 6-.5% for refinancing for up to 15 years. G01 to bear foreign exchange risk. (b) ARDC to Participating Banks, interest rate at 6.5% per annum for lending to small farmers 1/ and 7.5% for lending to other borrowers. Installment repayments to coincide approximately with expected collections of loans financed. (c) Participating Banks to Borrowers, interest rate at 9.5% per annum to -small farmers and 10.5% to other borrowers. Farmers' contribution to be a minimum of 5% of investment cost and Corporations' contribution to be a minimum of 20% of investment cost. Repayment periods to be based on borrowers' repayment capacity. 1/ Small farmers are defined as those cultivating land providing a pre- development net return to family income not exceeding Rs 2,000 annually (based on 1972 prices). 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 - Project Description: The project would help finance a cashew production pro- gram in the States of Kerala, Karnataka, Andhra Pradesh and Orissa, together with necessary supporting facili- ties. Cashew plantations would include new planting on 53,775 ha and improvements of existing plantation on 7,500 ha. About 30,500 ha of new planting and 4,500 ha of improvements would be carried out by smallholder farmers, and 23,275 ha of new planting and 3,000 ha of improvements by State Corporations. The project would also strengthen cashew development units in each State, strengthen State Corporations, and implement a program of research and training and a cashew industry study. Project rislks include the possible lack of coordination among the numerous agencies involved in implementation, and a possible lack of adequate response from the farmers for the proposed long-gestation investments. Measures have been included to coordinate, monitor and expedite all phases of implementation, and necessary services and incentives would be provided to farmers. The risks are, therefore, no greater than normally found in this kind of project. Estimated Costs: Local Foreign Total