India - Upper Ganga Irrigation Modernization Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4992-IN STAFF APPRAISAL REPORT INDIA UPPER GANIA IRRIGATION VDERNIZATION PROJBT April 27, 1984 South Asia Projects Department Irritation II Division 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 authoriztion.  CURRENCY EQUIVALENTS US$1.00 = Rupees (Rs) 10.80 1/ WEIGHTS AND MEASURES (METRIC SYSTEM) 2/ 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 miles (mi) 1 hectare (ha) = 2.47 acres (ac) 1 million cubic meters (Mm3) = 810 acre-feet (ac-ft) 1 cubic foot per second (cfs or cusec) = 0.028 cubic meters per second (m3/s) 1 kilogram (kg) = 2.2 pounds (lb) 1 metric ton (mt) = 2,205 pounds (lb) FISCAL YEAR GOI; GOUP April 1 - March 31 1/ The US Dollar/Rupee exchange rate is subject to change. Conversions in this report have been made at US$1.00 to Rs 10.80, which represents the projected exchange rate over the disbursement period. 2/ The metric system has been used in most cases. However, India is still in the process of transition to the metric system; non-metric units are still widely used and have been used in this report where a conversion to the metric system may confuse the reader.  FOR OMCIAL USE ONLY NDIA UPPER GANGA IRRIGATION MODERNIZATION PROJECT Credit and Project Summary Borrower: India, acting by its President (GOI). Beneficiary: Government of Uttar Pradesh (GOUP) Amount: IDA Credit: SDR 117.5 M (US$125.0 M equivalent) Terms: IDA Credit: Standard Re-LendinR Terms: From GOI to GOUP as part of central assistance to States of India for development projects on terms and conditions applicable at the time. GOI would bear the foreign exchange risk. Project Description: The proposed project comprises a six-year tilme-slice (September 1984 - September 1990) of the rehabili- tation and modernization the Upper Ganga Canal (UGC) System. It would (a) replace the existing main canal with a parallel lined canal together with modern regulating and access structures primarily to avert risk to the existing irrigated areas; (b) modernize the distribution system serving about 43,000 ha with lined channels down to and including watercourses; (c) construct augmentation ttibevells on the lined distributaries to supplement surface water supplies; (d) undertake a reconnaissance drainage study for the UGC command area and a 1etailed drainage study and pilot works program within the distributary blocks to be modernized; (e) initiate construction of a modern canal communication system; (f) construct one small hydro-electric station on the main canal and initiate the civil works of another station; (g) set up a water and land management. institute; (h) strengthen the project organization for planning, design, monitoring and evaluation and management of UGC modernization program; train project staff, provide study tours, visits and technical assistance; and Ci) provide vehicles, plant and equipment for the construction and managment of the project. The project would alleviate risks to the existing irrigated area and increase agricultural production and the standard of living of farmers in UP. Possible risks under the proposed project are these normally associated with irrigation project in India. Mm document has a restricted distribution and may be used by recipients only in the performance of their offcil duties Its contents may not otherwise be disclosed without World Bank authorization.  ABBREVIATIONS AND ACRONYMS AE - Assistant Engineer AO - Agricultural Officer CADA - Command Area Development Authority CCA - Cultivable Command Area CD - Department of Community Development CE - Chief Engineer CWC - Central Water Commission DA - Department of Agriculture EE - Executive Engineer ERR - Economic Rate of Return FCF - Foodgrain Conversion Factor GOI - Government of India GOUP - Government of Uttar Pradesh HYV - High Yielding Varieties ICB - International Competitive Bidding ID - Irrigation Department IDA - International Development Association IS - Secretary of Irrigation and Energy JE - Junior Engineer LCB - Local Competitive Bidding LGC - Lower Ganga Canal M&E - Monitoring and Evaluation NGC - Madhya Ganga Canal NPV - Net Present Value O&M - Operation and Maintenance SCF - Standard Conversion Factor SDV - Supplementary Data Volume SE - Superintending Engineer kV - kilovolt = 1,000 volts VLW - Village Level Worker UGC - Upper Ganga Canal WALMI - Water and Land Management Institute GLOSSARY kharif - Wet season (June to October) rabi - Dry season (November to February) zaid - Hot weather season (March to May) usar - Saline or alkaline efflorescence on the soil surface khadar - Low land where the river used to meander in the past Warabundi - Water distribution between farmers on the same common channel (watercourse) based on land area. Each farmer receives the full flow of the watecourse for the same period each week with the period of time depending on his land holding. The local usage within UP for warabundi is osrabundi. Kankar - Limestone layers in the sub-stratum Gul - Watercourse channel  INDIA UPPER GANGA IRRIGATION MODERNIZATION PROJECT VOLUME I - MAIN REPORT Table of Contents Page No. I. BACKGROUND ......................................................... 1 Introduction * . . ............................................ 1 Agriculture'and Irrigation in India ................ . . . ... 1 The State of Uttar Pradesh ......... .. ........ . 2 - Salient Features . . .. ............ ...... .. 2 - The Economy ................. ........................ 3 - Employment and Rural Poverty ........................ 3 - Agricultural Performance ............................ 3 - Irrigation Development ............................... 4 - Power Supply and Demand ............................. 5 II. THE PROJECT AREA AND PRESENT DEVELOPMENT ................. 5 Salient Features ........................................ 5 Location ................................. ....................... 5 - Climate ............................................. 5 - Topography and Soils ................................ 6 - Land Use ............................................. 6 - Population, Land Holdings and Land Tenure ............ 6 - Roads ............................................... 6 Water Resources and Utilization ........................ 7 - Water Resources ..................................... 7 - Surface Irrigation .. .................... .. . ..... 7 - Groundwater .. 8 Present Agriculture Development ...................... ..... 9 G rops ............................................................... 9 - Crop Yields ................................................ 0....... 10 Agricultural Supporting Services ....................... .. 10 - Agricultural Research . ... . ... .............. . 10 - Agricultural Extension ................... . 10 - Agricultural Inputs ................................... ................ 11 - Agricultural Credit ................................... ................ 11 - Farm Power .......................................... 11 - Marketing, Processing and Storage .................... 11 III. THE PROJECT ............................................. 12 Project Formulation ............ . . . . .. ............................. . 12 - Project Objectives .. .... ................. .. ... .... 12 - Justification for Bank Involvement .................. 13 Water Supply and Demand ................................. 13 Project Scope .............................. ............. 14 Project Components . .............................. .. .... . 15 This report is based on the findings of Bank Missions which visited India in Sept/Oct 1983, and Jan/Feb 1984. The missions comprised of Messrs. John F. Cunningham, A Seager, t. Herman, and C.M. Mathur (IDA); and Messrs. M. Barber, V. Byrappa and J. Narain (Consultants). Word processing was done by Ms. K. Landerer with assistance of Ms. S. Douglas and Ms. C. Batara.  Table of Contents (continuation) -ii- Page No. Detailed Description ..................... ............... 16 - Risk Aversion Works ...... .............. .. ............ 16 - Main Canal Modernization ............................. 16 - Canal Distribution System Modernization ............. . 17 - Watercourse Modernization .......................... .. 18 - Augmentation Tubewells ...... ................... ...... 19 - Canal Communication System ......................... .. 20 - Drainage Improvements ............................. ... 20 - Iydro-electric (Hydel) Stations ...................... 21 - .later and Land Management Institute .. ................ 21 - Management Improvements ........................... ... 21 - Technical Services ................................... 22 Agricultural Extension & Research ....................... 22 Status of Project Preparation ......... .. ................ 23 Implementation Schedule ...... .................. ......... 23 IV. COST ESTIMATES, FINANCING AND DISBURSEMENTS ........... .... 24 Project Cost Estimates .................................... 24 Financing ................................................. 25 Procurement ............................ ... ................ 25 - Works .................................................. 25 - Power Supply ....................................... .... 26 - Equipment, Instruments and Vehicles ................ .... 27 - Contract Review .................................... .... 27 Disbursements ............................................. 27 Accounts and Audits .................. ............ . ........ 28 V. ORGANIIZATION AND MANAGEMENT ............................. .. 28 General ................................................... . 28 Irrigation Department ...... ................. .. ......... ... 29 - Existing Organization ............................ ..... 29 - Proposed Project Organization ...................... ... 29 - Pro4ect Staffing Requirements ...................... ... 30 - Operation and Maintenance .......................... ... 31 - Progress Review and Reporting Requirements ......... ... 32 - Monitoring and Evaluation ......................... .... 32 - Training .............................................. 32 Uttar Pradesh State Electricity Board ...... ............... 32 - General ............................................... 32 - Operation and Maintenance (Power Supply) ... ........... 33 Department of Agriculture ................................. 33 VI. AGRICULTURAL PRODUCTION, MARKET PROSPECTS AND PRICES ...... 33 Cropping Patterns ..................................... .... 33 Crop Yields and Production ............................. ... 34 Input Requirements ................................. ....... 34 Market Prospects and Prices ............................. .. 35  Table of Contents (continuation) -iii- Page No. VII. FINANCIAL ANALYSIS .............................................. 35 General ......................................... ......... 35 Risk to Present Income Levels ............................. 36 Farm Incomes from Modernization ............. .............. 36 Impact on Poverty ................ ....... .................. 37 Repayment Capacity of Farmers ............... .............. 38 Cost Recovery .......... ................................... 38 - Water Charges ................ ............ .............. 38 - Other Agricultural Taxes . ............. ............. 39 - The Potential for Increased Recovery ................... 39 - Timing Considerations .................... .............. 39 - Conclusions .. ...................... .................... 40 Cost and Rent Recovery under the Project .................. 41 VIII. BENEFITS AND JUSTIFICATION ................................ 41 Project Impact ............................................ 41 Beneficiaries .............................................. 42 Project Analysis .......................................... 43 Justification for Risk Aversion Works ......... .. .......... 43 - Timing of Risk Aversion Works .......................... 44 Canal Modernization Components .. . 45 iv=in Canal Modernization .................................. 45 - Analysis Assumptions ................................... 45 - Economic Rate of Return ................................ 45 Canal Distributary Blocks ...... ...................... ..... 46 - Analysis Assumptions ................................... 46 - Economic Rate of Return .... .............. .............. 46 - Economics of Canal Lining .............................. 46 Sensitivity Analysis ...................................... 47 Project Risk .............................................. 48 - agricultural Objectives ................................ 48 Environmental Effects ..................................... 49 IX. AGREEMENTS REACHED AND RECOMMENDATIONS .................... 49 TABLES T-1 Agricultural Performance ............................ 52 T-2 Climatic Data ............ ... . 53 T-3 Cost Estimates by Project Components ................ 54 T-4 Annual Expenditure Schedule ........... .. ............ 55 T-5 Proposed Credit/Special Fund Allocation; and Estimated Schedule of Disbursements ..... ..................... 56 T-6 Present and Expected Future Cropping Patterns ....... 57 T-7 Organization Schedule - Irrigation Department ....... 58 T-8 Staffing Schedule - Irrigation Department ......... .. 59 T-9 Summary of Agricultural Production and Input Requirements ................................. 60 T-10 Estimated Farm Budgets and Project Rent at Full Development ..................... ................... 61  Table of Contents (continuatior.) -iv- Pase No. T-11 UGC Scheme - Water Charges; Annual Revenue and O&M Expenditures ......... .. . . ................................... . 62 T-12 Rent and Cost Recovery .............................. 63 T-13 Economic Costs and Benefits (a) Risk Aversion Works ............................ 64 (b) Common Modernization Works ....................... 65 (c) Modernization of Distributary Blocks ........... 66 CHARTS C-1 Schematic Diagram showing Existing and Proposed Developments near the Project Area ................. 67 C-2 Implementation Schedule .............................. 68 C-3 Existing and Proposed Organization (Irrigation Dept.). 69 ANNEtES Annex I - Selected Documents and Data Available with Project File .............................................. 70 Annex 2 - Assumptions for Financial and Economic Analysis . 72 Annex 3 - Detailed Cost Estimates .................. .. ...... 93 Annex 4 - Terms of Reference for Advisory Planning Group .. 109 LIST OF MAPS IBRD 17646R - Project Area IBRD 17648R - Detailed Project Area IBRD 17647R - Normal Annual Rainfall Volume II: SUPPLEMENTARY DATA VOLUME (SDV) ANNEXES 5 - Development Schemes on the Ganga in Western UP 6 - Characteristics and Performance of Existing UGC Systems 7 - Surface Water Resources 8 - Groundwater Resources 9 - Agriculture in Upper Ganga Command Area 10 - Modernized Irrigation and Drainage Systems, Planning Design and Operation Principles 11 - Hydel Development 12 - Augmentation Tubewell Systems 13 - Communication Network 14 - Water and Land Management Institute 15 - Risk Aversion in the Upper Ganga Command Area 16 - Monitoring and Evaluation  INDIA UPPER GANGA IRRIGATION MODERNIZATION PROJECT Staff Appraisal Report I. BACKGROUND Introduction 1.01 The State of Uttar Pradesh (UP), located in the northern central part of India, is well endowed with water resources (Map IBRD 17646R). However, only about two-fifths of the cropped area is irrigated in spite of large public investments in surface water and tubewell irrigation as well as rapid private groundwater development. Consequently, the Government of Uttar Pradesh (GOUP) has placed great emphasis on the acceleration of irrigation in recent Five-Year Plans. In western UP, available surface water resources have been fully committed. Groundwater development has been carried out aggressively by both the private and public sectors and this resource is now fairly highly exploited. Further expansion of agricultural production tbere- fore will depend mainly on improved efficiency and performance of existing irrigation systems. The proposed Upper Ganga Irrigation Modernization Project would focus on this requirement. Agriculture and IrriRation in India 1.02 India has a population of about 700 M (mid-1982) which is growing at an annual rate of about 2.0. Since 1960, per capita income grew at an annual rate of 1.4Z and reached US$240 in 1979/80. Although the average per capita income has increased and access to public services has improved, growth has been too slow to bring about more than a gradual reduction in the incidence of poverty. Accordingly, GOI's development plans give priority to alleviating poverty and creating employment, especially in rural areas. 1.03 Agriculture is the dominant sector of the Indian economy and con- tributes about 40% of GNP. It engages about 70Z of the labor force and provides the base for about 55% of India's exports. During the last decade, GOI has devoted considerable attention to agriculture in its development plans. To support agricultural growth, GOI has: (i) accelerated irrigation development through modernization of existing schemes and construction of new schemes; and (ii) improved agricultural supporting services to optimize the use of land and water resources. 1.04 Irrigation was given the highest priority from the beginning of the planning era in 1950. Some 52.6 M ha of irrigated command were developed by 1979/80, about 58% of which is from surface water sources and 422 from groundwater. Irrigated areas are almost four times as productive as rainfed areas and they account for about 60% of all agricultural output in India. More significantly, the expansion of irrigation facilities and the increased productivity on irrigated lands have together accounted for at least three-quarters of the agricultural growth since 1960. The potential area developed for irrigation is expected to reach 66.2 M ha by the end of 1985/86, of which 56% will be from surface water sources and 44% from groundwater. With little idle land left, only limited increase is expected I 't I  -2- in the net sown area in the future. The main increase in agricultural production will have to come from full utilization of potential area developed for irrigation (from double cropping, improvemenLs in agricultural practices, water management and the use of fertilizers and pesticides). In most completed projects, actual irrigated areas are less than planned and yields have been much lower than originally forecast. GOI and the State Governments are aware of the challenge and are seeking solutions to the dual problem of low irrigation intensities and poor crop yields. 1.05 Irrigation projects of the 1950s and 60s typically involved a storage or diversion dam and only the main conveyance system, leaving the farmers to construct the distribution system from project outlets to individual fields. In most projects, farmers were unable to finance or organize con- struction of the minor channels without outside assistance and this was rarely available. This resulted in considerable delays in the utilization of water from the irrigation potential created. 1.06 In the early 1970s, the concept of the Command Area Development Authority (CADA) evolved. Its objectives were to coordinate the State irrigation and agriculture activities and to assist farmers in obtaining institutional credit for the construction of the minor irrigation systems and for land development. The results of this approach have been below expeota- tions. Coordination was not entirely effective, and the attempt to finance on-farm development through institutional credit was generally unsuccessful. Farmers had no confidence in the reliability of water supply and were there- fore reluctant to undertake loan obligations, since no facility or framework for effective group action had been developed. This experience indicates that (i) more emphasis is needed on improving the efficiency and reliability of the conveyance system from the water source to the irrigation outlets; and (ii) Government should assume responsibility for conveying water much closer to the farmgate. There are clear indications that when individual farmers are fully confident of their water supply, increased cooperation results and they will undertake investments in other agricultural inputs and make full use of the water supplied. These concepts have been used in the design of the proposed project. The State of Uttar Pradesh 1.07 Salient Features. The State of Uttar Pradesh (UP) has a population of about 111 M (1981). This makes it the most populous State in India accounting 5or 16% of total population, whereas its geographical area (298,000 km ) covers 9% of the country. The population density is extremely high at 377 persons per km2. About two thirds of all farm holdings in UP are below 1.0 ha as compared to about 50% for the nation. 1.08 By most traditional indicators, UP is one of the least advanced States in India. The literacy rate (27.4%; 1981) is lower than the national average of 36.0%. The number of doctors and health centers per 1,000 persons is among the lowest in India. Although the State is well connected to the rest of India through national highways, railways and airways, the intra-State communication system is inadequate. The provision of potable water has been slow. At present, water supply schemes are being implemented  -3- in about 202 of the villages which lack an adequate source of drinking water. The Bank Group is supporting GOUP in water supply schemes through the on-going Uttar Pradesh Water Supply and Sewerage Project (Cr. 585-IN; US$40 M). 1.09 The Economy. The economy of UP is predominantly agrarian with agriculture contributing about 56% of the State income and employing about 782 of the work force. Between 1960/61 and 1976/77, the rate of growth of the primary sector, including agriculture, forestry and mining was only 1.7Z per annum (p.a.) compared to an all-India average of 2.02. Similarly, the secondary sector, including manufacturing, construction, electricity, gas and water supply (152 of the State income), only grew at 22 p.a., which was half the national rate of 4%. The performance of the tertiary sector, including transport, trade, finance and services (30Z of the State income), fared bette-r at 42 growth p.a. However, since tertiary sector activities started from a relatively small base and were concentrated mostly in the urban areas, their rapid growth contributed only marginally to majority of population (822) living in the rural areas. As a result of poor performance of the primary and secondary sectors, State income grew at an annual rate of 2.2Z p.a., well below the national rate of 3.12. Per capita income only increased by 0.52 p.a. and was one of the lowest in India (Rs. 981 in 1979/80), compared to the national average of Rs. 1,267. Since agriculture is the main activity in the State and it has close links to other sectors, economic progress is largely dependent on the removal of constraints to further agricultural growth, particularly through the expansion of irriga- tion. 1.10 Employment and Rural Poverty. The labor force constitutes about 312 of the population of UP. Its participation rate is significantly higher in rural areas (31.42) than in urban areas (27.72). Cultivators and agricul- tural laborers account for 652 and 22.82 of the rural labor force, respec- tively. Because of the slow growth of agriculture and manufacturing, produc- tive employment has failed to keep pace with population growth. The poor performance of the agricultural sector also resulted in a sharp rise in the proportion of rural population living below the poverty line (currently about US$90 per capita per annum) from 41.62 in 1960161 to 63.62 in 1970/71. According to the National Sample Survey in 1973/74, about two-thirds of the rural population in UP lived below the poverty level and an estimated 90Z of agricultural laborers are witbin this group. A series of programs have been created to raise standards of living of rural poor, including measures to secure tenants' rights, land redistribution and public works programs. These programs have had limited success due to the intrinsic difficulties of the problem, faulty planning and poor implementation. 1.11 ARricultural Performance (Table T-1). From the comencement of the First Five-Year Plan (1950/51 to 1977/78), foodgrain production grew only at about 22 p.a., barely keeping pace with population growth. Rice and wheat production accounted for most of this growth while coarse grains stagnated and pulse production declined. The performance of non-foodgrain crops such as oilseeds, sugarcane and potato fared better at 3.1Z, 3.5% and 5.5% growth p.a., respectively. However, since these are minor crops, their rapid rates  -4- of growth do not significantly affect the overall performance of the agricul- tural sector. 1.12 The early years after Independence were characterized by both area expansion and yield increases for most crops. Between 1950/51 and 1960/61, rice and wheat production (major cereals in the State) grew at respectable rates of 5.2Z and 4.8X pa. respectively. In the 1960s, the agricultural scene changed significantly with increases in production of most crops due largely to riLing yields; wheat and maize production grew at 9.92 and 9.72 p.a, respectively. Oilseeds and sugarcane production only grew at 3.72 and 1.02 p.a., respectively. Gain in potato production was spectacular at 102 p.a., resulting from both area expansion (4.32 p.a.) and yield increases (5.62 p.a.). The impressive performance of most crops, except rice and sugarcane, during this period was largely due to the introduction of hig8 yielding varieties and accelerated development of private tubewells in the latter part of the 1960s. 1.13 The transformation in rice production seemed to lag a few years behind wheat. From 1971 to 1978, rice production improved significantly, growing at 4.72 p.a., slightly above wheat production (4.12). Production of areas under otber cereal crops such as maize and barley declined. Cash crops performed well during this period, groving at 4-5X p.a. Production of oil- seeds and sugarcane improved significantly, with growths of 4.22 and 4.42 p.a., respectively. Potato production maintained its earlier momentum, growing at 9.52 p.s. 1.14 Irritation Development. The State is well endowed with water resour- ces. Nevertbeless, only about 8.9 N ha (522) of the total net cultivated area of 17.0 M ha was irrigated in 1979180. Between 1950/51 and the onset of the Green Revolution, surface and groundwater development contributed equally to the expansion of irrigated areas. However, since 1965/66, groundwater development has accounted for virtually all increases in net irrigated area. In 1979/80, about 5.7 M ha (642) of the total net irrigated area was supplied with groundwater compared to 2.8 N ha provided by large scale surface water irrigation schemes. The remainder is served by storage tanks or by pump lift schemes from rivers. Progress of irrigation development in terms of net irrigated area in the State since 1950151 is shown below: Increase 1950180 1950/51 1960/61 1970Q71 1979/80 Are 2 lcrease