India - Kerala State Power Project

Document of The World Bank FOR OMCIAL USE ONLY Rpwt No. P-4093-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$ 176.0 MILLION TO INDIA FOR THE KERALA POWER PROJECT May 22, 1985 This docinmuat bao a reod dirkdh ad way be wed by redpIe.Is im the pelfmme f troMdaI dudin Its cmemoub =y not uthewis e ".ldoead withu World Bamk muihoslzadom.  CURRENCY EQUIVALENTS (As of May 20, 1985) US$1.00 = Rs 12.317 Rs 1.00 = US$0.0812 Bs 1 million = US*81,200 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were, except as otherwise noted, made at the rate of US$1 to Rs 12.0. FISCAL YEAR April 1 - March 31 Abbreviations and Acronvrns CEA - Central Electricity Authority CiAG - Controller and Auditor General of India CWC - Central Water Commission GOI - Government of India GOK - Government of Kerala IBRD - International Bank for Reconstruction ana Development IDA - International Development Association KSEB - Kerala State Electricity Board LRMC - Long-Run Marginal Cost NHPC - National Hydroelectric Pover Corporation NPP - National Power Plan NTPC - National Thermal Power Corporation REC - Rural Electrification Corporation REB - Regional Electricity Boara SEB - State Electricity Board SBPS - Southern Region Power System lOE - Tons of oil equivalent  FOR OFFICIAL USE ONLY INDIA KERAlIA POWEL PROJECT LOAN AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiary: Kerala State Electricity Board (KSEB). Amount: US$176 million. Terms: Repayment over 20 years, including five years' grace, at the applicable rate of interest. Relending Terms: Government of India (GOL) to Government of Kerala (GOK) As part of Central assistance to States for development projects on terms and conditions applicable at the time. GOK to KSEB: (a) Bank loan: Repayment over 20 years, including five years grace, at GOK*s interest rate applicable at the time (currencly 13.5% per annum) for its lenaing to KSEB, not less than the current Bank interest rate of 9.29% per annum; (b) GOK loan: Repayment on GOK's terms and conditions for its lending to KSEB, as applicable at the Lime. GOI would bear the foreign exchange and interest rate risks. Project Description: The project's main objecti7es are: (i) to assist in meeting the electricity demand in the State of Kerala and the Southern Region of India through the construction of a 180-MW hydropower station; (ii) to improve the performance and efficiency of the existing system through the reinforcement of the distribution networks in the major cities of Cannanore, Kozhikode, and Cochin ana through the installation of reactive power compensation equipment; and (iii) to strengthen KSEBWs managerial, commercial, ana financial practices through an institutional development program. The project provides for the construction, on the lower Periyar River in the Idukki District, of a powerhouse housing three generating units each of 60-MW capacity, and the construction and installation of about 415 km of 220-kV double circuit transmission lines, additional transmission substations of 1,180-MWA capacity, 760 MVAR of reactive power compensation devices, additional distribution substations (110-kV, 1l-kV) or 270 hVA capacity, and the associated distribution cables and lines, switching stations, This document has a restrited 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.  gnd aistribution transformers. There are no extraorainary technical risks associated with the project. Geological investigations have confirmed the excellent rock formation in the area. KSEB has staff experienced in supervision and execution of works similar to those required under this project, and consultant support will be provided for those areas in which KSEB'A experience is limited. Estimated Cost: 1/ CUSS millions) Item Local Foreign Total Power Station 84.4 34.0 118.4 Transmission Lines 20.2 2.5 22.7 Substations 25.6 Z.3 27.9 Reactive Power Compensation Equipment 15.2 20.3 35.5 Distribution Works 36.2 12.0 4.2 Institutional Development 1.7 1.5 3.2 Base Cost 183.3 72.6 255.9 Physical Contingencies 12.9 3.9 16.8 Price Contingencies 42.1 18.5 60.6 Total Project Cost 238.3 95.0 333.3 Interest during Construction: Bank - 40.2 40.2 Other 26.3 - 26.3 Total Financing Requirements 264.6 135.2 399.8 1/ Including about US$59.1 million in taxes and duties.  -i.i- Financins Plan: (US* millions) Local Foreign Total IBRD 81.0 95.0 176.0 GOI - 40.2 40.2 GOK loans to KSEB 76.6 - 76.6 KSEB internal resources 107.0 - 107.0 Total 264.6 135.2 399.8 Estimated Disbursements: (US* millions) Bank FY FY86 FY87 FY88 FY89 FY90 FY91 Annual 9.2 31.2 45.4 47.9 32.7 9.6 Cumulative 9.2 40.4 85.8 133.7 166.4 176.0 RaEe of Return: AbouL 13Z. Appraisal Report: No. 5484-IN, dated May 22, 1985.  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO INDIA FOR THE KERALA POWER PROJECT 1. I submit the following report and recommendation on a proposed loan to India for US$176.0 million on standard terms to help finance the construction of a 180-MW hydroelectric power station in the Idukki District of the State of Kerala, the installation of transmission lines and power compensation and dis- tribution equipment, and an institutional development program for the Kerala State Electricity Board (KSEB). The Government of India (GOI) will channel the proceeds of the loan to the Government of Kerala (GOK) in accordance with GOI's standard terms and arrangements for financing State development projects. GOK will in turn onlend these funds to KSEB for 20 years, including five years' grace, at the interest rate applicable at this time (currently 13.5% per annum) for its lending to KSEB, not less than the current Bank interest rate of 9.29Z per annum. Additional financing of about US$10 million to US$30 million may possibly be provided from export credits, suppliers' credits, or commercial bank loans for selected components of the distribution and power compensation equipment. The foreign exchange and interest rate risks will be borne by the Government of India. PART I - THE ECONOMY 1/ 2. An economic report, "India: Structural Change and Development Perspectives" (5593-IN, dated April 24, 1985), was distributed to the Executive Directors on May 1, 1985. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of about 750 mil- lion (in mid-1984) and an annual per capita income of US$260. The economy is dominated by agriculture which employs more than two-thirds of the labor force. However, the land base is not sufficient to provide an adequate livelihood to everyone engaged in agricultural activities, especially those who own little or no land. Growth of value-added in agriculture - 2.2% since 1950151 -- has been slower than growth of industrial value-added (5.3% per annum). As a result, there has been a gradual decline in the share of agriculture in GDP (at factor cost) from 52% in 1950/51 to about 33% in 1981/82, while the share of industry rose from 20% to around 26%. But industrialization has not been rapid enough to absorb the growing labor force, or to bring about a rapid economic transformation, with significantly higher productivity and income levels. As a result economic growth has been sLow over the past three decades, averaging about 3.6Z per annum since 1950/51. 4. Nevertheless, there has been steady progress, with per capita income rising by about 1.4Z per year in the period 1950 to 1980. Despite the large population base and its relatively rapid growth, India has been able to 1/ Parts I and II of the report are similar to Parts I and II of the President's Report for the Rihand Power Transmission Project (No.P-4062-IN), dated May 7, 1985.  -2- eliminate persistent dependence on foodgrain imports through significant improvements in agricultural production. Savings and investment have increased markedly since 1950/51: the gross national savings rate more than doubled from 10.8% of GDP (at factor cost) to 22.7% in 1983/84, while the gross domestic investment rate rose from 12.51 of GDP to 24.8Z in 1983/84. Foreign savings (balance of payments deficit on current account) have never financed a major portion of domestic investment: a peak of about 20Z was reached during the early 1960s. Currently, foreign savings account for about 8% of investment. External assistance has been low both as a percentage of GDP and in per capita terms, never rising above 3% of GDP and averaging below 11 for the past five years. Net use of foreign savings has never risen above 3% of GDP, and presently stands at 2.1l. 5. Before the 1970s, India placed relatively less emphasis on export promo- tion and more on import substitution. Tha volume growth of exports between 1950/51 and 1969/70 averaged only 2.2% per annum, while the volume growth of imports over the same period was 4.3%. In the early to mid-1970s, however, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Government introduced various policy measures designed to stimulate exports. As a result, the volume of India's exports grew on average about 7.3% per annum for the 1970s as a whole, a perfor- mance which demonstrates that sustained rapid growth is possible. While expand- ing world markets, particularly in the nearby Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incen- tives played a major role. 6. Moving into the second half of the 1970s, the Indian economy was buoyed by higher levels of investment and an expanding level of foodgrain output. As a result, growth in real CDP and in agricultural and industrial value-added sub- stantially exceeded the historical 30-year trends (paragraph 3) averaging 5.3%, 3.3% and 8.1%, respectively, during the 1975/76 to 1978/79 period. In 1979/80, however, this momentum was broken when the worst drought in recent years, com- bined with a doubling of international oil prices and domestic supply shortages, led to a sharp fall in foodgrain production, a decline in GDP, and the opening up of a relatively large trade deficit. Severe inflationary pressures also emerged after several years of virtual price stability. These setbacks coin- cided with the preparation of the Sixth Five-Year Plan which laid down a program of adjustment that aimed at improving the trade deficit, removing infrastruc- tural bottlenecks and ensuring price stability with an overall growth of the economy of 5.2% per annum. Recent Trends 7. Despite the effects of two severe droughts in 1979/80 and 1982/83, India's economy in the early 1980s continued to grow at the faster pace of the second half of the 1970s. Between the two droughts (from 1979/80 to 1982/83), GDP growth averaged aLmost 5S per annum, while between the two recovery years (from 1980/81 to 1983/84), it was 4.5% per annum -- substantially higher than India's long-term growth rate of 3.6%. Continued rapid economic growth has resulted from a development strategy which includes higher investment levels and liberalized policies on imports, industriql licensing, prices, and commercial borrowing. These policies, by easing constraints on the supply of infrastruc- ture and basic commodities, were a determining factor in the improved perfor- mance of the economy and the industrial sector. This overall improvement in  -3- performance, combined with a more restrictive monetary policy in 1981/82 and 1982/83, resulted in a sharp decline in the rate of inflation. The growth rate of wholesale prices declined from over 18% in 1980/81 to only 2.6% in 1982/83, but rose to over 9Z in 1983/84, mainly due to the effect of the 1982/83 drought on food prices. Further improvements in the policy environment will be required to maintain these higher levels of economic growth and investment without put- ting undue pressure on the balance of payments or reviving inflationary expectations. 8. Economic growth in the early 1980s has not been steady, mainly because of the effect of uneven rainfall on agricultural production during the period. In 1980181 and 1981/82, the economy substantially recovered from the 1979 drought, with real CDP growing by 7.6% and 5.3%, respectively. While industrial output expanded by 4% in 1980/81 and 8.6% in 1981/82, recovery was particularly robust in agriculture where normal weather helped output to rise by more than 15% and 5.5%, respectively. The supply of power, coal, and rail transport, already improved in 1980/81, was further expanded in 1981/82, recording growth rates of about 10%, 9.6% and 12.5%, respectively. This overall improvement in the Indian economy was halted in 1982/83 by a severe drought in mid-1982 which reduced agricultural production by 4%, brought down the GDP growth rate to 1.8Z, and put further strains on the already difficult balance of payments and domes- tic resource situation. The timely implementation of various economic policies relating to foodgrain imports, procurement and distribution, and the allocation of power to irrigation pumps mitigated the otherwise very distressing effects of the poor monsoon. The economy recovered in 1983/84, led by a robust agricuL-- tural sector - GDP grew by about 6.5% to 7% with agricultural production growth in the 9%-10 range and industrial growth of 4.5%. The major factors contribut- ing to the good economic performance during 1983/84 were the excellent monsoon, combined with adequate agricultural policies and programs, and satisfactory performance of the coal and transport sectors. The power sector, however, emerged again as a constraint on higher growth, especially in industry. 5i. Agricultural production rebounded strongly in 1983/84 in response to the monsoon, improved use of inputs and continued expansion of irrigation. Overall foodgrain production rose by lOX-12Z over the previous year, reaching 3 new record of 142-144 million tons, a substantial increase over the previous peak of 133 million tons in 1981/82. Corrected for weather variations, foodgrain production continues to grow at a trend of 2.6% per annum--sufficient to maintain a broad balance between supply and steadily increasing domestic demand. Nonetheless, the balance remains delicate, and the need for foodgrain imports to maintain consumer supplies or adequate buffer stocks could arise from time to time. Thus, adequate management of foodgrain stocks and programs to expand irrigation, strengthen extension and encourage the efficient use of other agricultural inputs continue to receive high priority. 10. Basic infrastructure services had a mixed performance in 1983/84, par- tially because of sluggish demand from industry during the first half of the year but also due to a failure to maintain the productivity gains of 1980-82. Electricity generation grew only by about 3.7% due to low reservoir water levels during the first half of the year, delays in the z-ommissioning of new capacity, and a deterioration of capacity utilization in thermal plants. As a result, power generation was about 11.5% below requirements and constituted a major bottleneck in the economy. Key industries which were adversely affected by power constraints included steel, fertilizers, cement, and coal. To improve  -4- performance in the power sector, the Government recently increased incentives for higher labor and management productivity in thermal plants. Railway freight traffic, measured in ton-kme, grew by only 0.51 in 1983/84, reflecting sluggish demand. Coal production increased by about 6.51 in 1983/84 reaching 139 million tons. When combined with stocks already available this level of production was sufficient to meet the relatively slow demand growth. Infrastructural con- straints would have emerged much more sharply had the pace of industrial growth and demand been more rapid. It is therefore critically important that India maintain the pace of investment in these key sectors, mobilize sufficient resources to do so, and implement programs to enhance productivity. 11. The Indian economy has reverted from a situation of resource surplus in the late 1970. to an aggregate resource deficit. The gap between gross invest- ment and national savings increased from negligible levels during the late 1970s to an average equivalent to 2.1Z of GDP in 1980-84. India's gross national savings rate, which averaged 22.6% of GDP in the last four years, is high by any standard, perticularly considering India's low income and the large proportion of its population below the poverty line. The scope for a substantial increase in the savings rate is therefore quite limited. If India is to maintain invest- ment at about 25% of GDP, a major effort will be required to raise additional domestic resources particularly in the public sector. Future increases in savings will depend heavily upon the enhanced profitability of public sector enterprises which would require better utilization of capacity, more efficient operations and adequate pricing policies. This would also allow a marginal decline in the use of foreign savings from the recent 2.1X-2.3Z of GDP to 1.5Z-1.8Z, to ensure a sustainable external debt service burden. 12. India's external resource position has changed notably since the late 1970s. The current account balance, which recorded surpluses from 1976/77 to 1978/79, reverted to deficits averaging US$3.5 billion and 2.1% of GDP during 1980/81 to 1983184. Several developments contributed to these relatively larger current account deficits. First, the terms of trade deteriorated sharply in 1979/80 due to the second round of oil price increases and continued to move against India during the first three years of the 1980s. Second, a more liberal import policy towards industriai inputs was pursued. Third, net invisibles declined as travel receipts fell off, workers' remittances stagnated (reflecting slower development activity in the Middle East), and payment of interest on higher levels of foreign debt increased. Faced with severe infrastructural constraints and a deterioration in its balance of payments, India initiated an adjustment program in 1980/81 designed to raise the growth rate from its his- torical level of 3.6% to 5.2Z wnile adjusting the country's external balance to the adverse price developments in the world markets. The main elements of this strategy, which is being successfully implemented, are export promotion, import substitution where economically justifiable, implementation of a coherent energy policy designed to meet the energy needs of the economy while curbing the growth of oil imports, and continued movement toward a more liberal import policy aimed at providing producers with access to inputs for higher capacity utilization, greater efficiency, improved technology and capacity expansion. 13. A positive development in India's balance of payments is the reduction in the trade deficit from US$7.7 billion in 1980/81 to US$5.9 billion in 1983/84 despite unfavorable world market conditions and import liberalization. Export volume growth and import substitution of oil and petroleum products, metals and fertilizers more than offset the substantial increase in "other" imports. These  -5- "other" imports consist mainly of industrial imports and capital goods which historically have been in chronic short supply and which are of critical impor- tance to capacity utilization, product quality, and plant modernization and expansion. A major factor in the decline of the trade deficit was the lower net import bill for petroleum, which dropped from US$6.7 billion in 1980/81 to US$3.4 billion in 1983/84 in response to a successful oil development program that reduced import needs and aLlowed crude oil exports, which totalled about US$1.5 billion in 1983/84. These structural changes in the balance of payments are to a significant degree the result of India's development and adjustment efforts over the past three years. It is expected that the balance of payments will continue to be under strain for the next several years, since the adjust- ment strategy will continue to require high levels of imports. 14. Even assuming a favorable export performance, India will need external capital flows to augment its own resources for the foreseeable future, given the low per capita income level in the country, the already high savings rate, and the structural adjustment process. Faced with a growing need for external capital inflows and stagnation in the availability of concessional assistance, India decided at the start of the Sixth Plan to increase borrowings from the International Monetary Fund (IMF) and commercial banks to substantial levels. In the period covering the fiscal years 1981/82 to 1983/84, India drew SDR 3.9 billion from the Extended Fund Facility of the IMF. In addition, India borrowed significant amounts on commercial terms from the Euro-dollar market and increased the use of suppliers' and export credits. In the period 1980-84, India contracted commercial loans totalling over US$6,000 million and suppliers' credits of over US$1,000 million. The bulk of this borrowing has been used for specific development projects in the public and private sector (mostly for petroleum exploration and development, steel, power, aluminum and shipping). India's favorable debt service position and the nature of its borrowings, for project-related purposes instead of direct balance of payments support, enabled it to tap commercial capital markets at favorable spreads. This larger commer- cial borrowing and transfer of funds under the arrangement with the IMF has stemmed the use of foreign exchange reserves which had fallen to less than four months of import coverage in 1981/82. Development Prospects 15. The experience of recent years illustrates that India ha- che capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless is large in absolute terms and has a highly diversified structure, capable of manufacturing a wide variety of consumer and capital goods. Basic infrastructure -- irrigation, railways, telecommunications, power, roads and ports -- is extensive compared to many countries, although there is considerable need for additional capacity as well as improvement in the utilization of existing capacity. India also has a wide range of institutions capable of fostering development and is well-endowed with human resources. Finally, India has an extensive natural resource base in terms of land, water, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and reasonable access to foreign savings, India has the capabiLity for managing these considerable resources to accelerate its long-term growth. 16. The Government is currently preparing the Seventh Plan which will lay down the development strategy for 1985/86-1989/90. This strategy is expected  -6- to continue the emphasis of the Sixth Plan on agriculture, energy development, export promotion, domestic import substitution where economically justifiable and the removal of infrastructural bottlenecks. Overall Sixth Plan performance has been enrouraging, with aggregate real investment projected to be about 30% higher than in the period 1975-80--a creditable performance indeed. The Sixth Plan expenditure targets, however, will not be fulfilled as resource mobi- lization by the public sector will fall short of the financing requirements of planned public investment. Actual aggregate real investment is projected to be about 7% below the original target for the period 1980-85, private investment being 5% to 10% higher and public investment about 202 lower in real terms than actually projected. In terms of meeting Plan expenditure targets, the perfor- mance of the Central Government is considerably better than that of the State Governments. The Central Government's Plan outlays are likely to reach about 80% to 90% of the original Plan allocation in real terms, while the States' will probably achieve only about 50% of their targets, due principally to shortfalls in resource generation. Bottlenecks in key sectors such as power, transport and irrigation are likely to persist as a consequence of real investment shortfalls relative to original Plan allocations. 17. Although Sixth Plan expenditure targets will not be met, India's capital formation rates have increased from 22.6Z in 1975-80 to 24.7% of GDP in 1980-84. Recent higher capital formation rates are encouraging for future income growth, but returns to investment have so far been relatively low. Much of this phenomenon relates to India's stage of development, in which a large and growing proportion of investment has been needed to build up basic infrastructure serv- ices which have inherently high capital-output ratios. However, there is scope to reduce capital-output ratios through improvements in efficiency. As dis- cussed in greater detail in our recent economic reports, performance in the basic service sectors can be improved through better planning and management, thus leading to higher productivity and capacity utilization throughout the economy. At the same time, programs to expand domestic capacity are vital. In the case of tradeable commodities like coal, steel and cement, this is justified on the grounds of comparative advantage. For sectors such as irrigation, power and transportation, expansion of planned capacity in accordance with the requirements of the rest of the economy will be vital for sustained growth. 18. Under the Sixth Plan, India has an ambitious oil development program backed by substantial financial commitment. Performance under the program has been excellent with real investment and oil production levels running well ahead of Plan Targets. In 1981, and again in early 1983, resources for exploration and development were raised by successive price increases for domestic crude and products. While the gap between domestic consumption of petroleum and produc- tion remains large, India's dependence on oil imports dropped from 63% of con- sumption in 1979/80 to about 41% in 1983/84 and is expected to decrease to about 33% of consumption by 1984/85. The rapidly expanding level of exploration activity, combined with the possibilities for accelerated offtake from known fields, offers much encouragement for India's longer-term energy prospects. At the same time, the increases in domestic petroleum prices have helped encourage conservation and slow demand growth. 19. India's development prospects over the next few years will hinge on the extent to which the economy can be brought into both internal and external balance, while at the same tine achieving more rapid growth than in the past. This will require the continuation of the current development strategy which  -7- assigns high priority to export promotion, public finance discipline, improve- ment of economic efficiency, and investment in infrastructure. supperzed by adequate flows of external borrowing and aid. In the short term, a relatively large level of external borrowing, including an increased emphasis on comercial borrowing, will be necessary to cope with the balance of payments consequenc"s of such a growth strategy. However, an important element in providing India with the capacity to adjust flexibly will be adequate flows of concessional assistance since India is still a very poor country with a large rural sector and enormous investment requirements for human development and basic infrastructure. Although India is currently in a position to increase borrowing on commercial terms from the vcry low levels of the past, there are, of course, limits beyond which India will choose to sacrifice growth objectives rather than accept debt on unfavorable or unmanageable terms. Nevertheless, with a more open trade policy and expanded efforts to remove constraints on the growth of productive capacity, supported by adequate mobilization of both foreign and domestic savings, India is demonstrating that it can sustain a rate of growth closer to 5.0X per annum than to the long-run trend of 3.6Z per annum. If the rate of population growth can be brought to below 2.0% per annum, a 5.0% growth rate would mean a doubling of the trend rate of growth of per capita income of 1.4% per annum. S-uccess in these efforts would make a significant difference to the prospects of easing poverty in India. 20. A large and growing population and severe poverty underline the need to accelerate India's development efforts. The 1981 Census indicated there was no decline in the rate of population growth, which remained about 2.2% per annum in the 1970s despite a measurable decline in fertility rates. The population growth rate failed to decline in the past decade due to a reduction in the infant mortality rate and an increase in life expectancy, reflecting larger availability of food and health services. While this is a welcome development, it implies a greater strain on the economy and re-emphasizes the need for con- tinuing efforts to strengthen the health and family planning programs in a broad range of activities and services. These efforts are given high priority in the Sixth Plan, which aims at a rise in the proportion of protected couples in the reproductive age group from its estimated 1979/80 level of about 23% to over 35% by 1984/85. The Government is reviewing its population policy for the Seventh Plan, with indications of a determination to retain the emphasis on the implementation of family planning, health, education and literacy programs aimed at reducing fertility rates. 21. Reduction of poverty remains the central goal of Indian economic and social policy. More than one-third of the world's poor live in India, and more than 80% of the Indian poor belong to the rural households of landless laborers 2-d small farmers. About 51% of the rural population and 40% of the urban population subsist below the poverty line. Significant reductions in poverty will depend primarily on an acceleration of economic growth, particularly in agriculture, combined with effective implementation of poverty alleviation programs. India's poverty alleviation strategy appropriately recognizes that production-oriented programs, which aim at accelerating the overall pace of economic growth, and poverty alleviation programs, targetted at those least able to participate in the general growth of the economy, can be mutually reinforcing rather than substituting for each other. Major poverty programs operating on a nationwide basis at present include: the Minimum Needs Program (NNP), the Integrated Rural Development Program (IRDP), and the National Rural Employment Program (NREP). The IRDP and NREP are targeted programs aimed at increasing the  -8- incomes of the poor rapidly, either through the transfer of productive assets or direct employment. The MNP, aims at broadening the provision of social infrastructure and basic services which enhance the human capital of the poor and improve living standards. These programs represent a vitally important commitment of the Government to address the needs of the poorest. The scale of the poverty problem in India, combined with the inherent difficulties in implementing poverty programs in any country, imply the need for continued efforts to enhance the effectiveness of these programs. PART II - BANK GROUP OPERATIONS IN INDIA 22. Since 1949, the Bank Group has made 84 loans and 174 development credits to India totalling US$6,818 million and US$12,934 million (both net of cancellation), respectively. Of these amounts, US$1,465 million has been repaid, and US$5,909 million was still undisburstd as of March 31, 1985 Bank Group disbursements to India in the current fiscal year through March 31, 1985 totalled US$787 million, representing a decrease of about 27 percent over the same period last year. Annex II contains a summary statement of disbursements as of March 31, 1985. 23. Since 1959, IFC has made 32 commitments in India totalling US$265 million, of which US$145 million has been repaid, sold, terminated or cancelled. Of the balance of US$120 million, US$113 million represents loans and US$7 million equity. A summary statement of IFC disbursements as of March 31, 1985, is also included in Annex II (page 4). 24. The thrust of Bank Group assistance to India has been consistent with the country's development objectives in its support of agriculture, energy and infrastructure. Of particular importance have been investments in irrigation, extension and on-farm development designed to increase agricultural productivity, and efforts to improve the availability of basic agricultural inputs to farmers through credit, fertilizer, marketing, storage, and seed projects. Major elements of the lending program have also been directed at helping to meet the energy needs of the economy while curbing the growth of oil imports, and to ease the infrastructure bottlenecks which have hampered economic growth in India, particularly through power generation and distribution, and railways and telecommunications projects. The Bank Group has also provided financing for a broad range of medium- and small-scale industrial enterprises, primarily in the private sector, through its support of development finance institutions. Recognizing the importance of improving the ability to satisfy the essential needs of urban and rural populations, the Bank Group has supported nutrition and family planning programs, a rural roads project, as well as water supply and sewerage and other urban infrastructure projects. 25. This pattern of assistance remains highly relevant, and consonant with Government priorities, as reflected in the Sixth Plan and in the approach being taken by GOI in the preparation of the Seventh Plan. First, high priority will continue to be given to GOI's agricultural program. While India has made sig- nificant progress in agriculture, productivity growth will have to be sustained to improve the balance between food demand and supply and to contribute to poverty alleviation and employment. Thus, the Bank Group will continue to support irrigation, fertilizer production and distribution, and agricultural extension and credit. Second, alongside GOI's efforts in promoting greater efficiency and faster development of the industrial sector, increased assistance will be provided for industrial development. Third, the review of performance under the Sixth Plan confirms the high priority that should continue to be given  -9- to the expansion and more efficient use of basic infrastructure capacity and to the development of India's indigenous hydrocarbon resources. Accordingly the Bank Group will continue to support the development of the energy, transport and telecommunications sectors to alleviate critical shortages which constrain output in both agricultural and industrial sectors. Fourth, support of urban development and other GOI basic social services programs for the poor will also continue in light of the growth in population which, despite successes in lower- ing birth and death rates, still increases by about 16 million each year. 26. 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 part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid-1970s. However, India continues to require a substantial level of foreign assistance both to offset the overall deterioration in the world trade environment, and to sustain the relatively higher investment and growth rates achieved during the first four years of the Sixth Plan. As in the past, Bank Group assistance for projects in India should aim to include the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture and irrigation. 27. India's poverty and needs are such that whenever possible, external capital requirements should be provided on concessional terms. Accordingly, the bulk of the Bank Group assistance to India in the past was provided from IDA. However, IDA lending to India is declining from a peak of US$1.6 billion in FY82, mostly due to funding constraints related to IDA. The amount of IDA funds available to India is likely to remain small in relation to India's needs for external support. Thus, this requirement for additional assistance will have to be met, in part, through larger Bank lending. Given its development prospects and policies, India is judged creditworthy for Bank lending to supple- ment IDA assistance. A continuation of efforts already underway to achieve growth in productive capacity, trade expansion, higher levels of savings, foodgrains self-sufficiency and a reduction in the rate of population growth should result in continued economic growth and improvement in the balance of payments. India's debt service ratio is estimated at about 15.2% in 1984/85. This ratio is projected to rise to around 20% by 1989/90, mainly due to the hardening structure of India's debt; and to increase slightly over this level through the mid-1990's. Although the projected debt service ratios are con- siderably above historical levels, they are still manageable and will not adver- sely affect India's creditworthiness. 28. 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 62%, 33% and 37X, respectively, in 1983/84. In 1983/84, about 19.0% of India's total debt service payments were to the Bank Group. On March 31, 1984, India's outstanding and disbursed external public debt was estimated to be about US$26.9 billion, of which the Bank Group's share was US$9.6 billion or 36% (IDA's US$7.8 billion and IBRD's US$1.8 billion). As of March 31, 1985, outstanding loans and credits to India held by the Bank totalled US$18,288 million, of which US$5,909 million remain to be disbursed, leaving a net amount outstanding of US$12,379 million.  -10- PART III - THE POWER SECTOR 29. India's commercially exploitable energy resources consist of coal, oil, gas, hydro, uranium and thorium. Of the nonrenewable resources, coal is the most abundant. Reserves of thermal coal have been estimated at slightly more than 100 billion tons, of which 25 billion tons are proven. Although reserves are ample, the quality of coal produced is generally low and is deteriorating. Proven and probable petroleum reserves comprise approximately 530 million tons of oil and 390 million toe of natural gas. Despite recent increases in domestic production, India still imports about one third of its oil requirements, which in 1983/84 cost the equivalent of 40X of its merchandise exports. The Government has therefore given high priority to oil and gas exploration and, at the same time, has implemented measures to restrain the rapidly growing demand for oil products, in particular middle distillates; the Government has also generally limited the use of gas to premium markets, such as petrochemicals and fertilizer. However, delays in the construction of infrastructure for gas transport have resulted in substantial volumes of associated gas being flared. India's hydroelectric potential is about 100,000 MW. At present, only 13,000 MW have been developed, 4,700 MW are under construction, and a further 23,000 MW are being studied for future development. The country's uranium reserves could support a modest nuclear program (8,000-10,000 MW), and its thorium reserves are enough for a large breeder program. India's nuclear power generating capacity is currently 3000 MW. 30. Planning the best use of India's indigenous energy resources for power generation raises a number of issues. First, the high ash content of coal, which can reach 50%, increases transport costs, as well as power station capital and operating costs. The development of pithead stations, which is constrained by pollution limitations and the availability of cooling water, only helps to alleviate the transport problem. Thus, priority is being given in Bank lending to the coal sector to more selective mining and improved coal preparation. Two studies included in the Dudhichue Coal Project (Loan 2393-IN) are designed to address problems of coal transport: one study will examine -ways of improving the linkages between the sources of supply and demand, and the other will concentrate on improvements in handling and transportation facilities. Second, there is a need for a coherent policy on the utilization of gas, and this has become more urgent with the recent increases in estimated reserves. A Bank study planned for 1985 will focus on, among other things, the potential for the economic use of gas in power generation. Third, the prominent role of hydro in regional least-cost development plans prepared in 1982 has led GOI to emphasize the need to accelerate its development; however, progress has been slow owing to the time required to resolve water rights and environmental issues, the limited technical resources available for the simultaneous preparation of a large number of schemes, and the lack of financial resources of States with the greatest hydro potential.  -11- Supply and Demand of Electricity - India 31. Approximately 50S of India's electricity is generated from coal, 402 rom hydro, and the rest from oil, nuclear power, and natural gas. Although a number of large thermal projects are planned for the short term, the share of hydro is expected to increase in the long run. Electricity losses have risen slowly but steadily aver the last few years and now exceed 26Z of gross generation. The deteriorating quality of coal has been at least partly responsible for this trend, with coal stations' own consumption now approaching 102 of gross generation against a desirable 5Z. Distribution losses are also higher than is desirable owing to inadequate planning and insufficient investment. Although system losses are lower than in several countries in the region, they need to be reduced. Under its lending program, the Bank has supported measures designed to reduce losses and will continue to do so. However, such measures need to be State specific, reflecting the particular circumstances of each State. 32. Over the past two decades, the consumption of electricity has grown approximately twice as fast as total commercial energy consumption and now accounts for more than 30% of the latter. However, supply has not kept pace with demand and shortages have been prevalent throughout the country. During the last five years, shortages have on average been equivalent to about 13% of electricity requirements. The principal sectoral shares of total electricity consumption are: industrial, 56Z; agricultural, 19X; and domestic, 12%. Agriculture's share has grown steadily owing to increased electrical irrigation pumping made possible by rural electrification and encouraged by heavy subsidies. Total consumption has grown at an average rate of 10% per annum during the past two decades, and the Central Electricity Authority (CEA) has forecast growth of 9Z per annum between 1984/85 and 1989/90. Actual growth will depend on the allocation to power in the Seventh Plan and the performance of utilities in fulfilling the Plan. Supply and Demand of Electricity - Southern Region 33. The Southern Region comprises the States of Andhra Pradesh, Karnataka, Kerala, and Tamil Nadu, and the Union Territories of Pondicherry and Lakshadweep Islands. As of July 1984, the installed capacity in the Region was 9,685 MD, consisting of 3,407 Kw (35%) of thermal power, 6,043 NW (62Z) of hydropower, and 235 MW (3Z) of nuclear power. Installed capacity is expected to reach 25,100 MW by 1994/95, representing an average increase of 10% per year. In the period 1980/81 through 1984/85, electricity consumption grew at an average rate of about 9% per year, reaching an estimated 39,700 GWh in 1984/85; peak demand grew by about 7% per year, to 6,420 MW, in the same period. However, these rates of growth underestimate real demand growth because of the progressive severity of supply constraints. These constraints are expected to prevail into the coming decade despite the planned growth in installed capacity. Over the period 1984/85 to 1994/95, energy requirements are expected to increase at an average rate of about 10% per year to 101,840 GWh, and peak demand to increase by about 1lZ per year to  -12- 18,200 MW. Kerala's present installed capacity of 1,011 MW, which consists entirely of hydropower, is adequate only in years with average or above-average rainfall. During recent dry years, KSEB has had to introduce selective power cuts and load staggering. Electricity losses in Kerala are estimated at 20% of total generation, and although losses are relatively low compared with other States in India, further reductions are possible and desirable. The proposed project is expected to result in a reduction in system losses of between 3% and 5% in 1989/90. Organization of the Power Subsector 34. Responsibility for the supply of electricity is shared between the Central and State Governments. The State Electricity Boards (SEBs) and the Regional Electricity Boards (REBs) are controlled by States; the Central Electricity Authority, the National Thermal Power Corporation (NTPC), the National Hydro-Electric Power Corporation (NHPC), and the Rural Electrification Corporation (REC) are controlled by the Central Government. SEBs were instituted under the Electricity (Supply) Act, 1948 (the Act), to promote the development of the power subsector and to regulate private licensees. Although SEBs are supposed to be autonomous in managing their day-to-day operations, in practice they are under the control of State Governments in such matters as capital investment, tariffs, borrowings, pay, and personnel policies. As a first step towards national integration, the SEBs have been grouped into five regional systems, each coordinated by an REB. Coordination responsibilities include overhaul and maintenance programs, generation schedules, inter-State power transfers and concomitant tariffs. CEA was created in 1950 to develop national power policy and to coordinate the various agencies involved in supplying electricity. It is responsible for the formulation of countrywide investment plans for approval by the Central Government, development of integrated system operation, training of personnel, and research and development. It maintains operational, economic, and financial data at both the Central and State levels, and provides consulting support to SEBs. NTPC and NHPC were incorporated in 1975 by GOI to construct and operate large power stations and associated transmission facilities. They sell bulk power to the SEBs for distribution. NTPC has had marked success and has grown rapidly. In contrast, NHPC is still struggling to establish a role for itself. The States own most hydro sites and are reluctant to relinquish these sources of comparatively inexpensive energy to the Central Government. REC was established in 1969 to coordinate rural electrification and provide financial and technical expertise for SEB schemes. At present, REC finances more than half of total rural electrification investment. Pricing and Resource Mobilization 35. Through the 1983 amendments to the Act, GOI has set a financial objective for the SEBs in which they are required to produce an annual return of at least 3% on their historically valued net fixed assets, after meeting operating expenses, taxes, depreciation and interest. The 3% return would represent, in terms of the Bank's conventional method of calculation, a rate of return on historically valued assets in the range  -13- of 102 to 13Z. The Bank considers this objective to be a reasonable minimum but the investment requiremento of a number of SEBs are such that higher returns would be desirable in order to achieve reasonable cash generation. Although, in some cases, higher returns may be possible through reclassification of consumers, substantial improvements will only be achievable through tariff increases. SEB tariffs do not adequately reflect marginal costs. An analysis of 1981 tariffs indicated that they were on average only 52X of long run marginal cost (LRMC); industrial tariffs were almost 90X, domestic 362, and agricultural only 27%. While there may have been improvements since 1981 and adherence to the stipulated rate of return will further improve the overall level of the tariff, the structure is still distorted. State-specific financial programs are needed to provide both a higher return on investment and a simpler, efficient and affordable tariff structure. Such prograns will be addressed through the Bank's lending to individual SEBs. In contrast, NTPC's tariff is approximately equal to its LRMC. Power Subsector Planning 36. Due to rapid demand growth, GOI at present allocates about 20Z of pubjic investment to power development. In order that the subsector should be developed in the most economic manner, the Bank encouraged COI to prepare a least-cost National Power Plan (NPP), which was completed in September 1982. Although this plan, which is actually a collection of five regional plans, represents substantial progress, further refinement is needed. In particular, there is a need for integration of the regional plans and greater coordination between planning in power and other sectors. Since it will not be possible to achieve full national integration immediately, the Bank will continue to ensure that each Bank-financed project forms a part of an up-to-date regional least-cost development plan. In due course, the sources of supply considered should be widened to include the option of importing from neighboring regions. This approach would eventually lead to integrated planning at a national level. To facilitate integration, GOI has agreed, under the Rihand Power Transmission Project, to undertake a study on the long-term development of a national transmission system. A problem has arisen in the coordination of the long-term NPP with the national five-year plan and shorter-term budgets. Owing to the lack of resources, fewer projects have been included in the five-year plan than in the NPP and, as a result of underestimation of project costs and delays in project implementation, still fewer have been executed. Consequently, the shortage of power has become more and more acute and, over the next decade, India expects its power deficit to increase severalfold. In the past this deficit has undermined rational planning by encouraging emphasis on the rapid expansion of supply rather than on least-cost development. Furthermore, it has prompted overinvestment in captive plant, leading to excessive use of high-value petroleum products in power generation. In addition to supporting OOI's efforts to increase the supply of power, the Bank will continue to stress to COI the role of pricing in eliminating the deficit and the importance of integrating planning and pricing.  -14- Management and Operations 37. SEBs' organization and management practices hiave not kept pace with the expansion of supply. Quality of service, reliability, and financial performance are the principal areas of concern. In general, SEBs have high quality engineering staff, but lack experienced personnel in the areas of financial planning and control. The relatively poor status and pay of these personnel exacerbate the already significant pay differential between the public and private sectors and make it difficult to recruit competent staff. Management practices are generally outmoded and inadequate. The SEBs' inefficient accounting systems are an example. At present, accounts are maintained principally to track cash receipts and expenditures, and there is little use of accounting information for managerial purposes. GOI has decided that a new and uniform accounting system should be installed in all SEBs. After initial delays, implementation is now proceeding. 38. In the area of operations, one of the main concerns has been the poor performance of thermal plant. Factors that have contributed to this situation are inadequate maintenance (due to capacity shortages), deficiencies in plant manufacture, lack of spares, and the poor quality of coal; in general, these problems have been recognized by the relevant authorities and corrective steps are being taken. GOI is currently preparing a rehabilitation program for thermal plant. Until this program is compiled, the Bank will, whenever appropriate, include a thermal rehabilitation component under each of the loans made to the SEBs. Bank Group Participation in the Past 39. The Bank has made 18 loans for Indian power projects amounting to US$1,983 million, and 17 IDA credits totalling US$2,409 million. Seventeen projects financed under the following loans and credits have been completed: ten generating projects, the Beas Project (Credit 98-IN), the first four transmission projects (Loan 416-IN, Credits 242-IN, 377-IN and 604-IN), and the First and Second Rural Electrification Projects (Credits 572-IN and 911-IN). The Fourth Transmission Project (Credit 604-IN) was completed in 1983, and the Second Rural Electrification Project in 1984. The Singrauli (Credit 685-IN), Korba (Credit 793-IN), and Ramagundam (Credit 874-IN and Loan 1648-IN) Thermal Power Projects are in advanced stages of implementation. The credit for the Second Singrauli Thermal Power Project (Credit 1027-IN) and the credit/loan for the first stage of the Farakka Thermal Power Project (Credit 1053-IN and Loan 1887-IN) were approved in May and June 1980. Korba II (Credit 1172-IN) was approved in July 1981, Ramagundam II (Loan 2076-IN) in December 1981, and the Third Rural Electrification Project (Loan 2165-IN) in June 1982. The Upper Indravati Hydro Project (Credit 1356-IN and Loan 2278-IN) and the Central Power Transmission Project (Loan 2283-IN) were approved in May 1983, and the Indira Sarovar Hydroelectric Power Project in May 1984. The Second Farakka Thermal Power Project (Loan 2442-IN) was approved in June 1984, and the Trombay IV Thermal Power Project (Loan 2452-IN) in June of the same year. The Third Rural Electrification Project is about a year behind scheduLe. The first five units of the Singrauli Project and the  -15- first two units of the Korba project were commissioned on schedule. The Parakka and Ramagundam projects are proceeding satisfactorily, the first unit at Ramagundam having been commissioned four months ahead of schedule. The Third Trombay Project (Unit 5) (Loan 1549-IN) war first synchronized in January 1984, about a year behind schedule; time was lost mainly because parts for the boiler were not delivered on time, and because of delays in its construction. 40. A performance audit conducted in 1980 for the Second Power Transmission Project (Credit 242-IN) concluded that the project has succeeded in helping the nine beneficiary SEBs extend their transmission systems and meet their growing power requirements. Utilization of generating capacity in these SEBs has exceeded the appraisal forecast. The upgrading of the SEBs' financial management practices that began under this project will continue under subsequent projects. The audit highlighted the difficulties of supervising a project coosisting of many widely scattered subprojects, and of effecting institutional improvements in the absence of a close working relationship between the Bank Group and the beneficiary SEBs. Bank Group Strategy in the Power Subsector 41. Over the last ten years the Bank Group has assisted GOI in substantially expanding its centrally owned generation capacity. In the past two years, however, Bank Group lending has been broadened to encompass SEB-implemented projects in order to support GOI's policy of accelerating hydro development and improving project implementation, operational efficiency and financial performance in the SEbs. Specific objectives of Bank Group assistance include: (a) the better use of existing facilities--through transmission projecL. mproving regional interconnections and through rehabilitation of plant, particularly of thermal power stations and distribution networks: these measures vill impro-'e the efficiency of energy use and reduce system losses, thereby helping to minimize system capital and operating costs; (b) institution building--although the Bank will continue to maintain an interest in Central institutions, its efforts will be broadened, as noted above, to encompass individual SEBs, where substantial efforts are needed to strengthen management, operations, and finances and to ensure the successful implementation of commercial accounting; (c) improved planning--particularly by extending the scope of planning from the State through the regional to the national Level and through greater integration of planning with other sectors in the economy, both those that consume electricity and those that supply other forms of energy; and  -16- (d) improved resource mobilization from electricity consumers-- the principal vehicle for this has been and will continue to be financial covenants in relation to beneficiaries; however, the Bank will also continue to stress the importance of relating tariffs to the economic costs of supply. PART IV - THE PROJECT 42. The project was prepared by KSEB and appraised by a mission that visited India in November 1984. A Staff Appraisal Report is being distributed separately to the Executive Directors. Negotiations were held in Washington in May 1985. COI and KSEB were represented by a delegation with Mr. Prithvi Singh of the Department of Economic Affairs as coordinator. A Supplementary Project Data Sheet is attached as Annex III. Project Objectives and Rationale for Bank Involvement 43. The primary objective of the project is to help meet the demand for electricity in the State of Kerala and in the Southern Region of India through the provision of an additional 180 MW of installed hydro-generating capacity at a new plant on the lower Periyar River in the Idukki District of Kerala, and the installation of transmission lines linking the plant to three of the main load centers in the State. A secondary objective is to improve the performance and efficiency of the existing power system through the reinforcement of the distribution networks in the major cities of Kozhikode, Cochin, and Trivandrum, and the installation of reactive power compensation equipment. A further objective is to strengthen KSEB's managerial, commercial, and financial practices through the implementation of an institutional development program. 44. Through its involvement in the project, the Bank would be supporting GOI's objectives and efforts to accelerate the development of hydropower resources and alleviate power shortages in the Southern Region. By including the distribution network component in the project, the Bank would also help to ensure that the reliability of power supply is improved and system losses are reduced. The inclusion of the institutional development program is expected to contribute substantially to KSEB's development, particularly in the financial and management areas. The assistance of consultants in connection with the reactive power compensation and distribution elements of tile project would introduce KSEB to state-of-the-art planning techniques in these fields. Project Description 45. The project is made up of the following components: (a) construction of a run-of-the-river 180 MW hydropower station consisting of diversion dam, intake, headrace tunnel, penstocks, and a powerhouse equipped with three generating units of 60 MW each;  -17- (b) installation of about 415 km of 220 kV double circuit transmission lines and construction of associated substations (1,180 MVA capacity), to feed the main load centers of Cochin, Kozhikode, and Cannanore; (c) installation of about 760 MVAR of reactive pover compensation equipment to improve the system's power factor; (d) reinforcement of the secondary transmission and distribution networks (110 kV to 11 kV) in the cities of Cochin, Trivandrum, and Kozhikode, including the construction and installation of about 270 MVA of additional distribution substations and associated distribution cables and lines, switching stations, and distribution transformers; (e) implementation of an institutional development program for KSEB, comprising: (i) the design and implementation of an information system, including a commercial accounting system, and the training of KSEB staff, for management and planning; (ii) the preparation of an organization and management review, together with subsequent implementation of its recommendations; (iii) the preparation of a comprehensive fixed-asset inventory; (iv) the preparation of a study to develop a simpler and more efficient tariff schedule for KSEB; and (v) the acquisition of data processing facilities; (f) provision of training, technical assistance, and consulting services for the implementation of the project. Project Implementation 46. KSEB will implement the project over a period of about seven years (FY85-FY91). Field investigations for the proposed power plant began in 1971. KSEB has been developing the detailed engineering for the project since 1982, with the assistance of the Central Water Conission (CWC) for the civil works aspects and of CEA for the electromechanical aspects. The proposed power station layout was approved in 1984 by an independent panel of experts, who will be retained throughout the imp'lementation of the project to oversee the technical aspects of design and construction. 47. Construction of the headrace tunnel for the plant began in August 1984. Project engineering for the other components, with the exception of the distribution works and reactive power compensation equipment, is at a stage suitable for bidding. Further work on these two components will be carried out with the assistance of consultants. The three units of the plant are expected to be commissioned in the period May 1989 to February 1990, and the transmission lines, associated substations, and distribution works by about March 1990. However, about 135 km of the transmission line linking the proposed power station with the Idukki plant and Trichur substation need to be completed by mid-1986 so that power can be evacuated from the Idukki II -!ant, which is presently under construction. To meet these commissioning dates, contracts for the main civil works and principal items of equipment for the proposed station must be awarded  -18- during the first half of 1986; materials and equipment for the transmission and distribution components should be ordered in January 1986. These dates are achievable under the project's proposed construction schedule. 48. General engineering and consulting services will be provided to KSEB by CEA and CWC. CEA and CWC would be responsible for preparing or reviewing tender documents, preparing technical specifications for the major items of electromechanical equipment and drawings for the civil works, and providing general technical assistance during project construction. Both CEA and CWC have had experience in similar projects since they have served as the engineers for most of the hydropower and irrigation schemes in India over several decades. KSEB has a cadre of well-experienced construction and supervision engineers for the civil works, and has appointed a Chief Engineer, Construction, for the station. A satisfactory organization for the implementation of this part of the project has been established. Another Chief Engineer position has been created to coordinate and supervise the associated transmission and distribution works. KSEB has also had extensive experience in this area. However, it has had no substantial experience in the selection, procurement, or installation of reactive power compensation equipment, underground transmission, and gas-insulated switchgear. KSEB has therefore retained consultants (SNC of Canada) to assist in the engineering of the proposed distribution and reactive power compensation elements, the preparation of final technical specifications, the evaluation of tenders, the supervision of construction and installation, and the provision of general advice to KSEB as needed on other project-related matters. About 100 man-months of consulting services will be required for this purpose. 49. The implementation of this project wiLl involve several of KSEB's organizational units and the execution of a large number of contracts. In order to ensure the necessary control and monitcring of progress in the implementation of a project of this nature, KSEB will establish, by September 30, 1985, a Project Cell under the management of the Chief Engineer (Planning). This cell will be responsible for coordinating project implementation; liaising with COI, CEA, CWC, and the Bank; monitoring project execution; processing disbursement applications; and preparing required project reports for the project authorities and the Bank (Section 2.06 of Project Agreement). 50. The institutional development program will be carried out by consultants retained by KSEB. A total of about 350 man-months of consulting and training services will be required for the design and implementation of a management information system and the implementation of commercial accounting (120 man-months), the organization and management review (50 man-months), the fixed-assets inventory (100 man-months), the tariff simplification study (50 man-months), and the implemntation of data processing (30 man-months). In view of the extensive involvement of consultants under the project, KSEB will also set up a steering committee, which would include key KSEB staff, to coordinate all technical assistance and training activities. The steering committee would be established by  -19- June 30, 1985, and would meet regularly with the consultants responsible for the implementation of the various components of the institutional development program. 1SB will retain the consultants for the implementation of the commercial accounting system and the fixed assets inventory by August 31, 1985, and those for all other component. by December 31, 1985. Suggested terms of reference for the consultants have been provided by the Bank to KSEBI final terms of reference will be prepared by KSEB by June 30, 1985 in the case of the consultants for the commercial accounting system and fixed assets inventory, and by July 31, 1985 in the case of the other consultants. Water Rights, Land Acquisition, and Resettlement 51. The Periyar River lies entirely within the State of Kerala. There are no pending water rights disputes or claims to affect the plant's construction or operation. KSEB already owns the land for the small pondage area created by the project's intake dam, the powerhouse and switchyard areas, and the expansion of most of the existing transmission substations, and is acquiring the necessary land for the remaining substations. The new distribution substations, which will be located in the crowded centers of Kozhikode, Cochin, and Trivandrum, will utilize gas-insulated switchgear, which will minimize space requirements. The land for these substations, which are to be constructed in 1988, is being identified and valued. No land acquisition is required for the transmission lines. No substantial resettlement of population is necessary under the project. A court case is pending concerning the compensation to be paid to seventeen families who were supposedly illegal settlers on the site of the power station. The families have vacated the site. The expected amounts of compensation involved would be negligible compared with the cost of the project. Environmental Aspects 52. The project has been cleared by GOI's Department of Enviroment. No problems are anticipated with water quality, since no reservoir will be created under the project. Fish migration is not at issue in view of the existing dams upstream. Malaria and filaria have been ermdicated from the entire State of Kerala for more than a decade, and the risk of schistosomiasis is considered low because of the distances to potentially contaminating locations in Tamil Nadu. The project would pose little or no harm to forest land: only some 127 ha would be deforested. As a compensatory measure, KSEB will finance the planting of 127 ha of forest near a local village. No rare or endangered biota will be affected. Roads accessible by jeep will be built for the construction of the transmission lines, but these will be allowed to revert to forest when construction is completed. Project Cost and Financing 53. The total cost of the project, including contingencies but excluding about US$59 million in taxes and duties, is estimated at about US$274 million equivalent, of which US$95 million (35%) represents the  -20- estimated foreign exchange costs. Interest during construction adds about US*67 million to the financing required. The principal costs, net of physical and price contingencies, but including taxes and duties, will be as follows: power station, US$118 million; transmission lines, US$23 million; substations, US$28 million; reactive power compensation equipment, US$36 million; distribution works, US$44 million; consultancy and technical assistance for the institutional development program, US$3 million. The estimates of project costs are based on recent quotations for similar civil works in Kerala, and on manufacturers' price quotations for the major items of electrical and mechanical equipment. These prices have been adjusted for estimated inLtlation to May 1985 levels. The cost of consulting services is based upon an estimated total requirement of 450 man-months, ot whicn 3UO man-months would be for local consultants and 150 man-months for expatriate consultants. Price contingencies, amounting to 24% of base cost, are basea on expected annual intlation rates of 8.5Z for 1985|86 through 1989/90 for local costs, ana 8X for 1985, 9% tor 1986 througn 1988, 7.5% for 1989, and 6% thereafter for foreign costs. Physical contingencies of 10% on civil works ann 5% on equipment have been allowed, amounting to about 7X of base cost. 54. The proposed Bank loan of US*176 million will finance USY95 million (70Z) of the total foreign exchange financing requirement of about US$135 million, together with US$81 million of the local costs, and would cover about 52% of the total project financing requirements, net of -taxes and duties. The balance of the funds required, aggregating about US*224 million equivalent, will be provided by GOI (US$40 million), by GOK in the form of loans to KSEB (US*77 million), ana by KSEB from its own resources (USM107 million). The project provines opportunities for cofinancing of up to US$30 million from export credits, suppliers credits or commercial bank loans to meet part of the cost of gas-insulated switchgear, underground cables for the distribution works, ana the reactive power compensation equipment. GOI has indicated that it is prepared to consider these opportunities. In the event that arrangements for such cofinancing are successfully concluaed, GOK's contribution to project financing wili be reduced accordingly, and the Bank will seek to reallocate its contribution toward the tinancing of these items to other items in tne project, as appropriate. 55. The proceeas of the proposed loan will be channeled by GOI to GOK as part of its normal assistance to States for development projects on terms and conditions applicable at the time. In turn, GOK will relend the Bank funds, together with its own contribution, to KSEB. Terms for the onlent Bank funds will provide for repayment over 20 years, including five years grace, at GOK's interest rate applicable at the time of drawdown (currently 13.5% per annum) tor its lending to KSEB, but not less than the current Bank interest rate of 9.29% per annum (Section 2.01(b) of Project Agreement). Repayment of GOK's contribution will be on its terms and conditions for lending to KSEB, as applicable at the time. The average inflation rate is not expected to exceed 8.5% per annum over the next five years. GOK's lending rate to KSEB is therefore expected to remAin positive in real terms. The foreign exchange ana interest rate risks will be borne by GOI.  -21- Procurement and Disbursement 56. Procurement arrangements are summarized in Annex IV. All civil works contracts with an estimated cost of US$5 million or more, and all contracts for the supply of goods with an estimated cost of US$1 million or more, will be subject to international competitive bidding (ICB), in accordance with Bank guidelines. All other contracts will be awarded on the basis of local competitive bidding (LCB) under procedures acceptable to the Bank. About 80% of works and services for the project will be procured under ICB. Consultants will be selected in accordance with Bank guidelines. Foreign suppliers would not be precluded from participating in LCB. Major locai contractors and manufacturers are expected to be competitive in the civil works and most of the equipment supply tenders. Local contractors competing under ICB will be allowed a margin of preference of 7.5% for civil works, and local manufacturers a margin of preference of 15% of the c.i.f. bid price, or the actual customs duties and import taxes, whichever is less, for the supply of goods. All civil works contracts costing the equivalent of US$5 million or more and all equipment contracts costing the equivalent of US$1 million or more will be subject to the Bank's prior review. Such review would cover contracts totalling about 90Z of the estimated cost of the Bank-financed components. 57. The proceeds of the loan will be disbursed over a six-year period (FY86-91) and will cover 100% of the c.i.f. cost of imported goods or of the ex-factory cost of goods manufactured in India; 50% of local expenditures for other items procured locally; 60% of the cost of civil works; and 100% of the cost of consultancy services. Expenditures incurred since February 15, 1985 and prior to loan signing, covering consultancy services for project engineering and the implementation of commercial accounting in KSEB, will be financed retroactively up to an amount of US$600,000 equivalent (Schedule 1, para. 3 of Loan Agreement). The disbursement period for this loan is similar to the Bank-wide composite average for power generation, transmission, and distribution projects. The Kerala State Electricity Board 58. KSEB, which was established in 1957 under the Electricity (Supply) Act of 1948, is responsible for the generation, transmission, and distribution of electricity throughout the State. It constructs and operates generating stations and transmission and distribution networks to supply ultimate consumers and licensees with electric power. However, KSEB is not completely independent in executing these responsibilities since it is controlled, according to statutory power, by the State Government in matters of staffing, borrowing, and tariff setting. KSEB's capital investment program is determined within the overall State and national planning framework. 59. KSEB is an autonomous body consisting of a full-time Chairman, three full-time members for accounts, technical matters and vigilance (security), and three ex officio members who are appointed for a one-year  -22- term by COK. The ex officio members represent the consumers, including industry, commerce, and the general public. KSEB's organization structure is characterized by broad delegation of functional responsibilities to numerous local offices spread over a wide geographic area. KSEB has met the demands of its substantial growth either by adding new organizational units to its basic structure or by expanding existing units, both of which clearly affect the authority, responsibility and qualifications required of the local managers. To date, neither KSEB's organizational structure nor its managerial procedures have been extensively reviewed. Accordingly, as part of the institutional development component of the project, KSEB will retain consultants by December 31, 1985, to conduct a comprehensive organization and management study, and assist in implementing its recommendations. 60. Since 1982, GOK has restricted recruitment at KSEB, and new personnel can be recruited only if no present KSEB employee possesses the requisite skills. Consequently, during the past two years, the number of sanctioned posts at KSEB has changed only nominally, and the vacancy rate has been negligible. At the end of 1983/84, KSEB had about 34,800 regular employees. Engineers, technicians, and tech' cal support staff together make up about half of the total staff; operations and maintenance staff total about 5,200 employees. The training needs of KSEB have been given low priority over the past two years owing to the limited financial resources available. Provision has been made in the institutional development component of the project for training of KSEB staff, based on a preliminary assessment of training needs to be prepared jointly by KSEB and the Bank. KSEB will accordingly develop a satisfactory detailed training program by June 30, 1986 (Section 2.05 of Project Agreement). 61. In view of the fact that decisions concerning major expansions of systems are made by GOI on the basis of regional considerations, KSEB's planning activities are limited. They include the preparation of load forecasts, the identification of future power generation schemes, the preparation of feasibility reports, and the planning of the high-tension transmission and substation facilities. Systematic long-term planning of large distribution systems has been lacking, and distribution works have so far been executed as needed on an ad hoc basis. KSEB needs to strengthen its planning function by developing a more accurate and detailed data base; by integrating physical, financial, and organizational considerations into its expansion planning; and by using modern tools of analysis such as data processing facilities. These needs will be addressed in the context of the activities included as part of the institutional development component of the proposed project. 62. KSEB's operation and maintenance of its system are generally satisfactory. Preventive maintenance and inspection for generation, transmission, and substation facilities are conducted regularly according to standard practice. Periodic inspections and preventive maintenance of the distribution system are conducted on a selective basis with corrective maintenance being provided as needed. However, KSEB expects to be able to regularize these activities as its cash position improves.  -23- KSEB Finances 63. The financial operations of the SEBs are regulated by the Act. In August 1983, the Act was amended to enable GOI to prescribe financial objectives and a uniform accounting system for the SEBs. These amendments came into effect from April 1, 1985, the start of &OI's 1985/86 financial year. In parallel with these developments, 001 has prepared a uniform commercial system of accounting which is being introduced in accordance with agreements reached under previous Bank-supported projects. Although progress is being achieved in this area, a number of the SEBs continue to maintain their accounts poorly and are unable to compile timely and reliable accounts. KSEB's accounting situation is fairly typical of that of the other SEBs. However, KSEB is committed to strengthening its accounting, financial and commercial operations, and the Bank proposes to support these institutional development objectives under the proposed project (paragraphs 65-68). 64. KSEB financed a significant portion (about 402) of its investment program from 1982/83 through 1984185 from its own resources. However, it accomplished this by deferring its interest obligations on OOK loans, deferring taxes payable to 00K, extending its accounts payable, postponing certain maintenance expenditures, and cutting its training activities. These measures were necessitated in part by severe drought conditions in the State in 1982/83 and 1983/84, which reduced the hydropower available for sale. Under the combined effect of KSEB's commitment to self-financing and the drought conditions, KSEB's working capital was seriously reduced during the period. KSEB's debt-equity ratio of about 96:4 in these two years was also excessively high. 65. The need to address the negative effects of KSEB's past reliance on financial expedients 3uch as those indicated above prompted the inclusion of a financial recovery program under the proposed project. This program is designed to encourage financial discipline and ensure sufficient liquidity for operational and investment requirements. The proposed package of measures will address four categories of KSEB's financial operations: (a) accounting and financial practices; (b) adjustment of accounts; (c) annual financial performance targets; and (d) tariff structure. Several measures will he introduced in each category. Under the accounting and financial practices, KSEB has undertaken to strengthen its financial management through an interim reorganization of its finance department by which it will increase, through promotion or external recruitment, the number of Deputy Chief Accounts Officers and Senior Accounts Officers. Specialized training will also be provided to KSEB's divisional accountants. This interim reorganization is already under way, and the remaining senior financial managerial posts are expected to be filled by December 31, 1985. KSEB has also established an internal audit unit within its organization, and will modify the scope of the unit's activities as appropriate, by December 31, 1986, to reflect the recommendations of the organization and management study. The uniform commercial accounting system (paragraph 63) to be adopted by the SEBs will be formally notified by GOI by July 15, 1985 (Section 3.04 of Loan Agreement), and KSEB will implement it by April 1,  -24- 1986, the beginning ot financial year 1986/87 (Section 3.04 of Project Agreement). KSEB will retain consultantas to implement the system and provide the necessary training to its staff by August 31, 1985. 66. The measures in the secona category of tinancial recovery are designed to correct a number of anomalies in KSEB's accounts. Over a period of not more than eight years, KSEB will unaertake to expense about Rs 270 million in intangible assets which represent works undertaken on projects that have since been aropped from its investment program. KSEB will also review its suspense accounts and allocate to other accounts as appropriate about Rs 500 million held therein. A comprehensive fixed assets inventory will provide accurate tinancial records of KSEB's plant and equipment and the information needea for operation, inspection, and maintenance of all its facilities. Consultants to carry out this inventory will be retained by KSEB by August 31, 1985. GOK's loans to XSEB are "1perpetual" loans that carry no specific maturity periods. KSEB is more than five years in arrears in paying interest on GOK loans: as of March 31, 1984, its interest arrears, which are classi1ied as current liabilities, amounted to about Rs 380 million. KSEB cannot meet these arrears vithin the next year without jeopardizing its liquidity. GOK has undertaken to subordinate payments of interest arrears on these perpetual loans, as well as repayments of principal, to investment requirements for projects in GOI's approved Five-Year Plan. This protects KSEB's liquidity position and enables these liabilities to be treated as equity, for the purpose of financial analysis. GOK will also subordinate about Rs 428 million in arrears in taxes payable by KSEB in the same way. These adjustments will bring KSEB's debt-equity ratio to a conservative 40:60 by the end of 1985/86. 67. The measures in the third category of financial recovery have to do with the establishment of annual tinancial performance targets for KSEB. In negotiations for the recently-approved Chandrapur Thermal Power Project, GOI requested that the measure of an SEB's financial pertormance be based upon the recently incorporated earnings provisions in the Act. These provisions require tnat an SEB's total revenues produce a surplus of not less than 3% of the SEB's net fixed assets in service at the beginning of the year, after meeting all expenses properly chargeable to revenues, incluaing operating, maintenance, and management expenses; taxes on income and profits; depreciation; and interest payable on all debentures, bonds, and loans. On the basis of agreed definitions of the terms involved in the calculation of the surplus, the minimum target of 3% would yield acceptable levels of financial perlormance. Accordingly, KSEB will ensure that, beginning with financial year 1985/86, it will achieve the required 3X annual return (Section 3.05 of Project Agreement). This level of return would imply average annual tarift increases to 1994/95 of about 9%, an average annual conventional rate of return on historically valued assets of about 13.2X, ana an average annual self-financing ratio of about 33%. A second measure in this category concerns accounts payable and accounts receivable. In both areas, the amounts outstanding are beyond an acceptable level. KSEB will undertaKe to maintain, rrom 1985/86, its accounts payable to a level equivalent to the previous two months' operating expenses and capital expenditures, net of those capital  expenditures financed through suppliers' credits. Accounts receivable will be maintained at less than the equivalent of 2.5 months' electricity sales in 1985/86, and 2 months' sales thereafter. 68. The measures in the fourth category of financial recovery concern KSEB's tariff structure, which is extremely complex. At present, it consists of many subdivisions of consumer categories and complicated adjustment formulae all of which make the system difficult for consumers to understand and for KSEB to administer. The structure is not related to the underlying cost of electricity supply. KSEB's consumers pay excise taxes in addition to tariffs, the amounts depending upon the consumption and consumer category. The average tariff per consumer in 1984/85, across all consumer categories, was about 40 paise/kWh; the long-run marginal cost of power in the Southern Region is estimated at about 70 paise/krh. To address these problems, KSEB will carry out a study on the simplification of its tariffs, with a view to restructuring its tariffs on the basis of recommendations arising from the study. KSEB will retain the consultants required to carry out the study by December 31, 1985. 69. KSEB's financial requirements for the period 1985/86 through 1989/90, the project implementation period, are estimated at Rs 10,316 million (US$860 million). KSEB will finance 30Z of its investment program from its own resources, the remaining 70% to be provided from borrowings from GOK and other sources, and from onlent Bank funds. The proposed project is expected to account for about 38% of KSEB's investment program for the period. Project Justification and Risks 70. The proposed project is justified as part of the least-cost expansion program for the Southern Region. An analysis of alternatives for installed capacity, number of units, and place of the scheme in the Southern Region's development plan has indicated that the proposed plant would provide the least-cost option. According to analyses of alternatives for the transmission lines, reactive power compensation facility, and distribution works, these too would contribute to the least-cost development of the system. The economic rate of return for the program would be about 13%, if benefits are based on incremental revenues at average retail tariffs and quantifiable industrial and agricultural consumers' surplus. The actual rate of return is likely to be considerably higher if domestic consumers' surplus or industrial output made possible by the alleviation of power shortages is taken into account. 71. There are no extraordinary technical risks associated with the project, since the works to be constructed are well within the bounds of known engineering technology. Geological investigations and initial excavation of the headrace tunnel have confirmed the expected excellent rock formation prevalent throughout the area. No special difficulties are therefore expected for the tunneling works. KSEB has sufficient staff experienced in supervising and executing works similar to most of those proposed in the project. Consultants' support will be provided for those  -26- areas in which KSEB's experience is limited, to minimize any undue risks in this regard. PART V - LEGAL INSTRUMENTS AND AUTHORITY 72. The draft Loan Agreement between India and the Bank, the draft Project Agreement between the Bank and GOK, and the Report of the Conmnittee provided for in Article III, Section 4(iii) of the Articles of Agreement of the Bank are being distributed to the Executive Directors separately. 73. Special conditions of the project are listed in Section III of Annex III. 74. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 75. I recommend that the Executive Directors approve the proposed loan. A. W. Clausen President May 22, 1985  ANII= I ra8 g- I f s T A I L I tA MT (MT UINENT KITATI) await 1,7Olk RICKx LOW IN WDU uD c ZT IMATU& AUIA A PASIPIC ALIA & PACIFIC A cinai m _. m)- TOTAL 3267.4 327.6 3287.4 ACRULTURAL 1763.3 1730.3 iaii.. Go 33 CAPIZA CU$) 60.0 100.0 260.0 276.6 1091.2 (KILCRANU Or CIL IUIVALENT) 79.0 113.0 156.0 172.0 567.3 MPMZAUN SND VTAL ITNUT POPULATIONMID-UAR (TVOUIAO) 434U49.0 3473H9.0 716913.0 USUA POPULATION (2 O TOTAL) 14.0 19.3 24.1 21.7 34.7 POPULATION PROJCCTIONS POPULATIO IN TEAR 2000 (HILL) 394.4 STAT NAM POPULATION (KILL) 1707.2 POPULATIN NOENNION 1.7 POPULATION DEcSITY PER SQ. 34. 132.3 166.6 213.4 166.6 261.9 PM SQ. KR. ACRi. LUD 246.6 307.3 387.1 345.5 1735.1 POPULATION AGE SMUCTCPZ CZ) 0-14 YRS 40.9 42.7 39.3 35.6 39.0 13-64 116 34.5 54.2 57.6 59.8 57.6 65 AND AOVE 4.6 3.1 3.1 4.3 3.3 POPUATION CROWN RATE (x) TOTAL 1.8 2.1 2.2 1.9 2.3 UnAN 2.5 3.3 3.9 4.1 4.3 CRUDE BEIM RATE (PER TIIS) 47.7 41.4 34.2 27.7 30.1 CRUDE DEATH RATE (PE R THOUS) 23.3 17.8 12.7 10.1 9.S CROSS REPROWICTION RATE 2.9 2.6 L.2 1.8 2.0 FAITLY PLANNING ACCEPTURS. AINUAL (TRomS) 64.0 37B2.0 6826.0 USERS (S OF HARRIED WON) .. 11.7 28.0 52.7 FOOD A moanr INDEX OF FOOD PROC. PER CAPITA (1969-71-100) 98.0 102.o 101.0 112.8 123.0 PER CAPITA SUPPLY OF CALORIES (f OP REUIREEIITliSI 96.0 91.0 H6.0 97.7 114.4 ROTEINS (CRAIS PER MAY) 54.0 50.0 46.0 56.8 57.0 OF WHICH ANDUIL AND PULSE 17.0 13.0 13.0 7c 14.9 14.1 CHILD (ACES 1-4) DEATH RATE 26.2 20.7 11.0 9.8 7.2 LIFE EXPECT. AT BIRTH (YEARS) 42.5 47.5 54.6 60.0 60.4 ILFANt NORT. RATE (PER TOUS) 165.0 139.0 94.0 13.8 66.3 ACCESS TO SAFE WATER (SPoF) TOtAL .. 17.0 33.0 7d 32.9 37.0 URB1411 . 60.0 33.0 Td 70.9 54.3 RURAL .. 6.0 20.0 d 22.1 26.6 ACCESS TO EICRLTA DISPOSAL (C OF POPULATION) TOTAL . 18.0 20.0 Ie 18.1 41.3 URBAN . 85.0 37.07; 72.3 47.6 RUIRAL . 1.0 2.0 1. 4.6 33.3 POPULATION PER PSYSICIAN 4850.0 4390.0 3690.0 It 34U.2 7749.* POP. PER NURSING PERSON 10980.0 jL 7420.0 5460.0o7T 4793.1 2460.6 POP. PER HOSPITAL ME TOTAL 2180.0 1650.0 1290.0 7f 1066.5 1044.2 URBAN .. .. 370.0 7ir 298.0 651.2 RURAL .. .. io41i.O 5"3.4 2594.6 AiDISSIONS PER HOSPITAL RED .. .. .. .. 27.J ROSINC AVERACE SUZE OF HOUSEHOLD TOTAL 5.2 5.6 5.2 I.. URBAN 5.2 5.6 6.8 7; RURAL 3.2 5.6b 5.3 .. AVERAGE NO. OF PERSONSlROOM TOTAL 2.6 2.8 URBMA 2.6 2.B RURAL L.6 2.8 ACCES TO ELECT. (Z OF DWELLINGS) TOTAL - UR.N. .. .. RURAL .. ..  ANNEX I Page 2 of 5 TA B L E 3A INDIA - SOCIAL INDICATORS DAht SKETr INDIA REFFREEce CROUPS (GiE IGHTED AVZRACES) / MOST (MOST RICENT ESTLN(ATE) b RECENT LOW INCXlI MIDDLF INCO1 1960/b i,9OLk ESTIiAiiL ASIA 16 PACIFIC ASLA & PACIFIC ADJUSTED ENROLLMENr RATIOS PRIMRY: TOTAL 61.0 73.0 79.0 97.4 102.0 MALE 00.0 90.0 93.0 110.5 105.9 FEMALE 40.0 56.0 64.0 83.7 98.2 SECONDARY: TOTAL 20.0 26.0 30.0 35.9 46.0 HALE 30.0 36.0 39.0 44.6 48.7 FEMLE 10.0 15.0 20.0 26.8 43.1 VOCATIONAL (Z OF SECONDARY) 2.8 1.0 0.7 to 2.2 17.5 PUPIL-TEACHER RATIO PRDAY 46.0 41.0 54.0 38.5 31.8 SECONDARY 16.0 21.0 .. 1P.7 23.5 ADJLT LITERACY RATE (Z) 27.8 34.1 36.2 53.4 72.9 co sw r o PASSENCER CARSITHOUSAND POP 0.6 1.1 1.4 lh 0.9 10.1 RADIO RECEIVERS/THOUSAND POP 4.9 21.5 43.6 112.1 113.6 TV RECEIVERS/TUOUSAND POP 0.0 0.0 1.7 15.7 50.1 NEWSPAPER ("DAILY GENERAL INTEREST") CItCULATION PER THOUSAND POPULATION 10.6 16.2 19.4 th 16.2 53.9 CI'JA ANNUIAL ATTENDANCE/CAPITA 3.2 6.2 3.7 77 3.6 3.4 LABCR TOTAL LAOR FORCE (THmUS) 185951.0 219194.0 282169.0 FEMALE (PERCENT) 30.7 32.5 31.8 33.3 33.5 AGRICULTURE (PERCENT) 74.0 74.0 71.0 69.6 52.2 XNDUSTRY (PERCENT) 11.0 11.0 13.2 15.8 17.9 '-6RTICIPATION RATE (PERCENT) TOTAL 42.8 40.0 39.4 42.6 38.7 MALE 57.D 52.4 52.D 54.7 50.9 FEXALE 27.3 26.9 .5.9 29.8 26.6 ECONOMIC DEPENDENCY RATIO 1.1 1.1 1.1 1.0 1.1 C DISTRIBUTI PERCENT OF PRIVATE INCOME RECEIVED BY HICHES! 5: OF HOUSEHOL'DS 26.7 26.3 /i 22.2 /e 22.2 22.2 HICHEST 20: OF HOUSEHOLDUS 51.7 48.9 rI 49.4 le 48.0 48.0 LOWEST 2m DF HDUSEHOLDS 4.1 6.77r 7.07ir 6.4 6.4 LOWEST 40% OF HOUSEHOLDS 13.6 17.2 7? 16.2 7r 15.5 15.5 POVET TAROrT CRUM ESTIMATED ABSOLUrE POVERTY INCOIE LEVEL (USS PER CAPITA) URSAN .. . 132.0 lh 133.9 188.6 RURAL .. .. 114.0 111.6 152.0 ESTIMATED RELATIVE POVERTY INCME LEVEL (USS PER CAPITA) URBAN .. .. .. .. 177.9 RURIL ,. .. .. .. 164.6 ESTIMATED POP. BELOi ABSOLUTE POVERT INXoXE LEVEL (Z) URBAN .. .. 40.3 lh 43.8 23.4 RURAL .. .. 50.7 Ih 51.7 37.7 NOT AVAILABLE NIOT APPLICABLE NO T E S /a The group averages for each indicator are population--eighted arithmetic mean.. Coverage of countries a_nn the indicatar. depend. n availabilfty of data mnd In not uniform. lb Dales. otherwise noted. 'Data for 1960" refer to any year between 1959 and 1961; "Data for 1970" between 1969 and 1971; and data for "Moat Recent Eatimate" between 1980 and 1982. Ic 1977; /d 1976; Ie 1975; If 1978; /R 1962; lh 1979; /I 1964-65. JUIE, 1984  ANNE I ____________ ~~P536 3 of S aa t.1=00.5 0.1 O .1 o "IOSOaIUC olsoMO aooopo0089C,lo wetGomonn atOd IbSf am goO. Us lawo 09. omomoolco 00l09ll on gacam maoo sgoo 1.00". sfeade. M ad omotn." M1 otsloagr dloioopmo usWA se s. It ntolso grimp - M gm ama folipu one0 Of tall Whites m-oan a1 gel o noe on" Aht o lh 00 tall o le s oose, 1o= af WA =iiw omop i.e 'no tor ut Omoeftnsw are Swlag 01tMhd Stanbot Mitt mmCi). to I. R=00 h-aoo of sloor oooflaotwoq oajoomoo~oe .905m gt , 0 oh eafte a inogolsm mosio oalthoolee mo V "oe on logmoop noe ~ t war o ~ S orlo of Ohm mmusma ioo g.m.he ot.joe tIsjoCocO. Olo"m S "o"0 0mooso o oiotCpoomo ottttO fdO a 1 lov cSibem. moolo toOa 6 omoogto u"iodes 4cono ci a tojtr to moohc. ROsa, aiqn am alpr wool io gosomc WA ots Nof m raolooooe a C Itt Saooo oh* mom, Ia IS.$ tw i'P. - "PdslLmm d~~~~~~~~~~~iudew hp meloh r ofPeotimC Iotomoaoo.k. a rertoon a ore a Iot omout ~mo."3ufft1Id'klUuI