India - Bihar Public Tubewell Project

Dcc_nt of The World Bank FOR OMCIAL USE ONLY Report No. P-4390-IN MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 59.5 MILLION TO INDIA FOR THE BIHAR PUBLIC TUBEWELL PROJECT August 15, 1986 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS USS1.OO - Rs 13.0 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at the US$1.00 - Rs 13 which represents the average exchange rate at the time of the appraisal. Princi2al Abbreviations and Acronyms ERR - Economic Rate of Return GOB - Government of Bihar GOI - Government of India km - square kilometer ID - Minor Irrigation Department PTW - Public Tubewell T&V - Training and Visit  FOR OFFICIAL USE ONLY MEMORANDUM AND RECOMMENDATION OF TEE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE BIEAR PUBLIC TUBEWELL PROJECT 1. The following report on a proposed development credit to India for SDRi 59.5 N (US$68 K equivalent) is submitted for approval. The proposed credit would be on standard IDA terms and help finance rehabilitation, mod- ernization and expansion of public tubewells in the State of Bihar. The proceeds of the Credit would be channelled to the Government of Bihar (GOB) in accordance with the Goverment of India's (GOI) standard terms and arran- gements for the financing of State development projects. The exchange risk would be borne by the Government of India. 2. Background. gihar is one of the most densely populated states in India (426 personslkm ). It's annual per capita income of about Rs 1,330 (US$111 in current prices) is the lowest in India; about 50Z of the Stata's population lives below the poverty level (about US$123 per capita in current prices). The agricultural sector accounts for about 45Z of the State's Domestic Product and employs about 80% of the working population. Agricul- ture in the State is characterized by small-scale, subsistence farming, mainly focused on cereal cultivation. Since most of the cultivable land is already under cultivation, production can be expanded only by increasing yields and cropping intensity. 3. Rainfall is poorly distributed and varies greatly from season to season, making irrigation necessary for crop production in the dry season, and for minimizing risks in the wet season. Bihar is well endowed with both surface and groundwater resources, and thus, GOB accords high priority to irrigatiou. GOB's Ltrategy is to focus on rehabilitation, modernization and completion of existirng surface irrigation schemes and groundwater develop- ment--both private through credit, and public. 4. In the socio--economic context of Bihar-in areas with good land and groundwater resources--public tubewell development can be an effective way to provide irrigation to farmers who own or operate small, fragmented holdings (about 75% of holdings in Bihar are less than one hectare). Furthermore, unlike surface irrigation schemes, public tubewells can be sited selectively and constructed quickly. Thus, with respect to public groundwater develop- meat, GOB's investment strategy is to fully utilize existing public tubewells and complement private groundwater development with a limited program of new public tubewell construction directed at small farmers, who are unable to finance private wells. 5. Construction of public tubevells (PTWs) for irrigation began in 1937; by 1983 about 5,300 PTWs had been constructed. However, owing to ineffective management, insufficient funding, deteriorating power supply, and inadequate Government support, by 1985 public tubevells were irrigating only about 8Z of the potential command area created. To overcome the existing problems in public groundwater development, the GOB has decided to: (i) rehabilitate and modernize existing infrastructure and provide assured power supply so that most PTWs in the State can perform at least to original design standards; (ii) construct new tubewells with buried pipe distribution systems that can be operated automatically and controlled by farmers at field outlet valves; and (iii) change responsibility for PTW activities from a government-owned This document has a restrcted distribution and may be used by recipients only in the performancec of their official duties. Its contents may not otherwise be dischmed without World Bank authorization  -2- corporation to a line organization within the Minor Irrigation Department (MID) with proper staffing, adequate budget and an effective management structure. 6. Proiect Obiective. The objective of the proposed project is to increase agricultural production by improving and expanding the use of Bihar's considerable groundwater potential. This wouldl be achieved by: (i) introducing improved tubewell technology that eliminates the planning and design problems inherent in Bihar's existing PTNs; (ii) undertaking a phased program to rehabilitate and modernize most of Bihar's existing PTWs; (iii) strengthening the institution responsible for PTW activities to ensure that project works can be effectively and efficiently implemented, and operated and maintained. The result will be increased agricultural produc- tion, employment and incomes, especially for Bihar's small farmers. 7. Project Description. The tubewell irrigation systems to be rehabilitated or constructed under the project would be distributed in 26 of Northern Bihar's 38 administrative districts (see attached map). The proposed project would comprise a seven-year program to support: Ci) con- struction of about 500 new public tubewells; (ii) modernization of about 1,000 existing tubewells to the improved design standards of the new tubewells; (iii) rehabilitation of about 3,700 existing tubewells; (iv) construction of dedicated power lines to about 5,200 tubewells under the project so that sufficient power is available to achieve planned irrigation intensities; (v) improvements to management capability, through construction of buildings, provision of vehicles and equipment, training, monitoring and evaluation; and (vi) provision of technical services to undertake special studies including management, socio-economic performance and cost recovery. 8. The total cost of the project is estimated at US$99.7 X equivalent, including taxes and duties of US$3.0 H. Foreign exchange costs are estimated at US$14.2 H (14Z). A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in India are given in Schedules C and D respectively. The Staff Appraisal Report, No. 6034-IN, dated August 15J 1986 has been circulated separately. 9. Rationale for IDA Involvement. Improved management and efficiency of water delivery and use are fundamental objectives of Bank support to the irrigation sector in India. In support of these strategic objectives, the proposed project would: (a) Take advantage of lessons learnt and the technical principles proven successful under the Uttar Pradesh Public Tubewells II Project (Credit 1332-IN). These principles have resulted in irrigation services provided by PTWs that are timely, reliable and predictable. (b) Address serious organizational and management problems that have hampered public groundwater development in Bihar in the past. A series of major organizational changes, developed in cooperation with GOB during preparation, would be introduced under the project. (c) Support the review and formulation of improved cost recovery policies and procedures for: Ci) setting the level of water charges; (ii) billing for irrigation services; (iii) collecting bills on time; and (iv) monitoring the financial performance of the newly established Tubewell Wing of the MID.  -3- IDA involvement in the project is crucial to ensure successful introduction of improved tubevell technology and support effectively GOB's efforts to continue and fully implement its planned institutional and cost recovery policy reforms. 10. Aareed Actions. The Government has agreed to: (1) provide an effec- tive T&V agricultural extension service throughout the project districts before project tubewells in a district are energized; (2) locate, plan, design, construct, and operate and maintain the project works in accordance with satisfactory standards and criteria; (3) maintain sound accounts with timebound audits; (4) maintain a line government department responsible for public groundwater development throughout the State that would be fully staffed, funded and provided with facilities such that the project can be implemented effectively and efficiently; (5) monitor and evaluate project performance in terms of irrigation service and agricultural production; (6) prepare regular progress reports with OM costs and cost recovery separately identified; (7) review and formulate procedures to promptly collect water charges with provision to take appropriate action to collect arrears; (8) under- take studies to formulate an improved system of water charges appropriate to the new technology to be introduced under the project; and (9) maintain water charges to ensure that revenues would cover the average financial O&H costs and a reasonable share of investment cost. In addition, although the project is expected to improve the environment and reduce health hazards since tubewell water is potable, GOB has agreed to take all measures necessary to minimize the risk of water-related diseases in the project area. 11. Justification. The project would reduce farmers' risk by providing a reliable irrigation service and thereby expand and stabilize agricultural production. It would also lead to more efficient use of groundwater resour- ces and power. The quantifiable benefits of full development would include incremental annual foodgrain production of about 247,000 tons, valued at about US$28 M per year. About 495,000 farm families comprising small and marginal farmers would benefit directly from the project. The economic rates of return (ERR) for the various project components range from 29Z to 42%, for an overall project ERR of about 33%. 12. Risks. A potential risk is underutilization of the additional irrigation capacity created by the project investments since the project is directed at small farmers. In Bihar, low farmer response to irrigation is usually a result of poor quality of the irrigation service. Under the proposed project, this risk would be substantially reduced by providing reliable, timely, and equitable irrigation service, and by improved system management. 13. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington, D. C. August 15, 1986  -4- Schedule A INDIA Bihar Public Tubewell Proiect (1S$ Million)}_ __ Estimated Cost a/ Local Foreign Total Proiect Component A. Works 1. New Tubewell Systems 12.84 2.94 15.78 2. Modernization of Existing Tubewells 11.66 5.94 17.60 3. Rehabilitation of Existing Tubewells 10.72 0.04 10.76 4. Dedicated Power Lines 21.47 0.73 22.20 B. ManaRemeut Iwvrovements I. Buildings 3.97 - 3.97 2. Vehicles and Equipment 1.85 - 1.85 3. Training; Visits and Study Tours; Monitoring and Evaluation; and Technical Services 0.42 - 0.42 Baseline Costs 62.93 9.65 72.58 Physical Contingencies 4.09 0.93 5.02 Price Contingencies 18.50 3.61 22.11 Total Proiect Cost 85.52 14.19 99.71 (US$ Million) Financinx Plan: Local Fozeipn Total GOI/GOB 31.7 - 31.7 IDA 53.8 14.2 68.0 TOTAL 85.5 14.2 99.7 a/ Including taxes and duties of about US$3.0 million equivalent.  Schedule8 -5- INDIA Bihar Public Tubewell Proiect A. Procurement coDpoUents ICB LCB Other _otaL CDf. A. Works 1. New Tubevella - - 4.8 (3.7) 2.0 (1.4) 9.7 (5.1) 2. Modernized Tubewells - - 6.3 (4.8) 1.1 (0.8) 9.7 (5.6) 3. Rehabilitated Tubevells - - 6.2 (4.7) 0.7 (0.5) 9.3 (5.2) 4. Duildings - - 4.7 (3-3) - 5.2 (3.3) Sub Total - 22.0 (16.5) 3.8 (2.7) 33.9 (19.2) B. Manasement Improvements A/ - - 0.5 (0.5) 0.5 (0.5) C. Goods 1. PVC pipe aud fittings 21.8 (16.0) - - 21.8 (16.0) 2. Pump Units and ancillaries - 4.8 (3.6) - - 4.8 (3.6) 3. Steel pipe and fittings 3.3 (2.4) - - - 3.3 (2.4) 4. Other Misc. equipment - 4.7 (3.5) 0.8 (0.6) 5.5 (4.1) Sub Total 25.1 (18.4) 9.5 (7.1) 0.8 (0.6) 35.4 (26.1) C. Power Supply 1. Works - 4.0 (3.1) 0.7 (0.5) 7.3 (3.6) 2. Materials & Equipment - 22.6 (16.5) - - 22.6 (16.5) Sub Total 26.6 (19.6) 0.7 (0.5) 29.9 (20.1) Total 25.1 (18.4) 58.1 (43.2) 5.8 (4.3) 99.7 (65.9) hI Note: Figures in parentheses are the amounts allocated under the Credit to various procurement categories. a/ Including Training, Study Tours, M&E, and Consultancies and Studies; excluding vehicles and equipment. hi Excluding US$ 2.1 N which is not allocated to specific works. B. Proposed Credit Allocation S of Expenditures Categorv Amount to be Financed OUSS Million) 1. Civil Works 19.2 75Z 2. Power Supply (Tubewell Energization) 20.1 75Z 3. Materials & Equipment 26.1 100Z of foreign expenditures 100% of local expenditures (ex-factory costs) and 75Z 4. Management Improvements 0.5 1002 5. Unallocated 2.1 Total 68.0 C. Estimated Disbursements (US$ Millions) IDA FY FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 Annual 1.9 6.2 9.5 12.2 14.3 12.2 8.8 2.9 Cumulative 1.9 8.1 17.6 29.8 44.1 56.3 65.1 68.0  -6- Schedule C INDIA Bihar Public Tubewell Proiect Timetable of Key Proiect Processing Events (a) Time taken to prepare: Six Months (b) Prepared by: the Government of Bihar (GOB) with IDA Assistance (c) First IDA Mission: January 1985 (d) Appraisal Mission Departure: September 1985 (e) Negotiations: June 16-23, 1986 (f) Planned Date of Effectiveness: January 1987 (g) List of Relevant PCRs and PPARs: Not Applicable  Schedule D Page 1 of 4 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of March 31, 1986) US$ million Loan or Fiscal (Net of Cancellations) Credit Year of No. Approval Purpose Bank IDA 1/ Undisbursed 2/ 57 Loans/ 2,662.9 - 107 Credits fully disbursed - 6,563.7 - 482-IN 1974 Karnataka Dairy - 29.2 0.02 1251-IN 1976 Andhra Pradesh Irrigation 145.0 - 8.55 680-IN 1977 Kerala Agric. Development - 30.0 4.26 690-IN 1977 West Bengal Agricultural Extension & Research - 12.0 5.12 747-IN 1978 Second Foodgrain Storage - 107.0 2.49 761-IN 1978 Bihar Agricultural Extension & Research - 8.0 3.83 788-IN 1978 Karnataka Irrigation - 117.6 10.92 793-IN 1978 Korba Thermal Power - 200.0 8.46 806-IN 1978 Jammu-Kashmir Horticulture - 14.0 7.98 824-IN 1978 National Dairy - 150.0 1.43 842-IN 1979 Bombay Water Supply II - 196.0 84.94 848-IN 1979 Punjab Water Supply & Sewerage - 38.0 2.89 855-IN 1979 National Agricultural Research - 27.0 8.93 1648-IN 1979 Ramagundam Thermal Power 50.0 - 36.14 889-IN 1979 Punjab Irrigation - 129.0 9.16 963-IN 1980 Inland Fisheries - 20.0 11.56 981-IN 1980 Population II - 46.0 15.89 1003-IN 1980 Tamil Nadu Nutrition - 32.0 11.63 1011-IN 1980 Gujarat Irrigation II - 175.0 62.19 1012-IN 1980 Cashewnut - 22.0 12.47 1027-IN 1980 Singrauli Thermal II - 300.0 69.02 1028-IN 1980 Kerala Agricultural Extension - 10.0 3.76 1033-IN 1980 Calcutta Urban Transport - 56.0 13.20 1034-IN 1980 Karnataka Sericulture 54.0 19.50 1046-IN 1980 Rajasthan Water Supply & Sewerage - 80.0 37.91 1843-IN 1980 Industry DFC XIII 97.6 - 1.93 1053-IN 1980 Farakka Thermal Power - 225.0 39.09 1887-IN 1980 Farakka Thermal Power 25.0 - 25.00 1897-IN 1981 Kandi Watershed and Area Development 30.0 - 15.09 1072-IN 1981 Bihar Rural Roads - 35.0 7.61 1078-IN 1981 Mahanadi Barrages - 83.0 35.15 1082-IN 1981 Madras Urban Development II - 42.0 15.82 1108-IN 1981 M.P. Medium Irrigation - 140.0 55.21 1112-IN 1981 Telecommunications VIII 301.2 39.92 1116-IN 1981 Karnataka Tank Irrigation - 54.0 29.30 1125-IN 1981 Hazira Fertilizer Project - 399.1 53.40 1135-IN 1981 Maharashtra Agricultural Ext. - 23.0 4.72 1137-IN 1981 Tamil Nadu Agricultural Ext. - 28.0 12.86 1138-IN 1981 M.P. Agricultural Ext. II - 37.0 22.60  Schedule D -8- Page 2 of 4 US$ million Loan or Fiscal (Net of Cancellations) Credit Year of No. Approval Purpose Bank IDA I/ Undisbursed 2a 1146-IN 1981 National Cooperative Development Corp. II - 125.0 47.60 1172-IN 1982 Korba Thermal Power Project II - 400.0 208.74 1177-IN 1982 Kadhya Pradesh Major Irrigation - 220.0 125.89 2050-IN 1982 Tamil Nadu Newsprint 100.0 - 0.13 1178-IN 1982 West Bengal Social Forestry - 29.0 17.67 1185-IN 1982 Kanpur Urban Development - 25.0 12.12 2051-IN 1982 ICICI XIV 150.0 - 11.30 2076-IN 1982 Ramagundam Thermal Power ri 300.0 - 238.30 1219-IN 1982 Andhra Pradesh Agricultural Ext. - 6.0 4.28 2123-IN 1982 Refineries Rationalization 200.0 - 59.13 2165-IN 1982 Rural Electrification III 304.5 - 167.71 1269-IN 1982 Kallada Irrigation - 60.0 19.92 2186-IN 1982 RaLlada Irrigation 20.3 - 20.00 1280-IN 1983 Gujarat Water Supply - 72.0 58.66 1286-IN 1983 Jamu/Kashmir and Haryana Social Forestry - 33.0 21.06 1288-IN 1983 Chambal Madhya Pradesh Irrigation II - 31.0 15.22 1289-IN 1983 Subernarekha Irrigation - 127.0 98.12 2205-IN 1983 Krishna-Godavari Exploration 165.5 - 89.73 1299-IN 1983 Railways Modernization & Maintenance II - 200.0 141.75 2210-IN 1983 Railways Modernization & Maintenance II 200.0 - 197.04 2241-IN 1983 South Bassein Gas Development 139.3 - 133.71 1319-IN 1983 Haryana Irrigation II - 150.0 81.29 1332-IN 1983 U.P. Public Tubewells II - 101.0 74.78 1356-IN 1983 Upper Indravati Hydra Power - 170.0 134.20 2278-IN 1983 Upper Indravati Hydra Power 156.4 - 156.01 1369-IN 1983 Calcutta Urban Development III - 147.0 126.39 2283-IN 1983 Central Power Transmission 250.7 - 250.07 2295-IN 1983 Himalayan Watershed Management 46.2 - 44.83 1383-IN 1983 Maharashtra Water Utilization - 32.0 22.29 2308-IN 1983 Maharashtra Water Utilization 22.7 - 22.64 2329-IN 1983 Madhya Pradesh Urban 24.1 - 22.69 1397-IN 1984 Orissa Irrigation II - 105.0 60.35 1424-IN 1984 Rainfed Areas Watershed Dev. - 31.0 33.30 1426-IN 1984 Population III - 70.0 63.61 1432-IN 1984 Karnataka Social Forestry - 27.0 21.12 2387-IN 1984 Nhava Sheva Port 250.0 - 235.41 2393-IN 1984 Dudhichua Coal 151.0 - 141.88 2403-IN 1984 Cambay Basin Petroleum 242.5 - 227.94 2415-IN 1984 Madhya Pradesh Fertilizer 203.6 - 169.39 1454-IN 1984 Tamil Nadu Water Supply - 36.5 39.58 SF-12-IN 1984 Tamil Nadu Water Supply 36.5 40.18 1468-IN 1984 Periyar Vaigai II Irrigation - 17.5 8.47 SF-16-IN 1984 Periyar Vaigai II Irrigation - 17.5 18.90 1483-IN 1984 Upper Ganga Irrigation - 125.0 126.67 1496-IN 1984 Gujarat Medium Irrigation - 172.0 140.32 2416-IN 1984 Indira Sarovar Hydroelectric 157.4 - 154.92  Schedule D -9- Page 3 of 4 US$ million Loan or Fiacal (Net of Cancellations) Credit Year of No. Approval Purpose Bank IDA 1/ Undisbursed 2/ SF-20-IN 1984 Indira Sarovar Hydroelectric - 129.8 138.51 2417-IN 1984 Railways Electrification 280.7 - 280.00 2442-IN 1984 Farakka II Thermal Power 300.8 - 295.24 2452-IN 1984 Fourth Trombay Thermal Power 135.4 - 131.70 1502-IN 1984 National Cooperative Development Corporation III - 220.0 201.59 1514-IN 1985 Kerala Social Forestry - 31.8 31.95 1523-IN 1985 National Agric. Extension I - 39.1 43.94 1544-IN 1985 Bombay Urban Development - 138.0 136.89 2497-IN 1985 Narmada (Gujarat) Dam and Power 200.0 - 200.00 1552-IN 1985 Narmada (Cujarat) Dam and Power - 100.0 97.78 1553-IN 1985 Narmada (Cujarat) Canal - 150.0 161.29 1569-IN 1985 Second National Agricultural Ext. - 49.0 55.77 1611-IN 1985 National Social Forestry - 165.0 189.41 1613-IN 1985 Indira Sarovar Hydroelectric - 13.2 14.11 2498-IN 1985 Jharia Coking Coal 248.0 - 248.00 2505-IN 1985 Maharashtra Petrochemical 300.0 - 293.11 2534-IN 1985 Second National Highway 200.0 - 200.00 2544-IN 1985 Chandrapur Thermal Power 300.0 - 277.29 2555-IN 1985 Rihand Power Transmission 250.0 - 249.39 2582-IN 1985 Kerala Power 176.0 - 176.00 1619-IN 1986 West Bengal Minor Irrigation - 99.0 114.97 1621-IN 1986 Maharashtra Composite Irrigation - 160.0 186.90 1622-IN 1986 Kerala Water Supply and Sanitation - 41.0 48.60 1623-IN 1986 West Bengal Population - 51.0 55.64 1631-IN 1986 National Agricultural Research IT* - 72.1 72.10 2629-IN 1986 Industrial Exporf Dev. Finance* 90.0 - 90.00 2630-IN 1986 ICICI-Indus. Exp. Dev. Finance* 160.0 - 160.0 Total 8,734.6 13,808.8 of which has been repaid 1,385.2 247.3 Total now outstanding 7,349.4 13,561.5 Amount Sold 133.8 of which has been repaid 133.8 - - Total now held by Bank and IDA 3/ 7,349.4 13,561.5 Total undisbursed (excluding *) 4,780.27 3,963.07 1/ IDA Credit amounts for SDR-denominated Credits are expressed in terms of their US dollar equivalents, as established at the time of Credit negotiations and as subsequently presented to the Board. 2/ Undisbursed amounts for effective SDR-denominated IDA Credits are derived from cumulative disbursements converted to their US dollar equivalents at the SDR/US dollar exchange rate in effect an March 31, 1986. 31 Prior to exchange adjustment. * oNt yet effective.  Schedule D -10- Page 4 of 4 B. STATEMENT OF IFC INVESTMENTS (As of March 31, 1986) Amount (US