India - Fertilizer Industry Project

Dom-at of The World Bank FOR OMCIL USE ONLY Report No. 6297. PROJECT COMPLETION REPORT INDIA - FERTILIZER INDUSTRY CREDIT (CREDIT 598-IN) June 23, 1986 Industry Department This document has a restricted disttibution and may be used by recipients only in the performance of teit officl duties. Its contents may not otherwise be disclosed without World Bank authorization.  FOREIGN EXCHANGE RATES Mo/Year Appraisal 04/75 US$1 - Rupees 7.85 Board Approval 12/75 US$1 - Rupees 7.80 Credit Closing 12/82 US$1 = Rupees 9.70 Project Completion Report 02/86 US$1 - Rupees 12.50 FISCAL YEAR April 1 - March 31 ABBREVIATIONS ASC - Administrative Staff College of India, Hyderabad CFL - Coromandel Fertilizers Ltd. DOA - Department of Agriculture FCI - Fertilizer Corporation of India GOI - Government of India GSFC - Gujarat State Fertilizers Ltd. HFC - Hindustan Fertilizers Corporations Ltd. HPCL - Hindustan Petroleum Corp. HSC - Hindustan Steel Corporation Ltd. IDBI - Industrial Development Bank of India IPFCO - Indian Farmers' Fertilizers Cooperative Ltd. MFL - Madras Fertilizers Ltd. NCAER - National Council of Applied Economic Research NFL - National Fertilizers Ltd. NLC - Neyveli Lignite Corp. PDIL - Planning and Development India Ltd. RCF - Rashtriya Chemicals & Fertilizers Ltd. RITES - Railway Investigation Transport Engineering Services SAIL - Steel Authority of India, Rourkela (the new name of HSC) SPIC - Southern Petrochemical Industries Corp. ZAC - Zuari Agrochemicals Ltd.  FOR OFFCIAL USE ONLY THE WORLD SANK Washington, D.C. 20433 U.S.A. OIice of Dirctor-Cetal Opeations Vu4ut June 23, 1986 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report: India - Fertilizer Industry Credit (Credit 598-IN) Attached, for information, is a copy of a report entitled "Project Completion Report: India - Fertilizer Industry Credit (Credit 598-IN)" prepared by the Industry Department. Under the modified system for project performance auditing, further evaluation of this project by the Operations Evaluation Department has not been made. Yves Rovani By Otto Maiss Attachment 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.  FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT INDIA-FERTILIZER INDUSTRY CREDIT (CREDIT 598-IN) TABLE OF CONTENTS Page No. PREFACE ................. . ....... , ..... ...... i BASIC DATA SHEET ... .................ii HIGHLIGHTS v Io INTRODUCTION ...........1 II. PROJECT BACKGROUND ................... ......... . . . I A. Project Origin, Preparation, Appraisal, Approval and Credit Effectiveness .................. 1 B. Project Description and Objectives 2 C. Project Scope Revision 4 D. Subprojects Characteristics 5 Ea Project Cost ........ 6 F *Credit Allocation 8 G. Sub-borrowers Characteristics . .......8 III. PROJECT IMPLEMENTATION AND MANAGEMENT ............ 9 A. Achievement of Project Objectives ..... 9 B. Project Management ................... . 10 C. Technical Assistance and Training ....11 D. Use and Performance of Engineering Contractors 11 E. Transfer of Technology ... . . . . ... 12 F. Procurement and Performance of Suppliers 12 G. Implementation Schedule 12 IV. OPERATING PERFORMANCE ... .......... ........ 13 A. Commissioning and Start-up 13 B. Production and Capacity Utilization 13 V. FINANCIAL PERFORMANCE ................ 14 A. Financial Rates of Return 14 B. Financial Performance 15 VI. SECTORAL AND ECONOMIC PERFORMANCE .........17 A. Economic Rates of Return 17 B. Stability of Fertilizer Supply .......0...40000......... 17 C. Environmental Aspects 18 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.  TABLE OF CONTENTS (Cont'd) Page No. VII. ASSOCIATION PERFORMANCE .............. 18 VIII. LESSONS LEARNED ................. ............................. 19 ANNEXES 2-1 Revision of Project Scope ........ .... ... ... ....... ................ . 21 2-2 Project Cost and Credit Allocation ........................... 22 2-3 Production Trends of India's Fertilizer Plants, 1981/82-1984/85 ... 23 3-1 Disbursement Schedule for the Credit ...o ........................ 24 5-1 Retention Price Formula * *** ...***.......... *............ .... . . ............. 25 5-2 Financial and Economic Rates of Return for Select*O Subprojects .. 26 5-3 Summary of Financial Information for Selected Sub-borrower's ... ... 27 6-1 Historical Consumption, Production, and Import of Fertilizers in India, 1983/84 .............................................. 28  - i - PROJECT COMPLETION REPORT INDIA-FERTILIZER INDUSTRY CREDIT (CREDIT 598-IN) PREFACE 1. The Association approved a credit of US$105.0 million equivalent (Credit 598-IN) on December 31, 1975 to the Government of India (GOI) to assist India's fertilizer industry to modernize its existing production facilities, eliminate bottlenecks in prodtuction, improve pollution control systems, and install energy-efficient equipment. Under the Credit, thirty-six subprojects have been implemented by 13 subborrowers in the public, private and joint sectors, accounting for 65% of India's fertilizer manufactiprers. The Credit was onlent to beneficiaries, partly through the Industrial Development Bank of India (IDBI) with funds earmarked. In addition, GOI sponsored three fertilizer industry related studies under technical assistance. 2. The Project was designed as a pilot project of a new type of program lending which is tailored for a specific industry with a number of firm subproject components. As compared with traditional program or sector loans whose subproject contents were selected and implemented under the initiative of governments, the Project was designed to enable the Association to establish direct relationships with subproject executing entities. Therefore, all the subprojects under the Project were appraised individually by the Association mission during appraisal, and included in the Project scope as firm components. In the course of Project implementa- tion, however, the original concept of the Project proved to be difficult to manage, as most of the subprojects were dropped and had to be replaced by others with similar objectives. Out of nineteen original subprojects, nine were dropped and replaced by twenty-six new subprojects. Against this background, this Project Completion Report (PCR) has been prepared partly following the line used in preparing the PCR for Development Finance Corporation (DFC) projects within the basic framework used for normal industrial projects. 3. In accordance with the revised project performance reporting procedures this report has been read in the Operations Evaluation Department (OED) but the project was not audited by OED staff. The draft Completion Report was sent to the Borrower for comments; however, none were received.  - ii - PROJECT COMPLETION REPORT INDIA-FERTILIZER INDUSTRY CREDIT (CREDIT 598-IN) BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual and Item Estimate Final Estimates Project Cost (US$ million) 238.7 169.2 Cost Underrun or Overrun (%) - 29.1 Number of Subprojects 22 a/ 39 a/ Credit Amount (US$ million) Disbursement 105.0 101.9 Cancelled - 3.1 Project Cost and Credit Allocation by Sub-borrower Credit Project Credit Project Allocation Cost Allocation FCI ) ) 3.4 2.2 RCF ) ) 19.9 13.0 HFC ) 79.0 ) 38.5 b/ c/ 35.4 20.9 NFL ) ) 4.5 3.4 PDIL ) ) 0.4 0.4 NLC 19.5 12.0 21.1 10.9 HSC (SAIL) 26.1 15.5 22.2 16.2 GSFC d/ 20.6 9.0 17.1 4.5 SPIC d/ 46.2 14.0 12.3 8.1 HPCL 25.9 4.0 - - ZAC d/ 10.2 6.0 13.6 10.5 CFL e/ 8.5 4.0 3.1 1.7 MFL e/ 1.7 1.0 0.8 0.5 IFFCO d/ - - 17.1 10.2 DOA 1.0 1.0 0.4 0.4 Total 238.7 105.0 169.2 101.9 a/ Three fertilizer related studies are included. b/ This amount was allocated to FCI before its restructuring into five companies. c/ Equipment procured by PDIL, which was FCI's engineering department prior to its restructuring, has been allocated to other operating companies. d/ Credit proceeds were onlent to these subborrowers through IDBI. e/ Credit proceeds were sold by the Borrower to these two companies.  - iii - Cumulative IDA Loan Disbursement FY76 FY77 FY78 FY79 FY80 FY81 FY82 FY83 l ~~~~ Appraisal Estimate 13.6 34.6 84.0 105.0 - - - - Actual 1.0 7.5 18.0 35.9 60.0 83.6 96.9 101.9 Stabilized Capacity Utilization of Major Plants under the Project (%) After Project a/ Company Plant Before Project Appraisal Actual FCI Urea 54 80 59 RCF Ammonia 76 80 89 Phosphoric Acid 61 80 78 HFC Urea 38 80 37 NLC Urea 56 80 76 SAIL Calcium Ammonium Nitrate 39 80 34 GSFC Urea 72 80 86 Phosphoric Acid 55 80 86 SPIC Ammonium/Urea 73 80 96 CFL Ammonia/Urea 76 80 84 ZAC Ammonia/Urea 87 80 89 IFFCO Ammonia 92 N/A 95 Appraisal Estimate Actual Financial Rate of Return (Z) 14-60% 2-12% Economic Rate of Return (%) 18- 100% 12-100% OTHER DATA First Mention in Files 09/74 Preappraisal Mission 01/75 Appraisal Mission 04/75 Negotiations 11/75 Board Approval Date 11/16/75 Loan Signature Date 12/31/75 Effectiveness Date 03/01/76 Original Closing Date 06/30/80 Actual Closing Date 12/31/82 Borrower GOI Executing Agency 13 Fertilizer Companies and GOI a/ Average capacity utilization for four years after the Project.  - iv - MISSION DATA Mission Mo/Yr. No. of Weeks Persons Report Date Identification }1/74 1/2 1 12/05/74 Preparation/ Preappraisal 01/75 3 7 02/07/75 Appraisal 04/75 3 4 05/23/75 Supervision 05/76 2 4 05/25/76 Supervision 11/76 3 2 12/10/76 Problem Project Brief 03/77 - - 03/24/77 Supervision 07/77 2 2 08/09/77 Supervision 11/77 1 1 01/04/78 Supervision 03/79 1/2 1 05/29/79 Supervision 12/80 1/2 1 02/03/81 Supervision - 1 07/12/82  PROJECT COMPLETION REPORT INDIA-FERTILIZER INDUSTRY CREDIT (CREDIT 598-IN) HIGHLIGHTS 1. In mid-1970, India's fertilizer industry operated at a level of capacity utilization below 60%, mainly due to bottlenecks in ntilities supply, the use of old technology and process design faults. The Project was aimed at assisting India to remove the various obstacles to efficient operation of the fertilizer industry. The subprojects implemented under the Project include plant modifications, establishment of additional storage facilities, installation of captive powvr and energy saving equipment, and improvement of pollution control and testing facilities (paras. 1.01, 2.04-2.08). 2, The Project achieved most of its original objectives successfully. Rehabilitation/debottlenecking subprojects have contributed to an overall increase in capacity utilization at most of the existing production facilities, as anticipated at appraisal. After the Project, capacity utilization of the subproject entities, except for three companies which suffered from other unanticipated bottlenecks such as region-wide electricity interruptions, has increased substantially. The industry-wide capacity utilization has reached 74% for nitrogenous plants and 89% for phosphatic plants by 1984/85 as compared with the low level of helow 60% in the mid-1970s (para. 3.01). 3. Besides the improvement in capacity utilization, the Project also contributed to the upgrading of the industry's management efficiency and financial situation. Following IDA's recommendation, the giant public sector company, Fertilizer Corporation of India (FCI), which had been operating several large scale fertilizer plants throughout India with inadequate management controls, was restructured into five smaller and more manageable regional corporations. Also, fertilizer prices which stayed at an extremely low level in the mid-1970s, not sufficient for even efficient fertilizer manufacturers to generate positive cash flow, were substantially raised to allow efficient fertilizer manufacturers to become financially sound. The retention price formula, which was Introduced in 1977 at IDA's recommendation, was designed to enable efficient operators to realize a 12% after tax return on investments (paras. 7.03-7.04). 4. Even though the Project has ultimately achieved most of its original objectives, it encountered considerable difficulties in implementation. The Project scope changed substantially several times: nine subprojects in the original subproject list of 19 were dropped and replaced by 26 other subprojects; the Project was completed 52 months behind original schedule; and a portion of the credit (US$3.1 million out of US$105 million) had to be cancelled because GOI could not prepare in time the needed replacement subprojects (paras. 3.11-3.13).  - vi - 5. From the problems experienced in Project implementation, three major valuable lessons have been learned. One lesson was that a project involving various types of small subprojects by a number of entities should be coordinated by a central unit within the country charged with the responsibility for monitoring and coordinating the Project, preferably at the government level. Even though this was envisaged in the Project, it was not put into effect. The other lesson was that the Project should have been designed to include a smaller number of relatively large subprojects if the original approach were to be workable. Another lesson was that a project involving a number of subproject entities requires a good progress and completion reporting system using a etandardized format and content. Due to the inefficient reporting system, the Ministry of Chemical Industry could not consolidate the subproject data and prepare its draft Project Completion Report (PCR) (paras. 8.01-8.04).  - I.- PROJECT COMPLETION REPORT INDIA-FERTILIZER INDUSTRY CREDIT (CREDIT 598-IN) I, INTR0DUCTION 1.01 The dramatic fertilizer price increase in the early 1970s hit fertilizer importing countries, including India, presenting a major threat to the exploitation of the full potential of high yielding varieties, and thus the food self-sufficiency programs of these countries. In 1974/75 India was importing 48% of its total nitrogen (N) fertilizer requirements, 52% of its phosphate (P) consumption, and 100% of potash (K) requirements. Fertilizer imports had been far bigger than previously expected mainly because actual domestic production had fallen short of expectations due to low capacity utilization of installed fertilizer capacity. Major reasons for the low capacity utilization were: (i) use of old technologies; (ii) process design faults; (iii) shortage of electric power and other utilities; (iv) shortage of raw materials; (v) management/labor problems; (vi) financing gaps; and (vii) technical limitations. Because of these constraints, the target of reducing its dependence on imports down to 30% during the Fifth Five-Year Plan (1974/75-1978/79) appeared difficult to achieve. 1.02 Against this background, India prepared an investment program in collaboration with the Association aimed at expansion of its domestic fertilizer production base by enhancing the capacity utilization of existing facilities through rehabilitation/debottlenecking. At GOI's request, IDA provided assistance to implement the program. Under the Project thirty-five subprojects have been implemriated to modernize technology, eliminate bottlenecks, improve efficiency of energy use and reduce the level of polluting effluents. The Project was initiated in September 1974, appraised in April 1975, approved by the Board in November 1975, and completed in April 1984, 52 months behind schedule. II. PROJECT BACKGROUND A. Project Origin, Preparation, Appraisal, Approval and Credit Effectiveness 2.01 Since 1967 the Association had been involved in the Indian fertilizer sector by financing the establishment of several grassroot fertilizer production facilities in India. To meet the increasing needs of the agriculture sector, GOI initiated a program in 1974 to expand domestic fertilizer production under the Fifth Five-Year Plan. The program consisted of two parts: (i) expansion of grassroot fertilizer production capacities; and (ii) improvement of capacity utilization of existing plants which then were operating at below 60% of their designed capacities. In September 1974, GOI reviewed the possibility of Bank Group assistance in  - 2 - implementing the latter part of the program in a meeting with a Bank mission then visiting India, and subsequently requested an IDA credit of US$105 million for its financing. Following an identification mission in November 1974 to assist in the preparation of subprojects to be implemented under the Project, a preappraisal mission visited India in January 1975, agreed with GOI on the project scope, capital cost estimates, and IDA role. The Project was appraised in April/May 1975. The IDA Credit was negotiated and approved by the Board of the Association in November 1975. It became effective on March 1, 1976. 2.02 The subprojects in the original list of the Project were selected after detailed discussions with the concerned fertilizer companies and review with GOI to ensure their quick implementation. However, the subproject approval procedures within the companies and in the Government took a long time. In the process, almost half of the original subprojects were dropped and replaced with others having similar objectives. Because of substantial delays in the start of implementation, a Problem Project Brief was prepared in March 1977 delineating the problems facing the Project. The contents of subprojects were revised several times in order to substitute problem subprojects with new ones. As a result, the completion date of the Project which was originally set for December 31, 1979 was postponed three times, The cumulative delay in Project implementation was 52 months. 2.03 The Credit was made to GOI on standard IDA terms. About two-thirds of the Credit (US$67.0 million equivalent) was onlent by GOI directly to public sector companies; and the remaining one-third (US$33.3 million equivalent) onlent to private sector companies through the I.ndustrial Development Bank of India (IDBI). The balance of Credit proceeds (US$2.2 million equivalent) was sold by the Borrower to two companies at the prevailing exchange rates. B. Project Description and Objectives 2.04 The objectives of the Credit were to: (i) assist in removing various limitations facing the Indian fertilizer industry and thereby raise production in the existing facilities from the then industry-wide average level of less than 60% to about 80-90% capacity utilization; (ii) help several companies install pollution control facilities consistent with the agreed environmental standards; and (iii) provide technical assistance to facilitate fertilizer sector planning at the Government level. 2.05 Project components were selected after reviewing the needs of the Indian fertilizer industry with the Ministry of Petroleum and Chemicals (MPC) and the fertilizer producing companies. Nineteen original subprojects were selected to be carried out by nine companies; three fertilizer sector studies were included to help GOI in its sector planning. 2.06 The original subprojects under the Project, and their respective sponsors and objectives are summarized below:  - 3 - Original Project Sponsors and Subprojects Subproject Sponsor Subproject Objective 1. Fertilizer Corporation - Boiler/power set Reduction of the plant's of India (FCI) at Gorakhpur dependence on outside power supply - Boiler/power set at Durgapur - Boiler at Trombay Additional steam generation - Ammonia tank wagons Increase in operational and storage at stability Trombay - Pollution control Environmental protection and testing equip- ments 2. Neyveli Lignite - Feedftock conver- Conversion of feedstock Corpration (NLC) sion from lignite to fuel oil 3. Hindustan Steel - Feedstock conver- Conversion from coke gas Corporation (HSC) sion to naphtha 4. Gujarat State - Purge gas recovery Energy efficiency Fertilizer Corp. (GSFC) - Fluorine Recovery Recovery of fluorine from gaseous effluent - Phosphoric acid plant modernization plant debottle- necking 5. Hindustan Petroleum - Refinery debottle- Expansion of production Corp. (HPCL) necking capacity 6. Madras Fertilizers Ltd. - Urea debottleneck- Plant modernization (MFL) ing - Ammonia process Process computerization control unit 7. Southern Petrochemical - Fluorine recovery Recovery of fluorine Industries Corp. (SPIC) from effluent - Soda ash plant Conversion of excess ammonia 8. Coromandel Fertilizers - Boiler/power set Increase in reliability Ltd. (CFL) of power supply - Fluorine recovery For planned aluminum fluoride plant  - 4 - 9. Zuari Agro Chemicals - Ammonia plant Plant modernization (ZAC) debottlenecking - Urea plant pollu- " tion control 10.GOI (technical Assistance) - Various Fertilizer Study on Fertilizer Related Studies demand projections, distribution, and transportation. C. Project Scope Revision 2.07 The Project scope was substantially revised four times as shown in Annex 2-1, and summarized below. Project Scope Change in Subprojects a/ 1st 2nd 3rd 4th Original Revision Revision Revision Revision (Dec. 1975) (Mar. 1978)(Jan. 1980)(Jun. 1980)(April 1981) Addition of New Subprojects 19 17 5 1 4 Drop of Subprojects - 9 1 - - Total Number of Subprojects 19 27 31 32 36 = _ _ = Number of Sub-borrowers 9 7 13b/ 13 13 Number of Plants involved 11 14 15 15 15 a/ Excluding three study components under technical assistance. b/ FCT has been restructured into five companies. Although the Project was originally to include nineteen firm subproject components appraised individually as normal industrial projects, the companies decided not to proceed with several of them and they were replaced by a number of smaller subprojects with similar objectives. Out of the nineteen original subprojects1/, nine subprojects were dropped and replaced by twenty-six others. 1/ Three studies under technical assistance are excluded hereafter unless otherwise indicated when subprojects are mentioned.  2.08 There were three major reasons for the cancellation of 9 of the original subprojects. First, four original subprojects were dropped due to government decisions. Three planned flourine recovery subprojects were dropped by the sponsors (GSFC, SPIC, CFL) in light of the GOI decision that these subprojects should be based on commercially unproven Indian technology rather than the internationally-available and proven technology. The HPCL's refinery debottlenecking subproject was dropped in view of the proposed new Mathura refinery which was to be established in the same marketing area. Second, financial constraints led to the cancellation of a chlorine/soda ash subproject sponsored by SPIC. This sub-project was subsequently implemented without Bank Group financing. As its financial situation improved, SPIC implemented three other smaller subprojects later. Third, two other companies voluntarily decided not to proceed with their subprojects for technical and economic reasons. Ammonia process control (MIC) and boiler (FCI) were cancelled voluntarily by the subproject entities. Replacement subprojects were provided, reviewed and accepted by the Association. D. Subprojects Characteristics 2.09 The thirty-nine subprojects implemented are grouped into four main categories: (i) fertilizer capacity expansion and process efficiency improvements including plant modification/rehabilitation and additional storage of intermediate product; (ii) capture power and utilities; (iii) pollution control and testing equipment; and (iv) fertilizer related studies. The table below compares the original subprojects with the ones actually implemented. Characteristics of Subprojects Category At Appraisal Actual A. Fer.ilizer Expansion and Process Efficiency Improvement 1. Plant Phosphoric acid plant Phosphoric acid plant Rehabilitation debottlenecking (GSFC), debottlenecking (RCF, Refinery debottlenecking GSFC), ANP plant rehab- (HPCL), u'rea debottle- ilitation (RCF), necking, Ammonia process ammonia/urea plant control (MFL), Ammonia modification (MFL, HFC, debottlenecking (ZAC). SPIC, IFFCO). 2. Feedstock Feedstock conversion Feedstock conversion Conversion (NLC, SAIL) (RCF, NLC, SAIL) 3. Waste Recovery Purge gas recovery Purge gas recovery (GSFC) fluorine (GSFC, SPIC, IFFCO) recovery (GSFC, SPIC, CFL)  - 6 - 4. Additional Ammonia storage and Ammonia sc.6rge (FCI, Storage/Transport tank wagons (RCF) HFC, NFL, SPIC, IPFCO), ammonia tank wagons (HFC, NFL) 5. New Plant Soda ash/ammonium None chloride Plant (SPIC) B. Captive Power and Utilities 1. Captive Power/ Boiler/power set (FCI, Boiler/power set (RCF, Utilities RCF, CFL) HFC, CFL) C. Pollution Control and Testing Equipment 1. Pollution Control Pollution Control Pollution control (RCF, (RCF, MFL, ZAC) MFL, ZAC, IFFCO) 2. Testing Equipment Non-destructive testing Non-destructive testing equipment (PDIL) equipment (PDIL) D. Fertilizer-Related Studies Technical Three studies (DOA) Three studies (DOA) Assistance E. Project Cost 2.10 The Project costs, both the appraisal estimates and the actuals, for each subproject are given in Annex 2-2, and summarized below: Comparison of Projects Costs - Appraisal Estimate vs. Actual Appraisal Estimate _ Actual Number of Amount Number of Amount Subproject (US$ million) % Subproject (USS million) % FCI 5 79.0 33.1 1 3.4 2.0 RCF - - - 5 19.9 11.8 HFC - - - 8 35.4 20.9 NFL - - - 2 4.5 2.7 PDIL - - - 1 1.1 0.7 NLC 1 19.5 8.2 1 21.2 12.5 SAIL 1 26.1 10.9 1 22.4 13.2 MFL I 2 1.7 0.7 1 0.8 0.5 GSFC 3 20.6 8.6 2 17.1 10,1 SPIC 2 46.2 19.4 4 9.2 5.4 HPCL 1 25.9 10.9 - - - ZAC 2 10.2 4.3 3 13.6 8.0 CFL 2 8.5 3.6 1 3.1 1.8 IFFCO - - - 6 17.1 10.1 DOA 3 1.0 0.4 3 0.4 0.2 IT 38.7 100.0 39 169.2 100.0  -7- Due to the major scope change, a comparison of the actual costs for the whole project with the appraisal estimates is not meaningful. Overall Project costs were lower than appraisal estimates by 29%, mainly due to cancellation of subprojects which would have required higher local cost components. The actual capital costs for most of the original subprojects, which accounted for about 62% of the total project costs, were slightly lower than appraisal estimates as shown in Annex 2-2. The actual costs for the 10 original subprojects which were implemented were US$104.3 million, about 7.2% lower than the appraisal estimate of US$112.4 million. The main reason for cost underrun for these components was the rapid devaluation of local currency during their implementation, resulting in the reduction of local costs in U.S. dollar terms. 2.11 Actual capital costs for the whole Project are compared with the appraisal estimates by type of subprojects in the table below. 2tital onts !X 3eof afltoeots (inU$ mULio A-pEpnl Actul SIfrs &ter iNns MM&ctus Loca FonAgnia% % i*pngeMs loca FonggE alhbb X 1. Fb$1Hker *capak &quEfgxw & ftoos EfIctAvLy ]irbwot 10 79.7 67.6 147.3 61.7 29 55.9 79.5 135.4 805 2. ntm a Gmsi & tWIties 4 31.1 29.8 60.1 25.2 3 9.9 19.1 29.0 17.2 3. Ati-Pollutim 4 1.0 3.4 4.4 1.8 3 0.6 2.9 3.5 2.1 4.1 sf1ny Bqtpmm 1 21.9 4.0 25.9 10.9 - - - - - 5. gf2ties txxd Tadmical Asssts=a 3 - 1.0 1.0 0.4 3 - 0.4 0.4 0.2 6. Tat