India - National Cooperative Development (NCDC) Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 6820 PROJECT COMPLETION REPORT INDIA NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (NCDC I) (CREDIT 871-IN) June 10, 1987 South Asia Projects Department General Agriculture Division II 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.  lot USX ONLY THE WORLD BANK Washington. D.C. 20433 U.S.A. 04k. of Oveclar-Giwai O - atinrs Ivalutto June 10, 1i87 NEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on India National Cooperative Develoi,ment Corporation Proiect (NCDC I? (Credit 871-IN) Attached, for information, is a copy of a report entitled 'Project Completion Report on India National Cooperative Development Corporation Project (NCDC I) (Credit 871-IN)" prepared by the National Cooperative Development Corporation, together with an Overview prepared by the South Asia Regional Office. Further evaluation of this project by the Operations Evaluation Department has not been made. Attachment I This document ha a rstted distributon and may be used by scipIrts only in te perfoancem of their oMic dutWs. Its contents may not oterwie be disloed without Wodd bnk auftoztion.  FOR OMCIAL USE ONLY PROJECT COMPLETION REPORT INDIA NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (NCDC I) CREDIT 871-IN T-Le of Contents Page No. Preface . .. 9 .............. ..Is ........... . ...., ......a..... i gasic Data Sheet ................. ii evaluation mrr ........,,ii OVERVIEW - General ...... . ,.......................... ..... 1 - Project Objectives and Rationale .......... I - Identification, Preparation and Appraisal 2 - Project Implementation 2 - Project Impact ...............9.99...99999999.9999999.5 - Financial and Economic Evaluation 7 - Institutional Performance and Development ..... 7 - IDA Supervision Efforts 9 - Lessons Learned .9.9.9999999.9999999.9.99.99..... . 0 9 PROJECT COMPLETION REPORT I. Background 9999999999999999999999999999999999999999999999999999 1 II. Project Formulation . . ............... 9999999999999 6 III. Implementation 9999999999999999999999999999999999999..*999..... 23 IV. Impact Assessment .9999999. ............ 67 V. Conclusions ............... , 87 Annexes I-XV 4nnex mIV - .r...nts Received from NCDC on IDAts Draft Report ........ 127 This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authoriation.  - i - PROJECT COMPLETION REPORT INDIA NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (NCDC I) (CREDIT 871-IN) PREFACE Attached is a Project Completion Report (PCR) on the National Coopera- tive Development Corporation Project (NCDC I) (Credit 871-IN). The Credit, US$30 million equivalent, was made to the Government of India February 1979 for onlending to NCDC. The planned Closing Date was December 31, 1984; the final disbursement was made in June 1985. The PCR was prepared by NCDC, the executing agency. An overview pro,iding additional comments was prepared by the South Asia Regional staff, incorporating data from IDA records. This report has not been subjected to audit by OED. The draft report was sent to the Borrower for their comments. The comments by NCDC received from the Borrower are attached to the PCR as Annex XVI, and their content has been taken into consideration in the final preparation of the report.  INDIA NATIONAL COOPIIIUTl DtVISLOPIV -ORPORATION (CREDIT 87 1-1) PROJECT COM)UETION RRPOW Lasi Date Sh et IR?: PRtOlECT D^AA Actual or Actual a X Apprsiaal estmated of Appraisal Esthete Actual Estiete Total Project Coat (Rs Million) 549.9 586.9 106.5 Va. of odowna - ne ?,854 5,573 73.8 - rehabilitation 1.100 200 18.2 Total Storage Capacities (00C tona) - a" 1.013 830 81.9 - rebabilitation so 15 18.6 Credit Mount (US$ Million) 30 30 Date Board Approval 12/31/78 12/31/78 Dat ot Credit Agrezeant 02/02/79 02/02/79 Data effectiveness 5/3/79 5/3/79 Closing Date 12/31/84 12/31/84 financial RAte of Return 16-211 18-30X Econooic Rate of Return 222 11-182 Number of Benetfiiaties 5.7 5.7 (ailliot ;mili*s) CUIMUATIVE DISSRMEMPS FY79 FM EY8t fY82 EY3 EU E8 Appraisal Estihte dS$ Million) 2.2 6.9 12.5 18.5 24.9 30.0 - Aetual 1US$ Million) 0 8.4 14.5 19.3 24.1 25.9 30.0 Actual as 2 of estimate 0 121.7 116.0 104.3 96.8 86.3 100.0 Date of Final Disburtemnts 6/11/85 Principal Repaids first repynt due 6/15/1989 MISSION DATA Date No. of Mandays in Specialisrtions tia ypes of Mission t(Mouth/Year) Persons the field Represented t/ Status d problems Preparation Mission 11/76 5 75 A.B.D Appraisal 5/78 4 88 A.B.D Supervision II 10/79 4 41 A.B.C.D 1 I N Supervision III 7/80 1 n/A _/ A 1 2 Supervision IV 11/80 4 20 _/ A.8.D 1 2 H Supervision V 12/81 1 20 4/ B 1 2 M Supervision VI 5/82 1 15 n/ A 2 2 H-O Supervision VII 2/83 2 42 4/ A.g 2 2 M-O Supervision VIII 11/83 2 38 4/ E.0 2 2 1-0 Supervision IX 5/84 2 26 p/ C C 2 1 N-0 Supervison Y 12/84 1 19 I/ A I 1 M-0 Supervision XI 7/85 3 215/ E.E.a 1 2 M-0 1/ A sFinance anAemoent B Cooperatives Specialist C Marketing Specialist D g En5ineer Z Agro-Industrias Specialist I AS. Credit Specialiot C AS. gconomist H = Economist 2/ Supervision by NDW resident staff 3/ Combined uith MCDC II Appraisal 4/ Combined with MCDC II Supervision 51. Combined with NCDC II 6 III Supervision OTER PROJECT DATA Borrowers Gverornnt of India Ezcuting Agency: National Cooperative Developeent Corporation (CDQC) fiscal Year ot the Borrower: April 1 - March 31 NaMe of Currency (abbreviation)s Rupee (Re) Currency Ezchange Rates: Apprista Report US$1.0O a Re 8.60 Appraial Year Average US$1.00 R a 8.19 Intervening Years Average US$1.00 a Rs 8.84 Completion Year Average USS.00 Rs 11.36 follow up Projects$ NIet NCDC IS CeC iSS Credit No.s 1146-IN 1502-IN Credit Amount (SDR Mn) 102.8 210.2 Date oard Apptovalt 5/21/81 6/19/84  - iii - PROJECT COMPLETION REPORT INDIA NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (NCDC I) (CREDIT 871-IN) EVALUATION SUMMARY Introduction The project was IDA's first direct attempt in India to assist the rural cooperative sector broadly, although the Bank Group had previously provided funding for farm credit and dairy projects which had also supported coopera- tives. Indian models of development of agriculture - the Five Year Plans - recognized the cooperative sector as a balancing factor between the private and public sectors. The advent of Planning, with its moorings in democracy and socialism, the emphasis on growth with social justice, and the adoption of a socialistic pattern of society have added a new significance and positive role tv cooperatives in supporting the farmer, the worker, the artisan and the consumer. The democractic character of the movement, combined with its federal structure in which an individual member of the primary society in a village could draw support from a national level cooperative organization, renders the movement an effective instrument for decentralized planning and implementation of various economic activities by the people involved in these activities. It has been the deliberate policy of the GOI to foster and develop a strong and viable cooperative nucleus in every village of the country. Oblectives The physical objective of the Project was to construct godowns in 3 States - Haryana, Orissa and Uttar Pradesh. However, the primary objectives, according to the World Bank, were in institution building. First, the aim was to make NCDC grow into a more effective and viable development institution. Second, construction of godowns waw meant to promote a stronger cooperative infrastr-Acture in rural areas. Godowns construction activity was selected because of the urgent need to provide storage in rural a-eas for agricultural inputs and outputs and the need for supporting the development of the cotpera- tive sector. Other supporting components financed under the project were tech- nical assistance, vehicles and engineering equipment. Total project cost was estimated at US$63.9 million. The IDA credit was for US$30.0 million. Implementation Experience Physical targets were largely achieved, the main institutional objec- tives were met, and the Credit was fully disbursed. As highlighted in the  - iv - Overview, higher than expected cost escalations, aggravated by various delays, necessitated a scaling down of the construction program in order to keep costs within limits of allocated funds. Hence, in terms of storage capacity, only about 80% of the total planned construction program was completed, varying somewhat between the three project States--Haryana, Uttar Pradesh and Orissa. NCDC, the prime onlending and executing agency, performed satisfac- torily during project implementation, and its organization and staff was considerably strengthened under the project. Institutionally, benefits also accrued to the participating State Cooperative Banks, where the project intro- duced appraisal and lending criteria that led to a greater emphasis on proper appraisal of subprojects, borrower-cooperatives' credit-worthiness and general credit discipline. However, loan recoveries from primary societies have been mixed; they were low in Orissa, declining in Uttar Pradesh, but good in Haryana. Results The direct impact of the g&,owns on higher turnover of farm inputs, mainly fertilizer and consumer goods, was far above the expectation at appraisal. However, little use of the godowns was made for marketing and storage of surplus farm producet except in Uttar Pradesh where primary coopera- tive societies were involved in government grain procurement operations under price support schemes. Incremental crop production resulting from investments in godowns supplying fertilizer was difficult to quantify, although the benefits must be significant. Similarly, indirect effects on income and employment of the farming community could not be assessed. However, the economic rate of return was recalculated at 18% for Haryana, 12% for Uttar Pradesh and 11% for Orissa, which compares with the appraisal estimate of 22% for the total project. The financial rate of return to a PCS owning a godown exceeded the SAR estimate of 16%. Based on actu&' results it was recalculated at 30% in Haryana, 21% in Uttar Pradesh and 18% in Orissa. Sustainability The prciect has not yet had a significant impact on improvement of overall and financial management of the primary cooperative societies which is constrained by the lack of adequate training. This is being remedied now under the NCDC II and III follow-up projects. Such positive response to feedback of information on performance constraints offers good prospect that project achievements will be sustained. Findings and Lessons The series of projects has also brought out the need to give increased attention to the overall administrative and business environment affecting cooperatives and the type of direct government intervention in the operations of cooperatives, all with a view to generating the commercial and managerial autonomy needed for cooperatives to operate profitably on a sustained basis.  PROJECT COMPLETION RRYORT INDIA NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (NCDC I) CREDIT 871-IN OVERVIEW General i. The attached Project Completion Report (PCR) on the NCDC I project was prepared by the National Cooperative Development Corporation (NCD(), the project executing agency. The overview, prepared by South Asia Regional staff, is intended to aumuarize several observations, warranting special reinforcement or points not fully covered in the draft PCR prepared by NCDC. ii. The project was consistent with the government' overall agricul- tural development strategy. GOI had given a high priority to aking inputs and credit readily available to farmers. A key element in this strategy was the development of primary agricultural cooperative societieo (PCS) into viable multipurpose societies, by amalgamating small PCS, expanding their inputs supply package and. adding assembling and marketing of farm produce, distribution of consumer goods and mobilization of savings deposits to their existing functions of supplying credit and farm inputs (mainly fertilizer). Project Objectives and Rationale iii. The project objectives were sound and in keeping with agricultural eeds and the government's development priorities. The objectives covered two areas: institutional development and construction of godowns. The first aim of institutional development was to make NCDC grow into a more effective and viable development institution to serve the cooperative sector, providing funds and technical assistance. The second aim was to promote a stronger cooperative infrastructure in rural areas through construction of godowus. It Was recognized that to handle agricultural inputs and outputs more effectively it was essential for rural coopera- tives to have a multifunctional storage facility at their disposal. Con- sequently the project was to provide additional and improved storage facilities to PCS and their marketing federations at village and larger rural market level respectively, in three States (Haryana, Orissa and Uttar Pradesh). iv. Cooperatives play an important supporting role in both production and marketing in rural areas. The project was designed to improve condi- tions for increasing production and improving marketing. Godown construc- tion was selected because of the urgent need to provide storage in rural  -2-a areas for agriciltural lnputs and otitputs and also to fa:ilitate the sale of consumer goods by village level cooperatives, The simple design of the project also facilitated its easy adoption in the States chosen for the project. The three States provided a representative picture of the vary- ing level of cooperative development in India. Hatyana was high on the scale of cooperative development, whereas Orissa was low, and Uttar Pradesh (UP) in au intermediate stage of development. Finally, the project supported IDA's strategy for assisting India in attaining self-sufficiency in food production. Identification, Preparation and Appraisal v. The project which was appraised in May 1978, was IDA's first direct attempt to assist the rural cooperative sector broadly, although the Bank Group had provided funding for farm credit and dairy projects which had also supported cooperatives. From the outset, IDA focussed on institutional matters. An IDA mission which visited India in October/November 1976, concluded that with changes in NCDC's corporate structure and procedures as outlined fi its report (April 1977) NCDC would be a suitable institution for onlending to the cooperative sector. Sub- sequently, NCDC engaged the Management Development Institution of India (MDI) in 1978 and following their recommendations introduced a number of changes in organization, management and procedures. vi. The appraisal mission, by and large, focussed on the right issues (institutional matters, credit delivery system, lending policies and procedures, and technical aspects). While it accqpted the scope and size of the original project proposed by NCDC, it did not accept NCDC's proposal to include the State of Rajasthan in addition to Haryana. Orissa and UP. The mission maintained (in retrospect, probably correctly given execution delays which occurred anyway) that the first project should be conceptually and technically simple and not be geographically diffused. 1/ Project Implementation vii. On the whole, impgementation was successful although physical targets had to be scaled down because of higher cost ascalations than expected. The table below shows that in terms of new storage capacity 82% of total project targets were achieved. In the three States the marketing federations progressed much faster with their construction program than the PCS. In Haryana and UP, some godowns with 100 ton capacity were constructed instead of the planned 50 tons cap'city units because of 1/ The project was followed on with two IDA projects, NCDC II and NCDC III, for SDR 101.8 M and SDR 210.2 M respectively.  -3- expanded business activity. The rehabilitation programs in Orissa had to be reduced to 200 godowns from the 1,100 planned at appraisal due to much lower than expected demand for rehabilitating existing godown facilities, Generally, the quality of construction of rural and marketing godowns was good and the designs chosen proved to be practical and functional. CONSTRUCTION TARGETS AND ACHIEVEMENTS -O-R STart =eh q on 5 Tota Aehiiredn 4 L No. of Total 'is TOWoa Capaity No. of Total Total CapacItY "doomu GCpacity Godmw Capacjty Achieed a Godowne Capacity acuhe e (000 ton) (000 tose) of TaSret (000 tons) X of Tagoet Fexdeatiom (AM) 70 214 57 185 86.4 57 185 86.4 1050 125 86 6 68.8 945 95 76.0 1.570 339 918 271 79.9 002 Utter Pradeab Federation (P10) 2/ 35 50 18 SQ 100.0 18 30 100.0 PCs 4.600 410 3. 348 M3 84.9 4.635 460 3396 8M. .586 398 86. Orisan federation (OSYVcN 3/ 23 20 19 20 100.0 9 20 100.0 TDOC C 6 10 5 7 70.0 10 10 100.0 R a8 280 80 192 53 66.3 198 55 68.7 PCS 1.040 104 710 63 60.6 758 67 6_4* 1.349 21', 926 143 66.8 985 152 _71.0 Total NoW Godo4na 7,554 1.013 5.430 812 80.2 5.573 830 81.9 Z=U=u axtu" SUESUM Sama aa "Un - ns= Of WIbiab: Rural Godowns 7.140 639 5.139 497 77.8 5.227 S10 79.8 Marketing Godowns 414 374 291 315 84.2 302 320 85.6 g!o4do Rkhabilitation Orissa (PCs) 1.100 80 200 15 18.2 200 15 18.2 #|l~m mum - -sS mut _ 1/ artyama State Cooperative Supply a"d Harketin8 Federation. / Uttar Pradesh Cooperative Marketing Federation. O/ Oriasa State Cooperative Marketing Federation. 4/ Tribal Development Cooperative Corporation. Regional Cooperative Marketing Societies. 6/ As per supplemental information provided by 4CDC.  -4-. viii. By and large, the delay in construction was due principally to the financing strain of covering significant cost escalation of building materials, aggravated by managerial and administrative start-up delays, lengthy sub-loan processing procedures and difficult and, in some cases, inappropriate procurement procedures. Cost escalations occurred almost immediately after appraisal and continued throughout the proj'ct period. Unit costs of !00 ton godowns in Haryana increased from the base cost (per SAR estimate) of Rs 58,000 to Rs 96,000 by September 1982 (i.e. an overall increase of 65.5% over SAR base cost). Similar increases were recorded in Uttar Pradesh and Orissa, Price contingencies provided in the project (17% over base costs) were insufficient to cover these increases. ix. The underlying reasons for increases in construction costs were: (a) higher prices of cement and steel due to shortage and international price hikes; 1/ (b) higher prices of bricks due to greater demand and reduced supply 1/; decreased brick production had been due to shortage of coal arising from nationwide transport problems: and (c) varying distances of the brick kilns from construction sites, necessitating higher transport costs than estimated in the SAR, Shortages of cement were particularly severe and continued to plague project implementation in all the three project States. NCDC played a critical role by intervening at various Government levels to get favorable allocations of building materials for the project. X. While some of the causes for cost increases can be traced to conditions after time of appraisal, it would appear that the appraisal mission should have been more careful in determining price contingencies. Cost escalations were reported in the first supervision mission. March 1979, three months after Board approval. xi. Problems related to cost escalation were exacerbated by start-up delays due to institutional weaknesses. Staffing problems caused delays in subproject appraisal and approval and in tendering, especially during the early part of the project. While project authorities in Haryana and Uttar Pradesh were able to establish proper procedures to complete the reduced construction program by mid-1985, the institutions in Orissa 1/ From January 1979 to January 1985 prices of cement in US$ increased by 93%, steel by 422, bricks by 84% and skilled labor by 1002 (PCR paras 3.27, 3.28).  -5- proved unable to introduce changes to complete their reduced program by project closing. xii. Lengthy sub-lcan procedures and reappraisal of subprojects caused excessive delays and contributed to the rapid rise in costs. In early 1983. an IDA supervision mission suggested that to avoid re-appraisal of subprojects, sensitivity analyses should be applied to evaluate the impact of higher costs on the viability of rural godowns. Sensitivity analyses combined with streamlined sub-loan processing. procedures would have helped cut down preparation time and high costs. xiii. implementation delays were also caused by inadeqtate flexi.bility in adherence to prevailing procurement procedures. especially in remote areas and in areas with large ongoing irrigation and industrial works. Tenders often had to be recalled because of insufficient response or because bids were above the fixed ceiling. IDA objected to awarding contracts to labor and construction societies or to state agencies without competitive bidding procedures. IDA later agreed that in the event of an unsuccessful tender or in cases where no response could be expected, the PCS could be allowed to build the godowns themselves or under a labor contract. In these cases supervision and supply of materials were to be provided by the SCBs. xiv. Tihe PCR mentions (paras 3.54-3.55) that strict application of the project approach" caused delays in some cases. This was because a comr piete loan application, accompanied by financial projections and other necessary documentation, was required for each subproject. even for small rural godowns. Although the PCR recognizes the advantage of the proj ect approach, it indicates that the suggestion discussed with an IDA review mission to require detailed loan applications only from 10 of the societies and a shorter version from the rest, might have been useful. IDA. however, took the position that not only should the viability of the cooperative be taken into account, but also the feasibility of the opera- tions after a godown was constructed and that a full appraisal of each subproject was considered to be essential. IDA agreed that NCDC would review on a sample basis 10% of the loan applications. Project IJact xv. Looking to stimulate growth in the rural ec nomy, GOI officials felt that a rural cooperative with a godown would be better suited to service the needs of farmers than one without a godown. 1/ The SAR envisaged that the availability of godowns would have an 0xpansionary 1/ The equally important project objective of strengthening the perfozzance of the cooperative finance institutions is discussed in paras xxxiii to zxxvi.  -6- impact on credit as well as on non-credit business of the societies and would also have various indirect benefits. Zvi, The impact of rural godowns are at three levels: The first-order impact is the direct impact which enables societies with rural godowns to channel credits to members, to undertake the supply of agro-inputs and consumer goods in rurAl areas, to act as procurement agency for apex marketing federations and for the Food Corporation of India (FCI), to assist farmers in marketing their surplus produce, and to function as a service center for village community development. the second-order impact is the incremental crop production resulting from the first-order impact. While undoubtedly large, this impact is somewhat difficult to quantify reliably because agricultural production is dependent also on various other factors such as weather, extension and research and prices. The third-order impact which is the positive effect on income and employment, both direct and indirect, is equally difficult to measure. xvii. NCDC's Evaluation Division has carried out numerous studies on the basis of random sampling in the three States to assess the first order impact. The results, summarized in the PCR (paras 4.10 to 4.24 and Annex IV), illustrate that credit as well as non-credit business of the sampled 2CS had increased considerably in all States. SAR projections for project year 5 for total turnover of the cooperatives in the three States together were Rs 320 M for fertilizers, Rs 950 M for farm produce and Rs 400 M for consumer goods, This compares to actual turnovers of Rs 1,017 M, Rs 1,223 M and Rs 2,013 M respectively (PCR paras 4.26-4.30 and Annex VI), which exceeds appraisal projections significantly. However, except in UP, where PCS were involved in grain procurement under goverument price support operations, little use of the godowns was made for marketing and storage of surplus farm produce. In Haryana farAers can only sell surplus grain at regulated markets at which the Haryana State Marketing Federation (HAZED) is a buyer for the State Government and for FCI. Moreover, the studies indicate that fawmers preferred to sell their grain at regulated markets rather than using PCS for marketing and storage because PCS could not offer adequate liquidity at the time of harvest and storage was not profitable because of the uniform support price for the whole season fixed by the Government. xviii. NCDC's Evaluation Division is now taking steps to collect data in order to carry out studies on the second and third-order impact of storage investments. Although incremental crop production is not quantified in the iCR, it can probably be assumed that, based on the fact that incremen- tal fertilizer distribution through project godowns is far above SAR projections, the net value of additional crops in the three States also exceeds expectations at appraisal.  -7- xix. Direct employment effects (manager, storekeepers and watchmen) were lower than expected in the SAR, because the number of godownt co-r structed fell about 2,000 short of the target of 7,554. No attempt was made in the kCR to estimate indirect employment and income effects (third-order impact) ao a result of higher crop production. Financial and Economic Evaluation xx. In estimating the Financial Rate of Return (ERR) of a godown, the SAR took into account the entire business of the PCSD including the forecasted expansion as a result of the new godown. Conservatively, the FRR was computed for a model in Haryana where costs were higher than in UP and Orissa. Based on this methodology the ERR for a society's investment in a godown was estimated at 16X in the SA. Using a similar methodology the PCR recalculated the FRR on the basis of a sample of 33 societies in Haryana, 142 in Uttar Pradesh and 21 in Orissa. On this basis, the FRR was 301 in Haryana, 21X in Uttar Pradesh and 18 in Orissa. xxi, For calculation of the Economic Rate of Return (ERR), the SAR took into account two primary benefits: (i) reduction in storage losses, expected to be about 21 of the value of farm produce and fertilizer handled by the societies; (ii) savings in transport costs as a result of the availability of godowns in the vicinity of the farms, also estimated to be 21 of farm inputs and outputs. On this basis, and taking into account project investment costs and incremental operating costs of godowns, the SAR estimated the ERR at 221. To re-compute the ERR, NCDC carried out some empirical studies to assess (i) reduction in storage losses with societies in Haryana and in Uttar Pradeah; and (ii) savings in transport costs as a result of godovns in two distri'ots in Orissa. Based on these studies, NCDC concluded that reduction in storage losses was close to the 21 assumed at appraisal and also tnat savings in transport costs were equal to 2% of the total value of fertilizer and agricultural produce handled by the PCS. Applying these coefficients and taking into account project investments and incremental operating costs. the updated ERR was estimated at 182 in Haryana, 122 in Uttar Pradesh and 11X in Orissa. xxii. NCDC also recalculated the number of farm families benefitting from the godowns at 5.7 M which is similar to the figure estimated at appraisal. Institutional Performance and Development xxxiii. The principal institutional changes introduced as a result of the project were the following:  -8- (a) Restructuring and strengthening various departments in NCDC, setting up the Organization and Methods Department and upgrading NCDC's zonal offices; (b) Using the three State Cooperative Banks as onlending channels for the first time, and allowing NCDC to emphasize improvements in subproject preparaVion, appraisal and implementation, including engineering and supervision of godown construction; (c) Supporting participating entities with consultants, improved accounting and management information systems and new operational manuals; xxiii. The PVC notes that significant "institutional" benefits accrued to NCDC and SCB through the implementation of the project. Very early in the project period (February 1979) the NCDC Board approved a major reorganiza- tion of its staff and zonal-offices, as envisaged in the SAR, which was subsequently implemented. NCDC also used consultancy services judiciously in institutional reorganization. staff training and setting up a manage- ment information system. In 1981, NCDC created an Evaluation Cell to undertake project monitoring and evaluation, and in 1982 it established the Evaluation and Statistics Division. In addition to project monitor- ing, the Division undertook a variety of evaluation studies which provided a very useful feedback on overall operations of NCDC and externally aided projects in the cooperative sector. Overall, therefore, the project objectives regarding strengthening of NCDC were met, NCDC played an instrumental role in expediting subproject preparation, appraisals and approvals of financing requirements. xxiv. Use of consultants by the three SCBs produced somewhat mixed results. In starting the actual studies. there were initial delays in appointment of consultants by all the three States. Haryana did not formally appoint consultants until the end of 1980 (i.e., more than 18 months after effectiveness). There was also reluctance on the part of all the three SCBs to appoint counterpart bank staff to work with the consultants. With regard to the consultants' recommendations, those for SCBs in Orissa and UP were judged to be satisfactory and acceptable, but this was not the case for Haryana. In June 1982, following discussions w Zh the IDA supervision mission, the consultants (Agriculture Finance Cc Roration of India) agreed to assign more specialists and to revise their recommendations. Because of these problems, the June 1982 supervi- sion mission reported that "benefits anticipated from this component might not materialize to the extent envisaged at appraisal, because of the lack of enthusiasm on the part of NCDC and the participating banks and their reluctance and inability to assign counterpart staff to work with the consultants' staff during the investigation."  -9.- XXv. However, overall the three participating banks did derive benefits as a result of the project in spite- of problems encountered on the effec- tive use of consultants. Not only were the banks' engineering staff strengthened, but also the project introduced appraisal and lending criteria which eventually led to a greater emphasis by the banks on proper appraisals of borrower-societies' credit-worthiness, expected teturns from investments and general credit discipline than in the past. Intervention of NCDC in this process established a fruitful relationship for onlending in the cooperative sector. However, recovery performance of SCBs for the long term construction loans to PCS declined with the increasing numbers of repayments falling due. Cmpared to the figures in the PCR (pars 4.41) for December 12, 1984, recoveries in Orissa as of May 31, 1985 were 42 only from PCS, 302 from Regional Cooperative Marketing Societies (RCWS). whereas they bad remained 1001 for the State Marketing Federation (OSa4P) and the Tribal Development Corporation (UTDCC), The average recovery rate for total demand in Orissa stood at 391. Comparative average recovery rates as of that date were 991 for Haryana and 671 for Uttar Pradesh, the latter being a decline from the 97S figure given in the PCR for December 1984. NCDC urged SGBs to take steps to improve or regain earlier recovery performance. Future supervision missions in the NCDC follow-up projects. will check on the results of these efforts. xxvi. The project has not yet had a significant impact on improvement of financial management of PCSs nor on their overall management effective- ness. Lack of trained manpower, particularly qualified managers. was a key constraint in the cooperatives. Under the NCDC II and NCDC III projects extensive training programs for PCS staff are being implemented, which also cover the three project States assisted under NCDC I. IDA Supervision Efforts xxvii. IDA supervision was satisfactory throughout the project period. Between project effectiveness and closing, IDA undertook 11 supervision missions, averaging at six monti' intervals. There was fairly good con- tinuity in supervision staffing. More importantly, 1'--ever, the supervi- sion missions focussed on key issues adequately and measures were recom- mended to accelerate construction of godowns. Lessons Learned xxviii. The project experiences highlight the critical importance of proper attention to institutional aspects-staffing, organizational arran- gements, appropriateness of procedures etc.-project implementation. Execution delays and project shortfalls in terms of physical achievements were reflections of weaknesses which were encountered in these areas. Fortunately, timely corrective action allowed the project to still meet overall success. The project experiences illustrate that training should have been emphasized more from the outset. With proper attention given to  -10- training needs at all levels of the cooperative structure, including NCDC and the participating banks, management problems might bave been less serious during project implementation. xxix. Implementation results of this project and experiences to date under the follow-up NCDC II and III projects suggest that, in future project appraisals and P :udies of the cooperative sector. the overall regulatory and policy framework for the operations of cooperatives should be esamined closely to help ensure that cooperatives could operate profitably along commercial lines with minimal direct public sector inter- vention or control over decisionr-making. m.0 Finally. the project shows the importance of the monitoring and evaluation system in terms of improving the quality of investments and of the assistance provided by cooperative banks.  PROJECT COMPLETION REPORT INDIA NATIONAL COOPERATIVE DEVELOPMENT CORPORATION PROJECT (Credit 871-IN) March 30, 1985 NATIONAL COOPERATIVE DEVELOPMENT CORPORATION (EVALUATION DIVISION) Ministry of Agriculture and Rural Development Department of Agriculture & Cooperation, 4, Siri Institutional Area, Hauz Thas, NEW DELHI - 110016  ABBRBVIATIONS ARDC - Agricultural Refinance Credit Corporation CWC - Central Warehousing Corporation DCB - District Central Cooperative Bank FCI - Food Corporation of India GOI - Government of India GOS - Government of State HAEED - Haryana State Cooperative Supply and Marketing Federation IDA - International Development Association IDC - Indian Dairy Corporation IFFCO - Indian Farmers' Fertiliser Cooperative Limited MDI - Management Development Institute of India NABARD - National Bank for Agricultural and Rural Development NDDB - National Dairy Development Board NCDC - National Cooperative Development Corporation OSCMF - Orissa State Cooperative Marketing Federation PCC - Project Coordination Committee PCF - Uttar Pradesh Cooperative Marketing Federation PCS - Primary Cooperative Societies (also known as Mini Bank, PACS and LAMPS) RBI - Reserve Bank of India RCMS - Regional Cooperative Marketing Societies RCS - Registrar of Cooperative Societies SAR - Staff Appraisal Report SCB - State Cooperative Banks SWC - State Warehousing Corporation TDCC - Tribal Development Cooperative Corporation PMS - Primary Marketing Society  WEIGHTS AND MEASURES Metric Units are used. 1 kllogram (kg) 2.20 pounds 1 metric ton (ton) = 1,f)OO kg = 0X98 long ton 1 quintal. = 10C kg 1 meter (m) 1 1,09 yards 1 kilometer (km) = 0.62 miles 1 hectare (ha) = 2.47 acres 1 sauare kilometer (km2) u 0,386 square miles 1 lakh . 100