India - Agricultural Aviation Project

Document of The World Bank FOR OMCLAL USE ONLY Report No. 13217 PROJECT COMPLETION NOTE INDIA AGRICULTURAL AVIATION PROJECT (CREDIT 230-IN) JUNE 28, 1994 Country Operations, Industry and Finance Division Country Department II South Asia Regional Office This document has a restricted distribution and may be used bv recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Offi ot DOrf .r4.iwa Oprim Evuuder June 28, 1994 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT Subject: Project Completion Note on India Agricultural Aviation Project (Credit 230-1N) Attached is the Project Completion Note on India-Agricultural Aviation Project (Credit 230-IN) prepared by the South Asia Regional Office. The loan, approved in 1970, became effective in 1971. The Borrower requested cancellation in 1974 because of changing development priorities. The loan was never disbursed and is, therefore, not rated. The Note reports that serious difficulties were obvious from the first supervision. They centered on procurement and training arrangements, but the fundamental problem seems to have been a lack of domestic commitment to project objectives. Accordingly, the Note implies substantial shortcomings in Bank performance. The PCN is satisfactory. Robert Picciotto by H.Eberhard K6pp Attachment This document has a restrictod 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.  f  PROJECT COMPLETION NOTE INDIA AGRICULTURAL AVIATION PROJECT (CREDIT 230-IN} 1. On October 20, 1970, IDA approved a Credit for $6.0 million, with a closing date of December 31, 1974. The project was declared effective on May 25, 1971 with the ratification of the Credit and Project agreements and receipt of the necessary legal opinions. 2. The major objectives of the project was for the improvement and expansion of aerial plant protection services to cultivators. This was to be carried out by the provision of aircrafts and ancillary equipment to qualified private aviation operators. The Credit which consisted of the foreign exchange component was to be provided through the Agricultural Refinance Corporation, which in turn would extend refinance to schedule commercial banks. The major borrowers would be private operators. The Credit also included a component for pilot training - regarded as essential to help reduce the high accident rate for agricultural aircraft and to protect aircraft purchased under the project. 3. From effectiveness there had been slow progress in implementation - from the setting up of the training centers (i.e. identification of location) to the prequalification for the purchase of aircrafts. The Agricultural Refinance Corporation had made satisfactory progress in preparation for the commencement of lending operations for private operators. 4. The first supervision mission for the project in May 1971, reported that difficulties were being encountered in getting the training program underway, but no unresolvable problems were foreseen. However, the next supervision mission in October 1971, reported still no progress in project implementation due to "administrative delays and cumbersome bureaucratic procedures." Then, in February 1972, GOI informed the Bank that ac a result of the war on the sub-continent a general directive to re-examine foreign exchange priorities had been issued. The use of foreign exchange for crop spraying was of questionable priority and the project was being held up. There was even an intimation at that the Credit might be cancelled. Consequently, by June of 1972 a Bank supervision mission again found that no significant progress has been achieved, the cause of delay being attributed to the reconsideration of foreign exchange priorities. However, during this mission GOI proposed alterations to the project aircraft specifications which, in effect, would have permitted heavy, multi-purpose indigenously produced aircraft to compete in procurement. These proposals proved to be unacceptable to the Bank as they involved aircraft which would have been grossly uneconomical to operate. It was June 1973, before the issue was settled and GOI agreed to revert to the original specifications. 5. In the meantime, the training program was still stalled and was the focus of the next supervision mission in December 1973. In September 1973, GOI had requested that the training program be carried out by the Directorate of Civil Aviation (DCA) rather than the Department of Agriculture (DAA) since the former already had a pilot training program in existence. The Bank informed GOI that it had no objection to shifting training responsibility but it would wish to see the details of the proposal, particularly those concerning the capability of the Directorate of Civil Aviation to carry out the training. In December  -2- 1973, a mission visited India especially to try and help resolve the training issue. The mission reported: "...The mission was not able to obtain either an oral settlement or documentation of the components of the project proposed by GOI for transfer (of pilot training) from the DAA to the DCA. Even though a resolution taken by GOI in February 1973 directed the two Ministries to recommend what and how these changes were to be made, no substantive actions had been taken. The DCA was not prepared to discuss the issues with the mission. The Department of Economic Affairs assured the mission that a document outlining the proposed changes... .would be prepared and forwarded to IDA by the end of December 1973." In a post supervision letter to GOI on February 7, 1974, the Bank reminded GOI of the training issue and requested it be resolved as soon as possible. However, GOI was unable or unwilling to overcome the administrative difficulties at the root of the training issue. 6. On June 21, 1974 the Government of India (GOI) informed the Bank its priorities had changed and that "there is likely to be considerable further delay before the Credit can be utilised, if at all." Hence the request to cancel the Credit. 7. The Board was informed on August 13, 1974 that the US$6 million credit for the project was cancelled at the request of the Borrower.  ATTACHMENT PROJECT COMPLETION NOTE INDIA AGRICULTURAL AVIATION PROJECT (CREDIT 230-IN) BASIC DATA Loan Amount: US$6.0 million Cancellations: US$6.0 million Approval Date: October 20, 1970 Agreement Date: January 28, 1971 Effective Date: May 25, 1971 Closing Date: June 30, 1974