India - Upper Ganga Irrigation Modernization Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 14570 IMPLEMENTATION COMPLETION REPORT INDIA UPPER GANGA IRRIGATION MODERNIZATION PROJECT (CREDIT 1483-IN) JUNE 7, 1995 Agricultural and Water Operations Division Country Department II South Asia Regional Office 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 EQUlIVALENTS Name of currency = Rupee (Rs) Rate of exchange: Appraisal year (Feb. 1984): US$1.00 = Rsl0.80 Intervening years (1985-93): US$1.00= Rs18.30 Completion year (1994): US$1.00 = Rs3 1.37 WEIGHTS AND MEASURES I meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 miles (mi) I hectare (ha) = 2.47 acres (ac) I million cubic meters (Mm3) = 810 acre-feet (ac-ft) I billion cubic meters (Bm3) = 0.81 million acre-feet (MAF) I cubic foot per second (cfs or cusec) = 0.028 cubic meters per second (m3/s) I kilogram (kg) = 2.2 pounds (lb) I metric ton (mt) = 2,205 pounds (lb) FISCAL YEAR OF BORROWER April - March 31 ABBREVIATIONS AND ACRONYMS APG Advisory Planning Group A'TW Augmentation Tubewell CCA Cultivable Command Area CWC Central Water Commission DOA Department of Agriculture ERR Economic Rate of Retum GOI Government of India GOUP Government of Uttar Pradesh HYV High Yielding Varieties ICB International Competitive Bidding ICR Implementation Completion Report ID Irrigation Department IDA International Development Association kV kilovolt = 1,000 volts LCB Local Competitive Bidding M & E Monitoring & Evaluation MGC Madhya Ganga Canal NIC National Infornatic Center NPV Net Present Value O & M Operation & Maintenance PUGC Parallel Upper Ganga Canal SAR Staff Appraisal Report SCF Standard Conversion Factor UGC Upper Ganga Canal UGIMP Upper Ganga Irrigation Modemization Project UP Uttar Pradesh UPSEB Uttar Pradesh State Electricity Board WALMI Water and Land Management Institute GLOSSARY Kharif Wet season (June to October) Rabi Dry season (November to February) Zaid Hot weather season (March to May) Gul Watercourse channel Kankar Limestone layers in the substratum Khadar Low land where river used to meander in the past Usar Saline or alkaline efflorescence on soil surface Warabundi Water distribution between farmers on the same common channel (watercourse) based on land area. Each farmer receives the full flow of the watercourse for the same period each week with the period of time depending on his landholding. The local usage within UP for warabundi is osrabundi.  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT INDIA UPPER GANGA IRRIGATION MODERNIZATION PROJECT (Credit 1483-IN) TABLE OF CONTENTS PREFACE ........................................... i EVALUATION SUMMARY ........................................... ii PART I. PROJECT IMPLEMENTATION ASSESSMENT ........................................... I A. Statement/Evaluation of Objectives .1 B. Achievement of Project Objectives .4 C. Major Factors Affecting the Project. 7 D. Project Sustair,ability. 10 E. Bank Performance .10 F. Borrower Performance .12 G. Assessment of Outcome .16 H. Future Operation .16 I. Lessons Learned .17 PART II. STATISTICAL TABLES .......... .. 18 l . Summary of Assessments. 1 8 2. Related Bank Loans/Credits .20 3. Project Timetables .21 4. Loan/Credit Disbursements .21 5. Key Indicators for Project Implementation .22 6. Key Indicators for Project Operation .24 7. Studies Included in Project .24 This document has a restricted distribution and may be used by recipients only in the performance of their |official duties. Its contents may not othcnvise be disclosed without World Bank authorization.l  8. Project Costs and Financing ................................... 25 A. Project Costs .2...................................5......... 2 B . Project Financing .............. ....................2......... 26 9. Economic Costs and Benefits .................................... ................... 26 10. Status of Legal Covenants ................................... 27 11. ConcurTence with Operational Manual Statements ................................... 29 12. Bank Resources: Staff Inputs ................................... 29 13. Bank Resources: Missions .................................. 30 Appendix 1. FAO/CP Mission Aide Memoire .31 Appendix 2. Economic Re-evaluation. 40 TABLES 1. Cropping Pattern - Main Canal Modernization ......................................... 46 2. Crop Yield - Main Canal Modernization ......................... .......... 47 3 . Average Crop Budgets at Financial Prices-Main Canal Modernization ....... ...... 48 4. Cropping Pattern - Bulandshahr ......................................... 49 5. Cropping Patter-n - Harduagani ......................................... 50 6. Crop Yield - Bulandshahr ......................................... 51 7. Crop Yield - Harduaganj .......................................... 52 8. Exchange Rates and Wholesale Price Indices ........................................ 53 9. Average Crop Budgets at Financial Prices - Bulandshahr ............. .............. 54 10. Average Crop Budgets at Financial Prices - Harduaganj ............................. 55 11. Economic Costs - Risk Aversion Works .56 12. Economic Costs - Common Modernization Works .57 13. Economic Costs - Harduaganj Distibutary .58 14. Economic Costs - Bulandshahr Distributary .59 15. Summary of Financial and Economic Prices. 60 16. Derivation of Economic Prices. 6 1 17. Economic Analysis: Risk Aversion Works. 62 1 8. Economic Analysis: Canal Modernization ................................. ........ 64 19. Economic Analysis: Bulandshahr Distiibutazy .................... ............ 66 20. Economic Analysis: Harduaganj Distributary ......................................... 68 Appendix 3. Status of Study Reports as on September 30, 1994 .70 Appendix 4. Project Cost in Nominal and Real Terms .72 Appendix 5. Borrower's Comments on the Implementation Completion Report .73 Map IBRD 17646RI  i IMPLEMENTATION COMPLETION REPORT INDIA UPPER GANGA IRRIGATION MODERNIZATION PROJECT (UGIMP) (Credit 1483-IN) Preface This is the Implementation Completion Report (ICR) for the Upper Ganga Irrigation Modernization Project (UGIMP) in India, for which Credit 1483-IN in the amount of SDR 117.5 million (US$125 million equivalent) was approved on May 24, 1984 and made effective on September 21, 1984. SDR 18.4 million (US$25.1 million equivalent) was cancelled on December 5, 1991 during the funds redeployment exercise. The Credit was closed on September 30, 1994, three years behind schedule. Final disbursement took place on February 24, 1995, and the undisbursed balance of SDR 4.72 million was cancelled. The ICR was prepared by a Food and Agriculture Organization/Cooperative Program (FAO/CP) mission which vlsit-d India in September/October 1994. It was finalized by the Task Manager, Mr. Jean-Pierre Baudelaire, Agriculture Unit, Resident Staff in India, Country Department II, South Asia R ~gional Office, and reviewed by Mr. Shawki Barghouti, Chief, Agriculture and Water Operati.ons Division, and Nls. Kazuko Uchimura, Project Advisor. The Borrower provided comments that are included as an appendix to the ICR. Preparation of the ICR was begun dtuiing the Bank's final supervision and joint implementation completion mission in September/October 1994. It is based on a review of the Staff Appraisal Report and legal documents, supervision reports and project files, as well as field investigations and discussions with Bank staff and GOUP officials associated with the project. The implementing agency contributed to the preparation of the ICR by commenting on the mission's aide-m6moire, arranging all field visits and discussions with project officers and participating farmers, and providing available data on project performance.   ii IMPLEMENTATION COMPLETION REPORT INDIA UPPER GANGA IRRIGATION MODERNIZATION PROJECT (UGIMP) (Cr.1483-IN) Evaluation Summary Project Objectives I . The Upper Ganga Irrigation Modernization Project (UGIMP) financed a six-year time slice to rehabilitate and modernize the Upper Ganga Canal (UGC) command area which was constructed more than a century ago. The main objectives of the project were to: (a) avert a serious risk of failure of several major structures in the upper reach of the UGC system; (b) rehabilitate and modemize the system and use the savings in water supplies to increase the irrigated areas; (c) increase water supply through conjunctive use of groundwater; (d) improve the State's capacity for sectoral planning and overall management of irrigation schemes; (e) enhance the benefits from sunk cost in the Madhya Ganga Canal (MGC) system which interrelates with the UGC system; and (f) maximize crop production andi farmers' income in the project area. 2. Project Components. Replacement ol the existing main canal with a parallel lined canal together with modern regulating and access structures, modernization of the distributary systems, construction of augmentation tubewells andi a modern communications system were the primary components of UGIMP. Project Changes After Appraisal 3. The project restructuring in 1991 expanded the project scope by: (a) adding the Madhya Ganga Canal; (b) prolonging the parallel main canal by 12.5 km; (c) advancing the com1pletion of the major cross-drainage works, (d) extending the modernization of the Machua distributary to cover an area of 17,000 ha; and (e) upgrading and expanding the proposed remote control and monitoring telecommunications system in UGC. 4. Credit Covenants. Special credit covenants or agreemcnts that were expected to promote achievement of project objectives were: (a) the retention of consultants to advise in planning, design, operation, management, monitoring/evaluation and drainage. as well as carrying out agriculture and socio-economic, management and water charge system studies; (b) installation and operation of dedicated and independent electrical feeder lines to energize each augmentation tubewell (ATW); and (c) maintenance of water rates to cover average cost of operation and maintenance, and a reasonable portion of investment cost, taking into account repayment capacity of farmers. The first covenant was fully complied with and the second and third complied with partially, raising some doubt on the full effectiveness of the covenants. 5. Evaluation of Project Objectives. The project objectives were clear, realistic and important for the irrigation sub-sector of Uttar Pradesh as it was the first time that the comprehensive rehabilitation and modernization of a major irrigation system was attempted in the state. It was worthwhile because of the innovative risk aversion component which differentiated it from other irrigation rehabilitation investment in the rest of the country. The project also had sectoral implications since there were several other major canal systems in Uttar Pradesh (UP) which required modernization. The project was complex as it was based on an integrated irrigation  iii modernization package. The project was responsive to Borrower's circumstances and the risk of the Government of Uttar Pradesh (GOUP) not proceeding with project works after completion of the first time slice was considered small. Implementation Experience and Results 6. The project experienced a delay of two years due to forest clearance on the canal right- of-way and a further 1-1/2 years in procedural matters relating to international and local competitive bidding, thereby limiting effective implementation to about 6-1/2 years. The project has partially achieved its physical, sector policy and institutional development objectives. Macro-economic policies and financial objectives were not applicable to this project. There was no coverage of gender issues and equity was not a stated objective under the project. Overall, the physical achievements have exceeded 80 percent of revised targets in all components except energization of augmentation tubewells and risk aversion structures (except Ranipur syphon). The modernization of the distributaries turned out to be successful inspite of delays in the completion of the risk aversion and parallel canal works, and also inspite of delays in the completion of the telecommunication system, augmentation tubewells, and of some fine tuning works in the distribution networks. Thus there is every reason to believe that irrigated agricultural production will further improve as soon as the delayed activities are completed. However, project success has only been partial so far and it is clear that modernization activities should continue beyond the simple upgrading of the distributary networks (to works on the main canal, conjunctive use, telecommunication and institutional strengthening, as planned at appraisal) to achieve full development objectives. 7. Project Impact. The project impact has been evaluated, taking into consideration three distinct but interrelated benefits: (a) risk aversion to protect the existing irrigation system benefiting 400,000 ha; (b) modernization of the main canal benefiting initially 270,000 ha; and (c) modernization of the canal distributary blocks totalling about 31,000 ha (Bulandshahr and Harduaganj). When completed, the first two investments would generate long-term direct benefits to the overall UGC Irrigation System covering about 1.2 million ha; the rehabilitation and modernization of existing works would improve mainly the quality of irrigation services. The incremental irrigated area commanded by the two distributaries would be of the order of 1,000 ha (3 percent of the cultivable command area [CCAl), but the major benefits are to be generated from higher cropping intensities and crop yields with the availability of improved water supply, particularly to tail-end farmers. Water saved from seepage losses would, therefore, be used for better irrigation of existing areas commanded by the main canal and distributaries as foreseen at appraisal. 8. It is important to recognize that the comprehensive development of the UGC system involves a five-stage (30-year) investment program of which the UGIMP is the first stage. In view of the interrelationships between the different stages, evaluationi in isolation of one of the stages does not truly reflect all the benefits, given the complementarity of investments in different stages. There is not enough information yet to attempt an analysis of the total program. The analysis has therefore been restricted to a comparison with estimates of the first stage made at appraisal. 9. Economic Rates of Returns (ERRs). The currt-mlt economic rates of return re- estimated at completion are 12 percent for the risk aversion component, 18 percent for main canal modernization, 17 percent for the Bulandshahr distributary block, and 20 percent for the Harduaganj distributary block. These compare with appraisal ERR estimates of 15 percent for the risk aversion works, 19 percent for main canal modernization, 18 percent for Bulandshahr distributary, and 25 percent for Harduaganj distributary. The recalculated ERRs are based on actual costs incurred up to the Credit closing date plus costs to coniplete works until mid-1998, and  iv an actual and updated projection of benefits. Both appraisal and completion estimates of ERRs are more speculative than usual because they incorporate returns also to investments projected in later years. The implementation difficulties as evidenced by cost overruns, delays in completion and in later years, funding constraints are consistent with diminished project performance. Consequently, the reduction in ERR estimates is not unexpected, despite higher cropping intensities, better crop yields. and diversification to higher-value cropping patterns. Project Sustainability 1 (. The project is associated with ERRs that are consistent with sustainable economic performance. However, project sustainability hinges on: (a) ensuring adequate provision of operation and maintenance (O & M) funding; (b) having trained staff in place together with adequate equipment to maintain the system; and (c) obtaining active local support for the project through farmers' organizations or otherwise, to realize water management objectives. The key to securing adequate 0 & M funding would be the revision of water rates and improved water management. No revision of water charges has taken place since 1983, until October 1994 when water rates were increased by 100 percent. However, the rate increase was still not enough to cover average cost of operation and maintenance and a reasonable portion of investment costs. GOUP has, therefore, only partially complied with any of the cost recovery covenants; however the covenant requiring a study to be carried out by the Advisory Planning Group (APG) has been complied with fully. A related issue is the active organization of farmers' organizations able and willing to take over water management. Farmers need to be motivated and prepared for this task through non-governmental organizations (NGOs) or other voluntary organizations and then given proper training and technical assistance probably through the Water and Land Management Institute (WALMI) on water management. These are major challenges facing GOUP in order to sustain ilTigation development througlh the ongoing rehabilitation and modernization activities. As a first time slice (of six years) of a longer term investment program, it is still too early to address the sustainability of UGIMP. Evaluation of follow-up nhases should provide further opportunity for review. I]. Actual Cost. Financing and Implementati on Timetable. The final cost of the project is now estimated at Rs.7,075 million (US$283 million), compared to the appraisal estimate of about Rs.2,498 million (US$231 million), representing a 183 percent cost overrun in nominal rupee terms or 55 percent cost overrun in real rupee terms. The Credit was able to finance about US$125 million or 44 percent of the estimated total project cost compared to 54 percent at appraisal. At appraisal, it was estimated that the first time slice would be completed by September 30, 1990, with a project closing date of September 30, 1991. Current estimates indicate that completion is not likely until mid-1998 although the Credit was closed on September 30, 1994. Key Factors Relating to Achievement of Project Objectives 12. The most important contributory factors for delayed implernentation can be classified into: (a) Factors not generally subject to Government control. These include mainly civil disturbances. (b) Factors generally subject to Government control. These include contractual implementation issues, the latter substantially delaying excavation and lining of Parallel Upper Ganga Canal (PUGC) (km 177.5 to 240), inadequate funding in the initial years, farmers tampering with government property, continued indecision on the part of the GOUP to take prompt action in  v resolving issues (Pathri structure), late issuance (involving almost two years) of forest clearance for felling of trees on the canal right-of-way, late approval of APG consultants by one year, slow land acquisition, and lack of adequate policy for resettling canal displaced persons. These have substantially delayed the implementation of the project. (c) Factors generally subject to implementing agency control. These include time taken in processing changes in designs and amendment of contracts for the Solani aqueduct and construction of PUGC in the reach km 189.5 to 240, and in fixing alternative contract for the construction of the Pathri superpassage after rescinding the original contract, delays in the finalization of the planning and design for modernization of the 3.6 km Roorkee reach of UGC, delays in implementing drainage works, lack of progress in the construction of the augmentation tubewells and in the provision of telecommunications facilities, delays in resolution of land acquisition cases in the Bulandshahr reach of PUGC and in MGC, slow implementation of adaptive research and agricultural extension programmes, lack of coordination among 0 & M staff and construction staff in the modernization of distributaries, the slow pace of procurement in the MGC system, and frequent turnover of key project staff. The combined effect of these factors has prevented GOUP from achieving progress at a higher pace. 13. Performance of Bank and Borrower. The performance of the Bank during supervision was mixed since they failed to push the integrated approach of the project. The supervision missions should also have paid more attention to the problems of land acquisition and canal affected persons earlier on in project implementation. The restructuring exercise, as requested and agreed with the Borrower, was also not adequate. First, it overburdened an already stretched budget and second, it did not provide adequate extension of time for the completion of the additional components. The Borrower and the implementing agencies have also encountered implementation difficulties. 14. Project outcome assessment. The project outcome is rated as satisfactory. Summary of Findings, Future Operations and Key Lessons Learned 15. Findings. Risk aversion works would help reduce the risk of failure in the main canal head reach, saving a command area of about 400,000 ha. The modernization of the main canal would have an impact throughout the UGC command. The project impact of modernizing distributary canal commands in terms of increased agricultural production, employment generated and farm families benefited is being experienced. 16. Plans for future project operations. The Irrigation Department has planned to complete its first time slice operation by mid-1998. It is essential for GOUP to provide adequate funds for completion as well as operation and maintenance of completed works. Another priority is to arrange a review of augmentation tubewells and determine a strategy for their operation. The lining of PUGC in reach km 177.5 to 190.7 needs to be completed on a priority basis to allow this segment of lined canal to become operational for all rabi flows of the UGC system as envisaged. GOUP plans to review the design of PUGC in reach km 190.7 to 240, to at least partially line it (sides only) to carry 127 cumecs, matching the capacity of reach km 177.5 to 190.7. Risk aversion works in the head reach and regulatory structures on modernized distiibutaries and minors will have to be expeditiously completed to achieve proper regulation of canal supplies. Similarly,  vi the pipe outlets need to be replaced with adjustable proportional module (APM) outlets to ensure equitable distribution of water in various reaches of the lined channels and watercourses. 17. The Irrigation Department is advised to monitor project impact using such measures as irrigation system perfornance indicators supplemented by cropping patterns, cropped areas, cropping intensities and crop yields according to crops and by seasons. 18. Lessons for Future Projects in the Sub-sector. The main lessons learnt are: (a) As in many other projects in India, part of the reason for partial completion of the project in UP is due to the allocation of counterpart funds among too many projects. It is essential that the scale of the project be tailored to the availability of financial resources of the government and to match institutional capabilities. Where design is so done and yet financial constraints intervene midway during implementation, the Bank should be prudent in accepting Borrower's request to expand the project scope merely to absorb some cost savings. (b) When project is restructured late during the implementation period (as is the case with the addition of MGC system), extension must be for a full three or four years and not year by year to allow for adequate budgeting over the planned period by the Government (c) It is essential to have proper designs and adequate investigations of major structures available for review during appraisal and in any case prior to negotiations. (d) There is a need for future projects to resolve the problem of inadequate O&M funding and the related issues of level of water charges and collection rates. These will have to be seriously addressed under larger WRCP or NWMP projects. (e) In addition to the usual arbitration and court procedures for resolving disputes between implementing agencies and their contractors, future projects should consider setting up high-power dispute resolution committees at Government level. The role of these committees would be to take quick decisions when conflicts arise. In case of persistent disagreements, court action should remain the last resort for contractors. (f) The adequacy of ATWs and the related issue of dedicated power lines raise further questions. These concepts have become either obsolete or inadequate for conjunctive use in the light of current experience of farmer-operated tubewells. Only in special cases where high groundwater levels and salinity must be controlled departmentally, should they be used. (g) Turnover rate of key senior-level staff must be minimized if the benefits of project training and efficiency in implementation are to be realized. (h) There is a need to have an up-front environmental clearance and an adequate land acquisition and rehabilitation policy for canal affected persons. These issues are better treated in recent projects through more precise Operational Guidelines.  vui (i) In-depth monitoring is an essential tool for improving project performance and for providing reliable data for estimation of project benefits. Follow-up surveys should therefore be encouraged.  I IMPLEMENTATION COMPLETION REPORT INDIA UPPER GANGA IRRIGATION MODERNIZATION PROJECT (Credit 1483-IN) PART 1: PROJECT IMPLEMENTATION ASSESSMENT A. STATEMENT/EVALUATION OF OBJECTIVES Statement of Project Objectives l. The Upper Ganga Canal (UGC) Irrigation System, covering about 1.2 million ha. was constructed about 1 50 years ago. The Government of Uttar Pradesh (GOUP) has prepared a 30-year development program to rehabilitate and modernize this system. The Upper Ganga Irrigation Modernization Project (UGIMP) was designed to finance a six-year first time slice of the proposed rehabilitation and modernization plan. This has excluded the main canal headworks, confining the project activities to rehabilitation and modernization and not a new diversion scheme. 2. The main objectives of UGIMP were: (a) risk aversion from failure of the UGC system; (b) rehabilitation and modernization of the system and using the savings resulting from lining canals and improvements in the operational characteristics of the canal system to increase the command area; (c) supplement surface water supply through conjunctive use of groundwater; (d) improvement of the state's capability to plan, design and manage irrigation schemes; and (e) maximization of crop production and farmers' income in the modernized project areas. An additional objective of the first time slice was to maximize benefits from the sunk investment in the Madhya Ganga Canal (MGC) system, which physically inter-relates with the UGC system. 3. Project components included: (a) partial construction of a channel parallel to the existing main canal of the UGC Irrigation System (between km 6-36 and between km 177.5 and 240 of such main canal), including the replacement of four river crossings of which Ratmau and Solani are aqueducts, regulatory and access structures; (b) replacement of the existing hydro- electric station at Palra and initial construction of a new hydro-electric station at Pathri; (c) modernization of the irrigation distribution systems within the command areas of the Harduaganj, Bulandshahr and Machua distributary canals, serving in the aggregate about 43,000 ha in the project area through lining of about 140 km of distributary and minor canals and lining of about 1,250 km of watercourses; (d) construction and energization of about 33 augmentation tubewells (ATWs) to be located along the Harduaganj and Bulandshahr distributary canals, to discharge in the aggregate about 7,900 m3 per hour; (e) installation of dedicated and independent electrical power transmission lines to serve augmentation tubewells (ATWs); (f) improvement of the UGC Irrigation System's communications network through provision of two-way radio relay equipment and of multi-access radio line-of-sight systems; (g) preparation of a comprehensive drainage plan for the three distributary command areas (Harduaganj, Bulandshahr and Machua) and implementation of a pilot work program; (h) carrying out of a reconnaissance study of the drainage requirements of the project area; (i) improvements of Uttar Pradesh (UP) Irrigation Department's capability to plan, design, operate, maintain, manage, monitor and evaluate irrigation and drainage schemes; (j) construction of residential and non-residential buildings for project staff of the Irrigation Department; (k) provision of equipment and vehicles; (I) carrying out of a training  2 program, through the Water and Land Management Institute (WALMI), for Irrigation Department staff, including construction, operation, equipping and maintenance of the required facilities and provision of required technical assistance; (m) carrying out of agricultural and socio-economic studies, management study of irrigation schemes under the project, and irrigation water charge system study; and (n) training and study tours of irrigated agricultural and irrigation system for UP Irrigation Department staff. 4. Project Cost. The total project cost including physical and price contingencies was estimated at US$231.3 million (Rs.2,497.7 million), including an IDA Credit of US$125 million which was to finance about 54 percent of the total project cost. The remaining project cost was to be met by the Government of India (GOI) and the Government of Uttar Pradesh (GOUP). 5. Project Changes After Appraisal. The Development Credit Agreement was amended in June 1991 to expand the scope of the project, increase the percentage of disbursement for locally procured equipment and materials (other than ex-factory), reallocate the proceeds of the Credit among the several categories and amend the Project Agreement for the purpose of changing certain dated covenants. Accordingly, the project area was increased to about 1.4 million ha served by the UGC Irrigation System and the interconnected MGC Irrigation System. The second objective of the project was amended to "rehabilitate and modernize the UGC Irrigation System (excluding the main canal headworks) and complete the construction of the interconnected MGC Irrigation System." The Palra and Pathri hydro-electric stations were deleted. The additional works were included in the extension of the parallel UGC and some remaining works in the MGC system. The additional works of the UGC system included: (a) extension of the parallel UGC canal by 12.5 km (from km 177.5 to 189.50) and advancing the completion of major cross-drainage works: (b) modernization of the Machua distribution system and the expansion of the combined command areas of Harduaganj, Bulandshahr and Machua from 43,000 ha to 50,000 ha and lining from 140 km to 340 km; and (c) upgrading and expansion of the UGC Irrigation System's telecommunication network through provision of digital technology, equipment for voice, telex, facsimile and data transmission. 6. For the MGC Irrigation System, the remaining works consisted of: (a) completion of the construction of selected works on the main canal and the Mat feeder canal; (b) completion of the construction of the distributary canals and watercourses of the Lakhaoti branch and the Mat feeder canals; and (c) completion of the construction of the branch canals parallel to the Mat and the Hathras canals. 7. The disbursement percentage for certain items (vehicles, equipment, materials procured locally, other than ex-factory) was initially increased from 70 percent to 80 percent and then to 90 percent, to take etfect retroactively from September 1, 1990, as part of the Gulf Initiative to alleviate GOI's foreign exchange constraints. A sum of SDR 18.4 million was cancelled during implementation. 8. The UGIMP incorporated covenants or agreements that were expected to promote achievement of project objectives: (a) the retention of consultants to advise in planning, design, operation, maintenance, management, monitoring/evaluation, and drainage; preparation and implementation of training programs by a specified date; (b) retention of consultants to advise in carrying out agriculture and socio-economic, management, and water charge system studies; (c) installation and operation of dedicated and independent electrical feeder lines to energize each ATW; and (d) maintenance of water rates to cover average cost of operation and maintenance, and a reasonable portion of investment cost, taking into account repayment capacity of farmers. All the above covenants were complied with during the implementation of the project, except the last two which were complied with only partially. Water rates have not been increased since 1983 and cost  3 recovery from farmer beneficiaries continued to be minimal, lagging well below expenditure on operation and maintenance. The Principal Secretary, Irrigation indicated at the wrap-up meeting on October 17, 1994, thait the GOUP increased the water rates by about 100 percent by notification of October 18, 1994. However, the GOUP has still retained the statewide uniform rates and not switched over to the intended two or more tier system. Moreover the 100 percent water rates increase was still not enough to cover average cost of operation and maintenance and a reasonable portion of investment costs. Twenty-nine ATWs out of the proposed 33 have been drilled and 25 have been completed, of which only two have been energized until Credit closure. A defined strategy for their operation has yet to be developed. Evaluation of Project Objectives 9. Clarity and Realism. The project objectives were clear, realistic and important for the irrigation sub-sector of Uttar Pradesh as it was the first time that the comprehensive rehabilitation and modernization of a major irrigation system was being attempted in the state. The project emphasized the priority that GOUP must give to rehabilitation and modernization of existing irrigation schemes if the state's existing irrigation potential was to be realized in agricultural benefits muc'i quicker than was possible through politically popular new irrigation investments. 10. Innovativeness. Although the project was demanding on the implementing Irrigation Department, it was worthwhile because of the innovative risk aversion component which differentiated it from other irrigation rehabilitation investments in the rest of the country. 11. Sectoral Implications. The project also had sectoral implications since there were several other major canal systems in UP which had to be modernized. The project support has helped the Irrigation Department to develop its capabilities for planning, design, monitoring and evaluation of completed works in technical and financial terms. The project has also focused GOUP's attention on operation and maintenance of existing works which were severely underfunded. 1 2. Complexity. The project was complex as it was based on an integrated irrigation modernization package. This initial project concept was sound, but GOUP did not fully understand this approach and the initial Bank supervision missions were weak in pushing the idea. Furthermore, the addition of the MGC component in 1991 obviously expanded the scope of the project, complicating the already strained budget for local counterpart funds. 13. Responsiveness to Borrower's Circumstances. The project responded well to GOUP's emphasis on the acceleration of irrigation in recent Five-Year Plans. In Western Uttar Pradesh where available surface water resources have been fully committed and groundwater highly exploited both by the public and private sectors, further expansion in agricultural production will have to come from more efficient utilization and performance of existing irrigation investments, as tackled by the UGIMP. The Bank had also scaled down the original project cost of US$345 million to about US$230 million at appraisal and also extended the project period from the original 5-1/2 years to 6 years to allow extra time for GOUP to budget for local funds. 14. Risks. The risk of project failure which could arise from a number of factors including reduction of water supplies to the UGC System, gradual deterioration or breakdown of some critical parts of the irrigation system, and weak institutional capability, were safeguarded by project investments. The risk of GOUP not proceeding with project works after completion of the first time slice was regarded to be small.  4 B. ACHIEVEMENT OF PROJECT OBJECTIVES 15. Overall achievement. The project has partially achieved its physical, sector policy, and institutional development objectives. Macro-economic policies and financial objectives were not applicable to this project. There was no coverage of gender issues. Equity was not a stated objective under the project. 16. Physical objectives. A comparative statement of targets and achievements of the project components as on September 30, 1994, is given below. Comparative Statement of Targets & Achievements as of September 30, 1994 '1 arget Achievement as a