India - Maharashtra Composite Irrigation III Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16688 IMPLEMENTATION COMPLETION REPORT INDIA MAHARASHTRA COMPOSITE IRRIGATION m PROJECT (CREDIT 1621-IN) JUNE 17, 1997 Agriculture and Water Operations Division Country Department II South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Rupees (Rs) Atappraisal(1985)US$1 = RsI2.0 Completion Year (1996) US$1 = Rs 35.3 WEIGHTS AND MEASURES 1 metre (m) = 3.28 feet (ft) 1 kilometre (km) = 0.62 miles (mi) 1 hectare (ha) = 2.47 acres (ac) 1 million cubic metres (Mm3) = 804 acre-feet (ac-ft) 1 cubic foot per second (cfs or cusec) = 0.0283 cubic metres per second (m3/s) 1 kilogram (kg) = 2.2 lbs (lb) 1 metric ton (t) = 2,205 pounds (lb) 1 thousand million cubic feet (TMC) = 28.317 mlllion cubic metres (Mm3) FISCAL YEAR OF BORROWER April I - March 31 Vice President Mieko Nishimnzu Director : Robert S. Drysdale Division Chief/Manager Shawki Barghouti Staff Member N K. Bandyopadhyay  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT INDIA MAHARASHTRA COMPOSITE IRRIGATION HI PROJECT (CR. 1621-IN) Table of Contents P R E F A C E ..... ......... ....... ...... ........................... .................................................................. ..................................i EVALUATION SUMLIvARY.1i PART I: PROJECT IMPLEMENTATION ASSESSMENT ..........................................................1 A. PROJECT OBJECTIVES ....................................................... B. ACHIEVEMENT OF PROJECT OBJECTIVES .....................................4 C. MAJOR FACTORS AFFECTING THE PROJECT ...................................... 10 D. PROJECT SUSTAINABILITY .. .................................... 12 E. BANK PERFORMANCE ...................................... 13 F. BORROWER PERFORMANCE ...................................... 14 G. ASSESSMENT OF OUTCOME ...................................... 17 H. FUTURE OPERATION ...................................... . 17 I. LESSONS LEARNED ...................... ......................................................................... 18 PART II: STATISTICAL TABLES ............................... 21 Table 1. Summary of Assessments .........2...1. ... .............................................................. 21 Table 2: Related Bank Loans/Credits ............................... 23 Table 3: Project Timetable ............................... 24 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual .......................... 24 Table 5: Key Indicators for Project lnplementation ................................................... 25 Table 6: Key Indicators for Project Operation ................................................... 26 Table 7: Studies Included in Project ................................................... 26 Table 8A: Project Costs .................................................... 27 Table 8B: Project Financing ................................................... 27 Table 9: Economic Costs and Benefits ................................................... 28 Table 10: Status of Legal Covenants ................................................... 29 Table 11: Compliance with Operational Manual Statements .............................................. 33 Table 12: Bank Resources: Staff Inputs ................................................... 33 Table 13: Bank Resources: Missions ................................................... 34 APPENDICES 1. Mission's Aide Memoire 2. Economic and Financial Analysis 3. Miscellaneous Tables 4. Economic Rehabilitation Program 5. Borrower's Evaluation Report 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.   IMPLEMENTATION COMPLETION REPORT INDIA MAHARASHTRA COMPOSITE IRRIGATION PROJECT III (Cr. 1621-IN) PREFACE This is the Implementation Completion Report (ICR) for the Maharashtra Composite Irrigation Project III (MCIP III) in India, for which Credit 1621-IN in the amount of SDR 164.2 million (US$160 million equivalent) was approved on July 16, 1985 and made effective on March 13, 1986. The project was approved for restructuring on April 3, 1993, at which time the credit was revised to SDR 132.2 million (US$128.8 million equivalent). The Credit was closed on December 31, 1996, five and a half years later than the original closing date of June 30, 1991. Final disbursement took place on February 20, 1997 and the revised Credit amount was fully disbursed. This ICR was prepared by an FAO/CP mission' which visited India from November 29 to December 16, 1996. It was finalized by Mr. N. K. Bandyopadhyay, Irrigation Engineer in the Resident Mission in India, and Mr. Jean-Pierre Baudelaire, Consultant and former Task Manager, and reviewed by Mr. Ridley Nelson, Principal Agricultural Economist, Agriculture and Water Operations Division, and Ms. Kazuko Uchimura, Project Adviser, Country Department 2, South Asia Region. The ICR mission coincided with the final supervision mission2. It is based on a review of the Staff Appraisal Report of the original project, the consultants' feasibility study of the restructured project, legal documents, supervision reports and project files, as well as field investigations and discussions with Bank staff and officials of the Irrigation, Agriculture, Public Works, and Revenue and Forests Departments of the Government of Maharashtra (GOM). The implementing agencies had prepared their own progress reports from which the mission was able to draw considerable information regarding physical and financial progress of the works The mission visited five of the six subprojects (Majalgaon, Upper Penganga, Kukadi, Bhima and Krishna) and held discussions with project-level officers of the implementing agencies, and participating farmers, collecting considerable information on project performance. Borrower's comments have been taken into account and a Borrower's Evaluation Report is in Appendix 5. I Messrs. W.J. Sorrenson (Agricultural Economist, Mission Leader), G.S. Schokman (Irrigation Engineer, Consultant) and S. Sarkar (Agronomist, National Consultant). 2 Messrs. N.K. Bandyopadhyay (Task Manager, SA2RS) and I.U.B. Reddy (R&R Specialist, SA2RS).   ii IMPLEMENTATION COMPLETION REPORT INDIA MAHARASHTRA COMPOSITE IRRIGATION PROJECT III (Cr. 1621-IN) Evaluation Summarv Introduction 1. The Maharashtra Composite Irrigation Project III (MCIP III) initially provided for the completion of the Jayakwadi and construction of the Majalgaon schemes. These schemes, located along the Godavari river in West Maharashtra, are to cover an area of about 300,000 ha. At restructuring, in addition to the continuation of the remaining works of the Jayakwadi and Majalgaon subprojects, construction works for four new subprojects (Kukadi, Bhima, Krishna, and Upper Penganga) were added. Project Objectives 2. The main objective of the original and restructured project was to substantially raise agricultural production and farmers' incomes by improving the use of the poorly drained black cotton soils and the available water in the reservoirs of the subprojects. This objective was to be achieved through: (a) the completion of irrigation works and on-farm development works; (b) the stimulation and promotion of agricultural development; and (c) the introduction of improved operations and maintenance (O&M) practices. Additional measures introduced at the restructuring stage were: (a) the economic rehabilitation of project-affected persons (PAPs); (b) technical assistance to ensure the sustainability of the schemes; (c) establishment of water users' associations (WUAs) to be responsible for water management, maintenance and cost recovery; and (d) the modernization of canals. 3. Command Area. Of the total of 733,000 ha of culturable command area (CCA) in the subprojects included in the original and restructured project, the CCA under the project was limited to 227,800 ha3 according to the availability of water. 4. Components. The original project included the following components in the Jayakwadi subproject: (a) completion of the irrigation systems (distributary and minor canals); (b) completion of the main and link drains; and (c) development of three special distributaries (SDDs); and the following components in the Majalgaon subproject: (a) completion of main canals including lining; (b) construction of distributary and minor canals; and (c) construction of the main and link drains. In the two subprojects, the components include : (a) the construction of field and drainage networks; (b) land shaping; (c) rural roads; (d) equipment for land shaping; (e) 3 Jayakwadi, 88,000 ha; Majalgaon, 58,000 ha; Kukadi, 20,000 ha; Bhima, 28,000 ha; Krishna, 10,800 ha; and Upper Penganga, 23,000 ha.  iii strengthening the monitoring and evaluation unit; (f) technical, agricultural extension, and research support; and (g) training, studies, study tours and consulting services. 5. At restructuring, besides the continuation of the on-going works in Jayakwadi and Majalgaon subprojects, civil works in the four new subprojects were similar to those provided for in the original project. In addition, the project included: (a) modernization of reservoir headworks in the four new subprojects; (b) service roads; (c) establishment of WUAs; (d) modernization of water control including volumetric water supply and canal automation; (e) review of farmer water rights; (f) continuation of the training program; (g) technical assistance for the development of an O&M management system; (h) the economic rehabilitation of PAPs; (i) new studies - environmental impact assessment (EIA) and environmental management plan (EMP), management information system (MIS), plans of operation and maintenance (POM), and evaluation of the water resources of the Godavari river basin; and (j) designation of a Dam Safety Review Panel (DSRP). 6. Loan Covenants. Covenants were included to promote achievement of project objectives within the time frame of the project. The most critical covenants included: (a) adequate budgetary provision and timely release of funds; (b) establishment and continuation within the Agriculture Department (AD) of two new agricultural districts to implement the agricultural program; (c) taking such actions as necessary to strengthen the Command Area Development Authority (CADA); (d) an economic rehabilitation program; and (e) specific studies prescribed under the restructured project. Covenants (a) and (c) were complied with after a delay of over three years. Covenants (b), (d) and (e) were partially complied with. 7. Evaluation of Project Objectives. The project's main objective was clear and appropriate. Although the concept was sound, the design of the project was biased more on construction of civil works and did not adequately focus on the required supporting activities needed to improve agricultural production. SAR targets of the civil works program were unrealistic given past experience on budgetary allocations and problems of project management. The restructured project appropriately included new features and financing to correct the deficiencies identified under the original project and added measures to provide for the improvement of the sustainability and the economic rehabilitation of PAPs of the subprojects. The components included under the restructured project were well-defined and the revised implementation targets were realistic. The Staff Appraisal Report (SAR) clearly defined organization and management at the farm level and, at restructuring, funds were provided and targets were specified. Implementation Experience and Results 8. At restructuring, the project was expected to cover about 227,800 ha. At closure of the credit, about 210,000 ha were provided with irrigation facilities and the achievement in irrigated cropped area has averaged 36 percent of the areas prepared for irrigation. There were signs of water shortage in the subprojects located in the Godavari basin, whereas the three subprojects located in the Krishna River basin appeared to develop normally, except for Bhima, due to delays in the construction of a major structure. The construction of civil works, which started at a slow pace due to procurement problems and inadequate funds, progressed satisfactorily achieving about 90 percent on major works and about 86 percent on on-farm development (OFD) works.  iv The progress on service and rural roads, and the formation of a small number of viable and effective WUAs, has been quite satisfactory. Although the targets for the formation of WUAs were achieved, many of these WUAs are not yet fully effective. Maintenance of irrigation infrastructure continues to be a major issue. Funding constraints and the indifferent attitudes of Irrigation Department (ID) staff and farmers are major factors influencing the implementation of an effective maintenance program. Unless the automated canal system introduced on a pilot basis is better developed, and proper maintenance is carried out, particularly below the level of the branch canals, the advantages of the system will not be realized. 9. Progress on the economic rehabilitation program (ERP) and the Environmental Impact Assessment (EIA), Environmental Management Plan (EMP), and Plan of Operation and Maintenance (POM) studies, included under the restructured project, has fallen well behind schedule. The studies were to be completed before December 31, 1996 but only started in late 1996 and specification of the ERP component was finalized in early 1996. Agricultural development got off to a poor start mainly due to non-provision of funds under the original project. However, with the inclusion of a special provision at the time of restructuring, a specific program was eventually agreed to between ID, AD and the Bank. An achievement of about 83 percent of the agricultural development component was recorded at the end of December 1996. 10. Project Impact. Agricultural production at the end of disbursement has been much below what was anticipated. The main reasons for this have been limited availability of water and incomplete infrastructure4. The situation in the future is not likely to change substantially unless major modifications are made by: (a) the ID in optimizing the allocation of available water to all dams under its jurisdiction within a river basin; and (b) by the ID staff, WUAs and farmers in terms of water management at scheme level. Although below SAR estimates, significant increases in farmers' incomes were achieved in the project command areas which have benefited from canal water or groundwater recharging as a result of MCIP III. 11. Economic Rates of Return (ERR). The ERRs, estimated at appraisal, restructuring and at implementation completion, are tabulated in Part I, para 39. The re-estimated ERRs are much below appraisal and restructuring estimates (except in the case of Kukadi) and range from -2 percent to 15 percent. The overall project ERR is estimated at implementation completion at 7 percent. Due to a lack of data on water availability during project implementation, future scheme performance (especially irrigation intensities) and the ERR estimates should be considered indicative. 12. Project Sustainability. Presently, O&M funding levels for infrastructure controlled by ID are well below requirements; many WUAs routinely desilt and clean canals; confusion exists on who is responsible for the maintenance of the structures within the WUAs' command areas; and inadequate technical advice is provided to the WUAs by the ID staff. There are few visible signs of any improvement in funding levels, although the Government of Maharashtra (GOM) accept that present levels of O&M funds are inadequate. In its Ninth Five-Year Plan, GOM are proposing to increase the level of O&M funding based on actual requirements of individual irrigation schemes. Intensive on-site training for ID field staff and WUAs on periodic and 4 Limited water availability could be due to inherent scheme design problems where the areas prepared for irrigation over-extend water available and/or poor water management by the ID and farmers.  v preventive maintenance activities are required, which would not only reduce maintenance costs but also contribute immensely to the optimum use of the scarce water resources. Also, the formation of scheme-level and basin-level committees, which were not included in the restructured project, would significantly contribute to improving water allocation and sustaining irrigation infrastructure. Unless the above actions are taken and an effective maintenance system is firmly in position, the sustainability of the project would be uncertain. 13. Actual Project Cost and Financing. The original project costs, inclusive of physical and price contingencies, were estimated at US$322.7 million. At the time of restructuring, the total project cost was re-estimated at US$310 million, including contingencies and the IDA credit at SDR 132.2 million (US$178 million) was to finance 57 percent of the revised total project costs. Actual project expenditure up to December 31, 1996 is estimated at US$368.3 million (see Table 8A). The credit was fully disbursed at US$187.7 million, representing 51 percent of the estimated expenditure up to December 31, 1996 and 40 percent of the estimated final project cost including the balance works. 14. Key Factors Relating to Achievement of Project Objective. The major factors affecting the limited achievement of the project's objectives of substantially raising agricultural output and farmers' incomes are- (a) inadequate budgetary allocation and timely release of funds, delays in the appointment of key staff to CADA (ID II) during the first three years, procurement issues in the award of contracts for major civil works, and weak project design which resulted in a reformulation exercise ending with restructuring the project; (b) limited available water during the construction period, poor system management and a greater expansion into high water-demanding crops (bananas and sugar cane) than envisaged in the design cropping patterns5; and (c) a limited adoption of effective water management and O&M procedures. 15. During the restructured project period, civil works construction continued satisfactorily, although land acquisition and contractual problems adversely affected the construction of a few major works on the main canals. Whilst ID concentrated on civil works construction, insufficient effort was made to expedite the implementation of the ERP component and studies related to EIA, EMP, the evaluation of water resources of the basins where the subprojects are located and finally, the POMs for the subprojects. The poor progress resulted in Bank supervision missions giving unsatisfactory ratings for implementation progress and development objectives. 16. The performance of ID II on maintaining works has generally been unsatisfactory, and there has not been any turnover of the maintenance of structures to WUAs other than the cleaning and desilting of canals. ID II staff did not repair irrigation infrastructure suffering from deferred maintenance before turnover to WJUAs as was envisaged in the restructured project, not because of a lack of funds, but because of a lack of coordination and cooperation between themselves and ID I. It is also apparent that training program did not focus adequately on maintenance. 17. Not identifying before appraisal a detailed agricultural component involving the AD contributed to the initial slow progress in increasing agricultural production. During the latter part of the restructured project period, a provision of funds (included at the time of restructuring) 5 It has been suggested that rainfall during the construction period (1986 to 1997) has been below average but no statistical evidence has been available to the ICR mission to demonstrate this.  vi and an agreed program of work between ID and AD, resulted in satisfactory progress, albeit in small portions of the MCIP III command areas. 18. Performance of the Bank. The SAR dealt comprehensively with factors related to the achievement of the project objectives. However, inadequate project preparation work reflected in the design weaknesses identified in the second year of implementation, particularly on the drainage network, the SDDs and the agricultural development component, indicate a less than satisfactory performance of the Bank during the initial project implementation period. However, during the reformulation exercise culminating in the restructured project, the Bank's contribution was very useful. The Bank was directly responsible for preparation of a package of measures to ensure the economic rehabilitation of PAPs, environmental sustainability of infrastructure and future environmental management in the operational phase, establishment of viable and effective WUAs, and the modernization of water management. Supervisions were carried out regularly. While the Bank's actions to resolve constraints on construction were useful, efforts to expedite the implementation of the agriculture and ERP components and studies were not effective until late in the project. The Bank's reporting on O&M and the poor performance of areas actually irrigated compared to those provided with irrigation infrastructure was not sufficient. 19. Performance of the Borrower. The Borrower's performance in the identification and preparation of the original project was satisfactory in works related to planning and design of irrigation systems and structures. However, the performance on supporting activities, the design of drainage networks, and land shaping, was less than satisfactory. Reformulation was resorted to in the second project year. Construction of civil works, after a very slow start, progressed very well in the latter period and continued satisfactorily during the restructured project period. The Borrower's performance related to the ERP component, as well as with implementing important studies (EIA, EMP, POMs, and water resources evaluation), was unsatisfactory due to excessive delays in commissioning them. Its performance in O&M of systems was poor and institutional arrangements at farm level were less than satisfactory, although good progress was made in the formation of a small number of successful WUAs. Initially, coordination between the ID and AD was unsatisfactory, but in the latter years of the restructured project the situation improved and coordination between the two departments was satisfactory. 20. Project Outcome. The project's outcome is rated satisfactory with respect to civil works construction (irrigation and roads), the recognition of the importance of WUAs in O&M and in irrigation agriculture extension. However, in terms of present agricultural achievements (irrigated areas), progress on the ERP component, studies included at restructuring, and the generally less than adequate maintenance of irrigation infrastructure, the outcome is unsatisfactory and expected results are yet to materialize. Summary of Findings, Future Operations and Key Lessons Learned 21. Plans for Future Works and Operation. The GOM has committed itself to the following program of action to complete the project: (a) ID to complete the balance civil works over a period of three years ending in FY1999/2000, and the studies by the end of FY1997/98; (b) the Rehabilitation Department to carry out the implementation of the approved plan for the ERP in three years subject to the availability of funds; (c) the AD to continue the agricultural development program for a further three years from available State funds; and (d) the PWD to  vii complete the rural roads program over a period of two years. With respect to civil irrigation infrastructure, as there are indications that water supply may be insufficient to feed the developed command areas of the subprojects in the Godavari river basin, GOM should concentrate on completing main and branch canal infrastructure which supply water to the areas where OFD works have been completed, and prepare operational plans to remedy the problem to the extent possible. Until water availability is confirmed through additional studies on water resources, actual cropping patterns adopted by farmers, canal operation, and all works to further expand the command areas, should be suspended. In addition, training program in maintenance for ID field staff and farmers should be included. Funding levels for O&M remain at the same level, although the GOM's Ninth Five-Year Development Plan proposal to increase funds for O&M based on individual scheme needs is an encouraging sign. 22. Lessons for Future Projects. The lessons learned from the project are classified as follows: Water Resources Availability and Management (a) Unless the adequacy of water supply and the proper management of the existing systems is ensured, expansion of irrigation facilities to new areas in the CCA of the subprojects should not be taken up. (b) The financing of future water resources development projects in Maharashtra and elsewhere in India should be preceded by: (i) the issuance of a state water policy defining the state priorities and institutional reforms, (ii) the preparation of a state water management plan defining the availability and management of water resources on a river basin basis; (iii) the identification of the rehabilitation requirements of the existing operational irrigation infrastructure prior to considering further developments; and (iv) the consideration of private sector groundwater development to increase the efficiency of irrigation. (c) The cropping patterns used in designing the subprojects were quite different from those currently followed by farmers, especially in Majalgaon. Careful consideration is needed as to whether water should be spread thinly over the areas where irrigation infrastructure has been created, as a means of drought protection, or spread over smaller areas to enable development into higher value, thirsty crops. The optimum economic strategy would vary from subproject to subproject depending on the extent and condition of existing irrigation infrastructure, the effectiveness of WUAs in managing water, and on the irrigation water responses and economics of alternative crops. (d) The usefulness of the Pilot Project for Dynamic Regulation (canal automation) is questionable if the Majalgaon command continues to face water shortages, due to limited water availability and the poor maintenance of the canals (minors and field). Water allocations to this command need to be reviewed within the framework of the Godavari basin water resources management studies and a proper POM needs to be prepared and implemented in order to test the feasibility and sustainability of canal automation in India. Furthermore, the pilot activities should be continued for at least three more years.  viii Operation and Maintenance (e) No new projects should be considered for financing unless an effective and sustainable O&M system covering both the construction and operational periods is agreed upon and implemented. (f) To improve the performance of ID II field staff and WUAs in O&M, it is recommended that: (a) more intensive training (classroom and site) in preventive and periodic maintenance activities be given to ID II field staff and WUAs; (b) the technical supervision of WUAs should continue even after turnover of maintenance to them; and (b) an effective supervision schedule for Section Officers, and canal inspectors, be introduced with high level staff monitoring their activities. (g) Farmer involvement in O&M activities is critical to the sustainability of the project. In order to ensure that O&M activities are performed satisfactorily by farmers, WALMI should carry out more training, particularly on maintenance (preventive and periodic) at farm sites and not only in classrooms, taking groups to areas where severe deterioration is apparent. Water Users' Associations (h) The responsibilities between ID I and ID II for rehabilitating the structures turned-over to WUAs needs to be clarified, and the WUAs involved in these activities to ensure a sense of ownership. (i) The effectiveness of WUAs should be judged not only in terms of financial and water management, but also in terms of their ability to maintain the structures turned-over to them. (j) The ID II, which is responsible for the formation of WUAs, should recruit either institutional specialists or NGOs to work as a team with its own engineering staff while preparing the rehabilitation and O&M plans prior to turn-over of irrigation structures to farmers. (k) Once WUAs are formed throughout a scheme command, there is a need to form a scheme-level committee which would negotiate the allocation of water at the beginning of each season with the ID II. Special training will be required for this which should also be taken up under future projects. Irrigated Agriculture (1) In future, the Bank should ensure that, in all new projects providing irrigation facilities to traditionally rainfed areas, an agricultural component with a separate budget is included in the project from the outset.  ix (m) The ongoing extension work in the subproject should continue for another three years to ensure a better uptake of irrigated agriculture by project beneficiaries and a more efficient use of water at the farm level Economic Rehabilitation of Project Affected Families (n) An ERP component must be backed by a detailed action plan prior to project implementation. Such components must have a separate allocation of funds and be regularly monitored. General (o) The quality of project preparation is a major consideration for successful project implementation. The review of technical aspects are as important as the other social, economic, and financial aspects. (p) Complex Bank-financed irrigation projects should include provision for a mid- term review to be carried out by a team of specialists not connected with the project, and the monitoring of project implementation should not be confined to only physical and financial progress, but should also include irrigation performance and impact on agricultural production. (q) To improve coordination between the various implementing agencies involved in an irrigation project, a project-specific coordination committee, chaired by the Secretary of Finance, is needed. Funds should be allocated directly from the Ministry of Finance to the agency responsible for a project component. (r) Special arrangements need to be agreed with the Borrower prior to project implementation to ensure that national and, particularly international, consultant firms are recruited in a timely manner.  1 IMPLEMENTATION COMPLETION REPORT INDIA MAHARASHTRA COMPOSITE IRRIGATION PROJECT III (Cr. 1621-IN) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES Statement of Project Objectives 1. Original Project. The main objective of the Maharashtra Composite Irrigation Project m (MCIP M) was to substantially raise agricultural production and farmers' incomes by improving the utilization of poorly drained black cotton soils and the available water in the command areas of Jayakwadi and Majalgaon reservoirs. These two subprojects were initially under the Maharashtra Composite Irrigation Project I (MCIP I - Cr. 736-IN) and initiated in mid-1977. MCIP m was to: (a) complete irrigation works and on-farm development in the Jayakwadi command; (b) stimulate and promote agricultural development in all of the command area (200,000 ha); (c) advance the development of the associated Majalgaon command (100,000 ha) completing its first segment of 24,000 ha; and (d) introduce improved O&M practices. Major emphasis was to be shifted away from large infrastructure works to on-farm development, water management and agricultural production practices, so as to trigger a self-sustained process of agricultural growth. Issues already identified to be adversely affecting the achievements of the expected benefits were to be addressed under the project. These included: (a) better land management (drainage, land shaping, tillage); (b) better water management (appropriate distribution systems down to the farms, reliable and timely supply, and meticulous O&M of the systems); and (c) improved support services and incentives to the farmers (farmers' organization, training, input supply, equipment, technical advice, appropriate crops, and marketing outlets). Although the primary objective was increased agricultural production, there was no specific component involving the Agricultural Department (AD). A special services component, which was to have included intemational technical assistance in agriculture, was not put under the control of AD and consequently was not implemented. 2. Project Components. In the Javakwadi command, major works included: (a) the completion of irrigation systems (distributaries and minors) on about 45,000 ha; (b) completion of main and link drains on about 153,000 ha; and (c) construction and/or rehabilitation of rural roads on 537 km. Command Area Development Authority (CADA) works included: (a) construction of field channels and structures and field drains on about 68,000 ha, and field channel protection on about 102,000 ha; (b) development of three Specially Developed Distributaries (SDDs) on about 7,300 ha; (c) land shaping over an area of about 128,000 ha; and (d) technical support to farmers on the entire 200,000 ha of the command. 3. In the Majalgaon command major works included: (a) completion of construction of the first 100 km of the main canal, including distributaries and minors, lining and structures estimated to cover about 57,000 ha; and (b) main and link drainage network and rural road network covering the first  2 segment of about 24,000 ha. CADA works included: (a) construction of field channels, structures, field drains, land shaping and technical support to farmers on about 24,000 ha; (b) the development of one SDD serving about 4,000 ha; and (c) preliminary promotion programs for farmers on the rest (76,000 ha) of the command. 4. Common programs. for both the Jayakwadi and Majalgaon subprojects, included: (a) equipment for land shaping, telecommunication and monitoring; (b) strengthening the monitoring and evaluation unit within the project; (c) agricultural extension and research support; and (d) training, studies, study tours and consulting services. 5. Restructured Project. Between about 1987 and 1992, the project was restructured to take account of the scarcity of water and make use of additional rupee funds available from the credit due to the devaluation of the rupee vis-a-vis the SDR. In early 1987, the Bank advised GOM that as certain components at appraisal had been founded upon inadequate information or analysis, with a view to reformulation of the project, additional studies were needed. These were: (i) drainage; (ii) land shaping; (iii) rural roads and canal service roads; (iv) deferred canal lining; (v) pilot distributaries; (vi) additional system simulation; (vii) agricultural development; (viii) volumetric water supply to water users' associations (WUAs); and (ix) feasibility studies of subprojects partially completed under the Bank-financed MCIP II (Cr. 954-IN) project. While retaining the main objectives, the restructured project aimed to expand the scope of the project by including: (a) investments on water distribution and drainage networks in four additional subprojects which were included in an earlier Bank-financed MCIP II; (b) an economic rehabilitation program (ERP) of project-affected persons (PAPs) with special emphasis on consultation with PAPs and their participation in designing a compensation package; (c) inclusion of features to ensure environmental sustainability and sound future environmental management in the operational phase; (d) establishment of WUAs to be responsible for water management, maintenance, and cost recovery through an extension program designed to create farmer participation and involvement; and (e) modernization of water management. Other objectives included: (a) the development of a management system for O&M; (b) the inculcation of an O&M culture amongst subprofessional staff at the field level and farmers; (c) development of areas compatible to the available water resources; (d) studies to improve performance of the project and to ensure its sustainability, and at the same time to improve the performance of ID staff, (e) training of project staff and farmers; (f3 establishment of an MIS to monitor and report on project activities; and (g) an effective organization and management to implement the project. 6. Project Changes after Appraisal. Of the total 733,000 ha of CCA of the six subprojects incorporated in the restructured project, the command area included in the project was restricted to 227,800 ha according to water availability. This consisted of Jayakwadi 88,000 ha, Majalgaon 58,000 ha, Kukadi 20,000 ha, Bhima 28,000 ha, Krishna 10,800 ha and Upper Penganga 23,000 ha 7. In line with the reassessed availability of water, the Majalgaon command area was reduced to 58,000 ha; lining of distributary canals with a capacity less than 3 m3/s was deferred, the rural road component was reduced to 344 km and the four SDDs were dropped as these were deemed impractical, non-replicable and would duplicate the research being done by universities. Instead of the SDDs, CADA concentrated on pilot area proportional rotational water supply operations. Several covenants were revised. These related to economic rehabilitation, designation of a Dam Safety Review Panel (DSRP) to review all the dams and related structures in the project area, preparation of Environmental Management Plans (EMPs) for each command area under the project and the establishment of WUAs which would recover water charges.  3 8. The restructured project included: (a) completion of the ongoing Jayakwadi and Majalgaon irrigation and drainage works, including associated rural roads which were part of the original project; (b) completion of irrigation and drainage works and associated rural roads on four additional subprojects - Kukadi (100,000 ha), Bhima (113,000 ha), Krishna (81,000 ha), and Upper Penganga (139,000 ha) which were previously partially developed under MCIP II; and (c) buildings, vehicles and equipment, studies, training, dam safety measures, economic rehabilitation, rural roads and bridges, and economic development. 9. The changes at restructuring for the Jayakwadi command were as follows: (a) the area covered by the main and link drains was reduced to about 72,000 ha and about 5,500 ha respectively; (b) sub- surface drains to cover an area of about 13,500 ha were added; (c) the rural roads program was reduced to 310 km; (d) field channel protection was reduced to about 93,000 ha; (e) on-farm development (OFD) coverage was increased to 88,000 ha; (f) the SDDs were replaced by the Pilot Proportional Distributaries (PPDs) covering an area of 620 ha; (g) the land shaping area was reduced to about 32,000 ha; (h) construction of 572 km of service roads; (i) establishment of about 10 WUAs; (j) construction of buildings; and (k) modernization of the Paithan left and right bank canals including distributaries were added. 10. Changes at restructuring under the Majalgaon command were as follows: (a) the construction of about 150 km of service roads; (b) the main and link drainage network was reduced to 15,500 ha; (c) the rural road network was reduced to 34 km covering the total command area of 58,000 ha; (d) field channel protection and on-farm development works to cover the entire command area of 58,000 ha; (e) the SDDs were replaced by the development of about 30 minor canals in accordance with the principles of volumetric water supply, and about 30 WUAs were to be established on these minor canals; (f) land shaping was reduced to about 6,200 ha; (g) operation of the Majalgaon main canal up to km 100, and the Ganga Masala branch canal over its entire length, both on the principles of dynamic regulation; (h) technical support to farmers and a preliminary promotion program to cover the command area of about 58,000 ha; and (i) updating the baseline socio-economic survey for PAPs and their economic rehabilitation. 11. Works and Services. For the four new subprojects these were to include: (i) modernization of six dams, 3 powerhouses and a tank; (ii) construction of about 468 km of the main and branch canal system; (iii) upgrading the existing canal system for about 225,000 ha; (iv) partial lining of the distribution network for about 62,000 ha; (v) on-farm development works including main and link drains on about 85,000 ha and sub-surface drainage for about 15,900 ha;; (vi) construction of 144 km of service roads, 380 km of rural roads and 23 bridges; (vii) pilot operation land shaping and conjunctive use covering an area of about 4,000 ha; (viii) construction of buildings; (ix) establishment of about 10 water user associations; and (x) carrying out baseline socio-economic surveys for the preparation of the ERP for PAPs. 12. Traiinng. Equipment. Technical Assistance and Studies. The restructured project provided for: (a) training, at WALMI (Aurangabad) and the State Agricultural Universities, in water management and agricultural practices for farmer leaders in the project area, as well as CADA and ID staff, (b) technical assistance to project officers for advisory services; and (c) special studies in the areas of canal automation, radio telecommunication networks, volumetric water supply, farmers' water rights, environmental impact assessment (EIA) and EMP, and preparation of future projects. The project also provided for: (a) construction equipment; (b) vehicles for construction and O&M; (c) radio communication systems for the control and monitoring of canal systems; (d) agro-meteorological and hydrometeorological networks; (e) provision of office technology for management, monitoring and  4 evaluation of the project; and (f) strengthening of Maharashtra's hydrological measurement and analysis capabilities through: (i) the provision of equipment; and (ii) the carrying out of a study in the Paithan catchment area of the Godavari Basin. Evaluation of Project Objectives 13. The project's main objective was clear and appropriate. However, the design of the project did not adequately estimate water availability and the practicability of carrying out land shaping with heavy earth moving equipment. In addition, it did not focus, nor sufficiently clearly define and make adequate financial provision for, critical activities such as water management, agricultural production practices and sharing of O&M responsibilities between the GOM and farmers, necessary to trigger a self- sustained process of agricultural growth. This was clearly demonstrated by the need to restructure the project. 14. The SDDs proposed under the project were designed according to the warabandi system, which was not implementable in locations where the Shejpali system is used. Accordingly, these had to be dropped. A concerted effort by the Bank and project management would have been required to ensure success. The design and implementation procedures of the civil works program were relatively simple. However the SAR targets were unrealistic, given earlier experience on budgetary allocations and problems associated with project management (delays in posting of senior staff). 15. The restructured project, besides the introduction of measures to adjust the environmental and economic rehabilitation components to meet the guidelines and policies of the GOM and the Bank, in- line with the India Irrigation Subsector Review (Report No. 9518-IN of 20 December 1991), appropriately included new features and financing to correct the identified deficiencies. The components were well defined and implementation targets were realistic. Appropriately, emphasis was placed on environmental sustainability. 16. According to the SAR, farmer organizations would be set up at three levels' Outlet Committees (OCs) at the level of chaks; Water Utilization Committees (WUCs) at the level of minors; and Canal Advisory Committees (CACs). No targets for these were set. At restructuring, targets (specified in the legal agreement) were set for the formation of WUAs, and no emphasis was placed on the upper tier (above WUAs) and the lower tier (chaks). B. ACHIEVEMENT OF PROJECT OBJECTIVES Overall Achievement 17. The project ran into delays soon after inception in the appointment of key personnel and funding. From the start emphasis was placed by the ID on construction with little attention being given to capturing optimal benefits from the infrastructure created (irrigated cropped area being much less than the available area) and to the sustainability of the investment (inadequate maintenance and a limited number of effective WUAs throughout the project command areas). Of the 210,170 ha of command area provided with irrigation facilities at the end of December 1996, the irrigated cropping intensity at credit closure has averaged 36 pcercent compared to the appraisal target of 175 percent at full development. Hence, limited progress has so far been made in achieving the main objective of increasing agricultural production and farmers' incomes. This result is similar to the findings of  5 Maharashtra Water Utilization Project Completion Report (PCR)6 where in the Jayakwadi command the seven-year average cropping intensity during project implementation was 20 percent compared to the SAR target of 113 percent. Physical Achievements 18. Except for the construction of major works, which considerably exceeded SAR targets (see Table 5), progress on other components of the project has been below expectation. ERP, environment, special studies and technical assistance have shown little progress due to excessive start-up delays. 19. Irrigation Works. The total culturable command area (CCA) of Jayakwadi and Majalgaon to be achieved under MCIP mI was estimated at 146,000 ha in the SAR. The four subprojects included at restructuring account for a further 81,800 ha making a project total of 227,800 ha. By December 31, 1996, irrigation potentials were created through the completion of the main and distribution networks and OFD works to the six subprojects totalling 210,170 ha, 92 percent of the target. Culturable Command Areas and Areas Provided with Irrigation Infrastructure Area Provided with Total Conunand Area Irrigation Faclities Subproject Conmuand Area Under MCIP HI at Credit Closure Jayakwadi 200,000 88,000 84,600 Majalgaon 100,000 58,000 55,530 Kukadi 100,000 20,000 18,470 Bhima 113,000 28,000 20,400 K(nshna 81,000 10,800a/ 11,480 Upper Pengarga 139,000 23,000 19,650 Total 733,000 227,800 210,170 a/ According to the GOM's comments dated May 1997 on the draft ICR, the command area of the Krishna project was increased from 10,800 ha to 14,000 ha. This had not been brought to the attention of the ICR mission. 20. The overall progress on dams and canal works implemented by the Irrigation Department I (ID I) is estimated at about 90 percent. The progress on QFD works, implemented by the Irrigation Department 11 (ID I1), on Majalgaon, Kukadi, and Bhima varied between 87 percent and 100 percent, while on the remaining subprojects (Krishna and Upper Penganga) the progress was unsatisfactory (60 percent). Physical targets and achievements are summarized in Table 5. 21. Buildings. Buildings in Kukadc and Krishna have been completed while the progress at Bhima was 50 percent. 22. Rural and Service Roads. At the time of the ICR mission in December 1996, about 678 km of service roads, 776 km of rural roads and 6 bridges were completed7. 6 Report No. 125/91 CP-IND 90 CR, FAO/World Bank Cooperative Program dated 28 October 1991, Credit 1383-IN and Loan 2308-IN. 7 According to GOM (their comments of May 1997 on the draft ICR) 11 of the 22 bridges were completed by 31 December 1996.  6 23. Water Users' Associations. A total of 193 associations have been registered (276 percent of the target of 70 after restructuring) and irrigation infrastructure has been handed over to 71 associations. The associations registered, and the ones which have accepted responsibility for all O&M activities, are not necessarily in the subproject command areas, which was not a requirement of the restructured project. 24. Improved Water Management. Under the original project, the Pilot Proportional Distributaries (PPDs) equipped and operated on the area proportional system of rotational water supply (RWS) were established (this replaced the SDDs) to demonstrate the comparative benefits over the existing Shejpali system. In 1990, plans were finalized and implementation commenced, but delays occurred due to the reformulation exercise. 25. The Pilot Project for Dynamic Regulation (PPDR) began in 1994 and was to be commissioned in late December 1996, financed jointly by IDA and a French grant. PPDR included the Majalgaon main canal commanding 58,000 ha, the Ganga Masala branch canal (commanding about 11,000 ha) and minor canals (2 lined and 2 unlined taking off the branch canal commanding about 2,000 ha). All civil works and installation of equipment have been completed. The sophisticated system is operational for regulating the main and branch canals. Maintenance of the computer program used to dynamically regulate the main and branch canals is still dependent on the French consultants who have installed the system. 26. In the opinion of the mission, the pilot activities should be continued for at least three years to test the feasibility and sustainability of canal automation in India, given its potential importance for raising the efficiency of water use. The assistance of the international consultant should be withdrawn before the end of the pilot period extension. 27. Dam Safety Review Panel (DSRP). Under the origmal project, the Dam Safety Directorate was to inspect and report on the condition of the Majalgaon Dam once a year and the Paithan Dam once every five years. The Directorate fulfilled these obligations as required. In 1990, the Bank requested the GOM to establish an independent panel, and reiterated in early 1994, its request for the formation of the panel as per the Bank's guidelines. The GOM eventually established an independent DSRP in May 1994. A one-time report of the DSRP was submitted in June 1995 and the panel's report was accepted by the GOM in August 1996. The safety measures including rehabilitation works on all 9 dams of the project, were estimated to cost about Rs.960 million. Iniplementation of the program has been initiated. 28. Agriculture. Two new command area agricultural districts were to be established. These were to be staffed by additional Village Extension Workers (VEWs) so as to raise the ratio of VEWs to farmers from 1:1,200 to 1: 800. However, no progress was made in this direction because of the inadequacy of the proposal. The SAR made provision for intemational agricultural consultants to prepare an agricultural component for on-farm demonstrations, adaptive research and training of staff and farmers. There was apprehension on the part of the AD to get involved and no consultants were contracted. Apart from the technical assistance, no other funds for agriculture were included in the SAR. In the restructured project, the lessons learnt during the initial years of MCIP Im were capitalized upon. Although progress was initially quite slow, eventually a specific program of work was agreed by the ID, AD and the Bank. Consequently, funds were provided by GOM through the project to conduct about 30,618 crop irrigation demonstration sites (for which an achievement of 43 percent was realized), 3,947 drip and sprinkler irrigation demonstration sites were established (43 percent achievement), 52 multipurpose Agricultural Technology Dissemination Centers were built  7 (100 percent achievement) and 223 training programs were conducted for the AD staff and farmers against a target of 131. However, against an approved outlay of about Rs. 190 million, 56 percent achievement was obtained by October 31, 1996, with an anticipated achievement of 83 percent up to December 31, 1996. 29. Areas benefiting from increased canal water are much below expectations mostly due to inadequate water supply during the project construction period. However, it is encouraging that where canal water is being received, cropping intensities are mcreasing as well as crop yields. Mission findings mdicate that in areas where adequate water is available, the speed of switching from rainfed to irrigated agriculture and realizing irrigation potential is faster than was predicted in the SAR and in the feasibility studies of the four additional subprojects (seven years as opposed to twelve years). However, shortages of water appear to be restricting the expansion of actual areas irrigated and crop yields. There is some evidence of recharging of groundwater in the project areas and the number of dugwells in all project command areas has increased during MCIP JR. There has been a positive agricultural production impact to the increased extension. It is important that the agricultural component is continued for at least 2 to 3 years more in order to consolidate the efforts so far made. 30. Economic Rehabilitation8. Affected persons to be economically rehabilitated under the restructured project were not affected by MCIP III itself, but by dams which had been constructed under previous projects By the time MCIP m started, the affected persons had already been resettled, but unsatisfactorily The purpose of the Economic Rehabilitation Program (ERP) carried out under the restructured project was mainly to rehabilitate these affected persons. The Maharashtra Project Affected Act, 1986, laid down clear policies and rules for rehabilitation, which Maharashtra agreed to follow under the project. The Agreement Amending the Development Credit Agreement stated that the economic rehabilitation will be according to this Act. At the time of restructuring the conditions for implementing this Act were discussed and agreed upon. These included the preparation of: (a) a house-to-house socio-economic survey to be carried out m all project schemes except Jayakwadi which had been resettled much earlier, and (b) on the basis of the survey, Maharashtra was to frame a specific economic rehabilitation implementation plan of the restructured project. Whereas the socio-economic surveys were completed, Maharashtra took much time in issuing the project specific plan. Finally, a Government Order was issued in January 1996 with a detailed economic rehabilitation policy and action plan which was endorsed by the Bank. Out of the four activities envisaged under this component, only civic amenities have commenced. So far 18 percent of physical progress (162 out of 905 new facilities to be created) and 33 percent of financial progress (about Rs. 125 million out of Rs. 378 million) have been achieved. Implementation of the other three components (housing, irrigation and income generation) is yet to commence. Funds earmarked for 1996/97 for these three activities are yet to be placed with the Divisional Commissioners. Though 70 percent (10 out of 14 positions) of the professional staff created for exclusive implementation of this program are in position, the key position of Deputy Secretary is yet to be filled. Updating the list of eligible PAPs for individual schemes, and recruitment of non-government organizations (NGOs) for the implementation of income generation activities, have not been completed. No efforts have been made so far to finalize the terms of reference (TOR) and appointment of consultants for Monitoring and Evaluation (M&E). 31. Training. A total of 125 courses were conducted at the Water and Land Management Institute, Maharashtra for ID and AD staff, farmers, WUA office bearers and NGOs. Some 2,482 staff and 2,844 farmers and NGO representatives were trained under the program. WALMI is fully equipped with modern facilities to carryout the training envisaged under the project. Training staff have several 8 See Appendix 4 for details of the ERP.  8 years of experience in the required disciplines. To date the main thrust has been on the training of project staff on all engineering aspects and to a lesser extent on O&M. With regard to WUAs, the emphasis was to train the office bearers on all aspects of finance and management and to a lesser extent in O&M. The courses were mainly through classroom lectures with a minimal level of field work. However, between Apnl 1993 and November 1996, 130 ID staff were given training in canal maintenance by WALMI. In addition, 226 graduate and diploma engmeers received five months intensive training at WALMI, which included canal maintenance as one of its topics. 32. Since 1994/95 regular training in water management was carried out at the Rahuri and Parbhani State Agricultural Universities. Attendance by ID staff fell below targets. The foreign training program was not realized smce available funds were diverted for other purposes. Farmers' training, including rallies and educational tours, are reported to have been undertaken by AD staff. 33. Equipment, Technical Assistance and Studies. The project financed equipment and vehicles for construction, O&M, radio communication, agro-meteorological and hydrometeorological networks, and office technology for management, monitonng and evaluation. The restructured project also provided technical assistance for the preparation of: (a) a water resources management plan in the Godavari nver basin; (b) plans of operation and mamtenance for all project schemes; (c) environmental impact assessment and plans for project schemes located in the Godavari and Krishna River basins; (iv) a Management Information System (MIS); and (v) socio-economic surveys for the economic rehabilitation of PAPs. All equipment and vehicles have been procured after some delay. However, except for the MIS and socio-economic surveys of PAPs, all other studies could not be completed by credit closure due to considerable delays in recruiting national, and particularly, international consultant firms. 34. The studies included in the onginal project and not connected to the reformulation exercise were completed prior to restructuring. The status of all studies, including those added at the time of restructuring, is shown in Table 7. Objectives of Sector Policies 35. Sector policies relevant to the project include: (a) optimization of the full potential of the available water in the reservoirs; (b) water management of the system from the reservoir to the farms; (c) implementation of an effective and practical O&M program, including sharing of physical and financial aspects between GOM and farmers; (d) increasing of water charges to a level commensurate with actual O&M costs; (e) increasing irrigated agricultural production; (f) the ERP of PAPs; and (g) environmentally sustainable irrigation infrastructure. These sector policies remain to be translated into concrete action in the future since only limited success has been achieved in MCIP HI towards their implementation. Water charges have been increased but not to levels compatible with the cost of O&M. The functioning of a small number of WUAs is improving and the coordination between AD and ID staff has improved. These are positive signs for the development of irrigated agriculture in Maharashtra. Institutional Development Objectives 36. A workable management system for O&M is now being evolved with the organization of WUAs and the sharing of responsibilities between the GOM and farmers. At the time of restructuring, it was decided to focus efforts on the formation of WUAs at the level of minors. This decision was taken as a result of: (a) the poor results that the ID was experiencing in the formation of OCs in the MCIP HI  9 project; and (b) the positive results which were emerging from the pilot efforts of forming WUAs with the assistance of NGOs in the Mula command of the Maharashtra Water Utilization Project (MWUP). The rnission visited a number of WUAs and it was encouraging to note that in a number of cases, where members of the associations had been trained through the project, and where turnover of infrastructure to farmers had occurred, good results are being achieved. These WUAs were effectively managing the distribution of water among their members, successfully collecting water fees and controlling their associations' finances, as well as organizing the desilting and cleaning of canals. The principle of volumetric supply had been successfully introduced. Although OCs were dropped at the time of restructuring because they were not functioning, it is desirable to maintain these committees in an informal manner at the outlet level to facilitate the distribution of water among all outlet users. The mission has concluded that the project has successfully piloted a small number of WUAs consolidating the principles of participatory irrigation management (PIM) which were initiated in the Mula scheme of the MWUP. 37. A critical factor is a concern for maintenance, which is still not fully appreciated by field staff and farmers The training programs have improved the capability of high and mid level staff of ID and AD, but have had little impact on field staff. One of the observations made in the supervision reports was that ID staff concentrated more on construction activities and the expansion of irrigation networks well beyond the available water resources, at the expense of the already developed areas which are not serviced with a reliable and adequate water supply. The objective of the restructuring was to address this point. However, this perspective appears to be contmuing. Studies of the Godavari and Krishna River basins would improve the operation of existing schemes and assist in the preparation of future projects. 38. Data collection and reporting improved considerably as a result of the establishment of the MIS. Experience gained from the constraints confronted in the coordination of the project's implementing agencies will be valuable in improving institutional aspects of future projects. Economic Rate of Return 39. The re-estimated ERRs at project completion, compared to those at appraisal and restructuring, are tabulated below. The underlying assumptions and information supporting the analyses are given in Appendix 2. Economic Rate of Return (ERR) Subproject (%) SAR Restructuring ICR Jayakwadi 29 15 Majalgaon 13 5 Kukadi 5 5 Bhima 17 -2 Krishna 18 5 Upper Penganga 9 -2 Overall Project 7 40. It should be emphasised that, due to the limited data available to the ICR mission relating to water availability, a number of uncertainties had to be incorporated in the re-estimated ERR computations, especially relating to future irrigated areas, so that the results should therefore be  10 considered as indicative. However, poor initial project design and slow project start-up, significantly reduced benefiting areas, cost overruns, funding constraints for O&M, and focus on construction at the detriment of system performance and maintenance, are consistent with low project performance. Consequently, the reduction in the ERRs compared to those estimated at appraisal and restructuring are not unexpected/ The project has, however, had a positive impact on agricultural production and farmers' incomes in the areas where water has reached. Similar results were obtained in the PCR of the MWUP 9. The overall project is estimated by the mission to have an ERR of 7 percent. The higher ERR of the Jayakwadi subproject is due to the fact that primarily only OFD works were completed during MCIP mII; earlier investment was treated as sunk costs and therefore ignored. Sensitivity Analysis 41. Potential economic benefits are not expected to be realized as foreseen in the SAR and at the time of restructuring. Major reasons for this are: (a) inadequate water availability during the project construction period; (b) lower agricultural benefits; and (c) higher costs per additional hectare irrigated, than were anticipated. Sensitivity tests were carried out to examine the impact of: (a) increasing future areas irrigated where it was assumed that from the year 2000/2001 100 percent irrigation intensity would be obtained; (b) increasing agricultural production (+25 percent and +50 percent); and (c) reducing project costs (-25 percent and -50 percent). Details are provided in Appendix 2. 42. For all of the sensitivity tests carried out, only the Jayakwadi subproject yielded an ERR above 12 percent (the ERR ranged from 15 percent to 26 percent). The ERR of the Majalgaon subproject increased to 14 percent when irrigation intensities were raised to 100 percent from the year 2000/2001 as against lower percentages foreseen by the ICR mission and 175 percent foreseen in the SAR In all other cases tested in Majalgaon and in the other four subprojects (Upper Penganga, Kukadi, Bhima and Krishna), the ERRs remained below 12 percent, ranging from -0.7 percent to 10 percent. ERRs of all subprojects were more sensitive to reductions in project costs than to the samne percentage increases in agricultural benefits. Farm Incomes 43. Incomes estimated in the SAR and by the ICR mission for representative farms under without- project rainfed conditions are compared to those under with-project irrigated conditions at full development in first quarter 1997 prices. For Jayakwadi, farm incomes are re-estimated by the ICR mission to increase from about Rs.12,600 to Rs.58,700 compared with about Rs.23,000 to Rs.85,700 at appraisal. In the case of Majalgaon, farm incomes are re-estimated to increase from about Rs.11,900 to Rs.69,300 compared with an increase from Rs.11,300 to Rs.115,800 at appraisal. Farm incomes at the time of re-evaluation for the other four subprojects included at the time of restructuring are detailed in Appendix 2. These range from about Rs.6,600 to Rs. 12,600 under present rainfed conditions, to between Rs.49,200 to Rs.69,300 under fully developed irrigated conditions. C. MAJOR FACTORS AFFECTING THE PROJECT 44. Local Currency Depreciation. The depreciation of the Rupee against the SDR had a major effect on the project enabling four additional subprojects to be included in MCIP Im. 9 ERRs estimated in the SAR and PCR respectively were: Jayakwadi (47% and 7%); Puma (36% and -16%); and Khadakwasla (19% and 5%).  11 45. Implementation Record and Delays. The non-completion of some major construction works (aqueducts, regulators and drainage crossings, canal excavation in rock, and lining) was caused by: (a) objections to acquisition of land and prolonged litigation; (b) objection by villagers to blasting operations in close proximity to their villages; (c) shortage of blasting materials for rock excavation; (d) delay in the approval by GOM to go ahead with the construction of Hanga Aqueduct; and (e) unexpected delays with the contractor working on the construction of the Ghod Aqueduct under the Kukadi subproject and the resultant delay in re-mobilization. 46. Factors Generally Subject to Government Control. The original project was initially delayed two years, primarily due to the late appointment of the Chief Administrator ID II (CADA), other key positions, and insufficient budgetary allocations. In 1986 (one year after start) GOM, advised by the FAO/CP and with the concurrence of the Bank, started a reformulation exercise to improve project performance whlch was affected by: (a) problems in project design associated with availability of water, drainage, SDDs and agricultural development; (b) poor coordination between implementing agencies and untimely release of funds, particularly during the first three years; and (c) inadequate budgetary allocation for O&M works. 47. Factors Generally Subject to Implementing Agency Control. The following factors had a direct influence on project progress by the implementation agencies. For ID I: (a) overestimation of the water available10; (b) slow procurement particularly on LCB contracts; (c) unsatisfactory quality standards in concrete works of major structures and canal lining; (d) concentration on construction while neglecting the maintenance of completed infrastructure; (e) delays in repairing completed works prior to handing over to 1D II; (f) disagreement with the Bank on conditions in the major works tender documents; (g) conflict between ID I and ID II in taking over completed project works for operation; (h) weak agriculture input during the period of the original project; and (i) low priority given to the implementation of the ERP component and ELA, EMP, and POM studies. Most of the construction- related issues which impeded progress initially were resolved in the latter years of the project resulting in satisfactory ratings for construction of major construction works. ID II was responsible for OFD works, O&M of the operational phase of completed works, the formation of WUAs and the implementation of the water management program. 48. The AD had practically no input in the original project. This was due to the non-provision of funds by GOM and the definition of a program of work. A conflict between ID and AD appears to have been the main reason for the cancellation of the SDD component which was elaborately designed during the preparation phase of the original project. Delays in road works were mainly due to disagreement between ID, PWD and the Bank on the reduction of the scope of work. After much delay the issue was resolved by the PWD agreeing to undertake some of the roadwork with their own funds. Delays in completing the socio-economic surveys, the preparation of the resettlement and rehabilitation plan, and the GOM's slow issuance of a Government Order (GO) were contributing factors to the unsatisfactory status of the ERP component. Poor progress of the ERP component was also due to: (a) an earthquake in the State of Maharashtra and the Bombay riots which caused a diversion of funds in the early 1990s; (b) untimely resolutions to decide on the implementing agencies for the four activities; (c) lack of effective coordination; (d) delay in recruiting NGOs; and (e) failure to appoint a monitoring and evaluation agency. These constraints were addressed and resolved towards 10 This is a debatable issue, since simulation studies have indicated sufficient water in all schemes except Majalgaon. However, scheme performance data collected by the ID during MCIP III suggests that there could be a problem of water availability especially in the three subprojects in the Godavari River basin (Jayakwadi, Majalgaon and Upper Penganga).  12 the end of December 1996 by the issuance of a rehabilitation policy and action plan for persons affected by previous projects. 49. Project Cost and Financing. The project costs, inclusive of physical and price contingencies, were estimated at appraisal at US$322.7 million (Rs.3,872 million) in 1985 prices. An IDA credit of SDR 164.2 million (US$160 million equivalent) was to finance about 50 percent of the total costs and the remaining expenditures were to be met by GOM. At the time of restructunng, the total project cost, including physical and pnce contingencies, was re-estimated at US$310 million (Rs.8,622 million) in 1992 prices and the IDA credit at SDR 132.2 million (US$178 million equivalent). At this time, SDR 32 million was cancelled from the credit and retroactive financing remained at SDR 9 million11. The new credit amount was to finance 57 percent of the revised total project costs. Actual project expenditure up to December 31, 1996 is estimated at US$368.3 million (Rs.10,01 1 in current Rupees), and included the estimated cost of the balance works programmed up to March 31, 2000, at US$438.3 million (Rs 12,471.50 million in current Rupees)'2. Including the cost of the balance works, the actual project cost is 136 percent and 141 percent of the SAR and restructured project cost estimates, respectively. The cost overrun is in part due to the devaluation of the Rupee against the US$, which allowed an expansion of construction works included in the project. The credit was fully disbursed on February 20, 1997 at an amount of US$187.7 million, representing 51 percent of the estimated expenditure up to December 31, 1996 and 40 percent of the estimated final project cost including the balance works. 50. The loan disbursements by category of expenditure were as follows: works 95.2 percent; equipment, vehicles and materials 1.9 percent; incremental staff salaries 0.5 percent; consultancy services and training 2.4 percent. D. PROJECT SUSTAINABILITY 51. Sustaining mcreased agricultural production and farmers' incomes depends on several factors, including: (a) availability of adequate water and the management of this water; (b) effective operation and maintenance of the headworks, irrigation and drainage systems; and (c) viable and effective WUAs and the formation of scheme-level and basin-level committees. 52. As at December 31, 1996, irrigation facilities have been provided for about 92 percent of the MCIP m project command areas. The balance area depends on the completion of the major aqueducts, rock excavation of a limited reach of main canals and the OFD works within the reach of the incomplete main canals. As the availability of water is limited, GOM with its own funds should first complete all works on the main and branch canals which supply water to the areas where OFD works are completed 53. Limited availability of water is reflected in the shortfalls in the irrigated cropped areas compared to the areas prepared for irrigation in the period 1988 through 1996 (see Appendix 3, Table 10). Records indicate an average irrigation intensity of 36 percent (Appendix 3, Table 8). Concems regarding water management up to the chak outlet resulted initially in the implementation of pilot proportional distributaries (PPDs), and the one at Majalgaon was further improved by introducing measures to provide the control by Dynamic Regulation (PPDR). So far the results have been " The Bank rejected a request from GOM to increase retroactive financing to US$15 million. 12 See Appendix 3, Table 1.  13 promising in that optimum use of the water available from the reservoirs could be achieved through effective control of flows particularly in the main canals. However, the success of the operation will hinge critically on the maintenance of the minor canals and the development of a system which can be operated and maintained without external support. A minor canal completed in about 1994 is showing signs of deterioration due to the lack of maintenance, but this could also reflect problems in construction. Several temporary rock boulder checks were observed at chak outlets, control gates were damaged, beds were silted up and canals, especially at the tail reaches, were overgrown. Overall, there is doubt whether the expected increase in production would be achieved and, even if it is, it seems likely that poor maintenance of the irrigation and drainage infrastructure would result in the increases not being sustained. Project sustainability must therefore be considered uncertain. 54. A critical factor to ensure sustainability is an effective and viable maintenance program particularly in areas where farmers are responsible for maintenance. As yet, WUAs formed a few years back are not aware of their maintenance responsibilities for structures, apart from the desilting and cleaning of canals, nor are they aware of what maintenance of structures within and below the minors'3 entails. The inculcation of an O&M culture in the lower level ID field staff has not been achieved. It is also a concern that training programs have not focused sufficiently on O&M. Funds for O&M of the network to be maintamed by the government are based on outdated norms and require estimating on needs-based assessments. Records indicate that such an assessment has been made (a few years back). However, GOM recogmze that present levels of O&M funds are inadequate and in their Ninth Five-Year Plan they have proposed increases in O&M funding in line with the actual requirements of individual irrigation schemes. This proposal will need to be translated into an effective action program which would need to take into account turnover to farmers of maintenance responsibilities. E. PERFORMANCE OF THE BANK 55. Identification and Preparation. The Bank was closely involved in earlier projects where many of the problems experienced in this project were identified. The PCR for MCIP I (dated November 1984) drew attention to the slow uptake of irrigation by farmers and considerable efforts were made to improve this in the MWUP (Credit 1383-IN and Loan 2308-IN). Despite this, the problem persisted mainly due to the unreliability of the water supply to farmers' fields. The weaknesses in the design of MCIP El[ identified in the second year of implementation, specifically on the drainage network, the SDDs and agricultural development, could have been avoided if the Bank had made a greater effort to supervise their preparation The Bank became heavily involved in the reformulation exercise and in finalizing the scope of the restructured project. It was responsible in arrangmg the services of FAO/CP to provide advice and assistance during the reformulation exercise, and for providing an effective package at restructuring. Bank (Headquarters and Resident Mission) staff worked closely with ID and AD staff of the GOM and with GOI staff on policy matters. Given the Bank's awareness that O&M funds were allocated on outdated norms and that some works required rehabilitation, a special provision for canal upgrading was made. 56. Appraisal. The performance of the Bank in appraising the project was deficient. This judgement is based on the need, which arose after a year, to reformulate the project. Despite the statement in the SAR that ample water was available, there was insufficient. The project was 13 The mission recognizes that under the restructured project, all structures suffering from deferred maintenance were to be repaired before turnover to WUAs. However, these works, which were to be funded by the project, were not carried out apparently because of a lack of cooperation and coordination between the ID 11 and ID I.  14 reformulated over a three year period and finalized by a supervision mission m close co-operation between Bank staff, consultants and GOM. The measures taken were adequate to prepare an effective package. 57. Supervision. Twelve supervisions (the last in November/December 1996) were carried out during the period of the original and restructured project not including the period 1991/92 through 1993 when actions by the Bank and the GOM were mainly centered on restructuring the project. All supervision missions were manned by specialists in the required disciplines and comprised a mix of Bank Headquarters and Resident Mission staff and consultants. In the early years, the continuous pressure applied by the Bank on the posting of key staff to the CADA organization resulted in an improvement in management performance. Problems were identified and detailed in supervision reports and, as most of the problems persisted and continued to plague the early stages of the original project, the Bank realized that the project had to be restructured. However, because of diverging views within the Bank on whether the project should be restructured or the credit cancelled, the restructuring process dragged along for quite some time. When it was finally decided that the project could be restructured, and that the savings resulting from the devaluation of the rupee against the dollar could be used for financing the completion of the ex-MCIP II subprojects, it took another two years to prepare the feasibility studies and to complete the restructuring process. During the restructured project implementation, the Bank issued a threat to suspend disbursements m October 1995 because the ERP component had not been initiated by the Borrower. At credit closure implementation of measures specific to the environmental studies and ERP are in their infancy14. In the identification of inadequate budget allocations, quality of civil works, and the supervision of the improved water management component, specifically the PPDR, the Bank's involvement was very useful. However, supervision missions concentrated on ongoing civil works, and did not pay enough attention to the maintenance of completed works for which a special provision had been made. Correspondence related to O&M in project files refer to an O&M report submitted to the Bank in compliance with a condition m the project agreement. No positive action or follow up was taken on the findings and recommendations in the report. As regards WUAs, achievement numbers are detailed but the quality and performance of these associations, and actions to be taken to resolve problems, are not specified. Though supervision missions reported the areas which were being irrigated compared to areas made available for irrmgation, no specific action was taken. F. PERFORMANCE OF THE BORROWER 58. Preparation. ID prepared the original project taking account of comments in the Bank's Aide- Memoire dated 19 May, 1984, and the findings of the PCRs for MCIP I and II. GOM, advised and assisted by FAO/CP, with monitoring and guidance by the Bank, prepared the restructured project. The four new subprojects were prepared by internationally recruited consultants It was agreed that the preparation and design of the original project was weak on aspects other than construction of irrigation works. The restructured project rectified the deficiencies of the original project and was also adjusted to conform to the Bank's guidelines and policies on environmental and economic rehabilitation aspects. The Borrower performed well in the preparation, including designs, tendering, procurement, and, with the improvement in project management, the restructuring was approved by the Bank. 14 This threat resulted in the formulation of an ERP policy in January 1996. By this stage it was too late to have a significant impact on the implementation of the ERP component since most of the outstanding credit was already committed to completing irrigation works.  15 59. Implementation. Performance of the Borrower during the first two years of the original project was unsatisfactory. Funds fell well below the required amounts. Management was weak resulting from delays in posting key staff to the project. Tendering for major civil works was adversely affected due to GOI and GOM reluctance to conform to the Bank's guidelines. GOM's decision to defer lining of canals with a capacity less than 3 m3/s, and to also reduce the scope of the rural roads component, were objected to by the Bank and further delayed implementation. While construction of major civil works was carried out at a slow pace during the original project period, with improvements in project management and funding and procurement issues resolved, durmg the restructured project period the performance of the Borrower improved. However, the Borrower's performance on the institutional development of O&M, environmental studies and preparation of POM was unsatisfactory. Its recognition of the importance of WUAs was highly satisfactory, but too much attention was given to meeting targets for their formation at the detriment of improving their effectiveness and farmer turnover. 60. Quality Control. Performance was mitially substandard. No special organization under the ID was set up although constant and effective checks on major works were required. Supervision missions regularly commented on the deficiencies. During the latter part of the original project, and throughout the restructured project, a separate and independent organization under the ID was set up. Standard tests were carried out and units of this organization were operated on site at major aqueducts, drainage structures and regulators. Strict control measures were exercised. However, there was room for improvement in compaction of concrete to obtain a better finish. The construction of the widely scattered minor OFD structures supervised by ID II were carned out to the required standards. Earthworks, and precast lining in field channels, were however substandard. The precast lining was very poor and signs of severe dilapidation even after only one year of operation are visible. The ID should explore the possibility of carrying out selective lining with rectangular in situ brick lined construction as it appears that even after several years of experience in the manufacture of precast concrete sections, the product is very substandard The quality of lining of the mam canals is good. Lining by mechanical methods is far superior to that by manual operation in that the finish and construction joints are superior. Maintenance is reduced as construction joints are spaced further apart resulting in less weed growth and reduced seepage losses. 61. Operation and Maintenance. Though the responsibilities of ID I and U) II appear well defined, in practice there are problems particularly in the coordination of their respective activities, and the Borrower's performance in O&M is unsatisfactory. Currently the ID is responsible for maintaining all irrigation ifrTastructure from the headworks down to the field canal outlets to the chaks. The department is now in the process of handing over to WUAs, the O&M of irrigation systems covering an area of about 400 ha usually coming under mnor canals. Operational activities managed by WIUAs are covered satisfactorily. The distribution of water to WUAs on a volumetric basis are also carried out to the required standard. Preventive maintenance of structures down to the chak level is not carried out due to funding constraints and the lack of an effective maintenance plan. Periodic maintenance is not carried out on a needs-based assessment. In addition, a lack of either preventive or periodic maintenance has caused operational infrastructure previously managed by the ID I, to deteriorate to a state that rehabilitation is now required. One of the shortcomings of the Borrower was not to avail itself of the use of the special funds made available under the project to rehabilitate or upgrade the irrigation structures during the restructured project implementation period. This would have taken care of the maintenance needs of completed structures prior to their turn-over to WUAs. In addition, no provision was made for the maintenance of the structures during the construction period.  16 62. It was noted that: (a) lined sections are illegally broken to get water onto farms; (b) leaks developed around outlets and drops, and lack of attention for long periods caused the complete collapse of these structures; (c) clearing of shrubs around structures have not been carried out; (d) on fully lined main and branch canals extensive growth of shrubs were observed at construction joints left unattended for several years; (e) headwalls of gated structures have been damaged and control arrangements are damaged or missing; (f) farmers have constructed their own check structures thereby causing erosion of the channel bed; (g) field channels recently completed are being destroyed completely or partially to facilitate mechanical ploughing; and (h) drainage network systems are not maintained satisfactorily and have returned to their original overgrown condition. 63. Studies. The EIA, EMP, POM and river basin studies which should have been completed during the restructured period have only recently commenced. The major reason was inordinate and unjustified delays in recruiting national, and particularly international, consultant firms to carry out these studies. 64. Economic Rehabilitation Component. Although priority was to be given to the implementation of the economic rehabilitation component of PAPs, a plan was finalized as late as early 1996, and to date except for some work on the provision of civic amenities, compensation payments to PAPs have not commenced. 65. Progress and Audit Reports. Satisfactory progress reports were regularly submitted to the Bank and audit reports were submitted with minimal delays. 66. Agricultural Development. During the original project, performance was unsatisfactory. However during the restructured project period, the Borrower provided a separate allocation of funds, and this created an interest in AD. The results in terms of increased agricultural production and farmers' incomes have been quite impressive, but need to be consolidated if they are to have a wider and sustainable impact on agricultural production within the project command areas. 67. The poor utilization of the irrigation potential created can be due to a number of reasons: (a) scarcity of water; (b) project design limitations where the demand for water exceeds the water available; (c) willingness of farmers to take-up water; (d) farmers' reliance on nver lifts and wells; (e) incomplete scheme works preventing water flow; (f) water management practices adopted by ID staff and farmers; and (g) cropping patterns adopted, especially the use of high water demanding crops. Discussions with farmers, WUAs and ID field staff suggested that, especially in Majalgaon and Upper Penganga, limited water availability has definitely been restricting the area irrigated and this seems to be the core problem. The reasons why water is not being regularly supplied to all of the areas where OFD works have been completed as part of the project appear to result from poor and inequitable system management whereby the canals located in the upper reaches of irrigation systems continue to receive more water than those located at the tail end where the project was being implemented. Corrective action, based on the ongoing POM studies, needs to be taken to improve the prevailing situation. Unless this is done, the economic returns of the subprojects will continue to be lower than originally expected. 68. Steering Committee. A Steering Committee was to be established and maintained thereafter, for promotion of agricultural development and was to be headed by the Secretary of the ID. The committee was to meet once every three months (the minimum being six months). The first meeting was held in 1985. As the SDDs were dropped, the activities of the committee ceased and in 1991 a new Steering Committee was created to monitor implementation of the project, and specifically the  17 PPDs and the volumetric RWS There is no record of the activities of the committee. Judging from the progress of these studies, it is presumed that the committee had some influence on the results obtained. However in matters of O&M, WUAs and overall project coordination, the committee's performance appears to have been unsatisfactory 69. A coordinating committee organized at the level of the GOM's Ministry of Finance has the responsibility for the review of all externally financed projects. This high level committee served no useful purpose to resolve the inter-agency issues which impeded implementation of MCIP III. Had there been a project-specific coordinating committee, chaired by the Secretary of Finance and manned by high level staff of each of the ministries and departments implementing the project, fimely action to resolve several issues which retarded progress could have been taken. 70. Compliance with Covenants. During the original project all dated covenants at restructuring were substantially complied with, after a delay of several years. At credit closure all dated covenants for the studies and ERP component included in the restructured project were not complied with. G. ASSESSMENT OF OUTCOME 71. The project's outcome with respect to civil works (irrigation and roads), and recognition of the importance of WUAs in O&M and irrigation agriculture extension, is rated satisfactory. However in terms of present agricultural achievements, slow progress on economic rehabilitation of the ERP component and the EIA and EMP studies, as well as the poor condition of the operational irrigation infrastructure, the outcome is unsatisfactory. The reason for the low ranking is the low irrigated cropped areas averaging about 36 percent at Credit closure, lack of progress in farmer turnover and the less than satisfactory performance of ID field staff in providing technical supervision to WUAs, and the continuing low funding levels for O&M leading to the need for rehabilitation due to deferred maintenance. In addition, the objectives of equitable, predictable and reliable irrigation supplies to all farms according to the dependable reservoir supply have not been realized in the completed command areas, especially in the Godavari basin subprojects. H. FUTIIRE OPERATION 72. The following actions would be required to complete the project and to ensure it is operated in such a way that its objectives are achieved: (a) completion of remaining major civil works required for supplying water to the command areas where OFD works have been completed; (b) a realistic assessment of water supplies from the storage reservoirs and the area that could be irrigated; (c) EIA and EMP studies and the measures to be implemented; (d) the preparation of an effective POM; (e) a training program for ID field staff and farmers focused on maintenance activities; (f) a continuing program for organizing viable and effective WUAs; (g) provision of adequate budgetary allocations for O&M of infrastructure to be maintained by the ID; (h) completion of the studies; (i) a continuation and consolidation of the agricultural development program for three more years; and (j) completion of the ERP component. 73. The GOM has submitted to the World Bank a plan of action for the period January 1997 to March 2000 to complete the balance works on irrigation infrastructure, roads, bridges and agriculture, as well as to complete the studies and the ERP component referred to in the previous para (see Appendix 3, Tables 4 and 6).  18 I. LESSONS LEARNED 74. The lessons learned from the project are classified as follows: Water Resources Availability and Management (a) Unless the adequacy of water supply and the proper management of the existing systems is ensured, expansion of irrigation facilities to new areas in the CCA of the subprojects should not be taken up. (b) The financing of future water resources development projects in Maharashtra and elsewhere in India should be preceded by: (i) the issuance of a state water policy defining the state priorities and institutional reforms, (ii) the preparation of a state water management plan defining the availability and management of water resources on a river basin basis; (iii) the identification of the rehabilitation requirements of the existing operational irrigation infrastructure prior to considering further developments; and (iv) the consideration of private sector groundwater development to increase the efficiency of irrigation. (c) The cropping patterns used in designing the subprojects were quite different from those currently followed by farmers, especially in Majalgaon. Careful consideration is needed as to whether water should be spread thinly over the areas where irrigation infrastructure has been created, as a means of drought protection, or spread over smaller areas to enable development into higher value, thirsty crops. The optimum economic strategy would vary from subproject to subproject depending on the extent and condition of existing irrigation infrastructure, the effectiveness of WUAs in managing water, and on the irrigation water responses and economics of alternative crops. (d) The usefulness of the Pilot Project for Dynamic Regulation (canal automation) is questionable if the Majalgaon command continues to face water shortages, due to limited water availability and the poor maintenance of the canals (minors and field). Water allocations to this command need to be reviewed within the framework of the Godavari basin water resources management studies and a proper POM needs to be prepared and implemented in order to test the feasibility and sustainability of canal automation in India. Furthermore, the pilot activities should be continued for at least three more years. Operation and Maintenance (e) No new projects should be considered for financing unless an effective and sustainable O&M system covering both the construction and operational periods is agreed upon and implemented. (f) To improve the performance of ID II field staff and WUAs in O&M, it is recommended that: (i) more intensive training (classroom and site) in preventive and periodic maintenance activities be given to ID II field staff and WUAs; (ii) the technical supervision of WUAs should continue even after turnover of  19 maintenance to them; and (iii) an effective supervision schedule for Section Officers, and canal inspectors, be introduced with high level staff monitoring their activities. (g) Farmer involvement in O&M activities is critical to the sustainability of the project. In order to ensure that O&M activities are performed satisfactorily by farmers, WALMI should carry out more training, particularly on maintenance (preventive and periodic) at farm sites and not only in classrooms, taking groups to areas where severe deterioration is apparent. Water Users' Associations (h) The responsibilities between ID I and ID II for rehabilitating the structures turned- over to WUAs needs to be clarified, and the WUAs involved in these activities to ensure a sense of ownership. (i) The effectiveness of WUAs should be judged not only in terms of financial and water management, but also in terms of their ability to maintain the structures turned-over to them. (j) The ID II, which is responsible for the formation of WUAs, should recruit either institutional specialists or NGOs to work as a team with its own engineering staff while preparing the rehabilitation and O&M plans prior to turn-over of irrigation structures to farmers. (k) Once WUAs are formed throughout a scheme command, there is a need to form a scheme-level committee which would negotiate the allocation of water at the beginning of each season with the ID Il. Special training will be requwred for this which should also be taken up under future projects. Irrigated Agriculture (1) In future, the Bank should ensure that, in all new projects providing irrigation facilities to traditionally rainfed areas, an agricultural component with a separate budget is included in the project from the outset. (m) The ongoing extension work in the subproject should continue for another three years to ensure a better uptake of irrigated agriculture by project beneficianes and a more efficient use of water at the farm level. Economic Rehabilitation of Project Affected Families (n) An ERP component must be backed by a detailed action plan prior to project implementation. Such components must have a separate allocation of funds and be regularly monitored.  20 General (o) The quality of project preparation is a major consideration for successful project implementation. The review of technical aspects are as important as the other social, economic, and financial aspects. (p) Complex Bank-financed irrigation projects should include provision for a mid-term review to be carried out by a team of specialists not connected with the project, and the monitoring of project implementation should not be confined to only physical and financial progress, but should also include irrigation performance and impact on agricultural production. (q) To improve coordination between the various implementing agencies involved in an irrigation project, a project-specific coordination committee, chaired by the Secretary of Finance, is needed. Funds should be allocated directly from the Ministry of Finance to the agency responsible for a project component. (r) Special arrangements need to be agreed with the Borrower prior to project implementation to ensure that national, and particularly international, consultant firms are recruited in a timely manner.  21 PART I: STATISTICAL TABLES Table 1: Summary of Assessments A. Achievement of obiectives Substantial Partial Negliaible Not Aplicable (4) (4) (4) (4) Macro policies Fl [Z [LJ Sector policies P r] [I Financial objectives El El [f Institutional development l ElI El Physical objectives E E E E Poverty reduction El E El Gender issues E E El Other social objectives El El E i Environmental objectives E] El El Public sector management E E El Private sector development l l F] Other (specify) El E E B. Project sustainabilitv Likely Unlikely Uncertain (4) (4) (4 Hi~11 C. Bank Rerformance satisfactory Satisfactory Deficient (4) (4) Identification A LJ E Preparation assistance El El [f Appraisal E El Supervision El El  22 Ih1h D. Borrower verformance satisfactor Satisfactorv Deficient Preparation Implementation FT] Covenant compliance Z [W Operation (if applicable) D [ E H2thlI Highly E. Assessment of outcome satisfactor Satisfactorv Unsatisfactorv unsatisfactor El (l E () I 01 C: E [2-  23 Table 2: Related Bank Loans/Credits Loan/credit title Purpose Year of approval Status Preceding operations I.Maharashtra Irrigation I Project (Cr. Inigation development of the second stage (about 1977 Closed 736-In) 100,000 ha) ofthe Jayakwadi/Majalgaon river basin. PCR issued 1984 2. Maharashtra Irrigation II Project Financing of a five year time slice of a composite 1979 Closed PCR (Cr.954-IN) US$452.9 million programme of six new Irrigation schemes (Bhirna, issued 1987 Krishna, Kukadi, Upper Penganga, Upper Wardha and Warna). Pilot Farmers' Project. 3. Maharashtra Agricultural Extension Agricultural extension. 1981 Project (Cr. 1135-IN) 4. Maharashtra Water Utilization To mcrease effective use of available water in Jayakwadi 1983 Closed PCR Project (Cr.1383-lN, Ln. 2308-IN) and other schemes. issued 1995 5. National Agricultural Extension To strengthen the T&V extension system, to improve the 1984 Closed PCR Project (Cr.1523-lN)US$65.6 million capacity of central agencies to provide training and issued 1994 guidance to the states, and to finance special studies. 6. Second Agricultural Extension To improve the coverage, depth and quality of extenson 1985 Closed PCR Project (Cr. 1569-IND) US$49.0 services of the States of Haryana, Gujarat, and Kamataka issued 1994 million and to assist the state of Jammu and Kashmir in the improvement and reorgamisation of agricultural extension. 7. Pilot Project for Watershed To: (a) develop, on a watershed basis, and through the use 1983 Closed PCR Developmrent in Ra&fed Areas of appropriate organization and management syste, issued 1995 (Cr.1424-lN) US$31 milhon suitable technologies for increasing and stabilizing crop and forage yields, as well as the production of fuelwood and timber in selected rainfed faunng areas; and (b) defne technical criteria, adnunistrative procedures and investment limits useful in replicating watershed development activities in other areas. Follomwng Operations 1. National Water Managemntr Project Increase agriculhtural output providing farmers with more 1987 Closed PCR (Cr. 1770-lN) US$14 mnillion reliable & predictable irrigated water. issued April 1996 2. National Agricultural Extension Introduce T&V system in Himachal Pradesh and Uttar 1987 Ongoing Project III (Cr.1754-1N) US$85 Pradesh; further strengthen the reorganised agricultural million extension and linkages between extension & research in Assam.  24 Table 3: Project Timetable Steps in project process | Date planned Date actual/ l ___________________ latest estimate Identification (Executive Project Summary) 1977 1977 Preparation 1983 1983 Appraisal N.A. September 1984 Negotiations 1985 Board presentation July 16, 1985 Signing December 5, 1985 Effectiveness March 13, 1986 Preparation for restructuring 1987 to 1992 Bank's of approval of the restrucred project June 8, 1993 Project completion June 1990 (original) December31, 1996 December31, 1996 (restructured) Credit Closing June 30, 1991 Extended twice up to June (original) 1993 December 31, 1996 December 31, 1996 Table 4: Credit Disbursements: Cumulative Estimated and Actual (US$ million) Financial Years (FY) FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 Appraisal esfimate 25.50 59.30 99.50 133.50 156.40 160.0 160.0 160.0 160.0 160.0 160.0 Actual" 4.22 12.44 17.19 25.77 43.24 51.15 58.46 91.48 128.86 177.99 187.74 Actual as % of 17 21 17 19 28 32 37 57 81 111 117 estimate Date of final 20 February 1997 disbursement Sourced from FACT (Financial and Cost Application). Actual disbursements incorporate the SDR 32 million cancelled from the Credit in 1992.  25 Table 5: Key Indicators for Project Implementation Esfimate Actual Key Implementation Indicatorsl/ Unit Restructured Revised Cumulative % of Revised Target Target(1994/95) Achievement Target 1. Culturable Command Area 000 ha 227.S0 227.S0 210.17 92 2. Modernization of Headworks % 100.00 100.00 99.00 100 3. Main Canals (a) Earthworks 000 m3 18,169.00 19,073.00 17,344.00 91 (b) Lining 000 m2 6,437.00 6,320.00 4,711 00 75 (c) Structures Nos. 894.00 896.00 777.00 87 4. Branch Canals (a) Earthworks 000 m3 4,665.00 4,910.00 4,070.00 83 (b) Lining 000 rn2 2,686.00 2,524.00 1,662.00 66 (c) Structures Nos. 560.00 566.00 400.00 71 5. Distributary Canals (a) Earthworks 000 rn3 15,208.00 15,835.00 14,848.00 94 (b) Lining 000 rn2 3,636.00 3,587.00 3,361.00 94 (c) Structures Nos. 13,891.00 14,719.00 12,967.00 88 6. Minor Canals (a) Earthworks 000 rn3 8,806.00 9,914.00 8,726.00 88 (b) Lining 000 r2 3,256.00 3,251.00 3,123.00 96 (c) Structures Nos. 5,701.00 6,377.00 4,731.00 74 7. Vehicles and Equipment % 100.00 100.00 100.00 100 8. Upgradation of Existing Canals 000 ha 200.00 215.08 163.04 76 9. Main and Link Drains 000 ha 160.75 141.47 141.47 100 10. Sub-Surface Drains 000 ha 17.76 15.89 15.89 100 11. Field Canals 000 ha 230.70 230.37 208.58 91 12. Selective Lining 000 ha 197.98 198.15 164.85 83 13.Land Shaping and Conjunctive Use 000 ha 50.02 50 02 35.56 71 14. Service Roads 2/ km 1,140.00 866.00 678.00 78 15. Rural Roads 2 km 1,140.00 837.00 776.00 93 16. Bridges Nos. 23.00 21 00 6.00 29 17. Buildings Rs M 77.32 76.72 62.34 81 18. Vehicles and Equipment Rs M 91.16 91.16 73.33 80 19.Water Users Associations Nos. 70.00 70.00 193.00 276 20. Economic Rehabilitation Rs.M not estimated 583.81 0.00 0 21. Civic Amenities RsM not estimated 343.10 139.60 41 22. Studies Rs M 82.52 82.54 31.92 39  26 Estimate Actual Key Implementation Indicators' Unit Restructured Revised Cumulative % of Revised Target Target(1994/95) Achievement Target 23. DSRP-Repairs and Safety Measures RsM 203.50 0.00 0 24. Agricultural Development Rs M 190.00 190.00 157.00 83 " For the main canal systems, the SAR estimated 9 MN3 of earthworks, 12 Mm2 of lining and 1,200 structures. These quantities were exceeded by 400%, 7% and 1,470% respectively. 2 SAR estimated 250 km of service roads and 657 km of rural roads. The quantities were exceeded by 171% and 18% respectively. Table 6: Key Indicators for Project Operation (Not Applicable) Table 7: Studies Included in Project Purpose as defined Studies & Surveys at appraisal/redefined Status lmpact of study 1. Specially Developed Aimed at triggering a process of Abandoned after the second The pilot area-proportional Distributaries (SDD) agricultural development in the year as deemed impractical, rotational water supply project area non replicable and was (RWS) replaced the study. duplicating existing research programmes. 2. Refining Cultural Practices To determine cost effective methods Cancelled as it would No impact and improve farmer income. duplicate research programmes being carried out inthe country. 3 Develop and test fanning To improve farmer income. - do- No impact systems 4. Study of border length To find out the a cost effective Cancelled as being carried out None method of land shaping. at WALMI and the universities. S. Design and test animal drawn To improve tillage operations using As research is widely carried None equipment appropriate technology. out in the country, the study was not taken up. 6. Developing correct operating To improve water management and Completed and review was No record ofthe findings nor regimes for the distributary O&M. carried out by GOM in 1988. any improvement in water network management or O&M. 7. Land shaping criteria Production of a manual to facilitate Completed. The revised manual with the land shaping, mclusion of Bank's comments was useful in land shaping operations. 8. O&M cost study To assist in costing maintenance on Compleed. Report sent to the The outdated norms are still a needs based assessment and the Bank but no record of being used for budgetary revision of the outdated norms used acceptance ofthe report purpose and no useful for budgeting. purpose was served by the study. 9. Monitoring of resettlement Monitoring ofthe economic and Completed in October 1987. The study was accepted by and rehabilitation social progress of PAPs settled in the GOM and used for design  27 Table 8A: Project Costs Appraisal Estimate Actual Estimate11 Item Rs. million US$ million Rs. million US$ million Major Works (ID I) 2,334.4 194.5 6,059.4 206.8 CADA Works (ID II) 999.9 83.3 1,446.3 60.4 Common Programmes: - Special Development Distributaries 88.2 7.3 - Technical Services/Studies 32.3 2.7 58.7 2.6 - Vehicles and Equipment 69.5 5.8 77.9 4.6 - Establishment 347.9 29.0 1,568.4 70.6 - Buildings 41.6 1.6 - Training 70.7 2.1 - Dam Safety 5.5 0.2 Resettlement and Rehabilitation 139.6 2.0 Rural Roads and Bridges (PWD) 375.5 12.5 Agricultural Development (AD) 167.0 4 9 Total Project Costs 3 ,872.2 " 322.71/ 10,010.6 21 368.3 21 " Includes physical and price contingencies. 2v Up to 31 December 1996. Table 8B: Project Financing Appraisal Estimate Actual/Latest Estimate" (US$ million) (US$ million) Source IDA 160.0 187.7 2' Other External Sources 0 o 3/ Borrower - GOM 162.7 180.6 Total 322.7 368 3 " Up to 31 December 1996. v Sourced from FACT (see Table 4) 3 No co-financing institution, although French Aid supported the pilot dynamic regulation activities in the Majalgaon subproject.  28 Table 9: Economic Costs and Benefits Appraisal Estimate ICR Estimate Rainfed Irrigated Rainfed Irrigated Farm Incomes (Rs per 4.5 ha farm) II/ Jayakwadi 23,020 85,720 12,590 58,680 Majalgaon 11,280 115,770 11,920 69,270 Upper Penganga 6,570 57,120 Kukadi 8,220 52,160 Bhima 10,260 49,230 Krishna _ __ 16,650 78,460 Appraisal Estimate ICR Estimate Economic Rates of Return (%/o) Jayakwadi 21 18 and 29 4' 15 Majalgaon 21 13 5 Upper Penganga 31 9 and 11 5 -2 Kukadi 3' 5 5 Bhima 3/ 17 -2 Krishna3' 18 5 Underlying Assumptions Project Life 40 years 40 years Standard Conversion Factor 0.8 0.9 Construction Conversion Factor 0.7-0.8 0.9 Unskilled Labour 0.66 financial price 0.9 financial price " First quarter 1997 prices. 2' At appraisal. 3' At restructuring. 4/ New area and MCIP l/GOM portion respectively. s' RBC an 0-1 10 and km 0-177 respectively.  Table 10: Status of Legal Covenants Original Revised Covenant Present fulfilment fulfilment Description of Agreement Section type status date date covenant Comments 202(a) T OK Plan, design, construct, operate and maintain works under part A Complied and B of project according to standards/criteria satisfactory to IDA and provide adequate funds for O&M. 2.02(b) T OK Plan, design and implement land shaping according to criteria Complied satisfactory to IDA. 2.02(c) M OK 12/31/85 11/30/86 Train project staff and furnish schedules to IDA for Complied review/comments. 2.02(eXi) M OK 12/31/93 3/31/95 GOM shall review and update with the assistance of consultants, Complied lists of PAPs except Jayakwadi. 2.02(eXii) E OK 09/30/93 12/31/94 GOM shall review and update its regulations dealing with Complied 04/02/96 entitlement of PAPs except Jayakwadi, including civic amenities, financial assistance for housing, land and income generating schemes. 2.02(f) M OK 06/30/93 03/31/95 GOM shall strengthen R&R units at district level, including the Complied 04/02/96 appointment of a Senior Officer of a suitable rank with necessary administrative and financial powers for each command area except Jayakwadi. 2.02(g) M OK 12/31/93 12/31/94 GOM shall prepare with assistance of experienced consultants Complied 04/02/96 acceptable to the association and in close consultation with PAPs, rehabilitation plans in consistent with the act; such plans shall set out proposed income generating schemes, eligibility criteria and submit to the association for review and approval. 206 T NYD Take measures to minimise risk of malaria and other water- Necessary actions are being related diseases in the project area. taken to minimise the risk of malaria & water- related diseases in respect of Jayakwadi & Majalgaon. 2.08 T OK 12/02/96 GOM shall take all necessary remedial measures recommended by Complied.  Original Revised Covenant Present fulfilment fulfiltment Description of Agreement Section type status date date covenant Comments the DSRP through the existing Dam Safety Organization. 2 09 T OK GOM shall carry out the Paithan Catchment area of the Godavari Complied Basin Study under Part L(ii) of the project in accordance with TORs and schedule agreed with the Association 2 10 T SOON 06/30/96 GOM shall complete the studies under Part D.2 of the project Complied. Studies are (except as provided in Sec. 2 11) and furnish the results of the entrusted to Consultant which studies to the Association for review and comments. are in progress. 2.1 l(a) M SOON 12/31/95 GOM shall prepare, in accordance with the TORs and schedule Complied, except appointment agreed with the association and furnish for review and comments, of consultants for POM for environmental impact assessment and management plans under Jayakwadi and UPP. Part D.2 of the project, for each of the command areas under Part A,B,G,H,I and J of the project 2 1 l(b) M OK Initiate the implementation of such plans, and monitor such Complied. implementation through the MIS established under Part E of the project. 3 01 F OK Maintain separate records and accounts and furnish copies of The Statement of Expenditure accounts and financial statements as soon as available, but not (SOE) for 94/95 are already later than 9 months after end of the year sent. The SOE for 95/96 are being sent shortly 3.02 F OK Furnish Audit Report to IDA immediately following finalization. The Statement of Expenditure (SOE) for 94/95 are already sent The SOE for 95/96 are being sent shortly. 3.03(a) M SOON 06/30/94 Proposed GOM shall complete the establishment of the Water Users' Target for establishing WUAs 06/30/96 Societies under the project in accordance with the procedures is 80. and responsibilities satisfactory to the Association. Societies registered are 193. Societies handed over to beneficiaries are 71. 3 04 A F NC Review and, if required, revised levels of water charges every Not complied two years commencing not later than Dec. 5, 1987, to cover average O&M costs and portion of investment costs commensurate with repayment capacity of farmers 3 04 B M OK Wherever half the farmers on a distributary request water, make Complied supplementary kharif irrigation available to such farmers.  Original Revised Covenant Present fulfilment ftdfilment Description of Agreement Section type status date date covenant Comments 3.04 C F OK 12/31/86 Conduct study and determine annual amount for O&M costs. Complied 3.05 F OK 04/01/87 On April I of each year, make annual budgetary allocations to Complied cover O&M costs. 3.06 (a) F OK GOM shall take all such action as shall be necessary, including Complied provision of fuids for carrying out through CADA the land shaping of farmers' fields. 3.06(b) F OK Make adequate arrangements for the recovery of the funds that Complied may be lent. 3.07 F OK 12/31/86 Conduct study to assess loan repayment capacity of farmers for Complied land shaping and, if necessary, revised lending terms. Schedule 2 M OK 10/31/93 10/31/94 Update furnish to the Association, for its review and comments, a Complied para (a) detailed work plan for carrying out parts C, D, E, l, K and L of the project and thereafter taking into account the Association's comments, if any, to implement such plans H Schedule 2 M OK 06/30/93 GOM shall appoint and thereafter maintain within its AD a Complied para (bXi) qualified and experienced officer of SDADO level as Water Management Specialist in such T&V cluster of the project area. Schedule 2 M OK 06/30/93 12/31/94 Strengthen existing agriculture extension services at the district Complied para(bXii) level in the project area with adequate staff including an assistant to the Principal Agriculture Officer at each district. Schedule 2 M OK 06/30/93 GOM shall appoint and thereafter maintain within its ID a Complied (c) Conmmand Area Development Administrator of the SE level in each command area, each with qualifications and responsibilities acceptable to the Association. Schedule 2 M OK Establish suitable farmer's organisations pursuant to a plan Complied (d) satisfactory to GOM and IDA to promote active participating fanners in O&M of system, land shaping and maintenance of the  Onginal Revised Covenat Present fulfihment fiilfihment Description of| Agreement Section type status date date covenant Comments service roads. Schedule 2 M SOON Cause CADA to carry out required improvement and Fanners are being trained for| (e) modification in irrigation system within two years of O&M activities. Required commissioning of each Distributary m consultation with improvement and modifications farmers' organization. in irrigation system is being carried out before handing over system to societies.  33 Table 11: Compliance with Operational Manual Statements Statement number and title Describe and comment on lack of compliance 1. OMS 2.25 Cost Recovery Policy The GOM did not comply with this OMS which emphasises the importance of recovering the full cost of O&M of irrigation schemes. 2. OMS 2.36 Environmental Aspects of Bank Work The GOM did not comply with this OMS which emphasises the importance of environmental aspects. The EIA and EMP studies included at restructuring were not implemented before Credit closure. Table 12: Bank Resources: Staff Inputs 1/ Stage of Planned Revised Actual project cycle l Weeks US$'000 Weeks US$'000 Weeks US$'000 Preparation to nr 2/ nr nr nr 30.5 59.0 appraisal l Appraisal nr nr nr nr 48.5 91.0 Negotiations through nr nr nr nr 7.9 15.2 Board approval Supervision 45.0 48.4 49.6 45.4 464.3 467.5 Completion 15.0 51.4 11.1 34.6 7.2 28.2 TOTAL 60.0 99.8 60.7 80.0 558.4 660.9 1/ Data extracted from FACT as of 10 March 1997. 2/ nr = no records available.  34 Table 13: Bank Resources: Missions Perfornance rating Stage of project cycle Month/ Number Days m Specialised hnplemen- Develop- year of Seld staff Skills tation ment Types of peesons represented'5 status objectives problems6 | Through appraisal 17 _ Appraisal through' Board approval Supervision 3 Sept85 1 I1 IE(3),A(3)RE(I),P I I F,M ___ __ __ ___ __ __S(l),S(I) _ _ _ _ _ _ 2 ~ April 86 5 19 IE(l),RE(l),PS(l), 3 2 F,M _____________ |F(l),A(l) 3 Nov. 86 n.a na na na na | a 4 Sept.87 1 7 IE(l) 4 2 F,M 5 May 88 6 8 IE(2),A(l),RE(l), 4 2 F,M S(l), DE!(l) ;~~~~ T I = =_ 6 Oct.88 2 o0 I 1E(2) 3 2 7 June 89 |6 I5 I|E(2),PE(2),PA(1), 2 I I P,T,EA !__ _ ! !CA(l) ! ! 8 Dec. 89 5 11 EE(2),PIE(I),RE(1) | 2 1 T,EA 9 July90 3 7 E E(2),RE(l) 12 lI F,TA, 10 Jan.91 5 1 [5 I E(2),RE(l),A(l), 2 1 M,F,P,TA, .l | | l | ~~~~~ ~ ~~ ~ ~ ~~~~ARS(I) |EA i I Aug91 5 4 | PIE(1),E(1),RE(1), i 2 1 1 C,M,F,P,TA =l = = | | S(l) j _ _ _ _ EA 12 Dec.93 6 13 PIE(I),E(I),RE(l) 2 1 C,FP,T,TA, = = = I | | PE(I),RR = I = S, E 13 Dec. 94 4 23 PIE(l),IE(l),RE(1), S S C,P,T,TA,S, |l l l | | ~~~~~ ~ ~ ~ ~ ~ ~ ~~~~ARS(I) |EA 14 Nov. 95 4 5 | PIE(l),IE(l),S(l), U | S | C,PT,TA, - - 1A(l) 1 . S,EA 15 Aug.96 6 11 | PIE(l),IE(I)A(l), U | U | C,P,TTA, = = = J_gRR(1),RE(1), CE(1) [ _ _ _ S,EA 16 Dec.96 2 12 IE(I),RR(1) n.a n.a | a Completion Dec.96 3 12 ] E(l),IE(l), A() I I I '5PIE=Principal hTigation Engineer, IE=Lrrigation Engineer, PA=Project advisor, CA=Chief Agriculturlist, A= Agriculturalist A=Agriculbre Research Officer, RE=Roads Engineer, F=Fmancial Analyst, S=Sociologist, RR=Resettlement and Rehabilitation Specialist, DE=Drainage Engineer, PS=Procurement Specialist, E=Econonist, CE=Construction Engineer 1 6 F=Finacial, M=Management, P=Procurewent, TA=Technical Assistance, C=Legal Covenents, S=Studies, EA=Environmental, T=Training 7 No records available on FACT as at 10 March 1997.  35 IMPLEMENTATION COMPLETION REPORT NDIA MAHARASHTRA COMPOSITE IRRIGATION PROJECT III {CR. 1621-lN) APPENDIX 1 MISSION'S AIDE-MEMOIRE A. Introduction 1. An FAO/World Bank Cooperative Programme (FAO/CP) mission comprising Messrs. W.J. Sorrenson (Agricultural Economist, Mission Leader), G.S Schokman (Irrigation Engineer) and S. Sarkar (Agronomist), visited India from 29 November to 16 December 1996 to review the implementation performance of the Maharashtra Composite Irrigation Project III (MCIP III) and prepare its Implementation Completion Report (ICR). As required by Bank regulations, the FAO/CP mission coincided with the last supervision mission for the project by Messrs. N.K. Bandyopadhyay (Task Manager) and I.U.B. Reddy (R&R Specialist), from the World Bank, Resident Mission, New Delhi. After initial discussions with staff of the Resident Mission in New Delhi, the mission visited Maharashtra from 2-13 December. Field visits were made to five of the six subprojects included in MCIP III (Majalgaon, Upper Penganga, Kukadi, Bhima and Krishna). Discussions were held with farmers and concerned field officials from the Irrigation, Public Works, Agriculture and Revenue and Forests Departments. The mission also visited the Water and Land Management Institute (WALMI) in Aurangabad. 2. A wrap-up meeting was held in Bombay on 13 December 1996 to discuss this draft aide-memoire. The meeting was chaired by Mr. R.G. Kulkarni, Secretary Irrigation Department and was attended by Mr. M.D. Pendse, Secretary Irrigation, CAD, and other staff concerned with the project of the Departments of Irrigation, PWD, Agriculture and Rehabilitation. 3. This draft Aide-Memoire summarises the findings and preliminary conclusions of the ICR mission, and is subject to confirmation of Bank and FAO/CP management. 4. The mission wishes to express its appreciation for the excellent assistance and hospitality extended to it in Maharashtra. B. The Project 5. The MCIP III project was appraised in 1985. Implementation started in December 1985 and the project was to be completed in June 1991. Subsequently, the project was extended twice on a twelve month basis to 30 June 1993 and in April 1993 approval was granted to restructure the project with a revised closure date of 31 December 1996.  36 Project Objectives SAR 6. According to the SAR the main objective of the project was to substantially raise agricultural production and farmers' incomes by improving the utilisation of black cotton soils and available water in two command areas (Jayakwadi and Majalgaon). These subprojects were funded under the MCIP I project (Cr. 736-IN) which was initiated in mid-1 977. MCIP III was to: (a) complete irrigation works and on-farm development in the Jayakwadi command; (b) stimulate and promote agricultural development in all of the command (200,000 ha); (c) advance the development of the associated Majalgaon command (100,000 ha) completing its first segment of 24,000 ha; and (d) introduce improved O&M procedures. Major emphasis would be shifted away from large infrastructure works to on-farm development, water management and agricultural production practices, so as to trigger a self-sustained process of agricultural growth. Restructured Project 7. While retaining the main objectives of increasing agricultural productivity and farmers' incomes, the restructured project aimed to expand the scope of the project by including: (a) investments on water distribution and drainage networks in four additional incomplete subprojects which were included in an earlier Bank financed project (MCIP II - Cr. 954-IN); (b) an economic rehabilitation programme for families who had been earlier affected when the dams were constructed for the Majalgaon, Upper Penganga, Kukadi, Krishna and Bhima subprojects'; and (c) to improve project performance and environmental impact. Project Components SAR 8. Major Works: (i) In the Jayakwadi command completion of irrigation systems (distributaries and minors), main and link drains and the construction and / or rehabilitation of 537 km of rural roads within the Jayakwadi command; and (ii) in the Majalgaon command construction of structures along km 0-67 of the main canal, construction of the main canal between km 67-100 including lining and structures, distributaries and minors along the first 100 km of the main canal, main and link drains and 120 km of rural roads in the first segment of the command. 9. On-Farm Development Works: (i) In the Jayakwadi command, construction of structures, field channels and drains, the development of three special distributaries (SDDs), land shaping Economic rehabilitation in the Jayakwadi command had been completed earlier.  37 and technical support to farmers in the entire command; and (ii) in the Majalgaon command, construction of structures, field channels and drains, the development of one special distributary (SDD), land shaping and technical support to farmers. 10. On-Farm Development Works: (i) Equipment for land shaping, telecommunication and monitoring; (ii) strengthening the project monitoring and evaluation unit; (iii) agricultural research and extension support; and (iv) training, studies, study tours and consultancy services. Restructured Project 11. As per the restructuring mission findings, the project was to be restructured to complete the ongoing irrigation and drainage works and associated rural roads in the Jayakwadi and Majalgaon commands as per the SAR. The Majalgaon command area was reduced from 100,000 ha to 58,000 ha in line with the reassessed availability of water and the Kukadi command (100,000 ha), Krishna command (81,000 ha), Bhima (106,000 ha) and Upper Penganga (140,000 ha), were added'. 12. Construction Works. In order to complete works in all 6 subprojects the following construction works were included: (i) 570 km of main and branch canals; (ii) distributary networks on 103,580 ha; and (iii) main and link drains on 78,000 ha. 13. On-Farm Development Works. Across all 6 subprojects construction of: (i) field channels and drains on 106,000 ha; and (ii) land shaping on 32,150 ha. 14. Rural and Service Roads. Construction and / or rehabilitation of: (i) 836.6 km of rural roads; and (ii) 757 km of service roads. 15. Water User Associations. The establishment of WUAs was included in the project at the time of restructuring. Some 80 WUAs were to be formed and handed-over in the subproject command areas (not necessarily within the project affected areas). Associations were to be responsible for water management, the maintenance of irrigation works from the level of minors and for the collection of water fees on a volumetric pricing basis from all farmers within the command area of the concerned minors. The development of WUAs was to be achieved through an extension programme designed to create farmer participation and involvement. 16. Agriculture. A detailed agricultural component was to be prepared and carried out to support agricultural extension and demonstration plots for improved water management. 1 These areas have been obtained from the project supervision reports and include areas already developed, to be developed under the project and to be developed in the future  38 17. Economic Rehabilitation. The economic rehabilitation programme was to cover the needs of some 36,000 project affected persons (PAPs) through: (a) the provision and upgrading of basic civic amenities in 218 villages (roads, water, street lighting, schools, community centres, sanitary units and other facilities); (b) the provision of financial assistance - Rs 15,000 and Rs 10,000 for agricultural and non-agricultural families respectively for upgrading of their housing; (c) the provision of tube well lift irrigation facilities to those PAPs not having access to adequate irrigation; and (d) income generating schemes for the landless PAPs living below the poverty line of up to Rs 18,000 per family to be implemented with the involvement of NGOs. 18. Environment. This component was included to ensure environmentally sustainable infrastructure and subsequent operation, including the actions and Environmental Management Plans for all of the subproject command areas. Initial implementation of the Plans was to be undertaken not later than 31 December 1995. The hydrological measurement and analysis capability of the ID was to be strengthened through the provision of additional equipment and technical assistance for a pilot water resource study in the Godavari Basin up to the Paithan dam. 19. Technical Assistance, Training and Studies. Special studies and modernisation were to be funded including volumetric water supply to WUAs, canal automation and a review of farmer water rights. 20. Project Management. This component was added to strengthen project management through the establishment of management information systems and office technology, training and tightened administrative procedures and staff reinforcement to expedite procurement. Project Costs 21. The total cost of the MCIP III project inclusive of physical and price contingencies was estimated at appraisal at US$ 322.7 m (Rs 3,872 m). IDA credit was for SDR 164.2 m (US$ 160 m). At restructuring the total project cost, inclusive of physical and price contingencies, was re-estimated at US$ 310 m (Rs 8,662 m) and the IDA credit at SDR 132.2 m (US$ 128.8 m). At this time SDR 32 m was cancelled from the loan and retroactive financing was increased from SDR 9 m to SDR 15 m. C. Mission's Findings Evaluation of Project Objectives 22. The project objectives were clear and important considering that in the past ID, with IDA support, had focused its efforts almost exclusively on the construction of surface irrigation infrastructure. The widening of the project scope at restructuring to shift focus of attention away from construction to: (a) ensuring optimum utilisation of the infrastructure created in the commands; and (b) sustainability of the investment; was timely and appropriate in view of the performance of the project at that point in time. Furthermore, it was in-line with the India Irrigation Sector Review (Report No. 9518-IN of 20 December 1991).  39 Achievement of Project Objectives 23. Disbursements initially were very slow. Despite an original closing date of 30 June 1991, disbursements at 28 February 1993 were SDR 40.3 m (only 24% of the original credit). This low disbursement performance was due not only to the weak original project design (as noted at the time of restructuring) but also to the large devaluation of the Rupee against the SDR. Slow disbursement was overcome by the time of restructuring and disbursement performance picked up thereafter. 24. According to SAR, major emphasis was to be shifted from large infrastructure work to on-farm development, water management and agricultural production practices, to trigger a self-sustained process of agricultural growth. Initially project efforts focused on construction. Increasing water use efficiency and actual areas irrigated, as well as the maintenance of irrigation structures, were all neglected. 25. At restructuring the scope of the project was substantially revised to: (a) improve project performance through the economic rehabilitation of PAPs; (b) include environmental management and sustainability features; (c) establish WUAs; (d) complete works in four subprojects included in MCIP II; (e) reduce the command areas; and (f) improve project management and performance. However, once again the main focus was found to be on the construction activities. 26. Except for the construction of major irrigation works and roads (90% and 110%' complete respectively in financial terms), progress of all other components has been slow. A number of components, especially R&R, environment, special studies and TA, have hardly got off the ground. Furthermore, the areas of new irrigation have been much below expectation. Therefore, the main objective of substantially raising agricultural productivity and farmers' incomes through increasing the area irrigated, and the efficiency of water use, has not yet been realised at the expected level. 27. Credit under the project will be fully disbursed on, or shortly thereafter, 31 December 1996. Implementation and Major Factors Affecting Project Performance Irrigation Works2 28. Irrigable Command. The culturable command area (CCA) estimated at appraisal (1984/85) was 300,000 ha and was re-estimated at restructuring at about 227,800 ha. The Jayakwadi and Majalgaon subprojects account for 146,000 ha and the additional four subprojects included at restructuring account for a further 81,800 ha. By December 1996 about 182,000 ha of on- farm development (OFD) works were completed giving an overall physical achievement of 80%. 1 Mainly due to excess quantities. 2 The areas quoted refer to the targets as at the time of restructuring the project.  40 29. The re-estimated (at the time of restructuring) CCA of Jayakwadi, about 88,000 ha, was achieved by 1991/921. By mid December 1996, irrigation potentials were created through the completion of OFD works on the remaining subprojects as follows: (a) at Majalgaon, 55,457 ha out of the targeted 58,000 ha (97%); (b) at Upper Penganga, 19,631 ha out of 23,000 ha (85%); (c) at Bhima, 15,921 ha out of 28,000 ha (57%); (d) at Krishna, 7,309 ha out of 10,800 ha (68%); and (e) at Kukadi, 8,960 ha out of 20,000 ha (45%). 30. Given the constraints of land acquisition, objections by villages in close proximity to blasting operations, the extensive rock excavations in the main canal systems, inordinate delays in the award of tenders and the subsequent contract management issues for the major aqueducts, the progress achieved is highly commendable. Progress on OFD works implemented by ID II is satisfactory. Delays in achievement of targets is mainly attributable to the requirement that OFD works should commence only after the go ahead decision is given by ID I. 31. Irrigated Cropped Area. Preliminary analysis of data supplied to the ICR mission indicates that the overall progress so far achieved in terms of increased area irrigated has been disappointing and is much below target. Of the total area of 227,800 ha to be brought under irrigation as a result of project-related works, the maximum area which has actually been irrigated is 69,409, accounting for 30% of the total area2. Achievement between subprojects has varied markedly. Mission estimates indicate that the areas actually irrigated, expressed as a percentage of the areas where OFD works have been completed, range from 45% to 97%. Major factors responsible for this poor and varied performance are: (i) OFD works start only when substantial completion is achieved in construction works, which set back progress in cultivation; (ii) the long rotations and limited quantities of water being supplied to farmers, primarily because of a shortage of water in the reservoirs especially in 1995; and (iii) farmers' reliance on river lifts and well irrigation and their reluctance to take up canal water unless they can be certain that water will be supplied both reliably and in sufficient quantity3. 32. Construction (Irrigation) 4 . By mid December 1996, the overall progress on dams, and canal works implemented by the construction division of the ID (ID I), is estimated at about 90%. Jayakwadi has been fully completed with the remaining subprojects varying between 77% to 90%. The construction of the OFD works is the responsibility of the O&M division of the Irrigation Department Il (ID 11). With the exception of Krishna, where the achievement is about 65%, the remaining subprojects have reached completion varying from 87% to 100%. Progress of each subproject is described below: Although the restructuring was approved in 1993, reformulation commenced in 1987 and the estimate of 88,000 ha was confirmed in 1990. 2 The figure of 69,409 ha is the sum of the maximum areas which have actually been irrigated in any one year in each of the subprojects. 3 Farmers do prefer to use canal water, if it is available, because it is less costly than river lifts or well irrigation. 4The targets for the construction works are as detailed in the SAR or later at the time of project restructuring.  41 33. Jayakwadi. Prior to 1984/85, all works on the dam and the main and branch canals were completed. Under MCIP III the following works were needed to be carried out: (a) the distributaries and minors on about 45,000 ha; (b) the main and link drains covering about 153,000 ha; (c) OFD works on about 88,000 ha - increased from 68,000 ha; and (d) land shaping on about 128,000 ha. Prior to the commencement of the restructured subproject, in 1992/93, all works on the distributary network commanding 88,000 ha and the OFD works for 84,671 ha were completed. Land shaping on a reduced area (128,000 ha to 32,000 ha) was completed in 1994/95. 34. Majalgaon. Works under the original MCIP III project included: (a) on the main canal, the construction of 116 structures along km 0 to 67, and earthwork, lining and structures between km 67 and 100; (b) construction of the distributary network on about 58,000 ha in the reach km 0 to 100; (c) construction of the drainage network on the first segment covering an area of about 24,000 ha; (d) construction of on-farm development works comprising the field and drainage network on about 24,000 ha; and land shaping on about 24,000 ha. 35. Out of a total length of 100 km of the main canal, earthwork on about 2 km and 14 structures are incomplete, about 90% of the branch canal is complete and 80% of the distributary network commanding 58,000 ha has been completed. Substantial completion has been achieved on field canals and drains with selective lining reaching about 77% of the estimated target. The land shaping provision was reduced from 24,000 ha to 6,200 ha. Due to problems associated with loan arrangements and farmers' reluctance to accept this development, only about 1,000 ha have been completed. 36. Upper Penganga. Works include: (a) the modernisation of the Isapur dam; (b) construction of main and branch canals of about 220 km; (c) upgrading the existing distributary canal system covering an area of about 25,000 ha; (d) construction of partially lined distribution networks covering an area of about 23,000 ha; (e) construction of buildings; (f) construction of OFD works (including main and link drains) covering about 23,000 ha; and (g) pilot land shaping operations and conjunctive use covering about 4,000 ha. 37. Modernisation works of the dam are substantially completed, and the remaining works are expected to be completed by the end of December 1996. On the Isapur Left Bank Canal (ILBC) 57 km have been fully completed and on the remaining 24 km about 70% of earthworks, 50% of lining, and 40% of structures have been completed. In the Isapur Right Bank Canal (IRBC), work is in progress on the entire length (Km 0 to 115). By mid December an overall achievement of 60% is estimated. The incomplete works are located in the reach outside the proposed subproject area of 23,000 ha, and as such do not affect the target of CCA to be achieved under the subproject. The length of branch canals on both main canals to be developed is estimated at 223 km. About 80% of earthworks, 47% lining, and 60% structures have been completed. The overall progress on 107 km of distributary canals is about 70%. Under OFD, the achievement on field canals and selective lining is 87%, whilst that of main and link drains is 3%. Subproject staff did not consider this work necessary. This should be studied in depth and technical reasons given for the omission. Land shaping was not carried out as farmers were not interested in getting loans to carry out the work. Conjunctive use on about 4,000 ha was not implemented due to delay in obtaining reports and certificates from the government organisation responsible for groundwater exploration.  42 38. Kukadi. The works included: (a) modernisation of the Dimbhe and Manikdoh dams, and Visapur tank; (b) construction of 127 km of main and branch canals; (c) upgrading the existing canal system covering an area of about 65,000 ha; (d) construction of partially lined distribution networks covering an area of about 20,000 ha; (e) construction of main and link drains and field canals covering about 20,000 ha and sub-surface drains covering about 500 ha; and (f) provision of pilot land shaping and conjunctive use covering an area of about 4,000 ha. 39. Modernisation works on the two dams including the preventive works specified by the Dam Safety Review Panel (DSRP) and works on Visapur Tank have been completed. About 132 km of main canals on the right and left banks of the Dimbhe, Manikdoh, and Yedgaon reservoirs were to be constructed under the subproject. About 98% of earthworks and structures and 88% of lining have been completed. About 50% of earthworks in 12.5 km of the Ghod Branch Canal is completed. The major works to be completed are: (a) the Ghod Aqueduct located in the Dimbhe Right Bank Canal, and rock tunnelling in this canal is about 75% complete; and (b) construction of Hanga Aqueduct located at km 74 of the Kukadi Left Bank Canal commenced in October 1996. The reason for the delay was the late approval to go ahead with the work as there was an alternative to use the Visapur Tank as a pick up reservoir. The distributary network for about 15,000 ha out of the target of 20,000 ha has been completed. OFD works covering about 17,700 ha has been completed. About 75% of the drainage system, 108% of the sub-surface drains, and 66% of target for land shaping and conjunctive use have been completed. 40. Bhima. Works included under the subprojects are: (a) modernisation of Ujani Dam and powerhouse; (b) construction of main and branch canals over a length of 63 km; (c) upgrading existing canal system over an area of 85,000 ha; (d) construction of partially lined distribution networks covering about 28,000 ha; (e) construction of field canals and drainage covering an area of 28,000 ha; and (f) provision of pilot land shaping and conjunctive use covering an area of 4,000 ha. 41. Modernisation of dams has been completed. Although about 10% of the earthworks on the main and branch canals have yet to be carried out, quantities based on targets at restructuring have exceeded by about 30%. Structures have been completed and 75% of lining is complete. Earthworks have exceeded the targets by about 10%, and 81% on the distributary canals and minors. For completion of these canals, about 10% and 50% of earthworks are still to be carried out. Structures on these canals have been completed, whilst lining has yet to be provided to about 14%. The progress on field canals is estimated at 83%, while the provision of drainage facilities has been completed. No land shaping and conjunctive use on the pilot area of 4,000 ha have been carried out. 42. Krishna. This subproject provides for: (a) modemisation of the Dhom and Kanher dams; (b) construction of about 58 km of main and branch canals; (c) upgrading the existing canal system covering an area of 50,000 ha; (d) construction of partially lined distributary networks covering about 14,000 ha; (e) construction of main and link drains and field canals covering an area of 14,000 ha, and sub-surface drainage to an area of 1,000 ha; and (f) provision of pilot land shaping and conjunctive use covering about 4,000 ha.  43 43. Modernisation works have been completed. Earthworks in the main canal over 65 km (7 km in excess of the restructuring target) have been completed. Structures are estimated at 86% completion and lining at 71%. Earthworks on the distributary network including minors have been completed with quantities exceeded by about 20%. On the distributary canals, 15 structures out of a total of 669 (the target), have yet to be completed, whilst on minors 1,413 structures have been completed as against a target at restructuring of 1,296. In distributaries, lining has been completed with an excess of about 70%. In minors, lining is estimated at 93%. Upgrading of existing canals is substantially completed, whilst the drainage system works are fully completed. The progress on field canals is poor and estimated at 54% with selective lining on the completed canals exceeding by about 50%. As in the case of Bhima, no work has been done in land shaping and conjunctive use. 44. Buildings. Under the original MCIP III project no provision was made for buildings. At restructuring, funds were provided for buildings for both ID I and ID II. In Kukadi and Krishna all buildings have been completed, whilst at Bhima 50% completion was achieved. There was no provision for buildings at Upper Penganga. Rural and Service Roads' 45. Under the original MCIP III project, provision was limited to the construction of rural roads. On the restructured project, in addition to rural roads in the new subprojects, service roads were included in all subprojects, and a number of bridges was provided for the new subprojects. A total of 727 km of rural roads (subsequently modified to 837 km) and 757 km of service roads together with 21 bridges for the rural roads were included. PWD is responsible for implementing the rural roads programme and the implementation wing of ID II implements the service roads programme. Details with progress for each subproject are given below: 46. Rural Roads. The programme includes: (a) Jayakwadi, 445 km; (b) Majalgaon, 34 km; (c) Upper Penganga, 39.5 km with 11 bridges; (d) Krishna, 65.5 km with 2 bridges; (e) Bhima, 95.5 km with 4 bridges; and (f) Kukadi, 100 km with 3 bridges. In the six subprojects, out of 779.5 km of roads and 21 bridges included in the implementation programme, 776.5 km (93%) and 6 bridges (29%) have been completed. The poor progress on bridges is attributed to constraints during the preparation and processing of tenders and contract management. 47. Canal Service Roads. The programme includes: (a) Jayakwadi, 572 km; (b) Upper Penganga, 45 km; (c) Krishna, 26 km; (d) Bhima, 81 km; and (e) Kukadi, 27 km; and (f) Majalgaon, although the SAR provides for 150 km, the work was not included under a separate 2 item . Out of 757 km in the six subprojects, 679 km (90%) have been completed. l Since many revisions were made after appraisal and restructuring, the targets are as per the final revisions given in the progress reports of ID and PWD. 2 Presumably the work was included under embankment construction.  44 Quality of Civil Work Construction. 48. Quality of concrete works in major structures carried out by ID I and PWD is of a high standard. Quality control tests were regularly carried out. There is room for improvement in compaction of concrete to obtain a better finish. The works carried out by ID II are widely scattered necessitating strict supervision to achieve high standards. The ID II staff provide this service satisfactorily as evident from the high standard of concrete and rubble masonry work. However, there is room for improvement on lining and earthworks. Water Users' Associations (WUAs) 49. Under the original project, agreement was reached with the GOM, that it would establish farmers' organisations in the project command areas in accordance with a plan satisfactory to GOM and the Bank (schedule 2 (i) of the Project Agreement). The SAR proposed the formation of Outlet Committees (OCs) to manage O&M of the channel system below the chak level. The next level was to be Water Utilisation Committees (WUCs) to be organised for each minor. The highest tier was to be Canal Advisory Committees (CACs) with jurisdiction over an area of up to 40,000 ha. The mission's observation made during limited field visits confirmed that minimal progress has been achieved in this field. Following unsatisfactory progress the restructured project included a covenant in the legal agreement specifying targets for the formation of WUAs. Eighty associations were to be formed, 30 in Majalgaon and 10 each in the other subprojects. 50. A total of 193 associations have been registered and irrigation infrastructure has been handed over to 71 associations. The associations registered, and the ones which have accepted responsibility for all O&M activities, are not necessarily in the project command area. The associations that have been handed-over include: (a) 18 at Jayakwadi; (b) 4 out of the required 30 at Majalgaon; (c) I in Upper Penganga out of 10; (d) 17 out of the required 10 in Kukadi; (e) 18 out of the required 10 in Bhima; and (f) 13 out of the required 10 in Krishna. 51. Limited field visits indicated that farmers' conceptions of maintenance were limited to the desilting and clearing of canals, one time activities during a season. No preventive action is taken to repair structures once deterioration commences. Lined sections are illegally broken to get water on to farms. Leaks, mainly at drop structures, are not arrested in time and eventually cause structural collapse. In minor canals under the control of WUAs, structures have deteriorated to such an extent that major rehabilitation work is needed before effective water management can be carried out. 52. Field canal systems in areas controlled by WUAs, and in areas controlled by OCs, are in a very bad state of disrepair. In most cases the canals, which were completed to acceptable standards, are now small waterways with uncontrolled flows. Farmers and some field level ID staff appear to accept the situation as normal. 53. As a priority, ID staff should stop further registration of associations, and concentrate on improving the performance of 10 associations at each subproject.  45 54. Despite the weaknesses noted above, the mission did visit some WUAs which are very effectively distributing water within their command areas and successfully collecting water fees from farmers. Improved Water Management 55. Due to scarce and unreliable water resources in the river basins where the subprojects are located, particularly the Godawari River Basin, in addition to carrying out a study of the water resources of this basin, the restructured project included a component for operation of the Majalgaon main canal up to km 100, and the Ganga Masala branch canal over its entire length, based on "principles of dynamic regulation". Following this, the Pilot Project Dynamic Regulation (PPDR) exercise was implemented on the Majalgaon Right Bank Canal. Existing control structures were improved to operate automatically. Initially the main canal is to operate under constant volume conditions and eventually to shift on to a controlled volume method. It was envisaged that volume controls would be effected in the branch and minor canals and existing structures were improved and new structures constructed. The pilot project incorporated the provision of controls on the main canal for about 58,000 ha, the branch canal for about 11,000 ha and minor canals covering an area of 2,000 ha. 56. The mission was impressed with the operation of the automatic system on the main and branch canals. One important issue though is the cleaning of these canals (silt and rock falls) and it is essential that a schedule of maintenance activities be prepared and implemented effectively. The mission visited one minor which supplied water to about 700 ha. The condition of this minor was found to be very substandard. Given that the infrastructure was completed over the last two years, this is a matter for concern and should be addressed immediately if the pilot operation is to be sustained. 57. It is important that in future the formation of viable and effective WUAs, including the education of farmers to maintain and safeguard GOM investments, should be carried out to ensure sustainability. Operation and Maintenance 58. Currently the ID is responsible for maintaining all irrigation infrastructure from the headworks up to the field canal outlets to the chaks. The department is now in the process of handing over to WUAs the O&M of irrigation systems covering an area of about 400 ha per association, usually under a group of minor channels. Operational activities are covered satisfactorily by department staff and farmers within the chaks. 59. WUAs effectively carry out water distribution operations within their area of responsibility. However, maintenance is problematic. Preventive maintenance by ID staff is not carried out mainly due to funding restrictions, although limited periodic maintenance, such as repairs to structures and desilting, are carried out by departmental staff. The mission observed minors and field canals completed a few years back in a severe state of disrepair in all five subproject areas. A major rehabilitation effort would be necessary to bring the system to an  46 operational condition to ensure optimal use of the scarce water and reduce excessive runoff into the drainage system. Agriculture 60. SAR contemplated the creation of two new command area agricultural districts to be staffed by specific Village Extension Workers (VEW) assigned to the two subproject command areas so as to raise the ratio of VEWs to farmers from 1:1200 to 1:800. However, no progress was made because: (a) a detailed programme of work was not prepared for conducting on-farm demonstrations, adaptive research and training of staff and farmers; (b) there were no funds allowed for in the original project for the agriculture work; (c) there was apprehension on the part of the AD to get involved; and (d) there was a lack of effective co-ordination between the ID and AD. 61. In the restructured project the lessons learnt during the initial years of MCIP III were capitalised upon. Although progress was initially quite slow, eventually a specific programme of work was agreed to between the ID, AD and the Bank. Consequently funds were provided by the GOM to conduct 30,618 crop demonstrations (for which 105% achievement was realised), 3,947 drip and sprinkler irrigation demonstration sites were established (43% achievement), 52 multipurpose Agricultural Technology Dissemination Centres were build (100% achievement) and 223 training programmes were conducted for Agriculture Department (AD) staff and farmers (target 131). Against an approved outlay of about Rs 190 m, 56% achievement was obtained up to 31 October 1996 with an anticipated achievement of 83% up to 31 December 1996. 62. Although no specific data have been received from the AD regarding increases in cropping intensity and crop productivity in the project affected areas, the mission will analyse data obtained from the ID and from its field visits and interviews with farmers and AD field level staff. While the areas benefiting from increased canal water are much below target, where water is being received, cropping intensities are increasing as well as crop yields. Preliminary analyses indicate that the speed of switching from rainfed to irrigated agriculture is higher than was predicted in the SAR and in the feasibility studies of the restructured project. While farmers use canal water conjunctively with tube and open well water, shortages of water are definitely restricting crop yields. The overall impact on agriculture will therefore be restricted in the project affected areas unless more water can be supplied from the project. The mission will allow for increases in irrigated area once OFD works are completed, as well as for the recharging of ground water reserves from canal water in the command areas. Full benefits will only be realised if more water is made available and water use efficiency is raised. There has been a positive impact to the increased agricultural extension effort in the project areas and the mission was pleased to note that during the restructured project period, the co-operation between the ID and AD staff showed a marked improvement. GOM should ensure though that extension efforts funded through the project are kept up for at least 2-3 more years. Economic Rehabilitation 63. The main aim of including the economic rehabilitation component (ERP) at the time of restructuring was to assist the GOM to improve the welfare of persons previously resettled due  47 to the dam investments made in the early 1970s. The ERP component was included to address GOM inadequacies in the execution of R&R programmes. It was considered that the restructured project ERP could serve as a model for possible further use elsewhere in Maharashtra. 64. Retrofit socio-economic surveys were carried out during 1994/95 to find out the number of PAPs residing in the resettlement villages and their living standards. Against the total number of 36,084 who were originally affected, only 22,168 PAPs (61.4%) were identified at the time of conducting the survey. Based on the survey findings and subsequent rehabilitation action plans, the GOM brought out a Government Order (GO) in January 1996 detailing its economic rehabilitation policy; which was subsequently endorsed by the Bank. The ERP was to be implemented over a three year period from January 1996 to December 1998 with a budget of Rs 960 m (US$ 27.42 m). 65. Implementation of this component is well behind schedule and is yet to pick up momentum. Out of the four activities envisaged under this component, only civic amenities have commenced. So far 18% of physical progress (162 out of 905 new facilities to be created) and 7% of financial progress (about Rs 2 m out of Rs 382 m) have been achieved. Implementation of the other three components (housing, irrigation and income generation) is yet to commence. Funds earmarked for 1996-97 for housing, irrigation and income generation activities are yet to be placed with the Divisional Commissioners. Though 70% (10 out of 14 positions) of the professional staff created for exclusive implementation of this scheme are in position, the key position of Deputy Secretary is yet be filled. Updating the list of eligible PAPs for individual schemes and recruitment of NGOs for implementation of income generation activities, are pending completion. No efforts have been made so far to finalise the TOR and appointment of consultants for Monitoring and Evaluation (M&E). 66. The mission is of the view that project implementation needs to be considerably speeded up by: (a) placing adequate funds for all activities with the Divisional Commissioners; (b) filling up the vacant staff positions including the key position of Deputy Secretary; (c) finalising the recruitment of NGOs; and (d) selecting the M&E agency to monitor implementation progress. 67. The major reasons why implementation progress has been slow are: (a) Non-availability of funds. The ID and Rehabilitation Department (RD) failed to decide over who should fund the various rehabilitation activities - housing, income generation and irrigation. The ID is willing to finance only the civic amenities, as these were in accordance with the State Act on rehabilitation and are being implemented by the ID. According to them all other activities should be financed out of the RD's funds since these are being implemented by them. On the other hand, the RD do not have any funds and they feel it is the responsibility of the ID, since they are responsible for displacement and it should form part of the overall project cost. All the activities included under the ERP are consistent with the Amended Development Credit Agreement dated 8 June 1993. This problem should be sorted out by the GOM and the necessary funds transferred to the RD for its implementation.  48 (b) Lack of effective co-ordination. The delay in appointing a Deputy Secretary, who would be the key person in the implementation of the ERP, has impeded the co-ordination and guidance of staff at divisional and project level. There is also no follow-up from the senior level staff at the divisional level. As a result, the implementational preparation activities at project level have slowed down considerably. (c) Delay in recruitment of NGOs. The appointment of NGOs for implementation of the income generation activities has been pending for over eight months. In spite of there having been no objection on the part of the Bank for the recruitment of five NGOs, no action has been taken to finalise their contracts. (d) Failure to appoint a M&E agency. The appointment of a M&E agency is essential to monitor implementation progress and guide the NGOs and other persons involved in the implementation process. The failure to initiate the process of appointing a M&E agency has delayed the completion of various preparatory activities such as updating the list of eligible PAPs for individual schemes, issuing identify cards, finalising the details of the irrigation and income generation components, and providing guidance to the staff involved in its implementation. Studies and Training 68. Studies. To ensure the introduction of an effective management information system, environmentally sustainable investments, and efficient irrigation management in the different subprojects, it was envisaged that the following important studies would be carried out under the project: (i) Development of a Management Information System (MIS); (ii) Environmental Impact Assessment (EIA) study and the preparation of a Environmental Management Plan (EMP) for the Krishna Basin subprojects; (iii) an EIA Study and the preparation of an EMP for the Godavari Basin subprojects; (iv) a Water Resources Study in the Godavari Basin up to Paithan Dam; (v) the development of a Plan of Operation and Management (POM) for the Kukadi subproject; (vi) the development of a POM for the Krishna and Bhima subprojects; and (vii) the development of a POM for the Godavari Basin subprojects. The following is the current status of these studies: (i) Management Information System (MIS). Tender was invited on 16 August 1994 and a contract was awarded to M/S CMC Ltd. Pune on March 24, 1995 at an estimated cost of Rs 7.796 m for the development of 24 MIS modules. Almost all the modules have been finalised by the Consultant and are being tested. A draft final report has been submitted by the Consultant and is under review by the GOM. The Consultant has also trained 80 officials on basic awareness and 21 officials in an advanced course in computer applications during the period 8 July to 6 November 1996. Expenditure incurred up to 30 September 1996 is Rs 5.0 m. (ii) EIA and EMP studies for subprojects in Krishna Basin. Tender was invited on 21 November 1994 and a contract was awarded to M/S Acres International  49 Ltd. Canada on 10 September 1996 at an estimated cost of Rs 9.28 m with a reduced scope of work from what was contemplated in the original proposal. The Consultant has submitted the Work Plan which was approved by the GOM on 30 November 1996. Expenditure incurred up to 30 September 1996 is Rs 0.36 m. (iii) EIA and EMP studies for subprojects in Godavari Basin. Tender was invited on 10 October 1996 for this study and a contract was awarded to M/S _ _ ERM, London, on 10 September 1996 at an estimated cost of Rs 10.8 m. The Consultant has submitted the Inception Report and first Progress Report which are under review by GOM. No expenditure has been incurred up to 30 September 1996. (iv) Pilot Studies of Water Resources in Godavari Basin up to Paithan Dam. Tender was invited on 13 June 1994 and a contract was awarded to M/S WAPCOS, New Delhi on September 22, 1996 at an estimated cost of Rs 11.0 m. The Consultant has submitted the Inception Report which is being reviewed by GOM. Expenditure incurred up to 30 September 1996 is Rs 2.2 m. (v) Studies of POM for Kukadi Project. Tender was invited on 20 March 1996 and a contract was awarded to M/S SMEC, Australia on March 22, 1996 at an estimated cost of Rs 25.68 m The Consultant has submitted the Inception Report and the first Progress Report which have been approved by GOM. Expenditure incurred up to September 1996 is Rs 8.41 m. (vi) Studies of POM for Bhima and Krishna subprojects. Tender was invited on 21 August 1996 for this study and a contract was awarded to M/S CES, New Delhi on 25 March 1996 at an estimated cost of Rs 6.67 m. The Consultant has submitted the Inception Report and the first Progress Report which have been approved by GOM. Expenditure incurred up to 30 September 1996 is Rs 2.8 m. (vii) Studies for POM for subprojects in Godavari Basin. Tender was invited on 9 August 1996 for this study. The contract for this consultancy has not yet been awarded. 69. The mission notes that it was contemplated that these studies would be initiated before 31 December 1995, and completed before Credit Closure on 31 December 1996. Since they have only just been initiated, realisation of the objectives included at the time of project restructuring to improve the performance of the infrastructure created and its environmental impact, has not been realised. 70. The main reasons for delays in completing the studies are: (i) the inability of GOM to take prompt decisions on the tenders. GOM has taken between 7 to 27 months to award a contract after invitation of tenders; and (ii) according a low priority to this work, preferring instead to concentrate efforts on the completion of physical works.  50 71. Training. The following training components were included in the project. - WALMI. Under MCIP III an amount of Rs 75 m was provided to WALMI for conducting training in land and water management'. A total of 125 courses were conducted for ID and AD officials, farmers, WUA office bearers and NGOs. Some 2,482 officials and 2,844 farmers and NGO representatives were trained under the programme. Up to November 1996 expenditure totalled Rs 64.55 m. The mission was impressed with the modem facilities that are available for training and the overall performance of the Institute. However, there is a need to place more emphasis on the maintenance of major and OFD irrigation works and on practical oriented training in the field. - Agriculture Department. Since 1994/95 regular training in irrigation water management was conducted at the Rahuri and Parbhani State Agricultural Universities. Attendance by ID staff, especially from Kukadi, Bhima and Krishna subprojects fell below targets. The foreign training programme was not realised since available funds were diverted for other purposes. However, farmers' training, including rallies and educational tours are reported to have been undertaken by AD staff. Project Sustainability 72. Project sustainability will be dependent on several factors. These are: (a) the availability of adequate water in the reservoirs to conform to the criteria of 75% dependability; (b) effective management of the available water; (c) effective preventive and periodic maintenance of the headworks, the main and branch canals, the distributary networks inclusive of the minor canals, the drainage network and finally the field canal systems at the outlet to the chaks. This will be dependent upon the GOM ensuring increased and adequate funds for maintenance and in improving the capability of ID staff to prioritise and supervise maintenance work; and (d) completing outstanding works (after Credit closure) programmed up to 31 March 2000 - see attached summary operational programme. 73. During the project period, Jayakwadi subproject was operational for several years. However, inadequate water supply in the reservoir is reflected in the excessive shortfalls in the cropped areas for the period 1991/92 through 1995/96. The dependability criteria has failed over the last five years. This factor is a major concern as the expected benefits cannot be achieved. 74. Concerns regarding water management up to the outlet to the chak resulted in the implementation of the Pilot Project for Dynamic Regulation (PPDR). So far the results have been promising in that optimum use of the water available from the reservoirs could be achieved through effective control of flows particularly in the main canals. However the success of this operation will depend on the maintenance of the minor canals. I WALMI, Maharashtra, was established in 1980 for capacity building in an integrated approach to water and land management.  51 75. The most critical factor to ensure project sustainability is an effective maintenance programme particularly in areas where farmers are responsible for maintenance. The mission's findings on the effectiveness of the WUAs to carry out maintenance activities clearly indicate that sustainability of project works is very much in doubt. 76. As at December 1996, irrigation facilities have been provided for about 80% of the project area. The balance areas is dependent on the completion of the major aqueducts, rock excavation of a limited reach of the main canals and the OFD works within the reach of the incomplete main canals. These works need to be completed using GOM funds. 77. One other aspect relating to project sustainability is that it will be important that the GOM, through the AD, maintain agricultural extension efforts in the project affected commands for 2-3 more years. This will ensure that farmers successfully switch from rainfed to irrigated agriculture, make good use of the infrastructure created and will be in a position to pay the full operational and maintenance costs of the water supplied to them. Assessment of Outcome 78. The project's outcome with respect to the construction of civil works (irrigation and roads) is rated satisfactory. However in terms of present agricultural achievements, performance of WUAs (with the exception of operational activities), R&R and O&M, it is clearly unsatisfactory. The reasons for the adverse ranking are: (a) the low cropped area averaging about 30% throughout the project period; (b) the less than satisfactory performance of ID field staff in providing technical supervision; (c) the continuing low funding levels for O&M leading to deferred maintenance; and (d) the technical, managerial and funding limitations of the WUAs to maintain infrastructure. In addition, the objectives of equitable, predictable and reliable irrigation supplies to all farms according to the dependable reservoir supply (75%) have not been realised in the completed command areas 79. The original project envisaged a shift from large infrastructure to OFD works, water management and improved agricultural production practices, so as to trigger a self sustained process of development. Whilst OFD works were emphasised, and at a later stage to assist in improved water management the PPDR was taken up, the services of the AD were not effectively utilised until very late in the project. Initially no project funds were allocated for the agriculture component and a detailed work programme and responsibilities were not defined. At the time of restructuring, funds were earmarked for the agriculture component, but valuable time was lost in defining a programme of work. Throughout the period of the original project, co-ordination between the ID and AD could have been much better. Future Operations 80. The financial programme for completing the civil works by ID 1, ID II, and PWD, as well as the agricultural development component, R&R, studies and the recommended repairs and safety measures by the DSRP have been furnished by the GOM following the wrap-up meeting in Bombay (see attached summary). The cost of the balance works programmed to be completed by 31 March 2000 total Rs 2,470.86 (US$ 70 m). The outstanding irrigation works, studies and dam  52 safety measures total Rs 1,588.77 (US$ 45 m). No provision has been made to continue the agriculture component beyond 31 March 1997. According to the AD representative at the wrap- up meeting, the ID should provide the necessary funds for these project-related activities which have been supported to date by the project. The cost of the balance work of the R&R component is estimated at Rs 787.31 m (US$ 22 m), which according to the GOM will be executed as per the availability of funds. PWD work is programmed for completion before 31 March 1998 at a cost of Rs 55.52 m (US$ 1.6 m). Lessons Learned 81. The main lessons learned from the project are as follows: (a) The unsatisfactory performnance on the low cropped areas as against the available CCA, is mainly due to the unreliability of water supplies and insufficient water resources in the basins. Until an in depth study is carried out in the two major basins affecting the subproject areas, no further expansion of OFD works should be implemented, and no further extension of main canals should be taken up. (b) Funds for O&M are based on norms which need updating and should be substantially increased to ensure effective preventive and periodic maintenance of the infrastructure under the control of ID. The circle at Aurangabad has worked out the detailed requirements based on actual needs. An updating is required and followed up by a critical look by the GOM. (c) An immediate survey is needed to identify the rehabilitation needs of all infrastructure mainly on the minors and field canals'. To safeguard the vast investments made in the irrigation subsector, a rehabilitation project should be prepared. No new projects should be taken up until the operation and maintenance of existing projects are improved. (d) to resolve the problem of poor maintenance of the field channel system, it is suggested that: (a) ID staff responsible for the formation of associations be given intensive training in preventive and periodic maintenance activities; (b) an effective supervision schedule for Section Officers, and Canal Inspectors, be introduced and higher level staff should monitor the activities; (c) during the formation period, maintenance activities should be detailed not in class rooms b,ut at field sites. This could be done at handing over. The groups could be taken to sites where infrastructure is in a severe state of disrepair; (d) the thrust of the training courses at WALMI should be directed more towards preventive and periodic maintenance and should be carried out at site. (e) The effectiveness of the unit responsible for the formation of WUAs should not be judged on the numbers formed, and tumed-over to farmers, but on the The infrastructure to be assessed is limited to existing works completed prior to the commencement of MCIP Ill.  53 effectiveness of the associations not only on financial management and operational aspects, but also on maintenance aspects. It is important to have a follow up programme to ensure that all requirements are achieved. (f) Studies should be accorded their much needed priority. Delays experienced on previous Bank funded projects continue to plague current projects. More stringent covenants should be included and management of the Borrower and Bank should closely monitor progress and take early action to ensure that target dates are met. (g) To optimise the use of available water supplies, the PPDR is being implemented. The benefits from this pilot project can only be derived if the distributary network to be eventually managed by farmers is operated and maintained to the required standards. Government involvement in the maintenance of infrastructure in areas where the system is introduced should continue until farmers are able to appreciate the importance of O&M. (h) In order to facilitate timely implementation of an agricultural component in an irrigation project, there is a need to have a separate budget allocation for the component which should be a part of the project cost. Moreover, to ensure effective co-ordination between the AD and the ID, a Project Co-ordination Committee of high level officials is needed, with funds passed directly from the GOM Finance Department to the AD. The component should be closely monitored and evaluated by the AD and the Project Co-ordination Committee. (i) Although implementation of the ERP is at an early phase the following lessons can so far be drawn: (i) an R&R programme must have a policy delineated by the State Government detailing the various activities to be carried out, budget allocations, scope and involvement of NGOs, institutional mechanisms, and monitoring and evaluation procedures; (ii) any project incorporating an R&R component should have an exclusive budget earmarked for R&R which should be a part of the overall project cost and passed directly from the GOM Finance to the Rehabilitation Department to facilitate timely implementation; and (iii) regular monitoring is critical for timely and successful implementation. D. Follow-up 82. The mission will return to Rome and prepare a draft ICR, in accordance with World Bank guidelines, for submission to the IDA before 28 February 1997, which will then transmit the draft ICR to the borrower for comment.  54 INDIA: Maharashtra Composite Irrigation Project III Implementation Completion Report Appendix 1: Mission's Aide-Memoire Attachment 1: Financial Program of Balance Works of MCIP III Cost of Programme Programme for Work Balance 1/97 to 3/97 Work _1997-98 1998-9 19-2000 (Rs Million) ID-I 1132.24 110.85 693.43 167.74 160.22 ID-I 202.43 30.27 113.64 36.50 . 22.02 PWD 55.52 8.06 47.46 0 R&R 787.31 30.00 250.00 250.00 257.31 Agri. Extn. Programme 39.26 39.26 - - Studies 50.60 24.10 26.50 - Implementation of DSRP 203.50 32.80 130.70 40.00 Recommendations Total 2470.86 275.34 1261.73 494.24 439.55  55 IMPLEMENTATION COMPLETION REPORT INDIA MAHARASHTRA COMPOSITE IRRIGATION PROJECT III (CR. 1621-IN) APPENDIX 2 ECONOMIC AND FINANCIAL ANALYSIS A. INTRODUCTION General 1. This appendix details the economic re-evaluation of MCIP Im carried out by the ICR mission. It compares the methodology and the results of the SAR, in the case of the Jayakwadi and Majalgaon subprojects, and those of the consultant's feasibility study for the remaining subprojects which were included at the time of restructuring. In addition, the impacts of the project on farmers' incomes have been re-estimated and are compared to those which were anticipated in the SAR at the time the original project was formulated. 2. Agricultural Benefits. MCIP Im was designed to provide irrigation to previously rainfed areas and to raise agricultural production in areas already commanded through improving irrigation facilities, drainage, landshaping and water management. Since the project focused excessively on construction of irrigation infrastructure to the detriment of improved water use efficiency, the ICR mission concluded that project benefits are confined to the areas which have been, or will be, irrigated as a result of the MCIP m project. No benefits could therefore be attributed to improved water management in the subproject command areas outside of those directly associated with the MCIP Im project which were already being irrigated prior to MCIP m. 3. Two types of agricultural benefits were quantified. The first is those associated with canal irrigation and the second those associated with groundwater recharging from canal water. (a) Canal irrigation benefits. Here benefits are confined to areas in the subproject commands which have actually been irrigated as a result of project works from the start of the project up to the latest available data for the 1995/96 season. Future canal irrigated areas in each subproject have been projected by the mission based on actual performance since the start of the project.  56 (b) Dugwell irrigation. Benefits from groundwater recharging have been assessed for each of the subprojects'. The quantification of these benefits is based on historical data on the number of dugwells in the subproject command areas included in MCIP m. 4. The agricultural benefits quantified are based on present and future crop budgets and cropping patterns, under both rainfed and irrigated conditions, which have been reassessed through detailed field work by the ICR mission. Irrigation potential in project benefiting areas is assumed to be reached at a faster rate than was projected in the SAR, viz. seven years as opposed to twelve years. 5. Past Irrigation Performance in the Subprojects. The actual areas irrigated have been considerably below the areas which have been supplied with irrigation infrastructure and have fluctuated widely (see Appendix 3, Table 7). In Appendix 3, Table 8, the actual areas irrigated in each year are expressed as a percentage of the areas available for irrigation in each respective year. These percentage figures provide a performance rating for each of the subprojects. Ratings have averaged 16% in Majalgaon, 17% in Bhima, 19% in Upper Penganga, 37% in Jayakwadi, 64% in Kukadi and 65% in Krishna. Overall, performance has been disappointing. Kukadi and Krishna have consistently performed the best over the most recent seasons, while Jayakwadi has performed much better than Majalgaon, Bhima and Upper Penganga. 6. Future Scenarios. Two possible future scenarios were defined - a 'likely" and an 'bptimistic" Both of these scenarios are based on actual areas irrigated up to 1995/96, for which data are available. They differ with respect to the projections of future areas irrigated. In the 'likely scenario," the future areas irrigated are calculated by considering the areas which are planned to be created up to the end of the balance works in 1999/2000 and assume that the average subproject-wise achievement in areas actually irrigated up to 1995/96 will continue. In the case of the 'bptimistic scenario" again the planned expansion in the areas created through the balance works are considered, but in terms of future achievements in areas irrigated two assumptions have been made: (a) for the subprojects which have performed reasonably (Jayakwadi, Kukadi and Krishna) it is assumed that 100% of the areas created up to the end of the balance works would be supplied with irrigation water from year 1999/2000; (b) for the other subprojects which have performed poorly, it has been assumed that only 50% of the areas that will be created will be irrigated from 1999/2000. The 'likely" scenario was adopted as the base case since it is considered to most likely reflect future performance which should be realizable provided the project is completed and the ID and WUAs adopt sensible O&M plans. l Seepage losses from canal water are significant in all of the subprojects which recharge wells below command areas of the canals. Seepage occurs since all field channels and a greater part of the minors are unlined.  57 7. Project Capital Costs. Nominal historical works-related project costs' bear little relation to the real costs since inflation diminishes the purchasing power of the Rupee. To make cost figures more representative of the real resources used in the subprojects, each year's Rupee cost was converted into first quarter 1997 Rupees before summing them. The Wholesale Price Index for India was used for this purpose (Appendix 2, Table 1). Actual expenditures on irrigation works up to December 31, 1996 have been used (Appendix 3, Table 3). In addition, the estimated costs of balance works have been included in the re-evaluation which are detailed in Appendix 3, Table 4. 8. O&M and Cost Recovery. Funds are insufficient to properly maintain irrigation infrastructure both off-farm and on-farm. Currently the standard norm used for O&M is Rs.90/ha. The ICR mission considers this totally inadequate. Mission estimates range from Rs. 1,470/ha to Rs. 1,955/ha in financial prices2. These were converted into economic terms by applying a conversion factor of 0.9. Currently irrigation water charges3, depending on the crop grown, range from Rs. 1 00/ha to Rs.200/ha in kharif, Rs.150/ha to Rs.300/ha in rabi, Rs.300/ha to Rs.800/ha for the hot weather season, to Rs. 1,750/ha for perennial crops (Appendix 3, Table 9). There is therefore a need to substantially raise water charges if full recovery of O&M costs is to be realized. In the economic re-evaluation, water charges are ignored since they are a transfer payment. O&M costs are included which are based on the mission's estimates of the real costs of O&M required to ensure that the canal irrigation infrastructure created in the project-affected command areas is adequately maintained. 9. Sunk Costs. As in the SAR and the feasibility study, all costs associated with the provision of irrigation facilities in the subprojects concerned, which had been incurred before MCIP , have been treated as sunk costs and consequently ignored. B. ECONOMIC ANALYSIS SAR Economic Analysis 10. Basic Assumptions. Tradable farm outputs and fertilizer were valued at border equivalent prices based on international prices, while the non-tradable outputs and most farm inputs were adjusted from financial prices to economic values by the standard conversion factor (SCF) of 0.8. Unskilled labour was priced at two-thirds the financial price. For civil works, a variety of conversion factors were used ranging from 0.7 to 0.8 and for equipment the conversion factor used was 0.8. 1 Equipment, vehicles, studies, training, rural roads, bridges, and rehabilitation and resettlement of PAPs, were excluded from the project costs for the purpose of the economic re-evaluation because these items are general and cannot be directly attributed to each of the subprojects. 2 Jayakwadi, Majalgaon and Upper Penganga Rs. 1,955/ha; Bhima Rs. 1,643/ha; Krishna Rs. 1,612/ha; Kukadi Rs. 1,470/ha. 3 These were last revised in July 1994.  58 11. Results. The economic rates of return calculated in the SAR, over a forty year time span, were: Jayakwadi - MCIP I and GOM portion (78,650 ha) 29% Jayakwadi - new area (68,000 ha 18% Majalgaon - km 0-30 (24,000 ha) 13% 12. According to the SAR, the risks that farmers' responses to irrigation may not be adequate, and yield levels would be below those anticipated, would be minimized, through: (a) the provision of landshaping and improved system operation methods which would ensure all farmers including tail- enders would receive reliable water supply; and (b) placing emphasis on increasing agricultural productivity through SDDs, technical support to farmers, research and development, and monitoring and evaluation. Feasibility Study Economic Analysis 13. Basic Assumptions. Most basic assumptions used in the feasibility study are not explicit in the Consultant's report. Border parity prices were calculated for all crops for which World Bank forecasts were available and for fertilizer. For the remaining crops and farm inputs 'appropriate" factors were applied to their respective financial prices to reflect their economic values. A shadow wage rate was used equivalent to 80% of financial rates. 14. Results. The following economic rates of return were calculated: Kukadi - base case (167,401 ha) 5% Bhima - base case (134,140 ha) 17%0 l Krishna - base case (62,990 ha) 18% Upper Penganga - RBC km 0-110 9% Upper Penganga - RBC km 0-177 11% 15. The low ERR calculated for the Kukadi subproject was attributed to its relatively high cost and lower cropping intensities due to water shortages. The consultants concluded that the Kukadi subproject should not be financed and that alternatives needed to be considered capable of supporting higher cropping intensities. ICR Economic Re-evaluation 16. Basic Assumptions. Tradable farm outputs and fertilizer were valued at border equivalent prices based on international prices (Appendix 2, Table 2) while the non-tradable outputs and farm inputs were adjusted from financial prices to economic values by the standard conversion factor (SCF) of 0.9. Farm labour and project costs (both capital and O&M) were also adjusted by the SCF of 0.9.  59 17. Crop Budgets. The detailed crop budgets on which the re-evaluation rests are provided in Appendix 2, Tables 15-34. 18. Farm Models. The farm models specified for each of the subprojects which were used to quantify the impact of the project are given in Appendix 2, Tables 3 to 8. 19. Benefit and Cost Streams. The detailed benefit and cost streams for each of the subprojects are provided in Appendix 2, Tables 9 to 14. Details relating to the derivation of the flows are footnoted. 20. Summary of Results. The recalculated economic rates of return for the base case ('likely scenario") over a forty year time span, were: Jayakwadi - (88,000 ha) 10% Majalgaon - (58,000 ha) -8% Upper Penganga - (23,000 ha) -11% Kukadi - (20,000 ha) 3% Bhima - (28,000 ha) naI Krishna - (10,800) 4% 21. Sensitivity Analysis. The following sensitivity analysis tests were undertaken in the re- evaluation: Increased areas irrigated. A major assumption of the re-evaluation relates to the projected future irrigated areas. Hence a 'bptimistic"scenario was specified in which the future irrigated areas in each of the subprojects were set equal to the maximum areas in any year which have been achieved up until 1995/96 (see Appendix 3, Table 1 for details). These ranged from 7% to 65% of the irrigated areas created. The re- estimated ERRs are given below: Base Optimistic Jayakwadi - (88,000 ha) 10% 19% Majalgaon - (58,000 ha) -8% 7%0l Upper Penganga - (23,000 ha) -11% -2% Kukadi - (20,000 ha) 3% 4% Bhima - (28,000 ha) na -12% Krishna - (10,800 ha) 4% 4% For this subproject the net benefit flow was negative in all years so that an ERR could not be calculated.  60 Increased incremental agricultural production. The incremental agricultural benefits have been assessed by the ICR mission through detailed field analysis. They are based on what has actually occurred in the project command areas. The agricultural component was delayed. Essentially it got off the ground only in the last two years before credit closure. However, its results over this short period of time have been impressive, although they have been confined to relatively small parts of the project command areas. Unfortunately, it seems that this good work will not be replicated to other command areas since the component will most likely not continue following credit closure. Had the agriculture component been successfully launched at the start of the project, and irrigation water supply more reliable, there is no doubt that farmers' switches to irrigated farming, and hence their responses in terms of increased production, could have been greater. Changes in the ERRs if agricultural benefits were increased by 25% and 50% are shown below: Base +25% agric. +50% agric. benefitsbenefits Jayakwadi - (88,000 ha) 10% 16% 22% Majalgaon - (58,000 ha) -8% -2% 1% U. Penganga - (23,000 ha) -11% -7% -5% Kukadi - (20,000 ha) 3% 5% 7% Bhima - (28,000 ha) na na na Krishna- (10,800) 4% 6% 8% - Reduced project costs .The project was not an overly expensive undertaking in terms of cost per hectare created (US$2,284/ha). However, since the actual areas irrigated have been much below those created, the real costs per hectare irrigated are much higher. If the maximum area irrigated in any one season is used after project restructuring (45,876 ha in 1994/95), the costs work out at US$9,555/ha due largely to the fact that costly infrastructure was created but not fully utilised due to a shortage of water and inadequate water management practices. The major cost item was canal lining - especially of the main canals. Excessive lining was carried out and costs could have been reduced significantly had selective lining been done. Also there was a cost over-run, which in dollar terms was 41%, some of which was due to the devaluation of the rupee against the dollar during project construction. The 'likely" scenario was re-calculated for two cost reductions, viz. 25% and 50%, which yield the following ERRs: Base -25% -50% costs costs Jayakwadi - (88,000 ha) 10% 14% 21% Majalgaon - (58,000 ha) -8% -7% -5% U. Penganga - (23,000 ha) -11% -10% -8%  61 I Kukadi - (20,000 ha) 3% 6% 9% Bhima - (28,000 ha) na na na Krishna- (10,800) 4% 5% 7% C. AGRICULTURAL AND FARM INCOME IMPACTS Agricultural Impact 22. Since the project was considerably altered at the time of restructuring, when four more subprojects were added to the two subprojects included in the original project, it is not meaningful to compare the agricultural impact estimated at appraisal to that at the time of the ICR. However, it can be concluded that the impact of the project on agricultural production has been much less than that estimated at appraisal since the area actually irrigated has averaged only 36% of that created during project implementation due to a scarcity of water. The situation in the future is not likely to change unless major changes are made by the IID at the river basin level in terms of optimising the allocation of water to dams, and by the ID staff, WUAs and farmers in terms of water management at the scheme level. Cropping Intensities 23. The cropping intensities estimated at appraisal and at the time of the ICR are shown below. SAR Jayakwadi and Majalgaon Present rainfed 100%-105% Future irrigated 175% ICR Jayakwadi/ U.Penganga Kukadi Bhima Krishna Majalgaon Present rainfed 93%-99% 67% 100% 100% 100% Future irrigated 175% 124% 159% 155% 157%0l 24. In the Jayakwadi and Majalgaon subprojects, whilst the rainfed cropping intensity is estimated to be slightly lower at project implementation end than it was at appraisal, the future irrigated cropping intensity estimates remain unchanged. For the additional subprojects irrigated cropping intensities are all estimated to be lower than in the Jayakwadi and Majalgaon subprojects due less experience of farmers in irrigated agriculture.  62 25. It was considered by the ICR nission that full irrigation potential in pre-project rainfed areas would be reached in 7 years rather than the more conservative 12 years assumed at appraisal. The main reasons for this faster switch from rainfed to irrigated farming are: (i) the increasing number of private dugwells in the project command areas and the impact this has had on expanding the knowledge base of farmers of irrigated farming since appraisal in the project command areas; and (iii) the reasonably active irrigation extension in the area, stimulated in the most recent years through direct project interventions. Farmers' Incomes 26. SAR. Average farm incomes1 for a 4.5 hectare farm calculated in the SAR under rainfed (without-project) and irrigated (with-project) conditions are summarised below. Full details, including the crop budgets and cropping patterns for each of the subprojects are contained in Appendix 2. Net Farm Income (1997 financial prices) Without Project With Project Change (Rs) (Rs) (%) Jayakwadi 23,020 85,720 272 Majalgaon 11,283 115,774 926 27. ICR re-evaluation. Farmers' incomes recalculated by the ICR mission for a typical 4.5 hectare farm are tabulated below for each of the subprojects. Net farm incomes are compared under present rainfed conditions to those expected under irrigation at full development. Net Farmn Income (1997 Financial Prices) Present Rainfed Future Irrigated Change (Rs) (Rs) (%) Jayakwadi 12,592 58,684 366 Majalgaon 11,922 69,271 481 U. Penganga 6,575 57,119 769 Kukadi 8,218 52,157 535 Bhima 10,260 49,233 380 Krishna 16,653 78,455 371 28. For the Jayakwadi subproject, the re-estimated farm incomes under both rainfed and irrigated conditions are lower than were estimated at appraisal. In the case of Majalgaon, the re- estimated net farm income under rainfed conditions is almost equal to that estimated at appraisal, although the re-estimated net farm income under irrigated conditions is only slightly more than half that 1 Incomes are averages weighted by the areas of the different subproject segments analysed in the SAR. Rupee values inflated to first quarter 1997 prices using the WPI index (Table 1).  63 estimated at appraisal. Comparing the estimated changes in farm incomes as a result of the project, the change is now estimated to be considerably higher in Jayakwadi (366% compared to 272%) but much lower in Majalgaon (481% compared to 926%). Nevertheless, the impact of providing irrigation to farmers is still estimated to provide a substantial lift in farmers' incomes. It should be stressed that these changes in farmers' incomes only apply to a limited number of farmers in the project-affected command areas - probably less than 40% of all farmers. For the farmers who have not received canal water, or additional well water from groundwater recharging, the project has not had any impact on their incomes.  64 INDIA: Maharashtra Composite Irrigation Project III Implementation Completion Report Appendix 2: Economic and Financial Analysis Table 1: Wholesale Price Indices and Inflators for India Fiscal Year (a) WPI Inflators 1997Q1=100(b) 1997Q1=1 1985/86 38.27 2.61 1986/87 43.56 2.30 1987188 45.43 ___ 2.20 1988/89 48.92 2.04 1989/90 53.08 1.88 1990/91 58.67 1.70 1991/92 65.90 1.52 1992/93 69.81 _ 1.43 1993/94 75.51 _ 1.32 1994/95 83.78 _ 1.19 1995/96 91.40 1.09 1996/97 | 94.34 1.06 1997Q1 . _ 100.00 1.00 (a) Fiscal year WPI = average of Q2,Q3,Q4 and Ql _ (b) Source: International Finacial Statistics, IMF, various issues  .8dmso b - - - I- -~~~~~~~~~~~~~~~~~~~~~~~~~~a i 0040 d =dll I - pANTY (1) _ _ iEI 13618 m GlumS 12 S SUGA 16N DAO) 90 CANE PRAECTED Y A 117 PRIC 2_ h Ut5. T 2566 60340 140 0 047 4 i i0 797 O 120 3X 060 136 40 Ii 5Z 40 bdlbsIIOIUOdsga,S 7 i 56' 118 I111 It 116 7 I III _ = I_ b csnstaedl dIS" doomf f _ 5SI 71201 14167 *io01 510478 11154 5 250 75 44934 0 16314 l?4t OUAUTYUADASTMENT - 0 #0 -,O 00 *0600 000 000 0 0 o 7D o 35 1000 c 1000 1 t000 K MARK5ET ELVA4T 24 12 701 1103B 4020 161S30 1U04 02 43 t57 27 6 o n -743 kasmaunha _ USSUtT 5000 10000 00 o 0 00 250 0 50 00 .o000 1000 50 00 5 00 1000 CIF* MN PORT USt 20412 012701 11763 15620 36530 145 02 17323 257 27 21095 23314 16743 EXC54AIGE RATE t4 RIADSI 5 3560 150 30 2 356 35 60 15 60 3 60 356 0x: CIF IDIAN POfi AsUT 1041062 260076 6 150 24 16303 647 4822 6 f o040 5 0 _ 62W 46 1106 4 Pod RsT 261n 77 226s 157 6 14000 -121512 11708 15 I7 228 1577 - 46 14102 Wemas Rs/Mt - 150 20000 20000 20000 24000 20 -200 - 2500W 10000 1000 0 IOO hiU ano t20 2W 120W 1200W tlO0 W 20 120 00 1500Isw 2 00 12000 120 O t200W 4_ased so 8 tlW2 f f 2 W 5 0 3s h00ii dhd I s ff3542 075 700 0170 P8 = 07 S 105 p d"o % *2~~~~~~~~~~5W -200 W tO00 -100 Woo 050 eo 1W O t WWIO VA ufd co"e -- R&lT 25WW _ OLESALE VALUE Rmat ff7b4 M12521 50006 tOS.60 5e 55 s5 Sf 5t 5 f 1b 1 i1 _ FARWGATE PstfCE R";tT 47t U tW5026 St Sf 0 5n5 5025 tf 7 *t 072 SS Ot1704 _ 67t 420 5 = ECONOSC FAXK>TlE PtUCE