Ceylon - Lift Irrigation Project

R'E -7URN 'TO U1r RESTRICTED Dnn oESK rILE WUWIJ Report No. TO-635a v;IITHIN ON E W 2K This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION LIFT IRRIGATION PROJECT CEYLON May 9, 1968 Projects Department  CURRENCY EQUIVALENTS US$1. 00 = Ceylon Rupee (Rs) 5.95 Rs 1 US$0. 17 Rs 1, 000, 000 = US$167,000 WE IZHTS AND MEASURES - BRITISH SYSTEM acres = 0.404 ha inches 2. 54 cm feet = 0. 3048 m cwt = 112 lb =3 50.9 kg 3 acre feet = 43, 560 ft - 1233.48 m I ton 2, 240 lb  CEYLON LIFT IRRIGATION PROJECT TABLE OF CONTENTS Page No. SUMMARY .... . . . *. . I. INTRODUCTION ..................... . 1 II. BACKGROUND . ..................... . 1 III. THE PROJECTAREA . . . . . . . . . 2 General . . ..................................... 2 Climiate . . . .............................a........ 3 Soils and Topography . . . . . . . . . . 3. . . . 2 Farm Size and land Tenure . . . . . . . . ..... 3 Agricultural Production . . . . . . . . . . . . . Marketing and Transportation . . . . . . . . . . 4 IV* THE PROJECT . . . . . . . . . . . . *. . . . . . . | a Proposed Works . . . o . . . .. ....... . . Water Supply . . . . . . a 5 Status of Engineering . . . . . a. . .. . . .. .* . 5 Cost Estimates . . . . . . . . . V . . . . . . . . 6 Financing . . . . . . . . . . . . . . . . . . . * * 6 Procurement . . . . . . . . . . . . . . . . a . . . 7 V. AGRICULTURAL DEVELO P M m T............a. 7 VI. ORGANIZATION AND MANAGEMENT . . .. . . . . . . . ... 8 Construction . . . . . , . . . . . . . a. . . . . 8 Operation and Maintenance a . . .... .. 8 Land Development . . . . . . . . . . . . . 9 Credit and Extension Services...... . . . .. 9 Auditing of Accounts . . . . ........... 9 VII. FINANCIAL RESULTS . . . . . . . . . . . . . . . . . . . 10 Operation and Maintenance Costs . . . . . . . . . . 10 Water Charges . . . . . . . . . . . . . . . . . . . 10 Benefits to Farmers . . . . . . . . . . . . . . . . 11 VIII.BENEFITS AND JUSTIFICATION . . . . . . . . . . . . . . 11 IX. CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . 12 This report is based on the findings of a mission in September 1967 to Ceylon composed of Messrs. Douglass, Chang and Sonley (of the Bank) and Mr. Boumendil (FAO). Mr. Golan of the Bank also contributed materially to its preparation.  XNNEXES 1. Imports of Chillies and Onio~ns 1955 - 1966 2 Soils 3. Development Schedule 4. Description of Works 5. Water Supply 6. Estimated Operation and Maintenance Costs 7, Projected Farm Income e Economic Rate of Return MAP Lift Irrigation Project Schemes Location  CEYLON LIFT IRRIGATION PROJECT SUMMARY i. The Government of Ceylon has requested an IDA credit of US$ 2.0 million to assist in financing the development of a low lift pump irrigation project to serve some 6,500 ac in four different areas in the dry zone of Ceylon. Of the total project area, about 6,100 ac would be on existing farms and the balance of 400 ac on jungle lands which would be cleared. ii. Water would be supplied to individual holdings in irrigation blocks ranging in size from 50 to 250 ac by pumping from existing gravity irrigation canals serving paddy fields to elevations varying between 15 and 50 ft above the canals. Land leveling would be carried out on all project lands. Crops to be produced on the project would be primarily chillies and onions which are currently being imported into Ceylon. iii. The estimated cost of the project is Rs 19.6 million, US$ 3.3 million equivalent, of which US$ 1.3 million would be in foreign exchange. The proposed IDA credit of US$ 2.0 million, about 60 percent of the total estimated cost, wculd be used to finance imports of equipment and supplies and a portion of the local expenditures to be incurred in constructing the project. iv. The Irrigation Department of the Ministry of Land, Irrigation and Power would be responsible for the design, construction and operation and maintenance of the irrigation facilities. Land leveling would be the re- sponsibility of the Lands Department of the same Ministry. All works would be performed by force account with the necessary imported equipment and materials being procured under international competitive bidding. Participating farmers would pay a water charge sufficient to cover all annual operations and maintenance cost and replacement of pumps. v. At maximum development, the incremental net value of production would be about Rs 9.4 million. The rate of return to the economy would exceed 25 percent. vi. The project is technically sound and economically advantageous to Ceylon and is suitable for an IDA credit of US$ 2.0 million. The borrower would be the Government of Ceylon.  CEYION LIFT IRRIGATION PROJECT I. INTRODUCTION 1.01 The Government of Ceylon has requested an IDA Credit of US$ 2.0 million to assist in financing the development of low lift pump irrigation from existing canals to serve 6,500 ac in four different areas in the dry zone of Ceylon. Of the areas selected, 6,100 ac are on the highland house lots of existing colonist schemes and 00 ac are now in jungle which would be cleared and developed for settlement by youths. The colonists are farmers who have been settled on crown lands in the dry zone under a Government plan aimed at development of irrigated agriculture. Agricultural production on the house lots is restricted by lack of irrigation. The settlement of youths is a new Governmental program introduced in 1965 under which the Government hopes to settle educated unemployed youths in the 17-21 age group on two-acre irrigated plots. Crops to be raised on the project would be primarily chillies and onions, which are currently imported in large quantities into Ceylon. The proposed lift irrigation project would be a part of the Government's plan to expand the production of chillies and onions and other subsidiary food crops under irrigation. 1.02 An FAO mission visited Ceylon in June and July 1966 to review the irrigation program of that country and, while there, made suggestions to the Government on projects they considered worthwhile. This report is based on materials and reportsprepared jointly by the Ministry of Land, Irrigation and Power, and the Ministry of Food and Agriculture of the Government of Ceylon and on findings of an appraisal mission which visited Ceylon in September 1967. Members of the mission were Messrs. J.C. Douglass, H.T. Chang, L.T. Sonley and H. Boumendil (FAO). Mr. A. Golan contributed materially to the preparation of this report. II. BACKGROUND 2.01 Agricultural production in Ceylon represents about 34 percent of the gross domestic product and employs over half of the labor force. Tea, rubber and coconut make up more than 90 percent of the nation's exports. Although export volume of these commodities has been increasing in recent years, the decline of prices has reduced foreign exchange earnings. 2.02 To help improve the foreign exchange position, the Government has adopted a two-pronged policy in the field of agriculture. First, diversi- fication of the export sector, coupled with increased efficiency. Second, the attainment of self-sufficiency in food, particularly rice, subsidiary food crops, dairy and meat products and fish, at the earliest possible date. The proposed lift irrigation project would be part of an on-going Government program aimed at increasing the production of subsidiary food crops under which some 40,000 ac devoted to chillies and onions are expected to be pro- vided with irrigation during the next five years. 2.03 Chillies and onions, the main crops to be produced on the proposed project, are staple commodities in the Ceylonese diet. Despite an active  - 2 - demand and rising prices in recent years, domestic production has been limited because chillies and onions can only be grown economically under irrigation in the highland areas of the dry zone. The lack of irrigation facilities has been a serious constraint on the expansion of production. 2.04 Under these circumstances, Ceylon has relied upon imports to supple. ment domestic production. Thus, between 1955 and 1966, annual imports of dried chillies have increased from about Rs 27 million to Rs 48 million. Imports of onions include two varieties, red and Bombay, with the bulk of imports being of the Bombay variety. Total imports of onions into Ceylon rose from Rs 9 million in 1955 to Rs 20 million in 1966. Further details are given in Annex 1. III. THE PROJECT AREA General 3.01 The proposed project lands would consist of four non-contiguous areas in the dry zone of Ceylon, where colonist paddy irrigation schemes have been in operation for several years (see Map). Three criteria were used in selecting the areas: availability of water; proximity to existing irrigation canals; and suitability of the soils for the production of subsidiary food crops. All these areas are above the existing gravity irrigation canals. Each of the four schemes are made up of a number of separate blocks varying in size from 100 to 500 ac of land, of which from 50 to 250 ac would be irrig- ated by pumping out of the canals. The unit area to be irrigated under the project within each block is one acre in the case of colonists and two acres in the youth settlement scheme. Net acreage to be developed at each scheme would be as follows: Scheme Net Irrigated Area (ac) Vavunikulam 500 Mahakandarawa 1.,000 Rajangana 3,500 Polonnaruwa 1,500 Total 6,500 3.02 About 6,100 ac of the proposed project lands would be on four colonists' schemes and 400 ac on Polonnaruwa would be for youth settlement. Under the colonist schemes, each family is allotted about five acres by the Government. Three acres are devoted to paddy cultivation under gravity irrigation and two acres are on lands above the irrigation canals where the colonists have their homes and produce subsidiary crops under dry farming conditions. Although the colonists on these schemeshave long association with paddy irrigation, they have noprevious experience in producing subsidiary food crops under irrigation. In most instances, the colonists receive only a limited return from their paddy fields and are unable to fully develop their dry land house lots due to lack of irrigation. The proposed project would enable the colonist to supplement his income from paddy cultivation by growing chillies and onions on the one acre of his dry land lot to be provided with irrigation. 3.03 The youth settlement scheme would be part of a Government program started in 1965 under which the Government hopes to provide employment opportunity in agriculture to unemployed educated single youths in the 17-21 age group. These schemes, which are largely untried and mainly experimental,  - 3 - contain a large risk element. However, if proven successful, they would contribute to solving Ceylon's unemployment problems. The Association has agreed to 400 ac of jungle land adjacent to the Polonnaruwa colonist scheme being included as a first stage in the project. If this settlement turns out to be a success, other youth settlement areas would be considered for inclusion in possible subsequent stages. Climate 3.04 Ceylon is subject to the monsoon shift in wind direction with the prevailing winds coming from the southwvest during the dry (yala) season from May to September, and from the northeast during the wet (maha) season from October to April. The wet zone of Ceylon is the southwestern part of the island where precipitation occurs during the southwest monsoon as well as during the northeast. The dry zone, where the lift irrigation project lies, is on the north and east portion of the island and is in the rain shadow of the mountains during the southwest monsoon and consequently receives about 70 percent of its precipitation during the northeast monsoon. Annual rain- fall varies from 55 in to 74 in on the four different project areas. Because of rainfall distribution, irrigation would be most intensively used in the dry season, May to September. However, irrigation would be used during the wet season to supplement rainfall and ensure proper soil moisture conditions for crop cultivation. 3.05 The climate in the project areas is tropical with average monthly temperatures ranging from a minimum of 731F to a maximum of 880F. Average daily sunshine varies from about 6 hours October through December to 9 hours in April and May. Average number of days per month with precipitation varies from 3 in June, July and August to 17 in November. Soils and Topography 3.06 Soil survey and land classification show that the soils of the four areas selected have good surface and subsurface drainage characteristics and are suitable for irrigated cultivation of chillies, onions and a wide range of field crops. The soils mostly have medium to good depth and moderate water holding capacity. Further description of soils is given in Annex 2. 3.07 Although the four areas are widely scattered throughout the dry zone, their topography is very similar. All areas consist of gently undu- lating uplands ranging from 100 to 400 ft above sea level, with cross slopes of up to five percent. Local farmers adapt to the slopes by using traditional methods of small basin irrigation for even spreading of water and erosion control. With land leveling, furrow or corrugated irrigation could be practiced. Farm Size and Land Tenure 3.08 Each of the colonists occupies approximately five acres consisting of three acres of paddy land with gravity irrigation in the valley bottom and a two-acre dry-land house lot on the adjacent valley slope. One acre of the house lot would be included in the project for lift irrigation to grow chillies and onions. After clearing the jungle in the youth settlement area, each youth would be assigned two acres of irrigated land in addition to one acre of unirrigated land in a common area devoted to housing. 3.09 All the project areas are on Crown Lands presently owned by the Gov- ernment and under the terms of alienation there is no possibility of  - h - fragmentation of holdings. The colonists pay a nominal land rent and enjoy a secure tenure arrangement. Steps are under way to effect transfer of land title from the Government to the individual allottees. Similar arrangements would prevail on the youth settlement. Agricultural Production 3.10 On the homestead sites of the colonist schemes, some coconut, mango, lime, jak, or banana trees are grown. In the 6,100 ac earmarked for the project on these sites, the colonists presently produce, during the northeast monsoon, wet season, some rainfed crops for domestic consumption such as hill paddy, maize, cowpea, cassava and vegetables. The actual area under cultivation in any given year varies according to weather expectations, but due to absence of irrigation, yields are generally extremely low and for all prac- tical purposes, total production is negligible. The 400 ac selected for the youth scheme is presently jungle or reverting to natural cover after having been used for chena (shifting) cultivation. Marketing and Transportation 3.11 Key agricultural products in Ceylon, including chillies and onions, are marketed under a guaranteed price scheme (GPS). Under this system, the Government announces periodically the prices at which it stands ready to buy various crops. Farmers are not compelled, however, to sell their produce through the GPS and can sell on the free market where prices are often higher than the guaranteed price. Thus, Government purchases of chillies in recent years represent only a small fraction of local production and in the case of onions roughly one-third of production has been moving through the GPS (see para 5.04). The Government maintains purchasing stations at points convenient to the project areas. 3.12 The project areas are served by a well-developed network of all- weather roads and are also close to railway lines. Adequate trucking services are available throughout the project areas and could easily handle the expected increase in production. IV. TIHE PROJECT 4.01 The project proposed for IDA financing would be part of a Government program aimed at increasing domestic production of chillies and onions. It would include: procurement of pumps and other equipment; installation of pumps; construction of an irrigation system to serve about 6,500 ac; construction of 200 cottages and 400 ac of jungle clearing in the youth settlement area; land leveling over the entire area; enployment of an agronorist to advise on the irrigated culture of chillies and onions; and operation and maintenance for the initial four years while the project is being established. Develop- ment of the project, including settlement on the youth scheme, would be com- pleted within four years (see Annex 3). Proposed Works 4.02 Irrigation and Drainage. On each of the four areas, several inde- pendent irrigation blocks would be developed ranging in size from 50 to 250 ac. Water would be pumped from existing gravity irrigation canals serving  -5 - paddy fields to elevations varying between 15 to 50 ft above the canals. A small pumping station equipped with one or more single stage centrifugal pumps driven by a diesel engine would be constructed at each block. Pumps would vary in size from four to eight inches and the size and number of pumps to be installed at each block would depend upon the area to be served. The dis- charge lines would be of rigid polyvinyl chloride (P.V.C.) emptying into a concrete-lined forebay on the high point of the block. From this point, lined canals would deliver the water to each land holding with a turnout to be provided at the high point of each holding. Lining would generally be of concrete cast in place, although bricks, either of cement mortar or burned clay, would be used in areas where they are found to be more economical. Surface drainage would be provided by excavating small open channels to remove excess water. Subsurface drainage is not considered necessary. A detailed description of the works is presented in Annex 4. 4.03 Land Development. Land leveling and grading would be carried out over the entire project area. In addition, mechanized jungle clearing would be carried out on the 400 ac youth settlement scheme along with the construc- tion of 200 cottages for the youths. Water Supply h.04 Irrigation water would come from existing storage dams. The water is of good to excellent quality in each of the project areas for use on the crops proposed. Water requirements, supply and quality are further discussed in Annex 5. In an average year, the existing storage facilities could meet the irrigation requirements of the proposed lift areas during the wet season (October - April) without impinging upon paddy irrigation. There would be, however, ccmpetition over water uses during the dry season (May - September) when water supply is normally limited to that carried over in storage in the reservoirs from the wet season. Except for the Polonnaruwa Scheme where the storage capacity is sufficient to allow year round paddy cultivation on the entire area, water supply on the three other schemes generally dictates a reduction in paddy acreage from about 25,000 ac in the wet season to 11,000 ac during the dry season. The introduction of the lift irrigation project would necessitate a further reduction in dry season paddy acreage. Water oonsump- tive use calculations indicate a necessity to reduce the paddy area of 11,000 ac by about 800 ac in order to ensure adequate water supply for the 6,500 ac of the lift irrigation project. Such a reduction would represent only a small fraction of the total paddy area on the schemes and would be highly profitable since returns from an acre of chillies and onions would be at least four times greater than those from paddy. 4.05 At the beginning of the dry season, the Irrigation Department makes an assessment of the water available in the reservoirs and informs the Govern- ment Agent on the extent of paddy lands which could be provided with irrigation on each scheme. The Government Agent in turn informs a Cultivation Committee composed of colonists and the Committee decides what proportion of each holding would be irrigated. Water for the lift irrigation project would be pumped out of the canals serving the paddy fields and in order to ensure that adequate water would be available for the project, assurances were nbtained from the GT.-rnr.cnt that it would guarantee the priority of water for lift irrigation. Status of Engineering 4.06 Planning and preparation of the feasibility study for the project was performed by the Technical Service unit of the Department of Irrigation,  - 6 - with assistance from the Ministry of Food and Agriculture. Detailed designs for the irrigation and drainage works have been prepared by the Irrigation Department for about 6,000 ac in various colonist and youth schemes throughout the dry zone. Much of this work was done in the project areas and the work is considered adequate as a basis for cost estimate projections. Detailed designs for the balance of the project areas would be prepared by the Irriga- tion Department, which is competent to carry out the work. Cost Estimates 4.07 Project cost estimates are based on detailed designs prepared for 6,000 ac of lift irrigation schemes in the dry zone. Unit prices are based on costs experienced to date on similar work in Ceylon and the actual develop- ment of about 1,000 ac of lift irrigation. Contingencies of 20 percent have been added for unforeseen expenditures and possible price increases. The cost estimates also include adequate provisions for engineering and overhead and are considered reasonable. The cost estimates are summarized below: Local Foreign Total Costs Exchange Costs (US$'000 Equivalent) Pump Installation 160 450 610 Distribution System 620 285 905 Land Development 650 30 680 Housing for Youth Settlement 60 - 60 Vehicles and Tractors - 200 200 Contingencies 20% 300 195 495 Engineering, Administration and Agricultural Specialist 110 50 160 Operation and Maintenance during initial four years 120 70 190 TOTAL 2,020 1,280 3,300 Financing 4.08 The amount of the proposed credit would be US$ 2.0 million (Es 11.9 million), which is approximately 60 percent of the total cost. The propcsed credit would cover the estimated US$ 1.3 million foreign exchange cost of im- ported equipment, spare parts, materials and employment of an agricultural specialist. In addition, the credit would assist in financing part of the local expenditures to be incurred in constructing .nd opcrtting the project during the initial four years. Th& balance of cost, totaling Rs 7.7 million, would be met by budget allocations. The approximate expenditure schedule, including disbursement of the proposed IDA credit, would be as follows: Year 1st 2nd 3rd hth Total ---- US$t00O Equivalent---------- Government con- tribution 300 400 300 300 1,300 IDA credit hO0 700 500 400 2,000 TOTAL 700 1,100 55 700 3,300  - 7 - 4.09 Disbursements under the credit would be against the CIF cost of imported equipment, spare parts and materials and foreign exchange cost of an agricultural specialist. Disbursements would also be made on a per- centage basis against the local cost of installation of pumps, construction and maintenance of distribution system and land developrnt. The cost of these items is the equivalent of ""51.5 million and approximately L5 percent of this amount would be disbursed under the credit. In the event of increase in project costs, the percentage would be decreased to spread disbursement over the period of construction of the project. Any savings remaining in the credit account due to a decrease in project cost would be cancelled. Procurement 4.10 The scope of the project works is too small to attract foreign contractors and wcald be carried out as force account work by the Irrigation and Lands Departments of the Ministry of Land, Irrigation and Power. All imported equipment and materials for the project, however, would be procured on the basis of international competitive bidding. V. AGRICULTURAL DEVELOPMENT 5.01 The proposed lift irrigation project would provide an assured irrigation supply for the cultivation of chillies and onions on 6,500 ac. Each colonist would produce one acre of chillies during January-July and follow it with the production of red onions on one-third of an acre from July to September. The area to be planted to onions has been restricted to that which could be cultivated with family labor without resorting to hiring out- side labor. However, farmers wishing to expand their onion production could do so by employing seasonal labor. A similar pattern (two acres of chillies and two-thirds of an acre of onions) would be followed by the youths on their two-acre plots except that they would have to depend more heavily on hired labor which is expected to be readily available in the Polonnaruwqa area. 5.02 During the early years, irrigation would be by small basins, generally three by six feet for chillies and three by three feet for onions, but as farmers gain experience and the extension service agents have received proper training in irrigation techniques, furrow irrigation would be intro- duced. The use of furrow irrigation would reduce labor requirements and bring about a more efficient operation. Necessary agricultural inputs would be purchased by participating farmers through the existing farmrls cooperatives in the area which are well-equipped to provide such services. Produce would be sold through Government purchasing stations under the guaranteed price scheme (GPS) or through commercial outlets. 5.03 According to production projections of the Ministry of Agriculture and Food, about 38,000 ac would be planted to chillies in 1968. out of this total, about 33,000 ac would be under rainfed cultivation and 5,000 ac, mostly in Jaffna District, under irrigation. Anticipated production, however, would be largely marketed as green chillies. This production would only supply about ten percent of local demand for dried chillies thus necessitating large imports to supplement domestic production. The level of reeent imports would be equivalent to dried chillies production from some 40,000 ac of irrigated land. Imports of red onions, on the other hand, account for a much smaller fraction of domestic consumption (approximately 20 percent) and are usually necessary only during November-January when climatic conditions  - 8 - restrict local production. However, Ceylon does import large quantities of Bombay onions. Since red onions can be substituted for Bombay onions, any further increase in their production would enable a reduction in the imports of Bombay onions. 5.04 The precarious foreign exchange position of Ceylon in the mid- 1960's prompted Government to introduce measures to encourage domestic pro- duction and to reduce the imports of chillies and onions. To that end, GPS prices for dried chillies were increased in late 1964 from Rs 168 per cwt for Grade I and Rs 140 per cwt for Grade II, to Rs 252 and REs 196 respectively. These new prices have been in effect ever since. In the case of onions, the GPS price was changed from a fixed price of Rs 27 per cwt to a moving monthly average fluctuating between Rs 22 and Rs 35 to coincide with supply fluctuations on the market and to encourage off-season production. Imports at the same time were brought under close scrutiny and restricted. Follow- ing the introduction of these measures, prices on the free market have been rising steadily and are currently around Rs 312 per cwt for chillies and an average price of Rs 28 per cwt for red onions. 5.05 Although farmers have responded to the new prices by expanding production, imports are still large. Further expansion of production is restricted by the absence of the necessary irrigation facilities on lands suitable for the production of chillies and onions. 5.06 At maximum production, estimated production of dried chillies on the project would amount to 65,000 cwt, or roughly 19 percent of the aver- age 1963-66 imports, while the projected red onions production would be 220,000 cwt, or roughly twice the average imports during the period. How- ever, in terms of Bombay onions, for which the red onions can be substituted, the projected production would only amount to 19 percent of ixports. Thus, production of chillies and onions on the project would replace only a small portion of present imports and farmers should find a ready market for their produce in Ceylon. Demand for these products is expected to increase with population growth. VI. ORGANIZATION AND MANAGEMENT Construction 6.01 Responsibility for planning, design and construction of the irrig- ation and drainage works would rest with the Irrigation Department, an agency within the Ministry of Land, Irrigation and Power. The Irrigation Department, which is staffed with experienced personnel, and has had previous experience with similar works, would be competent to implement the project. Preparation of designs and overall supervision of the works would be done from the Department's headquarters in Colombo. Field supervision would be assigned to the Division Engineer within whose jurisdiction the specific project area lies and he in turn would assign a Resident Engineer to execute the work in the field. Operation and Maintenance 6.02 The colonist schemes are organized into cooperatives and the youth settlement scheme would also be organized along similar lines. It is the  - 9 - Government's intention to eventually turn over responsibility for the oper- ation and maintenance to these cooperatives. Until such time as this can be done, responsibility for operation and maintenance activities would rest with the Department of Irrigation, using its existing facilities established for the paddy schemes. Assurances were obtained from the Government that the Irrigation Department would operate and maintain the irrigation facilities until such time as they could safely be turned over to the cooperatives or other satisfactory organizations. Land Development 6.03 Land leveling and smoothing would be done by the Lands Department of the Ministry of Land, Irrigation and Power, with equipment to be purchased under the Credit. The Department would also carry out the mechanized jungle clearing on the youth settlement scheme. Land development works to be imple- mented under the project are small in scApe and relatively simple, and wnuld be within the c"mpetence of the Department. Credit and Extension Services 6.a4 Annual production credit requirements for the cultivation of chillies and onions are estimated at Rs 400 and Rs 800 per acre, respectively. Upon completion of project works in the fourth year, annual credit requirements would be around Rs 4.5 million. These loans would be granted to farmers in the project areas by the farmer's cooperatives, who in turn would receive their funds from the People's Bank. Loan terms would vary between nine and twelve percent per annum, with the lower rate applying te leans paid back before the date on which they are due. The cooperatives are well organized and would be able to handle all credit requirements under the project. Aasurances were obtained from the Government that the necessary production credit would be made available to farmers participating in the project. 6.05 Extensi#n services in the project areas would be provided by the Ministry of Agriculture through village agents supervising about 200 ac each; an Agricultural Instructor for every five village agents; and mne District Agricultural Officer in each of the project areas. Although the Department has adequate personnel to provide assistance to farmers in the project areas, most of them lack experience with irrigated chillies and onions. To strengthen the system, all village agents assigned to the project would receive an in-service training course at the Department's extension services institute at Perandeniya. Assurances were obtained from the Government that, within twelve menths after effective date of the credit, they will employ an agronomist with qualifications acceptable to the Association, to assist in the training of extension workers assigned to the project fer at least a two-year peried. The foreign exchange costs to be incurred in employing this specialist would be reimbursed out of the proposed credit. Auditing of Accounts 6.06 Ministerial departments participating in the project would maintain separate accounts for the project. Annual audits would be made by the Govern- ment's Auditor General and submitted to the Association. Auditing procedures are satisfactory.  - 10 - VII. FINANCIAL RESULTS Operation and Maintenance Costs 7.01 Estimates of operation and maintenance costs are based on actual expenditures incurred on the recently installed 1,000 ac of lift irrigation and include charges for personnel, fuel and lubricants, repairs, materials, a sinking fund for replacing the pumps and engines in the 15th year and contingencies. Annual operation and maintenance costs are estimated at Rs 135 (US$ 23) per acre. Further details are presented in Annex 6. For the 6,500 ac included in the project, the annual cost would be about Rs 0.9 million or US$ 150,000. Operation and maintenance cost estimates during the initial four years are as follows: Year 1st 2nd 3rd hth Total (in thousands of Rs) Cost - 162 380 610 1,152 From the fifth year on, the full annual cost of Rs 0.9 million is anticipated. Water Charges 7.02 Rates charged for water on existing irrigation schemes in Ceylon may include amortization of capital cost, as well as operation and maintenance costs. Only operation and maintenance charges are usually collected in exist- ing projects. The Irrigation Department certifies the average operation and maintenance costs for each individual scheme and the District Government Agent is responsible for collection of water charges. For the lift irrigation pro- ject, operation and maintenance expenses, including a charge to replace the pumps and engines as needed, should be paid by the irrigators on the project. This charge, estimated at Rs 135 per ac, is substantially higher than the Rs 10 per ac now normally charged on the gravity schemes. In view of the high benefits to be realized by participating farmers, the assessment of Rs 135 per ac appears reasonable. This charge may be somewhat high on the youth settle- ment scheme since the project would be the sole source of income for the youths and might, therefore, have to be reduced somewhat in the early years of the project. The existing legislation on water charges is complicated and requires agreement of a majority of the cultivators to the charges to be imiposed. The Government has recently issued temporary regulations which enable it to levy water charges without the prior consent of the cultivators. These regulations, however, must be renewed monthly and are only an interim arrangement until passage of legislation presently before Parliament which would give the Government complete power to assess and collect charges. The Government has agreed that by June 30, 1969, it will have either secured the agreement of a majority of the cultivators benefiting from the project to the proposed charges or will have acquired permanent powers to levy water charges without such agreement. It further agreed that water rates to be paid by farmers benefiting from the lift irrigation project would be gradually increased so that by the fifth year after completion of construction of each block, all operation, maintenance and pump and engine replacement costs (presently estimated at Rs 135 per ac) would be assessed to individual farmers and that these charges would be collected.  - II - Benefits to Farmers 7.03 Expected benefits to participating farmers would be substantial. Even when chillies and onion prices are projected on the basis of the 1963-66 average import price valued at the current exchange rate, net returns (gross value of production less costs of production) from the cultivation of one acre of chillies and one-third of an acre of onions by the colonists are expected to be about Rs 600 during the first year and Rs 1,200 by the fifth year. These prices are well below the prevailing average GPS prices of Rs 225 per cwt for Grade I and II dried chillies and the moving monthly average price of Rs 22-35 for red onions and the even higher free market prices (para 5.0b). When GPS prices are used, and these prices are likely to prevail in Ceylon at least until domestic production matches demand, the net return increase to Rs 1,100 and Rs 2,100 in first and fifth year respectively. These returns are after payment for all production costs and operation and main- tenance charges including a charge for pump and engine replacement, and are based on the use of family labor only. Amortization of other project costs is not deducted. Net income from the cultivation of one crop of paddy by com- parison is estimated to be Rs 300 per acre. Thus, a typical colonist culti- vating three acres of paddy during the wet season and 1.5 ac during the dry sea%,M would have a net annual income of about Rs 1,350. Additional income from the production of chillies and onions would represent a substantial increase in colonist's net earnings and should provide adequate incentive to them to participate in the project. Further details of projected farm income are presented in Annex 7. 7.04 Unlike the colonists who would rely exclusively on family labor, participants in the youth nettlement scheme would have to resort to hiring outside labor. This in turn would bring about a substantial increase in production costs and a corresponding reduction in net earnings. However, at the prevailing GPS prices, even with the higher production costs, annual net income in the fifth year from a two-acre plot on the youth settlement scheme would be about Rs 3,000. This level of income should provide sufficient incentive to attract and maintain the youths on the project. VIII. BENEFITS AND JUSTIFICATION 8.01 The prime benefits to be derived from the project would be diversi- fication of agricultural activities on the colonist schemes and a substantial increase in farm income. In addition, the project would contribute to Ceylon's balance of payments position by reducing import needs. At maximum production the project would enable the country to save about Rs 1T million (US$2.3 million annually in imports -based on 1963/66 average import prices valued at the current exchange rate). The project would also provide the experience on which to plan the development of subsequent stages. 8.02 At full agricultural development the annual gross value of pro- duction from project lands is expected to increase from the present negligi:bl level to around Rs 14a million per annum. These figures are based on chillie and onion prices corresponding to the average 1963-66 import prices valued at the current exchange rate. After deducting production costs (family labor used on the farm was valued at zero cost), the foregoing of paddy production on some 800 ac and annual operation and maintenance charges, the annual direct benefits to the economy at full development would be about Rs 9.5 million. Assuming a useful life of 30 years for all irrigation facilities except for purps and engines wqhich would require replacement after 15 years, the rate of ret.arn to the economy would exceed 25 percent (Annex 8).  - 12 - IX. CONCLUSIONS AND RECOMMENDATIONS 9.01 The lift irrigation project would be part of the Government pleai to expand the production of subsidiary food crops under irrigation in the dry zone of Ceylon. Experience to be gained on it would be used to plan subsequent development of lift irrigation. Upon completion, the project would provide a dependable water supply to about 6,100 ac on colonists' home sites which are presently being dry-farmed and bOO ac of youth settlement. Crops to be produced on the project would be dried chi]lies and red onions, two commodities which are currently being imported in large quantities. 9.02 The project is technically sound and economically advantageous to Ceylon. It is suitable for an IDA Credit of US$ 2.0 million. The borrower would be the Government of Ceylon. May 9, 1968  LIFT IRRIGATION PROJECT Im,jirs of Chillies and Onions 1955-1966 Ghilli|e D-T~ed) Onions (Onib B Volume Price Volume Price Volume Price Year _ TO0 - ct) TC-W-T (tooo UT Rs7EWitY _ _ _ cwt_7s t 1955 283 94.0 8 14.0 731 12.5 1956 273 86.2 50 15.3 679 17.9 1957 283 108.5 2 7.5 748 20.5 1958 285 76.4 12 17.0 1,350 13.0 1959 316 77.9 43 13.0 1,196 14.0 1960 345 106.0 203 16.0 1,242 15.0 1961 340 96.0 212 13.0 1,135 16.0 1962 380 95.6 166 15.0 1,405 12.3 1963 3L43 110.3 153 11.8 1,126 17.6 1964 425 109.5 110 25.5 1,2414 18.5 1965 278 112.0 130 15.5 1,142 17.0 1966 358 135.6 104 15.8 1,152 15.8 1955-66 Average 326 100.0 100 14.9 1,100 15.8 1963-66 Average 351 116.8 124 17.1 1,166 17.2  t.N Z, 2 LIFT IRPIGATION PROJECT Soils The lands of the four selected schemes, though scattered in the dry zone, are similar in general topographic characteristics. They are gently undulating uplands lying between 100 and OO ft above sea level wTith cross sLopes of up to five percent. The predominant soil type is reddish brown earth which is suitable for the cultivation of a wide range of crops, includi na chillies and onions, if irrigation is provided. Areas to be developed under the project would be delineated within lands of existing colonization schemes by conducting a seei-detailed soil ,urvey (one soil sanple for each 10 to 15 ac). Only suitable soils would be salected. As of September, 1967, a total of 3,400 ac had been surveyed in detail and about 80 percent of these lands were found suitable for the lift irrigation project. Other lands would be substituted for those found unsuit- able. The survey will be continued at a pace keeping ahead of the contemplatec construction schedule. The reddish brown earth soils in the project area are deep to moder- ately deep residual soils developed from parent rocks of various types of quiartzite, gneisses and granites. A typical profile shows sandy loam top soil in the first foot or so, sandy clay loam fo- the second foot and clay loan in t1ie third and fourth feet. Unweathered particles of quartz and fedlspar are often found at a depth of between 20 to 30 in. Because of the topography and profile characteristics, the soils generally have good surface and sub- surface drainage. The reddish brown earth of Ceylon generally has a cation exchange capacity of between 15 to 20 m.e. per 100 gm of soils, a base saturation of around 70 percent, an initial organic matter content of from two percent to five percent, a slightly acidic reaction, Ph being around six, and a field rapacity of about 1.5 to 2 in water per foot of soil. The loss of initial soil organic matter will be rapid under the 'ocal climatic conditions. Annual replenishment by application of cattle o;: green manure is recommended. Soils Ph should be checked regularl17 5trials should be made to test practicability of substituting urea or other I.eutral nitrogen fertilizers for ammonium sulfate as now prescribed by the Extension Service.  LIFT IRRIGATI7)l' PRq J:-;'T Development Schedule (Acres) NIame of Scheme lsty 2yid 2dyearye a3 r )th Leac r Fot d 1. Vavunikulam 200 200 100 - 50C 2. I'Iahakanadarawa 200 200 200 LOO 1,000 3. Hajangana WOO 600 1,000 1,500 3,500 b. Polonnaruwa bO0 600 IO0 100 1.,500 TOTAL (acres) 1,200 1,600 1,700 2,000 6,500  AX72EX h Page 1 LIFT IRRIGATION PROJECT Description of Project Irrigation Works Areas for the lift irrigation project would be selected from suit- able highlands above the paddy irrigation canals where the colonistsr honie;c are located. The housing areas are scattered throughout the paddy schemes and range in size from 100 to 500 ac. Colonists' plots consist of twvo-ac're units with a house situated at one end and the area to be irrigated at the other. Irrigation would thus be provided to contiguous two-acre plots (only one acre of each to be irrigated) arranged into irrigation blocks varying in size from 50 to 250 ac. Irrigation would be provided by a pump which would be installed adjacent to the main supply canals serving the paddy schemes. Water would be pumped from the supply canal to a forebay located on the high point of the block. A lined distribution system would deliver water from the forebay to each individual colonist. Pumps would be of three different sizes rated according to the diameter of the discharge line. The pumps would be of the single stage centrifugal type driven by a diesel engine. The pump and engine are mounted on a skid as a unit so they can be removed or exchanged conveniently. Ten percent of the required pumps would be purchased for standby use in case of breakdowns or need for heavy maintenance. The characteristics of the pumps are as follows: Size (Discharge Maximum (Di-charge MaximuLm Head Efficiency H.P. of Line) at Rated Head) (feet) (%) Engine Inches Imp g p.m. h 500 106 50-60 12 6 1,250 115 50-70 38 8 1,650 115 50-70 48 The difference in level between water in the supply canal and in the forebay would vary from block to block and would be between 15 and 60 ft. The dy%namic or pumping head would vary from 60 to 110 ft depending on the length of the discharge line. Pumping is planned for 16 hours a day during peak water use periods. The size of pump and the number to be installed at each block depends on the area to be irrigated in each block. Sufficient pump capacity would be installed so that 1 c.f.s. can be delivered to each 53 ac of irrigable land. The pumps would be installed in a pump house having a concrete floor and corrugated iron sides and roof. Pump discharge lines would be of rigid polyvinyl chloride plastic (PVC). Diameters of 4, 6 and 8 in are used to match the pumps. The PVC pipes were formerly imported but can now be fabricated locally using imported materials. Gate valves to control discharge and a water meter to measure discharge would be installed on each discharge line.  The pump discharge lines deliver water from the pump to a concretue Lined forebay which serves as a small regulating reservoir. The forebay is on the highest point of each block and water is distributed by gravity fron the forebay to the irrigable lands. Slide gates are used at the forebay to control discharge to the various canals leading to the lands. The canals would be lined with concrete cast in place or where bricks or concrete blocks are readily available, they may be used and grouted into place. A turnout would be provided to each irrigator. The drainage system would consist of open shallow surface drailns designed to remove excess rain and irrigation water. Land Development The colonist housing areas are now cleared. The 100 ac of youth scheme would be cleared of jungle growth. Land leveling and shaping would be done on all lands to adapt it ; surface irrigation. Housing Housing would be provided for the 200 youths who would occupy the !0o ac on the youth scheme. These houses would be similar to those already provided the colonists and represent a minimum type accommodation, Agricultural Specialist An agronomist knowledgeable in the irrigated culture of chillies and onions would be employed for at least two years to assist in training extension workers assigned to the project.  ANUEX 5 Page 1 LIFT IRRIGATION PtOJWECT Water Supply Water Requirements Water requirements have been estimated by use of the Blaney- Criddle consumptive use formula and checked by use of Thornthwaite's formula. The irrigation requirement,s as proposed by the Government and as recommended by the Associaticn aro given beloTw,heirrigation require- n