Senegal - Casamance Rice Project

RESTRICTED Report No. PA-77a 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 The report may not be published nor may it be quoted as representing their views.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 CASAMANCE RICE PROJECT SENEGAL April 19, 1971 Agriculture Projects Department  CURRENCY EQUIVALENTS US$ 1 - CFAF 277.71 CFAF 100 = US$0.36 CFAF 1 million - US$3,601 WEIGHTS AND MEASURES Metric System ABBREVIATIONS BCEAO - Central Bank of West African Countries BNDS = The National Development Bank of Senegal CCCE A French Financing Institute FED European Development Fund ILACO - A Dutch Consulting Firm IRAT - A French Agricultural Research Agency MRD - Ministry of Rural Development OCAS - Agricultural Marketing Agency ONCAD = Agency for the Supply of Agricultural Inputs and Cooperatives PWD = Public Works Department SATEC - A French Consulting Firm SODAICA - An Agency Responsible for Settlement Schemes in Sedhiou SISCOMA = A Local Machinery Manufacturing Firm USAID = United States Agency for International Development  SENEGAL CASAMANCE RICE PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ................................ i - ii 1. INTRODUCTION ... ..1... II. BACKGROUND ..... 2 General ..... 2 Agricultural Sector ..... 2 Rice Production ..... 2 Institutions ........ 3 III. THE PROJECT AREA ........ 4 General ........ 4 Rice Development Projects ........ 4 Climate, Soils and Topography ........ 4 Population ........ 4 Farm Size and Land Tenure ........ 5 Farming Systems ........ 5 Irrigation, Drainage and Swamp Rice .... .... 6 Communications ........ 6 Marketing, Credit and Storage ........ 6 Agricultural Research and Seed Production ........ 7 IV. THE PROJECT .................. 7 A. General Description. 7 B. Detailed Features . . 8 - Project Organization .................. 8 - Irrigation and Drainage Works . . 8 - Rice Mills and Storage Facilities 9 - Land Clearing and Crop Spraying Equipment .. 10 - Improvement of Roads .. 10 - Credit .. 11 - Ecology .. 11 This report is based on the findings of an appraisal mission which visited Senegal in November 1970, composed of Messrs. D.J. Parsons, A.J.H. Otten, A.A. Meimaris, and R. Rosseels (all of the Association). The mission was accompanied in Senegal by Mr. A. Delon of the FAO/IBRD Cooperative Program.  -2- Page No. V. COST ESTTMATES AND FINANCING ......................... 11 Cost Estimates .................................. 11 Financing ....................................... 13 Procurement and Contracts ....................... 15 Disbursement .................................... 15 Accounts and Audits ............................. 16 VI. ORGANIZATION AND MANAGEMENT .......................... 16 A. Project Organization and Staffing .... ...... 16 - Extension Services ..... ............. 17 B. Project Technical Operations .... ........... 17 - Staff Training ..... ................. 17 - Ox-drawn Equipment Program .... ...... 18 - Soil Conservation ..... .............. 18 C. Farmer's Selection, Cooperatives, Credit and Marketing .. ......... 18 - Project Cooperatives ..... ........... 18 - Agricultural Inputs and Credit ...... 18 VII. PRODUCTION, MARKET PROSPECTS, FARM INCOMES AND GOVERNMENT REVENUES .............................. 19 Production ...................................... 19 Market Prospects and Prices ..................... 20 Fertilizer Subsidies ............................ 21 Farmers' Benefits ............................... 22 Government Revenues ............................. 22 Recovery of Costs ............................... 22 VIII. BENEFITS AND JUSTIFICATION ............................ 23 IX. RECOMMENDATIONS ...................................... 24 ANNEXES 1. Existing Rice Development Projects in Casamance 2. Agriculture 3. Project Staffing and Operations 4. Project Organization 5. Irrigation and Drainage Works  -3- 6. Water Supply and Demand for Swamp Rice 7. Water Requirements for Rainfed Rice 8. Rice Mills 9. Labor Requirements 10. Road Improvement Program 11. Cost Estimates 12. Estimated Schedule of Disbursements 13. Crop Yields 14. Crop Production 15. Allocation of Proceeds from Rice Imports and Locally Produced Paddy and from Groundnut Exports 16. Farm Budgets 17. Cash Flow to Government 18. Calculation of Economic Rate of Return MAPS 1. Location Map 2. Project Areas 3. Road Improvement Program   SENEGAL CASAMANCE RICE PROJECT SUMMARY AND CONCLUSIONS i. This report appraises a project for expanding rainfed and swamp rice production in the Sedhiou District of the Casamance region of Senegal. The project consists of the strengthening of extension and credit services needed to expand the area under rainfed rice by 9,500 ha and, through the construction of necessary water control works, the area under swamp rice by 2,000 ha. About 5,000 farms with some 37,000 ha of rotationally cropped land would be involved. The project would include the installation of rice mills and storage needed to handle project production, and the improvement of roads and tracks in the project area. The project is based upon the experience obtained from seven pilot rice development schemes that are operating in the Casamance, financed by the Caisse Centrale of France (CCCE), the European Development Fund (FED) and USAID. ii. The economy of Senegal is very heavily dependent upon the groundnut crop, which accounts for about 75% of the country's total exports and, through levies and taxes, for about 10% of Government's current budget reve- nue. At the same time, Senegal imports an increasing amount of rice each year (170,000 tons in 1969), while local production remains virtually stag- nant. iii. The project would be carried out by a Project Organization estab- lished for this purpose within the Ministry of Rural Development. Experienced consultants would be employed for certain key posts, and their role would be both to direct certain project operations and to train Senegalese counterparts to take over from them. During the project development period the Project Organization would work closely with the Sedhiou District extension service so as to ensure a smooth take over of project operations by the latter once project development is complete. lv. Project costs are estimated at US$4.9 million during the project development period -- 1972 through 1976 -- including about US$2.2 million for extension services of which US$1.6 million is personnel costs; about US$1.1 million for incremental seasonal and medium-term credits to project participants; about US$600,000 for road improvements, and about US$350,000 for irrigation and drainage works and rice mills. A further US$1.34 million would be required in the period 1977 through 1981, to complete development, and this cost would be met by Government. An IDA credit of US$3.7 million is proposed which would finance approximately 75% of project costs during the period 1972-1976, representing an estimated foreign exchange component of US$2.1 million and US$1.6 million of local costs. The proposed IDA credit represents 59% of the overall 10-year project cost. The cash contribution of project farmers would be small, about 2% of project costs, since the bulk of their contribution would be labor and self-provided materials. Project farmers now receive very low cash incomes, and are unable to make a larger contribution.  - ii - v. All vehicles, land clearing, crop spraying, and rice milling ma- chinery, estimated to cost about US$250,000 would be procured through in- ternational competitive bidding. Ox-drawn equipment would be purchased locally as annual requirements would be small, and the equipment is either manufactured or assembled locally. Mills, buildings, stores and houses would be built by local contractors after competitive bidding. Such works would be small in cost and widely scattered, and would not attract foreign contractors. Contracts for road improvements would be treated in the same way. vi. The project would generate a net foreign exchange gain of about US$2.3 million a year at maturity, mainly from replacing imported with domestically grown rice but also from exports of groundnuts. The latter crop would be increased on project farms through additional land being brought under cultivation, the use of fertilizers, and better cultural practices. The economic rate of return from investment in the project is estimated at 18.5% vii. At maturity of the project, farmers' annual net cash incomes are expected to rise to between about US$400 and US$550; these are about four to five times current levels. viii. The project is suitable for an IDA credit of US$3.7 million, pro-- vided assurances are obtained and steps taken as set out in the recommenda- tions.  SENEGAL CASAMANCE RICE PROJECT I. INTRODUCTION 1.01 In December 1969, the Government of Senegal requested a credit for the production of rice in Casamance region. The project was identi- fied by the FAO/IBRT) Cooperative Program in February 1970 and subsequently prepared by the Program during July and August 1970. 1.02 Senegal's rice imports are increasing each year while local production is more or less stagnant. Consequently, rice development has high priority in the Government's third four-year plan. Rice growing is traditional in much of the Casamance region, where soils and rainfall are suitable. A number of pilot rice development schemes are operating in the area, and their results indicate that good yields can be obtained and that farmers are responsive to such schemes. The proposed project would be based on experienced gained under these schemes which have been developed with FED, USAID. and French assistance. 1.03 The project would be the third Bank Group operation in the agri- cultural sector in Senegal. In February 1969, a US$6.0 million IDA credit and US$3.5 million Bank loan were approved to help finance a groundnut and millet improvement program which had been started in 1964 with the assist- ance of the European Economic Community (EEC). Progress of this project has been unsatisfactory; groundnut production has fallen in the project area, due to a combination of factors: poor weather, doubtful quality of seeds, low yield response to fertilizers, low producer prices, and poor project administration and coordination. As a consequence of these developments, most farmers are heavily indebted and have lost confidence in Government policies. Measures have been taken to correct the situation; in August 1970, cash payments on delivery of groundnuts by farmers were reintroduced. More recently, in early April, Government announced an increase in the producer price for groundnuts and is now reorganizing project administration. Although it is too early to assess the impact of these measures, they are steps in the right direction. In the project described in this report, account has been taken of the problems whlich have arisen in the first Bank Group operation and measures incorporated to ensure that project extension, credit and marketing services would operate efficiently although the two latter would be those involved in the groundnut and millet program. Impor- tantly, due to its location the project would not be subject to the vagaries of weather that have beset the groundnut program. In September 1970 IDA appraised a small settlement project, its second agricultural operation, the Terres Neuves Resettlement Project, this project is now being processed. 1.04 This report is based on the findings of an appraisal mission during November 1970, composed of Mlessrs. D. J. Parsons, A.J.H. Otten, A.A. Meimaris and R. Rosseels. The mission was assisted in Senegal by Mr. A. Delon (FAO/ IBRD Cooperative Program), co-author of the project preparation report.  - 2 - II. BACKGROUND General 2.01 The Republic 2f Senegal, on the western coast of Africa, has a land area of 197,000 km and a population of 3.7 million. Population growth is around 2.2% annually, ranging from less than 1% in rural areas to about 6% in the larger towns, reflecting internal migration. With manufacturing and construction contributing about 17% of Gross Domestic Product (GDP), Senegal has a relatively advanced industrial sector compared to other West African countries. The internal market is limited, however, and industrial production has not been able to expand in recent years. Agriculture is still the mainstay of the economy, producing one-third of GDP and occupying some 75% of the total labor force. There has been a decline in recent years in the production of groundnuts, the country's main cash crop, and with stagnating production in the industrial sector, per capita GDP, if increasing at all, is doing so very slowly. Agricultural Sector 2.02 The main physical limitation on agricultural production is rainfall. In the north, rainfall is highly erratic and averages around 400 mm annually, allowing cropping only where irrigation is practiced. Towards the south, rainfall is more regular, reaching a maximum of about 1,500 mm near the Guinea border. 2.03 Only 15% of the total land area of Senegal is cultivated, mostly in a zone within 200 miles from the coast and particularly in the hinterland of Dakar, the so-called "Groundnut Basin". Farms vary between 5 and 15-ha, according to family size. Groundnuts account for about 50% of the total value of agricultural production and the bulk of farmers' monetary income. They also account for almost 75% of Senegal's exports and -- through indirect levies and export taxes -- for 10% of Government's current budget revenue. Groundnut production declined from 840,000 tons marketed in 1967/68 to an estimated marketable surplus of some 400,000 tons for the 1970/71 season. This has severely strained the country's balance of payments position, and has raised questions about the efficiency of Government institutions dealing with agricultural production (see para 2.06). Government's development strategy is aimed at crop diversification, in particular increases in rice and cotton production, and the planned development of unexploited land of good agricultural potential. The first step in this latter direction is the Project. Rice Production 2.04 In order to reduce Senegal's excessive dependence on groundnuts and to save foreign exchange, Government places high priority on rice produc- tion. After millet, rice has become the most important foodgrain. Rice consumption has increased steadily and reached about 245,000 tons in 1969, or 65 kg per capita, which is high compared to other African countries. On the other hand, domestic production of rice has been stagnant for some time  - 3 - at about 75,000 tons. The deficit has been covered by imports, which reached a level of 170,000 tons in 1969, making Senegal the biggest rice importing country in West Africa. 2.05 About 80% of domestically produced rice is grown in the Casamance Region of southern Senegal, where it is traditionally cultivated in swampy valleys as a subsistence crop. Most of the remaining 20% of domestic rice production comes from the Delta Region of the Senegal River in the north, where embankments have been constructed and the protected areas are being irrigated, settled and developed by state companies. Institutions 2.06 Government activity in the agricultural sector is extensive. Since independence in 1960, Government has created about 1,800 cooperatives mainly for groundnut farmers, through which it channels provisions for credit, farm inputs, and extension services, and monopolizes groundnut marketing. Overall responsibility for agricultural development in Senegal rests with the Ministry of Rural Development (MRD), but numerous autonomous agencies are operating in the fields of production, extension and marketing for specific crops or in specific areas over which the Ministry has very little direct control. Poor organization and high operating costs of most of these agencies, coupled with recurring changes in internal pricing and subsidy policies, have lowered farmers' confidence and have led to serious disincen- tives for groundnut production. Two years of drought (1968 and 1970) have aggravated the problem and resulted in a considerable decline in output (see para 2.03). 2.07 In the case of rice, five autonomous state corporations are in charge of separate geographical areas with practically no coordination among them nor any common supervision. Four of these agencies are exclusively concerned with settlement schemes and the development of rice production in Senegal's Delta Region, whereas the fifth, the "Societe pour le Developpement Agricole et Industriel de la Casamance" (SODAICA), operates a settlement scheme in the Casamance where rainfed rice is produced in rotation with other crops. 2.08 While there are cases where the creation of autonomous state corporations are justified (settlement projects would be such), in many cases there are dangers in these autonomous agencies engaging in general ex- tension activity. Firstly, the coordination of national policy becomes difficult, and secondly, the corporations usually have priority in staff and finance. As a consequence, the corporations tend to operate in restricted areas, leaving the majority of farmers with inadequate assistance from a poorly staffed and financed national extension service. In other cases, individual farmers often receive advice from a number of different agencies and services which is often confusing. The need in Senegal is to upgrade the general standards of the national extension service, and the proposed project would attempt to do this.  - 4 - III. THE PROJECT AREA General 3.01 The project would be carried out in Sedhiou District in the Casamance region of Senegal (Map 1). Within Sedhiou District, the develop- ment of rice production would be concentrated in five separate areas (Map 2). Rice Development Projects 3.02 Seven pilot rice development schemes, started between 1967 and 1970, are in operation in the Casamance region. In each of them, the ap- proach has been to introduce higher yielding varieties of paddy, to improve cultivation methods and to promote the use of draft oxen by means of a field extension service. In addition, in the case of swamp rice, drainage im- provement works are being carried out. Together, these projects cover an area of about 3,000 ha of paddy (see Annex 1). Experience shows that the improvement of swamp rice does not require expensive civil works, that farm- ers respond well to advice on rainfed rice growing; that they readily adopt ox-drawn cultivation techniques; and that substantial yield increases can be obtained in a short time with efficient extension advice. Climate, Soils and Topography 3.03 Climate and soils are satisfactory for the efficient production of a wide range of crops. Climate is characterized by a single rainy season, from June to October, followed by a long dry season, from November to May. The mean annual rainfall varies from 1,800 mm in the coastal area to 1,000 mn in the northeast. In the project area, the mean annual rainfall is 1,387 mm at Sedhiou (from 30 years of records) with a probability of receiving at least 1,200 mm in four years out of five. Rain intensity is high, often over 120 mm per hour, and soil conservation measures are necessary. 3.04 The region is one of broad swampy valleys dividing a gently rolling countryside with plateau elevations not exceeding 50 m above sea level. Plateau soils are red or beige sandy soils suitable for rainfed rice, pro- vided planting is carried out at the correct time. The ochre soils found on the slopes are also suitable for rice provided soil conservation measures are carried out, but the grey soils on the swam? fringes are suitable for rice only where water table levels are high enough to supply the crop with moisture when rainfall is lacking. Swamp soils with their higher clay and organic matter contents are especially suitable for rice growing during the rains, or with irrigation. Importantly, continuous cropping with rice is possible on these soils. Population 3.05 Population of the Casamance totals about 460,000, of whom about 200,000 live in Sedhiou District where population density is moderate, aver- aging 27/km . The people live in villages, of which there are almost 800  - 5 - in the District. The average family comprises seven people equivalent to four adult workers. Farm Size and Land Tenure 3.06 Farm size is determined by the labor force available to the family, which on average cultivates about 4.0 ha, including about 0.4 ha of rice cultivated in the swamps by women; this is large enough to provide subsist- ence and a small cash income. Many farmers own cattle which are herded com- munally, and some have used draft oxen for many years. More are becoming interested in using draft animals and consequently are cultivating larger areas, between 6 and 10 ha annually, through the use of one or two pairs of oxen. 3.07 There is no individual ownership of land in Casamance. Land is not in short supply and its usufruct is allocated to families by the traditional authorities (see Annex 2, para 13). Farming Systems 3.08 Within the area farmed by the family, fields are cultivated for up to five years, after which fertility declines and they are allowed to revert to bush fallow for periods of between 2-10 years while an equivalent area of uncultivated land is opened up. In some areas of high population density where unallocated land is available only at some distance from the family holding, continuous cultivation persists on the same fields for up to 30 years. On such land soils deteriorate physically and even fertilizers are unable to generate satisfactory yields. 3.09 Within this system of cultivation, wghile the cropping period may vary considerably, cropping patterns are well defined. The men usually grow equal areas of groundnuts, bullrush millet, and sorghum on upland fields, while the women cultivate the rice grown in the swamps. Cassava and maize with some vegetables and fruits are grown in fields near the villages. Only one crop a year can be grown because of the short duration of the rainy season -- June to November. Food crop yields are low, averaging only 0.8 ton/ha of millet. Groundnut yields are moderately good, averaging 1.0 ton/ha of unshelled nuts. Further details of the agriculture of Casamance are given in Annex 2. 3.10 Swamp rice is grown on small plots of 0.1 to 0.2 ha. It is sown at the beginning of the rainy season and is submerged during flood periods (August-September), benefitting finally from the slowly receding flood waters during October-December. Because of the total absence of water control, yields vary widely. Long stem local varieties with a six-month growing season are grown, usually without fertilizers. Approximately one- half of the area is transplanted. In view of good soil fertility and water availability, substantial ihecreases in yields can be achieved with simple water control works and improved cultivation techniques.  - 6- Irrigation, Drainage and Swamp Rice 3.11 With the exception of a few small pilot projects established during 1969-1970 (see Annex 1), there has been no irrigation or drainage development in Sedhiou District. Under traditional practice, swamp rice is cultivated in the upper parts of small valleys with perennial or intermittent water flows; lower areas are avoided because of excessively deep water during floods and, in certain cases, the encroachment of saline waters from tidal rivers. There is no control of the water flowing in the valley, either to facilitate irrigation, drainage, or flood protection. Communications 3.12 Casamance is linked to Northern Senegal by the all-weather trans- Gambian road which crosses the Gambia River by means of ferries. Use of the road and ferries by Senegalese is governed by an agreement between Senegal and Gambia. Adequate all-weather gravel roads serve the area's main towns. Maintenance of these roads, for which the Department of Public Works (PWD) is responsible, is presently unsatisfactory but will be im- proved with the proceeds of a recently approved IDA credit (SE-198). How- ever, secondary roads and earth tracks, which serve most of the villages in the project area, are inadequate and badly maintained and are frequently impassable during the wet season; these would be improved under the pro- posed project. Marketing, Credit and Storage 3.13 Groundnuts are the only crop now marketed through official chan- nels in the area. Rice is sold on local markets in the Casamance, but the quantities are not more than 500 tons even in good rainfall years. Rice milling and storage facilities can handle 3,000 tons of rice annually and consequently are underutilized (see para 4.09). The demand for rice is met by some 9,000 tons of imported rice sold each year to wholesalers in Casamance by the Office de Commercialisation Agricole du Senegal (OCAS). 3.14 Short- and medium-term loans for farm inputs and machinery are made by the National Development Bank of Senegal (BNDS) through farmers' cooperatives. Such loans amounted to CFAF 43 million in Casamance in 1968/69, less than 10% of total BNDS lending to cooperatives in Senegal. At present loans are made largely for groundnut production and each cooperative's capacity to incur new loans is based on the value of its groundnut sales. 3.15 The present arrangements for providing credit are complex. BNDS' functions are limited to the supply of funds to the Office National de Coop- eration et d'Assistance au Developpement (ONCAD). ONCAD is responsible for buying and delivering to farmers inputs in line with cooperative require- ments, which are established through a census made by MRD about six months in advance of the planting season. ONCAD deducts repayments of credits from the proceeds obtained by the cooperatives by the sale of their members' groundnuts to ONCAD. Each cooperative handles the accounts of its members.  - 7 - The credit administration is clumsy, and while credit repayments are better than in other parts of Senegal (about 90% compared with a nationwide average of 75% in 1969), reorganization would be needed to cope with the consider- able expansion in credit needs which would result from the proposed rice development project, consequently, changes in organizational arrangements would have to be made to ensure the effective provision of credit (see paras 6.10 to 6.12). Agricultural Research and Seed Production 3.16 Agricultural research in Senegal is carried out on a commodity basis by various French agencies on long-term cost sharing contracts. In the project area, the Institut de Recherches Agronomiques Tropicales et des Cultures Vivrieres (IRAT) started to work on swamp rice in 1961 at its Sefa station, situated within a few miles of Sedhiou town. In 1966, the station began to concentrate on research into rainfed rice, and also started trials of irrigated rice in Ziguinchor District, adjacent to Sedhiou. The Sefa station works under the direction of IRAT's Senegal Research Head- quarters at Bambev, undertakes work on other food crops and groundnuts, and carries out rotational trials and work on farming systems applicable to the Casamance. 3.17 Improved seeds approved by the research institutes are multiplied by selected larger farmers under the supervision of MRD. Seed is repurchased from these selected farmers at a premium. Seed production programs in the project area are concerned mostly with groundnut seed, the aim being to provide each farmer with a new issue once in five years. Other crop seeds are multiplied on an ad hoc basis. An improved program for rice seed multiplication and distribution would be established under the project. IV. THE PROJECT A. General Description 4.01 The project would bring about the cultivation of 9,500 ha of rainfed rice, which would be grown mostly in rotation with groundnuts and food crops on about 32,000 ha of cultivated land by some 5,000 farm families. It would also involve, through provision of water control works, the improvement of about 2,000 ha of existing swamp rice land; and in addition the provision of necessary rice milling and storage facilities. The project would be completed in a period of ten years, but the bulk of development would be finished within five years. For the purpose of the disbursement of IDA funds the project development period is taken as 1972 through 1976. A longer disbursement period is considered undesirable in view of the small capital investment required post-1976 (see para 5.03). The project would consist of:  -8- (a) establishing a Project Organization within MRD reinforced by qualified and experienced specialists and provided with vehicles, housing, and offices. The Project Organization would be responsible for carrying out the project and providing extension services to project farmers; (b) constructing irrigation and drainage works for 2,000 ha of swamps; (c) constructing and operating 24 rice mills and associated storage; (d) clearing 9,500 ha of land, including procuring land clearing winches and crop sprayers for loan to project farmers; (e) improving project area roads; and (f) providing seasonal and medium-term credit to project farmers through co-operatives controlled by the Project Organization and arranging for marketing of project production. B. Detailed Features Project Organization 4.02 The Project Organization would be established in time to manage the project as from the beginning of 1972. A detailed description of the specialist services required is given in Annex 3. Organizational arrangements as a whole are described in Chapter 6 and Annex 4. A total of 15 houses and one office would be constructed for project staff, and 18 pickup trucks and small cars, and 14 motorcycles and 100 bicycles would be purchased to meet transportation needs. 4.03 The Project Organization would be established in Sedhiou and would consist principally of ten Senegalese professional officers with supporting staff, 12 technical agents and 100 field agents. In addition, four specialists, probably recruited from outside Senegal, would be employed to help operate the project in the initial stages and to train the Senegalese staff to take over responsibility for the project on a properly planned schedule (Annex 3). Irrigation and Drainage Works .04 The proposed works would cover about 1,000 ha of the 2,000 ha that would be improved or developed for swamp rice production, and would secure paitial control of the wet season natural flow. The remaining 1,000 ha -ould not need such works. Depending on topography, they would consist of  either the clearing and subsequent regulation of the natural drainageway with noncrete structures, or the construction of small diversion dams, canals and drainage ditches with regulators and distribution checks. It is assumed that about 500 ha would be served by simple drainage works with regulators, and the remainder with more complex works involving small dams and canals. The individual rice plots would be surrounded by low dikes and spot land levelling would be carried out as needed. 4.05 The works would be constructed by force account with the Project Organization bearing the cost of materials, skilled labor and hand tools. The farmers would supply all labor for earthworks free of charge. This system has been used successfully under ongoing schemes in Sedhiou District. The works would be carried out over the five-year project development period at a rate of about 200 ha annually. Details, design criteria, and costs are given at Annex 5. 4.06 A further refinement in the few valleys with perennial flows could be the construction of irrigation works capable of permitting cultivation of a second rice crop during the dry season. However, Government is pre- sently giving priority to establishing banana projects 1/ in such valleys, and available data show no sizable water surplus. When a final decision is reached on the location of the banana plantations and a better knowledge of water availability is obtained, the project could carry out pilot trials of double-cropping with minimal additional expenditures. Project benefits calculations assume single cropping only. 4.07 Although hydrological data are scarce, studies by consultants show that the natural flow available during the yet season in selected swamp valleys with catchment areas of over 30 km is substantially in ex- cess of the supplemental irrigation requirements of wet season rice over the proposed area of 30-50 ha per valley. Water quality is also excellent; project fields would be located on the upper reaches of the valleys above the influence of salinity intrusion. The relevant hydrological data are presented in Annex 6. 4.08 Annex 7 gives an analysis of climatic conditions in the project area, and the water requirements of rainfed rice. This analysis shows that rainfall in most years is adequate for rainfed rice provided it is planted at the correct time. Ensuring planting at the correct time would be a major task of the project's extension workers. Rice Mills and Storage Facilities 4.09 With the expected increase in paddy production, additional pro- cessing and storage capacity would become necessary. Existing rice mills can handle about 3,000 tons of paddy from farmers located in the mills' vicinity. In the remaining project area, about 24 small rice mills with 1/ Projects financed by the European Development Fund (FED) with ILACO as consultants.  - 10 - an average annual milling capacity of 500 tons (storage capacity 275 tons) would be set up during 1972 through 1976. These would provide adequate milling capacity for project production in this period. The experience of a Chinese technical assistance project shows that the installation of such small rice miills would provide the most economic means of processing, largely because of lower overheads. The location of these mills throughout the production area would enable producers to deliver paddy to the mills and to use the mills' by-products for animal feed without incurring high transport costs. A description of the mills and their operating costs is given in Annex 8. Land Clearing and Crop Spraying Equipment 4.10 The area to be cleared annually would be about one-third of the area to be planted to rice each year. It is not possible to demarcate these areas accurately in advance, as the area to be cleared will be chosen accord- irig to the location of the farmers who agree to join the project each year. However, farmers usually agree to cooperate on a village basis, and clearing would normally be carried out by groups of neighboring farmers in blocks adjacent to their existing cultivation. The bush cover on the plateau land ranges from fairly dense woodland (900 trees/ha) to light bush (200 small trees/ha), with trees ranging from 5 to 50 cm in diameter. Clearing the grey soil areas would entail the removal of the wild oilpalms that dominate the vegetation. 4.11 Each field agent would be issued a hand winch and would organize a team of eight farmers for clearing work in his area. This team would be supplied with saws, axes, picks and shovels and would selectively clear about 6 ha annually between May and December. The availability of farm labor for clearing is demonstrated in Annex 9. 4.12 Knapsack sprayers would be purchased under the project on the basis of one sprayer for 10 ha. These would be maintained by the Project Organization in the same manner as the winches for land clearing and uti- lized by farmers under the direction of the village agents for pest control on groundnuts and rice. Improvement of Roads 4.13 The projected development of rice and other crops in the project area would require the improvement of about 244 km of feeder roads not covered by IDA Credit 198-SE. The works would be carried out by contract under the supervision of the Project Organization during the 1973 dry season. A construction period of five to six months is considered adequate. Main- tenance would be carried out by PWD by force account, which is adequately equipped and staffed to do so. Assurances were obtained during negoti- ations that the improved feeder roads would be adequately maintained by PWD. A description of the proposed improvements and maintenance is given in Annex 10; location is shown in Map 3.  - 11 - Credit 4.14 Each farmer who adopts ox cultivation under tht' proj)ect L wulud 1b supplied in the first year with medium-term credit for a seeder and a multi- purpose toolbar with attachments. One cart would be purchased among four farmers in their fourth year of development. Over a five-year period, 2,500 toolbars, 625 carts and 5,000 oxen would be supplied under such credit. Short-term credit would be supplied for 13,500 tons of fertilizer, and 80,000 liters of insecticide. Proposed arrangements for the distribution of these credits are described in paragraphs 6.10 to 6.12. Ecoloy 4.15 A small area of forest would be cleared under the project, but this would be in a number of small blocks and adequate soil conservation measures would be practiced on all cultivated land (para 6.08). Some insec- ticide use on rice and groundnuts would be encouraged, but this would be under control of the extension services. The rotational cropping system that the farmers in the project would be encouraged to adopt could make shifting cultivation unnecessary. It would therefore slow down the present pace of deforestation. The effect of the irrigation and drainage works would be to delay run-off from the swamps to the main rivers, and thus to diminish flood levels during the main rainy season and prolong dry season flows. V. COST ESTIMATES AND FINANCING Cost Estimates 5.01 Project costs during the five-year period 1972 through 1976 (see para 4.01) are estimated at CFAF 1.3 billion (US$4.8 million), of which the foreign exchange component is about CFAF 0.6 billion (US$2.2 million) or 44%. Detailed cost cstimates are at Annex 11 and are summarized in the following table:  - 12 - Summary of Project Cost Estimates CFAF (Millions) US$ (Thousands) Foreign Local Foreign Total Local Foreign Total Exchange I. From 1972-1976 Extension Services: 359.1 266.9 626.0 1,293.2 961.1 2,254.3 43 Housing & equipment 52.9 80.0 132.9 190.7 288.1 478.8 60 Operating Costs 25.9 29.3 55.2 93.2 105.5 198.7 53 Personnel 280.3 157.6 437.9 1,009.3 567.5 1,576.8 36 Farm Inputs: 177.8 131.5 309.3 640.2 473.5 1,113.7 43 Draft animals, implements 89.1 42.8 131.9 320.8 154.1 474.9 32 Incremental seasonal inputs 88.7 88.7 177.4 319.4 319.4 638.8 50 Rice Milling & Storage 37.4 37.1 74.5 134.7 133.6 268.3 50 Road Improvements 84.3 80.1 164.4 303.6 288.4 592.0 49 Irrigation & Drainage Works 15.0 6.7 21.7 54.0 24.1 78.1 31 Contingencies 91.5 71.8 163.3 329.5 253.5 588.0 44 Sub-total 761.2 598.0 1,359.2 2,755.2 2X139.2 4,894.4 44 II. From 1977-1981 Extension Services 190.0 - 190.0 684.2 - 684.2 0 Rice Mills & Storage 34.1 34.1 68.2 122.8 122.8 245.6 50 Farm inputs and Operating Costs 34.7 45.7 80.4 124.9 164.6 289.5 57 Contingencies 27.7 6.9 34.6 99.8 24.8 124.6 20 Sub-total 286.5 86.7 373.2 1,031.7 312.2 1,343.9 23 III. TOTAL 1972-1981 1,047.7 684.7 1,732.4 3,786.9 2,451.4 6,238.3 40  - 13 - 5.02 Cost estimates for extension service personnel are based on salary levels presently paid for expatriates, and for Senegalese staff on similar rice development projects in the Casamance. Incremental seasonal inputs include fertilizer requirements calculated at their full cost. Both groundnut and rice fertilizers are subsidized, see para 7.05 and 7.06. Road improvement costs are derived from preliminary contractor's estimates and supported by PEWD data. A cumulative 3% per annum has been allowed for price increases in equipment and construction material and for increases for Senegalese staff salaries. Irrigation and drainage works include a 30% contingency since the extent of these works cannot be determined until final designs are produced. Contingencies ranging from 10% to 25% have also been added to remaining project costs to cover unforeseen expenditures. 5.03 Additional capital investments would be needed for five years beyond 1976, for rice mills and the incremental farm inputs for farms whose development would not be complete by the end of 1976. These are estimated at about CFAF 373 million (US$1.34 million). These additional funds would be provided by Government and appropriate assurances were obtained during nego- tiations. Financing 5.04 It is proposed that an IDA credit of US$3.70 million (CFAF 1,027.5 million) be made on standard terms to Government to cover approximately 76% of project costs from 1972 through 1976. During that period the credit would cover the estimated foreign exchange costs of the project, US$2.14 million (44% of project costs) and 57% of local costs or US$1.56 million (32% of project costs). The IDA credit would represent 59% of the 10-year project cost. 5.05 From 1972 through 1976 Government would contribute 22% of project costs or US$1.10 million (CFAF 305.3 million), which includes subsidies on fertilizer used by project farmers, amounting to CFAF 78.3 million (US$0.29 million). Except for road Improvements, which would be carried out by contractors, project costs are estimated free of sales taxes and import duties. During negotiations Government stated that project purchases would be taxable and gave assurance that it would provide additional funds to meet them. Assurances were also obtained that the required funds would be made available in advance on the basis of quarterly estimates prepared by the Project Director. From 1976 to 1981 Government would contribute another US$1.34 million (CFAF 373.2 million) to project costs and its overall contribution would represent 40% of the 10-year project cost. 5.06 US$0.73 million (CFAF 202.7 million) of the 1972-1976 Government contribution would be channelled through BNDS and be used to provide medium- and short-term loans to project farmers for farm inputs - "La Caisse Centrale de Cooperation Economique" (CCCE) from France is considering financing part of these credit operations. A subsidiary credit agreement between Government and BNDS, satisfactory to IDA, would specify BNDS obligations under the project (see para 6.12).  - 14 - 5.07 Farmers would provide US$0.10 million (CFAF 26.4 million), representing 2% of project costs; this contribution would comprise mainly the 20% cash payment required as a condition for utilizing the credit for the purchase of draft oxen and farm implements. No account has been taken of farmer's labor and self-procured materials. The overall financing plan is summarized in the following table: Financing Plan 1/ (M4illion) IDA Government Farmers Total CFAF USS % CFAF US$ % CFAF USS % CFAF USS Z 1. 1972 through 1976 Extension Service 626.0 2.25 100 626.0 2.25 36 Hlousing, equipment and ve- hicles 132.9 0.48 100 - 132.9 0.48 7 Personnel 437.9 1.58 100 - - - - - - 437.9 1.58 26 Operating costs 55.2 0.19 100 - - - - - - 55.2 0.19 3 Farm Inputs - - - 282.8 1.01 90 26.4 0.10 10 309.3 1.11 18 Draft oxen, implements - - - 105.4 0.38 80 26.4 0.10 20 131.9 0.47 8 Seasonal inputs - - - 177.4 0.63 100 - - - 177.4 0.64 10 Rice Milling and Stor- age 74.5 0.27 100 - - - - - - 74.5 0.27 4 Road Improve- ment 141.9 0.51 86 22.5 1.08 14 - - - 164.4 0.59 10 Irrigation and Drain- age W4orks 21.8 0.08 100 - - - - - - 21.8 0.08 1 Contin- gencies 163.3 0.60 100 - - - - - - 163.3 0.60 9 Sub-total 1,027.5 3.70 76 305.3 1.10 22 26.4 0.10 2 1,359.2 4.90 78 2. 1977 through 1981 - - - 373.2 1.34 100 - - - 373.2 1.34 22 3. TOTAL 1972 through 1981 1,027.5 3.70 59 678.5 2.44 40 26.4 0.10 1 1,732.4 6.24 100 ij Except for road improvement costs, all cpcts shown in this table are net of taxes.  - 15 - Procurement and Contracts 5.08 Procurement of vehicles, clearing and spraying equipment, and rice milling equipment would be by international competitive bidding. In the case of road construction and improvement, contracts involving about US$0.6 million, would be unlikely to attract bidders not established in West Africa and tenders for contracts would be advertised locally. At present, five firms of qualified contractors with adequate up-to-date equipment operate from Dakar, and the competition among them should ensure competitive bidding and realistic prices. Contracts for the construction of houses and rice milling and storage facilities valued at a total of US$0.5 million would be let through tender to local competitive bidding. 5.09 Irrigation and drainage works would be constructed on force account by the Project Organization. Animal-drawn implements for partici- pating farmers would be purchased annually by project cooperatives through ONCAD on the basis of farmers applications collected by the Project Organi- zation (see para 6.11). The demand for implements would develop gradually and would not lend itself to international procurement. ONCAD normally places orders with SISCOMA, the only firm which manufactures and assembles such implements locally. SISCOMA has repair facilities for its products throughout the country. Current ONCAD procurement procedures are satisfactory and would be used for the project. Disbursement 5.10 Taking into account the taxes imposed on IDA financed items (see para 5.05), the proposed IDA credit of US$3.7 million would be disbursed as follows: (a) 100% of the CIF cost of vehicles, clearing and spraying equipment, and rice million equipment, or 70% of the value of these items if purchased locally, about US$0.26 million; (b) 82% of the cost of irrigation and drainage works, buildings, road construction and improvement, about US$1.07 million; (c) 100% of the costs of expert services and of organization staff; about US$1.58 million; (d) 75% of Organization operating costs, excluding expensed under (c) above, about US$0.19 million; and (e) an unallocated amount of US$0.60 million representing contin- gencies on the above categories, and transferrable to them as recuired. Applications for disbursement would be supported by contracts, shipping documents and certified records of expenditure. A schedule of estimated disbursement by quarters is at Annex 12. It is proposed that any excess funds remaining in the credit account should be cancelled.  - 16 - Accounts and Audits 5.11 The Project Organization, being under MRD, would be subject to annual audits by the Office of the Accountant General, in accordance with procedures that apply to all Government ministries. The project financial analyst and accountant, however, would establish separate project accounts and introduce an analytical accounting system, with a breakdown of all expenses according to their purpose (extension services, drainage and irrigation works, rice milling and storage) and function (consultants services, personnel costs, transportation, operation and maintenance of equipment and buildings). In addition, the Project Organization would maintain individual accounts for participating farmers in order to control the supply of farm implements and inputs on credit as well as subsequent repayments, see para 6.10 to 6.12. Copies of audited accounts and the auditor's report would be submitted to IDA within six months of the close of each fiscal year. Assurances to this effect were obtained during negotiations. VI. ORGANIZATION AND MANAGEMENT A. Poect Organization and Staffing 6.01 Government would set up within MRD a Project organization with headquarters at Sedhiou to be responsible for the execution of the proposed project. The Project Director would report directly to the Minister of Rural Development. The following key personnel would assist the Director: an Agronomist and two assistants in charge of the project extension service; a Training Officer and assistant in charge of training field staff and farmers; a Rural Engineer and two assistants in charge of the project road program, the construction and operation of rice mills, and the irrigation and drainage works; a Cooperative Inspector and five assistants, seconded from ONCAD, in charge of controlling project cooperatives (see para 6.09); and a Financial Analyst assisted on one hand by an assistant to set up and keep all project and cooperative accounts and, on the other, by an agricultural economist in charge of analyzing economic results of the project. In addition a Planning Officer and an Administrative Officer posted at project headquarters would assist in project administration. During negotiations, Government gave assurances that such personnel and required supporting staff as detailed in Annex 3 would be provided and that appointees to the posts of Project Director, Planning Officer, Administrative Officer, Cooperative Inspector, and Account- ant, Financial Analyst, would be acceptable to IDA. Initial appointments to these posts would be a condition of credit effectiveness. 6.02 In view of the present shortage of qualified and experienced Senegalese staff, the Government intends to recruit consultants acceptable to IDA to fill the posts of Agronomist, Rural Engineer, Training Officer and Financial Analyst. These consultants would operate on the clear understanding that one of their functions, from the commencement of the project, would be on-the-job training of their Senegalese assistants, and that, at the  - 17 - end of their period of engagement, Project Organization staff should be adequately trained to continue operation of the project without further consultant assistance. Assurances to these effects were obtained during negotiations. It has been agreed with Government that the Organization would help to strengthen the Sedhiou District branch of MRD by training and trans- ferring staff to that branch to take over the functions of the Project Organi- zation after project completion. During negotiations, Government gave assurances that liaison between the Project Organization and other Government services in the project area would be secured through the membership of the Project Director in the Development Committees for the Sedhiou District and the Casamance Region, which are chaired by the District Prefect and the Regional Governor respectively. These Committees will assist the Project Organization by providing services and advice as required. Extension Services 6.03 The Project Organization would operate within the development areas shown in Map 2. Technical agents (see para 6.04) would be stationed within these development areas and field agents would live as close as possible to the farming communities they serve. Officers at project headquarters would be provided with transport, and full camp equipment so that they would spend a major proportion of their time in the field. Technical agents would each be issued motorcycles and field agents with bicycles. Field agents would have access to up-to-date extension aids and would be trained in their use, in the use of winches, and in methods of ox-training, irrigation, and soil conservation. Under the guidance of professional staff they would also establish and supervise a program for the multiplication and distribution of improved rice varieties. Each agent would be responsible ultimately for supervising 50 farmers. Farmers would be organized in cooperative groups and more specialized assistance would be available to them from the more highly qualified technical agents, of whom there would be one for 500 farmers. B. Project Technical Operations Staff Training 6.04 Technical agents would be selected from those who have obtained diplomas from the Agricultural Secondary School in Ziguinchor. Special courses oriented to specific project requirements would be organized for these people, who would each ultimately be responsible for about 8 to 10 field agents in their area of operations. 6.05 Field agents would be chosen from staff already employed by the Ministry of Rural Development, and augmented as necessary by selections from the output of the local schools and young people from the families of more progressive farmers. Training courses would be organized by the training officer at project headquarters in the use of land-clearing winches and ex- tension techniques in ox-training and in the use of ox-drawn equipment.  - 18 - Ox-drawn Equipment Program 6.06 It is expected that about half of the farmers entering the project each year would be able and willing to adopt ox cultivation, either by utilizing oxen and equipment already owned, or by purchasing a pair of oxen and equipment on credit. The remainder would not have oxen available, or would be unwilling to commit themselves to the additional expense and the departure from tradition involved, during the early years of development. Field agents would be responsible for teaching farmers to train their oxen and use their ox equipment efficiently. 6.07 There is an adequate supply of 3-to-4 year-old steers available locally to meet the demand for oxen arising from the project. During nego- tiations, assurances were obtained from Government that a veterinary officer with sufficient staff and an adequate supply of drugs and medicines at his disposal would be posted to work in Sedhiou District. Soil Conservation 6.08 Due to the high intensity of rainfall experienced in the Casamance, soil erosion can be serious on the plateau soils when large fields are opened to cultivation without adequate conservation measures. In all cases where land is cultivated under the project on these plateau soils, and also more importantly on the ochre slope soils where gradients are greater, farmers would cultivate their land in strips not exceeding 30 m in width. Between these strips a grass wash-stop at least 3 m wide would be left uncultivated. Assurances were obtained during negotiations that farmers not carrying out effective soil conservation measures would be excluded from participation in the project. C. Farmers' Selection, Cooperatives, Credit and Marketing Project Cooperatives 6.09 Farmers who wish to participate in the project would apply to the Organization. The main criteria for their selection, detailed in Annex 3, would be creditworthiness, availability of suitable land and sufficient family labor. Farmers participating in the project either must join new cooperative societies or special sections of established societies. The new societies and special sections (termed project cooperatives) would be under the full control of the Project Organization. Agricultural Inputs and Credit 6.10 Project cooperative members would apply to their cooperatives for short-term loans (one year at 5-1/2% interest) to purchase annual inputs Ifertilizer, insecticides and improved seeds). Members wishing to use draft -.Li.als would apply for medium-term loans (five years at 5% interest) to  purchase draft oxen and animal-drawn implements. The proposed rates are standard in Senegal, and similar to those emnloyed in len.ding ^or agricul- ture in other countries in the BCEA:GL zone. Loan an lications grom individual members for rice and groundnut opsrations ~-_uld be assembled a; the coopera- tive level with the assistance of organization staff. The jn.ect Organiza- tion would appraise each farmer's financLal poSiti on and technical compe- tence and present recommended applications to ENDS for approvwl. Inputs financed by BNDS would be purchased by ON>AD and delAvcred to G-CAD stores in the project area for subsequent distribution to prolect cooperatives and their members under Organization supenrision. indi-1dual b.on ;czounts for each cooperative me-mber would be kept by the Organization, and project coop- eratives would be notified of the indebtedness of each societ7 and each of its members. 6.11 Farmers would procure inputs from CNCAD on the auth'zrity o`f vouchers issued by the Project Organization. Draft Dxen Cwould be by the Project Organization and be issued to farmers agairnst oredit vonchers. T he ONCAD retail network in Casamance is sufficient to cope wizt, pKa.sent needs, but during negotiations assurances were obtained that ONCAD r:etail stores in the project area would be expanded in line w'th the demand for -arm inputs, that orders would be placed for such inpuLs on the basis of estimates sub- mitted six months in advance of the cropping season by thn .r,ect Director, and that individual stores would be stocked in line vith a schedule prepared by the Project Director. These arrangements shoutld ensture the timely supply of inputs to farmers. One of the problems of the ongoing groundnut and mil- let project has been the late delivery of input s. 6.12 Credit repayments would be through deductions from fa.rmers' sales proceeds for rice and groundnuts delivered to their cooperatives. The project Organization would control these transactions to ensure that approp- riate deeductions were made, and that farmers would receive no cash until at least 60% of their debts had been repaid. DurIng negotiations assurances were obtained that the Project Organization would be entrusted wwith the powers and the means to carry out the above credit operations and that ONCAD would fully cooperate. In addition, assurances were obtained from Government tlhat an agreement satisfactory to IDA would be signed between BNDS and Government which would set out in detail project credit arrangements. Signature of such an agreement would be a condition of effectiveness. VII. PRODUCTION, MARKET PROSPECTS, AND PRICES, FARM INCOMES AND GOVERNMENT REVENUES Production 7.01 Project farmers are expected to obtain average paddy yields of 2.5 and 3.0 tons per ha respectively from swamp rice and rainfed rice grown on grey soils after five years, and yields of 2.0 tons per ha from rainfed rice on upland soils after seven years (see Annex 13). Yields in these ranges have already been obtained in Casamance after appreciably  - 20 - shorter development periods. Total project rice production would amount to about 24,000 tons of paddy annually at maturity from 2,000 ha of irrigated, 1,500 ha of grey soil and 8,000 ha of upland rice. Groundnut production is estimated to increase by more than 5,000 tons through better cultivation and use of fertilizers, and the production of food crops by 500 tons as a result of the residual effects of fertilizer applied to rice and groundnuts in the crop rotation. Details of production estimated to be generated by the project are given in Annex 14. Ilarket Prospects and Prices 7.02 After reaching full development in 1983, the project would produce about 17,000 tons of rice and about 14,000 tons of groundnuts for market. By 1983, domestic demand for rice in Senegal is estimated to rise to about 320,000 tons, an increase of 75,000 tons over current consumption, assuming population growth continues at the current rate and the maintenance of present per capita consumption levels. If other rice development projects Nwhich are ongoing or in preparation prove successful, domestic production by 1983 could meet about 50% of estimated demand, thereby allowing stabili- zation of rice imports at about 160,000 tons. On the basis of the above assumptions no difficulties are foreseen in disposing of project-produced rice on the domestic market. Groundnut production induced by the project would be insignificant in comparison to total Senegal production and no export marketing problems are foreseen. 7.03 Most rice consumed in Senegal is imported under Government contracts. Quality is low--over 50% broken grain. Contract prices for deliveries in 1971 average about CFAF 24,000 (US$87) per ton FOB Bangkok; but the Banks' Econtomics Department forecasts a declining price reaching US$80 FOB Bangkok in 1980, equivalent to US$103 (CFAF 28,000) per ton CIF Dakar. This latter price has been used in calculating the projects economic rate of return. OCAS, the state trading agency, has a monopoly for rice imports and fixes retail and wholesale prices. The current Dakar wholesale price of CFAF 3d,000 (US$136) per ton is about 30% above the import cost. The retail price in Dakar is now CFAF 41,000 (US$148) per ton and higher elsewhere In the country to allow for transport costs. The producer price for paddy is fixed by Government at CFAF 21000 (US$76) per ton. On the basis of current exchange rates the real value of such paddy is close to CFAF 17,500 per ton and should world prices fall, as predicted by the Bank, its value would drop to about CFAF 15,500. Consequently, the current paddy price of CFAF 21,000 appears to involve a substantial subsidy to growers. However, two factors must be taken into account in considering the apparent subsidy. First, Senegal's currency may be overvalued by as much as 20%. If this is so, the va1ue of paddy in 1971 would be about CFAF 20,600/ton and in 1980 "FAF 19,000/ton instead of CFAF 17,500 and CFAF 15,500 res- pectively. Second, locally produced paddy could be milled to higher quality grades than the very low quality rice now imported and suclh quality imorove- ment could increase the value of paddy by about another 10%. Tr.e foregoing indicates that the current producer price does not entall. nn undue ,iinid i - zation of rice growers. Government has stated that It :Lntends to maintain the current producer price of CFAF 21,000 in the interest of stimulating  - 21 - domestic rice production and consequently of conserving foreign exchange. This course of action appears justified and in the farm budgets at para 7.07 and Annex 16, a producer price of CFAF 21,000 per ton has been used. 7.04 Groundnut prices have increased sharply on Senegal's main export markets in response to the drop in supplies (from CFAF 35,000 per ton in 1968 to CFAF 49,000 per ton unshelled FOB Dakar in 1971). The Commodity Division of the Bank's Economics Department, however, forecasts a decline to CFAF 28,600 per ton in 1975 and onwards, with a return to normal supply conditions. Thus, while present farmgate prices of CFAF 17.6 per kg of groundnuts could be increased substantially, a reduction would be necessary subsequently if the Bank's forecast obtains. In report calculations it is assumed that this reduction in world market prices will take place and, therefore, the current producer price of CFAF 17.6 per kg has been retained. Details of international groundnut price forecasts and allocations of proceeds from exports are given in Annex 15, Table 2. Fertilizer Subsidies 7.05 Project farmers would benefit from subsidies on groundnut and rice fertilizers, and on rock phosphate. The cost per ha, based on recommended usage, now amount to CFAF 6,400 (US$23) for groundnuts, and CFAF 3,500 (US$13) for rice. These subsidies, financed originally by FED in the case of groundnuts, are available to all farmers in Senegal and are designed to encourage fertilizer use. The cost of groundnut fertilizer and rock phos- phate subsidies are covered several times by taxation on groundnuts exports, and the margin earned by the Governnent in its groundnut marketing operations. Whether groundnut production would be better stimulated by higher producer prices and removal or reduction o