India - Fourth Trombay Fertilizer Expansion Project

SOP To ,- CIRCULATtNG COPY FILE CY TO BE-RURNED TO REPORTS DESK DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. P-1460-IN REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR THE TROMBAY IV FERTILIZER EXPANSION AND PLANT OPERATIONS IMPROVEMENT PROJECT June 3, 1974 This report was prepared for official use only by the Bank Group. It may not be, published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS US$1.00 = Rs 7.5 Rs 1.00 US$0.13 Rs 1 million = US$133,000 The Rupee is officially valued at a fixed Pound Sterling rate. As the Pound is now floating relative to the US Dollar, the US Dollar/Rupee exchange rate is subject to change. Conversions in the appraisal report and in this report have been made at US$1 = Rs 7.50 which was the rate prevailing at the time of appraisal. On April 26, 1974, the exchange rate was US$1 = Rs 7.82. FISCAL YEAR April 1 - March 31  INTERNATIONAL DEVELOPMEIT ASSOCIATION REPORT AND RECOMMENDATION OF TiE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR THE TROMBAY IV FERTILIZER EXPANSION AND PLANT OPERATIONS IMPROVEMENT PROJECT 1. I submit the following report and recommendation on a proposed credit to India in an amount equivalent to US$50 million on standard IDA terms to help finance the Trombay IV Fertilizer Expansion and Plant Operations Improve- ment Project. US$33 million of the proceeds of the proposed credit would be on-lent to the Fertilizer Corporation of India (FCI) for 15 years, including five years' grace, at an annual interest rate of 9h. PART I--THE ECONOMY 2. An economic report "Economic Situation and Prospects of India" (402-IN, dated May 7, 1974) was distributed to the Executive Directors on May 20, 1974. A country data sheet is attached as Annex I. 3. India is exceptional among the Bank Group's member countries for its size and diversity, and the extreme difficulty of its economic conditions. India's economic policies and performance have their shortcomings, many of which are attributable to the open political system, where the reconciliation of conflicting political views tends to favor less than optimal economic solutions; others are due to the sheer magnitude of the task facing the Government. Governing a country divided into more than 20 States with a population of some 580 million and over 60 major languages is an extraordinary responsibility. The country's poverty and poor natural resource endowment, supplemented by a net transfer of external resources averaging in recent years well below US$1 per head per annum, have imposed sharp limitations on the rate of growth. Any judgment of India's economic performance must take these underlying circumstances into account. So, also, must account be taken of two massive uncertainties which overhang India. The first is the availability of water. A bad monsoon, which is inevitable from time to time, has a pervasive influence over the entire economy and wipes out the results of years of effort. The second uncertainty is the availability of external assistance. The vast majority of bilateral aid is committed annually, usually several months after the start of the fiscal year, and with considerable uncertainties about the level of commitments and disburse- ments of particular donors. Any delay in IDA replenishment has an enormous impact on aid flows. Together, these considerations severely complicate planning and force a high degree of caution in foreign exchange management. 4. In this perspective, the performance of the economy has been far from bad. In the past 25 years, national income has grown at nearly 4% per annum, which compares very favorably with the average annual growth rate of less than 1% during the preceding 50 years. Population has also grown faster in the past two decades than previously, but per capita income has nevertheless risen from a more or less stagnant level in the first half of  -2- this century to achieve an average growth of roughly 1% a year since inde- pendence. 5. Progress has been impressive on many fronts but disappointing on others and has all too often fallen short of India's massive needs. The growth of the socio-economic infrastructure (transport, education, health services, etc.) has been spectacular, but has often been achieved at high cost and has yielded results of variable quality; many industrial and agricultural investment schemes have been highly successful, but others have taken excessively long to be completed and have operated well below full capacity; in some regions of the country growth and structural change have been rapid and compare favorably with developments in many other parts of the world, but in other regions there has been stagnation and possibly even decline. Despite these improvements and although the distribution of income in India is relatively even by comparison with many other countries, there has been little impact upon the living standards of the vast masses of the urban and rural population. The Government has become increasingly concerned about the plight of the lower income strata which, conservatively measured, consist of some 200 million people with incomes of-less than US$60 per head per year, and has initiated in recent years a variety of programs specifically designed-to alleviate poverty. 6. In broad-terms, the structure of the economy has been slow to change. Agriculture remains the dominant sector, accounting for some 42% of national product in the early 1970s compared with around 49% twenty years previously. The share of output contributed by the industrial sector has increased only slowly and since .the late 1960s has remained approximately constant at a level of 23%. There has,.however, been a shift in the composition of industrial production, with consumer, intermediate, and capital goods now contributing about one-third each compared with an overwhelming preponderance of consumer goods production 25 years ago. 7. One of India's most impressive achievements since the mid-1960S has been the doubling of the average growth rate of productivity in foodgrain production. This has been achieved primarily through the introduction of new, high-yielding seed varieties and through complementary itiprovements in farming practices. Nevertheless, much remains to be done to consolidate the production growth in the wheat belt and to extend it both to other areas and to other foodgrain crops, most particularly rice. Other crops have, in most cases, shown a slow but fairlJy constant rate of productivity increase. Irri- gation has played a major part in agricultural growth and, by reducing dependence on the monsoon, has reduced variability in performance. For instance, the drought-induced decline in foodgrain output in 1972/73 was only some 6%, com- pared with a fall of almost 20% due to the drought in the mid-1960s. At present only about half the potentially irrigable areas has been developed. Fuller utilization of the existing irrigation system and extension of the irrigatied areas are, therefore, matters of the highest priority in order to meet India's rising food needs and to protect the econonr against the vagaries  DOCUMENT OF INTERNATIONAL DE VELOPMENT ASSOCIA TION NOT FOR PUBLIC USE FOR | For consideration on EXECUTTVE June 18, 1974 UDRECTORS' ME Y##G IDA/R74-54/1 FROM: The Secretary JurLe 10, 1974 INDIA: Trombay IV Fertilizer Expansion and Plant Operations Improvement Project In connection with the President's Report and Recommendation (IDA/R74-54) on a proposed credit to the Government of India for the Trombay IV fertilizer expansion and plant operations improvement project, there is attached a copy of a map entitled "India - Major Fertilizer Plans and Refineries - Present and Proposed" (IBRD 10453R). Distribution: Executive Directors and Alternates President Senior Vice President, Operations Executive Vice President and Vice President, IFC President's Council Directors and Department Heads, Bank and IFC   .-, -.-c-- ~~~~~~INDIA MAJOR FERTILIZER PLANTS AND REFINERIES AFGHANISTAN N i . -_ ,,-N.> PRESENT AND PROPOSED /O ,,rld# 'O' sm cv 510 5lr 6 ! JAM/4U ond KASHM/R FERTILIZER PLANTS REFINERIES Nrrog.- PhI."ph.l ,3 E 0 Co.s.l,..d H/MACHAL 0 *. T.-n, .- PRADESH * NoC.o1-I CoCiol PAKISTAN ANGAL. _____ S- -O,od U-. I R-on Roondor,- PLRUNJAS B eeioirl8udre 3d' ~ ~ ~ hztd 8_3' '-. o ,oldoPNIPW / / H APYANA ' ni . C H I N A /71 D F/%SgZH/ : vIr1 ( T i e T ) ' >D,lh / L;EW DELHK ' , ~'\, ' '~' '*S I (ibet,