India - Orissa Irrigation Project

lP Document of FILE Copy The World Bank FOR OFFICIAL USE ONLY [i . Lb ~-frepi . WCP-.4124-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT -TO INDIA FOR THE ORISSA IRRIGATION PROJECT August 23, 1977 This document has a-restricted distribution and may be used by.recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (as of August 12, 1977) Rs 1.00 Paise 100 US$ 1.00 Rs 8.70 Rs 1.00 = US$0.1149 Rs I million = US$114,900 (Since September 24, 1977 the Rupee has been officially valued relative to a "basket" of currencies. As these currencies are now floating, the US Dollar/Rupee exchange rate is subject to change. Conversions in the Appraisal Report were made at US$1 to Rs 9.00.) FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS ARDC = Agricultural Refinance and Development Corporation GOI = Government of India GOO = Government of Orissa MIP = Medium Irrigation Project CAD = Command Area Development CWC = Central Water Commission (GOI) AC = Appraisal Committee (in C.WC) I&PD = Irrigation and Power Department kOO) CADA = Command Area Development Authority LDB = Land Development Bank CB = Commercial Bank O&M = Operation and Maintenance HYV = High Yielding Variety  FOR OFFICIAL USE ONLY INDIA ORISSA IRRIGATION PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiaries: State of Orissa for medium-scale irrigation projects and land consolidation; Agricultural Refinance and Development Corporation (ARDC) for refinancing on- farm development loans made to farmers by commercial and land development banks. Amount: US$58 million. Terms: Standard. Relending Terms: (a) India to Orissa: As part of Central Assist- ance for development projects on terms and conditions applicable at the time; (b) India to the Agricultural Refinance and Development Corporation (ARDC): At interest rate of not less than 7.25% per annum (with 0.25% per annum rebate for prompt repayment) for refinancing loans, with up to 15 years maturity; (c) ARDC to commercial and land development banks: Annual interest of not less than 7.5% with maturities according to maturities of loans to be refinanced; (d) Commercial and land development banks to farmers: Repayable at not less than 10.5% annual interest over a maximum period of 15 years including a grace period of 2 years on repayment of principal. Project Description: The purpose of the Project is to utilize the numerous small rivers located throughout the State for providing irrigation to about 66,000 ha of land throughout the State of Orissa, where large scale irrigation or groundwater development is not possible. The Project would also improve water use efficiency at the farm level in existing major irrigation systems. This document has a restricted distribution and may be used by recipients only in the performance of their omcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - The Project consists of: (a) over the next five years, construction of about 15 medium-scale irrigation projects (MIPs) (MIPs are irrigation projects that encompass cultivable command areas covering between 2,000 and 12,000 ha); (b) command area development (CAD), over a four year period, in three existing major irrigation projects located in Orissa (Mahanadi Delta, Hirakud, Salandi), consisting of: (i) land consolidation covering about 200,000 ha; (ii) on-farm works, including construction of field channels, drains, and structures covering a consolidated area of about 57,000 ha. The Project would increase food production and thereby improve farmer income, provide additional employment opportunities, and contribute to savings of foreign exchange. Under the Medium Irrigation Component, the incomes of about 30,000 farm house- holds (mostly at or below the subsistence minimum) would increase by about 180%. The risks under the proposed project are those normally associated with irrigation projects in India. The use of standard- ized yield and input projections in the analysis of MIPs and the procedures for preparation, appraisal and progress review of MIPs introduce additional risks. Estimated Cost: (US$ million) Local Foreign Total Medium Irrigation Projects 65.3 15.8 81.1 Command Area Development: (a) Land Consolidation 6.7 __ 6.7 (b) On-Farm Works 4.1 -- 4.1 Cost (including phy- sical contingencies and administration) 76.1 15.8 91.9 Price Contingencies 19.9 4.2 24.1 Total Project Cost 96.0 20.0 116.0  Financing Plan: (US$ million) Local Foreign Total IDA 38.0 20.0 58.0 Local Financing: GOO 55.2 -- 55.2 ARDC and Banks 2.4 -- 2.4 Farmers 0.4 -- 0.4 Total 96.0 20.0 116.0 Estimated Disbursements: FY78 FY79 FY80 FY81 FY82 FY83 FY84 Annual: 1.0 5.0 10.5 17.5 13.0 9.0 2.0 Cumulative: 1.0 6.0 16.5 34.0 47.0 56.0 58.0 Rate of Return: Average economic rate of return of 18% for medium irrigation projects component and 34% for command area development with overall economic rate of return of 20%. Appraisal Report: No. 1558a-IN, dated August 25, 1977.  INTERNATIONAL DEVELOPMIENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE ORISSA IRRIGATION PROJECT 1. I submit the following report and recommendation on a proposed development credit to India in an amount equivalent to US$58 million on standard IDA terms to help finance the implementation of the Government of Orissa's investment program for medium-scale irrigation projects over the next five years, and command area development, including land consolida- tion and on-farm works, throughout Orissa. The proceeds of the credit-- except for part of on-farm works (US$2.4 million)--would be channelled to the Government of Orissa in accordance with the Government of India's (GOI's) standard terms and arrangements for the financing of State devel- opment projects. For on-farm works, GOI would relend US$2.4 million of the credit to the Agricultural Refinance and Development Corporation (ARDC) for up to 15 years at not less than 7.25% annual interest. ARDC would in turn on-lend the funds to participating commercial and land development banks in Orissa at annual interest of not less than 7.5%. These banks would relend the funds to farmers with maximum repayment periods of 15 years, including 2 years of grace, at not less than 10.5% annual interest. PART I - THE ECONOMY I/ 2. An economic report, "Economic Situation and Prospects of India" (1529-IN dated April 25, 1977), was distributed to the Executive Directors on May 3, 1977. Country data sheets are attached as Annex I. Background 3. India is exceptional among the Bank Group's member countries for its size and diversity; the country is divided into more than 20 States with a population of some 630 million speaking over 60 languages. Since Independ- ence the trend in growth of GNP has been about 3.5% per annum, or a little over 1% per annum in per capita terms, while over the five years 1971/72 - 1975/76 it fell to as low as 2.5% per annum, in spite of the record harvest of 1975/76. This unsatisfactory performance is in part the result of the low availability of investable resources: while India's domestic savings effort compares well with other countries at the same average income levels, the rate has very rarely exceeded 17% of GNP; similarly, the net transfer of resources from abroad has never been above 3% of GNP, and fell to as little as 0.8% between 1969/70 and 1973/74. The investment rate puts India in the lower third of all developing countries. More significant perhaps is the fact that in spite of a marked rise in the investment rate from about 10% in the early 1/ Parts I and II of this report are substantially identical to Parts I and II of the President's Report for the Maharashtra Irrigation Project (Report No. P-2036-IN, dated June 30, 1977).  - 2 - 1950's to about 18% over the past fifteen years, the trend in GNP growth has remained about the same. This indicates a marked decline in the efficiency of capital use, as a result of increasing capacity underutilization, long project gestation, and increased emphasis on relatively capital intensive projects and sectors. 4. Since Independence the growth of the socio-economic infrastructure (transport, education, health services, etc.) has been impressive, 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; in other regions there has been stagnation, and in some, decline. Although national income has increased in most years, there has been no rise in the living standards of the vast mass of rural and urban poor, conservatively estimated at 200 million people with per capita incomes of US$70 per annum. 5. The structure of the economy has been slow to change. Agriculture remains the dominant sector, with its share of national product declining only gradually from about 50% to 42% over the last twenty years. The share of manufacturing industry has increased only slowly and, since the late 1960s, has remained approximately constant at about 16%. There has, however, been a shift in the composition of manufacturing production, with consumer, inter- mediate, and capital goods now contributing about one third each, compared with an overwhelming preponderance of consumer goods 25 years ago. Recent Trends 6. In March, 1977, a party other than Congress formed a Government for the first time since Independence. The state of the economy was not a promi- nent election issue; in fact the economy was generally stronger than at any time in the last six years. Although the growth of GDP in 1976/77 is not expected to have exceeded 2%, this was on top of the very good growth of 8.8% in 1975/76. Agricultural production is expected to have fallen by about 3%, but only because of the return to a more normal harvest of 110-114 million tons of foodgrains after the record 121 million tons of the previous year. Industrial growth was around 10% in 1976/77, which is significantly above the rates achieved in the late 1960's and early 1970's. Exports continued their bright performance, rising by 25% in nominal terms. The overall resource position, with record foreign exchange and foodgrain reserves, is exception- ally strong, and gives the Government considerable room for maneuver. 7. In agriculture the bumper crop of 1975/76 was largely due to remarkably good weather conditions; the good crop in 1976/77 - a foodgrain harvest in the region of 110 million tons would be the second largest on record - was produced under generally normal weather. A conspicuous change was the increase in fertilizer use, which rose by more than 20% over 1975/76,  - 3 - following marked declines in fertilizer prices. Industrial production bene- fited from fewer labor disputes, fuller utilization of installed capacity in both private and public sectors, a more liberal import policy, relatively good power availability, and increased demand because of higher consumer incomes, expanded exports and higher public expenditures. However, whole- sale prices which had fallen 14% from September 1974 through March 1976, rose 11% from the end of March to December 1976. This upsurge may be a new inflationary trend or merely a correction of the previous sharp decline in the relative prices of a range of agricultural commodities. 8. The balance of payments situation has improved dramatically since the 1973-1975 period. In 1975/76 the trade deficit was $1,530 million, which was more than covered by US$1,560 million in net aid, US$205 million in net purchases of currency from the IMF, and US$559 million in net miscellaneous capital and invisibles (mostly private remittances); indeed, this large aggregate net resource inflow led to a US$794 million increase in foreign exchange reserves, to a level of almost US$2.2 billion. In 1976/77, the balance of payments continued to improve, with exports provisionally, esti- mated to have increased by US$1,135 million against an imports increase of only US$15 million, so that the trade balance deficit is now estimated at a mere US$380 million. The sharply decreased trade deficit, along with a further increase in the net inflow of miscellaneous capital and invisibles from abroad of US$470 million, more than offset the fall of US$350 million in net aid and the US$365 million repurchases of currency from the IMF, and allowed a US$1.5 billion addition to reserves, which reached a level of US$3.7 billion at the end of March 1977. Development Prospects 9. The favorable economic situation gives the Government the opportun- ity to address the longer-term constraints on growth. The basic task is to raise the overall rate of growth from its historic range of 3% to 4%. In the long run this will require raising more resources for investment. But it will also be important to achieve significantly better utilization of avail- able resources, partly through an immediate boost to industrial demand. 10. In agriculture, the basic problem remains that, despite the record foodgrain crop in 1975/76 and the good crop in 1976/77, the long-term growth rate of foodgrain production has been unacceptably low, at about 2.5% per annum over the last seventeen years, and only 2% in the last ten. This has meant that only in good years has there been any margin of production to cater to per capita growth in food consumption, and in normal years it has been necessary to import food.. There is considerable scope for stepping up growth both by increasing the use of inputs and by raising the productivity of existing capacity. Three promising developments in regard to the first are the sharply higher outlays on irrigation in the Fifth Plan Period along with a renewed determination to complete projects expeditiously; the indica- tions that private investment, in tubewells is picking up again after a slow- down in the early 1970's; and the recent recovery of fertilizer demand. With  regard to more productive use of existing capacity, there is increased aware- ness in the Government that the benefits of irrigation projects can be much increased not only through command area development but also through more efficient design and operation of major surface irrigation infrastructure. Also, hopes have been generated for increasing productivity on both irrigated and rainfed farms through a reorganized and improved extension and research system, which has been recently introduced in several States in northern and eastern India. 11. A strong effort to raise agricultural growth is essential, not only to meet food requirements, but also because of the pervasive influence of agriculture on the levels of activity in other sectors of the economy. This effort must also be so structured as to increase the incomes of small and marginal farmers, in order to increase production since they operate 25% of the cultivated land and account for somewhat more than 25% of production, and for welfare reasons, since they make up about 70% of rural population and constitute the majority of those living below the poverty level. 12. The industrial sector is poised for growth, as serious constraints on the supply side have been removed by the improved situation, particularly with respect to coal and imported raw materials and components; the power supply situation is once more somewhat worrisome (paragraph 13 below). There has been a progressive liberalization of controls and the 1976/77 Central Budget announced a reduction of some taxes on private industry. In many cases management of public enterprises has improved, as is reflected in their markedly higher production and profitability as a group. In the medium term it is the demand for industrial output that will determine indus- trial growth. In certain industries, export demand will provide a strong pull on production; this is true, for example, for iron and steel, certain chemicals, some electrical equipment, processed agricultural products, and vehicles. But the impact of increased exports on overall industrial demand will grow only slowly given the current low share of exports in sales. If the higher growth and productivity in agriculture discussed earlier were to materialize, it would provide a significant stimulus to industry. It is difficult to specify the linkages explicitly; but because of the large share that agriculture holds in GNP, the coefficients do not have to be large for agricultural growth and the concomitant growth in demand for industrially produced inputs and mass consumption goods to boost overall industrial demand significantly. A higher public deficit and increased public investments are the instruments most directly under Government control, and also those that can increase demand for industrial products most immediately. The interim budget of the new Governnment moves strongly in this direction with a 240% increase in the planned budget deficit over 1976/77. 13. The general improvement in the supply of energy augurs well for India's ability to meet the needs of a more rapidly growing economy. Organ- izational and transportation problems in the coal industry have largely been overcome, production is sufficient to meet demand, stocks are comfortable, and the industry has good prospects for meeting both domestic and export demand. However, the supply of electricity continues to be a concern, since the power situation is not uniformly good. Power shortages affect a number  - 5 - of the more industrialized states, particularly Maharashtra in the west and Tamil Nadu in the south, and as a result, there is a continued constraint on the expansion of industry. This is despite a number of favorable factors: greatly improved capacity utilization in thermal power stations; more effi- cient exchange of power between states; accelerated implementation of power projects; and somewhat improved availability of finance for power investment. The underlying reason for the weak power supply position is that capacity shortages continue despite the improved investment program. In the short-term, the situation may improve somewhat if, as is hoped, reservoir replenishment is better than average during the last stages of the monsoon. The prospects for the oil and gas sector have been further improved by major new finds of oil and gas near the large offshore Bombay High field. Crude oil from Bombay High was brought to shore for the first time in May 1976; production reached an annual rate of 2 million tons by March 1977, and will rise to a level of 12-13 million tons by 1984/85. Although India will continue to import crude at or somewhat above the current level, much of the foreign exchange burden of rapidly rising imports will be avoided by the development of these resources. Prospects are also bright for further discoveries offshore, given the current high level of exploration activity. 14. Underlying all other development issues is that of population. Al- though India's population growth rate of a little over 2% is not high in com- parison with most LDCs, the size of the absolute increment - 13 million annually - is daunting. It appears, however, that population growth may have passed its peak in the 1960's, and it is expected to continue to slow down, both because the birth rate will continue to decline and because the death rate will not fall as steeply as in the past. With a sustained family planning effort, it should be possible to lower the population growth rate to 1.1% per annum by the end of the century. Our "best guess" projection of India's population by 2000 is 880 million. Many of the benefits of family planning policy will only be felt beyond the turn of the century, but the decline in fertility will bring about an early change in the age structure of the popu- lation. The school age group will grow more slowly or not at all after 1981 thereby reducing the pressures on the primary and secondary education system. The labor force, however, will continue to grow at a fast rate until the end of the century. 15. India's balance of payments position should be comfortable for the next few years. The combination of past global inflation and increased ex- ports have reduced the proportion of export earnings needed for debt service from 30% in 1970/71 to 16% in 1976/77. The ratio is not likely to rise above this level in the next few years. Given continuing favorable policies, the volume of exports should continue to grow by 7% to 10% annually in the near future; and import needs for fertilizer, POL and foodgrains will continue to require a diminishing proportion of available foreign exchange. The large inflow of private remittances shows no immediate signs of declining and should continue to bolster the foreign exchange position in the medium term. Imports,  - 6 - including a variety of capital goods, have already been liberalized signifi- cantly. Increased public investment and a revival of the domestic economy is likely to generate substantial additional import demand. However, this should be quite manageable, given the currently comfortable foreign exchange position, bright export prospects, and continuation of the current real level of net aid. The present situation presents an opportunity to raise the level of investment and, consequently, reach a more satisfactory level of long term growth. PART II - BANK GROUP OPERATIONS IN INDIA 16. Since 1949, the Bank Group has made 51 loans and 90 development credits to India totalling US$1,912 million and US$4,591 million (both net of cancellation), respectively. Of these amounts, US$820 million has been repaid, and US$1,552 million was still undisbursed as of June 30, 1977. Annex II contains a summary statement of disbursements as of June 30, 1977, and notes on the execution of ongoing projects. 17. Since 1957, IFC has made 14 commitments in India totalling US$58.4 million, of which US$13.0 million has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$30.9 million, US$24.4 mil- lion represents loans and US$6.5 million equity. A summary statement of IFC operations as of June 30, 1977, is also included in Annex II (page 2). 18. In recent years, the emphasis of Bank Group lending has been on agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit opera- tions. Major irrigation, marketing, seed development, and dairying are other agricultural activities supported by the Bank Group. Also, the Bank Group has been active in financing the expansion of output in the fertilizer sector and, through its sizeable assistance to development finance institutions, in a wide range of geographically scattered medium- and small-scale industrial enterprises. IDA financing of industrial raw materials and components for selected priority sectors has been instrumental in facilitating better capac- ity utilization in industry. The Bank Group has also been active in support- ing infrastructure development for power, telecommunications, and railways. Family planning, education, water supply development, and urban investments have also received Bank Group support in recent years. 19. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Government's priorities. The emphasis of the program on agriculture, industry, power, urban development and water supply remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs such as credit for on-farm investments, command area development of existing irrigation schemes, intensification and streamlining of extension systems, and seed production form an important aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefitting small farmers.  Projects supporting water supply, sewerage, and urban development also form an integral part of the Bank's lending strategy to India for the next several years. Leading in support of infrastructure and industrial investments will focus on agriculture-, export- and energy-related projects. 20. The need for a substantial net transfer of external resources in support of India's economy has been a recurrent theme of Bank economic re- ports and of the discussions within the India Consortium. Thanks in large part to the response of the aid community, India has successfully adjusted to the changed world price situation. However, the basic need for readily usable foreign exchange assistance, to augment domestic resources, assure effective utilization of existing capacity, stimulate investment and acceler- ate economic growth, remains. As in the past, Bank Group assistance for projects in India should include, as appropriate, the financing of local expenditures. India imports relatively few capital goods because of the capacity of the domestic capital goods industry. The import component of projects tends to be especially low in such high-priority areas as agriculture, education, and family planning. For the Bank Group to be able to make an appropriate contribution to the financing of projects in these sectors, it is important to cover a proportion of local expenditures. 21. It is clear from the review of the Indian economy that as much as possible of India's external capital requirements should be provided on con- cessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support, and some Bank lending to India, for which the country is creditworthy, is appropriate. As of June 30, 1977, outstanding loans to India totaled US$1,119 million, of which US$483 million remained to be disbursed, leaving a net amount outstanding of US$636 million. 22. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with an estimated 58%, 24% and 29%, respectively, in 1975/76. On March 31, 1976, India's outstanding and disbursed external public debt was US$13.1 billion, of which the Bank Group's share was 25%. The Bank Group's share is expected to remain around this level in the future. Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1975/76, about 15% of India's total debt service payments were to the Bank Group. PART III - AGRICULTURE AND IRRIGATION IN INDIA General 23. Agriculture is the most important sector in India; it engages 70% of the labor force, has recently contributed about 42% of national product  - 8 - and accounts for a major share of exports. Consequently, investments in agriculture have been given priority by GOI and the State Governments, espe- cially since the mid-1960s, and deserve continued emphasis in the future. 24. Since independence, the overall growth rate of agricultural produc- tion has averaged about 3% per annum. This low overall rate of growth in the agricultural sector obscures considerable variations over shorter periods of time, between crops, and between regions. The overall rate has been very much affected by the serious droughts in 1965 and 1966 and again in 1972 and 1974. At the same time, the success of high yielding varieties of wheat led to in- creases in wheat production of about 20% p.a. between 1967 and 1971. Other foodgrain crops, notably rice, have not enjoyed anything like the same success, as the introduction of high yielding varieties has encountered difficulties arising from local climatic and ecological conditions. The effects of the green revolution, which primarily affected wheat, have been concentrated in northwestern India, largely on account of the availability of irrigation in that area. 25. Despite the progress made in many aspects of food production, India's agriculture remains heavily dependent upon the weather. A major factor in reducing this dependence will be the rehabilitation and expansion of irrigation and the more effective use of existing investment in irriga- tion facilities. The Government is also placing emphasis on the improved supply of inputs such as seeds and fertilizer, agricultural credit, and extension services. Irrigation 26. Over the first half of the twentieth century, the area under irri- gation in India increased by only about 1% p.a. to reach slightly more than 20 million hectares in 1950/51, or about one-seventh of India's cultivated land. About half of the irrigated area was served by major and medium irrigation works. 27. Irrigation has received increased attention since independence, and substantial resources were devoted to it throughout the four Five-Year Plans. The area covered by major and medium surface systems and by groundwater devel- opment more than doubled to 19.6 million hectares and 16.0 million hectares, respectively, compared with an estimated ultimate potential for irrigation of 57 million hectares from major and medium surface schemes and 35 million hectares from groundwater utilization. During the same period, minor surface irrigation expanded more modestly from 6.4 million ha to 7.5 million ha, com- pared with an estimated potential of 15 million ha. While the increase in area brought under the command of new irrigation projects has been impressive, the increase in area actually irrigated has been more modest than the figures imply - particularly in the case of major and medium irrigation schemes. At the same time, in areas actually receiving water, irrigation efficiencies remain low.  - 9 - 28. The Second Irrigation Commission of 1972 and the National Commis- sion on Agriculture, which reported in 1976, found that the under-utilization of irrigation potential was attributable to the lack of integrated develop- ment in the irrigation areas, insufficient farmer training and extension ser- vice, and lack of administrative coordination. It has been estimated that the majority of recently completed irrigation projects require additional investments of up to US$600 per ha before they can become fully productive. Accordingly, for the Fifth Plan period (1974-79) various measures have been designed to improve utilization, and a Command Area Development Department has been set up in the Ministry of Food and Agriculture to coordinate work on a list of high priority projects. 29. In view of the emergence of farm technologies dependent on effec- tive water control - and given India's already substantial investment in major irrigation - the economic return on investment that improves water de- livery or else facilitates better use of the water provided can be very high. Consequently, rehabilitation and modernization of irrigation infrastructure as well as command area development have been given high priority under the Fifth Plan proposals, and a relatively large proportion of public sector investment in irrigation has been allocated for these purposes. Plan allocations have been supplemented by the resources of agricultural and commercial banks participating in financing command area development pro- grams through farm credit. In addition, major institutional changes have been proposed affecting the coordination of services in command areas and the administration of credit. 30. While emphasizing the need to improve water utilization through command area development, the Government is at the same time pursuing the objective of increasing the area under irrigation, in particular where only incremental investments are required. Thus, completion of on-going irri- gation developments is given equally high priority as command area devel- opment. Agriculture and Irrigation in Orissa 31. Agriculture is dominant in Orissa's economy, contributing about 60% of total domestic product. About 80% of the population of about 26 mil- lion depends directly or indirectly on agriculture, and about 75% of the work force is engaged in it. The land area covers some 15.6 million ha represent- ing 5% of India's total. The cultivated area is 6.8 million ha or about 44% of the total. The bulk of the balance is forest, covering 32%. 32. Paddy is the most important crop occupying 70 percent of all crop- ped area and contributing about one-tenth of the rice produced in India. Over 95% of paddy is grown in the kharif season, June to December, when moisture is available from the monsoon. In the coastal areas, paddy is virtually the only crop grown in kharif; in upland areas the cropping pattern is slightly more diverse; small grains, pulses and oilseeds are being grown in addition to paddy. About 25% of the area is double cropped, most of the second crop coming after kharif paddy on residual moisture. Statewide, in both the kharif and rabi seasons, other cereals (wheat, maize, millets and barley) take up another 7%  - 10 - and pulses 14% of the cropped area. This leaves about 9% of the cropped area for oilseeds (6%), fibers (1%), vegetables and spices. Rice yields in Orissa, as in other states of Eastern India, are low in relation to the rest of India. They range from 1.1 tons/ha in rainfed areas to about 2.0 tons/ha under rabi irrigation. Yields are about twice as high in Punjab, Haryana and Tamil Nadu. In neighboring West Bengal, with similar climatic patterns, yields are 30% higher, though a higher proportion of the crop is irrigated, about 40% as compared to 15% in Orissa. 33. There have been some increases in Orissa's agricultural production in the past decade, due to expansion of the area under cultivation (about 350,000 ha), increase of the irrigated area (close to 500,000 ha), and intro- duction of HYV seeds. However, against a population growth rate of 2.2%, per capita production has actually declined. Agriculture and allied activi- ties account for about 60% of State income at current prices, while the corresponding figure for all India is less than 50%. 34. The pressures of population and poverty in rural Orissa are consi- derable. Among Indian States, Orissa has the highest percentage of people living in rural areas (over 90%) and is also one of the poorest States in terms of per capita income. The population is stratified along caste, class and tribal lines and is caught in a web of social-economic relationships and land tenure systems that further hamper agricultural development and modern- ization. Small farmers, with holdings of less than 2 ha, represent roughly 2.6 million out of a total of 3.4 million cultivators' households. Although these farmers operate over 75% of all operational holdings, they control less than 40% of total cultivable land, while farms of 5 ha or more (representing less than 7% of holdings) account for some 35% of land. Adding to the skewed distribution of income in the rural areas are the landless and agricultural laborers, who constitute an additional 1.8 million households. Complicating the problem of size of holding is fragmentation, particularly in the delta areas, where an average 2 ha farm consists of 12 plots. The prospects for progress against the deep-rooted and longer term problems would be improved if some production gains could be achieved in the short and medium term. 35. A general review of Orissa's foodgrain potential and agricultural development constraints was undertaken by the Bank Group and the Government of India and of Orissa in 1975 with assistance of the IBRD/FAO Cooperative Program. This review led to the formulation of the Orissa Agricultural Dev- elopment Project (Credit 682-IN of April 1, 1977, $20 million) as well as this proposed project. The former project is designed to strengthen agricul- tural supporting services, particularly agricultural extension and research. It is aimed primarily at relieving the short-term constraints to foodgrain production. In the long run, however, irrigation is a prerequisite for stable growth in agricultural production. 36. Orissa has abundant water resources, theoretically sufficient to irrigate some 15 million ha. However, the potential for utilization of these resources is limited by a number of constraints, such as topography, over- concentration of water resources in certain areas of the State, and uneven distribution over the year with heavy concentration on periods when the need for irrigation water is lowest.  37. Development of major irrigation systemas in Orissa--with the excep- tion of the Mahanadi and Rushikulya Deltas which were begun in the late nine- teenth century--commenced only after 1950. One of the completed systems is the Salandi Irrigation Project, which was one of the first irrigation proj- ects supported by the Bank Group in India (Credit 14-IN of November 1961, US$8 million). Like other irrigation projects in India at about the same time, the Salandi Project did not fully achieve its agricultural potential due to inadequate supporting services and lagging construction of field channels and drains by the farmers. The problems encountered with projects such as Salandi have since led GOI and the Bank Group to reorientate their concept of sound irrigation development. Presently, two major multipurpose schemes and one major irrigation project are under construction in Orissa and will, when com- pleted, increase the area commanded by major projects to about 1.0 million ha. 38. The previous concentration of Orissa's irrigation development in the delta areas of the large rivers has resulted in regionally unbalanced growth in the State. In order to correct this imbalance, GOO started in the 1960's to construct some medium (2,000 ha - 12,000 ha) irrigation projects (MIPs) in areas where large scale irrigation and groundwater development is not feasible. But implementation was sluggish until the beginning of the Fifth Plan in 1974/75. Then, the general emphasis in irrigation development shifted from major to medium projects. Presently, about 60% of Orissa's investment budget for irrigation is allocated to MIPs (about $22.5 million annually, see para 41 below). Minor surface irrigation is of little importance in Orissa. Ground- water development, nearly stagnant at a low level until very recently, is now receiving increased attention. ARDC will help finance this development with financial support by the Bank Group under the Second Line of Credit to ARDC (Credit 157-IN of June 1, 1977, $200 million). PART IV - THE PROJECT 39. In support of GOO's development plan for medium-scale irrigation, the proposed project would finance construction works for about 15 medium irrigation projects (MIPs) (about 6 on-going and between 8 and 10 new MIPs) contained in the investment program for the next five years. These, when completed, would provide irrigation to some 66,000 ha of land throughout Orissa. The project would also support command area development (CAD) in three of the State's.major irrigation systems (Mahanadi Delta, Salandi, Hlirakud), through land consolidation on about 200,000 ha and on-farm works on 57,000 ha. 40. The CAD component of the proposed project was prepared with assist- ance from the FAO/IBRD Cooperative Program. The project was appraised by the Bank Group in October/November 1976. A Supplementary Project Data Sheet is attached as Annex III. A report entitled "India - Orissa Irrigation Project," Report No. 1558a-IN, dated August 25, 1977, is being circulated separately to the Executive Directors. Negotiations were held in Washington in July/August,  - 12 - 1977. The Borrower, the Government of Orissa, and the Agricultural Refinance and Development Corporation were representated by a delegation headed by Mr. D.K. Chatterjee, Director, Department of Economic Affairs, GOI. The Project 41. The proposed Project would support a five year time-slice (1977/78- 1981/82) of Orissa's medium irrigation program. This time-slice will overlap with the first two years of the Sixth Five-Year Plan, which is in its early stages of formulation. At present, it is projected to amount to about US$125.7 million. The Project would include construction, over the next five years, of about 15 MIPs covering about 66,000 ha throughout the State. Eligibility of MIPs for inclusion in the Project would be determined through procedures (para 48 below) and on the basis of criteria (para 43 below) agreed upon between the Association, GOI, and GOO. About 6 on-going projects that can be modified to meet the agreed technical and economic criteria (the remaining investment in these projects is estimated at $43.5 million) and between 8 and 10 new projects ($59.2 million), i.e. a total worth of $102.7 million (some 80% of the total MIP program of the State), are likely to be included in the Project. IDA financing of new MIPs would be limited to that portion of construction that would be implemented by the end of FY 1981/82. However, any MIP started under the Project would be completed in accordance with the agreed criteria. Assurances have been obtained from GOO that it would endeavor to make as many MIPs as possible eligible for financing under the Project (Section 3.09 of the draft Project Agreement). -- In addition, the Project would comprise land consolidation on 200,000 ha and on-farm works on 57,000 ha in three existing major irrigation systems. 42. Investment costs are substantially higher in MIPs (on average $1,220 per ha) than in major irrigation projects ($890 per ha). At present, lower standards of design, evaluation, implementation, and operation and maintenance apply to MIPs than to major irrigation systems. These lower standards result in considerable waste of water and rapid deterioration of the canal system. Deficiencies in the presently applied standards include: unreliability of the data base used in the planning process; lack of soil and agricultural surveys, resulting in unrealistic assumptions about cropping patterns; underestimation of water losses in conveyance and on the fields; reliance on farmers for con- structing field channels from outlets serving 40 ha blocks without providing funding, guidance in design and implementation of these works. Inadequate canal bank compaction, combined with poor maintenance, has led to a severe deterioration of the conveyance system and in turn to high operational and seepage losses. 43. In order to ensure that projects to be financed from the proposed credit are adequately designed, built and operated, basic data requirements, specific criteria for planning, design and construction, and a minimum level of economic viability have been established for MIPs. Projects to be financed from the credit would be prepared, designed (or redesigned) and constructed in accordance with these requirements and criteria (Schedule 4 to the draft Development Credit Agreement). The economic criteria would ensure that individual subprojects would have an economic rate of return of at least 12%.  - 13 - The procedure of financing a time-slice of GOO's medium irrigation program, in combination with the establishment of technical and economic criteria, would provide an opportunity to review in depth the largest part of Orissa's irrigation sector and to make an impact, Statewide, on technical and economic standards applied in MIPs. 44. Each MIP that would be included in the project would generally consist of an earthfill storage dam with a gated spillway, an unlined canal network, which would deliver water through outlets serving 5 ha blocks, and a drainage network connected to major natural drains. The average cost is about $1,220 per irrigated ha, ranging from $1,000 to $1,550 per ha. Nor- mally, the dam accounts for about two-thirds of the cost and the conveyance and drainage networks for about one-third. Due to size, number and distri- bution of MIPs throughout the State it would not be feasible to establish command area development organizations in each project as for major irriga- tion projects. Instead, proper water supply to each farm would be ensured by extending the canal system from the standard 40 ha outlets down to turnouts serving 5 ha blocks. Assurances have also been obtained from GOO that the staffing of agricultural extension services will be maintained, at this stage of development, in conformity with the Statewide standards agreed under the Orissa Agricultural Development Project referred in para 35 above (Section 3.05 (b) of the Project Agreement). 45. The main objective of the command area development (CAD) component of the project is to optimize the productive use of available water resources in three existing major irrigation systems in Orissa. This would be achieved through land consolidation and provision of irrigation and drainage facilities at the farm level with associated control structures, lining of critical water course sections and proper land development. Water distribution to each farm would be ensured, and proper drainage would eliminate waterlogging in low lying areas. The results from pilot operations in Orissa indicate that likely benefits would include a 20% to 30% increase in yields and water savings that would permit a 20% to 30% increase in the irrigated area. 46. In the existing highly fragmented land holding pattern, land consol- idation is a pre-condition for on-farm works to make rotational irrigation manageable to the farmers. Experience from CAD pilot operations in Orissa and from other States, where large scale CAD has been attempted, suggests that major obstacles to the successful implementation of such CAD programs are obtaining the right-of-way for field channels and drains without payment of compensation for land and the large number of farmers ineligible for bank loans due to unclear land titles. Both obstacles would be removed in the course of land consolidation, which would precede the construction of on- farm works and which, for a given area, would take three years to implement. Since the start of the land consolidation program in 1974, about 15,000 ha have been consolidated and work is underway on about 160,000 ha. The land consolidation program included in the project would cover about 200,000 ha. It would be implemented over four years in accordance with the Orissa Con- solidation of Holdings and Prevention of Fragmentation Act of 1972, which  - 14 - allows rearrangement and redistribution of land in compact rectangular blocks. In the course of such land consolidation, land titles are cleared and land is set aside for communal purposes such as field channels and drains. 47. On-farm development included in the project for about 57,000 ha, generally on consolidated land, would mainly consist of constructing field channels and drains with masonry checks, turnouts and drop structures. About 20% of the field channels would be lined. Land shaping and leveling would not be required, since most of the areas to be covered are bunded and levelled. Project Implementation 48. Because of the large number of MIPs to be financed under the pro- posed credit and the relatively small size of the individual MIP, and because of institution building objectives (see para 49 below), a central feature of the proposed Project is that appraisal and routine progress review of individual MIPs would be delegated to GOI's Central Water Commission (CWC). A special Appraisal Committee (AC), consisting of engineers, agriculturalists and economists is being established in the CWC for this purpose. The appoint- ment of a director of the AC and staffing arrangements for the AC satisfactory to the Association would be conditions for the effectiveness of the credit. Under the general guidance of IDA, the AC would appraise and monitor the pro- gress of individual MIPs in accordance with technical and economic criteria and procedures agreed with IDA (paras 41 and 43 above). Potential MIPs have been identified in the Master Plan of 1972 for irrigation development. Determining priorities for preparation of MIPs would be the responsibility of the GOO Secretary of Irrigation and Power after consultation with other concerned GOO departments. Subsequent to the approval by GOO technical and administrative departments and to the overall financial clearance by GOO and GOI, the MIPs would be submitted to the AC for appraisal. The AC would visit the project area and for each MIP. prepare a project summary to be submitted to the Association. If the MIP meets all established criteria, costs less than Rs 70 million ($7.8 million) and has a benefit/cost ratio of better than 1.0, the CWC would be authorized to approve the project. In all other cases, the project would be reviewed in detail by IDA before approval. To establish quality standards for CWC appraisal work, full documentation for the first three MIPs, irrespective of cost, would be submitted to IDA for approval. With these procedures, it is expected that about 40-50% of all MIPs to be financed from the credit, representing more than 60% of total costs, would be submitted to the Association for detailed review and approval. 49. The AC would also closely monitor the progress of preparation, implementation and operation of the MIPs. Frequent progress reports would be submitted to IDA. The main activities of IDA would concentrate on assessing the quality of AC appraisal and review work, reviewing procurement procedures, spot checking whether the agreed criteria have been followed, reviewing the financial records kept by GOI and GOO, assessing the continuing appropriate- ness of the established criteria, and examining content. timing and adequacy of the reports to be submitted by the AC to the Association. The proposed procedure for implementation of the MIP component of the Project would be  - 15 - a major step toward the objective of building up a capable and responsible project preparation and appraisal unit at the Central Government, with exper- tise on all aspects of irrigation development. 50. The Irrigation and Power Department (I&PD) of GOO would be respon- sible for implementing all irrigation works. Field works would be technically and administratively controlled by the Divisional Executive Engineer. Pro- gress of project implementation would be reviewed by AC three times during each year; at least two of these reviews would be during the construction season. Labor-intensive methods would be used for all construction works. Responsibility for day-to-day operation of each MIP would rest with the sub- divisional Assistant Engineer. Water allocation, on a rotational basis, would be established at the beginning of each irrigation season by a comittee of technical and administrative officers and a representative of the locally elected body (Section 2.02(d) of the draft Project Agreement). I&PD would be responsible for maintenance of MIPs. 51. The Consolidation Unit of GOO's Revenue Department would carry out the land consolidation program. A special feature of the consolidation scheme is the involvement of the concerned village community in all stages of opera- tion. For this purpose, a Consolidation Committee comprised of at least one landless agricultural laborer, one representative of each category of land owners, and one person from Scheduled Castes and Tribes would be set up for each village and advise consolidation officers on matters such as land values and allotment of consolidated holdings. The Agriculture Engineering Organi- zation of the Directorate of Agriculture and Food Production would be respon- sible for planning, design and implementation of on-farm works. Their activ- ities would be coordinated by three of the Command Area Development Authorities (CADAs), which were recently established for the existing major irrigation systems in the State to ensure full cooperation among the various departments concerned with CAD. Cost of on-farm works would be charged directly to the beneficiaries. Financing for such works would be available to all farmers from land development banks (LDBs) and commercial banks (CBs). Loans for eligible farmers secured by mortgages would be for a maximum of 15 years in- cluding a grace period of 2 years, at a minimum interest rate of 10.5%. Far- mers, who are ineligible for such ordinary loans would receive unsecured Special Loans on the same terms but at 14% annual interest. Secured loans would be refinanced at a rate of 90% by the Agricultural Refinance and Dev- elopment Corporation (ARDC), to which a portion of the credit proceeds would be relent for this purpose (para 53 below). Unsecured loans would be fully refinanced by a Special Loans Account agreed upon among GOI, GOO and ARDC to be set up in ARDC with a 50% contribution by GOI and 25% contributions each by GOO and ARDC. Project Cost and Financing 52. The estimated total cost of the project is $116.0 million equivalent (net of taxes and duties), including $20.0 million (17%) in foreign exchange. The principal cost components, including a provision of 20% for physical con- tingencies, are: medium irrigation projects (US$81.1 million) and command  - 16 - area development (US$10.8 million, including US$6.7 million for land consol- idation and US$4.1 million for on-farm works). The balance is made up by expected price increases (US$21.6 million for MIPs and US$2.5 million for CAD). 53. The proposed credit of US$58.0 million would cover 50% of project cost, including all foreign exchange costs and US$38.0 million of local costs. Local cost financing is justified in India for projects such as this for the reasons discussed in paragraph 20. GOO would finance 48%, while 2% would be contributed by ARDC, LDBs, CBs, and the farmers. All contributions of ARDC, the Banks and the farmers would be for the US$5.2 million (including physical and price contingencies) on-farm works component of the Project and would rep- resent, of the cost for this component, 36%, 10% and 8%, respectively (with the balance of 46% coming from GOO). Of the proceeds of the credit, GOI would channel US$55.6 million to GOO on the standard terms and arrangements on which development funds are being provided to State governments by the Center. US$2.4 million would be passed on by GOI to ARDC for up to 15 years at not less than 7.25% annual interest. ARDC in turn would refinance 90% of the on-farm work loans extended to farmers by the LDBs and CBs at not less than 7.5% annual interest, repayable in accordance with the terms of the loans to the farmers. Procurement and Disbursement 54. The proceeds of the proposed credit would be used to finance: medium irrigation projects (US$52.3 million), land consolidation (US$3.3 million) and on-farm works (US$2.4 million). 55. Civil works for MIPs (US$67.6 million net of physical and price contingencies) would be labor-intensive, relatively small, and restricted to seasonal construction. In these circumstances, it would not be feasible or economic to combine them into contracts large enough to attract international competition. It is therefore proposed that they be carried out by local con- tractors in accordance with GOO's present practice under on-going projects. Current practice is to contract most of the construction works for dams, spillways, structures and distribution networks after local competitive bid- ding. The remaining works are executed under small unit price contracts. Where bids are not received, e.g. due to the remoteness of an MIP area, the work is being implemented under force account. Force account work would also be used when required by safety or quality considerations; such force account work, however, would be limited to a maximum of 25% of civil works. On-farm works in major irrigation commands (US$3.4 million net of contingencies), mainly field channels and drains and associated small masonary structures, would be built by manual labor, the most economic and practical means. Con- tracts for these works would also be small and would be let on a unit price basis to small village contractors. These procedures are satisfactory to the Association. 56. The proceeds of the credit would be disbursed for approved MIPs against 65% of expenditures on civil works. Disbursements for CAD on-farm works would also be on a percentage basis (55% of ARDC's refinancing). For  - 17 - land consolidation, disbursements would be made at the rate of Rs 150 per ha. Disbursements for force account work, for on-farm works, and for MIP contract works of less than Rs 50,000 would be made against certificates of expenditure from GOO and ARDC, as appropriate. The supporting documents for these pay- ments would not be submitted to the Association but would be retained by GOO and ARDC, respectively, for inspection by IDA Project review missions. Dis- bursements for land consolidation would be made against certificates of com- pletion. The credit would be expected to be fully disbursed by October 31, 1983, about one year after completion of the Project. Benefits and Economic Justification 57. The proposed Project would expand by about 89,000 ha the area under irrigation and also increase the production efficiency of existing irrigated land. At full development, the project would increase foodgrain production by some 110,000 tons and generate about 30,000 and 13,000 additional full time jobs in farm and non-farm sectors, respectively. Valued at projected inter- national prices, the increased foodgrain production would be worth about US$20 million annually. An additional advantage of the Project would be the geographically wider distribution of direct and indirect benefits from irri- gation throughout Orissa, which would induce more even economic growth in the State. 58. According to the economic criteria for MIPs, CWC would be authorized to approve projects with. an economic rate of return exceeding 12%. Based on an estimated average investment cost of $1,220 per ha for MIPs in Orissa's project pipeline and on a projected "typical" cropping pattern the average economic rate of return of MIPs is estimated to be about 18%. for the CAD program the economic rate of return would be about 34%. Since the MIP and CAD components account for US$102.7 million and US$13.3 million (or 88% and 12%) of project cost, respectively, the overall economic rate of return for the Project is calculated at about 20%. 59. Net farm incomes would rise substantially under the project. Under the MIP component, the incomes,of about 30,000 farm households, mostly (88%) at or below the minimum subsistence level (US$30), would increase by an aver- age of 180%; thus, at full development, the percentage of farm households below the minimum subsistence level would be greatly reduced. Similarly, the share of farm households below the poverty line (US$60) would be reduced from 96% at present to 70%. On-farm works under the CAD component, which would mainly benefit farmers with land at the tailends of the irrigation outlet blocks, would raise their incomes (net of loan repayment) by between 15% and 30% and thus substantially reduce or remove the present income dif- ferences of about 30% between headreach and tailend farmers. 60. If costs for operation and maintenance (O&M) and for capital in- vestment were to be recovered from beneficiaries over 30 years at 10% annual interest, the annual charge to farmers would amount to about Rs 1,250 per ha. Assuming that all incremental production will be marketed, water charges and other irrigation related levies and taxes in Orissa at current levels would, as the Project is being implemented, result in incremental collections of  - 18 - about Rs 215 per ha per year for the typical cropping pattern of an MIP. Of this amount, only about Rs 35 would stem from water charges. These low over- all charges reflect the low taxation rate of Orissa, whose per capita revenue ranks 17th among the 21 States of India. Consequently, the States's ability to increase investments in agriculture without a higher rate of cost recovery, would be severely constrained by its budgetary resources. However, cost recovery must be examined in the light of the economic condition of the beneficiaries and their capacity to pay. The average per capita income in Orissa, ranks 16th among the Indian States. The proportion of the rural pop- ulation below the poverty line is larger in Orissa than in any other State. The average annual per capita income in rural areas is only about US$78 or about three-fifths of the average per capita income for India. The widespread poverty in the State and the low and uncertain benefits that farmers obtain from existing irrigation schemes make it politically difficult for GOO to change water rates and similar charges in the immediate future. Benefits from the Project would not be realized fully and perceived by the benefici- aries until the mid-1980s. Nevertheless in view of gradually rising incomes in line with Project implementation, the ability of farmers to pay higher water charges needs careful monitoring, with a view to drawing up a feasible cost recovery plan. To this end, GOO has agreed to review, by December 31, 1979, the State's system of water and water related charges, and to implement an appropriate system of such charges, based on the recommendations arising from the review, in consultation with the Association (Section 3.03 of the draft Project Agreement). Proper consideration would be given to incentives for and payment capacity of farmers, and to the objectives of ensuring full recovery of operation and maintenance cost, and as much as possible of capital cost. Project Risk 61. The risks associated with the Project are essentially those normally associated with irrigation projects in India. For the MIP component, special risks stem from the use of standardized yield and input projections in the economic analysis of sub-projects. Since agro-economic conditions in all MIP areas would be broadly similar, the error introduced by using standardized projections in evaluating an individual MIP would be small. Moreover, the overestimation of actual benefits for one MIP would likely be compensated by the underestimation of benefits for another. Another risk is associated with the delegation of primary responsibility for field appraisal, approval and routine progress reviews for qualifying MIPs to a new, untested organization in the Central Government. However, this risk would be minimized by the various measures and qualifications described in paragraph 48 above and the expanded reporting arrangements that would permit the Association to identify problems early and to intervene directly, if necessary. The risk associated with the CAD component is small and acceptable considering the significant returns foreseen and the successful experience in pilot operations.  - 19 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 62. The draft Development Credit Agreement between India and the Association, the draft Project Agreement between the Association and the State of Orissa, the draft ARDC Agreement between the Association and ARDC, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association, and the text of a draft resolution approving the proposed credit are being distributed to the Exe- cutive Directors separately. 63. Special conditions of the Project are listed in Section III of Annex III. The appointment of a director for the Appraisal Committee, and staffing arrangements for the Appraisal Committee satisfactory to the Asso- ciation are additional conditions to the effectiveness of the credit (Section 5.01(c) of the draft Development Credit Agreement). Financial arrangements for relending part of the proceeds of the Credit (US$2,400,000) by India to ARDC and the establishment of a Special Loans Account for ineligible farmers under the Project are conditions of disbursement in respect of the on-farm works component of the Project (Section 3 (b) of Schedule I to the Development Credit Agreement). 64. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATIONS 65. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President By I.P.M. Cargill Attachments August 23, 1977  -~~~~~~~~~~~~~~~~~~ .01 S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1 C C l.a a 4-0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C'*' 111~~~~~~~~~~~~~ a z o IL 0 4 4 -e - Ij~~~ .11 SIP Ill CS s04 - C I . I 000CC . W- C NO A ha C aOl - C C 4NN - 4 a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~W ~. . - isa a -.-. a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~6 w.0Z a - C X L a ' . WS - I-.. a~~~~~~~~~~~~~~~~~~~~~~~~~~~0 I M C.CC W ~~~ -I -IIftw = ~ CC U ~~*C 4 00 CNC4C C CCC 010 CC C, a*C C C - O Ct 00Cx I LI tIC C 04 COOIOIC CS'S 11.-.Iv ~~~~C- S- C 0C vC 0 CC 4 1 C C C C I' - ne,- 0 a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~w ~ -aw~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 aO WWw'  ANNlEX I Page 2 of 4 NOTES nin otbenaise noted, data for 1960 refer to anY year between 1959 and 1961, for 1970 betwee 1968 and 1970 and for Moot Recen.t intimate between 1973 and 1975. -0 Er-il has been enlenned soa bjecteive cutry bec...ee of it. sine and rasperable probles of regional inequality. INDIA 1960 /a1951-61 overge; lb 1951-60; Ic Ratio of population coder 15 and 65 and ove to labor force sge 15 and over; Id Regia.rrd applioantn for wok; /0 1962; If Rogitsornd, not all prt-toe.9ingt the -teety; IA Inoloding midwives; lb 1958; It 1960-62. 1970 Rateri of populstion coder 15 and 65 and ove to labor force sge 15 and ove lb 1967-68; Ic Including midives; /d 1967. HilT RECfTif ESTTKATE: Ia 1971: /b Ratio of popelation ondor 15 and 65 and ovn to labor feronagn 15 sod over; It 1976; Id Including midwivn; In 1969-71 avnrgn; /f Population It ynars and over. ENDO7NESIA 1970 I 1961-71; lb 1971; / Ic eluding nidsivec d Total hospital bedn inconpiete. PHILIPPINIS 1970 /A.t percentage Of mPloynent; lb Rot including private -ontiona sboo.l.. BR.AZrl. 1970 /a Enomi-allY attics popolstion; lb Hospital peraonnnl; It Inside only. RIO, April 18, 1977 DEFINITIONS OP SOCIAL. INDIGIATORE Land Area (thou km ) Poculetion per -urola corset - Pupolatiun dielded by numbher of pr-uti- Total - Total cufauc arca uosprmicia load uro and iblend -atro. tint molt and f-Iul grodoc to cre,"tr-ined or `cortified"l Agri-. - MHue reuttotmt of agri.ultura1 area used tonporrily or n-roe. en d ..neiliarY Personnel iub tiroitg nopor lopti..- perv..t. ily for cropc, pscturoe, esrket & kitrh- gardtno or to lie Poculution pt- bosptli1 bed - Pupol1-luc divided by norbor of boepital fellow bode avilable in publit end Prlo-te gane.. ca .d synuielicod hoapitol end r=bbilitatios aentoro; eculedoc nuring h.... snd eetablishe,ntrc GN,iPper -p ite (US)) - GNP per uspit. octistes aet curret maket pritoc, let tuctodisI etA proce-ti- torn. taIlcoletd by none eneo.. ien -otbod on World Benk Atlon (1973-75 bests); Pot capita cutely of uc is(7. of -esniroenotr) - Ceepsted from 1960, 1970 end 1975 data. energy equilnalot of not food oppyliee seilakie in -tocty per capita Per doy; -olluble cuyylics -upriso de...etit pr-d-utie, imports less Puceletion end viral tisistite ne.prte, ed ubangos in crck etspplies- cecludo nmlfo,se Potcls_ion (old-cr. mullion) - As of JulY first: if nor soslsbie, quantitis _cd in icdProo iong cod losses in din_ribuie In re courage Of two end- your eieo;1960, i97i end 1975 dti. -oni ere e-ti-utod by PAl haoe.d to pbycielgi-ai noeds for tonal actidity cad boclth toncidnoing o-itrcooata1 tonys.tatre, body ueigbte, PPaclarion de...lly - pr turt c - 91d-yoct popalatioc pot equat bile- age and coo distributina of yopulctien, end allusiag lit for canto coetr (10 beutaroc)r of .tur cree. at h.u.eholdI level. 'opolctio d-eity - cot scer. km of antic. icend - Computed an abo- for per cepit. ..c.. o f pet.ein (icons per dyc) - Prteoin -tenrt Of pot egricultnrl land .t,Y. "ePit'el Iupy ffoo yc dey co 'upY of fod Is defined a fuel1 tnicrti-n Receorcb leries provide for oinitim_ alluctue- of 60 g-am Of Crudo birth ratePer thousaod, -e-gse - Acasal lIeo births per th-u-cd total preotei per dey, end 20 go onef unimal cod pelce p-etei, of of mld-yecr poputiun; ron-year soitbeetie a-orgen odlag in 1960 sad chick 10 grmo hboud be caimal yr-tein; theno t-ed-rd arc eer 1970, and flo-year acreg ending Ia 197 Icr mos r00rn tae e hs f7 ro nttlpoencd7 on fale rtl Crude doeath taco - co ib.s.. ndnr--ao- A -aa1 deaths per tb-asod,of old- aan a-rgo for h.c word, p-pc...d by FAO in rho Third World Feed year popuaIo~e~n; ton-year arithme.tic averges anding ic 1960ed170nad Surcey. lic _ e-or aoog nd Ing in 1975 for meat raeor. estiacto. Per -spita protein au 1y fro stiedI sad polac - Protein aupply uf feed lafant mortality tore (/thou) - Anancl deutbe If infants cdor one year do-i-d from. aelal cad prIso .. grum St cp dcy. ofaeper tbhcecd lIce kirtho, ...Death race C/thee) coos I- - Annual deths per tbhnncd in age grop 'If. ceo ctanoc ikjos crg number of pact or f life rond- 1-b years, to hiidr- inthIis age group; cigo-ted ca00ldicator of leg si birth; eealy f _eYnr --aaco ending io 1560. 1970 cod maln_rrilco. 1975 fr dove.lopiag tceries. Cret roc dcutionosto-Avtraioe nuber of liv e dc-gb ot e oowil Bdo...ttin boar in boo norma rproducri_cer yInd ifh.b -pe-ie..c.. preent age- Adjusted onocllmeat oct10 - icy school - inEl..ooc.t of all guesc upeclfic fertily rcrc; ua..ely fiv-your -orgacen -ding in 1969, pretg ofriaycb-geppltiun; iculodos hbildroo aged 1970 and 19751 for deoelcpiag .. cutries. 6-,11.yea.rs but.adjocrod fec diffre-t lengtha of primary Iduce.tiom; PopulatIon 0R_wth yaLe(7.) - total - Ceapound anneal g-oth rots of old- forcutries ith unlo-nl ed-cti-, coroll ...t say e.eod 100% y..t population fcr 1950-60, 1960-70 sad 1970-75. sInce some pupils ar bole- ar bhev the ufficlal scbcel ago. Pecu,.iatt growth r-to (7. - orbc - Competed liko g-uth otet of t.ta1 Adfated onrelLoet ra,tio - secodary school - Computed an bov-; popalction; difforot dc initiate of orb-a areas nay affet coapar- _eonda~y educat Ionr tsa es four yoaa of apyt-vd poioary bil ity of date on nag eoorilo. iaatouuticn; pre-idec gnera, octiua tahrraniag Ulrban ceculatien 17 of total) -, Rtio of urha to total papu1otica; letruc ti... far popil In f 12 10 17Yearn of ago; c-r-ep-adeac differet definitions Of urba -ec nap affect cap-rbility Of data corsen are goercIly -1cldod. _~noagceuatoien loan of ubho.liac pravided (fIrst ond secood I-oo ) - Tote1 yours of Ag lt.r5M Et- Children (0-lb years), ecoking-age (15-64 yecr... schooling; ot soc-dary,lord, vocatioa .. nt. ctla my be Per- and retirod (65 yson ae aver as perceatagon of old-peat population. tio1Iy or _oclteoly souludad. Agc doedo..cY ratio Reta of population -dar 1) and 65 and Ine to Vocat ioa ...oInlIIar (7. of secondary) - Voca.tional iastltuti... tboce of ages 1) tbronib 6b. include technicci, indantriul or othor pr-grum which operat icoo..Ic dependecncy ratio - Relic of poynlotion under 1) and 65 and Ico iodepoo.doatly or a doperio..ala of necendary in,etirutioac to th e labor farce inage8 graup of 15-6b Yoaoe Adult literay rate(.) Literate adolta(beb to read end -wire)c family pc-ig-acptn (cumulative, thou) 1- Cutie- cooker of p-rcntcge of total adult .pclstion eged 1) years and ove. acco pturn of kirth-ctrt-I de-icen undot auspices Of national family plenting progrum tit..ienlacotie. tus Pa_lly planin. -ses(7. of caroled cu ) - r tten eg of earried Pasper r... (urban) - Aorago ...abor of po-ona Per r..a in wmnof child-beaing ago (15-his yean)wT hon I h Ith-coctrel device accupid --nv tir..nal daciliga In urbn since; duclliage enciwde to all eartiod women in -m gie group. nun-perman.ent structures od ...ccopiod parts. Oc...cied duelliaga witbhar pipod actor (7. - Occpied c-Ontie..al Imploycoct doellingSein urba and rura a reas ithuct hsido to outside piped Total labor fore (then...ad) - Ec..ia.yatis .esos inuloding eater facilitico as perentage uf all occpied delling. armed f-ren cd u-uployad bat . aludig .. boneics atudot, sic.; Access, to etlectricIty (7. of all decilinges) - C-nconioocI deniliags I defintions . it verb ... centiree aretnroupa-ble. oib, elocloicity in lioiag quaters an periont of rural dwellingst taboo force in agiotue(. - Agri-nItor..l labor farce (in faning, -rhan and rura aras foro-etry, boating and fishiag) an percentage ef tura la1 bor force. Rural.deelli... cocantod to electricity (7. - Computed as shee far Uampeyo (7. od f labor force) - Uaceploynd are useoily defined anrural dwellings only. petr.... r en ble ad nilliag to tko a jth, out of a job u give day, r-mined oatIof a Job,esad seking cork for a spocified Consumtion niniona period not eacoediag Ins cook; nay not bn cump-rble betnnen Raitotes (per tboc poo) - All typos of receivers for radio honed- cu..ntries dan t. different dofisition. of napnnyled end ..urce Of cents to gonera. 1public per theus...d of populalion; ocnc data,e.g. eploym..t office etatiotics, smplo --rcys, cuepaisory unic ecd oncoiv-rs it contries cad in ysatn chen registration Of saolyme -auace. r.dim nets can in effect; date fo recant years esy act be ...mperable Incom Distribntion - Percentage of private iacome (both in cah and Paansantcar (pr thou cp.) - Passenger cars cnpo ise motor cat kind) -recel-d b-y richest 57., richest 207., peorost 207., and poorest seating teenithan eight pensc...; e-cludos obulancen, bearsosua.d 407. uf hoa...bhlde. mii tarY enhile. Electricity (kwh/yr pot tap) - Annual censu..pti-n of iadcntria1, co Dintoibation of land .-ethipc-Pert...tagen of land oumed by neaItibot -orial, public and prio-to electricity In kilo...it boors per cpita; 107 ..ad poorest 107. of lead enr.generall1y based on prod-cti- data, with oct alieneee for losse is grids hat alewiag for iaports and nopert of electricity. Health and Nutriti-n Newpriat (ay per cap) - Per capita annual cnonumprtia in kilagrons .Poplation potphysician - Pepalatica divided by numbo cf pr-aticing antimatod foco do....ric predection plan net imports of oewprint. physicists qualifiod from a m.edical s-heolat usivereIty level.  ANNEX I Page 3 of 4 BCONOMIC DEVEOMlENT DATA GNP PER CAPITA IN 1975 -a USS 150 GROSS NATIONAL PRODUCT IN 1975/76 - ANNUAL RATE OF GROWM (%. constant prices) USR Bln.