India - Gujarat Fisheries Project

Report No. 1326b-IN India Appraisal of Gujarat Fisheries Project March 16, 1977 South Asia Projects Department Agriculture D Division FOR OFFICIAL USE ONLY Document of the World Bank 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 US$1.00 Rs 9.00 1/ Rs 1.00 US$0.111 Rs 1,000 US$111.111 Rs 1,000,000 US$111,111.111 WEIGHTS AND NEASURES Metric System ABBREVIATIONS ARDC - Agricultural Refinance and Development Corporation CCB - Central Cooperative Banks CCC - Central Coordinating Committee CIFT - Central Institute of Fishing Technology CMFRI - Central Marine Fisheries Research Institute EFP - Exploratory Fisheries Project FPCS - Fishermen's Primary Cooperative Societies FTD - Fisheries Terminal Division GDF - Gujarat Department of Fisheries GFCCA - Gujarat Fisheries Central Cooperative Association Ltd. GOG - Government of Gujarat GOI - Government of India GPD - Gujarat Ports Directorate GSCB - Gujarat State Cooperative Bank Ltd. GSLDB - Gujarat State Land Development Bank Ltd. DACFF - Department of Agriculture, Cooperatives, Forest, and Fisheries ICAR - Indian Council for Agricultural Research ICB - International Competitive Bidding MFV - Mechanized Fishing Vessels (Trawlers or Gillnetters) MPEDA - Marine Products Export Development Authority MES - Monitoring and Evaluation System PISFH - Pre-Investment Survey of Fishing Harbors PSC - Project Supervision Committee RIK - Reserve Bank of India SFDA - Small Farmers Development Agency 1/ Until September 24, 1975, the Rupee was officially valued at a fixed Pound Sterling rate. Since then it has been fixed against a "basket" of currencies. As these currencies are floating, the US Dollar/Rupee exchange rate is subject to change. Conversions in this report have been made at US$1 to Rs 9.00, which was the short-term average rate prevailing at the time of appraisal, May 1976.  FOR OFFICIAL USE ONLY INDIA APPRAISAL OF THE GUJARAT FISHERIES PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS ..... ......................... i - iv I. INTRODUCTION ............... .......................... 1 II. THE FISHERIES SECTOR ............... ..1................. General ..... 1 Marine Fisheries in Gujarat ...................... 2 Traditional Marine Fisheries ..................... 3 Fishing Harbors ............. ..................... 3 Marketing ....... ............................ 5 Boat Building ...... ........................... 5 Fisheries Credit ..................................... 5 Fisheries Extension Services (GOG) ............... 6 Development Policies ..... ....................... 6 III. THE PROJECT ........................................................ 6 General ....... .............. ..................... 6 Detailed Features ....... ..................... 7 Assistance to Traditional Fisheries .............. 9 Provision of Net Making Machines .. ............... 10 Technical Assistance ..... ........................ 10 Project Implementation ........................... 11 Project Beneficiaries ..... ...................... 11 IV. ORGANIZATION AND MANAGEMENT ..... ...................... 11 General ....... ................................... 11 Gujarat Ports Directorate ..... ................... 12 Gujarat Fisheries Central Cooperative Association .................................... 12 Gujarat State Cooperative Bank Ltd. .... ......... 13 Fishermen's Primary Cooperative Societies ....... . 13 Agricultural Refinance and Development Corporation 14 Fisheries Terminal Division ........... ........... 14 Central Coordinating Committee ......... .......... 15 Monitoring, Evaluation and Reporting ............. 15 This report is based on the findings of a mission composed of Messrs. R.L. Headworth, E. Chobanian, C. Helman, F. Kada (Bank) and M. Hewitt, J. Marr and P. Mornement (Consultants) that visited India in May, 1976. This disument has a retricted distribution and may be usod by recipients only in the performance of their .Alicial duties. Its contents may not otherwise be disclosd without World Bank authorization.  -2- Page No. V. COST ESTIMATES AND FINANCING ......................... 15 Cost Estimates ...... .................... 15 Financing ............................... ......... 17 Lending Terms and Conditions .................. .. 17 Procurement ...... ............................... 18 Disbursement ...... .............................. 19 Accounts and Audit .................... .. ..*.... . 19 Subsidies ....... ................................ 20 Boat Risk Fund ...... ............................ 20 VI. PRODUCTION, MARKETS AND PRICES, AND FINANCIAL RETURNS TO PROJECT BENEFICIARIES .................... 21 Production .................... ................... 21 Market .......... ................................ 21 Prices ............ . .............................. 21 Financial Returns to Project Beneficiaries ...... 22 Financial Returns to Government .... ............. 22 VII. ECONOMIC BENEFITS AND JUSTIFICATION .... .............. 23 VIII. RECOMMENDATIONS ...................................... 24 SCHEDULE A - PROJECT LENDING TERMS AND CONDITIONS ANNEXES 1. Marine Fisheries 2. Fishing Harbor Facilities 3. Shore Facilities and Services 4. Marine Fishing Vessels 5. Traditional Fishermen Component 6. Technical Assistance 7. Project Implementation Schedule 8. Cost Estimates 9. Estimated Quarterly Schedule of Disbursements 10. Monitoring, Evaluation and Reporting 11. Organization and Management 12. Marketing and Prices 13. Cash Flow Projections 14. Economic Analysis CHARTS 16235 - 14.8 m (48 ft) Trawler/Gillnetter 16236 - 9 m (29 ft) Canoe 16634 - Fishery Harbor at Mangrol 16633 - Fishery Harbor at Veraval MAP 12317 - India and Gujarat State 12318 - Gujarat Fishing Villages  INDIA GUJARAT FISHERIES PROJECT SUMMARY AND CONCLUSIONS i. This report appraises a fisheries project in the State of Gujarat. The project involves a total investment cost of US$38 million for which the Government of India (GOI) has asked for an IDA Credit of US$4 million and a Bank loan of US$14 million under Third Window terms. Objectives ii. Both GOI and Gujarat Government (GOG) attach high priority to developing marine fisheries in the interests of increasing protein supplies and exports, and of improving employment opportunities in fishing districts. Up to now most of the GOG efforts have gone into sponsoring the use of me- chanized fishing vessels (MFV) and the modernization of traditional fishing craft and gear. This drive has been generally successful, but the growth in catching capacity that it has generated is now placing great strain on exist- ing fishing harbors and on marketing channels and facilities. The project described in this report is designed to alleviate these problems in Gujarat by modernizing and expanding the harbors and shore facilities at Mangrol and Veraval. It would complement these efforts by financing an additional expan- sion in MFV numbers and by furthering the modernization of traditional fishing craft. Importantly the project would include a first, although very modest, program aimed at improving the physical infrastructure in selected fishing villages. iii. The project would be carried out over five years and would comprise the following principal components: (a) improvement of the fishing harbors at Mangrol and Veraval to permit more MFV to use these facilities and to provide better protection against adverse weather; (b) improvement of shore facilities and services at Mangrol and Veraval to provide suitable support for the existing fleet and expansions which are expected to occur as a consequence of the project; (c) provision of credit to entrepreneurs to establish fish processing, freezing, and ice plants at the two harbors; (d) construction and equipping of 270 14.8 m MFV and their sale on credit to fishermen; (e) assistance to traditional fisheries by the: (i) provision, on credit, of 350 9m fishing canoes equipped with out- board motors and gear, and of 1,050 outboard motors;  - ii - (ii) improvement in the infrastructure serving eight fishing villages; and (iii) improvement in the fish marketing sys- tem of these villages; (f) provision of two net making machines for Gujarat Fisheries Central Cooperative Association Ltd. (GFCCA); and (g) technical assistance for test fishing, a marketing study, and project implementation. iv. The project, with the exception of the test fishing operations and the fish marketing study which would be the responsibility of GOI, would be carried out by GOG with refinance for credit operations being provided by the Agricultural Refinance and Development Corporation (ARDC). v. GOI, in accordance with established policies for development assist- ance to the State, would make available part of the IDA Credit and Bank loan to GOG to finance: (a) improvement of the fishing harbors and shore facilities and services; and (b) improvement of the infrastructure and marketing system in selected fishing villages. A further part of the Credit would be made available to ARDC for on-lending through participating banks to fishermen, fisheries cooperative societies and private entrepreneurs for fishing vessels and installations, such as ice plants, freezing complexes, and processing plants. Lending to ultimate borrowers through ARDC would be on ARDC standard terms which follow closely current rates for institutional lending throughout India, including lending under on-going projects financed by IDA/Bank. Organization vi. The leading agency in project organization would be the GOG Depart- mnent of Agriculture, Cooperatives, Forest and Fisheries (DACFF) in which a Project Supervision Committee (PSC) would be established. PSC would have a full-time secretary who would act as the project coordinator. The Gujarat Ports Directorate (GPD) would be responsible for the construction of the harbor investments and would continue to manage the harbors. vii. A Fisheries Terminal Division (FTD) would be established under the Commissioner of Fisheries (GOG) to manage the zones allocated to the develop- ment of shore facilities and the fisheries terminals at Mangrol and Veraval. FTD would lease land, and in some cases buildings, to private, public and cooperative entities for the establishment of shore facilities to serve the fishing fleets and to process fish. Fish auction facilities at the two har- bors would be owned and operated by FTD. viii. ARDC would be the financing channel for the project credit compo- nents for which it would draw up a Project Banking Plan. ARDC, which is well known to Bank Group through its involvement in 26 IDA Credits, is well managed and its finances are satisfactory.  - iii - ix. GFCCA would play an important role in the project. It would be the source of supply of most, if not all, of the 14.8 m MFV, arrange for the sup- ply of 9 m canoes for traditional fishermen and assist with fish marketing ment of Fishermen's Primary Cooperative Societies (FPCS). However, to carry out its responsibilities it requires a large measure of financial rehabili- tation and the strengthening of its management. Assurances were given that GOG would assist with the establishment of FPCS, which would play an import- ant role in the project as they would operate the hire purchase type scheme through which canoes and outboard motors would be provided to fishermen under the project. Costs and Financing x. Total project costs are estimated at US$38 million equivalent of which about US$11.5 million (30%) is the estimated foreign exchange component, and about US$2.4 million are duties and taxes. Project Cost Summary Project Component Local Foreign Total Harbour Improvements 8.7 2.5 11.2 Shore Facilities 1.3 1.3 2.6 Vessels 5.2 0.6 5.8 Traditional Fishermen Sub-project 2.0 0.7 2.7 Miscellaneous Supporting Equipment - 0.1 0.1 Technical Assistance 0.3 2.6 2.9 Contingencies 9.0 3.7 12.7 26.5 11.5 38.0 xi. The proposed IDA Credit of US$4 million and Bank loan of US$14 million would finance about 50% of total project costs net of duties and taxes, including about US$6.5 million of local currency costs. Procurement xii. Contracts for one major harbor improvements at Veraval, equipment of shore facilities (ice plants, freezing complexes, etc), dredging equipment, and for the procurement of outboard motors for canoes, would be awarded through international competitive bidding. International competitive bidding would not, however, be suitable for procurement of the smaller harbor improvement at Mangrol, the MFV or their engines. The vessels would be built in Gujarat boat building yards to proven designs and be of locally procured timber. The MFV would be equipped with one of two makes of domestically manufactured engines according to customer preference. Procurement of canoes, which are made in the State of Kerala, and fishing nets and gear which are locally manufactured, also would not be suitable for international competitive bidding. In these cases procurement would follow local competitive bidding procedures acceptable to IDA/Bank.  - iv - Monitoring, Evaluation and Reporting xiv. A monitoring, evaluation and reporting system would be established under the project and would provide base line and current information on proj- ect implementation, its benefits and costs. The system would also be con- cerned with monitoring exploitation rates in order to identify any possibility of over-fishing. Benefits and Justification xv. The project would make an important contribution to GOI's develop- ment efforts to increase fisheries production for domestic consumption and export. Annual incremental output at full development (after project year five) is expected to be about 44,600 ton (including 3,700 tons of shrimp) valued at Rs 72.8 million (US$8.1 million) at current landing prices. xvi. The project would create employment for: (i) about 1,900 fisher- men on 14.8 m trawlers; (ii) about 1,100 fishermen on canoes financed under the project and (iii) for about 500 persons in shore facilities. About 500 fishermen would benefit from the motorization of their canoes. Existing vessels based on Mangrol and Veraval, which are operated by about 3,000 fish- ermen, would be able to fish for longer periods because of the harbor improve- ments. In total, about 7,000 persons would benefit directly from the project. An additional 10,000 people would benefit from the improvement of the infra- structure in their villages. As a consequence of project construction activi- ties about three million mandays of work would be generated by the project in its five year development period. xvii. Financial returns to project beneficiaries would be satisfactory ranging from 23% to over 55%. The overall economic rate of return for the project is estimated at 24% and the economic returns from individual compo- nents from 16% to over 60%. xviii. Subject to reaching satisfactory agreements and assurances which were obtained at negotiations, the project would be suitable for an IDA Credit of US$4 million and a Bank loan of US$14 million under Third Window terms.  INDIA APPRAISAL OF THE GUJARAT FISHERIES PROJECT I. INTRODUCTION 1.01 The Government of India (GOI) has asked for an IDA Credit of US$4 million and a Bank loan of US$14 million to help finance a fisheries project in the State of Gujarat. GOI attaches high priority to marine fisheries development and to this project which would be the first of its kind in India and the forerunner of similar projects now under preparation in other States. 1.02 The project was prepared by the Government of Gujarat (GOG) with assistance of an FAO/IBRD Cooperative Program Mission which visited India during November/December 1974 and at various times in the period July to December 1975. The Agricultural Refinance and Development Corporation (ARDC) participated in the preparation of the traditional fishermen component of the project. 1.03 This report is based on findings of an appraisal mission, composed of Messrs. R. L. Headworth, E. Chobanian, C. Helman, F. Kada (Bank) and M. Hewitt, J. Marr and P. Mornement (Consultants), that visited India in May 1976. 1/ II. THE MARINE FISHERIES SECTOR General 2.01 With total fisheries production in 1975 estimated at 2.4 million tons, of which 1.6 million tons (69%) from marine fisheries, India is a major fish producing country. During the past decade (1966 to 1975) marine catch and marine product exports increased at an average annual rate of about 8% and 13% respectively. The value of marine product exports in 1975/76 was Rs 1,269 million (US$140 million) or about 3% of the total value of India's exports in that year. India's shrimp catch is the largest in the world and shrimp account for most (about 90% in 1975) of marine product exports. There is a good demand in world markets for India shrimp, and resources are sufficient for a considerable expansion in catch and exports. The main con- straints are the shortage of harbor and processing facilities. 1/ Background on the economy and the agricultural sector is provided in reports on "Economic Situation and Prospects of India," Report No. 402-IN, May 7, 1974 and Report No. 1073-IN, March 29, 1976.  -2- 2.02 Protein supplies in India are estimated at about 88% of require- ments, making it one of the most protein deficient areas in the world. Fish is amongst the cheapest sources of animal protein and increased production is one way to rectify this deficiency. Fish consumption in India is increasing. Annual per capita supply of fish in 1975 was estimated at about 4 kg per capita, nearly double the supplies available two decades ago. 2.03 Under the Fifth Five Year Plan (1974-1979) GOI is giving a special boost to the fisheries sector. An outlay of Rs 1,619 million has been planned and annual incremental production targets for marine fisheries averaging about 100,000 tons per annum are envisaged. Similar annual targets have been recom- mended by the National Commission on Agriculture (1976) for the period 1975- 2000. If this is achieved, India's marine fisheries catch would amount to 3.5 million tons by the year 2000. These targets are realistic given that FAO estimates that India can harvest at least 2.4 million tons annually from its continental shelf without overfishing and that, in addition, there are sub- stantial deep sea resources that so far are largely unexploited (see Annex 1). The latter is due both to lack of experience and to lack of supporting infra- structure for deep sea fishing. GOI has recently ordered a number of 23 m steel hull mechanized fishing vessels for the purpose of carrying out experi- mental deep sea fishing beyond the continental shelf. In addition to the excellent resource base, catching capacity is steadily rising and there has been a rapid expansion over the last decade of fishing by small mechanized fishing vessel (MFV). The number of MFV has increased from about 3,000 to 11,000 over the last ten years, and productivity per fisherman from about three tons to over five tons per year. The MFV generally are made of wood, range between 10-15 m in length and are fitted with inboard engines of 90 hp. Crewed by 4 to 8 men, most MFV make only day trips. Typically, the boats operate as trawlers when shrimp are plentiful, and convert to gillnetters when table fish are abundant. In contrast to the expansion in MFV numbers, the development of fishing harbors and shore facilities has not kept pace with the expansion of the MFV fleet, the increasing size of MFV, and introduc- tion of deep sea fishing vessels, and, there is considerable congestion in most fishing harbors as well as unnecessary spillage of the catch. More detailed information on the marine fisheries sector is contained in Annex 1. Marine Fisheries in Gujarat 2.04 In India, as a whole, commercial fishermen and companies employing MFV account for about 40% of total catch, with traditional fishermen catch- ing the remainde~. The same proportion exists in Gujarat which commands about 100,000 km of India's continental shelf of 415,000 km but only harvests about 11% (190,000 tons annually) of India's marine catch. 2.05 Commercial fishermen in Gujarat use the same general type of vessel described in para 2.03, but specifically a 14.8 m trawler-cum-gillnetter is preferred. It is estimated that the number of MFV operating from Gujarat bases has increased from about 400 in 1965 to 1,300 in 1975, and this trend is ex- pected to continue. The average 14.8 trawler-cum-gillnetter catches about 120 tons annually, of which 10% is shrimp (50% of which usually is exportable). The principal commercial varieties of fish are Bombay duck, dhoma, clupeids,  - 3 - and sharks. In addition, smaller quantities of high price and export vari- eties such as pomfret, seer fish, thread fin, Indian shad, giant herring, squid, cuttle fish, red snapper, lobster, perch, eels, and sea bream are landed. MFV land fish at four partially protected fishing harbors: Veraval and Mangrol, which would be the subject of project actions, and Porbandar, and Okha, as well as at fifteen other landing sites equipped with jetties or walls. Fishing stops during the monsoon due to the bad weather and in this period of unem- ployment, fishermen are frequently forced to borrow heavily. Traditional Marine Fisheries 2.06 Traditional fishing methods and craft have evolved over centuries. Craft include dugout canoes, plank boats and catamarans, all of which can operate from unprotected beaches. Modernization has extended to the use of nylon nets and improved gear, which are now used on most craft, and to an increasing use of outboard motors. Most fish is landed on the beach in good condition where it is sold to fish traders, occasionally by auction. About 10 to 15% of the catch is salted, mostly for sale in inland Indian markets, lower quality fish is smoked, and the remainder iced and marketed. 2.07 Catch rates are subject to weather conditions especially since non-motorized vessels cannot be launched from beaches when the surf is strong. During these periods, fishermen often resort to obtaining advances from fish traders against future catches. 2.08 There are about 200 traditional fishing villages in Gujarat with an estimated population of about 200,000. Fishing villages are usually isolated and often lack potable water, access roads, primary schools, medical facil- ities and communications. Unemployment in these villages is high and it is difficult for fishermen to obtain credit to purchase canoes. GOG is attempt- ing to upgrade standards of living in these areas by improvement of the phy- sical and social infrastructure and through making credit available for canoes and outboard motors. Demand for the latter is high because of the substantial increases in catch made possible by motorization. The proposed project would contain elements aimed at assisting traditional fishermen. Fishing Harbors 2.09 Under the project described in this report two of Gujarat's four protected harbors would be improved. The situation at these two harbors is summarized below and described in more detail in Annex 2. 2.10 Mangrol: Mangrol is exclusively a fishing harbor. Harbor facil- ities consist of a beach, partially protected by a 150 m breakwater, which is used by about 170 canoes, about 50 of which are motorized, and a basin used by 95 MFV; shallowness of the basin limits MFV to 13 m. There are no landing quays and the breakwater is used for landing fish; only 5-6 vessels can moor alongside and others have to tie up in parallel with the catch carried across moored vessels. The landing area is congested, and because conditions are unsatisfactory for hygienic fish handling, spoilage is high.  -4- 2.11 The harbor is inadequately protected from the weather, and during the monsoon season the harbor basin is swept by surf and all the boats in- cluding MFV, have to be ashore from April/May to September. The number of vessels operating from Mangrol cannot be increased without considerable ex- pansion and improvement of the harbor. 2.12 The harbor is served by 7 block ice plants with a total rated capa- city of 31.5 t/day but one of the plants (5 t/day) is now inoperative. About 60% of ice produced is used by the fishing industry, and the remainder by other commercial interests in the town of Mangrol. Ice production capacity is only about 50% of the existing requirement. There is no storage facility for ice or iced fish, and no freezing plants or frozen storage facilities. Fish for processing have to be transported in ice to Veraval or Bombay. There are plans for a private company to develop a complex, including a 15 t/day block ice plant with 50 tons storage capacity, a 5 t/day freezing plant with 100 tons of frozen storage capacity, and an iced fish store with capacity for 50 tons of fish. This will largely satisfy current requirements but will be insufficient for the expanded fleet that is expected to develop as harbor improvements planned under the project are carried out. There are two en- gine service stations in the port area and fuel is available. Minor repair facilities for boats are available, but MFV have to sail to Veraval for major repairs. 2.13 Veraval: Veraval is both a fishing harbor and a commercial port. The port handles 350,000 tons of cargo per year, mainly fertilizer, agricul- tural products and cement, and is a pickup point for frozen fish products, such as shrimp, squid, cuttlefish and pomfret. Fishing facilities comprise a 185 m MFV quay and a 300 m landing quay, neither of which are accessible at low tide. Because these facilities are insufficient, MFV also utilize the commercial harbor, aggravating its congestion. The port entrance is shallow, insufficiently protected from the south west monsoon winds, and, as a result, fishing operations are interrupted for 3-4 months every year. Facilities for landing, auctioning, handling and marketing fish are unsatis- factory. Fish are landed directly on the quay where there are inadequate washing facilities. 2.14 Although Veraval has 12 block ice plants, with a total rated capa- city of 155 t/day, less than 70% of this capacity is achieved due to poor operating conditions and shortage of water. Ice is in short supply during the peak fishing months when it has to be brought from as far as Rajkot (150 km). A new 20 t/day block ice plant with 100 tons storage, financed by ARDC, is under construction for the Gujarat Fisheries Central Cooperative Association (GFCCA) and should be completed before mid-1977. When this is commissioned GFCCA will close an operating plant because it is obsolete, and total ice production capacity will be about 163 t/day, which is about 50% of maximum daily demand. 2.15 There are three fish freezing plants with installed capacity of 42 t/day with storage for 750 tons. An additional 4 t/day freezing plant with frozen storage of 200 tons of fish is being constructed for GFCCA with ARDC financing, and a 2.5 t/day freezing plant with 50 tons of frozen storage for a commercial enterprise (Tata) is at the planning stage. A commercial  -5- prawn canning plant is also under construction. Freezing capacity in Veraval is adequate for present catch rates. 2.16 Fish is dried at Veraval in areas leased from the Gujarat Ports Directorate (GPD). Fish are laid out on unsurfaced areas, either on the bare ground, fences or frames. The techniques and facilities are primitive and a high proportion of dried fish is spoiled and unsuitable for human consumption. 2.17 Veraval has one makeshift fishmeal plant with a rated capacity of 50 tons of raw material per day; in addition, there are 9 plants with a total capacity of 90 t/day for grinding sun dried fish to make animal feed, and a shark liver oil unit with a rated capacity of 50,000 liters per annum. GFCCA operates a boat building and repair yard with a capacity of building 90 MFV per annum at Veraval and there are 4 engine repair shops and a fuel supply station. Marketing 2.18 Bombay is the center in India for marine fish sales, both fresh and dried fish, consumption of fresh marine fish, and is the largest wholesale and transhipment center for these commodities. Prices throughout India are closely related to Bombay prices which are determined daily by a Bombay Market Com- mittee of private traders on the basis of supply and demand. The Committee determines maximum prices which are posted daily. The traders communicate price information daily to other fish production centers. Most dried fish is shipped to inland and tribal markets but a small percentage (about 15%) is exported to the Gulf States, Sri Lanka and Singapore. 2.19 Less than 15% of fresh fish produced in Gujarat is consumed there, because of a high percentage of vegetarians. A few traders purchase for urban centers in Gujarat but most fish is bought by traders and shipped to Bombay and other major cities. Boat Building 2.20 In Gujarat, all locally constructed fishing vessels are of wood (teak and sajad) from the forests of southern Gujarat. The cost of Gujarat teak is about 20% lower than the international price. MFV follow traditional designs that have proven suitable for local conditions. The only well equipped boat yard is that owned and operated by GFCCA at Veraval which employs a qua- lified engineer and naval architect. A small number of MFV are made on the open beaches by groups of individual carpenters; such boats are cheaper than those made by GFCCA but they rarely meet safety standards set by GOG. Fisheries Credit 2.21 The most important sources for medium and long term credit for the fisheries sector are commercial banks, the Gujarat State Cooperative Bank Ltd., (GSCB), and the Gujarat State Financing Corporation. ARDC provides refinance facilities for approved fisheries schemes.  - 6- GOG Fisheries Extension Services 2.22 In each of Gujarat's coastal districts there is a GOG superintendent of fisheries supported by fisheries officers and extension workers. New dev- elopments are disseminated to fishermen mostly through regular community meet- ings, and a bi-monthly magazine. The work of fisheries personnel includes: monitoring the trade in fish and fish prices; helping in the formation and operation of fishermen's cooperatives; and conducting research and revenue surveys. Development Policies 2.23 Both GOI and GOG attach high priority to developing marine fisheries in the interests of increasing protein supplies and exports, and of improving employment opportunities in fishing districts. Up to now most of the Govern- ments' efforts have gone into sponsoring the use of MFV and the modernization of traditional fishing craft and gear. This drive has been generally success- ful, but the growth in catching capacity that it has generated is now placing great strain on existing fishing harbors and on marketing channels and facil- ities. The project described in this report is designed to alleviate these problems in Gujarat by modernizing and expanding the harbors and shore facil- ities at Mangrol and Veraval. It would complement these efforts by financing an additional expansion in MFV numbers and by furthering the modernization of traditional fishing craft. Importantly, the project would include a first, although very modest, program aimed at improving living conditions in selected fishing villages. III. THE PROJECT General 3.01 The project would be carried out over five years and would comprise the following principal components: (a) improvement of the fishing harbors at Mangrol and Veraval to permit more MFV to use these facilities and to provide better protection against adverse weather; (b) improvement of shore facilities and services at Mangrol and Veraval to provide suitable support for the existing fleet and expansion which is expected to occur as a consequence of the project; (c) provision of credit to entrepreneurs to establish fish pro- cessing, freezing, and ice plants at the two harbors; (d) construction and equipping of 270 14.8 m MFV and their sale on credit and/or hire purchase to cooperatives and fishermen;  - 7 - (e) assistance to traditional fisheries by the: (i) provision, on credit, of 350 9 m fishing canoes equipped with outboard motors and gear, and of an additional 1,050 outboard motors; (ii) im- provement in the infrastructure serving eight fishing villages; and (iii) improvement in the fish marketing system of these villages; (f) provision of two net making machines for GFCCA; and (g) technical assistance for test fishing, marketing studies, and project implementation. 3.02 The project, with the exception of the test fishing operations which would be the responsibility of GOI, would be carried out by GOG with refinance for credit operations being provided by ARDC. Detailed Features 3.03 Fishing Harbors. The existing situation at Mangrol and Veraval is described in Annex 2 which details the works to be carried out under the project, the status of basic studies and engineering, the design criteria employed, and the methods and organization to be used. At Mangrol the harbor is too small to accommodate the existing fleet of 95 small, up to 13 m, MFV, and because of congestion, MFV have to be hauled up onto land for the monsoon period. This process entails considerable time as the first MFV have to be hauled up one month in advance of the end of season; conversely, it is about a month after the end of the monsoon season before the last boats are launched. Much fishing time is lost. Under the project an additional 250 m of breakwater would be constructed and dredging carried out to form a tidal basin about 190 m by 70 m and with a depth of 2.5 m below low water (the 14.8 m MFV draws about 1.7 m). The basin would be faced with 385 m of quay for landing fish, out- fitting and berthing. At the completion of project works the harbor would be able to handle about 110 MFV at either morning or evening landing periods. During emergencies a fleet of 165 MFV could be accommodated in sheltered berths. Additionally a protected beach would be formed for use by traditional craft and 2 ha of land cleared and leveled as a fisheries terminal where sup- porting services and facilities would be located. (Chart 16634). 3.04 At Veraval the fishing harbor is inadequate for the 400 MFV that are based there and for vessels from other harbors that land fish and dock there. There is insufficient quay length for loading and outfitting, in- adequate land area for the siting of shore facilities and, importantly, egress is restricted at low water and even during moderate seas. Slipway facilities for MFV are totally inadequate. Under the project the existing breakwater would be extended by 334 m to a total of 654 m; a lee breakwater of 500 m would be constructed, as would be 535 m of landing and berthing quays, and 1,120 m (both sides) of open berthing jetties. The entire harbor would be dredged to 3 m below low water (thus permitting use by MFV of up to 23 m) and the entrance channel from depths of 5.5 m at the harbor entrance to 4 m at the existing MFV quay. At completion of these works the harbor will be able to accommodate 700 MFV, and be open to vessels throughout the year, particularly the new 23 m and larger MFV which are expected to use the  -8- port in the future. Improvements would also include construction of a slipway (to accommodate the equivalent of sixty 15 m vessels), and development of 7.5 ha as a fisheries terminal where shore facilities and services would be provided (Chart 16633). 3.05 Improvement works at Mangrol would not significantly disrupt harbor operations. At Veraval, however, the works would require construction of a cofferdam and dewatering of part of the harbor. As described in Annex 2, while this dam would not seriously restrict access to existing wharves and quays, it would be necessary to open it and to flood the whole basin before the start of the monsoon to provide a refuge for vessels. 3.06 Shore Facilities and Services. Under the project GOG would provide a number of shore facilities at the two terminals to serve fishermen, these are described in more detail in Annex 3. These facilities would be con- structed at the fisheries terminals developed under the harbor improvement component which would be managed by Fisheries Terminal Division (FTD) (see para 4.09). The facilities would be owned by GOG and managed by GOG agen- cies, or leased to private companies or cooperatives. At Mangrol, GOG would provide and maintain roads and drainage facilities, offices, an improved water2 supply providing 250 t/day and, a 66 kv electricity supply line, and a 1,950 m fish auction hall would be operated by FTD. A cant en for fishermen and workers, surfaced areas for fish drying and a 240 m gear shed would be leased to entrepreneurs and MFV operators by FTD. At Veraval similar but more exten- sive facilities would be provided. They would include offices, roads and drainage, security fencing of the development area, a water system providing 2,000 t/day, and a 40 MW power supply. The auction hall would be much larger than at Iangrol, 8,250 m , as would2 be the canteen drying areas, workshop (1,200 m ) and gear sheds (2,250 m ). Sites for fuel and oil stations would be provided at both harbors. 3.07 Fish Processing, Freezing, and Ice Plants. Under the project, cre- dit would be provided (see para 4.08 ad 5.05) for entrepreneurs - private, corporate and cooperative, to construct and operate plants at the Mangrol and Veraval fisheries terminals. Sites for these plants, which will be needed to handle production generated by the project as well as to meet cur- rent shortfalls would be leased to entrepreneurs by FTD. For Mangrol, pro- vision is made for a 75 t/day block ice plant with 200 t storage; a 10 t/day freezing plant for shrimp and other fish; and 100 t storage for iced fish. Currently it is anticipated that catch rates will justify the construction of the freezing plant by project year (PY) 4 (1980). At Veraval, a larger and more sophisticated program is planned which would comprise two 200 t/day block ice plants each with 400 t storage; an 18 t/day freezing plant with a 500 t storage for frozen fish with 150 t storage for iced fish; and fish meal plant with a daily throughput of 75 t day raw material. The ice plants are estimat- ed to be required in PY 3 and PY 5; the freezing plant in PY 4; and the fish meal plant is planned for completion by PY 4. Annex 3 contains more details of these programs. During negotiations assurances were obtained that the design and capacity of the freezing complexes for Mangrol and Veraval would  - 9 - be reviewed by ARDC; and the proposed second block ice complex for Veraval would be prepared by GFCCA and reviewed by ARDC by June 1981 (para 8.01(a)). 3.08 Construction of MFV. The project would finance 270 14.8 m MFV (70 to operate from Mangrol and 200 from Veraval). These would be fully equipped with 90 hp air or water cooled inboard engines (according to owner preference) and fishing gear (Chart 16235), and would cost an estimated Rs 180,000 to Rs 200,000 each. Operated by a crew of six, with a carrying capacity of 4 tons of fish, the vessels would be suitable for both trawling and gill-netting. A description of the vessels is at Annex 4. They would be constructed in Gujarat by GFCCA at Veraval. They would be of wooden construction and of proven design (see para. 5.07). Assistance to Traditional Fisheries 3.09 Fishermen assisted under this component, which is described in more detail in Annex 5, would mostly be located in eight fishing villages situated between Mangrol and Veraval but recipients of the outboard motors would be drawn also from about 27 other villages (see Map 12318). 3.10 Canoes and outboard motors. The project would provide finance for 350 new 9 m canoes equipped with 8 hp outboard motors and fishing gear, 344 of these would be dugout canoes based on a single log of wood designed for a crew of three (Chart 16236), and six would be fiberglass canoes which would be used to test the suitability of this type of craft for Gujarat conditions. 1,400 outboard motors would be supplied on credit to fishermen: 475 for existing non-motorized canoes, 575 as replacements, and 350 for the new canoes to be constructed under the project. The motors would be provided together with spare parts equivalent to 20% of the value of the engines. 3.11 Marketing: To improve the marketing of fish produced by fishermen in the eight villages, the project would provide four trucks for use by GFCCA for the delivery of ice and spare parts and to collect fish from the eight villages (Map 12318). A shed would be provided by GOG at each village to be used as markets and for the temporary storage of fish. 3.12 Village Infrastructure. About 33.5 km of asphalted roads, 3.65 m wide, would be constructed by GOG to provide better access to the village fish markets and generally facilitate transportation of fish, ice and other inputs. Village water supply systems would be constructed by GOG in five villages which are now without them. The systems would comprise wells of 18 m x 6 m, energized by electrical pumps and piping (about 5 km/village) to stand pipes in the villages. Provision of Net Making Machines 3.13 The project would finance two net manufacturing machines for GFCCA, which is one of India's leading net manufacturers. The net factory, which is now operating six days per week and three shifts per day, needs these machines to meet an increasing demand for nets.  - 10 - Technical Assistance 3.14 Test Fishing Operations: The project would finance two test fishing operations by GOI: one off Gujarat and the other off Andhra Pradesh. Objec- tives would be resource data collection, in particular details of distribution and catch rates of different species according to season, and the determination of improved methods of catching. The trials would be carried out by both for- eign commercial vessels (trawlers and purse seiners) and GOI resource survey vessels recently built under Indo-Norwegian Project in Goa. Indian counterparts would be trained on board these vessels. Assurances were obtained that the test fishing operations would begin by December 1977 and be completed by June 1979. The results of the tests would be communicated to GOG and to the private sector. Quarterly progress reports, and final reports for each area, including economic analyses, would be prepared. Results of the tests would be reviewed by GOG and GOI. Assurances were obtained that IDA/Bank would be provided promptly with copies of progress reports and the final reports (para 8.01(b)). 3.15 Marketing Study: The project would finance a fish marketing study covering fresh and dried fish. The study would aim at identifying bottlenecks in fish marketing, developing solutions for overcoming them, and at assessing future export and domestic demand for fish. Particular emphasis would be placed on examining the problems of congestion and unsanitary facilities at Bombay, as well as on the efficiency and equity of the pricing mechanisms. The latter currently appear to be controlled by a relatively few traders. Terms of Reference for the study would be prepared by the Ministry of Agriculture (GOI), and the study would be carried out by the Indian Institute of Management, Ahmadabad or similar marketing research institution. Assurances were obtained at negotiations that Terms of Reference for the study would be agreed with IDA, and that the study would start not later than December 1977 (para 8.01(a)). 3.16 Consultants for Project Implementation: The project would finance consultants to assist in project implementation. About 50-man-months of consultants' time, costing an average of US$8,000 per man-month for fees and expenses, would be required as described in Annex 6 and summarized below: Harbor engineer to assist GPD in reviewing design and tender documents; coordinating the activities of local electrical/ mechanical engineers and the rock excavation specialist; and supervising construction. Rock excavation specialist to assist GPD in preparing speci- fications and other documents relating to the procurement of dredging equipment; and devising and implementing field trials for drilling and blasting, etc., and determining optimum methods for fragmentation of rock for dredging. Fisheries resource management specialist to assist GOI in preparing Terms of Reference for the test fishing operations to be agreed with IDA/Bank, and in engaging a contractors to  - 11 - carry out the tests, assessing the results of the test fishing operations, and developing fisheries resource policies appro- priate to these results. Management specialist to assist FTD in establishing management systems for its fisheries terminals and organizing fish auctions at the Mangrol and Veraval terminals. Further details of the Technical Assistance elements of the project are at Annex 6. Project Implementation 3.17 The project would be implemented over the five years, 1977 through 1981. A project implementation schedule is at Annex 7. Project Beneficiaries 3.18 The major project beneficiaries would be entreprenuers prepared to risk capital in marine fishing, a difficult and relatively risky venture. For canoes and canoe motorization these would mostly be individual small fish- ermen. For the 14.8 m MFV a wider range of individuals and entities would be involved; but given the relatively large down payment required from the entrepreneur, they would be corporate or cooperative entities or relatively well-to-do individuals. GOG selection criteria gives the following order of preference: cooperative and State undertakings; fishermen who have had training in fisheries whether from a State or a Central institution, fisher- men who have adequate experience; fishermen who have worked or who are work- ing as boat skippers on other people's vessels; and demobilized Navy officers. IV. ORGANIZATION AND MANAGEMENT General 4.01 With the exception of the test fishing surveys the project would be carried out by GOG. Details of the more important agencies involved are in Annex 11. The leading agency would be the State's Department of Agricul- ture, Cooperatives, Forest and Fisheries (DACFF) in which a Project Supervision Committee (PSC) would be established. PSC would be chaired by the Department's Secretary. The Commissioner of Fisheries would be the Secretary of PSC and would function as a full-time project coordinator. Membership would include the Secretary, Ministry of Finance or his representative, the Commissioner of Fisheries, the Director of Ports, and the Regional Director of ARDC. PSC would be empowered to coopt other State officials as necessary, for example the Chief Engineer, Department of Public Health (water supplies) and the Chief Engineer, Gujarat Electricity Board. PSC would be responsible for organizing execution of the project and would do this by delegating responsibilities to appropriate state agencies. For example the Ports Directorate (GPD) would be responsible for the construction of harbor improvements. A condition of effectiveness would be that PSC had been established under the chairmanship of Secretary  - 12 - of DACFF, with the Commissioner of Fisheries (GOG) as Secretary and project coordinator (para 8.02(a)). Gujarat Ports Directorate (GPD) 4.02 GPD would use as consultants India's Pre-Investment Survey of Fish- ing Harbors (PISFH), a unit established with UNDP assistance and which has designed the proposed improvements to Veraval and Mangrol (see Annex 1). To supervise the work at both harbors, GPD would appoint a chief engineer and, for Veraval, 3 executive engineers, 11 deputy engineers and 24 junior engi- neers; for Mangrol where the amount of work would be substantially less, GPD would appoint an executive engineer, 4 deputy engineers and 10 junior engi- neers. In addition to the construction of harbor improvements, GPD would continue to manage harbor services at Mangrol and Veraval. These would in- clude: supervision of the use and maintenance of approach and entrance chan- nels, navigation aids, and of all breakwaters, jetties, quays, and basins; con- trol of vessel movements in basins and entrance channels; and the operation of slipways. An assurance was obtained at negotiations that GOG would provide by September 1977 the technicians and engineers needed to carry out the proposed improvement at Veraval and Mangrol (para 8.01(d)). Gujarat Fisheries Central Cooperative Association (GFCCA) 4.03 GFCCA, more details of which are in Annex 11, would play an impor- tant role in the project. Its functions would include (i) construction of project financed 14.8 m MFV; it would construct all of these, unless and until other local builders are able to meet GOG standards; (ii) importing the outboard motors financed under the project; and (iii) assisting in obtaining a supply of canoes for traditional fishermen (as it is difficult for indivi- dual fishermen to organize the construction of canoes, GFCCA would act as middle man between fisherman and constructor). 4.04 GFCCA, which has its head office at Ahmadabad, would also be a direct beneficiary of the project insofar as the net making machines financed under the project would be used in its factory, and it would be eligible for project loans for the construction and operation of shore facilities, such as ice and freezing plants at Mangrol and Veraval. It would also be eligible for loans for the purchase of MFV to be sold under hire purchase agreements to fishermen. GFCCA was established in 1956 as an apex institution for fishing cooperatives. Currently it is engaged in a wide range of activities including direct fishing; fish marketing, transporting, processing, storing, freezing and exporting; fishing gear manufacture; MFV construction; and in- land fisheries promotion. 60 cooperative societies constitute the Association whose Chairman is the Commissioner of Fisheries. As of June 30, 1975, GFCCA's authorized capital was Rs 5 million and paid-up capital Rs 1.6 million of which Rs 1.4 million was contributed by GOG and Rs 0.2 million by constitutent societies and individual fishermen. 4.05 Until 1973/74 GFCCA was burdened with accumulated losses for several years. In that year, however, the Association was able to wipe out these losses and earn a small profit. Although profits and losses have  - 13 - always fluctuated widely, the main contributors to profits have been its boat yard, marine engine and outboard motor sales, fish net factory, and inland fisheries unit; the loss makers have been the freezing and ice plants which are obsolete, and its trading operations in fresh and dried fish. GFCCA is in need of considerable strengthening, both organizationally and financially. A program for rehabilitation has been discussed with IDA, which was based on a report prepared by ECOTECH Consultants Pvt. Ltd., Ahmadabad. During negotia- tions, a rehabilitation program was discussed and agreed with GOG, ARDC and GFCCA. The program which will be carried out over five years, includes the establishment of suitable accounting, auditing, budgeting and inventory con- trol systems and improvement of the Association's capital structure, the strengthening of top management; and the engagement of qualified engineers and a marketing manager. A schedule for implementation of the program was agreed at negotiations. Assurances were given that GOG would reorganize GFCCA in accordance with the proposal prepared by GOG in consultation with ARDC and approved by IDA/Bank; GOG would retain qualified accountants to maintain a sound financial system for GFCCA; and GOG would appoint additional engineers and a marketing manager for this purpose (para 8.01(e)). Gujarat State Cooperative Bank Ltd. 4.06 The Gujarat State Cooperative Bank Ltd. (GSCB), together with commer- cial banks, would provide credit to project beneficiaries. GSCB is the apex body of the short and medium term cooperative credit structure in the State. This structure consists of fishermen's primary cooperative societies (FPCS) at village level, central cooperative banks (CCB) at district level and GSCB at the apex. GSCB, whose membership consists of CCB and other State Coopera- tive organizations throughout Gujarat, is in a sound financial position and has an excellent recovery record. Since inception it has been generating steadily increasing annual net profits (Rs 7.2 million for 1975), and a divi- dend of 9% on share capital has been paid for the last two financial years, 1973/74 and 1974/75. GSCB is fully qualified to undertake its project role. Fishermen's Primary Cooperative Societies (FPCS) 4.07 Fishermen's Primary Cooperative Societies (FPCS) would play a key role in the traditional fisheries component (see Annex 5). These societies are based on the existing social structure of the fishing villages and usually the President of a FPCS is the village Patel or social leader. This form of organization benefits from its linkage with the traditional village structure, an important consideration given the risks of lending to fishermen. Under the project, loans for canoes and outboard motors would be made to the FPCS. In turn the FPCS would enter into hire purchase type arrangements with the final beneficiaries, the fishermen. Under this arrangement ownership of the item financed would remain the property of the FPCS until the loan was repaid. FPCS would be affiliated to District Cooperative Societies. In their establishment and management, FPCS would benefit from the assistance and supervision provided by GOG, GSCB and the4r affiliates, and by ARDC. An assurance was obtained that GOG would assist in the establishment and manage- ment of FPCS in the project area (para 8.01(f)).  - 14 - Agricultural Refinance and Development Corporation (ARDC) 4.08 ARDC would be responsible for: (i) refinancing loans made by GSCB and commercial banks for MFV and shore installations, (ii) refinancing credits made under the traditional fishermen component for such items as canoes, out- board motors, and fishing gear; (iii) assisting participating banks and pros- pective borrowers to prepare and evaluate investment plans; and (iv) assisting GOG in the establishment and management of FPCS. ARDC would prepare a project Banking Plan which is a standard feature of other Bank Group operations in- volving ARDC, and it would be a condition of disbursement against the relevant credit components that such Banking Plan was acceptable to IDA/Bank (para 8.03(a)). Lending terms and conditions are shown in Schedule A and would be spelt out in a Refinance Agreement that would be concluded between ARDC and the participating banks. At this time ARDC is operating most satisfactorily in 26 IDA assisted projects in the agriculture sector 1/. Fisheries Terminal Division (FTD) 4.09 A Fisheries Terminal Division (FTD) would be established under GOG Commissioner of Fisheries (DACFF) to develop and manage the terminals at Man- grol and Veraval. FTO would be responsible for all GOG owned land (except that used by GPD) in the harbor area at Mangrol and the area allocated for terminal development at Veraval. It would take over all existing GPD build- ings at the two sites that are currently used to provide services to fisher- men as well as new buildings for this purpose that would be constructed under the project. These would be offices for the agency, the auction hall at each harbor, and buildings designed to be used for canteens, gear sheds, and work- shops. FTD would operate the auction halls itself but would lease the other buildings to entrepreneurs wishing to provide services to fishermen. FTD would also lease sites to entrepreneurs, private, public and cooperative, wishing to construct facilities such as fish processing plants, freezing, and fish storage plants and who would be eligible under the project for credit for these purposes. Assurances were obtained at negotiations that FTD would be established by December 1977 with the above powers; and, an assurance was also given that GOG would cause FTD to charge amounts sufficient to enable FTD to cover all operating expenditures and charges, including taxes, interest payment on borrowings, and depreciation. In addition, an assurance was given that GOG would furnish IDA/Bank by December 1977 a feasibility study on the deduction of proceeds of fish sales at FTD for the repayment of loans (para 8.01(g)). 1/ For the most recent appraisal of ARDC see IDA Report No. 562a-IN: Appraisal of ARC Credit Project, March 15, 1975. IDA Credit 540-IN for US$75 million.  - 15 - Central Coordinating Committee (CCC) 4.10 GOI involvement in the project mainly would be through a Fisheries Project Central Coordinating Committee (CCC) that would be established in its Ministry of Agriculture and Irrigation to establish policy for, to aid, and to monitor this and similar projects. CCC would be chaired by the Ministry's Joint Secretary for Fisheries, and the Deputy Commissioner for Fisheries (Planning) would be secretary. Other members would include the Managing Director of ARDC or his representative, and representatives of the Ministry of Finance and the Ministry of Shipping and Transport (GOI). Appropriate GOG or other state representatives would be coopted as needed for consideration of matters affecting the Gujarat project. A condition of credit effectiveness would be that CCC, with membership agreed with IDA/Bank, had been established (para 8.02(b)). Monitoring, Evaluation and Reporting 4.11 A project monitoring and evaluation system (MES) would be set up in DACFF to chase and report on progress in project implementation. Importantly, however, MES would study the economic and financial results of different proj- ect activities in order to provide information needed in the planning of future projects. More details are at Annex 10. Special attention would be given to obtaining reliable vessel production estimates and to relate these to vessel numbers and to the extent of the fishing resource in order to identify any risk of over fishing. Production surveys are already being carried out both by GOG and Central Marine Fisheries Research Institute (CMFRI) although staffing of the former is weak and needs strengthening by the appointment of an additional senior statistician and other staff. There would appear to be major benefits in amalgamating or coordinating this type of work in Gujarat, since the objec- tives of the two operations are similar, and such a possibility is being examined. Assurances were obtained that a senior Statistician would be ap- pointed to the Statistical Cell of the GOG Department of Fisheries by October 1977. A MES unit has been set up, and during negotiations assurances were obtained from GOG that the unit would be adequately staffed to prepare reports on the progress of project implementation (Annex 10); and three basic surveys (Production, Fisherman's Households and Credit Recipients) would be carried out by MES and that Terms of Reference would be made available to IDA/Bank for comment by September 1977 (para 8.01(h)). Assurances were also obtained that, by September 1977, GOI would introduce a mandatory fishing vessel registration scheme for India as a whole as one of the means for better controlling resource exploitation, and that this scheme would be applicable to Gujarat (para 8.01(i)). V. COST ESTIMATES AND FINANCING Cost Estimates 5.01 Project costs including duties and taxes are estimated at Rs 341.7 million (US$38.0 million) of which about 30% would be foreign exchange. De- tailed cost estimates which include duties and taxes estimated at about US$2.4 million are given in Annex 8 and are summarized below:  - 16 - Foreign Local Foreign Total Local Foreign Total Exchange (Rs M) ------ ------ (US$ M) --