Romania - Cuvurlui Irrigation Project

Document of The World Bank FOR OFFICIAL USE ONLY FIL Y Report No. 2726-RO ROMANIA COVURLUT IRRIGATION PROJECT STAFF APPRAISAL REPORT December 17, 1979 Projects Department Europe, Middle East and North Africa Region 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 Currency Unit: Leu (plural lei) 1. Official Rate Lei 4.47 = US$1.00 Leu 1.00 = US$0.22 2. Tourist Rate Lei 12.00 = US$1.00 Leu 1.00 = US$0.08 3. Conversion Rate for Traded Goods Lei 18.00 = US$1.00 Leu 1.00 = US$0.06 The Official Exchange Rate of lei 4.47 per US$1 is used only for accounting pur- poses. The rate used for tourist transactions is lei 12 per US$1. Beginning in March 1978, a trading rate of lei 18 per US$1 has been used to convert the prices of all traded goods; this rate is considered representative of the average cost of convertible foreign exchange. WEIGHTS AND MEASURES 1 millimeter (mm) 0.0394 inch (in) 1 centimeter (cm) = 0.3937 inch (in) 1 meter (m) = 3.2808 feet (ft) I kilometer (km) = 0.6214 mile (mi) 1 square kilometer (km2) = 0.3861 square mile (mi2) 1 liter (1) = 0.2642 gallon (gal) 1 liter per second (1/sec) = 0.0353 cubic foot per second (ft3/sec) 1 cubic meter per second (m3/sec) = 35.3147 cubic feet per second (ft3/sec) 1 atmosphere (at) = 14.2239 pounds per square inch (psi) 1 kilowatt (kw) = 1.3410 horsepower (hp) 1 kilogram (kg) = 2.2046 pounds (lb) 1 metric ton (ton) = 2,204.6225 pounds (lb) ABBREVIATIONS BAFI Bank for Agriculture and Food Industry CAP Agricultural Production Cooperative DELIF Directorate for Exploitation of Land Reclamation Works DGEIFCA Economic General Directorate for Land Reclamation and Agricultural Construction GSI Group for Supervising Investments TAS State Agricultural Enterprise ICA Intercooperative Economic Association IELIF Enterprise for Exploitation of Land Reclamation Works ISPIF Institute for Land Reclamation Studies and Design MAFI Ministry of Agriculture and Food Industry UAC Unified Agroindustrial Council SMA Station for Agricultural Machinery TCIF Construction Trust for Land Reclamation Works ROMANIAN FISCAL YEAR January 1 to December 31  FOR OFFICIAL USE ONLY APPRAISAL OF COVURLUI IRRIGATION PROJECT ROMANIA Table of Contents Page No. I. THE AGRICULTURAL SECTOR ................................ 1 A. Role of Agriculture in the Romanian Economy 1........ B. Constraints to Agricultural Production .... ......... 1 C. Policy Planning and Strategy ....................... 2 D. Bank Experience in Agriculture ..................... 3 II. THE PROJECT AREA AND NATIONAL INSTITUTIONS .... ......... 4 A. The Project Area ................................... 4 B. Natural Resources .................................. 5 C. Agricultural Production ............................ 6 D. Agricultural Production Organizations .... .......... 7 E. Farm Inputs ........................................ 10 F. Agricultural Research and Extension .... ............ 11 G. The Bank for Agriculture and Food Industry ... ...... 12 H. Investment Financing ............................... 13 I. Marketing .......................................... 14 III. THE PROJECT ............................................ 16 A. Objectives ......................................... 16 B. Detailed Features .................................. 16 C. Description of Project Works ....................... 17 D. Water Requirements, Availability and Quality ....... 21 E. Water Rights ....................................... 21 F. Status of Engineering .............................. 22 G. Cost Estimates ..................................... 22 H. Financing .......................................... 23 I. Cost Recovery ...................................... 24 J. Implementation Schedule ............................ 25 K. Procurement ........................................ 26 L. Disbursements ...................................... 26 M. Environment and Health ............................. 27 N. The Role of Women .................................. 27 This report is based on the findings of an appraisal mission to Romania in June 1979, consisting of Messrs. M. H. Tirmazi, H. von Pogrell and Jose Lopez-Lopez, Y.P. (IBRD). 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.  Table of Contents (Continued) Page No. IV. PROJECT IMPLEMENTATION ................................... 28 A. Organization and Management .28 B. Operation and Maintenance .29 C. Accounts and Audit .29 D. Project Monitoring and Completion Report .30 V. BENEFITS AND JUSTIFICATION .31 A. Project Production and Markets .31 B. Prices .33 C. Main Benefits and Beneficiaries .34 D. Economic Rate of Return and Sensitivity Analysis 35 VI. AGREEMENTS AND RECOMMENDATIONS .38 ANNEXES Annex Table Heading No. No. 1 1 Climatological Data ............................... 39 2 1 Present and Future Cropping Pattern ............... 40 3 1 List of Farm Machinery ........................... 41 3 2 Operation and Maintenance Equipment ......... , 42 3 3 Equipment to be Procured Following International Competitive Bidding. 43-44 4 1 Cropping Pattern and Estimated Water Requirements 45 5 1 Cost Estimate 46 5 2 Annual Operations and Maintenance Cost 47 5 3 Estimated Table of Expenditure......... 48 6 1 Financing Plan .49 7 1 Estimated Schedule of Disbursements .50 8 Prices Used for Economic Analysis ... 1 Output Prices .51 2 Input Prices .52 9 1 Annual Production Costs based on Border Prices of Inputs ......................53 10 1 Economic Cost and Benefit Streams With and Without Project. 54 11 1 Selected Documents and Data Available in the Project Implementation File ....................55 CHARTS 1. Implementation Schedule (World Bank 20960) .... .......... 56 2. Organization of BAFI (World Bank 20959) .... ............. 57 MAPS Covurlui IBRD 14577  APPRAISAL OF COVURLUI IRRIGATION PROJECT ROMANIA A. Role of Agriculture in the Romanian Economy 1.01 Agriculture, which plays an important role within the Romanian economy, accounted, in 1978, for 15% of national income, 33% of the total labor force and 11.3% of total fixed assets. Agriculture has provided a broad and expanding food base for the increasingly urban population and raw materials for industrial production. Agriculture also serves as a reserve pool of labor for transfer to other sectors, especially industry, generates funds for capital investment, and is an important contributor to foreign trade, both as a direct earner of foreign exchange and insofar as its growth saves imports. Over the 1965-77 period, national income in the agricultural sector has increased by 48%, or by a compound rate of 3.3% p.a.; achieved mainly through reduced labor intensity, infusion of capital, improved tech- nology, increased use of material inputs, scale economies from reorganization and specialization, and expansion in irrigated areas. Livestock production growing at about 6.2% p.a. accounted for 44% of the gross value of agricul- tural production in 1978, and, crops, at 3.8% p.a., for the remaining 56%. Romanian agriculture displayed a positive trade balance over the 1950-77 period; which rose from US$18.5 million in 1950 to US$227.3 million in 1977. 1.02 Romanian agriculture benefits from relatively good soils, a climate seasonally suitable for production, and exploitable water resources. Out of a national total of 23.8 million ha, 14.9 million are used for various types of agricultural production. Of the agricultural total, arable land accounts for 65.8%, (9.8 million ha) pasture 20.1%, (3.0 million ha) meadowland 9.4% (1.4 million ha), and vineyards and orchards 4.7% (0.7 million ha). Romania can be divided into three agroclimatic zones based on climatic factors, topography, soils, and other natural conditions influencing land use and agricultural performance. The Plains Zone, located in the western, southern, and eastern parts of the country, is especially well endowed with fertile soils and irri- gation infrastructure; it contains approximately 53% of total arable land but only 18% of land under pastures and meadows. Crop yields tend to be highest in this region. The Foothills Zone, situated mainly to the north of the Plains Zone, is characterized by shallow, less productive soils. About 28% of the total arable land and 32% of total pasture and meadowlands are situated in the Foothills. The Mountain and Tableland Zone, including dis- tricts in the northern and central parts of the country, accounts for 19% of total arable area but 50% of pasture and meadowlands. B. Constraints to Agricultural Production 1.03 Despite its importance, agriculture remains underdeveloped relative to other sectors of the economy. One of the major constraint to increasing and stabilizing production is the wide variation in yearly rainfall, partic- ularly in the southern and eastern plains. Approximately 2.5 million ha in  -2- the flood plains of numerous rivers are subject to flood damages, and inade- quate drainage limits crop production on much of this area. Soil erosion is also a major problem. Large scale irrigation and flood control works have been introduced relatively recently and as a result irrigated area has increased from 199,700 ha or 2% of arable land in 1960 to 2,216,000 ha or 23% of arable land in 1978. By 1985 the total irrigated area is expected to be about 3.7 million ha. 1.04 In the past the State farms (IAS's) have received a higher share of investments relative to their share of cultivated land and as a result the marginal productivity of capital has tended to be lower in the State farms than in the Agricultural Production Cooperatives (CAP's). The position of the CAP's has been further exacerbated, through allocations to the IAS's, of a greater share of fertile land, farm machinery and farm inputs. The Government has only recently recognized that further growth of the agricultural sector depends largely on the development of agriculture in cooperatives. Their potential is to be developed in the future by allocating an increasing share of agricultural investments through the newly created Unified Agroindustrial Councils who are responsible for dispersing equal levels of services and inputs to the IAS's and the CAP's. C. Policy Planning and Strategy 1.05 Agricultural policy is formuliated within the framework of a national plan at the highest State level i.e. tha Romanian Communist Party. In order to achieve centrally delineated socio-economic targets, the plan encompasses all aspects of investment, finance, production and marketing. Policy is then transmitted through general guidelines and indicators for preparation of detailed five-year and annual plans beginning at the farm level. The draft guidelines for preparation of Romania's new five-year plan (1981-85) were published in July 1979; and the detailed plan was presented and approved by the 12th Congress of the Romanian Communist Party, in November 1979. These guidelines on agriculture indicate that the gross agricultural production will increase at an annual rate of 4.5 to 5.0% as compared to 4.8% over the period 1965-77. Provisions will be made for rapid and intensive development and modernization of agriculture during this plan period, as agriculture is being given top priority, on which also depends the development of industry and the welfare of a large percentage of the population. The specific components of the agricultural sector of the plan include, inter alia, the following: (a) investments of lei 133,000 million on State and cooperative farms; (b) an increase of arable area by about 154,000 ha, by 1985, through reclamation of land in the Danube delta and in other zones, bring- ing the total to about 10 million ha; (c) an increase of irrigated areas from 2.2 million ha in 1979 to about 3.7 million ha by 1985;  -3 - (d) provision of drainage facilities for an additional 0.8 million ha and soil erosion control works to protect an additional 1.0 million ha; (e) an increase in the use of high power tractors, to reach 140,000 units, and self-propelled harvesters to 40,000 units, including a wide range of other multipurpose farm machinery and equipment; (f) an increase in high potency fertilizer applications to about 3.8 million tons p.a. by 1985; (g) provision of adequate quantities of pesticides and high yield seeds and seedlings; and (h) improvement of the present breeds of livestock and development of new ones. 1.06 Irrigation is important in Romania for agricultural growth as it enables crop diversification, stability in production and yield improvement. The Government recognizes this and has given priority to irrigation, drainage and soil erosion control in the five-year plan for 1981-85 (see paras. c and d above). The Covurlui project aims at reducing growth constraints through ensuring investment in agriculture, and expansion of area under irrigation, thereby reducing dependence on weather and fluctuations in output. The project is a priority project of the Government of Romania, is in line with the guidelines of the five-year plan, and, also, meets the Bank criteria for lending to the agricultural sector. D. Bank Experience in Agriculture 1.07 The Bank has made twenty three loans to Romania since it became a member in December 1972, for a total lending volume of US$1,262.8 million. Ten of these, totalling US$601.5 million, have been in agriculture, of which four are irrigation projects, one irrigation and agricultural development project, one agricultural credit project, one agricultural component of a flood recovery project, and three livestock projects. The first irrigation project (Giurgiu-Razmiresti Loan 1082-RO) has already been completed satis- factorily and a completion report is being prepared. Progress on the others, viz. Rasova-Vederoasa Irrigation and Agricultural Development Project (Loan 1247-RO), Ialomita-Calmatui Irrigation Project (Loan 1368-RO), Viisoara Irrigation Project (Loan 1509-RO) is satisfactory. Construction of project works on the Mostistea-Calmatui Irrigation and Drainage Project (Loan 1670-RO) which was approved in April 1979 has also been started and procurement actions for this project are now being finalized. 1.08 In these five irrigation projects, the Bank has made a substantial contribution to improve the technical quality of these projects. In particular several suggestions were given as a result of which the finally selected alternatives of canal alignments, and pumping stations were technically and  - 4 - economically better than the original proposals. Suggestions given by the Bank staff also improved the design of canals in loess soils, design of drainage works and soil reclamation. Because of such contributions, it has also become possible for the Bank staff to get involved in detailed discus- sions about future projects atearlier stages of project preparation, and as a result the proposed project is relatively better conceived and prepared than the earlier projects. II. THE PROJECT AREA AND NATIONAL INSTITUTIONS A. The Project Area 2.01 Location. The project area, about 148,400 ha gross (about 145,200 ha presently cropped), is located in the southern prolongation of the Moldovian Plateau about 250 km northeast of Bucharest (Map IBRD 14577). In Romania the area is known as the Covurlui Plain and covers about 98% of Galati district and 2% of Vaslui district. To the east, the area is bounded by the flood plain of River Prut (nam-ly Bratesul de Jus and Bratesul de Sus), to the south by the Siret Plain, to the west by the Birlad River, a tributary of the Siret River and to the north by a conventio-ial line which follows the watershed of the Birlad and Siret hydrographical basins. Galati, which is an inland harbor on the Danube and capital of the district (population 250,000), is located in the southeast corner of the project area, close to the confluence of the Rivers Prut and Siret with the River Danube. The distance from Galati Port to the Black Sea is about 150 km. 2.02 Topography and Drainage. Topographically the project area is a part of the central Covurlui plateau rising from about 80 m to 260 m above the level of the Danube. The plateau is fairly uniform with slightly rolling relief and a gentle north south slope of about 0.5%. Six streams, namely: Corozel, Calmatui, Gerului, Suhurlui, Lazova, and Malina cross the plateau from north to south dividing it into seven separate terraces. The banks of these streams show varying degrees of soil erosion. The valleys are narrow and suffer from floods which cause damages to crops and interrupt access between the terraces. All six streams provide natural drainage into the Siret River, which joins the Danube River, south of Galati, and drainage therefore does not represent any particular problem on the plateau where groundwater is below 10 m. Drainage facilities would be necessary only in an area of about 11,000 ha in the flood plains of Corozel, Calmatui, Gerului and Suhurlui streams. 2.03 Population. Total population in the project area is estimated at 520,000, with about 200,000 living in the rural areas, of which 92,700 (46%) constitute the active labor force. Labor employed in the agricultural sector is derived mainly from the rural areas and is estimated at about 74,200, of which 22,900 are employed by the state farms and 51,300 are active members of the cooperatives. The rural population is traditionally employed in rain- fed farming and is generally colnversant with agricultural practices.  - 5 - 2.04 Electricity and Water Supply. All towns and villages in the project area, as well as isolated state farms and livestock units, are served with electricity which is supplied from the national grid. The water for village households is drawn manually from shallow open wells, built along the main village roads or within each private plot. The towns of Galati and Tecuci however are provided with piped water supply. 2.05 Communications. The project area is well linked with the national Romanian railway and road network. One single-track railway line, from Galati to Birlad, runs from north to south on the eastern border of the project area. A second single track line, which is presently being upgraded to double track, circles the area on its western border connecting the towns of Galati and Tecuci. Average hauling distance between any one village in the project area and the nearest railway station seldom exceeds 30 km. Two primary roads border the project area in the east and west parallel to the railway line. Several secondary eastwest roads interconnect towns and villages to the primary roads. Almost all villages in the project area are accessible by asphalt roads, which also serve as the main streets of the villages. The existing farm road network which is mostly ungravelled, adequately serves the needs of the areas on the plateau. Some farm roads, along streams and valleys would require grading and improvement. The port of Galati can accommodate seagoing vessels of 30,000 tons (dead weight), and would serve as the main export terminal for the project area. 2.06 Livestock in the Project Area. Livestock plays an important role in the project area and livestock activities can be found in practically every commune. About 29,200 heads of cattle, 85,500 pigs, 190,300 sheep and 306,900 poultry are presently raised in about 66 livestock units in the social sector. These livestock units are separate organizations with specialized personnel operating within the framework of the existing state farms and cooperatives. Feed requirements are met from local fodder production. Estimates of present and future livestock development, until 1987, are summarized below: Present Future Type of Livestock Farms Head Farms Head Cattle 34 29,200 43 49,500 Pigs 9 85,500 12 158,500 Sheep 17 190,300 18 199,300 Poultry 6 306,900 7 426,900 B. Natural Resources 2.07 Climate. The principal climatological data from Galati and Tecuci weather stations which are located in the project area, is given in Annex 1, Table 1. The climate is basically continental with hot summers and cold winters. In the growing season (April 1-October 31), the average monthly temperature varies from a high of 22.60C in July to a low of 10.60C in October. Sunshine hours during the cropping season averages 1,720 hours.. First frost  -6 - occurs in late September, while late frost may occur up to late April. The average snow cover from December to March is about 5 cm. Rainfall varies widely from year to year and is particularly torrential in the summer. During the cropping season April-October the average rainfall in Galati and Tecuci amounts to 312 mm and 354 mm respectively; however, minimum rainfall can be as low as 160 mm in the cropping season with droughts sometimes extending to over 60 days. Irrigation can greatly improve the yields for summer crops. Wind velocity would not be a constraint to sprinkler irrigation, as strong winds prevail mainly from January to May, when the need for irrigation is minimal. 2.08 Soils. The pedological study of Covurlui plateau was carried out and mapped to a scale of 1:50,000. The soils consist of chernozems, formed on loess deposits under steppe conditions, with continental climate characteristized by cold winters, dry summers and average rainfall of less than 500 mm. Most of the chernozem soils are deep and in different stages of transformation. Sandy chernozems prevail in the western part of the project area which are very permeable. Alluvial soils influenced by groundwater exist near and within the valleys. Due to deforestation in the northern part of the plateau and steep slopes along river banks, moderate to heavy soil erosion is in evidence and would require control measures. 2.09 Land Classification. About 61% of the lands in the project area belong to Class I 1/ which are topographically best suited for sprinkler irrigated farming, able to produce sustained high yields for a wide variety of crops. These lands are very fertile, well structured, of medium texture and with good water retention capacity. Thirty one percent of the lands belong to Class II and are suitable for irrigated farming with adequate soil erosion control measures. These soils also have a medium texture, high water retention capacity, moderate permeability and are not affected by salinization. Eight percent of the project area has a high ground water table and would require surface drainage, and only 0.75% of the project area would require sub-surface drainage. C. Agricultural Production 2.10 Present Land Use. Of the gross area of about 148,400 ha in the project area the net cultivable area is presently about 145,200 ha; the remaining is occupied by waterways, roads and forests. Of the net area about 133,600 ha (92%) is under rainfed cultivation and 11,600 ha (8%) is presently irrigated from several local schemes. With the exception of the Vinatori scheme (area about 4,000 ha), all other irrigation schemes for the remaining 7,600 ha are of a rudimentary and improvised nature and are inefficient to operate and maintain. Even the Vinatori scheme is dependent on sparse summer flows in the Chineja stream. Presently the cropping intensity on the rainfed 1/ USDA Land Classification.  -7- land is 100%, it is also no more than 100% on the irrigated land due to inadequate water supplies. Presently, 37.5% of the cultivated land are grown with maize grain, 26.8% with wheat, 10.5% with sunflower, 10.3% with alfalfa, 6.2% with vineyards and orchards, 2.7% with vetch as green mass and the remaining 6.0% with barley, sugarbeet, vegetables, linseed for oil and beans. No double cropping is possible due to the lack of irrigation. 2.11 Production. Crop yields are low for the area presently irrigated from small schemes due to inadequate supplies, but are reasonable for the rainfed area as production is supervised by well qualified personnel. Due to a wide variation of rainfall, yields of rainfed crops are subject to yearly fluctuations and in some years there may be a complete failure of some crops due to extended drought periods. Based on five representative years, the average yields of major crops obtained under irrigation on the Vinatori scheme are: maize 5.9 ton/ha; wheat 3.1 ton/ha, sunflower 1.7 ton/ha; sugarbeet 32.4 ton/ha; vegetables 16.5 ton/ha and alfalfa (hay) 5.7 ton/ha. Under rain- fed conditions average yields of major crops are: maize 3.3 ton/ha, wheat 2.6 ton/ha, sunflower 1.5 ton/ha and alfalfa 4.8 ton/ha. Details of land use and yields are given in Annex 2, Table 1. D. Agricultural Production Organizations Agricultural Production Cooperatives (CAPs) 2.12 Background. Collectivization of private farms started in 1945 and was completed by 1962. During its final stage private farms and agricultural associations 1/ were merged into what are presently known as Agricultural Production Cooperatives (CAP's). Cooperatives, whose membership includes about 3.4 million families, own 9.1 million ha, (60.6%) of agricultural land, of which 7.3 million ha is arable representing 74.1% of the total arable land in Romania. Almost oine million ha of the total agricultural land or less than 0.3 ha per family are set aside as private plots for the personal use of cooperative members. Cooperatives produce about 67% of all cereals, 48% of green peas, beans and soybeans, 41% of potatoes and vegetables, 58% of forage crops, 99% of sugarbeet and 80% of oilseeds. 2.13 Organization and Management. The land and assets of CAPs are owned jointly by their members, with the exception of farm machinery. CAPs do not own farm machinery or equipment but rely on the services of state owned and operated stations for agricultural machiniery (SMAs). These enterprises are responsible for providing all machinery services to CAPs whenever required. The management of a CAP is the responsibility of its President, the Vice President, a Management Council and a General Assembly. The President and the Vice President conduct the day-to-day operations and are assisted by the Chief 1/ Agricultural Associations, an intermediary form of organization introduced in the early 1950's, allowed participating farmers to pool their lands without loosing title and to be paid according to their contribution to production.  - 8 - Economist, who is responsible not only for the accounting and the financial affairs but also for the preparation of the investment plans. The Management Council, the executive body of the CAP, is responsible for coordinating the CAPs operations. Its membership consists of the President and Vice President, the Chief Economist, Chiefs of the Farms in the CAP and the elected repre- sentatives of technicians and members. The governing body of a CAP is its General Assembly, which consists of all working adults (ages 16-62) in the CAP. The General Assembly is responsible for drafting productivity investment and financial plans, for ratifying major contracts and for deciding the income allocation. 2.14 CAPs in the Project Area. In the project area 51 CAPs currently own about 122,300 ha or 84% of the total cropped project area. CAP holdings range from 250 to 6,000 ha with an average holding size of 2,400 ha. Small private plots retained by CAP members for their personal use amount to 3,100 ha or about 2.5% of the CAP land. CAP members provide all necessary permanent and seasonal labor. CAPs normally utilize about 6,900 male and 20,850 female workers permanently. Another 17,700 male and 5,850 female workers are engaged full time, on seasonal work with different production organizations including the CAPs. About 80% of CAP workers are engaged in crop production with the remainder engaged in livestock production. State Agricultural Enterprises (IASs) 2.15 Background. In the early postwar period State Agricultural Enter- prises were initially established on land expropriated from landlords, on church land and existing government owned land. By 1950, 9.2% of total arable land had been allocated to state units including research stations and seed farms; and by 1965 the corresponding figure was 20%. The structure of the state sector has, however, been changed through a policy of consolidation by which the number of IASs was reduced from 721 in 1965 to 215 in 1972. As of 1977, the number had increased again to 392. These changes have been asso- ciated with efforts to reorganize some IASs into agroindustrial type complexes where state enterprises and their individual farm units have been separated and reassigned to form specialized enterprises. The trend toward specializa- tion has occurred mainly in pig, poultry and grain production. IASs currently own about 2.0 million ha of agricultural land of which about 1.7 million ha are arable and employ about 267,000 persons. They produce about 19% of all cereals, 40% of green peas, beans and soybeans, 19% of oilseeds, 5% of pota- toes and vegetables and 29% of forage crops. 2.16 Organization and Management. IASs are operated and managed by employees of the Ministry of Agriculture and Food Industry (MAFI). One single IAS may consist of several farms or specialized production units. Transport and farm equipment are supplied by and maintained by a Central Service Unit owned by the SMA organization. Until 1978, IASs used exclusively their own equipment but under the new system of Agroindustrial Councils (see para. 2.18) it is jointly used with nearby cooperatives under the auspices of SMAs. The chief executive officer of an IAS is a director, who is appointed by the General Director of IASs in the Ministry. He is assisted by the chief engineers of the farms in the IAS and a chief economist or accountant. Other  - 9 - technicians required for the farms are included on the staff. The governing body or workers council of an IAS consists of the top management, chiefs of the farms, representatives of the unions and the party, and elected repre- sentatives of the workers. In keeping with the territorial organizations of planning and administration, the Director reports to the trust of IASs and the Agroindustrial Councils at the judet level as well as to the Workers Council of the Enterprise. The Workers Council typically meets monthly to make the most important decisions. An executive bureau headed by the director, tech- nical directors, chief mechanical engineer and chief accountant manage the day-to-day operations. 2.17 IASs in the Project Area. Out of a total of about 145,200 ha of currently cropped area, seven IASs own about 22,800 ha or 16%. IAS holdings range from 420 to 6,000 ha with a median holding of 3,200 ha. To meet their labor requirements IASs in the project area employ permanently 11,500 male and 1,250 female workers and seasonally 3,000 male and 7,150 female workers recruited from neighboring CAPs. 2.18 Unified Agroindustrial Councils (UACs) and Stations for Agricul- tural Mechanization (SMAs). The use of agricultural machinery in Romania has recently undergone an important reorganizational change. In the past, state farms were fully mechanized with their own machinery, whereas the cooperatives did not own equipment and were served by Stations for Agricultural Machinery (SMAs). As a result discrepancies in production levels between state farms and cooperatives developed. A large number of machines in the state farms remained underutilized while cooperatives suffered shortages of equipment. In February 1979 important steps were taken to remove the performance dispari- ties between IASs and CAPs. The main feature of the new policy is an attempt to promote uniform development of agriculture on IASs and CAPs through the creation of "State and Cooperative Unified Agroindustrial Councils". These councils are responsible for coordinating the planning of all agricultural activities in the area and for dispensing equal levels of services and inputs (mechanization, irrigation, fertilizer, seeds, plant protection, etc.), for the CAPs and IASs in their jurisdiction. With introduction of the new system of Agroindustrial Councils, farm machinery owned by IASs was handed over to existing SMAs which in turn would serve the common needs of both state farms and cooperatives. The formation of the Agroindustrial Councils is expected to improve the use of agricultural machinery and remedy previous shortcomings in the services rendered by the SMAs to the cooperatives. In the past, SMAs were simple service suppliers and were paid by the CAPs in cash or kind based on fixed norms. Compensation to SMAs will now be based directly on achieved production levels. Respective targets and tariffs are presently being set. The competence and responsibilities of SMAs has been upgraded. The President of the SMA would in addition be the Vice President of the respective Agro- industrial Council. In the project area there now exist 18 SMAs which coincide with the number of the newly established Agroindustrial Councils. Agricultural machinery pooled under the Agroindustrial Councils is either stationed on state farms or stations for agricultural machinery (SMAs) which are fully equipped with repair shops, spare parts and trained maintenance staff and will serve the common needs of both State farms and cooperatives.  -10 - E. Farm Inputs 2.19 Mechanization. Agricultural machinery is locally manufactured and some, including tractors, is already being exported. The production program is standardized to the extent possible facilitating operation and maintenance on the farm level. New farm equipment is developed and tested by the Institute for Agricultural Mechanization under auspicies of MAFI in close collaboration with the manufacturers. Research efforts are directed to economize labor and energy. The production program is tailored to the specific needs of large farm operations. It includes tractors of 45-180 HP, self-propelled combines, and complex soil preparation and seeding equipment for row crops. Land preparation and sowing, fertilizer, biocides 1/ application, transport, cereal harvesting and straw bailing are fully mechanized. Weeding between rows, consisting of 80% of weeding requirement is mechanized, while the remaining 20% along the rows of crops is inaccessible to machines and is done by hand. As an average, there is one tractor to 60-80 ha. Large scale farm operation in the southeastern plains of Romania, where the project is located, make the use of agricultural machinery essential for timely and full achievement of production targets. The existing farm equipment is adequate for rainfed farming, however, additional equipment will be required for incremental production. This additional equipment is being provided under the project. 2.20 Labor. In addition to mechanization, hand labor is required for various field crops and operations. There are two peak periods of labor, one in May for weeding, thinning sugarbeet, and transplanting vegetables, and, the other in September-October at harvesting time. The available labor force in rural areas is shared between state farms and cooperatives. Requirements of labor for the project have been estimated at about 990,000 man-days per month during the peak period. Sufficient labor is available in the project area to meet the above demand. 2.21 Seed. Improved seeds for all project crops are available in Romania in the required quantities and would be used in the project area. Seed requirement per cultivated ha and price per kilo are fixed by MAFI. Seed development and multiplication of elite seed is entrusted to the research stations and selected state and cooperative farms and is supervised by a specialized state organization SEMRON. Processing, testing and certification of seed meet international standards. Romanian seeds of maize and sunflower are considered of high quality and are exported to several countries. Of the seeds provided by the seed enterprises, wheat and barley seeds are renewed every two years, while for other crops seeds are renewed on an annual basis. 2.22 Fertilizer. National fertilizer production of ammonium nitrate is estimated at 4.3 million tons and of superphosphate at 2.2 million tons per year. About 128,000 tons of potash are imported. Use of compound fertilizers 1/ Herbicides, fungicides, insecticides and other chemicals for plant protection.  - 11 - is less common in Romania. The allocation of fertilizers to state farm and cooperatives, which is based on soils, climatic conditions and crop require- ments is reviewed each year by MAFI and the Chemical Industries Ministry. Following introduction of irrigation, the project area would receive priority in the allocation of fertilizer which would be increased to the levels recom- mended by research and the results from soil fertility laboratories. The fertilizer formulae proposed for the project are appropriate. Under rainfed conditions there is no significant application of potash, however, with irrigation, the high projected yields would necessitate some use of potash, which has been included. 2.23 Plant Protection. Regional research and forecasting stations under the Ministry of Agriculture (MAFI) advise CAPs and IASs on timely and appropriate plant protection treatments which are carried out by the SMA's. In addition, a plant protection department exists in the Directorate for Agriculture which deploys special equipment including planes for spraying insecticides. At present about 1.9 million ha are sprayed in Romania by air. Basic research, long-term forecasting, testing of new products is undertaken by the Central Institute for Plant Protection in Bucharest which also conducts large scale experiments in agricultural fields of IASs and CAPs. A wide range of pesticides and herbicides is used, with a satisfactory rate of application. F. Agricultural Research and Extension 2.24 Research. Agricultural Research in Romania is coordinated by the Academy of Agriculture and Forestry and is carried out in 13 institutes, 6 central stations and 41 research stations. These research facilities are distributed throughout the country's ecological zones over an area of about 80,000 ha and are well staffed with over 1,600 scientists. Specific research needs and experiments for the project area are attended to by the Research station in Braila, about 30 km south of Galati. This station has existed for 25 years and is carrying out applied research and experiments on cereals and industrial crops, soil reclamation and irrigation. The Fundulea Research Institute, about 20 km from Bucharest, is the main research station in the country and is responsible for applied research in cereals and industrial crops. Some of Fundulea's research findings under experimental conditions and actual yields obtained upto 1978 in IAS's and CAP's in the production sector are summarized below: Yield under Actual Yield Experimental in the Produc- Irrigated Crops Conditions tion Sector -----------(tons/ha)----------- Wheat 7to 8 4to 6 Barley 8 to 11 6.5 to 7.5 Maize 10 to 14 7to 9 Sunflower 3 to 4.5 3 to 3.5 Soybeans 3.5 to 4.5 3.5 Sugar beet 70 to 90 60 to 70 Alfalfa (hay) 16 to 18 12  - 12 - 2.25 Extension. Extension services in Romania, which are provided through the General Directorate of Agriculture in each district, are efficient and effective. The General Directorate of the district of Galati has a staff of about 20 specialists in crop and livestock production, CAP activities, marketing and planning. In addition, each CAP or IAS has its own specialists who are provided by the General Directorate in case of CAPs and by Department of State Agriculture in case of IAS. The General Directorate coordinates the programs for IASs and CAPs in accordance with technical guidelines received from the Ministry of Agriculture. The extension staff has a direct say in improvement of cultural practices and application of technology instead of an advisory role. Research findings pass rapidly into practice and the super- visory staff of each CAP and IAS adequately monitor their application. Train- ing of both IAS and CAP field staff is periodically provided by the General Directorate through short and medium term courses. For more specialized personnel, graduate courses are organized during the winter. Irrigated schemes and land reclamation works near the project area provide opportunities for gaining practical experience with works similar to those under the project. G. The Bank for Agriculture and Food Industry 2.26 The Bank for Agriculture and Food Industry (BAFI) is a State-owned credit institution established in 1968 to finance and supervise investments and operations in agriculture and agroindustries, for State, cooperative and, to a limited extent, individual production units. The general organization of BAFI and its departments is illustrated in Chart 2. The principal respon- sibilities of BAFI are to: (a) act as fiscal agent for collection and distribution of State budgetary funds; (b) provide short-term production credit; (c) review both technical and financial aspects of investment proposals of State enterprises and cooperatives; (d) provide long-term investment credit; (e) exercise financial control over execution of investment and financial plans; (f) maintain deposit accounts for State enterprises and coop- eratives; and (g) cooperate with foreign and international organizations to finance investment in agriculture and agroindustries. 2.27 The Administrative Council is BAFI's policy-making body. It is composed of BAFI's President, Vice Presidents, department directors from the Bucharest head office and major branches, economic and agricultural experts,  - 13 - representatives of ministries and other central State agencies, and a delegate designated by the General Trade Union of Romania. Between the sessions of the Administrative Council, the Executive Bureau acts as the decision-making body. Its members are the President, Vice Presidents, three department directors and the trade union representative. 2.28 BAFI operates through 39 branches, 92 sub-branches and about 850 credit cooperatives which serve as its agents for small-scale lending. Three operational departments in the head office (agroindustries, cooperative sector and State sector) serve enterprises of national importance. Two BAFI branches operate in the project area, all within Galati district. H. Investment Financing 2.29 Investment projects are planned at the farm level (IAS and CAP) on the basis of guidelines and indicators issued by judet agricultural organiza- tions within the framework of the national plan. Tentative plans then move through a system of reviews, aggregations, adjustments, and clearances up through the Grand National Assembly after whose approval they are enacted into law. Once a project is included in the annual plan, the CAP or IAS prepares a technical and financial proposal with the help of staff from BAFI and the con- cerned General Directorate of Agriculture. This proposal is normally backed up by detailed studies and designs made by relevant specialized institutes. After the proposal is approved by the competent authority, it is reviewed by BAFI, revised if necessary, and a decision to finance the project is taken. 2.30 Investments in CAPs are financed from the Development Fund (see para. 3.30) and from BAFI loans. The Fund may finance up to 30% of the costs and the BAFI loans up to 95%, depending on the project, the financial status of the cooperative, and other similar criteria. 2.31 Once a project has been appraised, the Branch Council of BAFI approves the amount and term of the loan. The repayment terms may be in equal installments or in declining or ascending amounts, depending on the nature of the loan. Each January, the President and Council of the CAP establishes the month, in which the loan installment will be repaid. Loan repayment terms vary, generally matching the expected economic lives of the assets being financed; repayment periods for typical loans are: vineyard or orchard, 10 years including 4 years of grace; feedmill, 12 years including 2 years of grace; dairy unit, 20 years including 3 years of grace; on-farm irrigation equipment; 8 years including 3 years of grace; on-farm buried irrigation pipe network, 25 years including 5 years of grace. Current interest rates on investment loans to CAPs amount to 3% including interest during construction, and a penalty rate of 5%. 2.32 Currently few investment loans are made to IASs, except for small mechanization and some minor investments. Most long-term IAS investments, as well as short-term capital requirements, are financed from the State budget, funds for which are channelled through BAFI. In the case of credit financing,  - 14 - payments are made from profits, or where no profits occur, from the IAS's own funds. The financing plan establishes repayment on a quarterly basis and the schedule is monitored by a BAFI loan officer. Interest rates on investment loans to IASs are higher than for CAPs and range from 2% during construction to 4% thereafter; the penalty rate on delayed payment ranges up to 6%. Maximum repayment periods are ten years after start of operations. In future the IAS system will change. The portion of profits currently paid into the Consolida- tion Fund 1/ will remain unchanged, but the proportion of profits channelled into the State budget and own funds will shift significantly with the major share going into own funds. Investments will therefore be mainly financed from IAS's own funds and also increasingly through credit financing by BAFI. The trend toward more internal generation of resources and debt financing reflects a policy decision to require greater financial discipline of State Enterprises. 2.33 Interest rates play little or no resource allocative role in the country because they are "taxes-on" rather than "prices-of" capital. Over the medium term, there appears to be no intention of changing interest rates, which are already higher than in other socialist countries. There is, how- ever, some indication that interest rates are beginning to be used to a limited extent as an allocative tool: for undisbursed funds interest rates may be decreased in favor of CAPs, penalty rates for CAPs may also decrease, and for loans to enterprises needing to borrow due to poor management, interest rates may be increased by 2 to 3%. These measures are in line with a shift in preference in allocating funds from IASs to CAPs. I. Marketing 2.34 Organization and Management. Marketing of agricultural products in Romania is entrusted to State owned and operated marketing Centrals, estab- lished in the late 1960's to assist MAFI in the procurement, grading, pro- cessing, storage and distribution of agricultural products. Currently, there are 13 Centrals which specialize in marketing specific commodities such as cereals, vegetables and fruits, sugar, meat, milk, etc. With the exception of the Central for sugar, each Central has its headquarters in Bucharest and an enterprise in each of the country's 39 judets. The enterprises are the executing agencies of the Centrals which organize the collection, transport, and delivery of farm products. The Central for Sugar is organized differently from the others in that, instead of having district enterprises and collection centers, it owns and operates 17 sugar factories. The CAP and the IASs farms are responsible for the delivery of products to the collecting centers but all costs of transportation are paid by the Centrals. Each farm is expected to 1/ Normally about 10% of the net profits of an IAS are credited to a Con- solidation Fund used to finance minor on-farm investments on any enter- prise under MAFI, 25% of profits in excess of planned profits are also allocated to the Consolidation Fund.  - 15 - provide its own packaging materials; the collecting centers reimburse the IAS farms for such materials (about lei 17 or US$0.8 per ton for grain) but not the CAP farms, who are allowed to take back their materials after delivery of products. Products from individually-owned plots and some surplus CAP produc- tion, i.e. production exceeding quotas contracted to the Centrals, are marketed through peasant free markets and Agro-cooperatives. Agro-cooperatives are marketing cooperatives formed and operated by the CAPs. Both channels are under the jurisdiction of the local People's Councils and handle mainly vege- tables and fruits (less than 5% of total output marketed) and also live chickens and dairy products to some extent. 2.35 Each Central is headed by a director general who reports directly to the concerned Deputy Minister. He is assisted by directors of commerce/ marketing, economics/accounting, and technical matters. The composition of each district enterprise's administrative personnel is similar to that of the Central: its staff usually includes a chief engineer, a marketing specialist, and an economist or accountant. 2.36 Transport, Marketing and Storage Processing Capacities in the Project Area. Incremental project output would be handled by the appropriate marketing Centrals described above through their enterprises and collection centers in the project area for which adequate transport is available. The Centrals and the enterprises are well equipped to facilitate smooth flow of products without excessive losses. Storage and processing capacities in the area are planned in accordance with the Government policy on promoting integrated agricultural development and implemented, based on the Five-Year Planning cycle. The following additional storage and processing facilities have been planned and would be completed during the 1981-85 plan period: (a) Grain silos at Galati and another suitable location for 88,000 tons. (b) Modernization of existing oil factory "Prutul" Galati to handle 600 tons of soybeans and 70 tons of oil in 24 hours. (c) Sugar factory lanca-Braila for 4,000 tons of sugar beet per 24 hours. (d) Yearly increase in wooden storage facilities for maize. 2.37 Some of the sugar beet production would also be processed at the existing sugar factories at Bacau and Buzau, which at present are operating below capacity. The existing capacities for processing vegetables, fruits and tc&.a+ces are considered sufficient to absorb the incremental production. The new facilities, including modernization, are being financed by BAFI outside the ptojecL. Asstirances were sought during negotiations, that funds would be mad^ a9aila!.1e f^- tuLe corpletion of these facilities in time to satisfy thi- needs ctf the pr-jcct With these additions and modernization, the storage -ld , oce 3iLLg caparity ii tLhe project area would be adequate to handle incLemerital rtoductrisn from the project.  - 16 - III. THE PROJECT A. Objectives 3.01 The main objectives of the project are to increase and stabilize crop production in a gross area of about 148,400 ha (about 143,250 ha net) and to raise crop production and labor productivity through construction of irrigation and drainage facilities and soil erosion control. B. Detailed Features 3.02 The project works would consist of: (i) a fixed pumping station on the Danube River to lift water into the main irrigation canal in the flood plain; (ii) a fixed pumping station at the foot of the plateau to further lift water into the main terrace canal; (iii) a system of main canals (115.6 km) and secondary canals (75.5 km) in the flood plain and on the plateau; (iv) sixteen repumping stations on the main and secondary canals on the plateau; (v) a storage dam in the Suhurlui valley to store off-season pumped supplies from the Danube River; (vi) forty four pressure pumping stations to feed piped irrigation systems; (vii) surface drainage works to serve a gross area of about 11,350 ha (about 10,800 ha net); (viii) tile drainage works for an area of about 1,100 ha; (ix) soil erosion control works to protect a gross area of about 45,300 ha (about 44,300 ha net); (x) valley training of 4 streams in a length of 267 km; (xi) equipment for operation and maintenance of irrigation and drainage works; and (xii) farm machinery to intensify agriculture on the area to be irrigated by the project.  - 17 - Brief description of these works is given in paras. 3.03 to 3.20. Major irri- gation and drainage systems and soil erosion control works are illustrated in Map IBRD 14577. C. Description of Project Works Pumping Stations and Power Supply 3.03 Pumping Station on the Danube River. This station (SPA Dunare) would be located about 7 km below the town of Galati and would have a capacity to pump 53.5 m3/sec over a maximum head of 4.5 m. A stationary pumping station has been selected for this site. Many factors, inter alia, stability of river bank; substantial depth of natural channel for submerged operation of foot valves; and favorable foundation conditions have contributed to this decision. This stretch of the Danube River is a major navigation channel with congested shipping lanes. The Lower Danube Shipping Authority has also advised that a floating pumping station would be an obstruction to navigation and should not be constructed. One open type caisson (49.5 m x 17.8 m) would be sunk to a depth of 12.5 m to provide the foundation for the station which would be located about 200 m inland from the river edge. The river bank would be further stabilized through provision of stone protection on the river slope, upstream and downstream of the station and a flexible stone apron in the river bed adjoining the slope. Water would be siphoned over the Danube flood protection dyke, through twelve steel pipes, to an equal number of pumps. The installed power capacity at this station would be 4,900 kw. 3.04 Vinatori Pumping Station: This pumping station (SRPl) would be located about 19 km from the Danube on the main canal in the flood plain and would lift about 46 m3/sec to the plateau over a height of 94.0 meters. This would be the largest pumping station in the system, with an installed capacity of 60,325 kw. Foundation works would consist of an open caisson 18 m x 56 m which would be sunk 11 m below the ground. Ten pumps would discharge into two pipes, each 1,250 m in length and 3.1 m in diameter. The pipes would cross under the existing railway line, and the Chineja stream, and discharge on the plateau into a concrete lined stilling chamber. The Canal System 3.05 The main canal in the flood plain of the Prut River would be about 13 km long and would be aligned along the foot of the Covurlui terrace. The canal would extend from the discharge basin of the Pumping Station on the Danube (SPA) to the Pumping Station Vinatori SRP1 (Map IBRD 14577). For the first 4 km, the canal would be in the old flood plain of the Danube. In the next 9 km, it would follow the periphery of existing Lake Brates, using the existing embankment of the lake as one bank of the canal. In the remaining 4 km, it would run parallel to the Chineja stream. The canal would have a trapezoidal section with its bed width varying from 10 m to 15 m. The canal would have a slope of 0.1 per thousand and the conveyance velocity would be 0.5 to 0.6 m/sec.  - 18 - 3.06 On the terrace, the main canal (CMT) would be about 102.5 km long and would have a capacity of 46.0 m3/sec at its head. The main canal would start from SRP1 Vinatori and pass through 3 siphons (namely, Malina, Lozova and Suhurlui; total length 10.8 km). One canal system (CP1) would offtake immediately below SRPI Vinatori, along the Chineja stream; while two canal systems (CP3 and CP4) would take off, from the CMT canal, below Malina and Lozova siphons. At km 37.5, a repumping station (SRP2 Vladimirescu) would lift the water to an elevation of 112 m a.b.s.l. 1/ into (a) CA2 canal (13.1 km) for Suhurlui storage, and (b) into the second reach of the main canal CMT. This pumping station would also feed the canal system CA5. The CA2 canal (capacity 17.8 m3/sec) would fill the Suhurlui pumped storage during off peak periods and flow in the reverse direction during July and August when pumping from the Danube (SRP1) would need to be augmented from Suhurlui storage for meeting peak irrigation requirements. Suhurlui storage would also feed canal systems CP6 and CP7. The second reach of the main canal (CMT), after Repumping Station SRP2 Vladimirescu, would be 45.8 km long, and apart from feeding sub-systems, CD I-M, CD 2-M and CD 3-M, would also serve directly five pressure pumping stations. 3.07 All canals would be lined with concrete; 90% of the work would be done with canal lining machines, while 10% in difficult terrain would be carried out manually. The bed width of the main canal in the first reach (up to SRP2) would vary from 8 to 10 m, its slope from 0.08 to 0.97 per thousand and its velocity of flow from 0.94 to 1.1 m/sec. 3.08 Operation of the canal system would be automated by the use of hydraulically operated constant downstream water level gates at the regulating structures. Some canal reaches would have adequate capacity to store flow variations, resulting from differences between supply and demand. At suitable locations, escape weirs would be provided to spill surplus water into the canal downstream or nearby natural drainages. A total of about 105 structures would be constructed on the canal system. 3.09 Repumping Stations: A total of sixteen fixed pumping stations would lift supplies within the network of irrigation canals; of these, 14 stations would be located on the main canal and 2 on the distributaries. The total installed capacity at the 16 sites would be 109,000 kw. The largest repumping station (SRP2 Vladimirescu) would pump 25.7 m3/sec over about 40 m from the main canal; into main canals CA2 and CA5. This pumping station would also serve to fill the storage at Suhurlui during off peak season. 3.10 Pressure Pumping Stations: There would be a total of 44 fixed pressure pumping stations on the irrigation system; their location is shown on Map IBRD 14577. Twenty nine stations would be equipped with units with horizontal shafts, according to land configuration and minimum level in the canal and 15 units would be equipped with vertical shafts. These stations would serve an area of about 137,250 ha; of which about 105,400 ha would be 1/ a.b.s.l. above Baltic Sea level.  - 19 - supplied by 29 high pressure stations and about 31,900 ha of furrow area by 15 low pressure stations. Smaller areas totalling 4,400 ha would be served by 41 semi-mobile pumps. The capacity of these fixed stations would vary from 0.43 m3/sec to 3.0 m3/sec and the maximum pressure imparted at these stations would range from 60 m to 80 m. Their installed capacity would total to about 75,500 kw. The aggregate installed capacity of the semi-mobile pumps would be about 3,400 kw. 3.11 Power Supply Works. About 114 km of 110 kv and 20 kv power lines would be constructed to supply energy to the pumping stations. Transformer substations supplied from 110 kv lines would be constructed at the locations of main irrigation pumping stations. Power to smaller pumps would be supplied through pole mounted transformers, from a network of 20 kv lines. 3.12 Suhurlui Pumped Storage. Comparison of a number of alternatives indicated that the inclusion of a storage in the supply system represented the most efficient and economical variant for meeting the peak requirements during July and August. Stability of foundations, geological and topographical considerations, availability of construction materials, and economy of cost versus storage was considered for a number of sites, and the presently selected location on Suhurlui stream near village Rediu was found the most suitable for the construction of a pumped storage for conserving 156 Mm3 gross (144 Mm3 net) through pumping from the Danube River during off peak season through the canal network at the maximum rate of 17.8 m3/sec. The dam will have a height of 36 m above bed level and would be constructed of homogenous earth fill which is available at the site. The Suhurlui stream has a small flow, varying between zero and 0.2 m3/sec and a spillway for a flood of 0.1% frequency has been provided. The concept of the dam and its associated structures and the adequacy of their design would be reviewed by qualified experts of the National Water Council. Also periodic reviews during construction and following completion of the dam would be arranged to ensure the quality of construction and adequacy of maintenance and method of operation of the structures. 3.13 Sprinkler Irrigation. A total area of about 109,800 ha would be served by sprinkler irrigation. About 44% of this area would be served with self propelled and longitudinally towed equipment, and the remaining 56% with manually handled sprinkler equipment. Distribution pipes (antennae) would be spaced 612 m apart and their length would extend to about 2,700 m according to the terrain. Hydrants would be located on the antennae at a spacing of 72 m and each hydrant would supply water to six laterals (three on either side) by rotation, but only two would be served simultaneously. Sprinklers would be placed at 18 m intervals, each to serve an area of 18m x 24 m. The laterals would be of aluminum with a diameter of 10 cm. The sprinkler nozzle would have a diameter of 7 mm, and operating at a pressure of three atmospheres would be able to supply water at an hourly intensity of about 6.6 mm. The laterals would be in one position for 11 hours with a return period of 14 days. 3.14 Furrow Irrigation. About 31,900 ha of the project area would be served by furrows with a network similar to that for sprinkler irrigation but the hydrants would be spaced 216 m apart. Each hydrant would feed 16 to  - 20 - 20 furrows through portable aluminum and mobile flexible butyl rubber pipes with outlets at furrow spacings. Length of each furrow would be about 200 m and its maximum discharge would not exceed 2.0 1/sec. 3.15 Surface Drainage Networks. Surface drainage would be required for about 11,350 ha, within the flood plains of Corozel, Gerului and Suhurlui valleys. Main drains would outfall by gravity into the three streams. The main drains are relatively short in length (2 to 3 km) and are spaced 300 m to 400 m apart. The drains would be designed to remove, in two days, the runoff resulting from a storm precipitation of about 100 mm in 24 hours in the month of August with a 1% probability. The specific design discharge has been estimated at 0.6 1/sec/ha. 3.16 Sub-Surface Drainage and Reclamation of Saline Soils. The present depth to water table, mostly in the lower flood plain of Suhurlui valley is less than 2.0 m and after introduction of irrigation water table will tend to rise further in this low area, with adverse effect on crop production. The project, accordingly, provides for the construction of subsurface tile drains on an area of about 1,100 ha. Tile drains would be designed with a specific flow of 0.6 1/sec/ha; made of ceramic pipe 70 mm in diameter and would be laid at a median depth of 1.5 m to ensure that groundwater level does not rise above 1.2 m. The individual drains would be 200 m long with a longi- tudinal slope of 1.5 to 2 per thousand and would be spaced 40 m apart. The tiles would have a filter envelope of 100 mm, consisting of graded cinder from the steel factory at Galati. The drainage effluent would discharge into the Suhurlui stream by gravity. A small area of 700 ha would require reclama- tion measures which would include levelling, deep ripping, mole ploughing, deep ploughing without turning, application of chemical amendments, and leaching. 3.17 Valley Training. Corozel, Calmatui, Suhurlui and Lozova streams overflow their banks during high floods, causing damage to crops and communica- tions. Embankments would be provided on these streams in a length of 267 km, which would contain high flows corresponding to a probability of 5%. Four small bridges and their access roads would also require raising. 3.18 Soil Erosion Control Works. Soil erosion control works would be carried out to protect an area of about 44,300 ha of irrigated land with existing slopes between 3 and 15%. The works consist of levelling of rain- washes, realignment of land for contour ploughing, terracing and protective plantation. In addition, the project would provide for an improved all weather feeder road network on 582 km including about 150 river crossings, 10 bridges and 63 km of interception canals. 3.19 Farm Machinery. About 270 tractors and 206 combines would be provided to SMAs for State farms and cooperatives under the project to culti- vate and harvest the increased production (see Annex 3, Table 1). This machinery, which would partly replace the old equipment and partly meet the additional requirements generated by the project, is necessary to ensure development of full agricultural potential following irrigation.  - 21 - 3.20 Operation and Maintenance Equipment. The equipment listed in Annex 3, Table 2 is considered necessary for the operation and maintenance of the project and would be provided under the project. D. Water Requirements, Water Availability and Quality 3.21 Water Requirements. Net water requirements for project crops were estimated at 3,294 m3/ha, the highest monthly net demand of 967 m3/ha would occur in July (Annex 4, Table 1). The irrigation efficiency for the sprinkler area has been estimated at 73%, and for the furrow area at 65% giving an overall system efficiency of 71%. Gross water requirement, at source, per cropped hectare would be 4,639 m3/ha which would amount to a total demand of 782 Mm3 during the croping season and 230 Mm3 (29%) in July. The July and August demand would correspond to a maximum flow of about 85.7 m3/sec of which 53.5 m3/sec would be supplied by pumping from the Danube and the remain- ing would be released from the Suhurlui reservoir, which would have a storage capacity of 144 Mm3. During periods of shortages, the existing pumping station on the Prut river, which can supply up to 9.0 m3/sec, will be operated. 3.22 Water Availability. About 98% of the project's water supply would be derived from the Danube, which drains about 814,000 km2 in central and eastern Europe and is a reliable source of water. It reaches its peak flow between mid March and mid June corresponding to the snow-melt period. Minimum flows occurs between the end of August and November. The peak water require- ment for Covurlui Project would occur in the month of July and, in a dry year, is estimated to be about 85.7 m3/sec of which only 53.5 m3/sec would be pumped from the Danube. In a typical dry year, the lowest discharge in the Danube during July is about 4,500 m3/sec. The peak withdrawal would thus be only about 1.2% of the Danube flow in July. The demand in September, when the river is at its lowest flow of about 2,000 m3/sec, would be 17.3 m3/sec which is less than 0.9% of the Danube flow. Some supplies would also be stored from the catchment from the Suhurlui valley but due to these uncertainties these have not been included in the water balance. Water supply for the project's irrigation system, therefore, is assured. It will also not affect adversely the requirements of international navigation. 3.23 Water Quality. The Danube water is potable and of good quality for irrigation and is already used in five large Bank financed and other irrigation projects. Analysis of samples of Danube water collected at the future pump- site downstream of the industrial area of Galati shows that it has an average ph of 7.7 and contains about 482 mg/l of total suspended solids. The water is classified as of C S1 category and can be used for irrigation without any restriction. E. Water Rights 3.24 There is no international agreement among the Danube River riparian states for the use of its water for irrigation but a convention exists for development of the River for mutual benefits, and for protection of navigation  - 22 - and water quality. The International Water Commission for the Danube River, of which Romania is a member, is mainly concerned with schemes which may inter- fere with navigation and water quality. The maximum diversion for the project, in July, would amount to about 1.2% of the minimum river flow in that month. Even when all of the 2.34 million ha that are potentially irrigable from the Danube River have been equipped for irrigation, the aggregate diversions from the Danube would not exceed 20% of its flow (1,130 m3/sec) in July; 11% (440 m3/sec) in September and 4% (90 m3/sec) in October. Diversions for the present and future projects dependent on the Danube River would not adversely affect the Danube supplies for international navigation. There is no reason to expect, therefore, that the project would raise issues on the use of Danube waters, and no agreement of other riparians would be required. However, as for the previous Bank financed irrigation projects in Romania, Government has furnished a satisfactory letter of representation to the Bank setting forth Romania's treaty obligations on the use of Danube waters and confirming that the project would present no problem on the use of international waters. F. Status of Engineering 3.25 The project has been studied in detail by the Institute for Land Reclamation Studies and Design (ISPIF). Plans for pumping facilities, Suhurlui dam, canal alignments, drainage, soil erosion control, sprinkler and furrow irrigation works have already been finalized by ISPIF. A number of variants were considered, inter alia, irrigation from storages on Siret River and con- struction of more than one storage within the project area. The selected alternative is the most appropriate and economical and is acceptable to the Bank. Detailed design and major drawings have already been completed by ISPIF, while the detailed drawings for construction would be ready much ahead of com- mencement of construction. G. Cost Estimates 3.26 The total project cost, including physical and price contingencies, but excluding interest during construction, is estimated at lei 6,384.1 million (US$354.6 million). The estimate includes duties and taxes and is based on expected December 1979 prices. The foreign exchange component is estimated at US$105.5 million or 29.8% of total cost. The cost estimates are based on unit rates-of works that are prevailing in Romania under the system of regulated prices of materials and wages. Cost of equipment and spare parts expected to be procured from foreign suppliers has been calculated at the international prices likely to prevail at the end of 1979 and is esti- mated at US$13.5 million. Customs duty on imported materials and equipment which now averages about 10% amounts to lei 21.6 million (US$1.2 million) and is included in the cost estimate. Because detailed engineering has already been carried out, physical contingencies have been provided at 7.5% of irriga- tion, drainage, soil reclamation and soil erosion control works and 5% of  - 23 - other minor works, which is consistent with previous Bank experience. Price contingencies on foreign costs are compounded annually at 9% (1980), 8% (1981), 7% (1982-85) and 6% (1986-87). Due to near zero inflation in Romania, price contingencies on local costs are compounded at 1% per annum. Cost estimates are summarized in the table below; details are in Annex 5, Table 1. Foreign Item Local Foreign Total Local Foreign Total Exchange ------lei million ------ -----US$ million---- % Irrigation Works 2,765.9 1,087.9 3,853.8 153.7 60.4 214.1 28 Drainage Works 39.5 9.9 49.4 2.2 0.5 2.7 20 Miscellaneous Works 654.3 115.5 769.8 36.4 6.4 42.8 15 Land Compensation 19.3 - 19.3 1.1 - 1.1 - Equipment 252.0 146.3 398.3 14.0 8.1 22.1 37 Engineering & Admn. 340.6 38.0 378.6 18.9 2.1 21.0 10 Base Cost 4,071.6 1,397.6 5,469.2 226.3 77.5 303.8 26 Physical Contingencies 279.9 98.5 378.4 15.5 5.5 21.0 26 Price Con- tingencies 131.1 405.4 536.5 7.3 22.5 29.8 76 Total (contg.) 411.0 503.9 914.9 22.8 28.0 50.8 55 Total Project Cost 4,482.6 1,901.5 6,384.1 249.1 105.5 354.6 29.8 H. Financing 3.27 According to Romanian law, the State will finance 100% of the total cost of main canals and drains, all pumping stations, drainage, and river training works. First time levelling, ripping and soil reclamation are also financed by the State but subsequent works of this type are financed by the respective CAP or IAS. The cost of buried pipeline, on-farm sprinkler and furrow equipment, and small secondary open drainage canals serving CAP- owned and IAS lands will be transferred to the CAP's and IAS's. The cost of farm machinery and operation and maintenance equipment would be financed from the State budget. 3.28 The proposed Bank loan of US$90 million, to be made to BAFI, will finance about 25% of total project costs, and will be equivalent to 85% of the estimated foreign exchange component. Judging by the response of co-financiers to other Bank-financed projects in Romania it is expected that offers of co-financing will be obtained. The amount and timing of co-financing will depend on market conditions and amounts being raised by Romania on other  - 24 - Bank-financed projects. It is likely that for this project cofinancing of up to US$100 million equivalent will become available. A summary financing plan, which includes physical and price contingencies is shown at Annex 6, Table 1. I. Cost Recovery 3.29 Recovery of CAP Loans and Cost of Farm Machinery. Of the costs to be transferred to CAPs, about 30% would come from their own funds with the remaining 70% financed through BAFI loans. These loans would be recovered in accordance with standard on-lending terms derived from established amortiza- tion practices. For on-farm buried pipelines, the loans would be for 25 years including 5 years of grace, and for on-farm irrigation equipment, 8 years including 3 years of grace. The interest rate would be 3% including interest during construction, with penalty rates for late payment of up to 5%. The cost of farm machinery would be recovered by the State through unit rates paid by IASs and CAPs to SMAs for mechanization services and SMA's contributions to the Depreciation Fund as per law 62 of 1968. 3.30 Investment, Operation and Maintenance, and Replacement Cost. The State recovers a part of the project costs from IASs through 50% of annual net profits credited to the State budget. The State also recovers a part of the project costs through payments to the Depreciation Fund which are used to finance future investments, and through payments of 10% of net profits to the Consolidation Fund which are used to finance minor on-farm investments. The present value of these compulsory contributions to the two funds over an assumed project life of 40 years in constant prices and a discount rate of 9% is estimated at lei 113 million (US$6.3 million), which amounts to a recovery of about 2.2% of the total investment costs, O&M and replacement. Similarly, costs are recovered indirectly by the State from CAPs through the compulsory portion of net income paid into the Development Fund for future investments. The Development Fund is a compulsory saving mechanism, under which funds are set aside for future investments including payments for certain services, for repayment of long-term investment credits, and for contributions to social funds of ICAs and other institutions, with which CAPs are associated. At least 18% of the net income of CAPs must be allocated to the Development Fund. The Fund is deposited with BAFI and earns 1.5 percent interest. The present value of this contribution is estimated at lei 2,253 million (US$125.2 million) which amounts to about 42% of the total investment costs, O&M and replacement. 3.31 The annual O&M costs for the whole project are estimated at about lei 187.4 million (US$10.4 million) or an average of lei 1,308 per ha. The present value of investment, O&M and replacement costs discounted over 40 years at 9% is lei 5,094.3 million (US$283.0 million) of which lei 4,349.6 million (US$241.6 million) will be financed by the State. Operation and maintenance costs are recovered by IELIF through water charges of three types levied on all CAPs and IASs using irrigation water. These are:  - 25 - (a) a variable charge of lei 18 (US$1.00) per 1,000 m3 levied on the volume of water used. This would yield an income of lei 14.1 million p.a. for the Covurlui Project; (b) a fixed annual charge per hectare on the basis of crops grown. The estimated recovery from this charge would be about lei 25.4 million; and (c) fixed charge per hectare levied on the basis of type of irrigation method used. The return from this levy would be lei 19.7 million. These water charges would yield an annual revenue of about lei 59.2 million (US$3.3 million) beginning with year 9, at full implementation, of the project. The present value of this recovery over an assumed project life of 40 years in constant prices and at a discount rate of 9% is estimated at about lei 394.7 million (US$21.9 million). The resulting cost recovery would amount to about 8% of the total cost. 3.32 The revenues accruing to the State would result in a cost recovery of about 52% of the total investment costs including O&M and replacement. In addition, the substantial profits made by the State from the purchase of tradeable commodities at administered low farmgate prices and subsequent export at higher world prices, and general linkage benefits to the economy resulting from incremental project output would contribute further towards the project's cost recovery and with their inclusion, the total recovery would exceed 100%. J. Implementation Schedule 3.33 The project works would be completed in 8 years (1980 to 1987) and in accordance with the implementation schedule (Chart 1). Irrigation would commence in 1982, and would cover the entire area by 1987. An estimated Schedule of Expenditure is given in Annex 5, Table 3 and is summarized below: Calendar Year 1979 1980 1981 1982 1983 1984 1985 1986 1987