Sri Lanka - Agricultural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3272 PROJECT PERFORMANCE AUDIT REPORT SIR LANKA AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 595-CE) December 31, 1980 Operations Evaluation Department 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. ABBREVIATIONS APC - Agricultural Production CenterS CFPP - Crash Food Production Program DCA - Development Credit Agreement DME - Department of Machinery and Equipment GOSL - Government of Sri Lanka ICB - International Competitive Bidding IDA - International. Development Association MPI - Ministry of Plantation Industries PCC - Project Coordination Committee SAR - Staff Appraisal Report SLTC - Sri Lanka Tractor Corporation TCEO - Territorial Civil Engineering Organization UNDP - United Nations Development Program FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT SRI LANKA AGRICULTURAL DEVELOPMENT PROJECT (Credit 595-CE) TABLE OF CONTENTS Page No. * Preface ........................................................... i Basic Data Sheet ...................................................... ii Highlights ............................................................ iii PROJECT PERFORMANCE AUDIT MEMORANDUM I. Summary ...................................... .......... 1 II. Main Issues ................................................... 2 Management of the Project ................................. 2 Other Issues ............................................... 4 PROJECT COMPLETION REPORT I. Background .................................................... 7 II. Project Formulation .......................................... 7 III. Implementation .............................................. 13 IV. Agricultural Impact .......................................... 17 V. Justification ................................................ 19 VI. Institutional Performance ................................... 19 VII. Special Issues .............................................. 20 VIII. IDA Performance ............................................. 21 IX. Conclusion .................................................. 22 Annexes 1 & 2 Map 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.  - 1 - PROJECT PERFORMANCE AUDIT REPORT SRI LANKA AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 595-CE) PREFACE This is a performance audit of the Agricultural Development Project in Sri Lanka for which Credit 595-CE in the amount of US$25.0 million was approved in November 1975. The credit was closed on September 30, 1979 with a delay of 15 months. The final disbursement was made on March 15, 1980 and the remaining balance of US$4.4 million was cancelled. This audit consists of a memorandum prepared by the Operations Evaluation Department and a Project Completion Report (PCR) of August 1980. The PCR was prepared by the South Asia Regional Office following a visit to Sri Lanka in January 1980. The audit memorandum is based on a review of the Appraisal Report (No. 911-CE) dated November 5, 1975, the President-s Report (P-1716) of November 26, 1975, the Development Credit Agreement dated Decem- ber 24, 1975 and the PCR. Correspondence with the Borrower and internal Bank memoranda and other communications on project issues as contained in relevant Bank files have been surveyed and Bank staff associated with the project have been interviewed. An OED mission visited Sri Lanka in July 1980. Discussions were held with Government officials and others who have been associated with the project. The information obtained and observations made during that mission were used to evaluate the conclusions of the PCR and are also reflected in the audit memorandum. A copy of the draft report was sent to the Borrower on October 16, 1980; no comments, however, have been received. The audit agrees with most of the major findings and conclusions of the PCR. The memorandum highlights the functioning of the Project Coordinat- ing Committee, general problems of project implementation and a few other issues which warrant further elaboration because of their importance to the Agricultural Development Project as well as other Bank supported projects. OED wishes to acknowledge the valuable assistance provided by the Government, participating agency officials, and others who had been associated with the project, which significantly contributed to the preparation of this report.  - 11 - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET SRI LANKA AGRICULTURAL DEVELOPMENT PROJECT (Credit 595-CE) KEY PROJECT DATA Appraisal Actual or Item Expectation Current EstLiate Total Project Cost (US$ million) 60.5 NA Overrun (%) Credit Amount (US$ million) ) 25.0 Disbursed ) as of 07/31/80 20.7 Cancelled ) 4.3 Date Physical Component Completed 06/30/78 09/30/79 Proportion Completed by Above Date (%) 60 83 Proportion of Time Overrun (%) 48 Economic Rate of Return (%) NC 1/ NC Cumulative Estimated and Actual Disbursements (US$OOO) FY76 FY77 FY78 FY79 FY80 Estimated 2,000 22,800 25,000 - - Actual 0 4,508 14,726 18,572 20,662 2/ Actual/Estimated (Z) 0 20 59 - - OTHER PROJECT DATA Original Actual or Item Plan Revisions Est. Actual First Mention in Files - - 12/04/74 Government's Application - - 03/21/75 Negotiations - - 10/20/75 Board Approval 12/09/75 12/11/75 12/11/75 Credit Agreement Date - - 12/24/75 Effectiveness Date 03/24/76 - 03/01/76 Closing Date 06/30/78 06/30/79 09/30/79 Borrower Government of Sri Lanka Executing Agency Project Coordinating Committee, Ministry of Planning and Economic Affairs Fiscal Year of Borrower July 1 - June 30 Follow-on Project None MISSION DATA Sent Month No. of No. of Date of Item By Year Persons Weeks 11anweeks Report Identification ASPGA 6-7/74 6.4 6 38.4 NA (Sector Review Mission) Follow-up Mission ASPGA 10-11/74 3.4 4 13.6 NA Discussion with Government of Sector ASPGA 02/75 2.0 2 4.0 02/19/75 Report and Follow-up (Sector Report) on Project Preparation Appraisal ASPGA 04-05/75 5.6 5 30.0 11/05/75 +2 p.t. Total: 17.4 86.0 Supervision ASPGA 06-07/76 4.4 3 13.2 08/04/76 ASPGA 09-10/76 4.4 1 4.4 11/05/76 ASPGA 02/77 1.8 2 3.6 04/19/77 ASPGA 05-06/77 4.0 1 4.0 06/29/77 ASPGA 10/77 2.8 2 5.6 11/07/77 " ASPGA 03-04/78 3.2 3 11.2 05/09/78 ASPGA +1 p.t. ASFGA 09/78 1.5 2 3.0 11/02/78 ASPGA 02/79 1.5 1 1.5 03/07/79 ASPGA 07/79 1.8 1 1.8 08/03/79 Completion ASPGA 02-03/80 1.3 2 2.6 08/ /80 EXCHANGE RATES Name of Currency (Abbreviation) Rupee = SLR Year: Appraisal Year Average Exchange Rate: US$1 = SLRs 6.87 Intervening Years Average 1976 US$1 = SLRs 8.57 1977 US$1 = SLRs 9.68 1978 US$1 = SLRs 15.57 Completion Year Average 1979 US$1 = SLRs 15.55 1/ Not calculated. 2/ US$4,388 thousand was cancelled on April 15, 1980. 9 8 4 - iii - PROJECT PERFORMANCE AUDIT REPORT SRI LANKA AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 595-CE) HIGHLIGHTS The Agricultural Development Project, approved in October 1975, aimed to increase agricultural production in the short-run and also lay the foundation for comprehensive long-term agricultural development. The credit was meant to be quick disbursing and provide much needed foreign exchange to the Government mainly for importation of critical capital equipment for the agricultural sector; it supported the financing of imports of trucks, tractors, other farm equipment and spare parts, and expenditures for studies of tree crop price incentives, development opportunities and machinery repair facilities. Though the credit was expected to be fully disbursed 30 months after project initiation, implementation suffered from a change in the Government followed by a change in import policy, insufficient borrower commitment, and poor project execution. The project never was fully completed and the credit was closed with a cancellation of about 17% after a time overrun of 15 months or 48%. Despite the problems that beset the project, benefits, though difficult to measure, likely have been significant and close to appraisal estimates. The impact of the project is evidenced by the steadily rising harvested acreage and production of paddy (rice), which was expected to be the major benefit of the project. Other points of interest are: - coordinating committee established to direct project imple- mentation was never fully staffed and functioned poorly (PCR paras. 8 and 11); - parallel financing of project components held up disbursements because of conditional restrictions of Credit Agreement (PPAM para. 16 and PCR para. 3.02); - special studies consumed much staff time and were not completed satisfactorily (PPAM para. 16 and PCR para. 3.05); - change in government policy contributed to disbursement delays (PCR para. 3.09); and - IDA procurement procedures were sometimes unknown, and when known were considered to be too restrictive by some partici- pating agencies (PCR para. 3.10). 1 PROJECT PERFORMANCE AUDIT REPORT SRI LANKA AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 595-CE) I. SUMMARY1/ 1. An IDA credit of US$25.0 million was approved in late 1975 to provide foreign exchange to the Government of Sri Lanka to permit the importa- tion of urgently needed capital equipment for the agricultural and tree crop sectors. The need for this credit had been identified by an IDA agri- cultural sector mission in early 1975. During appraisal, the emphasis was changed from a quick disbursing program credit to a project which would provide quantifiable long-term production benefits. 2. The main objectives of the project were to increase agricultural production in the short-run and lay the foundation for longer-term, more comprehensive agricultural development. The credit supported the financing of truck, tractor, other farm equipment and spare part imports and of technical assistance for pre-investment studies and improvement of machinery repair facilities. The Ministry of Planning and Economic Affairs was responsible for overall project implementation, with execution of individual project compo- nents through participating ministries. A Project Coordinating Committee was responsible for inter-ministerial coordination, supervision and monitoring. 3. Project implementation was much slower than anticipated. The appraisal report estimated that disbursements would be finalized by June 30, 1978, about 30 months from project initiation. In fact, disbursements were finally halted on April 15, 1980 some 50 months after project start-up. Approximately $4.4 million of the credit remained unutilized and was cancelled. 4. The major reason for the slow implementation was poor project coordination. Other factors were: (a) an inadequately prepared spare parts component; (b) misunderstandings of procurement procedures; (c) Government s indecision on the use of credit proceeds; (d) parallel financing constraints; and (e) delays in the appointment of consultants. 5. Despite these problems, the agricultural impact of the project, while difficult to quantify, has probably been close to appraisal estimates. The one exception would be the sugar component, where results have been 1/ Adapted from the PCR. -2- disappointing. However, this short-fall may not have been as great as report- ed in the PCR, para. 4.06, and may have been due to factors outside of the project, (PPAM para. 17). Because of the difficulty of linking increases in agricultural output to machinery and equipment imports and the problem of isolating project effects from other output increasing factors that changed over the period period, such as extension, prices, water and fertilizer, a rate of return was not calculated at appraisal nor at completion. 6. This credit raises some issues for future projects of this type. Firstly, if a quick transfer of foreign exchange is an important objective, disbursement conditions should be consistent with it, and IDA procurement re- quirements must be well explained to project staff and kept as simple as possible. Secondly, a project implementation unit rather than a project coordinating committee is more likely to have the authority needed to obtain cooperation from the participating agencies and sufficient staff to exercise adequate control over allocations and disbursements. II. MAIN ISSUES A. Management of the Project 7. A condition of credit effectiveness was: In order to coordinate the execution of the project the Borrower shall establish and maintain: (i) a Project Coordinating Committee (PCC), chaired by the Director of the External Resources Division of the Ministry of Planning and Economic Affairs and including representatives of the Ministries of Agriculture and Lands, Planta- tion Industries (MIPH), and the Central Bank of Ceylon and shall provide such Committee with an adequate full time staff; (ii) in consultation with the Project Coordinating Committee and for the purpose of rendering its technical advice and assistance in project implementation and subsequent monitoring, [shall establish and maintain] technical assistance sub-committees in the Ministries of Agriculture and Lands, Plantation Industries and MIPH not later than thirty days after the effective date or such other date as the associa- tion shall agree.1/ According to the SAR2/ the PCC would be responsible for, inter alia, resolving all issues in the administration of the project; approving project plans; coordinating the preparation of tender documents for ICB; allocating vehicles and equipment to different line Ministries; super- vision of line Ministries and their subordinate departments to ensure that vehicles and equipment imported under the project would be used for the purposes intended; guiding technical assistance programs; coordinating GOSL activities supported by the project with those of UNDP or other donor agencies and advising GOSL on follow-on projects and programs. 8. While the Coordinating Committee was appointed with dispatch and the credit became effective on March 1, 1976 about a month ahead of the planned date, there is no evidence that the Coordinating Committee was ever provided 1/ Development Credit Agreement, section 3.02. 2/ Staff Appraisal Report para. 6.02. -3- with an adequate staff and there is no evidence that technical sub-committees were established in the specified agencies. As late as November 1976, IDA records indicate that the Coordinating Committee was not functionning and did not have an adequate staff. Consequently, implementation of the project was seriously lagging. At this time, the Regional Vice President cabled the Ministry of Planning about the problem. Then in early 1977, the Secretary of the Project Coordinating Committee was appointed as a full time project coordinator. Following this action, the next supervision mission noted that it was anticipated that the project as presently defined would be completed in June 1978, but US$3.5 million of the credit could remain unused because of cost savings and deletion of a few components. This view was supported by an increasing rate of disbursement. Supervising personnel continued to be optimistic about implementation of the project through the end of 1977, but concluded that full utilization of the credit by the original closing date was unlikely and proposed a six-month extension. 9. In the meantime, the Borrower and/or PCC was vacillating on the use of the proceeds of the credit (PCR para. 3.03). First, the Borrower requested the approval of purchases of two-wheeled instead of four-wheeled tractors for private farmers, then the Borrower requested that tractors be sold only to Agricultural Production Centers (APC-s). IDA approved both of these requests but only approved the latter after considerable correspondence and the assur- ance that the loans to APC's would be productive and adequately supervised. In February 1978, the Borrower decided it would be best to sell to private farmers 50 of the 200 tractors that had been approved for sale to APC's. When a supervision mission arrived a month later it found that 150 tractors which had been earmarked for the APC's were stored in the Tractor Corporation's holding area. The reason for this situation was that the APC's had been disbanded and the Agricultural Service Centers (ASC's) which were to replace them had not yet been established by required legislation. The mission recommended that these tractors be sold to private farmers and eventually they were. 10. The view expressed by IDA toward the end of 1977 that the project was making good progress and that disbursement would be completed by the extended closing date of December 1978, turned out to be optimistic. In March 1978, a supervision mission reported that-disbursements were seriously lagging and that only 40 percent had been disbursed compared with the 99 percent that had been expected at appraisal. It was necessary finally to delay the closing date until September 30, 1979. 11. The general conclusion of the audit is that the Project Coordinating Committee was ineffective, contributing to the slow implementation and to the cancellation of a significant part of the credit. The quarterly reports of the PCC were brief and usually did not follow the guidelines drawn-up by the Bank; nor did they indicate that PCC was carrying out its terms of refer- ence as specified in the SAR, PPAR para. 6. Moreover, the performance of the Coordinating Committee did not improve after a full time project coordinator -4- was appointed. Some staff of participating agencies did not know that a coordinating committee existed. An official of another agency stated that the agency did not know its actual allocation and was not given information on its unused allocation of the credit until early 1979, when it was too late to order more equipment. But as noted in PPAM, para. 8, FCC was hampered by the long delay before even a partial support staff was appointed, which may indicate lack of borrower commitment. It is not certain that PCC ever had adequate staff. (The staffing specifications for PCC were not included in the appraisal report.) Another reason for PCC's ineffectiveness may have been that the Director of the Coordinating Committee, who was also the Director of the External Resource Department, had many other competing duties. 12. The mission discussed these problems with the recent Director of the Coordinating Committee and he agreed that another type of implementation organization should have been set up such as a project implementation unit together with a full time director and adequate staff. This may have been the appropriate solution if the unit had been given complete independence and unequivocal support of the Government. 13. There is no indication that the Bank ever considered an alternative type of implementing organization, such as that noted above, when the project was appraised. There had been considerable negative experience with project coordinating committees. A brief review has shown that seventeen projects which were completed or underway at that time had coordinating committees in their implementation schemes. Two of these projects were in the Latin America and Caribbean Region, where none was fully successful; and the rest were in the East and West Africa Regions, where only three were successful. Further, many of these coordinating committees were set up together with project units or other executing agencies. Because of the number of participating agencies and because the credit was to be disbursed quickly to help alleviate Sri Lanka's foreign exchange problem as well as to relieve critical production bottlenecks, it was very important that control of the Agricultural Develop- ment Project was placed under a strong unitary implementation unit.l/ B. Other Issues 14. Another aspect of the credit served to discourage disbursements (PCR para. 3.09). Although the procedure is not discussed in the appraisal report, income earning participating agencies, such as the State Plantation Corpora- tion and Jantha Estates Development Board, were required to pay the full cost of imports at the time they sent an order to the Supply Department for equip- ment to be financed by the project. In most cases, this equipment was not delivered until six months to a year later, primarily because of complex tendering procedures followed in Sri Lanka. 1/ Central Projects Staff has commented that this report draws some poten- tially useful design lessons which have been extracted and circulated to operational staff. -5- 15. When the new government instituted an import liberalization program in 1977, these agencies found it more efficient to order equipment directly, without taking recourse to the project. The only advantage the project brought these agencies at time of appraisal was that it permitted them to import. It did not provide any additional investment capital, When the law was changed, the project offered no benefits from their viewpoint (cf PCR, paras. 3.09 and 7.03). 16. The usefulness of including special studies in the project is open to question. UNDP was to finance complementary pre-investment studies for the crops and for development planning of the Lower Uva region. The credit would assist in financing equipment needed to carry out these studies. In 1976, however, UNDP was having funding problems and under the credit agreement IDA disbursements for tree crop research institutes and the Department of Agricul- ture could not commence until complementary agreements with UNDP had been signed (PCR para. 3.02). The Lower Uva region study was eventually cancelled. The Borrower did not appoint a consultant for the tree crop incentives study until 12 months after the target date. IDA had anticipated that the study would be done by an expatriate consultant. First, the Borrower tried to get the study done by a consultant under a foreign aid grant. Being unsuccessful in this, the Borrower decided to appoint a local consultant to do the study; and after considerable discussions on the qualifications of the appointee and later on the terms of reference, IDA agreed. The consultant then had diffi- culty in getting funds to initiate the study. Further, even though a final report was submitted in September 1979, the consultant maintained that by the summer of 1980 he had still not been paid the full contract amount. In short, it seems that the Government was not interested in having this study carried out because it did not want to face the issue of tree crop taxation (see PCR, para. 3.05). Staff time likely could have been saved if the Tree Crop Incentives Study had not been included in the project and the Bank had pro- posed financing it under technical assistance. 17. The PCR states (para. 4.06) that only 600 acres of land were brought into production by the Sugar Corporation (SC) at the Kantalai Estate compared with 4,600 acres anticipated at appraisal, concluding, therefore, that this was a particularly unsatisfactory project component. This conclusion appears to have been the result of a misunderstanding of the project objectives. Officials of the Sugar Corporation presented the audit mission with data indicating that 2,900 acres of land had been brought into production since the initiation of the project. Of this total acreage, 600 acres represent newly formed lands; in addition, about 130 acres of jungle land had been cleared, formed and brought into production, and 2,100 acres of previously and partly developed land also had been brought into production. At appraisal it was anticipated that sugar production would increase by over 11 thousand tons in -6- contrast with five thousand tons actually achieved (PCR para. 4.06). SC explained that this shortfall was due more to the lack of irrigation water that was to be received from the Mahaweli Ganga Project than to lack of land development. Moreover, SC underspent its allotment for heavy machinery under the project because of this water shortage. SC now expects to receive the promised additional water in the near future and it wishes, therefore, that it had used its total allocation under the credit. This latter development only serves to demonstrate again that Bank/IDA projects cannot be designed and implemented in isolation without due attention to other related or supporting projects. -7- PROJECT COMPLETION REPORT I. BACKGROUND 1.01 In thp mid-1970s, the Sri Lankan economy was in a state of crisis, with large balance of payments deficits, low levels of productivity, and high unemployment. The agricultural and tree crop sectors, in particular, were per- forming poorly, with production stagnating or declining and food imports run- ning at high levels. The uncertainties associated with the land reforms at this time contributed to this situation. 1.02 The foreign exchange required for food and other imports had histori- cally been largely generated by tree crop exports. With the stagnation of tree crop production and increasingly adverse terms of trade, foreign exchange avail- ability had become precarious. This, in turn, restricted importation of capital equipment required to maintain economic growth. In the agricultural and tree crop sectors, shortages of farm power, transport and spare parts were particularly severe problems. 1.03 It was in this setting that the Bank conducted a review of the agri- cultural and tree crop sectors, 1/ and discussions following this review focused on the urgent need to alleviate the capital equipment shortage. Sub- sequently, Cr. 595-CE for $25.0 M, in support of the Agricultural Development Project, was approved by the Board on December 11, 1975; the project was designed to provide broad-based and comparatively quick disbursing IDA assis- tance to enable completion of ongoing development activities. Projects to develop food production, and to rehabilitate and diversify tree crop output, were also being processed at about the same time for Bank Group financing. 1.04 This Project Completion Report has been prepared by staff of the Bank's South Asia Projects Department after an examination of regional and division files, and supervision reports; discussions with Bank officials involved in the preparation, appraisal and supervision of the project; and a mission to Sri Lanka to visit the project areas and talk with project officials. II. PROJECT FORMULATION Origin 2.01 The proposal for the project originated with the 1975 IDA agricul- tural sector study. This study identified the need for a quick disbursing sector lending operation to procure critically needed equipment and machinery requirements. In particular, there were reported to be shortages of transport, farm power, and spare parts for existing equipment. Also, it is apparent that regional management viewed the credit as an opportunity to reestablish IDA / Republic of Sri Lanka. Agricultural Policy and Program Review. Report No. 579a-CE, Feb. 1975. -8- involvement in the Sri Lanka agricultural sector, following many years of inactivity. Policy Issues 2.02 At the initial stages of project preparation, IDA staff considered that a sector credit would have most impact if: (a) agricultural research, extension and training were strengthened; (b) appropriate land use plans for land taken over during land reforms were formulated; (c) the extension services for smallholder tree crops were reorganized and strengthened; (d) the economic position of the tree crop sector was improved through a reduction in taxation, extension cf the FEEC I/ system to plantation crops, and increased allocations of foreign exchange for vital imports; (e) fertilizer subsidies were standardized or reduced; and (f) an improved irrigation rehabilitation and main- tenance program was formulated, and if this program was financed from water charges levied at appropriate levels. 2.03 This was obviously a time of strained relationships between GOSL and IDA and only limited agreement was reached on the above points during project preparation. In particular, GOSL completely rejected the idea of extending FEEC coverage to the tree crop sector, contending that the economic implica- tions were much broader than simply tree crop profitability, and that IDA had inadequately analyzed the impact of FEECs on the economy. In view of this opposition, IDA finally accepted GOSL agreement to a study of the economic profitability of, and constraints on, the sector. In retr3spect, this relax- ation by IDA was unfortunate; poor industry profitability was perpetuated, leading to low levels of reinvestment and continuing decliaes in output. The study, when it was finally produced, was of poor quality (see para 3.05). 2.04 There was eventual agreement that fertilizer subsidies should be unified (though not reduced), and that agricultural research, extension and training should be strengthened. However, GOSL did not see the urgency for the formulation of appropriate land use plans for expropriated lands, and the 1/ Foreign Exchange Entitlement Certificates. At this time, Sri Lanka effec- tively had a dual exchange rate. Most non-traditional exports received a 65% premium over the official rate through the sale of FEECs. -9- introduction of water use charges was also strongly resisted. This latter measure would obviously have been politically unpopular. IDA did, however, insist that COSL increase the operating and maintenance budget of the Depart- ment of Irrigation; this was accepted. Internally it was agreed, within the Bank, that the general question of appropriate water charges would best be handled in the context of the forthcoming Mahaweli project. 1/ Project Preparation 2.05 The project was "prepared" by GOSL, though no formal preparation document was ever compiled. Initially, a credit of $51.0 million was proposed to IDA, comprising: $M (a) machinery and vehicles for the Crash Food Production Program (CFPP) 33.0 (b) vehicles and equipment for the estate sector 6.0 (c) 2-wheel and 4-wheel tractors and spares 8.0 (d) rehabilitation of irrigation tanks 0.5 (e) machinery and equipment for ongoing irrigation projects 3.5 $51.0 M 2.06 IDA found the emphasis on the CFPP to be unacceptable.. The program, which obviously had political support at the highest levels, was considered to be inadequately prepared, with insufficient economic, technical or organiza- tional foundation. Appraisal 2.07 The terms of reference of the appraisal mission stipulated that components to be financed under the credit must: (a) fit in with GOSL's food and tree crop production plans; (b) be applied to complete ongoing programs in the public sector, for which budgetary allocation had been made, but implementation of which was constrained by lack of foreign exchange; (c) be clearly identifiable and have necessary back-up services; and (d) be used for items available within a short period of time to assure an overall disbursement period not exceeding about 24 months. 1/ Mahaweli Ganga Development II (Cr. 701-CE). - 10 - 2.08 On its return, the appraisal mission proposed a general line of credit which would provide funds for the importation of transport equipment, tractors and implements, and spare parts, both to increase food grain produc- tion, and to improve the efficiency of the tree crop sector. Funds were also allocated for equipment to increase sugar output and a technical assistance component was included. This technical assistance was to undertake economic studies, improve the operation of public sector equipment-handling institu- tions, and for project preparation. To complement IDA's contribution, UNDP was to provide technical assistance, fpllowships and some laboratory equip- ment, to strengthen agricultural and tree crop research and agricultural training. 2.09 Project activities were to be coordinated by a Project Coordination Committee (PCC), chaired by a senior member of the External Resources Division, and having representatives from the Central Bank and the Ministries of Agricul- ture, Plantation Industries, and Irrigation. 2.10 Tractors, implements, and vehicles for the public sector were to be procured on the basis of ICE, while spare parts could be purchased through normal trade channels. Tractors and vehicles for the private sector were to be procured on a modified ICB basis, with provision for customer preference. Credit Processing 2.11 Major issues discussed with the Bank during credit processing were: (a) Management of State Lands. In previous discussions with Government, IDA had argued the need for a management and investment plan for all land affected by Land Reform. It was obvious, though, that GOSL would not welcome outside involvement in this sensitive area. It was finally agreed that the credit could proceed on the basis that GOSL had demonstrated its concern in other ways (e.g. agreeing to the incentive study) and only a small part of the credit proceeds would go to lands taken over. (b) Counterpart Funds. The appraisal mission had recommended that counterpart funds generated by the sale of imported equipment should be tied to specific development objectives, and that these funds should be regarded as "additional". This was finally rejected on the basis that the concept of additionality was difficult to apply, that: it would not be appropriate for the tree crop sector component in view of the Bank's tea policy (see 2.11(e)), and with the change in emphasis from a general line 0:: credit to a project oriented credit (see 2.11(c)), uses of credit funds would be well defined in any event. (c) General Line of Credit or Project Credit. The appraisal mission had proposed a general line of credit to the agricultural and tree crop sectors, to finance urgently needed imports. During the May 1975 review Df the Sri Lanka CPP, however, senior Bank Management indicated they would opposa any agricultural credit unless it was for directly productive investments that would produce continuing loDg-erm benefits. The credit thus became a "project", with specific and quantified expected benefits (see paras 2.15 and 2.16). (d) Eater Charges. During processing, some staff argued that support for the irrigation sector should be contingent upon the introduction cf a satisfactory system of water charges0 It was decided, however, that this issue would more appropriately be 1andled during appraisal of the Mahaweli project, and that it would delay processing of the credit, when the objective was for quick disbursement. It was agreed th.t increased budget allocations for irri- gation system operation and maintenance would suffice. (e) Sp22rt for Tea Industry. In view of the Bank's restrictive tea finance policy, there was some opposition to project support for the tea industry. Despite the objections of the Commodities Division, it was decided, however, that there was no conflict because Government had a policy of tea diversification and because the assistance to be pro- vided was aimed at maintaining output and improving quality, rather than increasing production. Negotiations 2.12 The only major issue of dispute at negotiations concerned the quantity of consultancy services to be provided in the project. GOSL pro- tested that the allowance was excessive, especially the 24 months provided for reorganization of the Department of Machinery and Equipment (DME) and the 48 months for the Sri Lanka Tractor Corporation. IDA staff maintained that these services were required but that qualified local consultants could be used,.and that GOSL could first approach UNDP or bilateral aid sources before resorting to project finance. Legal Covenants 2.13 Major legal covenants stipulated that: (a) no disbursements would be made for the tree crop component until consultants for the prices and incentive study had been appointed; (b) no disbursements would be made for equipment for the research, training and extension services of the Department of Agriculture until a project agreement, satisfactory to IDA, had been signed with UNDP for the supply of technical assistance, laboratory equipment and materials; - 12 - (c) no disbursements would be made for equipment for the tree crop research institutes until a project agreement, satisfactory to IDA, had been signed with UNDP for the supply of technical assistance, laboratory and material; (d) no disbursements would be made for spare parts for DME until IDA had approved DHE's assessment of requirements; (e) the borrower would establish and maintain a project coor- dination committee, and that this committee would have full time staff; and (f) GOSL would increase its budget allocations to the Territorial Civil Engineering Organization (TCEO) for irrigation works operation and maintenance. Project Components 2.14 The negotiated project had a total cost of $60.5 M, of which $25.0 M were to be financed by the IDA credit. The IDA credit provided funds for: Department of Agriculture 3.752 Farm Power 3.890 Ministry of Irrigation 9.160 Ministry of Plantation and Industries 5.315 Sugar Corporation 1.705 Lower Uva Project Preparation .628 Technical Assistance and Fellowships .550 25.000 Details of project components, costs and financing are given in Annex 1. Project Targets 2.15 The appraisal report quantified specific benefits from invest- ments supported by the credit as: Component Expected Benefits a. Seed Improvement .. Additional 75,000 tons rice b. Tractor Rehabilitation and Import Additional 45,000 tons rice c. Improvement and Expansion of Irrigation Networks Additional 40,000 tons rice d. Expanded Sugar Cultivation Additional 11,500 tons sugar e. On Estate Transport 7 percent reduction in cost of production Improved tea quality Improved estate financial viability - 13 - Project Formulation in Retrospect 2.16 In retrospect, there were perhaps inherent conflicts in the design of this credit operation. A major (if not the major) objective was to provide a quick transfer of foreign exchange to relieve a serious bottleneck to increasing agricultural output. However, its emphasis ultimately ;.as more on investments that would produce continuing long term benefits. The resultant hybrid embodied some inflexibilities which inhibited quick disbursements (paras. 3.05, 7.01 and 7.02) and at the same time, due to time and staffing constraints, paid limited attention to developing institutions capable of sustaining long term production benefits. An example of this latter point was the sugar production component (para 3.12). 2.17 Less fundamentally, this project would have performed better if: (a) the spare parts importation and equipment rehabilitation program had been more precisely prepared; (b) project officials had been better briefed on IDA pro- curement procedures, and if tender documents had been prepared and agreed prior to Board presentation or credit signing; (c) a more effective coordination body had been established to coordinate the project activities of the multiplicity of project agencies; and (d) the project cost tables in the appraisal report had been presented in such a way that allowed each individual agency involved to know exactly how much money was allocated to it. III. IMPLEIMATION- 3.01 Implementation of the project was considerably slower than antici- pated; the appraisal report estimated that disbursements would be finalized by June 30, 1978, about 30 months after project initiation. In fact, disburse- ments were finally halted on April 15, 1980, some 50 months after start-up. Approximately $4.3 million of the credit remained unutilized and was cancelled. Considering that the credit was aimed at providing quick disbursing, urgently needed foreign exchange, this aspect of its performance was most unsatisfactory. 3.02 An early problem was the lengthy delay in signing the complementary project agreements with UNDP. This resulted from the funding problems being experienced by UNDP at that time and, as a consequence, IDA disbursements for the tree crop research institutes, and for the research, training and exten- sion divisions of the Department of Agriculture, could not commence. The necessary agreements were finally signed about 12 months later than antici- pated. From this point, these two components proceeded at a satisfactory pace. 3.03 Government indecision on the import and distribution of tractors for private farmers severely delayed this component. First there was the - 14 - request that some two-wheel tractors should be imported after GOSL's decision to abandon Government's program for their local manufacture. This was followed by the decision that most of the tractors should be attached to Agricultural Productivity Centers rather than sold to private farmers. Finally, this decision was reversed following the 1977 change in government and the tractors were eventually sold to private farmers as originally envisaged. On top of this, there was initial confusion, and then opposition, to the use of customer preference for tractor procurement. Opposition was based on the desire of Government officials to standardize the tractor fleet as much as possible, and on the suspicion that farmers could be "influenced" by suppliers' agents. IDA finally agreed that imports could be made on the basis of the proportion- ate numbers of each of the three major models already operating in the country. 3.04 The equipment rehabilitation and spare parts import component of the project was inadequately prepared. In both the Department of Agriculture and the Department of Machinery and Equipment (DME), it was found,subsequently, that about 50 percent of the items earmarked for rehabilitation were, in fact, beyond the stage of economical repair and would best be scrapped. This situation was accentuated by personnel changes in both departments; new staff had different views on what should and should not be rehabilitated. 3.05 Disbursements for the tree crop component of the project were conditional upon appointment of consultants for the tree crop prices and incentives study. GOSL took nearly 12 months to make this appointment, having first attempted to obtain the consultants on a grant basis via the Commonwealth Fund for Technical Cooperation. Eventually, IDA agreed to the appointment of local consultants for the study. Unfortunately, during this period, the plantations officials had not prepared any tender documents, And this work only started after the disbursement condition had been met. At a later stage, IDA refused to clear the tender evaluation until definite proposals regarding the allocation of vehicles to individual estates had been drawn up. In retrospect, GOSL could have objected to this delay; such IDA clearance was not called for under the terms of the DCA. The tree crop prices and incentives study, once finally under way, was subject to numerous delays and was only completed in October 1979, about 18 months later than originally anticipated. The quality of the end report was poor; it was mostly a regurgitation of already available data and was largely devoid of the analysis called for in the terms of reference. A prime reason for this disappointing result was a distinct lack of enthusiasm on the part of the Ministry of Plantation Indus- tries (MPI) in the results of the study. MPI apparently considered that the ongoing Tea Master Plan 1/ study would cover much the same topics. In addi- tion, during this period, the Sri Lankan consultant undertook other assign- ments, to which he obviously attached greater importance. Basically, however, it seems that Government was never really interested in the study and only went along with the idea because of IDA's insistence. :DA, in turn, had suggested the study as a 'second best' solution and as a way of averting a showdown with Government over tree crop profitability. 1/ This study had been recommended by IDA in its agricultural sector report and its was subsequently undertaken with the assistance of the Canadian International Development assistance Agency. - 15 - 3.06 The project was to provide transport equipment for the tree crop smallholder extension services. In fact, for reasons which remain unclear, no vehicles ever went to the extension services; all went to estates. 3.07 Increased budgetary provision for irrigation system operation and maintenance prouably exceeded the increase required in the DCA. The DCA specified that the O&M budget should be increased to Rs 50 per acre in January 1976 terms. This would be equivalent to about Rs 75 in January 1980 prices. The actual provision is currently Rs 90 per acre. During project implemen- tation, the Territorial Civil Engineering Organization (TCEO), which was responsible for irrigation system O&M (among other duties), was disbanded and its functions were divided between the Departments of Highways and Irrigation. All of the equipment purchased by TCEO ($5.06 M) under the project during 1976 and 1977 were allocated by Government for use by the River Valley and the Mahaweli development projects. 3.08 Implementation of several of the components was hampered by lack of provision for rupee cover in the budgets of the agencies concerned. While the terms of reference of the appraisal mission specifically indicated that only components which had such provision were to be included in the project, this still emerged as a problem. The equipment rehabilitation program for DME was particularly affected. 3.09 The project was greatly influenced by the new economic policies introduced following the change of government in mid-1977. In particular, the new government liberalized imports of capital equipment and spare parts. Consequently, potential private sector beneficiaries of the IDA credit, found it to be administratively much simpler, and no more costly, to make their own import arrangements. This had a particular impact on the trucks to service the tea estates, all the spare parts programs, and tractors for private farmers. These new economic policies were accompanied by a substantial improvement in the country's balance of payments situation. Following two years of substan- tial deficits in 1974 and 1975, significant surpluses were recorded from 1976 onwards. In 1976, this was largely due to a sharp reduction in the value of merchandise imports, while in later years the surpluses were due to increasing export revenues. Balance of Payments ($ million) 1973 1974. 1975 1976 1977 1978 1979 37 -57 -57 57 183 94 48 3.10 A general problem was lack of awareness, among the various agencies, of IDA's procurement procedures, and difficulties in preparing technical specifications. There is a strong feeling among some project agencies that they were forced by IDA to purchase unsuitable equipment because of low bid prices. There are several documented instances where agencies prophesized that certain items of equipment would not perform satisfactorily, where they claim they were "forced" by IDA to buy the equipment in any case, and where subsequent performance fulfilled the initial prophesy. It is possible that - 16 - this may mainly reflect the agencies' lack of understanding of zhe concept of lowest "evaluated" cost. On the other hand, it reinforces the need for appraisal missions to fully inform project staff of procurement procedures, and, in turn, to make those procedures as simple and manageable as possible (para 7.03). 3.11 There was confusion in some project agencies concerniug the amount of funds allocated to them under the credit. This resulted from misunderstand- ing of the concept of price contingencies. This misunderstanding was probably exacerbated by the manner of presentation of the cost tables in the appraisal report. The total amount of funds (including price contirLgencies) available for each agency and for each component, is not made clear in the tables. This highlights the need for Bank staff to prepare a document (whether an appraisal report or a project file) which can be used by project staff for implementa- tion purposes. 3.12 A particularly unsatisfactory project component was the program of assistance for the Sugar Corporation's Kantalai Estate. From a technical viewpoint, the equipment provided under the project, while being extremely useful, was probably not the most critically needed. A major contributing factor to low cane yields on Kantalai has been, and still is, poor land- levelling and drainage. Originally, however, no allocation was made for excavators or motor graders to overcome the problem. Thile the need was recognized during project implementation, procurement difficulties and delays resulted in the equipment never being purchased. in addition, the project contained no provision for strengthening the mana:ement of the cor- poration, this weakness has been a major constraint to improved performance. 3.13 Finally, a perusal of the project files indicates a lack of govern- ment commitment to the project once the credit agreement had been signed. Until this stage, government interest had been at a high level. However, after signing, there seemed to be a belief that the project would operate by itself. An indication of this is the inadequate attention given to, and the poor performance of, the PCC. It met infrequently, until 1978 had no per- manent staff (in contravention of the Development Credit Agreement), and never did provide quarterly progress reports in any meaningful form (again in contravention of the legal agreement). Even when a permanent staff member was appointed, the PCC acted as little more than a mail box for correspondence between project agencies and IDA, and only limited records of project activities were maintained in the office. This is unfortunate, as the PCC could have played a more dynamic role in facilitating the implementation of the project. Apart from the operation of the PCC, all legal covenants were adhered to. 3.14 The credit savings of $4.3 million were primarily the result of: (a) less spare parts being imported than originally planned due to fewer numbers of machines being rehabilitated, and lack of interest after import liberalization ($3.3 M); (b) some items of equipment which were, subsequent to appraisal, either considered unnecessary, or were financed from bilateral sources ($0.5 M); and - 17 - (c) significant savings on consultants' expenditure due to use of local consultants or to consultants being financed from bilateral sources ($0.5 M) 3.15 Annex 2 lists the items and value of equipment actually imported, compared to the appraisal estimates, for each of the major components of the credit. IV. AGRICULTURAL IMPACT 4.01 The project's objectives, in terms of agricultural impact, were given in para 2.15. The major benefit was to be a substantial increase in paddy output, resulting from improved seed, more timely cultivation and double cropping, improved water use, and expansion of the irrigated paddy area. While the project's expected benefits were specifically quantified, it is difficult, if not impossible, to assess actual results. This is due to the problem of isolating project-related impact from other factors such as farm prices and water and fertilizer input. It is evident, however, that paddy production, area and yield have all tended upward since 1975. 1975 1976 1977 1978 1979 Production (million tons) 1.154 1.252 1.677 1.890 1.815 Area Harvested (000 hectares) 508.5 540.1 665.6 723.5 -- Yield (Kg/hectare) 2,267 2,576 2,314 2,613 -- 4.02 The component for support of seed multiplication and processing was successfully implemented. During the period of the project, the production of certified seed increased from 1,550 tons in 1975 to 3,440 tons in 1979/80. Over this time, the proportion of farm seed production which was accepted for certification increased from 62 percent to 92 percent. It is unclear as to whether this increased availability of higher quality seed has led to the yield increases assumed at appraisal. 4.03 The two irrigation schemes earmarked for finalization by the Irrigation Department were successfully completed, with yields and total production generally being higher than anticipated at appraisal. For example, paddy yields in the Wahalkade scheme have averaged 3,090 Kg per ha, compared to the 2,320 Kg projected at appraisal of the credit. 4.04 The evidence with regard to the production impact of improved farm power availability is conflicting. A recent FAO report 1/ claims that a critical shortage of farm power still exists in the dry zone during the Maha season. This shortage was estimated to affect 162,000 ha of paddy land in the dry zone; this land was said to be either left uncultivated or planted later 1/ "Farm Power Improvement Project," FAO, AG:DP/SRL/77/012. 1980. - 18 - than it should be because of farm power shortage. The report indicates that the shortage has arisen due to: (a) a decline in draught animal numbers; (b) restrictions on imports of capital equipment during the period 1971-77; (c) use of tractors in non-tillage activities; and (d) expansion of the paddy area. On the basis of this, the report recommends the importation of an additional 1,300 four-wheel and 2,400 two-wheel tractors. 4.05 Two research papers from the Agricultural Research and Training Center are, however, less enthusiastic about the yield and production impact of increased tractor availability. 1/ 2/ These papers suggest that the intro- duction of tractors for land preparation has led to no diszernible increase in cropping intensity, and only limited cultivation of new lands. They conclude, however, that on aggregate the effect of tractors on yields may be marginally positive, and that this impact would be most pronounced in the dry zone of the country. As it was to this climatic area that the farm power component of the Agricultural Development Project was directed, it could be assumed that the project had some beneficial production impact. The extent of this impact is, however, impossible to estimate. 4.06 The sugar component of the project was not particularly successful. The appraisal report projected that, as a result of the land development equipment provided for Kantalai Estate, 4,600 acres of new land would be developed over four years and an additional 130,000 tons of cane produced. From this cane, an estimated 11,500 tons of sugar would be. processed. The results obtained fell well short of these projections. During the period under review, only an additional 600 acres were brought irnto production, cane output increased by 5,000 tons and sugar yields did not increase. It should be noted, though, that equipment supplied under the IDA crel.t probably con- stitutes over 90 percent of the currently available tractor power on Kant-alai Estate. Almost all the remaining equipment is of Russian origin, for which vital spare parts are unavailable. Therefore, without the IDA-financed equipment, actual performance would most likely have been much worse, with an actual decline in production. 4.07 Project impact on the activities of the Department of Agriculture cannot be quantified. The credit did, however, finance about 70 percent of the new equipment supplied to the extension, research, and training divisions 1/ "Issues in Farm Power and Water Use in Sri Lanka," Farrington and Abeysekara, ARTI Occasional Pub. 17; Nov. 1979. 2/ "Energy in the Small Farm Sector in Sri Lanka," Farrington, Ryan, Abeyratne and Bandara. Draft of paper presented at seminar: "Energy in Sri Lanka," Colombo, Jan. 10-12, 1980. - 19 - during the period in question. As such, it must have maintained these services at a higher level of effectiveness than would otherwise have been possible. 4.08 An objective of the project was to maintain the volume and quality of tree crop output. Potential project benefits were not, however, specific- ally quantified and project impact cannot be measured. The credit did finance the bulk of new transport equipment supplied to the plantation sector during the period of the project and enabled partial replacement of the obsolete transport fleet. While rubber production did tend upward during the project period, tea output showed no discernible trend. Production (kg million) Rubber Tea 1975 149 214 1976 152 197 1977 146 209 1978 156 199 1979 156 206 V. JUSTIFICATION 5.01 At appraisal, no rates of return were calculated for the project. The extent to which expected benefits were obtained was discussed in the previous section. 5.02 An important, but nonquantifiable, benefit of the Credit was that it reestablished an IDA involvement in the agricultural sector of Sri Lanka, after a long break. Additional projects in the irrigation and tree crop sub- sectors were financed soon after. VI. INSTITUTIONAL PERFORMANCE 6.01 The project, being primarily designed to provide urgently needed foreign exchange, had limited institution building objectives. Project support to the Department of Agriculture has undoubtedly strengthened the research, training and extension divisions; this support was well complemented by the UNDP program for assistance with training, reference materials and fellowships. This program, which was late starting because of UNDP funding difficulties, has been extended and will tie in with the recently approved Agricultural Research and Extension Project, funded by TDA. 6.02 The impact of assistance to the tree crop research institutes is less certain. While the project supplied some urgently needed equipment, the performance of the institutes was still hampered in some instances, by lack of firm direction, staff vacancies, and high staff turnover; these were issues which the credit did not address. - 20 - 6.03 Funds were included in the project for provision of technical assistance to DME for reorganization of the department's stores and workshop operations. Subsequently, this assistance was provided under UK bilateral funding and no IDA funds were used. The consultants who were employed did introduce a workshop job-cosling procedure, survey redundant 3tocks and revise the procedures for hire charge calculations; these seem to have been useful contributions VII. SPECIAL ISSUES Disbursement Delays 7.01 The project was designed to be quick disbursing and to provide urgently needed foreign exchange. That such a need existed at the time is well documented. Despite the urgency, however, actual credit disbursements were slow, apparently for two reasons: (a) delays in meeting disbursement conditions; and (b) difficulties faced by project officials in understanding and implementing IDA procurement procedures. 7.02 Delays in meeting disbursement conditions particularly delayed implementation of the tree crop component of the project. The delays were partly unavoidable (because of problems with UNDP funding; see para 3.02), and partly self-inflicted by government (protracted and Lnsuccessful efforts to sign prices and incentives consultancy contract). What is now more important is whether the conditions were warranted in the first instance. In retrospect, this is dubious, especially for the signing of the prices and incentives study. If IDA felt so concerned with the profitability of the tree crop sector, the issue should have been resolved prior to Board presentation. Adequate data were available at the time to indicate the seriousness of the situation. For the future, inclusion of any conditions of disbursement in a quick disbursing credit such as this, should be closely scrutinized. 7.03 As indicated earlier (para 3.10), procurement problems also delayed credit disbursements. This suggests that, for future projects of this type, either the bulk of procurement should be on the basis of competitive shopping (or some similar approach), or else Bank staff must make a special effort during the appraisal process to brief project officials on procurement pro- cedures. Another possibility would be to have an adequately staffed, and well briefed, central project procurment unit attached to the. PCC. At one stage during the life of this project, one agency became so disillusioned with the procurement process, that it seriously considered withdrawing from the project. Tractor Economics 7.04 The largest single component of the project provided for the importation of tractors and spare parts to relieve a shortage of farm power. Given the import restrictions that were in force at the time of appraisal, - 21 - there is little doubt that the shortage of farm power was a serious con- straint at that time. The question arises, however, of the relative econom- ics of tractor versus animal power. The two research papers referred to in para 4.05, suggest that the economic cost of four-wheel tractor power is at least double that of animal power. One of the papers 1/ also states: "....the argument has frequently been advanced that certain operations in agriculture can be performed only by tractors because of their higher power output. A study currently in progress at ARTI suggests, however, that only in a very limited number of circumstances would it be physically im- possible to carry out with human or animal power what is now done by tractors (Farrington and Akeysekara). Such circum- stances occur in those parts of the Dry Zone where land preparation has to be performed urgently with the onset of the rains and frequently with the soils still in a hard condition." The tractor power imported under the credit was directed to the Dry Zone, and, therefore, perhaps qualifies under the exception noted above. In addition, the important, but unquantifiable benefits of increased transport capacity provided by these tractors in the agricultural off-seasons, should not be ignored. These research findings suggest, however, that any future farm power projects should pay close attention to the relative economics of tractor versus animal power, and to the circumstances where animal power would not be feasible. The impact on rural employment would also need to be examined. 2/ 7.05 There is evidence to suggest that tractor ownership in Sri Lanka is concentrated in the hands of relatively few operators, and that these operators have been able to extract substantial "monopoly profit" from their hiring operations. 3/ While group ownership of tractors in Sri Lanka has been subject to the usual severe managerial and technical problems, future IDA-assisted farm power projects or components would need to closely examine the social equity implications of private tractor ownership. Greater emphasis on less expensive two-wheel tractors, and improved credit facilities for small farmers, may be a part solution to this problem, in that smaller farmers would then have better prospects to tractor power ownership. VIII. IDA PERFORMANCE 8.01 IDA's supervision effort was generally satisfactory. Staff reacted promptly and constructively to government requests for assistance and displayed 1/ "Energy in the Small Farm Sector in Sri Lanka," Farrington, Ryan, Abeyratne, Bandara, January 1980, page 4. 2/ It should also be noted that these research findings are somewhat at variance with a recent FAO study on farm power in Sri Lanka (Farm Power Improvement Project; Report No. AG: DP/SRL/77/012; Rome 1980) which recommends further large scale importation of four-wheel and two-wheel tractors. 3/ "Issues in Farm Power and Water Use in Sri Lanka," op cit. - 22 - considerable flexibility to proposals for changes in the project. For example, Government at one stage proposed that four-wheel tractors should be distributed to agricultural service centers, rather than to private farmers. In view of the poor performance record of these centers, IDA had reservations about this change. IDA staff, however, recognized that there were some merits in the proposal and put considerable effort into devising appropriate implementation procedures. IDA also displayed flexibility with regard to the types of equipment to be imported and to proposals for utilization of project savings. 8.02 In retrospect, greater continuity in staffing of supervision mis- sions would have been useful; whether this would have been possible given the constraints imposed by staff rotation is another matter. The only other possible means by which IDA performance could have been :i.mproved, would have been more direct staff involvement in finding a suitable consultant for the tree crop prices and incentives study. This delay was a major cause of early disbursement delays. Also, the procurement process may have been speeded up if project officials had been provided with draft copies of suitable tender documents and equipment specifications. The professional composition of supervision missions appears to have been reasonable. IX. CONCLUSION 9.01 The Agricultural Development Project originated as a quick disburs- ing line of credit, which would partly alleviate the impact of a severe foreign exchange scarcity and lead to long term increases in agricultural and tree crop output. When redesigned as more of a project-type operation, there was perhaps some conflict in these objectives in that the project design contained inflexibilities which mitigated against quick disbursement. At the same time, greater attention could have been given to strengthen agricultural institu- tions to promote a longer term production impact; the main objective of the change in status. The overall production impact of the project was, however, significant and has probably been close to appraisal targets. Quantification of the actual impact has not been possible. 9.02 Credit disbursements were much slower than anticipated. This seems to have been due to a number of factors: (a) an inadequately prepared spare parts component; (b) delays in meeting disbursement conditions; (c) lack of familiarity with IDA procurement procedures; (d) changed economic circumstances following the advent of a new government in 1977; and (e) government indecision on the uses to which credit funds should be put, and inadequate project coordination. - 23 - 9.03 For future sector credits, the need for any disbursement conditions should be closely scrutinized; policy changes which are considered by IDA to be essential, should be discussed and implemented prior to Board presentation. Similarly, where rapid disbursement is considered an important objective, procurement procedures must be streamlined to the greatest extent possible. * 1 - 24 - ANNEX 1 SRI LANKA AGRICULTURAL. DEVELOPMENT - CREDIT 595-CE PROJECT CO1PLETION REPORT Components, Costs and Financing Other Component Total Cost IDA Finance Agency Finance -- ---US $r-- Department of Agriculture (a) Research, Training, Extension 7.230 2.325 4.905 (b) Seed Production 2.777 1.427 1.350 Farm Power 6.435 3.890 2.545 Ministry of Irrigation (a) TCEO 18.390 5.590 12.800 (b) DME 5.535 -2.945 2.590 (c) DI 1.195 0.625 0.570 Ministry Plantation Industries (a) On Estate Transport and Processing 8.875 4.815 4.060 (b) Extension 0.320 0.240 0.080 (c) Research 2.645 0.260 2.385 Sugar Corporation 3.415 1.705 1.710 Lower Uva Project Preparation 1.228 0.628 0.600 Technical Assistance and Fellowships 2.475 0.550 1.925 TOTAL 60.52 25.000 35.520 SRI LANKA Agricultural Development Project (595-CE) Summary Table Comparision between Appraisal Estimate and Actual Imports Proposed at 1/ Actual Savings(+) Appraisal Imports Deficit(-) US '000 US$'000 US$'000 Department of Agriculture Rehabilitation of Transport Fleet 170 161 + 9 Research 1,002 582 + 420 Education and Training 253 177 + 76 Extension 900 775 + 125 Seed Multiplication 1,427 3,404 -1,977 Farm Power 4,090 4,275 - 185 TCEO 5,590 5,062 + 528 Department of Machinery and Equipment 3,045 1,070 +1,975 Department of Irrigation 625 368 + 257 Plantation Industries 5,105 3,527 +1,578 Tree Crop Research 260 237 + 23 Sugar Corporation 1,705 1,062 + 643 Lower Uva Project 828 - + 828 Totals 25,000 20,700 4,300 1/ Including Price Contingency DEPARTMENT OF AGRICULTURE Transport Fleet Rehabilitation Program At Appraisal Actual Imports Est. Cost Est. Cost $ '000 $ '000 Rehabilitation of Transport Fleet 170.00 Spares for: Mitsubishi Colt Lancer Cars 1.10 Renoult Tractors 12.90 Mitsubishi Delica Microbus 3.50 David Brown Tractors 47.80 Datsun Cars 2.65 Datsun Station Wagons 1.10 Nisan Pickup Trucks 1.30 International Harvester Tractors 31.45 International Harvester Tractors 20.35 International Harvester Tractors 11.10 Massey Ferguson Discploughs 8.30 Fendt Tractor (Farmer) 10.10 Fendt Tractor Tool Carrier 9.35 Totals 1 0 2161.00 o - 27 - ANNEX 2 Component 2 SRI LANKA AGRICULTURAL DEVELOPMENT - CREDIT 595-CE PROJECT COMPLETION REPORT Research Division (RD) Support to the Research division was to be in the form of imported field machinery, transport and spare parts for the major research stations at Peradeniya, Mahaillupallam, Angunukolapellessa and Bandarawela, and 11 smaller research stations. Funds were also to be provided for the foreign exchange costs of glasshouses. Total IDA contribution was estimated at $1.002 M includ- ing price contingencies compared with total disbursement of $.58 'M. GOSL was to provide for the local costs of buildings, while UNDP was to provide for tech- nical assistance, fellowships, laboratory equipment, periodicals and library books. Attachment 1 compares proposed and actual uitilization of funds. Except for power and knapsack sprayers and lorries, the numbers of items imported were less than proposed at appraisal. Several items of farm machinery, transport vehicles and office equipment were, with IDA's approval, added to the original list. IDA also agreed to finance the cost of laboratory equipment and accessories, approximating $70,000, to avoid further disbursement delay caused by the delay in approval of the UNDP technical assistance agree- ment to complement the IDA credit. Because of shortage of rupee funds, construction of glasshouses never took place. The IDA-financed machinery, vehicles and equipment accounted for about 60% of the RD's total imports. All these have been distributed to 4 major research stations and 32 other smaller research stations all over the country. Because of the absence of local agents in the country, RD anticipates problems in obtaining spare parts for imported machinery and equipment, especially for specialized equipment such as seed cleaners and seed dryers. As with the other divisions in the DOA, problems encountered during project implementation were mainly procurement-related, mainly due to IDA's strict procurement guidelines and GOSL's bureaucratic procurement procedures. Departme.nt of Aa,ictusre iteuearlh Di vision A T A P R A i S A L A C T U Al. S 32 Off, Tot.Est. 32 Off. Tot.Est. P.ca- Malsatllu- Angunoko- Banda- &Sall. Total c£ Para- Mahalillu- Angunoko- anda- &Satel. Total Coat It... deniya pallaa pLe.ad raw-la Stations Hog. IhS$o0o0 deniya pall.a pellna ra.,IN Stin.s No.. US5000 4-WhI. Tracbora and I-plaents 2 4 3 2 12 23 115 1 i 1 I 14 140 Threshr0 2 4 2 2 8 18 31 4 2 2 lu 11 19 Thre6hera (portal.) 12 12 12 8 40 84 32 1 l 1 9 12 31 S..d hryaa 2 2 2 l 13 20 4 S..d Clen.ers 2 2 2 1 13 20 10 I I l 7 10 7 Watr V-ps and Icrigation Equipaent 2 4 2 - 10 88 70 2/ 1 5 6 52 pr Sprayera 4 5 4 2 I1 32 l6 4 10 6 3 35 58 6 Knapuak spray.rs 12 16 80 8 35 81 12 2 12 4 12 55 5 2 3ý-tn Tipping Trailera 2 2 3 Rea-a,unted auvr ft. 4-whecel tractor 2 2 4 it'ar--u-Led rotary alah for 4-wheel tractor 2 2 2 3-ao.nLorties I 1 I . 2 33 I t 1 8 4 8 1/ 66 ViLk-up T-uk# 2 2 I l 9 15 105 l 5 6 37 4-wh.el Driv. Transport 4 6 3 2 10 25 162 1 1 t . 0 13 55 Micro-busS (s Øeata) I I 3 6 32 Estate Cara 3 3 12 Øoble Car Pick-p 4 4 22 GIash~.oss 176 Spare Paris ir new equip.ent 64 Typ.writr (Englts and Sighalese) s k 4 Electronic Calculators 20 1 A:lc lronic Progaraumaable Calcula tura 8 2 Laoiratory equiApmntr, i*trounents and apparatus 70 ir le Coa ingena iena 120 1,902 582 j/ 5-ton lorries 2/ Incu.des 2 units coat.d at iS$5600 -29 - ANNEX 2 Component 3 SRI LANKA AGRICULTURAL DEVELOPMENT - CREDIT 595-CE PROJECT COMPLETION REPORT Education and Training Division (ETD) The credit was to finance imported farm machinery and workshop and transport equipment for the agricultural school in Kundasale. Support would also be given to the regional and district training centers and for agricultural information. UNDP was to provide laboratory and other smaller equipment, technical assistance and fellowships. Out of a total allocation of $253,000, $177,000 was utilized. A comparison between proposed credit utilization at appraisal and items actually imported is in Attachment 1. IDA agreed to finance some $42,000 worth of visual aid and photographic and laboratory equipment originally envisaged to be financed by UNDP to avoid further disbursement delays caused by the delay in the approval of the complementary UNDP technical assistance agreement. In 1977, the Department of Agriculture embarked on an expansion program. During this time 60% of all capital equipment imported by the ETD was financed from the IDA credit. 40% were from GOSL's consultative fund, SIDA aid and West German funding. The agricultural training center in Kundasale, the three regional training centers and 14 district level training centers were expanded. Two-year diploma courses in agriculture were added to the curriculum. The eight one-year agricultural courses were increased to 14, and the three regular training courses increased to eight. Training activities were diversified by adding six short courses, i.e., plant nursery management, bookeeping, sprayers and pump repairs, compost preparation, farm produce processing, small scale poultry and dairy farming, etc. In-service training scope was broadened and facilities at in-service training centers were improved. The UNDP technical assistance project complemented very well the ETD's expansion program by financing some of the training equipment and fellowship training to teaching personnel at the school and centers. As with the other divisions in the DOA most of the problems encountered during project implementation were procurement-related. This was mainly due to IDA's strict procurement guidelines and bureaucratic government procurement procedures. For example, due to IDA's insistence, laboratory equipment had to be imported directly from abroad when it would have been administratively simpler and no more expensive if they had been procured from local agents. The ETD anticipates difficulty in obtaining spare parts for some of the specialized equipment due to the absence of local agents in the country. Attachment 1 DEPARTMENT OF AGRICULTURE Education and Training Division Proposed at Appraisal Actual Imports Est. Cost Est. Cost Nos. $ '000 Nos. $ '000 4-wheel Tractors & Implements 7 50 6 46.00 Power Sprayers - Low volume 15 8 Power Sprayers - High volume 1 2 Knapsack Sprayers 20 3 20 .50 Pumps 2" 150 gpm 13 13 Diesel Irrigation Pump 5 6.30 Electric Pumps 3" 250 gpm 3 18 Sprinkler Irrigation Set 1 10 2 4.20 Mechanic Basic Tool Set 17 9 6 2.30 Carpentry Basic Tool Set 17 5 10 4.20 3-ton lorries 2 11 5-ton Lorries 2 21.00 4-wheel Drive 8 52 6 25.00 Minibus 1 6 Station Wagon 1 13.50 175 cc Motorcycles 21 16 9 5.00 0 Spare Parts 20. Price Contingencies 30 Mist Blowers 12 1.20 Megaphones 20 1.40 Tipping Trailers 6 5.10 Visual Aid and OLher 7.00 photographic equipment Laboratory equipment 7.00 All-purpose levels 4.60 Chemicals 23.00 Totals 253 177.00 o > - 31 - ANNEX 2 Component 4 SRI LANKA AGRICULTURAL DEVELOPMENT - CREDIT 595-CE PROJECT COMPLETION REPORT Extension Division (ED) The credit was to finance importation of motorcycles for extension workers, transport for supervisory staff and field extension officers, and protection equipment. UNDP was to complement project support by providing smaller scale field equipment, books, periodicals as well as audio-visual aid and office equipment. Out of a total allocation of $900,000, $775,000 was utilized. Attachment 1 compares proposed fund utilization at appraisal and actual imports. With IDA's approval, the original imports list was expanded to include audio-visual equipment and office equipment, valued at approximately $280,000. Originally it was envisaged that this would be financed by the UNDP. Also with IDA approval, cars and smaller farm and other equipment totalling about $80,000, not in the original list, were imported. During the period of the credit, financing facilities for motorcycle purchase were extended to extension workers. This consisted of a 2-year salary advance at 6% interest per annum payable in five years. Whatever could not be covered by the salary advance was made available through loans from commercial banks at prevailing interest rates. After imports liberalization in 1977, motorcycles that were imported under the credit were about 30% more costly than those imported and offered for sale by local agents. As a result of this only about 20 of the 175 IDA-financed motorcycles were sold to extension workers. The DOA intends to keep the rest as departmental property. The IDA credit accounted for about 60% of the ED's transport equipment import, greatly enhancing extension workers (and officers) mobility, and improving seeds movement. Although no difficulty is anticipated in the servicing of motorcycles and transport equipment due to the presence of a widespread network of local service agents, the same is not so for specialized equipment such as sprayers and mistblowers. Strict IDA procurement guidelines and complicated government procurement procedures were the main problems encountered by the ED during project implementation. Department of Agriculture Extension Division AT APPRAISAL ACTUAL IMPORTS Estimated Cost Estimated Cost Item Nos. $'000 Nos. $'000 500 250 4 21.20 Lorries 25 138 19 151.00 4-Wheel Drive 25 162 38 156.00 Pick-up Trucks 2 14 Motorcycles 200 150 175 90.00 Spares for new equipment 71 Price Contingencies 115 Cars 10 41.30 Cinema Vans 8 204.00 Megaphones & Spares 480 37.00 File Cabinets 290 16.00 Motorized Mist Blowers 152 14.20 English/Sinhala Typewriters 14 4.00 Public Address System 22 4.20 Felt Pens 400 3.60 Weighing Scales 480 3.60 Measuring Tapes 480 3.00 Kanpnrck Spryerr 105 2.50 Calculators 55 1.00 Other Sets of Equipment 480 22.00 Totals 900 775.00 - 33 - ANNEX 2 Component 5 Page 1 SRI LANKA AGRICULTURAL DEVELOP=ENT - CREDIT 595-CE PROJECT COMPLETION REPORT Division of Seed and Planting Materials (DSP) Responsibility for certified seed production, processing and dis- tribution within the Department of Agriculture rests with the DSP. Sagd multiplication is carried out in 42 Government farms, as well as by licensed private farmers. At the time of appraisal, the 42 Governmeht farms were not operating at full capacity, resulting in inadequate seed production and the production of low-quality seed. The key constraints were inadequate land development, insufficient and frequently delayed land preparation, irregular irrigation and plant protection, wasteful harvesting and threshing methods, lack of seed drying and processing equipment and poor storage and lack of transport. To achieve full development for these 42 Government farms, the project was to provide assistance to DSP by financing the importation of farm machinery, transport, plant protection, irrigation and seed processing equipment. Attachment 1 provides a comparison between machinery, equipment and transport equipment proposed to be imported at appraisal and actual imports. With IDA's approval, the numbers of imported transport equipment and tractors were increased and tipping trailers and electric water pumps were added to the list. This increased DSP's imports to $3.4 m, about $2.0 m more than originally envisaged. This was made possible by savings from other divisions in the DA. All these machinery, equipment and transport items have been distributed to the 42 Government farms. During the three year period ending 1979, DSP had to rely heavily on the IDA credit for importation of farm machinery, equipment and vehicles, which accounted for about 50% of DCP's total imports. A number of machinery and equipment items were also imported through SIDA aid funds. Through German assistance, sufficient seed storage facilities, with about 300,000 bushels capacity, have been put up. IDA support had a tremendous impact on the quality and quantity of seeds produced by the Government farms. Government achieved its targeted acreage under the different cropping programs, increasing the production of high-quality seeds. Efficient distribution of basic seeds to the different districts was made possible by the imported vehicles. Imported tractors and farm implements helped in timely cultivation and in disease and pest control, making possible increased yields; the seed yield per acre during the Maha 79/80 is the highest on record. The seed processing units have improved the quality of seeds, helping farmers to get increased yield. - 34 - ANNEX 2 Component 5 Page 2 Most of the problems encountered during project implementation were related to procurement. DSP felt that IDA procurement procedures were too stringent, complicated and cumbersome, and felt at cne point that it was not worth their effort to import. For instance they had to procure the inefficient Indian power sprayers because they were the lowest bidders and IDA had objected to their choice of the German power sprayers which were of better quality and proven efficiency, and which were not much different in price. PH meters are not being used due to complicated usage procedures. Except for transport equipment and tractors, problems may be anticipated in obtain- ing spares for seed processing equipment and other special equipment items due to the lack of local agents in Sri Lanka. There was some misunderstanding as regards purchase of spare parts. After imports liberalization in late 1977, it was determined that local agents for transport equipment and tractors would be able to supply the spares requirement for these items and that no spares should be imported. The DSP took this to mean including all other special machinery and equipment, thus no spares were purchased for sprayers, pumps, seed processing equipment and other technical equipment. - 35 - Component 5 Department of Agriculture Division of Seeds and Planting Materials (pS-.D Proposed at Appraisal Actual Imports Tyne of Eauioment Nos. $'000 Nos. V'000 Tractors 25 125 ho Discplows 2 furrows 20 14 20 Discplows 3 furrows 15 14 15 Tyne Tillers 30 17 25 Rotovators 20 12 Ridgers 20 5 5-T Transport 10 75 15 3-T Transport 10 55 4-Wheel Drive Cars 10 65 15 2-Wheel Drive Cars 8 28 3 1000 gall. Bowzer 5 33 1 Motorcycles 175 cc 20 15 20 Knapsack Sprayers 100 15 100 Tractor Mounted Sprayers 20- 10 10 Sprinkler Equipment and Pumps 20 120 6 Water Pumps Lift Irrigation 90 't 3" 20 120 20 Seed Processing Equipment: 12 342 Batch Driers 12 Tipping Tray Dryers 4 Scalpers 8 Air Screen Cleaners 10 Canvass Cloth 20,000 yds. Small Technical Equipment: TT PH Meters 20 Seed Moisture Testers 40 Tipping Trailers 10 Electric Water Pumps 10 Spare parts for new IDA Equipment .115 Price Contingencies 170 Total 3,70 Farm Power At Appraisal Actual Imports Est. Cost Est. Cost Nos. Unit Price $ '000 Nos. Unit Price $ '000 Four-wheel tractors and implements 370 5,000 1,945 669 4,900 3,275 Sparas for existing equipment 1,280 Spapes for new equipment. 195 Technical Assistance 200 Price contingencies 470 Two-wheel tractors 1,000 1,000 1,000 Totals 4090 4,275 I/ Implements - $95,000. 2/ Excluding tractors imported for Plantation Sector and the Department of Agriculture, TCEO and the Department of Irrigation (See Annex 2, Components 2, 3, 5, 7, 9 and 10.) O - 37 - ANNEX 2 Component 7 Page 1 SRI LANKA AGRICULTURAL DEVELOPMENT - CREDIT 595-CE PROJECT COMPLETION REPORT Territorial Civil Engineering Organization (TCEO) Prior to the 1977 reorganization, TCEO was responsible for main- tainance of major tanks, and construction and managment of minor tanks in the country. At the time of appraisal, it was also responsible for the maintenance of 16,290 miles of roads, of which 7,500 were primarily agri- cultural service roads. TCEO's irrigation responsibility was concentrated mainly in the dry zone, while in the wet zone, its task was dominated by highways maintenance. Project support to TCEO was for its work in the dry zone, in the form of imported vehicles and a limited amount of construction and surveying and drafting equipment. The list of imported machinery and equipment proposed at appraisal was subsequently revised and justified by TCEO, reviewed and approved by the June 1976 Supervision Mission and approved by IDA. Attachment I shows a comparison between imported machinery and equipment proposed at appraisal and actual imports. Construction equipment was to remain in the ownership of the Department of Machinery and Equipment and assigned to TCEO for specific jobs. Surveying and drafting equipment was to be directly allocated to TCEO. In late 1977, after a major reorganization in the Ministry of Irri- gation, Power and Highways (MIPH), TCEO was abolished and its work divided between the Department of Highways, under the Ministry of Local Governments and Highways, and the Department of Irrigation, under the Ministry of Land and Land Development. The credit intended that new IDA-financed machinery, equipment and vehicles be used primarily for maintenance and repair of irrigation facilities rather than for roads and new irrigation construction. However, after the 1977 reorganization, all of the machinery and equipment and vehicles and surveying equipment imported for TCEO during 1976 and 1977 were allocated by Government for use by the River Valley and the Mahaweli development projects. - 38 - ANNEX 2 Component 7 Territorial Civil Engineering Organization Page 2 (TCEO) Pronosed at Anrraisal Actual Imnorts Est.Art. Est.Amt. Items Nos. $'000_ Nos. $'000 Machinery and Eauinment Jeeps 110 715 100 530.0 Tippers (small) 85 595 48 41o.3 Farm Tractors 85 425 95 372.1 Lorries (5-tons) 20 150 Jeep Station Wagon 8 56 Motor Graders 4 180 Front End Loaders 10 300 10 287.5 Water Bovsers 6 72 7 90.2 Dumpers (1/2 to 3/4 cu yd) 55 440 Concrete Mixers (5-8 cu ft) Mobile Type 60 120 44 81.7 Vibrating Rollers, Pedestrian Type 85 255 4o 238.6 (w/scares) Sludge Pumps (6") 80 160 20 168.7 Water Pumps (3" to 41), Centrifugal 170 170 Generator sets (5 kw) 12 24 10 18.6 (v/spares) Vibrators, Portable Type 85 170 24 15.6 Excavators (1/2 to 3/4 cu yd) 6 120 6 246.4 Explosive Vans 29.3 Dozer Shovels (Komatsu D85E) 2 91.2 Angle Dozer (Komatsu D85E) 4 236.9 Scrapers Bharat Model C 8 665.1 Crawler Tractors (Komatsu D85E' 4 264.0 Trailers 100 117.5 Crawler Tractors (Komatsu D1551) 4 370.1 Machinery Carriers 2 111.1 Transceivers and Spares 39 63.1 Mobile Welding 10 80.0 Fuel Bowsers 7 94.3 Mobile Crane 1 107.0 Spare Parts (10%) 395 256.1 Surveying Ecuimment Dumply Levels 300 300 350 31.3 Levelling Staves (14 ft.) 300 90 Steel Bands (100 ft) 300 . 30 300 9.7 Theodolites 100 100 200 75.8 Drafting instruments 48 Price Contingencies 6T5 Grand Total 4115 - 39 - ANNEX 2 Component 8 Page 1 SRI LANKA AGRICULTURAL DEVELOPMENT - CREDIT 595-CE PROJECT COMPLETION REPORT Department of Machinery and Equipment (DME) DME is the central holding pool for machinery and equipment in the Ministry of Irrigation, Power and Highways (MIPH) and is responsible for its repair and maintenance and for its assignment on rental or contract agreement. Project support for DME was for the rehabilitation of 146 pieces of heavy construction equipment primarily used for irrigation. The June 1976 Supervision Mission, which included an agricultural engineering consultfit-, recommended revision of the list to exclude items which were already being rehabilitated under other aid programs, items not economical to repair, and, to include rehabilitation of transport equipment, motor graders and agricul- tural tractors, and the purchase of basic machine tools, which were all deemed justified. After a major reorganization in MIPH in late 1977, crawler tractors, excavators, transport equipment and low loaders were transferred to the Highways Department now under the Ministry of Local Governments and Highways. Attachment 1 shows P comparison between the proposed rehabilitation program at appraisal, the revised rehabilitation program as proposed by the June 1976 Supervision Mission and the actual rehabilitation program undertaken by DME. The project was also to provide $.10 M for the recruitment of a specialist to assist DME in improving the Department's operations, advise on deployment of machinery, rental charges, improving repair and maintenance services and generally assist in all aspects of DME's operations and main- tenance of construction fleet. In mid-77 two consultants financed by the Commonwealth Federation for Technical Cooperation (CFTC) were recruited for a period of one year by MIPH to advise DME on workshop organization and stores management. Their work laid a good fpundation for the establishment of a sound workshop costing system and a stores management system now being used at the DME. They also assisted in evaluating DME's spares stocks, segregating and costing obsolete spares which were eventually auctioned off in late 1978, removing one of the constraints for Treasury's release of rehabilitation funds. However, the consultants were not directly associated with the rehabilitation program, although their assistance and advise were invaluable. DME's rehabilitation program suffered considerable delays. These delays have, in large part, been caused by complicated government procurement procedures, delay by suppliers in completing orders as all the models were over 15 years old and spare parts had to be especially manufactured (in most cases it took between 18-21 months to complete orders), lack of rupee funds and difficulty experienced by suppliers in locating IDA-member country vessels - 40 - ANNEX 2 Component 8 Page 2 with which to transport goods. Within DME, the constraints were managerial, exacerbated by the exodus of DME's trained senior engineers for better jobs overseas. Due to the chronic lack of rupee funds, DME gave priority to the rehabilitation of 24 motorized scrapers and motor graders. Of these, ten were completed between May and November 1979 and, at the time of the PCR mission, were performing work at different Government development projects, and ten are in different stages of completion. Rehabilitation has yet to commence on four. The rehabilitation program was expected to be completed in June 1980 and all the spare parts required for completion are in DME's main workshop in Colombo. Records of machine hours worked by the ten rehabilitated machinery were not available in Colombo as all were performing work on different govern- ment projects in various parts of the country. - 41 - Amn 3 Com!ponaat 3 - - - DeDar'ment 3f Mýachi:neny and Equi=ment 'r-?T) ?roposed at ka evised by AVn-iaal ~ /'6 m ''ssion A_al al.-=es os. .t. -. t:"os. st.Amt. : ; a0.Amt. Mbt3rized c es Caterpillar DW 21 5 .13 .22 .32 21/28 cu yd JABC 'C'iulpac. .0S .21 .21 15/21 u yd 'ABCO 'C' Turapull 1.4 .30 6 .17 6 .16 12/16 u yd 'AECO 'D' ,ournapull 19 .30 .54 6 .23 7/9 zu yd :"VlerTctr Alls Mualners 21A 12 .27 6 .48 zuclid 82-30 9 .20 Caterpillar D/3 15A 14 .31 Cater?illar D/8 .'4A .10 2) Caterpillar :18 13A zo .23 8 ) .08 Catarpillar 3/8 H 2 .03 ALIis Chalners D232 10 .06 :nternaztioal D 15 3 .05 AI.Ls Chalner 20 5 .08 3 .20 :racl Xarshall 55 2 .02 "Zrack Marstall: 70 u1 .13 10 .12 Yarion 360 2 .07 Osgood 2 .06 R.3. 3T 1 .02 Fristman l'ge 3 -07 ytor Graders Galion 04a 6 .10 2 .08 Adams -40 .06 2 .07 willy's 75 .13 Massey rerguson 135 125 .04 Lov loaders A.Z.C. .02 3.M.C. 100 .!' 'Jorkshop Tools and Accessories .4o Technical Assistance .10 ric ontingency -3- - 42 - ANNEX 2 Component 9 SRI LANKA AGRICULTURAL DEVELOPMENT - CREDIT 595-CE PROJECT COMPLETION REPORT Department of Irrigation (DI) At the time of appraisal, work remaining to be completed on the Wahalkade Scheme included four miles of main canal and connecting distrib- utaries, jungle clearing on about 1,750 acres and construction of irrigation structures. Completion of the Mutuaiyankaddu Scheme involved drainage of 6,000 acres of land, construction of internal access roads, construction of field canals and jungle clearing on about 200 acres. The project was to provide foreign exchange of about $.63 'M for the importation of limited machinery and equipment to allow DI speedy cpmpletion of these two irrigation schemes. The major pieces of equipment to'be provided under the project were to be vested in DME and assigned to DI for the comple- tion of these two schemes. Attachment 1 shows a comparison between imported machinery and equipment proposed at appraisal and machinery and equipment actually imported by DI. Some $.14 M worth of machinery and equipment were imported using a Swedish Line of Credit. Although all of the major drainage works, canal and access road constructions and jungle clearing works on both schemes were completed in mid-1977, rendering both schemes operational since then, some drainage works and road paving is still being undertaken. At the end of 1979, a total of 2,000 acres of land was rendered irrigable under the Wahalkade Scheme. At present 1,800 acres are in paddy cultivation for two seasons per year. 200 acres will be taken up for cul- tivation during the course of 1980. With a present average yield of 65 bushels per acre per seasons, the total yearly yield amounts to 234,000 bushels, compared to 90,000 bushels targeted at appraisal. During the yala season, 6,000 acres irrigated by the Muthuaiyankaddu Scheme are cultivated with two crops of chillies and one crop of onions. Estimated yield of production per year for chillies is 1,714 lbs/acre compared to appraisal target of 1,200 lbs/acre. For onions, however, estimated yield of production per year is 4,286 lbs/acre as compared with appraisal target of 10,315 lbs/acre. During the maha season, 3,000 acres are cultivated with short-term paddy variety, yielding an average of 40 bushels per acre or 120,000 bushels per year. ANNEX 2 - 43 - Component 9 Department of irrigation Proposed at Antraisal Actual Imnorts Cost Cost Items Nos. $'000 Nos. $'000 Stone Crusher 2 60.0 1 15.4 Air Compressor (500 cfm) 2 50.0 1/ Air Compressor (300 cfm) 1 17.0 1/ Hand Held Rock Drills 14 7.0 1/ Exploder 3 1.8 1 29.4 Ohm Meters 3 1.5 1/ Pay Loader - Crawler (2 cu yd) 3 150.0 2 71.4 Pay Loader - Rubber Tired ( 2 cu yd) 1 L0.0 2 58.0 Jeeps 6 39.0 5 26.5 Rollers (Pedestrian Operated) 3 4.5 10 60.0 Concrete Vibrators 4 6.0 4 2.6 Agricultural Tractors 6 30.0 10 39.2 5-Ton Tipping Trucks 2 15.0 2 17.1 Concrete Mixer (7/5) 8 12.0 4 14.0 Drill Steel 65.0 1/ Spare Parts (10%) 50.0 (5%) 14.7 Price Contingency 70.0 Total 62E.0 368.3 1/ Imported under Swedish Line of Credit. TREE CROP SECTOR PLANTATION INDUSTRIES At Appraisal Actual Imports Est. Cost Est. Cost Nos. $'000 Nos. $'000 Incentive Study 50 Tea and Rubber Estate Transport and Spares 485 2,775 360 2,200 Lorries and Spares for Bought Leaf Factories 85 500 86 525 Tractors and Spares for Coconut Estates 45 250 80 590 Spares for Existing Vehicles 95 Motorcycles and Spares for Estate Supervision 150 200 76 65 Spares for Coconut Processing Industry 450 Extension Vehicles and Spares: Motorcycles for Tea and Rubber Extension 50 40 ) Motorcycles for Coconut Cultivation Board 80 65 ) 120 62 Motorcycles for Coconut Processing Board 15 15 ) Vehicles for Tea and Rubber Control Department 5 25 ) Vehicles for Coconut Cultivation and Coconut ) 16 85 Processing Board 6 30 ) Price Contingencies 610 Totals 5,105 3.527 1/ 50% Lorries; 50% Tractors 2/ 187 Lorries; 173 Tractors - 45 - ANNEX 2 Component 11 Tree Crop Research Proposed at Appraisal Actual Imvorts Est. Amt. Est. Amt. Nos.1/ S '000 Nos. $ '000 Tea Research Institute Vehicles and spares 90 Station wagons 19 96 Electric Calculators 10 Jeep 1 5 Car 1 6 Rubber Research Institute Microbuses and spares 13 Minibuses 2 31 Vehicles and spares 30 Station wagons 4 20 Lorry CIM 6 Cal . 4 24 Four-wheel tractors 101- Motorcycles 30 15 Spares for existing vehicles 2 Coconut Research Institute Four-wheel tractors 25 Car 1 6 Tractor implements 5 Station wagons 4 20 Pumps and sprayers 20 Motorcycles 28 14 Vehicles 20 Price Contingencies 29 Totals 260 237 / Not specified. SRI LANKA SUGAR CORPORATION At Appraisal Actual Imports Nos. Est. Cost Nos. Est. Cost (US'000) Crawler Tractor w/Dozer and Ripper (100-200hp) 6 500 6 363 Crawler Tractor w/Dozer only (180-200hp) 4 340 4 212 Wheeled Tractor w/Dozer (120hp) 10 190 2 89 4-Wheel Drive 4 26 4 27 Staff Cars 1 5 1 6 Motorcycles 16 21 16 1/ 9 Telephone Exchange 1 25 1 25 Walkie Talkie and Radio Transmitters 40 14 Research and Scientific Equipment 20 6 Cane Slings 34 12 Planing Machine 40 40 54 Shaping Machine 10 1 21 Universal Milling Machine 10 1 36 Center Lathe 10 1 14 Air Compressor 5 1 16 a' Hand Drill Grinder 1 1. 1 Thread Cutting Machine 5 1) 3 Hydraulic Pipe Bender 5 1) Workshop Tools 5 - 7 Bowser w/Stainless Steel Tank 25 16 Spare Parts 143 131 Price Contingencies 205 Totals 1705 1/ Only 10 received at Kantalai O 0 X~ SRI LANKA to LAND UTILIZATION Project oreas O1 Paddy ltivaftlns - eserves -----District boundaries 20 4o 80 8,0 Kilometers M äh6 10 20 30 40 50 Waholkae- MANN AR i\ iV> TRINCOMALEE \ Tn 1 Z/nrZriComree Mahaweli on Prowect Stage t,j t ANURADHÄRA $7 Bay of Benga/ -chKanta D- -Sugar Plantatfon 91 PUTTALA- --: -- " LONNARUWA OPutolair,_ BATTI ALOA 'Batticaloa pi.i. ~ ~ w ý AALE /ndo'an w Ocean r < N E - \ BADULLA 7' YEC.LL - 04 1&,.,____ - - 7 °. ..--- - - 1 &i, I' r#ale____ u ____ -- - - - o tuvil 14 7E E c The boun,danesshcown on this oa - imply end or acceptance r--'' I-I1JIP...H11 -9 1 ' 'IE___ /n dia n O c e a n SRI LANKA Matara /dia Ocen l2 81'