Nepal - Agricultural Extension and Research Project

Document of The World Bank FOR OFFICIAL USE ONAYl COPY Report No. 3104-NEP NEPAL STAFF APPRAISAL REPORT OF THE AGRICULTURAL EXTENSION AND RESEARCH PROJECT January 5, 1981 South Asia Projects Department Agriculture Division E This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS US$1 = Nepalese Rupee 12.00 WEIGHTS AND MEASURES Metric System FISCAL YEAR July 16 - July 15 ABBREVIATIONS AADO - Assistant Agricultural Development Officer ADBN - Agricultural Development Bank, Nepal ADO - Agricultural Development Officer AIC - Agricultural Input Corporation CTC - Central Technical Committee DDG - Deputy Director General DG - Director General DOA - Department of Agriculture DTC - District Technical Committee FAMSD - Food and Agricultural Marketing Services Department HMGN - His Majesty's Government of Nepal JT - Junior Technician JTA - Junior Technical Assistant MFA - Ministry of Food and Agriculture PC - Project Coordinator PLAA - Panchayat Level Agricultural Assistant ROO - Research Outreach Officer RRC - Regional Research Coordinator RRS - Regional Research Station RTC - Regional Training Center SMS - Subject Matter Specialist T&V - Training and Visit System  FOR OFFICIAL USE ONLY NEPAL AGRICULTURAL EXTENSION AND RESEARCH PROJECT Table of Contents Page No. I. BACKGROUND .........................1.......................... A. Introduction .............................................. 1 B. The Country ............................................... 1 The Panchayat System .................................... 2 C. The Development Scene ..................................... 2 D. Agriculture in Nepal ...................................... 3 Agricultural Institutions ............................... 4 E. The Project Area .......................................... 9 The Terai Region ........................................ 9 Other IDA Assisted Projects ............................. 10 The Project Districts ................................... 11 II. THE PROJECT .12 A. General Description ....................................... 12 B. Detailed Features ......................................... 12 Agricultural Extension .................................. 12 Applied and Adaptive Research ........................... 18 Monitoring and Evaluation ............................... 21 Strengthening Agricultural Engineering Division of DOA ................................................ 22 Fertilizer Import and Storage ........................... 22 Agricultural Development Bank ........................... 24 Technical Assistance .................................... 24 III. COST ESTIMATES AND FINANCING ..25 A. Cost Estimates .25 B. Proposed Financing .26 C. Procurement .26 D. Disbursements and Audit .26 IV. ORGANIZATION AND MANAGEMENT .27 Project Implementation .27 National Level Coordination .28 Linkages Between Extension and Research .28 Training .30 V. BENEFITS, JUSTIFICATION AND RISKS .30 VI. AGREEMENTS REACHED DURING NEGOTIATIONS .31 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.  ANNEXES 1. Cost Tables Table 1 Summary of Project Costs Table 2 Summary of Extension Costs Table 3 Extension: Civil Works Table 4 Extension: Vehicles and Equipment Table 5 Extension: Incremental Staff Salaries Table 6 Extension: Incremental Operating Costs Table 7 Requirement and Availability of Extension Staff Table 8 Requirement of Extension Staff by Year Table 9(a) Regional Training Centers: Capital Costs (b) Regional Training Centers: Staff, Operating and Training Costs Table 10 Summary of Research Costs Table 11 Research: Summary of Capital Costs Table 12 Research: Location of Civil Works Table 13(a), (b) and (c) Research: Details of Vehicles and Equipment Table 14 Research: Incremental Staff Salaries Table 15 Research: Incremental Operating Costs Table 16 (a) to (f) Research: Incremental Staff Needs Table 17 Monitoring and Evaluation Table 18 Strengthening of Agricultural Engineering Unit Table 19 Loan for Purchase of Fertilizer Table 20 Overseas Training and Technical Assistance Chart 21898 Chart 21899 2. Training 3. Table 1 Implementation Schedule Table 2 Estimated IDA Disbursements 4. Consultants: Terms of Reference MAP IBRD 15167  NEPAL AGRICULTURAL EXTENSION AND RESEARCH PROJECT STAFF APPRAISAL REPORT I. BACKGROUND A. Introduction 1.01 Under the proposed project, His Majesty's Government of Nepal (HMGN) would reorganize its agricultural extension service and upgrade adaptive research facilities in eight districts of the Terai, to provide farmers, on a regular and systematic basis, with up to date advice on farming practices best suited to their specific conditions and capable of having an immediate impact on production and income. This would be achieved by strictly programmed visits from regularly trained field staff, supported by professional advice from extension and research staff of the Department of Agriculture. 1/ This report is based on the findings of an appraisal mission consisting of Messrs. R.V. Ramakrishna and A.J. Pritchard (IDA) and Shyam Khadka (Consultant) which visited Nepal in May-June 1980. B. The Country 1.02 Nepal is landlocked between China and India. It is divided into three parallel ecological zones running east-west: the Terai Plain, an extension of the Gangetic Plain of India; the Hills, actually the foothills of the Himalayas, ranging from 500 m to 4,000 m in elevation; and the Himalayan Mountains to the north. These three zones account for 17%, 68% and 15% of the total area (140,800 sq km), respectively. Rivers and streams, running north-south, cut the Hills into isolated areas and varying microclimatic conditions provide a range of environments for plant growth, depending on elevation, aspect, cloud cover, slope, etc. 1.03 Nepal's population is currently estimated at 13.4 M and is increas- ing at 2.6% annually with about 65% of the population living in the Mountains and Hills. Population pressure and the lack of employment opportunities in the Hills forces 10% to 50% of male family members to migrate, either season- ally or permanently, to the Terai, Kathmandu or elsewhere in order to find employment and supplement incomes. Annual per capita income, at about US$110-120, is one of the lowest in the world. 1.04 Administratively, Nepal is divided into four Development Regions. Each of these comprises a section of the country, running north to south, containing Mountain, Hill and Terai districts. Each Development Region is 1/ The main principles of the proposed extension reform are described in Agricultural Extension: The Training and Visit System (World Bank, 1977).  - 2 - divided into Development Zones, varying from three to five in number, which are further divided into districts. The Panchayat System 1.05 The panchayat system, which encompasses both political and develop- mental organizations, has three tiers. The lowest political level is the village followed next by the district panchayat and the national panchayat acting as the central legislative body. A village panchayat with a popula- tion of about 800 families is generally comprised of nine administrative wards (the smallest socieconomic unit), each containing about two hamlets. 1.06 The working of the panchayat system and responsibility for law and order rest with the Ministry of Home Panchayat (MOHP). 1.07 District Administration. The Chief District Officer (CDO), belong- ing to MOHP, besides being responsible for law and order is also the admin- istrative head of all functionaries of government line ministries operating at the district level. These officers operate a District Secretariat and which also functions as the Secretariat to the District Panchayat. A Pan- chayat Development Officer, subordinate to CDO, is responsible for implementa- tion of district development plans. 1.08 Line ministries retain technical supervision of staff at district level, while delegating responsibility to CDO for day-to-day management of their activities. Popular participation in development at this level is through a number of coordinating committees, chaired by the district panchayat chairman and comprising CDO, representatives of line ministries, and individ- uals chosen by district panchayats from among their elected members. 1.09 Proposals for village level development are put forward and dis- cussed at village meetings and submitted to the district panchyat for approval, technical clearance, and financial assistance. Each year, village panchayat plans with estimated costs and the contribution the village panchayats can make (including funds, labor and materials), are consolidated by the district panchayat into a draft district plan. The district panchayat then assigns priorities to projects submitted by village panchayats and government line officers examine these proposals, assess their technical feasibility, and relate them to the implementation capacity of the line department and to funds and other resources available. After further discussions, the final district plan, approved by the district assembly, is submitted to MOHP for its approval and release of funds. C. The Development Scene 1.10 Nepal embarked on social and economic development in the early 1950s. Considerable progress has been made since then within the constraints imposed by its landlocked position, low resource base, inaccessibility of many of its regions, rapidly growing population, and a shortage of trained manpower. Furthermore, a lack of communication between administrative zones impedes economic integration of the country and efficient use of comparative regional advantages.  1.11 Nepal's economic performance during the Fifth Five-Year Plan (1975-80) has not been encouraging (less than 2.4% GDP growth annually) in spite of real increases in the levels of investment. This performance is mainly due to little increases in agricultural production. The critical stage that agricul- tural development has now reached is highlighted by the fact that Nepal's most important export, rice, has declined from a high annual level of about 500,000 tons in the mid-1960s to about 100-200,000 tons in the early 1970s, 300,000 tons in 1977/78, and in 1979/80, a year of low rainfall, Nepal became a net importer of rice. The trade gap has widened steadily, but has so far been covered by increased earnings from tourism and foreign aid disbursements. Investment, however, still only amounts to 10% of GDP. The Sixth Five-Year Plan (1980-85), currently under preparation, calls for a 4% growth in GDP and increased investment outlays. The plan focuses more sharply on the issues facing Nepal, while recognizing the limited financial and human resources available for development. The main plan objectives are to increase produc- tion in agriculture and cottage and small scale industry, improve opportuni- ties for productive employment, to meet certain basic human needs, and to slow down the population growth rate (currently estimated at 2.6% annually). D. Agriculture in Nepal 1.12 Agriculture continues to dominate the economy, providing a liveli- hood to over 90% of the population and generating about two-thirds of GDP. Food crops (mainly paddy, maize, wheat, millet, barley and potatoes) are grown on some 2.0 M ha or about 90% of the total cropped area. Paddy, cul- tivated on 1.3 M ha is the dominant crop with maize (445,000 ha) wheat, millet and barley (348,000, 121,000 and 24,000 ha, respectively) being of lesser importance. Oilseeds, jute, potato, sugarcane and tobacco are Nepal's main cash crops. About 10% of total cultivated area is under these crops, most of which is found in the Terai. 1.13 During the period 1970/71 to 1977/78, the trend in production of major foodgrains and potatoes has been disappointing, except for wheat. Production grew at about 1.1% annually largely due to expansion in acreage, while yields, again with the exception of wheat (increased at 9%), fell at a rate of about 0.9% per year. Erratic rainfall and higher cost of fertil- izers partly account for the decline but inadequate agricultural advice and other supporting services, and inappropriate pricing policies have also contributed to the decline. Cash crops, however, fared better due to more favorable international prices. 1.14 Agricultural Strategy. Declining production of foodgrains and ever increasing population have caused Government to moderate its earlier approach to a policy of regional agricultural specialization (foodgrains in the Terai and horticulture, tea, and livestock in the Hills). The shift in policy is brought about by the need to increase food production in the Hills and the generation of domestic and exportable foodgrain surpluses in the Terai. Since area expansion in the Terai is limited, emphasis will be on increasing crop yields under rainfed and irrigated conditions.  Agricultural Institutions 1.15 Agricultural development programs and policies are the concern of four ministries: the Ministry of Food and Agriculture (MFA), the Ministry of Forests, the Ministry of Water Resources, and the Ministry of Land Reform. MFA includes the Department of Agriculture (DOA) which is responsible for promoting production through extension, training and research. MFA has also overall responsibility for a number of institutions such as the Agricultural Development Bank of Nepal (ADBN), the Agricultural Inputs Corporation (AIC), and the Nepal Food Corporation (NFC). 1.16 Agricultural Extension. The Director General of Agriculture (DG) is assisted by a Deputy Director General (DDG), Extension and Training. The extension wing is represented at the region by a Regional Director of Agri- culture who supervises district level extension programs headed by an Agri- cultural Development Officer/Assistant Agricultural Development Officer (ADO/AADO). Each ADO/AADO is assisted by a number of Junior Technicians (JT) and Junior Technical Assistants (JTA) each receiving two years and one year training respectively. A recent innovation has been the employment of Agricultural Assistants (AA) at the village level, who are selected from among progressive farmers and retired servicemen. AAs receive minimal train- ing and serve on a part-time basis in areas adjacent to their homes for which they are paid an allowance of NRs 50 per month. The extension wing of DOA employs about 151 graduate workers and 1,007 other staff (JT and JTA). 1.17 The DOA has a well established Farm Information and Communication Unit located at headquarters and which produces pamphlets, posters, charts, and training aids. The Unit has developed a systematic program of farm radio broadcasts. An Information Officer is located at each of the four Regional Directorates. 1.18 Presently, there is no organized system of extension and several factors contribute to the relatively low level of effectiveness of the exten- sion service in increasing agricultural productivity. The JT and JTA are required to perform varied tasks and devote much time and effort to coordi- nating input supply and farmer credit needs, and to data collection for statistical and regulatory purposes. They also have much reporting to do. Targets on various work areas are imposed, some of which are conflicting and generally related to fertilizer uptake and increasing areas grown under certain crops and varieties. These targets are often centrally determined and bear little relation to local conditions and priorities. Usually, these work programs are more relevant to a small number of farmers, often the more advanced and larger ones. Supervision and technical backstopping are lacking and insufficient attention is given to the in-service training of extension personnel. 1.19 The concentration of research workers and policy makers on a high cost and sophisticated technology is also an important factor limiting the effectiveness of extension. The goal of high production and income is supposed to be achieved by the farmer instantly, through the adoption of an entire tech- nology package, rather than progressing, step by step, from present production levels. Thus, given the present level of resource and knowledge constraints, a majority of farmers have few relevant messages delivered to them.  1.20 Compounding these shortcomings, are factors inherent to Nepal: poor communications; heavy dependency on a short and erratic monsoon season; poorly developed irrigation; and areas having special cultivation problems. In addition, DOA operates with insufficient budgetary support, inadequate transportation, and housing facilities for staff living in rural areas are virtually non existent. All these factors place a heavy strain on staff and act as disincentives to effective work. 121 As part of IDA assisted irrigation projects in the Terai, 1/ the Training and Visit System of Extension has been introduced in Sunsari, Morang, Bara, Parsa, Rautahat, Rupandehi districts and a part of Kanchanpur district. Encouraging results have been obtained in Bara, Parsa, and Rautahat districts, but in other districts the system is only now being introduced. 1.22 Agricultural Research. Agricultural Research is the responsibility of DOA and is administered by a Deputy Director General (DDG). The research service operates a total of 52 centers located throughout the country: 7 in Eastern Region, 25 in Central Region, 10 in Western Region and 10 in Far Western Region. These consist of (a) research stations; (b) research centers; and (c) research farms, the latter being mainly engaged in seed multiplication. The research service is charged with the responsibility for providing suitable agricultural technology for development of all the regions and climatic zones of Nepal. Considerable progress has been made under the Integrated Cereals Project (ICP), assisted by USAID. The programme has shown the benefits of a coordinated approach to rice, wheat, and maize research and production. 1.23 However, more applied and adaptive research is needed to increase crop production in Nepal, but there are major problems preventing the research programs from operating efficiently. They are, (a) insufficient operating funds for materials, supplies and equipment in research establishments; (b) lack of adequate facilities at a number of research stations; and (c) shortage of research staff working in different agroclimatic zones on location specific problems. Transportation and mobility are constraints not only to conducting research but also to field testing of research findings. 1.24 Education and Training. The Institute of Agriculture and Animal Science, Rampur has responsibility for training JTA (one year course) and JT (two year course). It also offers a three year course leading to a Diploma in Agricultural Science (equivalent to B.Sc. Agriculture). About 180 persons have so far been awarded the diploma. In addition, a few selected candidates are sent abroad for post graduate training in a range of agricultural sciences. 1.25 Inservice training for extension staff is organized by the Extension and Training wing of DOA. Each year, about 400 extension workers receive such inservice training. These training courses are organized at training centers, research stations and on farms with the help of local trainers and crop 1/ Birganj (Narayani) Irrigation Project Stages I & II (Credits 373 and 856), the Bhairawa-Lumbini Groundwater Project (Credit 654), the Sunsari-Morang Irrigation and Drainage Development Project (Credia 856), and the Mahakali Stage I Irrigation Project (Credit 1055).  - 6 - specialists, but the training program is handicapped by the absence of suitable teaching material, adequate facilities and well trained staff. 1.26 Agricultural Credit. The single major source of institutional credit is the Agricultural Development Bank of Nepal (ADBN), established in 1973. It is expected to provide the overall credit requirements of agricul- ture and agro-based industries, and ensure effective mobilization of rural savings. The Sajha (cooperative) program provides short term production credit with funds made available from ADBN for onlending to its members. More recently, commercial banks have also become involved in agricultural credit. 1.27 ADBN is authorized to provide loans to individuals, companies, and institutions engaged in agricultural production. More specifically, its func- tions are: (a) to provide short, medium and long term credit to cooperatives and corporate bodies engaged in agriculture development; (b) to provide loans directly to farmers for the purchase of seed, fertilizer, pesticides, farm machinery, and irrigation equipment; (c) to invest in small scale industries engaged in processing farm products and manufacturing inputs required for agriculture; and (d) to provide banking facilities in places where commercial banks are not established. The standard terms and conditions of lending by ADBN are 18 months duration for short term loans with a 14% annual interest rate, 7 years for medium loans at 11% annual interest rate, and 20 years for long term loans with an 8% interest rate. Rediscount facilities available to ADBN through the Rashtra Central Bank provide about 6% spread which is con- sidered satisfactory to cover operating and administrative charges. 1.28 Lending operations of the ADBN have increased substantially as shown below: ADBN LOANS AND ADVANCES (Rs '000) 1973/74 1974/75 1975/76 1976/77 1977/78 I. TERM-WISE Short Term 43,888 142,347 80,906 142,260 160,712 Medium Term 28,053 30,834 27,310 68,072 89,501 Long Term 4,434 8,599 6,099 11,735 11,325 Total 76,375 181,780 114,315 222,067 261,538 II. PURPOSE-WISE Cereal and Cash Crop Production 24,498 37,082 42,011 49,920 87,523 Farm Mechanization and Irrigation 22,469 17,574 22,453 36,658 58,500 Livestock, Poultry, and Fisheries 3,975 6,201 9,636 20,011 27,870 Agro-Industry, Marketing and Warehousing 23,261 116,589 34,166 107,296 77,040 Horticulture 805 1,103 1,804 4,737 6,842 Tea 1,367 3,231 4,245 3,445 3,763 Total 76,375 181,780 114,315 222,067 261,538  1.29 Most farmers are still reluctant to approach ADBN and Sajha for credit, mainly due to lengthy and complicated procedures for borrowing and difficulties in establishing collateral for loans. Absence of technical knowhow in commercial banks is a factor restricting expansion of lending by these organizations. Loan recovery is poor and has been around 40 to 50%. 1.30 Cooperatives. The Sajha development program was introduced in early 1976 to revitalize the cooperative movement, mobilize local savings, and to link economic development with political decentralization at the local level. The objectives of the Sajhas are to provide credit, agricultural inputs and marketing facilities, as well as to sell consumer goods (salt, kerosene, course cloth, diesel oil, rice and sugar). At present, one Sajha serves on an average, three to four panchayats. Further, at the village panchayat level, they act as the local agent of the Agricultural Inputs Corporation. There are 1,170 registered societies. 1.31 Agricultural Inputs. The Agricultural Input Corporation (AIC), is the sole government agency responsible for supply of inputs and was established in its present form in 1975/76. Its functions include: (a) importation and digtribution of chemical fertilizers and maintenance of a buffer stock suffi- cient for at least one cropping season; (b) collection, processing, storage and distribution of improved seeds and assistance to DOA in conducting seed multiplication programs; (c) procurement and distribution of agricultural chemicals for plant protection and grain storage; and (d) distribution of locally manufactured agricultural tools and implements as well as importation and distribution of agricultural machinery. 1.32 AIC multiplies improved seed through contract growers. In addition, all seed produced on government farms is distributed through the Corporation. 1.33 Nepal does not manufacture chemical fertilizer and depends entirely on imports which are either financed by bilateral aid (two-thirds) or by direct purchase (one-third). International procurement, by nature of Nepal's isolation and landlocked position, is not easy as all purchases have to pass through India. Procurement is so arranged that stocks arrive in Nepal before the advent of the monsoon and again before the winter planting season begins in November. Fertilizer imports are generally delivered through Calcutta Port (India) and transported by road and train to the Indian/Nepalese border. Internal distribution is then either by road or in the hills and mountains by mules and porters. The transportation costs to some of the more remote interior areas amount to more than the actual cost of fertilizer. 1.34 Official figures of fertilizer imported during the last three years are as follows: 1977/78 1978/79 1979/80 Bilateral aid (tons) 37,000 42,000 25,000 HMGN purchases (tons) 9,000 5,000 13,000 46,000 47,000 38,000  -8- Over the next five years HMGN is expecting a substantial increase in consump- tion but is uncertain about the availability of fertilizer provided by bilateral agencies as contributions from these sources declined quite substantially in 1979/80 and levels of future assistance cannot be assured. 1.35 The total national consumption of fertilizers in 1977/78 was about 54,000 tons (including carryover stocks and fresh imports) which is about 6 kg of nutrients per cropped ha. This is one of the lowest application rates in the world. Consumption in neighboring India is about 25-30 kg nutrients per ha. 1.36 As Nepal depends on the international market for the purchase of fertilizer, inflationary trends in international prices have a marked influence on domestic prices. However, in keeping with other countries in the region, HMGN subsidizes the cost of fertilizers to farmers. The amount of this subsidy is dependent on the prevailing retail price in India as any price differential would ensure flows of fertilizer either one way or the other across the border and which would be detrimental to both governments. 1.37 HMGN has, as a matter of policy, adopted a uniform price structure throughout the country, regardless of transportation costs. The present sale price of Urea to farmers is about Rs 3,000 (US$250) per ton which corresponds to the price prevailing in India. This covers roughly two-thirds of the aver- age total cost of fertilizer c.i.f. retail sales point. At this price, HMGN provides an average subsidy to farmers of Rs 1,543 (US$129) per ton. The subsidy to farmers amounts to some 34% of the current retail price of urea and is somewhat lower than subsidies in Bangladesh (40%) and Pakistan (35-40%) where transportation costs are much lower. HMGN provides AIC with either the foreign exchange to purchase the fertilizers or the fertilizer received under the bilateral assistance program. After the fertilizer is sold, AIC returns the rupee equivalent of the sales price to government. AIC lost some Rs 46 M on its fertilizer sales between 1972 and 1976. 1.38 AIC is not usually involved in retailing except in some remote hill areas. Fertilizer is sold mostly through Sajha or private dealers where cooperatives do not exist. There are about 1,170 cooperatives and 260 private dealers in Nepal. AIC has its own countrywide network for distribution of inputs consisting of three regional offices, 16 branch offices, 18 sub branches, and 23 sales depots. 1.39 AIC makes available fertilizer to District Cooperative Unions (DCU) who act as wholesalers both to Sajha and private dealers. Dealers operate on a commission basis and irrespective of the type of fertilizer, AIC allows a 6% commission to DCU who retain 1% and pass on 5% to individual Sajha. Private dealers are allowed 4-1/2% commission and in this case DCU retain 1-1/2%. In addition, a 3-1/2% additional commission is allowed to Sajha as an incentive to lift fertilizer from district storage well ahead of the planting season. 1.40 The estimated sales of inputs by AIC in 1978 were: 54,000 tons of fertilizer, 2,520 tons of improved seeds, pesticides costing Rs 1.9 M, and agricultural implements valued at Rs 2.6 M.  - 9 - 1.41 Agricultural Marketing. The main institutions involved in agricul- tural marketing are: (a) The Nepal Food Corporation (NFC), whose main respon- sibility is to distribute foodgrains to food deficit hill districts; (b) The Food and Agricultural Marketing Services Department (FAMSD), whose role is to collect price data, analyze trade patterns, and establish marketing systems, particularly in the Hills; and (c) The Rice Export Companies (RECs) which are quasi' government agencies, purchasing paddy either directly from farmers or through Sajha cooperatives. RECs public procurement and export functions are being taken over by NFC. E. The Project Area The Terai Region 1.42 The Terai lies below the southern foothills of the Siwalik range and stretches westwards as part of the Indo-Gangetic Plain. The region extends 800 km in an east-west direction and 220 km in the north south direction. The elevation of the region varies from 100 meters a.s.l. near the Indian border to 500 meters a.s.l. near the hills. There are 20 administrative districts in the Terai region, all having a common border with India. 1.43 Climate. The average annual temperature is 24 C. Temperatures are high between March and October when the mean monthly range is between 21 and 30 C. November to February are cold winter months with mean monthly tempera- tures between 14 and 23 0C. The average rainfall is 1,600 mm per year. There is considerable annual variation in the duration of the rainy season, and in the total amount of rainfall. The average number of rainy days is 81. The peak season is from June to September when 80% of rainfall occurs. 1.44 Soils. The Terai plain forms the piedmont in the northern part of the Indo-Gangetic depression which has been filled by recent alluvial material derived from the Himalayas. Soils vary from sandy and silty with thick gravel fans in the northern part. The soil pattern changes from north to south and also from east to west depending upon nearness to sources. The texture of soil varies from coarse sandy to gravelly on foot hill slopes to medium sandy and silty in the middle of the Terai, and to somewhat clayey near the Nepal- India border. 1.45 Land Use. Over 60% of the land area in the Eastern Region is under cultivation. In the Central Region, the percentage of cultivated area ranges from 64% (67,740 ha) in Mahottari district to 19% (48,945 ha) in Chitaun district. In the Western region, the area cultivated ranges from 18% (26,415 ha) in Nawalparasi to 45% (80,391 ha) in Kapilavastu district, but is lowest in Far-Western Region with 15% (49,287 ha) in Kailali district. 1.46 Irrigation. According to current estimates, about 250,000 ha receive some form of irrigation. Out of this, about 150,000 ha are irrigated from private water sources and the remainder from government schemes which are concentrated mostly in Eastern and Central Regions.  - 10 - 1.47 Crops and Production. Paddy is the most important crop of the Terai, followed by maize, wheat, oilseeds, and pulses. The Terai accounts for about 64% of the area under foodgrains and 62% of total production. It also accounts for 60% of the area under cash crops and 61% of total production. Overall foodgrain production has declined over the last few years accompanied by a steep fall in yields (see table below). Foodgrains Production in the Terai (all crops) 1974/75 1975/76 1976/77 1977/78 Production (M tons) 2.47 2.60 2.38 2.26 Area (M ha) 1.41 1.47 1.48 1.43 Yield (kg/ha) 1,775 1,772 1,612 1,580 1.48 Agricultural Research. There are six agricultural research stations in the Terai at Nepalganj (Banke district), Maize Research Station, Rampur (Chitaun district), Wheat Research Station, Bhairawa (Rupandehi district), Rice Research Station, Parwanipur (Bara district), Oilseeds Research Station, Nawalpur (Sarlahi district), Janakpur Research Center, Janakpur (Dhanusha district), and Tarahara Research Station (Sunsari district). The coordinated research program on rice, wheat and maize has made good progress, but the overall research effort is inadequate to satisfy the needs of the Terai. Increase in agricultural production in the Terai requires new technology, skills and information, which demand an increase of research in problem areas. These include: (a) Location Specific Research. Research is needed on varietal and fertilizer needs, and agronomic practices as related to particular soils, cropping patterns, and climatic conditions. Information not only on optimum fertilizer rates, but also on the use of fertilizer under conditions where both supply and choice are restricted. Certain areas of the Terai face specific constraints to production which require attention from research workers. These include trace element defi- ciencies (particularly zinc), hail damage, and sterility in wheat. (b) Improved Varieties. New crops are being introduced into the rice-based farming system, so that in addition to breeding varieties with specific traits (rust resistance in wheat, grain quality and straw production in HYV rice), it is now necessary to adapt varieties to the evolving cropping systems. More attention is needed to crop duration and maturity date, which must be appropriate to the cropping sequence. (c) Agronomic Practices for New Crops. Wheat, maize, and summer pulse are relatively new crops in the Terai and farmers have attempted to grow them by applying traditional practices. Research is now needed to provide the specific agronomic practices needed to grow these crops efficiently.  - 11 - (d) Agricultural Machinery. Present sowing methods of wheat are inadequate and a program is needed for testing improved bullock drawn seed drills. (e) Water Management. In irrigated areas appropriate water man- agement techniques need to be evolved. Other IDA Assisted Projects 1.49 IDA is currently financing four irrigation projects in the Terai- Birganj (Narayani) Irrigation Project Stages I and II (Credit 373 and 856-NEP, 1973 and 1979), Bhairawa-Lumbini Groundwater Project (Credit 654-NEP, 1976), Sunsari-Morang Irrigation and Drainage Development Project (Credit 856-NEP, 1978) and Mahakali Stage I Irrigation Project (Credit 1055-NEP, 1980). In order to make best possible use of irrigation developed under these projects, intensive agricultural extension was initially introduced in Bara and Parsa districts of Narayani Zone. The results were encouraging. In view of this, it was decided to reorganize extension services in Rupandehi district (Bhairawa-Lumbini Groundwater Project), Rautahat district (Narayani Project), and Sunsari and Morang districts (Sunsari-Morang Irrigation Project). Thus, six districts are already involved in the Training and Visit System of exten- sion covering about 240,000 farm families. In Kanchanpur district (Mahakali Project), 2,400 farm families would be covered by the system. 1.50 In Bara and Parsa districts, in addition to the provision of an improved extension service, irrigation facilities have also been developed over a limited area. Studies carried out by HMGN on a districtwide basis in these two districts show an average increase in yields of early paddy from 1.3 to 1.9 tons per ha. and main crop paddy from 2.2 to 2.9 tons per ha. Additionally a summer pulse crop has been introduced in irrigated areas. The average yield increases in the districts are largely as a result of better extension activity, under rainfed and irrigated conditions, established under the same staffing intensities and methodology as envisaged under the proposed project. The Project Districts 1.51 Of 20 districts in the Terai, 6 are already covered by the Training and Visit System of extension and eight more districts would be covered under the proposed project. The districts are Jhapa (Eastern Region), Sarlahi, Dhanusha, Mahottari, and Chitaun (Central Region), Nawalparasi and Kapilavastu (Western Region), and Banke (Far-Western Region). These districts were selected as they are adequately staffed in terms of JTA and JT and are con- tiguous with the six districts already provided with improved extension service. 1.52 The eight districts cover an area of 13,824 km (40% of the gross area of the Terai). The total cultivated area is 478,800 ha. The population is 1.74 million (1971 census) with 362,741 farm families. The average size of holdings is 1.3 ha.  - 12 - 1.53 Project districts follow the same general agricultural pattern as elsewhere in the Terai (paras 1.42 to 1.48), but other important crops grown are jute (Jhapa); tobacco (Dhanusha and Mahohari); maize and oilseeds Chitaun); and wheat and sugarcane (Nawalparasi and Kapilavastu). II. THE PROJECT A. General Description 2.01 The project would reorganize and strengthen the agricultural exten- sion service and upgrade and develop adaptive research in eight administrative districts of the Nepal Terai with the objective of achieving early and sus- tained improvement in agricultural production, particularly of foodgrains. These improvements in production would largely be brought about by the wide adoption of low cost, labor intensive agricultural practices, and use of appropriate levels of fertilizer. The five year project would comprise: (a) Reorganization and Strengthening of Agricultural Extension Services. Provision of additional staff, housing, offices, equipment, transportation and staff training designed to consolidate the reorganization; (b) Strengthening and Reorientation of Applied and Adaptive Research. Development and upgrading of four regional research stations, and one substation by farm development; and provision of staff, machinery, equipment, laboratory facilities, and vehicles; (c) Project Monitoring and Evaluation. Establishment of regular monitoring and evaluation procedures; (d) Technical Assistance. Overseas training of project staff and provision of consultants; and (e) 22,100 tons of Fertilizer. Provision of fertilizer to be used in project districts. B. Detailed Features Agricultural Extension 2.02 Under the project agricultural extension would be reorganized and intensified in 8 of the 20 administrative districts of the Nepal Terai. The districts would be Jhapa (Eastern Region), Sarlahi, Dhanusha, Mahottari, and Chitaun (Central Region), Nawalparasi and Kapilavastu (Western Region), and Banke (Far Western Region). Extension coverage of the eight districts would be phased over a period of three years with two districts in the first year, Jhapa and Nawalparasi; and three each in the second and third years: ''ahottari,  - 13 - Dhanusha, and Banke; and Sarlahi, Kapilvastu, and Chitaun, respectively (see Map and Implementation Schedule at Annex 3, Table 1). 2.03 The project would provide for: (a) Reorganization of extension staff into a single line of command from the Director General of Agriculture to the Panchayat Level Agricultural Assistants (PLAA) who would be employed as full time extension workers at the panchayat level; one ADO, one AADO and two Subject Matter Specialists (SMS) who would support operations at the district level; (b) Introduction of regular and systematic farm and village visits to provide farmers with advice on farming practices best suited to their specific conditions; (c) Frequent training of all staff; (d) Establishment of Regional Training Centers for pre- service and inservice training; (e) Facilities and equipment to support extension and training programs; (f) Vehicles and travel allowances to ensure greater mobility of all staff; (g) Offices and housing for field staff; and (h) Coordination between research and extension services to enable effective development and transfer of proven and suitably adapted technology. 2.04 The project would provide farmers, on a regular and systematic basis, with demonstrations and up to date advice on farming practices best suited to their specific conditions and capable of having an immediate impact on produc- tion and income. This would be achieved by programmed visits from regularly trained field staff, supported by professional advice from within the Depart- ment of Agriculture. At the village level, the Panchayat Level Agricultural Assistant (PLAA) would be the extension worker and would have completed about eight years of schooling and come from a farming background. PLAA would be residents of the panchayat in which they would work and would be mainly selected from among existing Agricultural Assistants (AA) who have the requisite background and qualification. Unlike AA, they would be full time extension workers and would earn Rs 150 pm compared with Rs 50 pm earned by AA. Assurances were obtained during negotiations that PLAA of requisite qualifications and experience would be recruited. This would be ensured by proper screening of existing Agricultural Assistants and new entrants. 2.05 Administratively all districts are sub-divided into Panchayats. In the project districts, there are 375 Panchayats and about 363,000 farm families and the number of farm families per Panchayat ranges between about 530 and 1,330. Each Panchayat is divided into nine wards. Initiallv. one  - 14 - PLAA would be posted to each Panchayat, but in some PanchayaLs where popula- tion is sparse or in irrigated areas, more than one PLAA would be required. In the first case because of long distances to be travelled and secondly because of intensity of coverage. Provision has been made for 125 addi- tional PLAAs to meet the needs of more intensive coverage. Overall require- ment of additional staff would be reviewed during project implementation. An assurance was obtained during negotiations that HIMGN and IDA would review by December 31, 1982, the adequacy of staff, especially of PLAA, and ensure that adequate numbers are employed for the implementation of the project. 2.06 The Extension Methodology. Under the proposed agricultural exten- sion system, an intensive scheduled program of farm visits would be introduced. Each ward would be visited by the PLAA, on a fixed day of the week, once every two weeks. Thus, the PLAA would cover five wards in one week and four wards in the next week. In some panchayats, where additional PLAAs are pro- vided, the number of farm families covered by one PLAA would not exceed 700. During daily visits, PLAA would spend the full day in the scheduled ward, would visit fields during morning hours, and in the afternoon, either hold meetings in the village at a pre-determined time or hold discussions with fatmers or meet farmers in their homes. One of the three remaining working days each fortnight would be devoted to in-service training, where PLAA would discuss and learn recommended practices to be given to farmers during the following fortnight and also bring farmer's problems to the attention of trainers. Thus, every two weeks the PLAA would spend nine days in visiting each of his nine wards and one day in training. During the two remaining days, PLAA would visit field trials, arrange special extension activities, make up visits missed because of illness or holidays, and do occasional but limited office work. All PLAAs would maintain a chart showing days for visiting each ward as well as time and place of group meetings. 2.07 It would not be possible for the PLAA to reach all farmers in the wards during field visits. Thus, under the guidance of supervisors and in consultation with the Panchayat and farmers themselves, PLAA would select contact farmers from each ward. Contact farmers could be from all levels of village society, and would be selected for their potential influence and willingness to collaborate with the extension service in following recommen- dations. Changes in contact farmers would be made, especially between seasons, if they are shown to be ineffective or if they wish to give up. PLAAs, during their field visits, would make special efforts to reach at least all contact farmers' fields, and they, in turn, would share the responsibility of organiz- ing and attending afternoon meetings or any other village group activity. PLAA would also invite neighboring farmers while meeting contact farmers in their fields, and visit other farmers' fields while moving from one contact farmer to another. In due course of time most farmers in a ward would be aware of the visit day of PLAA. 2.08 Within their area of operation, PLAA would concentrate on the most important crops, focussing on practices which bring the best economic results. Initially concentration would be on improving agricultural practices and would include better land and seed bed preparation, improved nursery maintenance, use of good seed, seed treatment, timely operation (such as right time of sowing), proper spacing, weedings, etc., followed by use of appropriate quantities of fertilizer. in adopting better practices farmers face little risks, but will  - 15 - be required to work harder. Since most small farmers have surplus labour but little cash, this fits their financial status well. 2.09 Organization and Technical Support. PLAAs would receive technical support from Junior Technical Assistants (JTAs) and one JTA would guide and supervise the work of 3-5 PLAAs working in three Panchayats. One Junior Technician (JT) would guide and supervise the work of three JTAs. To strengthen technical back up, the project would provide two Subject Matter Specialists in each district, one each in agronomy and crop protection. 2.10 Each JTA would spend at least nine days in the fortnight visiting PLA.A in the fie3d, He would also help the PLAA in carrying out demonstrations and simple trials. He would attend meetings organized by PLAA and meet each of his PLAAs on a fixed day of the fortnight. This close ongoing relationship between PJAA and JTA would relieve the former of the need for formal reporting. PLAA and JTPA would, however, maintain a daily diary of activities. The JT would supervise the work of PLAA and JTA and ensure effectiveness of extension operationg. He would spend at least four days in the week meeting his PLAA and JTA in the field. During his visits, he would be able to find out whether visits are being made as planned, inquire from farmers about visit days in their villages, messages learned, etc. Experience of work in Bara, Parsa, and Rautahat districts has shown that once farmers become aware of visit schedules, they themselves become effective monitors by complaining if visits are not made regularly and in a satisfactory manner. 2.11 At the district level, there would be an Agricultural Development Officer (ADO) to supervise all extension activities. Provision has also been made for additional support staff such as an accountant and an additional clerk to assist ADO. To free ADO from routine activities and to allow fre- quent field visits so necessary to review extension operations, one Assistant Agricultural Development Officer would be provided. AADO would take over responsibility for reporting, attending coordination meetings at district level, and input supply arrangements. 2.12 At the national level, project activities would be coordinated by a full time Project Coordinator. 2.13 To ensure a continuous flow of timely, locally proven and adapted farm recommendations, and adequate back-stopping and training of PLAA, JTA and JT, it would be necessary to strengthen the technical support staff at district level. Two Subject Matter Specialists (SMS) would be provided in each district (one each for Agronomy and Crop Protection). SMS would spend one-third of their time in training groups of PLAA, JTA and JT, one-third of their time in field visits providing technical support and guidance to PLAA and JTA, and one-third of their time in building their own stock of knowledge through a regular dialogue with research workers, carrying out simple field trials in farmers' fields, and attending short training courses. 2.14 Staffing and Incentives. Much of the professional staff required under the project is presently working in DOA. Details are summarized below and in Annex 1, Table 8.  - 16 - Project Staff Requirements Additional No. Post Total No. Required No Existing Needed PLAA 500 - /a 500 JTA 125 125 - JT 43 43 - SMS 16 6 10 AADO 8 8 - ADO 8 4 4 Project Coordinator 1 1 /a About 20% of existing AA may be suitable for selection as PLAA. There is urgent need for training existing staff, and for selection, recruit- ment and training of additional staff needed, especially of SMS who would have a key role in training and supporting other field staff. At the time of appraisal, HMGN indicated that six suitably qualified staff would be made available for the posts of SMS from among existing persontiel. Assurances were obtained during negotiations that all project staff, in particular SMS appointed from existing staff in DOA, would work exclusively on the project and would have no other responsibilities. Assurances were also obtained that permanent positions would be created as needed to employ all incremental staff in accordance with the agreed schedule at Annex 1, Table 8. 2.15 Extension work in project districts would be carried out under difficult conditions. Experience in similar projects elsewhere has shown that the staff work harder than in the past. Provision of housing, motorcycles and bicycles (paras 2.22 and 2.23) would provide an incentive to staff. In addition, as has been done in the past by HMGN, some exceptionally capable JTA would be promoted to JT and, similarly, JT would be promoted to AADO after special training. 2.16 In each project district, a number of extension sub-centers would be established and which would be the headquarters of JT. Each sub-center would cover about nine Panchayats and would be used for fortnightly training of extension staff. There would be 43 sub-centers in the project districts. 2.17 Training. The project would strengthen training programs for extension workers and other administrative staff. The keynote would be the continuous fortnightly training of PLAA, JTA and JT by SMS who are conver- sant with the latest research results, active in the identification of local problems, and who participate in local verification trials. The entire training effort would be focussed on making these fortnightly sessions as effective as possible. Training would be practical and concentrate on the few specific recommendations relevant to farming operations in the coming fortnight. Ample time would be provided for PLAA and JTA to study the recom- mendations and practice how they would convince farmers to adopt them. They would also have an oppJrtunity to raise and discuss problems encountered in the past two weeks. On alternate weeks PLAA would meet with JTA to review  - 17 - progress. Other in-service training courses for PLAA, JTA and JT would include a pre-season workshop/training session for each major season and one or two special short courses per year on a specific technical topic. 2.18 All PLAA would receive an intensive pre-service training course (35 days). Higher level staff would require a range of training programs as well. Before pre-season training of PLAA, similar sessions would be held for JTA and JT. Also before each season there would be a workshop at the Regional Research Station attended by ADO, SMS, Research Outreach Officer (ROO) and research workers. During the session, research workers and extension staff would review the previous season's research results, specify recommendations and plan the coming season's research and field trial programs (paras 4.05-4.11). 2.19 Improving the knowledge of SMS is crucial to the success of the project. For this, there would be a training session held once in two months at the Regional Research Station of each region. The training would be attended by all SMS in the region, ADO, ROO and other research staff. The main objective would be to review results achieved, modify recommendations as necessary to suit prevailing field conditions, review findings and progress of field trials and develop suggestions for future research topics and field trials. 2.20 Training facilities would be provided at four Regional Training Centers (RTC): Jhumka (Eastern Region), Janakpur (Central Region), Bhairawa (Western Region), and Nepalganj (Far Western Region). The RTC at Jhumka is being financed by the IDA assisted Naranyani Zone Irrigation Project (Cr. No. 856). The RTC at Janakpur is already functioning as part of the Janakpur Agricultural Development Project funded by the Japanese Government. The West German Volunteer Service (WGVS) and USAID are assisting HMGN in the establish- ment of small training centers at Bhairawa and Nepalganj. The project would supplement these efforts at Bhairawa and Nepalganj by providing additional buildings for hostel, dormitory and classrooms; furniture and equipment, incremental staff, and training costs. As the RTC would be located near the Regional Research Station, research workers would help in the training of extension staff. As such, limited, incremental staff is provided--one Training Officer and support staff for the project's training component. Details are at Annex 1, Table 9(a) and 9(b). 2.21 Each RTC would have capacity for 60 trainees and provide preservice training to PLAA and inservice training to all extension staff. Training programs are outlined in Annex 2. 2.22 Housing, Offices and Training Center Buildings. Under the reorgan- ized extension service, extension staff would be required to make regular and frequent visits to their wards. Consequently, it is necessary for them to live in or near their areas of work. Provision has been made for modest housing (Rs 21.77 M) for 125 JTA, 35 JT, 4 AADO, 5 ADO, 16 SMS, and 24 support staff. As PLAA would be locally recruited, residential accommodation has not been provided. The unit cost of housing would be Rs 67,500 (JTA, JT, support staff), Rs 144,000 (AADO and SMS), and Rs 162,000 (ADO). Provision also has been made for construction of 43 sub-centers, each with a small office for JT and a training hall. Furthermore, office, classroom, hostel, and housing facilities have been provided at two Regional Training Centers (Nepalganj and  - 18 - Bhairawa). Details are at Annex 1, Tables 3 and 9a. Assurances were obtained during negotiations that HMGN would furnish to IDA, by December 31, 1981, information on location of sites for all civil works to be financed under the project. 2.23 Transport. The operation of an extension system depends on a high degree of personal contact between all levels of the extension hierarchy and with farmers. Mobility is essential to ensure this and thus funds would be made available for loans to JTA for purchase of bicycles. The project would also provide a small monthly allowance (Rs 30) to ensure maintenance of these bicycles. Assurances were obtained during negotiations from HMGN that bicycle loan terms and maintenance allowances would be sufficient to ensure their purchase and use. JT would be provided with motorcycles (43), SMS with motorcycles (16), and four 4-wheel drive vehicles would be provided to districts which do not already have a vehicle. Details are given in Annex 1, Table 4. 2.24 Training Equipment. The project would provide simple audio visual e:quipment to support training sessions and enhance field operations. Emphasis would be on low cost simple aids such as charts and flipcharts which exten- sion staff can design themselves and modify to fit local conditions. The Farm Information and Communication Unit of DOA would be provided with an offset printer, dupl-cator, and silk screen unit, to enable it to support the exten- sion service with additional material. Details are given in Annex 1, Table 4. Applied and Adaptive Research 2.25 The project would strengthen applied and adaptive research to pro- vide practical answers to farmers' problems so that agricultural productivity may be increased throughout the project area. Efforts would focus on princi- pal crops grown under the different agroclimatic conditions prevailing in the project area, and concentrate on developing improved cultivation practices with early maturing, high yielding varieties acceptable to farmers. Special atten- tion would be paid to dryland farming techniques, soil and water management, improved farm implements, and farming systems and cropping patterns designed to increase farmers' income. Research would be conducted on a multidisciplinary team approach, with staff devoting full time to research. 2.26 The research effort would be decentralized by designating four of the existing research stations as Regional Research Stations (RRS), one for each of the four regions of the project area: Nepalganj (Far Western Region), Bhairawa (Western Region), Parwanipur (Central Region), and Tarahara (Eastern Region). Each station would also have a lead responsibility for research on specific crops. In addition, two substations would be developed (Sarlahi and Hardinath in Central Region) to ensure coverage of all major agroclimatic variations found in the eight new project districts and the six ongoing extension districts. 2.27 Adaptive field trials would be conducted on the regional research stations, substations, and farmers' fields. 2.28 The project would strengthen coordination between extension and research at local, regional, and national levels.  - 19 - 2.29 Program Components. In order to achieve the goals outlined above, the project would provide: (a) buildings, at four regional research stations and one substation, which will include laboratories; offices, staff quarters, and dormitory; (b) farm development at all research stations; (c) modest increases in professional and support staff; (d) training fellowships and technical assistance; and (e) incremental operating costs over the five year project period. 2.30 Regional and Substations. Each regional research station would have prime responsibility for research on a specific commodity. The substation at Nawalparasi (Sarlahi district) would continue its main responsibility for oil- seeds. In addition to commodity research, the project would support research on mixed cropping, dryland farming, and farm implements. Major areas of research would be: (a) Cultivation Practices: Techniques which improve crop pro- ductivity would be emphasized. These would include land preparation, time of planting in relation to rainfall patterns, soil amendments (organic and inorganic) especially to relate fertilizer use to site requirements, spacing, alternative farming and cropping patterns, and use of pesticides. Im- proved water management practices and more effective utiliza- tion of rainfed areas would also be high priority areas for research. Mixed farming practices which involve fisheries and livestock would be evaluated to determine means of increasing farmer incomes. (b) Varietal Improvement: Plant breeding, screening, identifica- tion and selection of varieties of all major crops useful to farmers would be continued and strengthened. Varieties would be sought for factors relevant to seasons, rainfall patterns, and soil types of different agro-climatic zones, and resistance to the prevalent pests and diseases. (c) Pest and Disease Control: Studies on pest and disease control of the main crops of the Terai would be strengthened. The epide- miology, prophylactic measures of control, chemical control where required, and screening for varietal resistance and tolerance would be undertaken in joint programs involving entomologists, plant pathologists, and plant breeders. (d) Farming Implements: Testing and modification of farm implements available in the area and in neighboring districts of India, and development of improved implements would be an important activity.  - 20 - (e) Cropping and Farming Systems: The ROO located at each regional research station would evaluate cultivation practices, alterna- tive farming and cropping systems developed as a result of the program outlined, and adjust the new technology according to the agroclimatic conditions and requirements of farmers. 2.31 Staffing. At full development, the staff at the four regional research stations and two substations would comprise 86 professionals of which 10 would be additional staff (no additional staff is proposed for Hardinath substation in Dhanusha district). Each regional research station would be headed by a Regional Research Coordinator (RRC) responsible for formulating research and field trial programs and for ensuring close contact with exten- sion. There is provision for a ROO in each regional research station for organizing and carrying out adaptive trials on farmers' fields. He would work closely with subject matter specialists, extension staff, farmers, and research workers and form an important link between research and extension. He would also have an active role in training subject matter specialists. 2.31 The total project requirements of professional staff, number of existing staff, and additional staff that need to be recruited is summarized below: Project Staff Requirements Post Total Required Available Additional Needed Class I 4 3 1 Class II 13 12 1 Class III 69 61 8 In addition to the above, four ROO (Class II) would be provided. Support staff would also be strengthened. Assurances were obtained during negotia- tions that permanent positions would be created as needed to employ all incremental staff in accordance with an agreed schedule at Annex 1, Table 16(a) to (f). 2.33 Civil Works, Vehicles and Equipment. Provision has been made for basic minimum laboratory and farm buildings at all RRS and one substation (Nawalpur). Adequate facilities exist at Hardinath substation. The RRC and substations are located in difficult and often inaccessible areas. Research work is expected to be highly intensive with long hours spent in the field. Modest housing has been provided, as an incentive to staff, to supplement existing facilities (Annex 1, Table 12). 2.34 The RRS at Bhairawa and Parwanipur are fairly well equipped. How- ever, these present facilities would be supplemented under the project. In case of the RRS at Nepalganj and Tarahara, provision has been made to equip them to the level of other two stations. This would enable all RRS to carry out research work to meet the needs of the Terai districts. Existing facili- ties at Nawalpur substation are inadequate even though it is classified as a Commodity Station for oilseeds. Additional facilities are, therefore, pro- vided under the project (Annex 1, Tables 13a to 13c).  - 21 - 2.35 Research staff, especially the ROO, would be expected to spend condiderable time in the field. Transportation is thus crucial for estab- lishing proper linkages with extension and is at present not available in all stations. The project would, therefore, provide for six diesel, 4-wheel drive vehicles and six motorcycles for use of staff, and two pick-up vans for transport of seed and other inputs (Annex 1, Table 13a). 2.36 Incremental Operating Costs. Operating and maintenance costs for vehicles are provided under the project. Other incremental operating costs included are: (a) cost of additional trials at research stations; (b) research farm development and maintenance; and (c) adaptive trials on farmers' fields (Annex 1, Table 15). Monitoring and Evaluation 2.37 A monitoring and evaluation system would be established to generate data with which to measure output, effects, and impact of project actions, thus providing management guidance to those responsible for project implementa- tion and permit in-depth studies enabling an evaluation to be made of longer term effects brought about by the project. Monitoring would consist of the continuous gathering of information on project inputs and activities (timely provision of staff, vehicles, equipment, and buildings) and objectives (train- ing of extension and research staff, development of appropriate agricultural recommendations). This information would alert project management and policy makers to problems of implementation requiring corrective action and provide part of the data necessary for evaluation. Project evaluation would analyze project output (the activities of trained extension and research workers), effects (increased production and consequent increase in income), and general developmental impact. 2.38 Monitoring and Evaluation would be the responsibility of the Evaluation and Program Analysis Division of the Ministry of Food and Agricul- ture. The responsibilities of this unit would be to: (a) Carry out a benchmark study establishing data on the present agricultural conditions of farmers living in the project districts, the practices they use presently, current use of inputs and credit, and present yields. (b) Obtain, collate, and compile on an annual basis, relevant data on areas under different crops, yields, and total pro- duction with the help of existing staff of the Food and Marketing Services Department (FAMSD) at headquarters and those posted in each district (one JTA and five to seven enumerators). (c) Carry out short term management oriented studies for deter- mining (i) the extent to which organizational innovations and improvements envisaged under the T&V system are being followed, and (ii) the adequacy and suitability of recommendations being propagated by the extension service.  - 22 - 2.39 Funds would be provided for carrying out the benchmark study and the management oriented studies. MOA would commission such studies by organi- zations existing in Nepal. The project would also provide funds for training field staff of FAMSD in methods of data collection, crop area surveys, and crop cutting surveys (Annex 1, Table 17). Assurances were obtained during negotiations that HMGN would: (a) finalize, by May 31, 1981, a format accept- able to IDA for the benchmark survey; and (b) undertake monitoring and evalua- tion in a form acceptable to IDA and forward results to the Association once a year. Strengthening Agricultural Engineering Division of DOA 2.40 The Agricultural Engineering Division of the DOA has responsibility for agricultural machinery research and development, post harvest technology, and construction of departmental buildings. The construction unit is expected to design, supervise construction, and maintain departmental buildings at head- quarters, research stations, and on farms. The Division is headed by the Chief, Agricultural Engineering who is assisted by two Engineers (graduates), eight Overseers (diploma), five supervisors, three draftsmen, and four field staff (located in the regions). The Division hires consulting architects to design and supervise bigger construction activities. 2.41 The project would assist in a modest strengthening of the Division by providing one Assistant Engineer at headquarters, an Overseer for each project district, funds for purchase of equipment, and fees for consulting architects. Details are in Annex 1, Table 18. Fertilizer Import and Storage 2.42 Fertilizer Import. During the Sixth Plan period, HMGN expects to increase fertilizer consumption substantially. There is, however, no indica- tion that bilateral assistance, which declined in 1979/80, will increase during the next few years. Any continued shortage or decline in the amount of fer- tilizer available would have serious consequences on agricultural production in the country and on the success of the proposed project. 2.43 The present level (1978/79) of fertilizer consumption in the eight project districts is about 10,000 tons (gross) annually and which is equiva- lent to a dressing of 21 kg per cropped ha or 7 kg per ha of nutrients. By the end of the five year project period, as a result of more intensive exten- sion activity, consumption is expected to reach some 35 kg per cropped ha. (12 kg per ha of nutrients), thus increasing the annual gross level of con- sumption to 17,500 tons. To reach this level, AIC would need to purchase an additional 18,200 tons of fertilizer over the project period and which would require considerable amounts of foreign exchange. Currently, HMGN is exper- iencing difficulty in increasing foreign exchange earnings to finance essen- tial imports. This has been brought about by declining exports and substantial increases in the cost of petroleum products and other essential items. 2.44 Estimated annual fertilizer consumption in the project area and actual incremental requirement each year, over the base year, are as follows:  - 23 - Incremental over Year Total Requirement Base Year (tons) (tons) Base year 10,000 First 10,500 500 Second 11,600 1,600 Third 13,300 3,300 Fourth 15,300 5,300 Fifth 17,500 7,500 18,200 2.45 If Nepal is to increase its agricultural production significantly, a major effort is required to ensure adequate supplies of fertilizer and improved institutional arrangements for handling the increased quantities that will be needed. Thus, AIC requires the strengthening of its management, organization and financial structure. Consequently, the project would fund a study (para 2.53) and provide assistance to HMGN to prepare within the next two years a suitable national fertilizer strategy and program, and make recommendations on appropriate institutional arrangements to carry out such a program. It is likely the study would formulate recommendations for improve- ments in the working of AIC, its procurement pricing and financial policies, and its storage and distribution system. 2.46 Pending the preparation and execution of the National program, and to avoid a situation in which the base needs of the project area are met at the expense of other areas, the project would help meet the immediate fertil- izer needs in project districts by financing the total cost (both foreign and local) of all fertilizer required by farmers for the first two project years. This would amount to 22,100 tons (10,500 in first year and 11,600 in second year), at a cost of Rs 100.40 M (US$8.37 M). Details are at Annex 1, Table 19. 2.47 Assurances were obtained during negotiations that HMGN would: (a) ensure that fertilizer financed out of the proceeds of the credit would be sold and used exclusively in the project area; (b) review annually with the Association the credit needs of farmers in the project area; (c) provide adequate funds to ADBN for the purpose of making loans to satisfy the needs of farmers in the project area; (d) by not later than January 31, 1982, pre- pare a study of the working of AIC; and (e) formulate a national fertilizer strategy and program for procurement, storage, pricing, and distribution and furnish the report to the Association by July 31, 1982. 2.48 Storage. Input storage capacity in project districts is about 20,000 tons, of which 11,000 tons are operated by AIC and 9,000 tons by coop- eratives. The available storage capacity is concentrated in three districts. Jhapa (9,500 tons), Janakpur (4,900 tons), and Nepalganj (2,500 tons). Within individual districts, however, the distribution of available storage capacity is uneven. As such, advance storage of inputs before the monsoon is a press- ing problem.  - 24 - 2.49 Intensified extension activity in the project would generate addi-- tional demand for inputs and escalate the storage problem. The Janakpur Agricultural Development Project is constructing 11 new warehouses in Dhanusha, Mahottari, and Sarlahi districts. To supplement this effort, the project would provide for the construction of 20 Panchayat level warehouses (each of 50 MT capacity), in Jhapa, Chitaun, Nawalparasi, Kapilavastu and Banke dis- tricts. These warehouses would be managed by cooperatives. Details are at Annex 1, Table 3. Agricultural Development Bank 2.50 ADBN is responsible for meeting the credit requirements of farmers in the project area and will have a larger future role as the demand for fertilizer increases. Thus, technical assistance has been included in the project to enable a review of the working of ADBN and to make recommendations on its long term financial and managerial needs. Technical assistance in the event of management and accounting is also expected to be provided under the International Fund for Agricultural Development (IFAD) assisted Small Farmers Development Project and the Asian Development Bank (ADB) assisted Fourth Agricultural Credit Project. Technical Assistance 2.51 UNDP has agreed in principle to provide US$0.65 M to meet the cost of training project staff outside Nepal and short term consultancies designed to improve project implementation. 2.52 Overseas training would build up capabilities and expertise in HMGN officers working in the fields of extension, research, and training. The overseas training effort would be directed to building up multidisciplinary teams of research staff, upgrading SMS who have to provide leadership in training, and strengthening extension capability of field staff. The project would finance, over a five-year period, 128 man-months of overseas training for research workers and 258 man-months of overseas training for extension staff. 2.53 To further assist HMGN in strengthening research and extension activities, and to study the working of AIC and ADBN and to formulate recom- mendations for their improvement, the project would finance 53 man-months (average cost of Rs 78,000 per man-month) of consultants, in the following disciplines: (a) 6 man-months - Agricultural Research; (b) 12 man-months - Farm Development; (c) 15 man-months - Extension Management; (d) 9 man-months - Extension Communications (e) 6 man-months - Management advice to AIC; and (f) 5 man-months - Management advice to ADBN. Most of the consultants would be selected from within the Region.  - 25 - 2.54 Cost estimates for overseas training and consultants are at Annex 1, Table 20. A condition of credit effectiveness would be that the UNDP Project Agreement for the employment of the technical experts required would have been signed. III. COSr ESTIMATES AND FINANCING A. Cost Estimates 3.01 Total project costs over the five year period (1981-86) are esti- mated at US$20.85 M equivalent. The foreign exchange component is estimated at US$13.34 M (about 64% of total project cost). Duties and taxes included in total costs are estimated at US$70,000 equivalent. Physical contingencies of 10% are included. Price contingencies have been applied in accordance with current Bank estimates of expected inflation rates (1981: 9%; 1982; 8%; 1983-85: 7%) and compounded accordingly. Estimated project costs detailed in Annex 1, Table 1 are summarized below: Summary of Project Costs by Expenditure NRs Million US$ Million Category Local Foreign Total Local Foreign Total Civil Works 24.91 20.39 45.30 2.07 1.71 3.78 Vehicles - 4.28 4.28 - 0.35 0.35 Equipment and Furniture 2.68 10.11 12.79 0.22 0.84 1.06 Farm Development 0.47 2.09 2.56 0.04 0.17 0.21 Technical Assistance - 7.80 7.80 - 0.65 0.65 Monitoring and Evaluation 2.04 - 2.04 0.17 - 0.17 Incremental Staff Costs 6.58 - 6.58 0.55 - 0.55 Incremental Operating Costs 7.16 3.73 10.89 0.60 0.31 0.91 Fertilizer Import 25.88 74.52 100.40 2.15 6.21 8.36 Total Base Cost 69.72 122.92 192.64 5.80 10.24 16.04 Physical Contingencies 6.31 12.23 18.54 0.53 1.01 1.54 Price Contingencies 14.26 25.16 39.42 1.18 2.09 3.27 TOTAL PROJECT COST 90.29 160.31 250.60 7.51 13.34 20.85 Summary of Project Costs by Components NRs Million US$ Million Category Local Foreign Total Local Foreign Total Extension 21.04 18.04 39.08 1.75 1.50 3.25 Training 5.52 2.65 8.17 0.46 0.22 0.68 Research 14.32 19.85 34.17 1.20 1.65 2.85 Monitoring & Evaluation 2.04 - 2.04 0.17 - 0.17 Technical Assistance - 7.80 7.80 - 0.65 0.65 Engineering 0.92 0.06 0.98 0.07 0.01 0.08 Fertilizer Import 25.88 74.52 100.40 2.15 6.21 8.36 Total Base Cost 69.72 122.92 192.64 5.80 10.24 16.04 Physical Contingencies 6.31 12.23 18.54 0.53 1.01 1.54 Price Contingencies 14.26 25.16 39.42 1.18 2.09 3.27 TOTAL PROJECT COST 90.29 160.31 250.60 7.51 13.34 20.85  - 26 - B. Proposed Financing 3.02 Financing to cover total project costs of NRs 250.60 M (US$20.85 M), including contingencies, would be provided as follows: Technical Other Development Assistance Costs Total Percentage (US$ M) IDA - 17.50 17.50 84 HMGN - 2.70 2.70 13 UNDP 0.65 0.65 3 TOTAL 0.65 20.20 20.85 100 The proposed IDA Credit of US$17.5 M would be to HMGN on standard terms and conditions and would finance about 84% of project costs, including all foreign exchange costs. An assurance was obtained during negotiations that HMGN would make adequate budgetary provision each year for the operation of the project. C. Procurement 3.03 The main items to be financed under the project are: motor vehicles, cycles, and motorcycles; civil works; equipment, machinery and furniture; training; project monitoring; incremental staff and operating costs; and fertilizer import. 3.04 Civil Works. Most buildings (US$3.78 M) would be unsuitable for ICB because they would be small, low cost and scattered throughout the project area. Accordingly, construction of buildings would be awarded to local contractors following local competitive bidding procedures and supervised by the Agricul- tural Engineering Division of DOA and in accordance with procedures already agreed with IDA. 3.05 Fertilizers (US$6.21), motor vehicles, motorcycles and cycles (US$0.35 M) and equipment (US$1.06) would be procured through ICB procedures and orders would be bulked wherever possible. Where orders are valued at less than US$50,000, items would be purchased in accordance with HMGN's procurement procedures which are satisfactory to the Association. 3.06 Assurances were obtained during negotiations with HMGN that procure- ment procedures set out above would be followed. D. Disbursements and Audit 3.07 Disbursement under the Credit would extend over five years and would be against:  - 27 - (a) 92% of expenditures for civil works; (b) 100% of foreign expenditures for directly imported equipment, furniture, and vehicles and 100% of ex factory cost for locally manufactured goods, and 75% of local expenditure for other goods procured locally; (c) 36% of total expenditure on staff salaries and allowances equal to 85% of incremental staff salaries and allowances; (d) 95% of total incremental operating costs; and (e) 100% of the total foreign exchange cost of fertilizer imported under the project. 3.08 Disbursements against items (c) and (d) would be made against HMGN statements of expenditures, the documentation for which would not be submitted to IDA for review but would be retained by HMGN. These documents would be available for inspection by IDA during the course of project review missions. Disbursements against other items would be fully documented. An estimated disbursement schedule is presented in Annex 3, Table 2. 3.09 The project would be subject to normal government financial control and audit procedures which are satisfactory. Assurances were obtained during negotiations that HMGN, within the framework of its own financial system: (a) record all project expenditures under a separate head of account in accordance with sound accounting practices; (b) furnish to the Association as soon as available but not later than nine months after the end of each fiscal year certified copies of financial statements for the year and the report of such audit; (c) cause the records and accounts to be audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association. 3.10 Under current practices financial statements are prepared by the Financial Controller of MFA (who is a first class gazetted officer seconded by the Accountant General's office). Financial statements are reconciled quarterly and are the basis of an internal audit carried out by the Accountant General's office, which then forwards these statements to the Auditor General for purposes of external audit. An audit report is then prepared by the Auditor General and after approval by the National Panchayat will be made available to the Association. IV. ORGANIZATION AND MANAGEMENT Project Implementation 4.01 Overall responsibility for implementation of the project would be with the Director General of Agriculture who would be assisted at head- quarters by the two Deputy Directors General, one each responsible for Exten- sion and Research. At the Regional level, the Regional Director of Agricul- ture would be responsible for supervision of all district extension activities.  - 28 - 4.02 As the Deputy Directors General would not be able to devote all their time to project activities, a Project Coordinator, working under the Director General of Agriculture, would be responsible for ensuring iinplemen- tation and coordination of all project actions. Working through the Regional Directors, he would provide necessary guidance to field operations and coor- dinate timely recruitment and training of staff, budgeting, construction, procurement, disbursement of funds, and submission of periodic progress reports in a form acceptable to IDA and which were agreed to at the time of negotiations. He would visit the field frequently and report to the DDGs Research and Extension at headquarters, and Regional Directors in the field on actions required to be taken to ensure that project implementation progresses as scheduled. The Project Coordinator would be assisted by a small administra- tive unit to help maintain records of project expenditures, prepare progress reports, etc. Assurances were obtained during negotiations that a suitably qualified officer would be appointed as Project Coordinator, by not later than April 30, 1981, with full time responsibility for implementing the project. 4.03 As neither extension nor research can function effectively without close cooperation, the relationship between the two services, already good, would be formalized through regular meetings at national and regional levels (paras 4.07 and 4.09) and through close working relations at district level (para 4.08). National Level Coordination 4.04 Coordination at the national level between extension, research and allied agencies would be ensured through the existing Coordination and Pro- gress Review Committee chaired by the Secretary, Ministry of Food and Agricul- ture. The Committee, which meets monthly, consists of the Directors Generals of Agriculture and Livestock and Animal Husbandry, the Deputy Directors Generals, and representatives of credit, input, and marketing organizations. Linkages Between Extension and Research 4.05 As neither research nor extension can function efficiently without close cooperation, it would be necessary to formalize the responsibilities of both agencies. The research wing of DOA would assume full responsibility for the development of suitable new technology, while the extension service would have responsibility for the transfer of technology to farmers, including widespread testing of research recommendations on farmers' fields. The research organization would continue to identify and select improved varieties of important crops, and also identify economically appropriate practices directed to substantially increasing crop production and, at the same time, lowering farmers' risk. Selected varieties and production practices would then be tested at regional research stations, farms, and on farmers' fields. Research staff would work closely with extension staff, especially SMS, as much of the work at regional stations would be in reponse to the needs of local extension staff and farmers. The extension staff would work with research workers in carrying out a program of field trials and analyzing and interpret- ing the results. ROO and research workers would take responsibility for SMS training at regional level once every two months in order to prepare them for the fortnightly training of PLAA, JTA, and JT.  - 29 - 4.06 Strengthening of arrangements for close coordination between research and extension would also be promoted through Central and District level committees, and regional workshops (paras 4.07-4.09). 4.07 Central Technical Committee (CTC). This committee would comprise of the Deputy Directors Generals of Research and Extension and Training, Project Coordinator, Regional Research Coordinators and senior research staff. The DDG (Research) would be the secretary. CTC would meet twice a year and provide a formal mechanism for review of research and field trials, and for review of future research programs and extension recommendations made by District Technical Committees and at Regional Workshops. 4.08 District Technical Committee (DTC). Each Committee would be chaired by the Agricultural Development Officer of the district and comprise district field staff, SMS, Research Outreach Officer, research workers and farmers representatives. The DTC would meet twice a year to review and suggest recommendations for agricultural practices, including the identification of research priorities and adaptive trial needs, for discussion at the Regional Workshops. 4.09 Regional Workshops. Twice a year, regional workshoDs would be organized at each Regional Research Station by the Regional Research Coordi- nator, well in advance of the summer and winter crop seasons. The workshops would include research workers, Regional Director of Agriculture, and extension staff, and would discuss the implications of recommendations of DTC on exten- sion activities, adaptive trails, and research priorities, and finalize these after considering research data and field experience. 4.10 Assurances were obtained during negotiations that CTC and DTC would be established by not later than May 31, 1981, and meet at least twice every year. 4.11 The evolution of extension recommendations would be as under: District Technical Committee Reviews adaptive research and trials ADO/SMS/RDO/Farmers/Research to propose recommendations and suggests field trial program. Regional Workshop Assembles proposed recommendations Research and Extension from DTC. Frames recommendations Staff of Region after consideration of research data and economic constraints. Central Technical Committee Reviews proposed recommendations DC/DGG/RRC/Senior Research developed by regional workshops. Staff Approves or suggests modifications before returning to DTC/RRS for implementation. District Technical Committee Considers suggestions of CTC and ADO/SMS/ROO/Farmers/Research finalizes recommendations. Formu- lates specific fortnightly recom- mendations. These will form the  - 30 - basis of fortnightly training sessions after suitable modifications by SMS at regional training. Regional Training Zonal Regional Training will modify SMS/ROO/Research Staff/ recommendations made at preseason ADO (once in 2 months) training to suit local conditions, review findings of field trials and training techniques, and prepare lesson plans for fortnightly training. Fortnightly Training Discuss and finalize recommendations PLAA/JTA/JT/SMS for next fortnight. Training 4.12 Continuous practical training of PLAA, JTA and JT is crucial to project success (Annex 2). The keynote is the training of SMS, who have to be conversant with the latest research results, be active in the identifi- cation of local problems, and participate in local verification trials. Research workers would assist in the training of SMS in which ADO would also participate. V. BENEFITS, JUSTIFICATION AND RISKS 5.01 Economic Benefits. Attributing a precise level of benefits to this type of project is difficult since it is not possible to determine what pro- portion of benefits are due to extension alone and what are due to additional purchased inputs and other factors. In practice, it is the combination of a number of factors, with extension playing the role of catalyst, that brings the desired benefits. It is also difficult to estimate acceptance rates of recommended practices. However, since the project relies primarily on reorganization and strenghtening of an existing extension and research organization, the incremental cost is low per hectare and per family. Thus, a small production increase as a consequence of the project would generate a high rate of return. The project would be able to generate a 50% rate of return if, by 1988, yields of foodgrains increase by only 12 kg ha. One significant feature of the system is that the practices initially stressed by the extension service would largely focus on improving cultural practices (timely operations, good land preparation, proper seed rates, and weeding). As these operations usually involve more work and little cash outlay, they are particularly well suited to the needs of small farmers. 5.02 Project Risks. Risks are minimal. Experience in those areas where the T&V system of agricultural extension has been introduced shows that farmers' responsiveness to recommendations has been good wherever visits by extension workers are made systematically and where PLAA and JTA have gained confidence in their own professional ability to introduce innovations. Furthermore, the ability of the extension service to develop and disseminate recommendations leading to yield increases well above the level needed for a 50% rate of return has been demonstrated adequately. Initially, in most  - 31 - situations, availability of a suitable technology for different conditions has not been a constraint as there is a backlog of research findings as yet not adopted. The best farmers in the project area have already obtained nearly twice current average yields. Major yield increases are, therefore, possible even in the process of bringing the production level of average farmers up to that of the best farmers. VI. AGREEMENTS REACHED DURING NEGOTIATIONS 6.01 During negotiations assurances were obtained on the following matters: (a) HMGN would ensure that PLAA of requisite qualifications and experience would be recruited (para 2.04); (b) HMGN and IDA would jointly review progress by December 31, 1982, the adequacy of staff, especially PLAA, and ensure that adequate numbers are employed for implementation of the project (para 2.05); (c) HMGN would ensure that all project staff, especially the six SMS positions filled from among existing personnel, would be used exclusively for extension work (para 2.14); (d) HMGN would create permanent positions as needed to employ all incremental staff substantially in accordance with the schedules shown in Annex 1, Tables 8 and 14, (paras 2.14 and 2.32); (e) HMGN would furnish to the association by December 31, 1981, all such information as the Association shall reasonably request concerning the progress in locating sites for offices, laboratories, and houses to be financed out of the proceeds of the project (paras 2.22 and 2.33); (f) HMGN would ensure that credit and cycle allowances would be made available to JTA on such terms and conditions to create incentives for the purchase and use of bicycles (para 2.23); (g) HMGN would finalize, by May 31, 1981, a format acceptable to IDA for the benchmark survey and undertake monitoring and evaluation of the project in a form to be agreed on. Further, HMGN would forward to IDA a yearly summary of results in a form acceptable to IDA (paras 2.39 and 4.02); (h) HMGN would (i) ensure that fertilizer financed out of the proceeds of the credit would be sold and used exclusively in the project area; (ii) review annually with the Association the credit needs of farmers in the project area; (iii) pro- vide adequate funds to ADBN for the purpose of making loans to satisfy the needs of farmers in the project area; (iv) by  - 32 - not later than January 31, 1982, prepare a study of the work- ing of AIC; and (v) formulate a national fertilizer strategy and program for procurement, storage, pricing, and distribu- tion and furnish the report thereof to the Association by July 31, 1982 (para 2.47); (i) HMGN would make adequate budgetary provision each year for the operation of the project (para 3.02); (j) HMGN would prepare and present to IDA, administrative and financial data regarding progress of project, including procurement of goods and services, civil works, expenditures, audit and requests for disbursements in accordance with the time schedule agreed to at negotiations (para 3.06); (k) HMGN would maintain separate accounts of the proiect and follow the prescribed procedure agreed to at negotiations (para 3.09); (1) HMGN would ensure that a suitably qualified officer is appointed as Project Coordinator by not later than April 30, 1981, with full time exclusive responsibility for implemen- tation of the project (para 4.02); and (m) HMGN would establish a Central Technical Committee and District Technical Committees. These Committees would be established by not later than May 31, 1981, and meet at least twice every year (para 4.10). 6.02 Conditions of credit effectiveness would be that the UNDP Project Agreement, for the employment of technical experts required, would have been signed (para 2.54). 6.03 With these conditions and assurances, the project would be suitable for a Credit of US$17.5 M to HMGN on standard IDA terms.  - 33 - NE Teble I NEPAL AGRICULTURAL EXTENSION AND RESEARChi PROJECT SUMMARY OF PROJECT COSTS (R 000 - Foreign Year I Year 2 Year 3 Year 4 Year 5 Total Eachan e OXILNSION Capital Costs Civil Works - 2,396.7 11,983.5 9,586.8 - 23,967.0 10,785.0 Vehicles 849.0 941.0 905.0 - _ 2,695.0 2,695.0 Equipment 1,258.0 1,590.0 1,502.0 10.0 5.0 4,365.0 2,607.0 Operating Costs Incremental Staff 245.2 617.4 1,019.5 1,109.5 1,154.5 4,146.1 Operating Costs 281.3 633.8 986.7 1,001.7 1,009.2 3,912.7 1t955.7 Total Extension 2,633.5 6,178.9 16,396.7 11,708.0 2,168.7 39,085.8 18,042.7 AGRICULTURAL TRAINING Civil Works 300.0 1,500.0 1,800.0 - - 3,600.0 1,620.0 equipment 180.0 450.0 270.0 - 900.0 720.0 Operating Costs Incremental Staff 109.2 109.2 109.2 109.2 109.2 546.0 - Training Center 35.0 70.0 70.0 70.0 70.0 315.0 31.5 Training Costs 274.8 672.8 736.8 734.8 384.8 2,804.0 280.4 Total Agricultural Training 899.0 2,802.0 2,986.0 914.0 564.0 8,165.0 2,651,9 AGRICULTURAL RESEARCH Capital Costs Civil Works 1,645.0 8,294.0 7,796.5 - - 17,735.5 7,980.0 Vehicles 1,040.0 550.0 - - - 1,590o0 1,590.0 oquipment and Machinery 747.0 3,736.0 2,241.0 749.0 - 7,473.0 6,726.0 Farm Development 1,030.0 1,365.0 113.0 50.0 - 2,558,0 2,092.0 COerating Costs Incremental Staff 162.4 317.7 362.0 362.0 362.0 1,566.1 - Station Expenses 347.0 610.0 763.0 763.0 763.0 3,246.0 1,463.1 Total Agricultural Research 4,971.4 14,872.7 11,275.5 1,924.0 1,125.0 34,168.6 19,851.1 MONITORING AND EVALUATION 203.0 507.0 611.0 311.0 411.0 2,043.0 TECHNICAL ASSISTANCE 2,167,2 2,092,2 1,885,2 1,021.2 637.2 7,803,0 7,803,0 STRENGTHENING OF AGRI. ENGINEERING UNIT Capital Costs Equipment 56.0 - - - - 56.0 56.0 Op2eratng Costs Incremental Staff 34.7 69.7 69.7 69.7 69.7 313.5 - Operating Expenses 130.0 160.0 160.0 110.0 50.0 610.0 - Total Engineering Unit 220.7 229.7 229.7 179.7 119.7 979.5 56.0 FERTILIZER IMPORT 47,701.5 52,698.8 - - - 100,400.3 74,521.2 TOTAL (without contingencies) 58,796.3 79,381.3 33,384.1 16,057.9 5,025,6 192,645,2 122,925,9 Physical Contingencies 5,775.2 7,817.7 3,175.7 1,441.3 332.4 18,542.3 12,227.7 Price Contingencies 5,767.1 15,679.6 9,488.3 6,126.8 2,354.8 39,416.6 25,155.7 Sub-Total Contingencies 11,542.3 23,497.3 12,664.0 7,568.1 2,687.2 57>958.9 37,383.4 TOTAL PROJECT COST 70,338.6 102,878.6 46,048.1 23,626.0 7,712.8 250,604.1 160,309,3  ANNEX 1 Table 2 NEPAL AGRICULTURAL EXTENSION ANn RESEARCH PROJECT SUMMARY OF EXTENSION COSTS (Rs. '000) Year 1 Year 2 Year 3 Year 4 Year 5 Foreign Cost Cost Cost Cost Cost Total Exchange I. CAPITAL COSTS A. CIVIL WORKS Housing - 2,176.7 10,883.5 8,706.8 21,767.0 Sub Center Training Units - 120.0 600.0 480.0 - 1,200.0 Input Storage - 100.0 500.0 400.0 - 1,000.0 Sub total - 2,396.7 11,983.5 9,586.8 - 23,967.0 10,785.0 B. VEHICLES 849.0 941.0 905.0 - - 2,695.0 2,695.0 l C. OFFICE EQUIPMENT AND w FURNITURE 699.0 1,150.0 1,086.0 10.0 5.0 2,950.0 1,475.0 D. AUDIO VISUAL AIDS 559.0 440.0 416.0 - - 1,415.0 1,132.0 Total Capital Costs 2,107.0 4,927.7 14,390.5 9,596.8 5.0 31,027.0 16,087.0 II. OPERATING COSTS A. Incremental Staff Costs 245.2 617.4 1,019.5 1,109.5 1,154.5 4,146.1 B. Operating expenses and Extension Material 87.7 232.8 369.7 384.7 392.2 1,467.1 146.7 C. Incremental Travelling and Other Expenses 33.6 66.0 112.0 112.0 112.0 435.6 - D. Vehicle Operating Costs 160.0 335.0 505.0 505.0 505.0 2,010.0 1,809.0 Total Operating Costs 526.5 1,251.2 2,006.2 2,111.2 2,163.7 8,058.8 1,955.7 GRAND TOTAL: EXTENSION 2,633.5 6,178.9 16,396.7 11,708.0 2,168.7 39,085.8 18,042.7  NEPAL AGRICULTURAL EXTENSION AND RESEARCH PROJECT EXTENSION: CIVIL WORKS (Rs. '000) Description Cost is. fj2 Area .2 Unit Cost Year E Year 2 Year 3 Year 4 Year 5 Total Total F.E. PE Rs. '000 -Cost Cost Cost _ Cost Units Cost Housing Agricultural Development Officer (class IE) a) 1.80 90 162.0 - 81.0 405.0 324.0 - 5 810.0 Assistant Development Officer (Class III) b) 1.80 80 144.0 72.0 360.0 288.0 - 5 720.0 Subject Matter Specialists (Class III) c) 1.80 80 144.0 - 230.4 1152.0 921.6 - I6 2304.0 Junior Technician d) 1.50 150 225.0 - 787.5 3937.5 3150.0 - 35 7875.0 Junior Technical Assistant e) 1.50 45 67.5 _ 843.8 6219.0 3375.2 - 125 8438.0 Support Staff f) 1.50 45 67.5 _162.0 810.0 648.0 - 24 1620.0 Sub-Total _ 2,176.7 10,883.5 8,706.8 21,767.0 Sub Center Training Units g) Training halls 1.50 100 150.0 - 120.0 600.0 480.0 _ 8 1,200 0 LIput Storage h) Panchayat level warehouse i) Rs..1000/T 5OMT 50.0 - 100.0 500.0 400.0 _ 20 1,000.0 TO'AT. 2,396.7 11,983.5 9,586.8 - 23,967.0 10,785.0 457. a) To be located in Mahottari, Sarlalii, Kapilavastu, Banke and Jhapa at district head,uarters b) To be located in Dhanusha, Sarlahi, Nawalparasi, Banke and .Jhapa at district headquarters. c) Two in each project district d) One at each sub Center: office cum residence for JT, small store, training hall for fortnightly training. Only 35 units are provided as 8 JTA residences are provided by Janakpur Agriculture Development Project it, Sarlahi, Dhanusha and Mahottari. e) At panchayat level f) 3 in each district g) At 8 locations in Dhaousha, Mahottari, and Sarlahi where JT quarrer are not provided. x h) 50 Kr capacity input storage capacity will be provided to sajhb units in 5 districts (Jhapa, Chitaun, Nawalparasi, Kapilavastu and Banke).  NE PA L All1 IEPLIIaAL ExErI.NS1GEN AND IIESEXCCI> PROEAP EXTENSION; VCEICLEX 5> A I ,t lINI VEIITCT.EX Pio ~ m51< UIt CostI NtIs Cot 't. Cs ;s. Cost F . Cs ot cs >lsotiqsariers at ~~~~~~~~4 Eli-Diese 200.ii I 2il .tOXl - 200.0O lilt lies "~~~~~~~~~~~ lili)-li-oso Nit) 2 0l;; lii 200.0 21 X(i.;; I I 200.1 - Dii .I tooto (C-ol, lAs'90. 0 41 1 20. 0 it Igo (I0. CII lOlO - -- .01 SoIb Peste Ot tiie I ets 3 30.0 lOt 3011.11 iii tilt5 0 . t l> ,>0 - 290I tiAIMP iT-sl-l - Assiia-tt er 22 1. ( 29> _29.0 (57 511 42 4115.0 12N.01 ItUll ,IAT ~~~ ~ ~ ~~~~~~~~~~49. 0 94> .lt 1105.0 2 ,.t150i C0 I2 N Idt I -<Al IM 1F 0 FF11: E 'Ii 101 >121. > ) 5>li3s 7I PItliP 00. I'TAA 50 il 0. 2 >1'?> 17. 4 17231 NE t >051 3 3.1 511' 1 0.0 259 5.0 I00. 0 _ ______ SBul 111AT1 .99. 0 1.1(.1 W> >,0,e. 0 0).0 5.0 2 950.0 4,7t.X 50 AUDIO1 VISUlAL. AIDS >loadqsaoioos kt I 300.2 O I 300. 0 - - - -- -- 300. 0 T)iser 1Iol I> 0 15.0 12 30. 0 Id> 45.0I 31 1,5.0 - -2- - 00 tslt) Po-te tl43 20.0 0II.( f 17) 340l.0 tItti 320l.0 - -- eO, It IA 12 5 0.4 29> I. > 511 20.0 .441 S0.0 - C PIA0 .1 OO12 107Y) 1 7.4 >17 3> N34.' lIttA 33.0 - -( - - '. ____ ____ 11>1 kI. PIN>> liOlil 2 >21.11 2.4112.0 111.11 5.11. >01o.0 -11 'I