Turkey - Igdir - Aksu - Eregli - Ercis (IAEE) Irrigation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4299-TU STAFF APPRAISAL REPORT TURKEY IGDIR-AKSU-ERECLI-ERCIS (IAEE) IRRIGATION PROJECT May 13, 1983 Europe, Middle East and North Africa Regional Projects Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS US$1 = Turkish lira (TL) 195 la TL 1 = US$0.0051 TT. 1,000,000 US$5,128 WEIGHTS AND MEASURES 1 kilogram (kg) 2.20 pounds 1 metric ton 1,000 kilograms 1 metric ton 0.98 long ton 1 meter (m) 1.09 yards 1 kilometer (kin) 0.62 mile 1 hectare (ha) 2.47 acres 1 decare = 0.1 ha 0.25 acre 1 square kilometer (km2) l00 ha 0.386 square mile 1 liter (1) 0.264 gallon ABBREVIATIONS DSI - General Directorate of State Hydraulic Works of MPNR GDAA - General Directorate of Agricultural Affairs of MAF GDPPQ - General Directorate of Plant Protection and Quarantine of MAF GDVS - General Directorate of Veterinary Services of MAF IBRD - International Bank for Reconstruction and Development (World Bank) ICB - International Competitive Bidding IDA - International Development Association MAF - Ministry of Agriculture and Forestry HIPNR - Ministry of Power and Natural Resources MVA - Ministry of Village Affairs O&M - Operation and Maintenance PPAR - Project Performance Audit Report SAL - Structural Adjustment Loan SEE - State Economic Enterprise SEI'ER - Turkish Sugar Factories, an SEE SMS - Subject Matter Specialists for the Extension Service SPO - State Planning Organization T&V - Training and Visit System of Agricultural Extension TCZB - Agricultural Bank of Turkey TMO - Soil Products Office, an SEE TOPRAKSU - General Directorate of Land and Water Conservation of MVA TZ - Provincial Extension Services Arm of GDAA TZDK - Agricultural Supply Organization, an SEE FISCAL YEAR Government of Turkey - March I to February 28 SEEs and TCZB - January 1 to December 31 /a Exchange rate for March 1983  FOR OFFICIAL USE ONLY APPRAISAL OF IGDIR-AKSU-EREGLI-ERCIS (IAEE) IRRIGATION PROJECT TURKEY Table of Contents Page No. 1. THE AGRICULTURAL SECTOR I A. Project Background 1 B. Agriculture in Turkey I II. INVESTMENTS IN IRRIGATION INFRASTRUCTURE 3 A. Background 3 B. Total Irrigated Area and Potential 4 C. Key Constraints 5 D. Cost Recovery 8 E. Performance Under Previous Projects 9 F. Project's Role 11 III. THE PROJECT AREA 11 A. Igdir Irrigation Scheme 11 B. Aksu Irrigation Scheme 14 C. Eregli Irrigation Scheme 17 D. Ercis Irrigation Scheme 20 E. Agricultural Supporting Services 21 IV. THE PROJECT 24 A. Objectives and Brief Description 24 B. Description of the Project 24 C. Water Requirements, Availability and Quality 26 D. Water Rights 28 E. Status of Engineering 28 F. Cost Estimates 28 G. Financing 29 H. Procurement and Retroactive Financing 29 I. Implementation Schedule 31 J. Disbursements 3L K. Environmental lmpact 33 V. PROJECT IMPLEMENTATION 33 A. Organization and ManageTnent 33 B. Staffing and Training 36 C. Government Land 37 D. Monitoring and Evaluation 37 E. Irrigation Strategy Review 38 F. Accounts and Audit 39 G. Cost Recovery 39 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.  Page No. VI. PRODUCTION, MARKETING AND FINANCIAL ANALYSIS 39 A. Crcp Areas, Cropping Patterns and Yields 39 B. Production and Markets 43 C. Farmers' Incomes and Financial Analyses 47 VII. BENEFITS AND JUSTIFICATIONS 51 A. Beneficiaries and Employment 51 B. Economic Rate of Return 51 C. Other Benefits 55 D. Project Risks 56 VIII. AGRERENTS AND RECOMMENDATIONS 56 ANNEXES 1. Equipment Requirements 59 2. Detailed Cost Estimates 64 3. Procurement: Requirements 68 4. Work Prograim 71 5. Disbursement Schedule 72 b. Terms of Reference for Irrigation Strategy Review 73 7. Selected Documents and Data Available in the Project File 76 CHARTS AND MAPS IBRD No. 24416 linplementation Schedule Chart 78 IBRD No. 24417 Organization Chart 79 IKRD No. 16804 Project Area Map, Igdir Scheme (West) IBRD No. 16859 Project Area Map, Igdir Scheme (East) IKRD No. 16805 Project Area Map, Aksu Schemne IBRD No. 16806 Project Area Map, Eregli Schemae IBRD No. 16807 Project Area Map, Ercis Scheme  TLiRKEY IGDIR-AKSU-EREGLYL-ERCIS (IAEE) IRRIGATION PROJECT I. THE AGRICULTURAL SECTOR A. Project Background 1.01 In its current economic reform eFfort, the Government is seeking to increase export earnings, reduce inflation, improve the efficiency of public sector investment, accelerate technological change and increase the role of market forces in the economy by reducing subsidies, maintaining a realistic exchange rate, limiting monetary expansion, reducing price controls, changing the price system and other measures. Since irrigation accounts for almost two-thirds of Government expenditure in agriculture, efforts are underway to rationalize the investment program, concentrating first on irrigation projects already under construction which could produce quick-yielding results. The proposed project originated with government's request to the June 1980 Agricultural Sector Identification Mission for Bank financing to assist completion of irrigation schemes under construction. Consideration of the project was made possible by changes in Government policy for the irrigation subsector to concentrate resources on a few priority projects to accelerate their completion and by measures to imaprove cost recovery. 1.02 Four irrigation schemes were selected and the preparation of the IAEE irrigation project was undertaken under the leadership of the General Directorate of State Hydraulic Works (DSI) with the assistance of the FAO/IBRD Cooperation Program. This report is based on the findings of an appraisal mission which visited Turkey in September 1982. The mission consisted of Messrs. S. R. Freiberg, W. E. Roell and Ms. S. Tillier (Bank), and Mr. M. Fireman (Consultant). B. Agriculture in Turkey 1.03 While the importance of the agricultural sector in the economy is declining, it still represents about 20 percent of the GDP, about 40 percent of exports, and about 60 percent of employment (See Annex 7 Sector Studies A-1, 2, 3, 4 and 8). It also supplies much of the raw materials for industry. Growth in agricultural production is of major importance in expanding foreign earnings and providing employment for Turkey's growing labor force. 1.04 Performance. Throughout the 1970s, agriculture was assigned a subordinate role to industry pursuant to the inward-oriented growth strategy adopted by Turkey during those years. Its primary role was to supply low cost inputs to industry and guaranteed food supplies for the urban work force. Although agricultural commodities accounted for a significant though declining  - 2 - share of total exports in the 1970s, sectoral exports as a fraction of total production were quite low and far below potential, which mirrored the generally poor export performance of thie economy. At the samne time, the import content of production increased, a6ain mirroring patterns in the non-agricultural sector, as a result of programs which encouraged fairly indiscriminate agricultural mechanization and use of chemical inputs. 1.05 The seztor did not benefit as much as other sectors from the public investment drive of the 1970s, which gave rise to the strong non-agricultural growth rates experienced between 1972-1979. Much of the public investment which occurred, mainly in the irrigation subsector, gestated very slowly because resources were spread thinly over an excessive number of projects. As a result, the principal instruments of policy became a combination of budgetary and financial subsidies to guarantee high producer prices, low cost inputs and cheap credit in order to stimulate agricultural production and private investment in the sector. These incentives induced good production and investment performance until about 1975, but could not be sustained during the late 1970s as a result of the strain placed on the budget, the banking system and the competing demands for resources from the manufacturing sectors. 1.06 The effects of these policies on agriculture are manifested in the figures for sectoral GDP, export and investment during the 1970s. Between 1972 and 1979, real agricultural GDP increased at an annual average rate of 3.3% p.a., averaging higher at 4.7% p.a. from 1972-75, and falling off to 1.4% between 1976-79. As a result of disproportionately slower growth, the sector's share in real GDP declined from 25.0% in 1972 to 21.7% in 1979. Sectoral exports during this period increased by about 11% p.a. in US$ terms (less in real terms), which is quite low considering the very small proportion of total sectoral production actually exported. 1/ 1.07 Sectoral fixed investment (FI) manifested trends similar to agricultural GDP in the 1970s. It increased at an annual average rate of about 18% p.a. between 1972-75, then declined by about 17% p.a. between 1976-79. Moreover, the composition of Fl changed. During the early 1970s, the investment drive in the sector was fueled by private investment, whose share in agricultural FI expanded from 50% in 1972 to 61% in 1975. Thereafter, private capital formation fell off even more rapidly and, by 1979, its share was only about 44%. 1.08 With the imposition of crisis management measures by the Government in 1980 and 1981, much of the incentives apparatus put in place for farmers during the 1970s was abruptly dismantled. Of particular note is the sharp reduction of inputs subsidies, the reduction in number of production price supports, the gradual conversion of the remaining supports from artificially high incentive prices to floor prices, and the enforcement of constraints on the availability of subsidized agricultural credit. These, coupled with 1/ Agriculture's share in total exports, however, fell from about 61% in 1972 to 59% in 1979 as a result of the inward-oriented policies. As a fraction of agricultural GDP, agricultural sector exports amounted to less than 1% in 1979.  - 3 - deflationary demand management and the new export incentives, have forced exporters and the more commercial farmers to seek out foreigrn marketing opportunities. They have done so with some vigor. An inevitable consequence of the adjustment process, however, was to throw the agricultural sector into disarray, from which it is just now beginning to emerge. As a result, the growth of agricultural GDP in real terms fell to 1.5% p.a. in 1980 and further during 1981 co only 0.5% p.a. Aided by good weather, but also amidst strong indications that farmers are now adjusting to the new realities of farm management in Turkey--including considerably less subsidization, and greater exposure to market deternined prices--the growth of real agricultural GDP is expected to recover somewhat in 1982 (due in part to good weather) with agricultural value-added growth estimated at 4.7 percent. In contrast with sector production performance, agricultural exports during 1980 and 1981 jumped to unprecedentedly high levels in response to the new exporter incentives, increasing by an annual average rate of 29% over the two-year period. Export growth continued at a lower level in 1982 amidst some indications that the diversion of existing production to foreign markets is being replaced as a source of export growth by a genuine supply response to the higher valued marketing opportunities which exporting presents. 1.09 The encouraging sectoral export performance since 1980 represents a long overdue change in price policies and the foreign trade regime. These must also be supported by strong institutional measures to foster a continuous growth in the factor productivity of agriculture which include both technology generation and its dissemination to farmers, more effective public investments and higher levels of private capital formation, the provision of credit to encourage the uptake of improved technology at the farm level, and improvements in marketing and inputs distribution systems. A more effective irrigation development program is an integral part of the strategy since it will allow increased cropping intensities and higher yields at reasonable costs. II. INVESTMENTS IN IRRIGATION INFRASTRUCTURE A. Background 2.01 Public investment in the agricultural sector has consistently favored capital expenditures for physical infrasture. Thus, 55-65 percent has been allocated for infrastructure historically, mainly for the construction of large reservoirs, dams and water distribution systems by DSI, plus smaller works by TOPRAKSU. The high rate of growth of agricultural GDP up to 1975 partially reflects the emphasis on irrigation infrastructure and technical progress through the increased use of fertilizer, improved seeds, mechanization, etc. These in combination also have steadily increased the net contribution of irrigated agriculture to aggregate crop production. Although area in irrigated crops represented about 11 percent of total crop area (excluding fallow) in 1977, output accounted for roughly 39 percent of the total value of crop production. With continued development of irrigation the latter ratio, by 1990, could increase to more than half of the total value of crop production, while about 55 percent of the incremental crop exports would  derive froTm the continued exoiansion of the irrigated area and its more intensive use. 1/ 2.02 In man37 respeccs, however, irrigated agriculture has operated well below its capacity. For a number of reasons, including incomplete on-farm development, iess than 70 percent of the presently irrigable land is cultivated under irrigation. In addition, the net value of output has been reduced by suboptimal yields of irrigated crops (such as horticultu-ral and most industrial crops) due to inadequate O&M and inefficient research and extension services. Increases in output of irrigated crops have therefore lagged behind the expansion of irrigated areas, while progress of irrigated agriculture has been further stifled by the slow rate of completion of ongoing projects. During the last few years, especially since the sharp decline in public investment in agriculture beginning in 1977, the expansion of irrigated area has slowed down from a previous average of 50,000 ha annually to less than 20,000 ha in 1979. This led to a large backlog of incomplete and stalled projects, concommitant sunk costs, and the resultant squandering of the limited resources available for irrigation investment (see paras 2.06-2.07). Therefore, current priorities lie in the completion of irrigation schemes, on-farm development and the improvement of supporting services in commanded areas. B. Total Irrigated Area and Potential 2.03 Estimates of the area of 'irrigated' land in Turkey center on a figure of about 3 million ha. 2/ Much depends on what is considered to be irrigation (e.g. cLoes one application of water per crop count as 'irrigated') and on how much privately-financed irrigation operations exist. About 1.1 million ha are served by large-scale irrigation facilities built by DSI; however it is estimated that on-farm development works (such as land levelling, drainage facilities and on-farm distribution systems, which are under the responsibility of TOPRAKSU) bave been completed on only about half of this area. An additional 0.9 million ha is served by small-scale facilities developed totally by TOPRAKSU. A total of about 2.0 million ha is thus under the c,m-aand of public (DSI and TOPRAKSU) irrigation infrastructure, with about 1.4 million ha fully equipped with on-farm works to make efficient use of this infrastructure. Very little is known about private irrigation development, except that its growth in recent years has been less important than construction of public irrigation. 2.04 According to TOPRAKSU an additional 5.7million ha could be irrigated, thus bringing the total irrigated area to 8.7 million ha, Although 1/ Report No. 4204-TU, "TURKEY - Agricultural Development Alternatives fcr Growth with Exports (January 28, 1983 - green cover draft). 2/ The total irrigated area reported by TOPRAKSU's Land Use and Capability Study is 2.99 million ha; according to the 1980 Census of Agriculture it would be now about 3.23 million ha, while DSI estimates the total irrigated area at 3.99 million ha (of which 3.81 million ha from surface water sources and 0.18 million ha from groundwater sources).  - 5-- the figure of 8.7 million ha is considered feasible by both DSI and TOPRAKSU under present technology, it is likely that only a smaller area could be developed economically since this figure has been derived from very crude national averages of land slope and water availability and is not based on economic criterion, nor was the estimate constructed from regional or watershed-specific hydrological and topographic surveys. Irrigation development has been concentrated in the Mediterranean and Aegean regions, while the South East and the Marmara regions are the ones having the largest undeveloped potential. 2.05 The Government is presently giving emphasis to the completion of on-farm works in area already served by major infrastructure, and the proposed project would provide technical and capital assistance for this purpose. However, TOPRAKSU still does not have sufficient capacity to complete all the on-farm works needed on large projects constructed by DSI, and DSI is still proceeding with the construction of new large-scale works under an indicative annual program of about 130,000 ha p.a. TOPRAKSU estimates that with some staff augmentation and training, it could presently supervise completion on about 100,000 ha per year. C. Key Constraints 2.06 Investment Programming. A major constraint to further irrigation development is the absence of a capability to systematically program public investments for the subsector. DSI's and TOPRAKSU's project selection and evaluation criteria primarily emphasize technical considerations; both have had difficulty responding to the new exigencies of public investment mandated by the economic stabilization program, viz. a concentration of future investments on quickly gestating projects with high economic returns. The problem has been further exacerbated by a lack of coordination between DSI and TOPRAKSU at the planning level. As a result, the agencies have tended to carry out their annual work programs for service area development independently. 2.07 The ad hoc nature of irrigation investment planning is typified by the summary lists of projects prepared for the annual public investment budgeting exercizes. These are sparse in content and devoid of the kinds of indicators which an in-depth review of the application of sectoral priorities and subsequent monitoring of progress would require. Furthermore, neither the construction agencies, nor the SPO presently have a capability of improving the situation. This has hampered the Government's nonetheless serious effort to focus public expenditures on fewer irrigation projects in 1981 and 1982 and has resulted in near total emphasis on the scaling-back of financial aggregates in real terms, which has been supported only by rather crude attempts to modify the existing portfolio in order to hasten the rate of completion. 2.08 The pattern of adjustments since 1980 is instructive. At the height of the economic crisis in 1980, DSI's resources were spread thinly--over 142 irrigation, drainage and flood control "projects" serving an undetermined number of ha. The severity of the crisis mandated a complete portfolio review, a reassessment (indeed, simply an initial estimate) of the economic  - 6 - viability of its contents, and a subsequent reordering of priorities. This was not even attempted in 1980 for a number of reasons, through an important consideration was the fear of subsequent liability should outstanding contracts be unilaterally impaled by DSI. Moreover, the DSI--which was allocated about 90 percent of the budget for water resources development in 1980--also had neither the staffing and institutional capability to systematically review its operations and it is questionable whether in 1980 this politically entrenched entity had yet acknowledged the necessity of such a review. 2.09 By 1981, however, the need had become abundantly clear; adjustments were made to DSI's portfolio under the guidance of the SPO and the Ministry of Finance. The preliminary list of 1981 projects contained 133 investments 1/ of which 14 were slated for completion in 1981. The total allocation was TL 27,050 million. Subsequently, the list (see Project File) was revised, when one major project was dropped, 5 received token allocations to avert litigation, and others were scaled back. The final approved program for 1981 thus contained 108 projects in the amount of TL 22,451 million, covering some 965,800 ha in total, of which 85,681 ha were to be completed in 1981. Under the 1982 program for DSI, the completion schedule was further accelerated by assigning token allocations to 8 more projects and markedly augmenting the allocation for about 25 of the smaller ones. The final budget in 1982 thus contained 95 projects and an allocation of TL 33,020 million. 2/ As a result, 70,341 additionaL ha were scheduled for completion in 1982, while the indicative completion figures for 1983 and 1984 were enlarged to abouit 253,000 ha for the two years. 2.10 Construction Capabilities. Although these rates of irrigation development are roughly in line with the annual rate of 80,000-100,000 ha projected as being necessary to achieve performance possibilities from irrigated agriculture noted above growth and export targets (para 2.01), it is by no means certain that DSI has design and supervision capacity to attain these targets in view of recent staff attrition to the private sector. Nor have DSI (or TOPRAKSU) done the requisite programming and budgetting analysis to establish a benchmark for comparison with its present capabilities. Moreover, the per hectare "completion" figures cited above refer to hectares scheduled to be brought under the command of DSI-constructed headworks and distribution canals; such, generally, are not synonomous with the provision of service to farmers' fields, which also requires the completion of associated field channels and on-farm works by TOPRAKSU. 2.11 Thus, TOPRAKSU's limited construction capabilities, and the poor coordination of investment planning with DSI represents another major constraint in the irrigation subsector. Whereas on-farm development and other irrigation works wJere being completed by TOPRAKSU at the rate of 45-50,000 ha anDually in the early 1970s, this has recently been reduced to about 20,000 1/ Report No. 3472-TU; Turkey - Public Sector Investment Review (December 7, 1981); Appendix 2, page 1. 2/ In real terms, this represents only a marginal increase over the 1981 allocation.  ha/year. TOPRAKSU's backlog of works for on-farm development on DSI's schemes has remained at 300-400,000 ha throughout the 1970s. By 1982, the backlog was roughly equivalent to one-quarter of the area under the command of technically good headworks. In the 1981 and 1982 public investment budgets TOPRAKSU was given an allocation to complete on-farm development on about 30,000 ha. Each year, however, indications are that about only 20,000 ha could actually be constructed. Moreover, its completion capability is severely constrained by a near total reliance on force account construction for major works with the use of contractors being confined to supplemental tasks. 2.12 Measures to Accelerate Completion. A rapid expansion of the completion rate is possible, but it will entail a considerable further reorientation of the public investment budget for irrigation. Particular aspects include (i) a further concentration of both DSI's and TOPRAKSU's resources on service area development of ongoing DSI schemes, (ii) the further scaling back or postponement of many projects in DSI's pipeline which were initiated in the late 1970s, but for which to date sunk costs are comparatively insignificant, and (iii) a concommitant increase in TOPRAKSU's construction capability. Although investment planning data is very limited, the scope for an additional concentration of resources still appears to be high. It is crudely estimated in current terms that the capital expenditure required on new irrigation construction by DSI is approximately $4000 per ha, including headworks and major conveyances. This delivers water to the farm gate. In contrast, TOPRAKSU's on-farm development costs currently amount to about $500 per ha, which are considerably less. Therefore, with further concentration of DSI's resources on the completion of distributories on its surface gravity projects and pumping schemes where the major "headworks" have been substantially completed 1/, and a marked shift of its construction program to also encompass the completion of on-farm works, the average incremental expenditure per ha completed could be reduced from about $4500 to $2-2500 per ha, which, in the 1982 investment program, might have allowed DSI by itself to program the complete development for about 115-120,000 ha in 1982 rather than merely bring water to the farm gate on about 70,341 ha. Furthermore, with a selective expansion of TOPRAKSU's staff to augment its design and construction supervision capabilities, and an increase in its use of private contractors, it might be possible to rapidly augment TOPRAKSU's completion capabilities to 80-100,000 ha/year. These indicative figures, based on the implementation of priorities followed by readjustment in budgetary allocation, therefore suggest that DSI and TOPRAKSU together could relieve the current backlog on DSI schemes within two to three years should a firm decision to pursue this course be adopted by Government. The urgency of doing so forms one of the principle justifications for the proposed project, which contains training for the agencies' engineering and technical staff, and changes in TOPRAKSU's operating procedures to increase its use of private construction contractors. 2.13 Master Plan. A second justification for the project is the need to improve the government's capability to identify, plan and program additional investments for irrigation after the current budgetary crisis has been resolved. This will require, firstly, the preparation conjointly by DSI and 1/ Impossible to determine extent from existing data.  -8- TOPRAKSU of a detailed medium-term investment program in which the programmed expenditures of those agencies' resources would continue to be concentrated on economically justifiable projects which can be completed in a reasonable period of time, with clear indication of associated staff, equipment and budget requirements. The plan will thus entail both a careful screening of all ongoing projects as well as a careful assessment of new additions to the portfolio. Secondly, the plan would identify and program the corresponding expansion of the agencies' technical and engineering staffs and associated training. Staffing levels and fields of specialization would be determined with reference to requirements for improving longer term scheduling and planning as well as project identification and evaluation capabilities, accelerate the rate of project preparation and finalization of designs, and expand their construction, supervison and O&M training capabilities. The formulation of a medium-term program is one of the requirements of the proposed project. 2.14 Post-implementation Services. Only scattered information is available about irrigated cropping patterns, and no comprehensive study has been made on the subject. However, data from the 1980 Agricultural Census confirm the low cropping intensity since 7 percent of the presently irrigated land is annually left under fallow and scattered reports indicate that irrigated crop yields are well below their potential. On schemes developed by TOPRAKSU, some O&M training and extension advice is offered during the immediate post-implementatiorn period, however such assistance is usally withdrawn after two or three years. Therefore, the project will provide measures to effectively recover construction and O&M costs (paras 2.15-2.17) so as to generate additional resources both to sustain further public investments in the subsector and foster more effective O&M by DSI and O&M training by TOPRAKSU. 1/ The project will also provide for the development of effective agricultural extension assistance to the proposed service areas, which can introduce irrigatecd techniques to first time users and forge a link between applied research and the beneficiary farmers for the dissemination of improved technology. D. Cost Recovery 2.15 With regard to DSI major irrigation works, legal provision exists, since 1953, for recovery of costs of capital investment and O&M. These charges have to be approved by the Council of Ministers. In practice DSI computes the capital charges for completed irrigation works on the basis of recovery over 50 years without interest and without any adjustment for inflation. The O&M charges approved by the Cabinet have normally been significantly below actual costs. O&M costs of DSI works increased from TL 336 million in 1977 to TL 2.7 billion in 1981 but actual levies ranged from 23 percent (1977) to 82 percent (1978) of these costs. A one-titne 10 percent late penalty surcharge for delinquency of over one year in payment of capital or O&M charges has been insufficiently stringent to induce adequate recovery, 1/ Expenditures on O&M on TOPRAKSU's systems are generally borne by members of irrigators associations formed by TOPRAKSU for this purpose.  and collections average less than two-thirds of assessed charges. With respect to TOPRAKSU minor irrigation and on-farm development works there has been, until this year, no legislation permitting cost recovery. The Government has recently taken measures to improve cost recovery. The Government has planned a schedule for increasing O&M charges for DSI works progressively (32.5% in 1983, 50% in 1984, 75% in 1985) so as to charge, beginning in the 1986 irrigation season, 100 percent of the previous year's actual O&M charges. The Gove!rnment would also adjust its capital recovery charge to include interest. The Government also indicated its intention to seek legislation to increase substantially the penalties for delinquency in payment of DSI O&M and capital charges and to institute appropriate legal procedures in cases of delinquency of over 12 months. 2.16 Government has passed a law which levies a 5 percent agricultural sales tax on all farmers produce sold and beginning in 1981 it collected about TL 15 billion and expects to collect about TL 25 billion in 1982. The agricultural sales tax can be considered a partial alternative cost recovery arrangement since irrigation would be expected to increase yields and value and accordingly result in higher tax payments. A conservative estimate on the share value of sales tax revenues from irrigated areas is 20 percent or TL 3.0 billion for 1981 whereas actual DSI total O&M costs for irrigation amounted to TL 2.68 billion. Government should continue to move toward full payment of O&M costs in addition to the sales tax, but at least with the introduction of the sales tax the minimum acceptable condition has been met of recovering the full O&M costs of irrigation. 1/ 2.17 Draft legislation for cost recovery of farm development works by TOPRAKSU has been submitted by the Ministry of Village Affairs to the Council of Ministers. It would permit full recovery including interest for all TOPRAKSU investments in soil preservation, land improvement, field drainage and land levelling in a repayment period not to exceed 20 years including the grace period. If approved, it would, for the first time, permit cost recovery of public investment in on-farm development works. E. Performance Under Previous Projects 2.18 The Bank and IDA have provided financing in four credits and four loans for five irrigation projects in Turkey. The first Bank loan in 1952 (63-TU US$22.8 million) assisted in financing construction of the Seyhan Multipurpose Dam. It was followed in 1963 by a credit of US$20 million (38-TU) to assist financing of Stage I of the Seyhan Irrigation Project (57,000 ha) and in 1969 for stage II of the same project for an additional 48,250 ha in a combined loan of US$12.0 million (587-TU) and credit of US$12.0 million (143-TU). In 1972, financing was provided in a credit of US$18.0 million (281-TU) for an Irrigation Rehabilitation and Completion project in 1/ Bank's report "Water Management in Bank Supported Irrigation Project Systems: An Analysis of Past Experience, OED No. 3421 (1981)" and CPN No. 2.10 suggests that sales tax may be one of a number of alternative arrangements to substitute for direct cost recovery.  - 10 - three separate areas of Turkey (Koprucay, Silifke and Tokat) to rehabilitate 26,000 ha of existing irrigation and drainage systems and construction of new systems on an additional 24,000 ha. These four projects are now completed. _n 1973, the Ceyhan Aslantas Aultipurpose Project was initiated through a combined loan (883-TU US$44.0 million) and credit (360-TU US$30.0 million) to construct a storage dam and power plant and provide for irrigation of some 97,000 ha. This project is due for completion in December 1983. 2.19 The elimination of a major constraint to production by providing a reliable source of water had a major impact on agricultural production in the four completed Bank and IDA-financed projects. Production levels in all areas exceeded appraisal estimates, although they subsequently declined in the Seyhan irrigation command areas mainly due tc white fly and bollworm attacks on cotto3n, a major crop of the region. In the Irrigation Rehabilitation and Completion Project, as of the issuance of the Project Performance Audit Report \PPAR), the economic rates of return averaged 33 percent for the three areas and ranged from 23 percent at Koprucay to 42 percent at Tokat. Despite such performance, the projects were beset with a number of problems which were outlined in the PPARs for Seyhan II and the Irrigation Rehabilitation and Completiosn Project. Two major problems were cost recovery (para 2.15) and exten,sion services support. 2,20 Extension Services. A separate project extension service was initiated in 1967 for Stage I of the Seyhan Irrigation Project which was conttnued under Stage 11 Tft difEered from the Government extension programs in the use of viill-age level workers from the farming community (referred to as foresen) backed by more qualified staff, coordination of all extension activities undertaken by different Government agencies under a single program and concentration of activitties on extension rather than on data collection for use by Governrnent agencies, The service was backstopped by a consultant firm which introduced the new techniques and especially the training and visit system (- T &V)l which has now been extended to many Bank-supported projects in many developing countries. However. the success of this newly introduced form of extension in Turkey was slow to be adopted elsewhere since it was perceived as a project implepEmented servLce and not a part of the national extension systeml. This resulted in the T&V system being allowed to gradually dimninish in effectiveness in the Seyha) area after the Seyhan II project was completed in 1977, 2e21 Under the Irrigation Rehabilitation and Completion Project, existing extension services were to be strengthened in the three project areas by the appointment of extension coordinators and additional extension agents and two consultant extension specialists. While the extension coordinators were appointed, they were usually the extension directors for the region with other responsioilities and were, therefore, unable to devote full time to training and supervision of extension personnel. The full complement of extension personnel were not hired nor were the consultants. This was, however, mitigated by extension and research services available from other agencies, especially in Kopruicay. Never-theless, the additional extension personnel and especially the consultants could have helped farmers increase yields and especially with the serious outbreaks of white fly infestations which sharply reduced cotton production in the Koprucay area.  - 11 - 2.22 A T&V system in separate project extension services were established with varying degrees of success in Bank-financed projects of the Ceyhan-Aslantas Multipurpose Project, Corum-Cankiri Rural Development Project, and the Fruits and Vegetables I and II projects. Since 1982, all project oriented extension services have been merged with the parallel Ministry of Agriculture and Forestry's Extension Service known as Teknik Ziraat. The newly established Bank-financed Erzurum Rural Development Project will also be provided with a strengthened Teknik Ziraat which will also utilize a T&V system. Government has recognized the need to strengthen and coordinate its various extension activities and has a national program to accomplish these changes and introduce a modified T&V system on a nationwide basis, which will be partially supported througi a proposed Bank project. The major difference from the system introduced under the Bank projects is the substitution of agricultural technicians (agricultural school graduates) for the village foremen, with Government convinced that this will be an improvement because of the higher education of the agricultural technicians. F. Project's Role 2.23 The proposed IAEE Irrigation project has been formulated in accordance with the objectives outlined in paras 2.12 and 2.13. It is intended to be the first of a series which would accelerate the completion of irrigation schemes while contributing to the implementation of other desirable changes in the subsector. Four irrigation schemes corresponding to a total of about 120,000 ha have been selected for inclusion in the IAEE irrigation project, on the basis oL the following criteria: (i) they have a significant element of sunk costs; (ii) they can be completed quickly because of existing investment in major infrastructure; (iii) they are technically sound; (iv) they have an insignificant energy requirement; and (v) they are financially and economically viable. In addition to an expansion of the irrigated area, the IAEE irrigation project includes measures designed to foster its more efficient land use and strengthen, through training, the planning, design and construction capability of DSI and TOPRAKSU. III. THE PROJECT AREA The project would consist of four areas (see Maps): A. Igdir Irrigation Scheme Location 3.01 The scheme is in the Aras river basin of the eastern Anatolian region covering a gross area of 56,600 ha. The area is bounded on the north by the Aras river which divides Turkey from USSR. On the south it is bounded by the Agri (Ararat), Solaka, Kale and Pamuk mountains and on the southeast by the Karasu river. The entire command area lies within the Igdir and Aralik counties of Kars province and surrounds the towns of Igdir and Aralik and contains 59 villages with a total population of 80,900.  - 12 - Physical EnvironTnent 3.02 The area has a micro-climate very different from the rest of eastern Anatolia. Surrounded by mountains, with an average altitude of 850 meters, it has a milder clirmate characterized by hot dry summers and cold winters. Precipitation is mainly in the spring and averages between 226 and 265 mm. Temperatures range between maxima and minima of 430C and -300C and monthly averages of 270C and -40C. Frosts generally occur between October and April with total annual accumulation of snow ranging from only 1 cm to as high as 82 cm. Poor distribution as well as low rainfall are a major constraint to growing crops without irrigation. However, temperature and insolation permit growth of a wide variety of crops including cotton under irrigation. Irrigation and Drainage 3.03 Due to historical floods and river bed changes of the Aras river in the Igdir scheme, clay, silt, sand and other sediment deposits have formed a range of light to heavy soil textures on a basaltic underlying formation. Heavy and medium textured soils are predominant on the plains and consequently about half of this area has drainage difficulties. Nevertheless, about half of the subproject area presently has some form of irrigation. The Aras river is the major source for irrigation and for many years has been equally shared as agreed between Turkey and USSR. In 1927, Turkey and USSR jointly built and completed the Serdarabat diversion dam with two intakes at the head of the irrigation scheme. Turkeyts 50 percent share of Aras river water is barely sufficient during peak demand in August to meet the needs of 23,000 ha which are presently irrigated. To assure the supply of water to this area and providing for the remainder, the storage water of Arpacay dam (also jointly built by Turkey and USSR), which is completed but not yet in operation, will be used. For the existing network, referred to as Unit I (26,500 ha) between the Serderabat diversion dam and the Erkaci main discharge canal (West Igdir irrigation network), the main canals and irrigation networks need to be extended, replacecd and rehabilitated and capped with a settling basin to reduce excessive siltation (see para 3.16 on water rights). 3.04 Three separate parcels of land adjoining west, south and southeast of the existing West Igdir distribution system amounting to 8,400 ha are designated as Unit II. About 50 percent is presently irrigated by private earth canals which divert water from the existing irrigation network. Construction of Unit II is being carried out by a contract tendered in 1979 and due to be completed in 1983. The third unit of the Igdir scheme consists of 21,700 ha, located east of Unit I, and consisting of flat lands of the east Igdir and Dil plains. No irrigation development has been initiated except for the East Igdir outfall drain which is under construction. About one-third of the area is presently irrigated privately by farmers using water from large springs, from the tail end of canals of the existing network and from the Erkaci main drain. High watertables and use of water from existing drains has resulted in drainage and salinity problems. Land Tenure 3.05 The Igdir subproject area consists of 46,100 ha of land held privately by 12,500 households or an average of 3.7 ha. Farm size  - 13 - distribution shows that 78 percent of all households have 5 ha or less with only 6 percent having holdings greater than 10 ha which accounts for 15 percent of the land area. An additional 10,200 ha are publicly owned land mainly in the eastern Igdir section in Unit III which also contains some 5,000 ha with soils considered too highly alkaline for economic reclamation. In the Western Igdir irrigation network (Unit I) about 680 ha are village pastures or unoccupied wasteland and an additional 1,200 ha are occupied by land holding families in various lease-hold or usufruct arrangements. In Unit II, 1050 ha of publicly owned land are in nine parcels of unoccupied range and wasteland. In Unit III, about 1000 ha of publicly owned land is harvested annually for meadow hay. Also, grazing rights in the area are held by some 5,000 persons who have temporarily left the area in search of employment elsewhere. The area also has about 470 families without land and about 250 households from neighboring villages which graze animals in the area. Farming Systems 3.06 The Igdir subproject area has traditionally been in mixed farming of crops and livestock. Those areas without irrigation are mainly used for grazing cattle, sheep and goats during the winter supplemented by fodder crops of barley, alfalfa and wheat straw grown on irrigated land. During the summer months much of the livestock is moved to grazing pastures on the slopes of Mt. Agri (Ararat) while some of the lowland meadows are harvested for hay. Some 56,900 head of cattle, 428,000 sheep, 14,600 goats and 6,800 water buffalo are in the area. 3.07 In the irrigated areas, the major crops are cereals, sugar beets, cotton and alfalfa, which occupy 44%, 20%, 15%, and 12%, respectively, of the cropped land. Fruit orchards of apricots, apples, pears, and peaches account for an additional 4 percent and vegetables another 4 percent. Poplars, although a small proportion of the cropping area, are important for establishing field boundaries and are used locally for building materials. Farming operations are partially mechanized with some 614 tractors, 611 plows, 869 trailers, and 427 threshers in the area. Tractors are used for initial cultivation of field crops and regional transportation. Most of the wheat and all horticultural crops are planted and harvested by hand. 3.08 Farm production of crops and livestock have substantial, potential for improvement in the area with an increased supply of irrigation water and land levelling to permit its even distribution; appropriate drainage and soil reclamation; strengthened extension services to provide information on improved technology and better access to credit. This should result in increased yield of cereals and other crops and including corn for silage as a second crop. The reserve of unused family labor, once water is available, would permit an increase in horticultural crops, fruit orchards, sugarbeets and potatoes. Marketing 3.09 Wheat is produced in the Igdir area in sufficient quantities to produce an annual surplus which is exported to other counties which are in  - 14 - deficit. Seven private traders are involved in marketing, transportation and milling of wheat. Toprak Mahsulleri Ofisi (TMO) has a grain silo of 4000 tons at Igdir town but it has not been used since 1978 as farmers normally prefer to sell direct to the private sector because of low prices offered by TMO. Sugarbeets are purchased by the state Sugar Corporation (SEKER) in four collection centers in the subproject area and transported to a sugar factory in Erzurum 276 km away. A new factory is under construction in Agri of 3000 ton-daily capacity and should be completed in 1984 to receive sugarbeets for processing in 1985. This would take care of planned increase in sugarbeet production in the project area. Cotton is ginned in seven private ginneries in Igdir which are presently operating at 50 percent of capacity. Baled cotton and cotton seed are purchased by the Erzurum textile mill and by merchants from Adana and Izmir. A textile mill is under construction at Igdir. Fruit and vegetable production is marketed fresh in Kars, Erzurum and Agri provinces and to some extent in the central Anatolia region, particularly apricots. A small family business exists in Igdir for making jans from local fruit produce. Surplus livestock from the area is exported to Iran, USSR and the Persian Gulf countries. An animal feed plant in Dogubayazit in Agri province has a capacity of 16,000 tons per year using inputs from the region and from southeastern Anatolia. A milk processing plant in the city of Kars of 80 ton daily capacity works full time during the summer and 50 percent of capacity during the winter. Communications 3.10 A state highway of 75 km runs through the Igdir subproject area. In addition there are 118 km of provincial roads, 146 km of stabilized roads, 3 km of asphalt roads, and 76 km of earth roads without structures. In addition, roads lining the crest of the Aras levees are used as service roads for military facilities on the border. In the existing distribution system, there are service roads along some DSI canals and drains. Village roads and access from villages to field are earthen roads which are, in general, in satisfactory condition. Access to imports and exports are by paved roads to Kars (246 km), Agri (147 km), Van (237 km) and Erzurum (276 km) and to Gurbulak, point of entry located at the Iranian border (84 km) and the Black Sea port at Trabzon. Railroad connections to other parts of Turkey are possible from Kars and Erzurum. The area is served by regional TV and radio services which include farm programs. B. Aksu Irrigation Scheme Location 3.11 The Aksuj scheme is in the Antalya basin of the Mediterranean region. The scheme lies astride the Aksu river beginning about 20 km downstream from the Karacaoren dam presently under construction and covers a gross area of 23,200 ha. The area is bounded on the east by the Koprucay basin (which was a part of the Irrigation Rehabilitation and Completion Project) and by the Mediterranean sea on the south. It is some 16 to 20 km east of the city of Antalya and contains 33 villages with a total population of 38,900 within the counties of Merkez and Serik in the province of Antalya.  - 15 - Physical Environment 3.12 The climate of the Aksu irrigation area is Mediterranean with annual average rainfall from 850 to 1050 mm which mostly falls between October and March and with only 9 to 18 percent falling during the growing period. Temperatures range between 440C and -50C with monthly averages of 280C to 50C. Frosts occur infrequently but its possibility necessitates heating provision for greenhouses and limits outdoor planting of frost sensitive plants such as tomatoes until late March or early April. Temperature, insolation and relative humidity provide favorable conditions for growing a wide range of field crops, fruits and vegetables. However, poor rainfall distribution is the major constraint to an otherwise long growing season. Heavy rainfall during the winter months create drainage and soil conservation problems in its flat coastal area and delays cultivation, preventing timely planting of crops in many locations. Irrigation and Drainage 3.13 The Aksu irrigation area consists of a long fan-shaped plain following both sides of the river for 42 km and reaching a maximum width of 9.5 km south of the Aksu-Serik highway and comprises the main flood plain of the Aksu river. It also includes adjoining areas north of this road which are extensions of this plain and contiguous low slopelands. The flat plains are at elevations of one to two meters above sea level at the southern end which rises through the plains area to 60 m elevation and to 80 m on the slopelands. Soils in the area are derived from calcareous material and are alluvial and colluvial in type to a depth of more than 150 cm. Clay content increases with proximity to the river and about 40 percent of the area have heavy textured soils and drainage problems. 3.14 The irrigation systems presently in operation comprise the Aksu diversion dam which was completed in 1961, where water is diverted into two main canals (completed in 1965), one on each bank from which water is distributed by a network of secondary and tertiary canals. This system serves 9,285 ha and is on relatively flat land. Except for 120 ha of sloping land which has been levelled, no TOPRAKSU on-farm works, such as for surface drainage, have been carried out. Privately owned lift pumps are used to irrigate small areas close to the river. About 12,260 ha could be irrigated, partially double cropped, in this Unit I, provided flood protection is provided as flooded areas of up to 7,000 ha are common in this area. Between Unit I and the sea, lies 3,060 ha which would become a part of the project area as Unit II. It is presently three-quarters irrigated by privately pumped water from the river or from tail-ends of old canals carrying drainage water from upstream areas. The entire area suffers from drainage problems due to flooding and high water tables, The third unit in toe Aksu subproject area involves areas lying upstream and above the present DSI distribution system on both sides of the riverbank. It includes 6,170 ha of up to 2 percent slopeland and 1,730 ha of up to 5 percent slopeland. Some 35 percent of the area presently receives irrigation by farmers using pumps on the river, small streams and shallow wells and from an old DSI gravity scheme.  - 16 - Land Tenure 3.15 The Aksu subproject area consists of 23,300 ha held by 5,800 households. Average farm size is 4 ha with 50 percent having 2 ha or less and only 8 percent with holdings in excess of 10 ha accounting for 16 percent of the land area. According to DSI surveys, the number of farmers renting or share-cropping i.n the Aksu area is negligible. The area varies from other parts of Turkey in that it is used intensively and little is devoted to fallow, Tneadows or pasture. Farming Systems 3.16 Farming systems in the Aksu irrigation scheme along the Mediterranean differs from the Igdir area in that livestock is unimportant. Generally, where irrigation water is available, farmers plant cotton as the main crop with smaller areas devoted to tomatoes, fruits and vegetables. Where irrigation water is unavailable and poor drainage is not a factor, then Winter wheat is the main crop. Second cropping after wheat is a recent phenomenon with sesame and corn, and even more recently, soybeans, has been introduced to the area. Presently in Unit I, 70 percent is sown to cotton, 15-16 percent wbeat, 3 percent tomatoes and other vegetables, and 5 percent second crops. Unit III which is the least irrigated has 63-66 percent wheat, 32 percent cotton and very little in tomatoes, vegetables and second crops. About 500 greenhouses on some 25 ha have been established in recent years to intensify production and spreacl the seasonality of production, income and employment. Most greenhouses (steel framed with glass) are used for a single crop to produce out of season tomatoes planted in December or January and harvested in February and March. Livestock, as indicated, plays a minor role in the agriculture of the area. Less than half of the households own livestock and when they do it is mainly to provide the family with a source of milk. Total animals in the area amount to 7300 cattle and 2000 horses and donkeys. Sheep and goats are owned by individuals from outside the area and enter to graze CrIop stubble and wasteland but are generally not encouraged by irrigation crop farmers. 3.17 Farming operations are mechanized with roughly one tractor per 2.8 farmhouseholds and about the same ratio for plows and motor or tractor pumps. Practically all initial cultivation of field crops is mechanized. However, 40 percent of wheat, 30 percent of corn, and all sesane and horticultural crop seeds are planted by hand, whereas all cotton seed is mechanically planted. Conversely, all cotton is picked by hand as well as all other crops except wheat which is mechanically harvested with combines. Marketing 3.18 Cotton in Antalya province, which includes the Aksu scheme is ginned in 16 local ginneries. About half the lint is directly exported and about half is spun into yarn at two spinning mills in Antalya which is then exported to Western Europe. There is also a weaving mill which produces 6.5 million square meters of various cotton materials. Two oil processing plants of 110-120,000 ton capacity process cotton seed, sesame, sunflower, soybeans and olives into edible oils and soap. The region's wheat production is just under  - 17 - 300,000 tons which is processed in four flour mills in Antalya. The mills also compound animal feeds for sale to local poultry operators. The wheat flour is mainly exported to other parts of Turkey with small quantities going to Iraq. Since cotton and wheat processing capacity is well above production, no problems are foreseen in increased production, marketing, storage and processing of incremental production. 3.19 In 1981, Antalya province produced half the national output of early vegetables, 255,100 tons as well as 250,000 tons of citrus which was mainly exported as fresh produce. The Bank supported Fruit and Vegetable II project is assisting in the production and marketing of fruits and vegetables in the province. Seventy percent of regional output of fresh produce passes through a central market located in Antalya. There are plans to build a new out-of-town facility complete with cold storage. Growth in fruit and vegetable production in recent years has been matched by investment in marketing and storage facilities, particularly by the private sector. Increased trucking capacity has permitted a surge in exports, particularly of citrus to the Persian Gulf and Libya. Communications 3.20 A state highway of 13 km runs through the Aksu subproject area and it is connected by rail and paved roads to Antalya 20 km away and to Izmir and Ankara and to neighboring cities of Burdur (122 km), Isparta (149 km), Mersin (487 km) and Mugla (368 km). In addition, there are 54 km of provincial roads, 40 km of additional paved roads, 67 km stabilized roads and 15 km of earth roads without structures. There are also service roads along some DSI canals and drains and from the state highway, good provincial all asphalt roads connect as far north as Gebiz. In general, access in the area is satisfactory except for a few villages in the northern extremity; but access from the villages to the fields is in many cases lacking. The seaport of Antalya provides direct access for export and import and domestic air passenger services exist also. The area is served by regional TV and radio services including farmers' radio programs. Communications are constantly improving spurred by developments in tourism and fresh fruit and vegetable export which have increased rapidly over the last two years. C. Eregli Irrigation Scheme Location and Physical Environment 3.21 The Eregli scheme is in the Konya closed basin of the central Anatolian region. The entire command area lies within Konya province and Eregli county, 150 km from Konya. It contains 26 villages in a gross area of 31,860 ha with a population of 75,813. The area has a typical continental climate of Central Anatolia. Annual average precipitation is 300 mm with most of it falling between December and May and only 1 percent during July and August. In December and January most of the precipitation falls as snow. Temperature maxima and minima ranges are 380C and -270C with monthly averages of 220C and -0.50C. Good conditions for growing field crops, vegetables and fruits occur between April and September but due to poor rainfall distribution needs to be supplemented with irrigation.  - 18 - Irrigation and Drainage 3.22 Source of ,he irrigai-ion water for the Eregli irrigation scheme is the Ivriz springs and the Delirnahbmutlar river and the area lies along both banks of the Ivriz, as the river is called downstream of the springs for about 20 km. Sustained discharges during the dry season are due to supply of the Ivriz springs which constitutes almost 70 percent of the annual flow. Soils of the area are alluvial and colluvial derived from calcareous parent material and are heavy textured and rich in lime. Flooding occurs periodically, mostly during spring time and causes some damage along the river when discharges exceed 30 m3/sec. 3.23 The irrigation system presently in operation as Unit I in the Eregli scheme comprises the Ivriz diversion weir, completed in 1967, which diverts the water into the main canal completed in 1971, and through an old distribution system of earth canals. The Ivriz dam, which is about two-thirds completed (begun in 1979), will form a reservoir which will cover the Ivriz diversion weir. In Unit II an old canal called Alanarki is still in use for supplementary irrigation of 4,500 ha from water diverted from the unregulated Delimahmutlar stream. A main drainage canal, 42 km in length, serves both Unit I and II, and evacuates excess runoff into a depression. The Ivriz dam, which is being constructed, when completed for the irrigation season of 1985 will provide flood control and sufficient water to irrigate Unit II, and would add 19,800 ha including most of the Alanarki canal area. Unit I (12,100 ha) is on the left bank of the Ivriz river on mostly level land. At present 8,900 ha is irrigated, although inadequately, under control of the Eregli municipality and has about 90 percent provided with concrete canalette irrigation infrastructure and a matching drainage network. Ongoing rehabilitation and construction will increase the equipped area to 12,100 ha. AbOut 6,000 ha has salinity and drainage problems which will require subsurface drainage and about 5,500 ha require some land levelling. Unit II which is on the right bank is mostly gently sloping land. About 5,000 ha is irrigated to a limited extent of which 4,500 is irrigated by farmers from the Alanarki canal under the control of an irrigation cooperative. The remaining 500 ha is irrigated from private tubewells scattered over the area. About 3,000 ha of Unit I1 has salinity and drainage problems and about 16,500 ha requires land levelling. Land Tenure 3.24 Apart from 400 ha owned by the Zootechnique Institute, all land is privately owned in the Eregli irrigation scheme. In Unit I (12,100 ha) 2560 households own farm units averaging 4.5 ha and many of the young men of this area seek employment elsewhere. In Unit II (19,800 ha), because of a 1965 goverinment decree, village land was allocated on the basis of 25 ha per household on cond:ition it would be passed on by inheritance and not sold or subdivided. It now has 1800 household farm units with an average of 11 ha and many sons have remained, creating extended family units. Whereas most of Unit I has some form of irrigation, about 40 percent of Unit II lies fallow because of unavailability of irrigation water and low rainfall.  - 19 - Farming Systemqs 3.25 Unit I (12,100 ha) of the Eregli scheme is mostly irrigated and fruit orchards predominate, occupying 30 percent of the area. Fruit trees include apples, pears, apricots, peaches and cherries. Another 21 percent is occupied by sugarbeets, vegetables and beans. Winter wheat is still an important crop in the area and accounts for 23 percent of the irrigated and 14 percent of the rainfed areas with 12 percent fallow. In Unit II (19,800 ha) which is largely rainfed, 50 percent is in winter wheat and barley, 5 percent in sugarbeets, 2 percent in vegetables, 1 percent in alfalfa and 40 percent fallow. Livestock is an important factor with some 58,000 sheep, 3,650 goats including angora, and 4,000 cattle. Two minor but profitable developments in the area are the planting of poplar seedlings in nurseries which after one year are sold to growers all over Turkey, and is the growing of Kimyon, which produces an aromatic spice seed (cumin) and commands high prices. Farming is generally mechanized with most transportation and initial cultivation done by tractors which average about 1 tractor to 2.3 households in the project area. Seeding of wheat, sugarbeets, potatoes and sunflowers are by seed drill whereas other crops are hand planted. Cereals are harvested by combine but other crops are harvested by hand. Marketing 3.26 Of the produce grown in Eregli county, about 45 percent is consumed locally, 35 percent is purchased privately and 20 percent is purchased by TMO which has storage facilities in the area for 4220 tons. Eregli has one flour mill of 75 ton daily capacity which processes locally grown grains (25 percent) and the remainder transported from Adana and Karapinar. Vegetables are marketed privately and of 5000 tons of potatoes produced in 1981, 3,500 tons were exported to Iraq with additional orders from Iran and Syria unfulfilled. The area also enjoys a special market for tomatoes which are produced later than from other areas. The area also has seven cold stores of 16,000 ton capacity mainly for apples and cheese. There is also a privately owned fruit processing plant of 6000 tons capacity for apples, peaches, apricots and cherries mainly for export. The company also has plans to introduce a frozen vegetable operation of 2500 ton capacity. Sugarbeets produced in the Eregli area are transported to the processing plants in Kayseri and Konya. Construction of a 3000-ton capacity sugarbeet plant at Bor in 1984 and eventually at Eregli of 4000 ton capacity should handle increased production of sugarbeets in the area. An old mill operating since 1958 in Konya produces animal feeds using alfalfa and has an annual 4000 ton capacity. Livestock is consumed locally but is also exported to other parts of Turkey and to Middle East countries. Communications 3.27 The Eregli subproject area has connections by rail and state highway to the provincial capital at Konya (150 km), to Nigde (100 km), Adana (200 km) and Mersin (188 km) and also by state highway to Ankara (347 km). In addition to 38 km of state highway and 30 km of railroads in the irrigation scheme area, there are also 31 km of provincial roads, 10 km asphalt roads, 123 km of stabilized roads and 10 km of earth roads. Accordingly, access into the area is good and possible throughout the year. Telecommunications are also satisfactory with TV and radio services.  - 20 - D. Ercis Irrigation Scheme Location and Physical Environment 3.28 The scheme is in the river terrace land bounded on the south by Lake Van, on the east by the Zilan river mostly and on the west and north by mountains. The entire command area lies within Ercis county which is 100 km north of the city of Van, the provincial seat. The irrigation scheme covers a gross area of 7,500 ha and contains 12 villages with a population of 8,922. Climate of the Ercis irrigation area is continental with precipitation averaging between 473 to 497 mm annually and falling mostly between October and May and only 10 percent during the vegetative growing period. Temperatures range between maxima and minima of 370C and -280C with monthly averages of 220C and -50C. Under rainfed conditions, poor distribution of rainfall limits crop production to winter cereals with almost 50 percent of the area in fallow. Otherwise, conditions exist for growing a range of crops with irrigation. Irrigation and Drainage 3.29 The Ercis irrigation area consists of terrace land following both sides of the Zilan river, but mostly on the right bank with elevation changing from 1650 to 1760 m. The length of the command area is 17 km and consists of medium to light textured alluvial and colluvial soils. The irrigation area consists of two units. The existing area (3750 ha), which is not included in the project, lies on the left bank of the Zilan, and is irrigated with water diverted by a weir in the Zilan and by the Irsat spring. Some 1450 ha of sloping land has been levelled with on-farm infrastructure completed for subsurface drainage in a small area near Lake Van. Presently 2800 ha receives irrigation through the existing DSI irrigation network. Project works would be limited to a new area (Unit I, 7500 ha) located mainly on the right bank of the Zilan river. About 6700 ha of it is farmed under rainfed conditions in a cereal fallow rotation. About 1090 ha has up to 6 percent slope and another 780 ha having 6-12 percent slope. Located immediately upstream of the subproject area construction of the Kockopru dam was begun in 1979 to supply irrigation water for the new unit and generate power. It is expected to be completed by 1984. Land Tenure and Farming Systems 3.30 Average farm size in the Ercis scheme (7,500 ha) is 8.9 ha per household with 44 percent of farmers having between 5 and 10 ha and 77 percent of all households having 10 ha or less. Units larger than 10 ha account for 23 percent and 51 percent of the land area. Farmers renting or sharecropping in the area is negligible according to DSI surveys. Cropping intensity in the existing irrigation area of Ercis is quite high where irrigation water is available. About a third (34 percent) is planted to alfalfa, 16 percent each to cereals and sugarbeets, 20 percent to vegetables including potatoes, beans and melons, poplars 20 percent and orchards and vineyards, 4 percent. Farming in the rainfed area is traditionally mixed rainfed cereals/fallow and livestock. Livestock in the area consists of 5800 cattle and 26,100 sheep.  - 21 - In summer, livestock are grazed in high plateau rangelands in the surrounding areas and winter in and around the villages where they are fed on hay, sugarbeet pulp and straw from cereal crops. Mechanization is moderate with about nine household units per tractor, plow, and trailer and will need to increase when shifted from rainfed to irrigated agriculture. Mechanical operations are similar to those practiced in the other subproject areas. Marketing and Communications 3.31 In the Ercis subproject area excess wheat is processed in four flour mills in Van city with a total daily capacity of 288 tons. Vegetables and potatoes which can be held up to 1,000 tons capacity in cold storage owned by the Ercis municipality, are exported to nearby cities and towns. A state owned animal feed factory in Van city of 16,000 tons annual capacity operates at only 25 percent because of low demand and produces mainly poultry feed from cereal byproducts and cottonseed meal which is sold in Adana. A subsidiary alfalfa processing plant stopped operations in 1980 because of low prices offered to farmers. Sugarbeets are transported to Erzurum. The Ercis subproject area has good connections by state highway to the provincial capital at Van (100 km) and to Agri (130 km). General access in the area is satisfactory with 19 km of state highway, 23 km provincial roads, 51 km stabilized roads and 8 km of earth roads. There is also ferry boat service on Lake Van between Van and Tatvan where rail connection exists. Domestic air flights also occur four days per week between Van and Ankara-Istanbul. Radio and TV services are also available. E. Agricultural Supporting Services 3.32 The major government institutions providing services to the four irrigation schemes areas are the General Directorate of State Hydraulic Works (DSI) of the Ministry of Power and Natural Resources, the General Directorate of Land and Water Conservation (TOPRAKSU) of the Ministry of Village Affairs, the Ministry of Agriculture and Forestry's General Directorate of Agricultural Affairs (GDAA) and the Agricultural Bank of Turkey (TCZB). 3.33 DSI is responsible for completion of the dams, construction of weirs and canals, most of which are done by contractors, and for operation and maintenance of the existing irrigation networks. In Igdir they have a staff of 55, most with University degrees, which are responsible to the DSI regional office in Erzurum for existing irrigation schemes totalling 36,650 ha. Igdir staff meet monthly with the USSR counterparts in discussing the technical aspects of the shared use of the Aras river water at the diversion dam and head regulator. The Aksu irrigation scheme is under the DSI's regional office in Antalya which is responsible for 69,000 ha in existing irrigation schemes and has a staff of 106 of which 88 have University degrees. In 1981 they completed 2,748 ha of irrigation works and 1800 ha of drainage works. DSI manufactures 120-150 km of canalettes annually in its Antalya factory which is sufficient to meet the needs of the scheme. The DSI regional directorate in Konya is responsible for 84,000 ha in irrigation networks in the region and is responsible for the design and supervision of the construction of the irrigation scheme in Eregli. It has a total staff of 156 of which 123 have  - 22 - University degrees with 14 located in the Eregli branch office. No additional staff would be required for completion of the program. For the Ercis irrigation scheme the Van regional office of DSI has a technical staff of 85 of which 35 have University degrees. Existing DSI irrigation schemes in the region cover a net area of 30,000 ha of which 2800 ha are in Ercis county. 3.34 TOPRAKSU is responsible for all on-farm. development for publicly financed irrigation works. Until recently most on-farm development works were by force account. Increased capabilities of local contractors is resulting in TOPRAKISU contracting more of its works and at least 75 percent of land levelling, surface drains and farm roads will be done by contractors. Most subsurface drains are expected to be constructed by force account because of lack of know-how by contractors and the required specialized equipment. Nevertheless, measures are proposed (see para 4.02b) to encourage local contractors to participate in a portion of subsurface drainage works. TOPRAKSU has one of its regional offices in Erzurum with a staff of 313, including 45 engineers, and plans to establish a project directorate for the Igdir irrigation scheme to supervise land levelling, farm drainage and land reclamation. In 1981, TOPRAKSU completed 2,320 ha on-farm development works, 185 ha drainage and soil reclamation, 5,445 ha small irrigation schemes and 990 ha small dams and soil conservation. TOPRAKSU also provided TL 8 million credit for on-farm works valued at TL 12 million. The Aksu irrigation scheme will be served by TOPRAKSU's regional office in Antalya with a staff of 260 including 34 engineers. In 1981, 150 ha on-farm drainage works, 4,175 ha of small irrigation schemes and 290 ha of soil conservation works were carried out. TOPRAKSU in the region also provided TL 260 million of credit for on-farm works totalling TL 325 million in value. The Eregli scheme will be served by TOPRAKSU's regional headquarters in Konya with a total staff of 158 including 31 engineers. In 1981, this office completed 400 ha on-farm works, 780 ha drainage and soil reclamation 1751 ha of small irrigation schemes and 470 small dams. TOPRAKSU also provided TL 51 million for on-farm works totalling TL 63 million in value. The Ercis irrigation scheme comes under the jurisdiction of the TOPRAKSU regional headquarters in Van which has a staff of 294 including 28 enginers. In 1981 they completed 2502 ha of on-farm works, 3675 ha small irrigation schemes, and 4936 ha small dams and conservation works. 3.35 GDAA is the major directorate in the MAF providing extension services and research to the agricultural community. However, other directorates also provide services and plans are under way to bring all such services under the responsibility of a single Director in each province to coordinate different directorates under MAF. Such provincial directors have been appointed in Kars which includes the Igdir scheme, Antalya (Aksu scheme) and Konya (Eregli scheme) and is planned for Van province (Ercis scheme). For the Igdir scheme the GDAA extension service, Tekzik Ziraat (TZ) has 12 extension staff (5 in Igdir county and 7 in Aralik county), one of which is an agricultural engineer and the rest agricultural technicians. They provide inadequate service to some 26,000 farm families because of a shortage of staff and transport. In Antalya, TZ regional headquarters has 16 graduate staff including eight subject matter specialists. Services in the Aksu subproject area are provided through two county offices with 11 graduate staff, 123  - 23 - agricultural technicians and 23 home economist technicians. Contacts with village farmers is made by technicians and graduate staff but is constrained by a shortage of vehicles and is usually limited to visits to villages and not to the fields. Consequently, many farmers do not look to TZ for on-farm advice. The TZ regional office in Konya has 33 agricultural engineers and 279 agricultural technicians. In the Eregli subproject area, only 2 agricultural engineers, 9 agricultural technicians and 2 home economists are available but staffing is expected to increase to 28 technicians by the end of 1982. Transport in Eregli is in short supply with TZ only having 2 vehicles. The TZ provincial office in Van has 3 agricultural engineers, 13 technicians and 2 home economists. The Ercis subproject area has 9 agricultural technicians and I home economist and only one vehicle. 3.36 Agricultural research. The Igdir sub-project area is served by a small research station of GDAA near Igdir mainly for forage crops, cereals and cotton trials and by another small research station of TOPRAKSU near Igdir for trials on sugarbeets, rice, soybeans and other irrigated crops. The Igdir area also has a large state farm (3,353 ha) which is underutilized, being mainly in pastures and meadows and livestock and some 200 ha in wheat and barley. The farm also houses an agricultural school for training and demonstration purposes for agricultural technicians. Combined staff of farm and school totals 6 agricultural engineers and 13 technicians. The Aksu project area is well served by six MAF regional research institutes for vegetables, citrus, field crops, cotton, livestock and biological protection. Information and materials available from these institutes should be adequate to meet the needs of production expansion in the project area during the next five years. The Eregli subproject area is served by research from the regional TOPRAKSU Research Institute and the Veterinary Control and Research Institute, both at Konya. For field crops research they must look to the Central Anatolia Regional Research Institute near Ankara. No agricultural research facilities exist in the vicinity of the Ercis irrigation scheme and extension personnel will have to rely on findings of regional institutes located elsewhere. 3.37 Agricultural credit is mainly supplied by TCZB which has branch offices throughout the country. Loans are given to farmers or through cooperatives. Supervised loans are given only on the basis of development plans prepared by TCZB whereas conventional loans are granted according to collateral offered by borrowers. In the Igdir scheme TCZB in 1981 through its two branch offices in Igdir and Aralik provided credit to only 969 farmers who received a total of TL 24 million. In the Aksu scheme loans by TCZB's two branch offices is not known but the total for the provincial office in Antalya, Aksu and Serik branch offices amounted to roughly TL 1,033 million as 45 percent crop loans, 20 percent equipment loans, 27 percent land purchase and establishment loans mainly for greenhouses and 8 percent for other loans. Of this amount, 59 percent was for supervised credit and 35 percent by conventional credit and only 6 percent through cooperatives. Maximum loans per household is TL 5 million for supervised credit and TL 2.5 million for conventional credit. Loans for seasonal credit is presently TL 2050 for irrigated cotton to TL 720 for wheat per 0.1 ha and a maximum of TL 500,000 per farm. The TCZB branch office in the Eregli subproject area disbursed TL  - 24 - 180 million to 4,168 farmers, whereas the Ercis branch office disbursed TL 66 million to 466 farmers in 1981. In addition to TCZB, credit in kind is provided by the Turkish Sugar Factories (SEKER) to sugarbeet growers for seed, fertilizer, pesticides and implements. Similar credit in kind is provided by the cotton cooperatives such as ANTBIRLIK in the Antalya region. The usual procedure is to deduct the cost of these expenditures at the time of sale of harvested sugarbeets or cotton. Consultants financed under the First Agricultural Credit Loan (1248-TU) have recommended measures to improve the efficiency and effectiveness of TCZB. Assistance in implementing these measures is intended to be included as part of a Second Agricultural Credit Loan expected to be presented to the Bank's Executive Directors in the next few months. IV. THE PROJECT A. Objectives and Brief Description 4.01 The main objectives of the project are to increase agricultural production and incomes, expand rural employment opportunities, and to help provide for a rational longer-term investment program for irrigation development in Turkey. These would be accomplished by completing four irrigation schemes covering a total of about 119,000 ha gross (112,700 ha net) and benefitting some 25,356 farm families. It would include the construction of additional irrigation and drainage systems; rehabilitation and improvement of existing irrigation and drainage systems; provision of on-farm developments in the form of land levelling, surface and subsurface drainage; correction of salinity and alkalinity problems and feeder roads. It would also include strengthening of extension services and the project would provide for equipment and for training. Through an Irrigation Strategy Review and elaboration of current and proposed investment programs, the project would support the rationalization of future investments in irrigation, develop criteria for future investment choice based on various considerations and establish a clear program of institutional development. B. Description of the Project Works!/ 4.02 Igdir Irrigation Scheme. The subproject would complete the works planned for providing irrigation water from the Arpacay reservoir and the Aras river. It would comprise 56,300 ha gross (52,900 ha net) situated in the Aras river basin adjacent to the USSR and Iran borders and include only works to be carried out after January 1, 1983. It would include the construction of an additional intake for the Serderabat diversion weir, a 665 m tunnel, a settling basin to reduce siltation, and 31 km feeder canal, 144 km of main canals and 35 km of outfall drains for the east Igdir irrigation network. Rehabilitation and improvement of the existing irrigation and drainage system 1/ See Annex 1 for further details.  - 25 - of Unit I would involve construction of a settling basin and rehabilitaLion of 8 km of main canals, 120 km of secondary canals, 208 km of tertiary canals, 121 km of main and secondary drains, and 284 km of tertiary drains. Construction for the irrigation and drainage networks of Unit III would involve 152 km main canals, 216 km secondary canals, 381 km tertiary canals, 230 km of main and secondary drains and 383 km tertiary drains. 4.03 On-farm development works for the Igdir irrigation scheme would include 38,000 ha land levelling, 14,000 ha subsurface drains, 38,000 ha surface drains, feeder roads for 38,000 ha and 12,500 ha reclamation of saline and alkaline soils through amendments of gypsum (see Annex 7, C-10). 4.04 Aksu Irrigation Scheme. The subproject would complete the works planned for irrigating 23,220 ha gross (22,100 ha net) ha in the Antalya basin astride the Aksu river and to be served by the Karacaoren reservoir. For Unit I, it would raise the crest levels of the Aksu weir and the main right and left bank canals for 30 km, rehabilitate 10 km of secondary and 19 km of tertiary canals and add 50 km of tertiary canals, 38 km of secondary drains and 5 km of tertiary drains which would permit irrigation of 12,260 ha. For Unit II (3,060 ha) it would construct 4 km of main, 5 km of secondary and 89 km of tertiary canals and 7 km of main and secondary drains. For Unit III (7,900 ha), it would construct the Kargi concrete diversion weir, 100 m in length with a 4 m high crest designed to pass a 1,300 m3/sec flood and a head regulator of 31 m3/sec capacity. It would also construct the Alayli main canal of 21 km to serve by gravity 1,294 ha gross of the right bank area of Unit III and the Kurucen main canal of 44 km which includes a 1,500 m river siphon and a 1,250 m tunnel to serve 4,441 ha of Unit III. It would also construct secondary canals of 55 km and tertiary canals of 314 km. Flood control works would be constructed to prevent periodic flooding in Unit I and II comprising 70 km of flood protection dikes and 2 million m3 of river channel improvement. 4.05 On-farm development works of the Aksu irrigation scheme include 17,000 ha land levelling, 7,000 ha subsurface drains, 18,500 ha surface drains and farm roads for 17,000 ha. 4.06 Eregli Irrigation Scheme. The subproject would complete the on-farm development works for 12,100 ha gross (11,600 ha net) in Unit I and 19,800 ha gross (19,000 ha net) in Unit II, served from the Ivriz reservoir. It would not finance construction of any head or canal works as these are already contracted out and construction is under way. The on-farm development works to be completed include 22,000 ha land levelling, 9,000 ha subsurface drains, 22,000 ha surface drains, feeder roads for 22,000 ha and 4,000 ha reclamation of saline and alkaline soils. 4.07 Ercis Irrigation Scheme. The subproject would complete works for irrigating 7,500 ha gross (7,100 ha net) of the new Unit I served from the Kockopru reservoir. It would construct 51 km of right and left bank main canals, irrigation and drainage networks of 65 km of secondary canals, 108 km of tertiary canals, 33 km of secondary drains, 99 km of tertiary drains, and 400 m of siphons. On-farm development works would include land levelling of  - 26 - 7,100 ha, subsurface drains for 500 ha, surface drains and feeder roads for 5,300 ha. EquipTment 4.08 Equipmient will be required to supplement the existing equipment for operation and maintenance of the four irrigation schemes (Annex l, Tables 1-4). Equipment will also be required to supplement existing equipment for on-farm drainage and about 25 percent of the total requirements for on-farm land levelling (Annex 1, Tables 1-4). Extension Services 4.09 The extension services would be strengthened by recruitment of three or four subject matter specialists per each irrigation scheme and a county agricultural engineer for three of the schemes. Agricultural technicians would be recruited to permit a ratio of at least one village technician per 400 farm households. A county extension office and accommodation for the subject matter specialists would be provided for in the Igdir and Eregli schemes, Field demonstration equipment and vehicles for SMS and village technicians would also be provided in all four irrigation schemes. Training 4.10 In addition to on-job training, provision has been made for about 170 manmonths of training abroad of staff in various aspects of irrigation, investment assessments, operation and maintenance, cost recovery, on-farm development, soil reclamation, and extension. Master Plan for Investment in irrigation Develment 4.11 The Government has many irrigation schemes in various stages of construction (see para 2.03). In order to avoid having funds spread too thinly stretching out completion of projects, there is a need to systematize which of these schemes should receive priority for completion, develop criteria for future investment choices and establish a program of institutional support where requiread In order to establish a rational longer term investment program for irrigation development, the borrower would by June 30, 1984 conduct an irrigation strategy review and prepare an investment master plan aiming at achieving an average increase in irrigated area over the next ten years to about 100,000 ha per year, and would submit the plan to the Bank for comments. Assistance for preparation and review would be provided by a specialist consultant financed by the project (see para. 5.12 and Annex 6). (para 8.01a). C. Water Requirements, Availability and Quality 4.12 Water Requirements. Net water requirements for the proposed cropping patterns of the nine units of the four schemes vary between 252 mm (Ercis Scheme) and 592 mm (Aksu Scheme, Unit II). Differences in annual demand between the units are caused by different patterns, cropping  - 27 - intensities and percentages of crops with low irrigation requirements (winter cereals) and high requirements (rice). The overall efficiency of all four schemes has been estimated to be 51 percent, based on conveyance efficiencies of 85 percent and on-farm efficiencies of 60 percent. Annual diversion point requirements are: Igdir Scheme 466 million m3 Aksu Scheme 234 million m3 Eregli Scheme 161 million m3 Ercis Scheme 35 million m3 Peak requirements occur in the months of July or August. To meet peak demand, irrigation modules varying between 0.58 1/s/ha (Eregli Scheme Unit II) and 1.44 1/s/ha (Aksu Scheme, Unit II) have been used for designing the irrigation systems. Future developments depending on the same sources of supply are planned by the Government for the Igdir, Aksu and Ercis schemes, with the latter two also including hydropower development. Reservoir operation studies have been made which take into account these future needs and it was found that future developments would not affect water supply for Aksu and Ercis and only insignificantly the Igdir supply conditions of presently irrigated areas and extensions to be added by the project. 4.13 Water Availability and Quality. The existing supply systems for the four schemes, as they have been built or are in the final stages of construction, have sufficient capacity to meet crop requirements in most of the years and with acceptable reductions during very dry years. Reservoir operation studies indicated that the Igdir scheme would have a supply shortfall (about 10-15 percent) only once in a sample period of 26 years. The Eregli scheme would be subject to shortages in 4 out of every 17 years with shortfalls varying between 7 and 27 percent. The Aksu and Ercis schemes would not experience any shortage during the sample periods. The storage dam for the Igdir scheme, the Arpacay dam, will be operational in 1983. The dams for the Eregli and Ercis schemes, the Ivriz and Kockopru dams, would be completed in 1984 and operational in 1985. The Karacaoren dam would be completed by 1985. However, supply for the additional areas in the Aksu scheme (Units II and III) would be met before 1985 by releases of additionally stored water in the Egridir lake. The Government would employ independent qualified experts acceptable to the Bank to periodically inspect on an agreed schedule the ongoing construction of the Karacaoren, Ivriz and Kockopru dams. Without limiting requirements for project operation and maintenance in general, the Government also shall, under arrangements satisfactory to the Bank, cause the Karacaoren, Ivriz and Kockopru dams to be periodically inspected in accordance with sound engineering practice in order to determine whether there are any deficiencies in the condition of the dams or in the quality and adequacy of maintenance or methods of operations which may endanger their safety. Assurances of the above as well as the provision of all required funds and facilities to permit timely completion of the Karacaoren, Ivriz and Kockopru dams (for impounding 84/85) would be obtained during negotiations (para 8.01 b&d). The water quality for all four schemes is good and can be used for irrigation without any restriction.  - 28 - D. Water Rights 4.14 There is an international agreement between Turkey and USSR on the use of the Aras river flows which divides the two countries. The Aras river further downstream forms the border between Iran and the USSR. The Serderabat diversion dam with two intakes was jointly built and has been operating since 1927 equally dividing the Aras river flows. Recently the Arpacay storage dam was jointly built upstream and provides additional flows when necessary and a supplementary treaty was signed in 1973 governing the use of this water. Government provided copies of these treaties which satisfactorily deal with the water rights issues for the Igdir subproject with respect to the USSR. With respect to Iran, the arrangements in effect since 1960 have led to full utilization of all available water by USSR and lurkey during the growing season. The storage of additional water during the winter (8% of total flow) for release during the growing season appears not to have any significant adverse effects on Iran. These findings were conveyed to Iran and no objections have been received. E. Status of Engineering 4.15 The project work requirements have been studied and are well defined by DSI and TOPRAKSU and no more investigative work is necessary on the irrigation, drainage and on-farm development works. Preliminary designs and cost estimates have been prepared by DSI and TOPRAKSU with some assistance from the FAO/IBRI) Cooperative Program. DSI and TOPRAKSU have the responsibility of preparing final design cost estimates and bidding documents and have done so for the first year's contracts (1983), including main irrigation and drainage works for Unit I and III of the Igdir scheme, and main irrigation and drainage works for the Ercis scheme. F. Cost Estimates 4.16 The total project cost (exclusive of some US$28.3 million for farm investment credit and US$14.2 million for incremental farm operating credit) is estimated to be US$292.0 million equivalent including some US$6.6 million in taxes. The foreign exchange component which includes both direct and indirect foreign costs is estimated at US$115.0 million or about 39.4 percent of the total cost. The base cost represents the estimated cost of investment and initial operation during the five-year (1983-87) project implementation period, in March 1983 terms (US$1=TL 195.0). The estimated foreign exchange cost consists mostly of heavy equipment for construction and maintenance of irrigation/drainaige works, as well as a portion of construction costs. Physical contingencies of a total of US$27.8 million equivalent, or about 12 percent of the base project cost, have been estimated on the basis of 15 percent of the cost of main irrigation and drainage works, 15 percent of the cost of on-farm development works, 15 percent of the cost of engineering, 10 percent of the cost of machinery and equipment and 15 percent of the cost of buildings and initial operation of the extension services. Price contingencies between the March 1983 and the end of the project implementation period are estimated at US$39.4 million equivalent, or 15.6 percent of base cost plus physical contingencies. They have been applied to both local and foreign costs in US$ terms at the following annual rates: 8.0 percent in 1983, 7.5 percent in 1984 and 7.0 percent in 1985 and 6.0 percent in each of 1986 and 1987. By measuring both foreign and local price contingencies in  - 29 - US$ equivalents, it has been assumed in line with the Government's policy that the lira exchange rate would change so as to offset the inflation differential between Turkey and its major trading partners. The lira has been devalued roughly in accordance with this pattern since 1980 and is now adjusted daily on a crawling-peg system. A summary of the project cost is given in Table 4.1 with details in Annex 2 (Tables 1-4). G. Financing 4.17 Financing. The proposed Bank loan of US$115.3 million equivalent will finance 100 percent of the foreign exchange costs of the project (39.4 percent of total costs) and the front end fee. The Government of Turkey as the borrower will contribute US$176.7 million equivalent or 60.6 percent of the total. The Government, at negotiations satisfied the Bank that they have sufficient funds to finance year one budget allocations for the various components of the project. Subsequently, the Government would submit to the Bank for review, not later than September 30 prior to the beginning of each fiscal year, an annual updated financing plan indicating the proposed budget allocations for the project including revised schedules which account for physical and price changes. In addition, government will provide or cause to be provided timely and adequate credit to farmers in the project areas. Assurances for the above were obtained during negotiations (para 8.Olc&g). H. Procurement and Retroactive Financing 4.18 During negotiations assurances were obtained that contracts (estimated at about US$33.0 million equivalent including price and physical contingencies) for construction of DSI project works excluding the Igdir subproject and 40 percent of the Ercis subproject and rehabilitation of the existing network, and contracts (estimated at US$42.0 million equivalent) for purchase of equipment and machinery would be awarded through ICB in accordance with procedures consistent with those set forth in the current edition of the Guidelines for Procurement under World Bank Loans and IDA Credits published by the Bank in March 1977. Bidding documents for equipment will stipulate that suppliers will guarantee adequate servicing and the provision of spare parts within Turkey. Purchase of small items of value less than $50,000 and not to exceed $250,000 in total for the project may be procured off-the-shelf. Because of the remoteness and inaccessibility of the area, seven contracts varying in size from $0.5 million to $12 million (estimated at US$49.9 million equivalent) for the construction of the project works of the Igdir irrigation scheme could be more efficiently carried out by local contracts and would thus be awarded through LCB procedures acceptable to the Bank. In addition, about US$4.1 million awarded through LCB acceptable to the Bank for part of the Ercis subproject but not yet begun has been included. About US$33.2 million for the rehabilitation of the existing irrigation networks in Unit I each of the Aksu and the Igdir irrigation schemes would be by DSI force account. This is appropriate since work can only be accomplished during periods when power plants can be shut down and irrigation service interrupted. At least 75 percent of TOPRAKSU civil works for land levelling, surface drainage and farm roads, and at least 10 percent for subsurface drains (estimated at about US$43.2 million equivalent) and construction of buildings for the extension service (about US$1.6 million equivalent) would be carried out by contracts awarded by LCB. These on-farm works are local in nature and local contractors  - 30 - Table 4.1. PRDJECT OOST SUMMARY Foreign Item Local Foreign Total Iocai Foreig Total Exchange TL Million U Million Main irrigation & drainage works 10648.2 7098.8 17747.0 54.6 36.4 91.0 40.0 On-farm development works 6544.8 3730.7 10275.5 33.6 19.1 52.7 36.3 Machinery & ecluipment 1421.1 5519.7 6940.8 7.3 28.3 35.6 79.5 Engineering 2802.2 - 2802.2 14.4 - 14.4 - Land acquisition 3053.0 - 3053.0 15.7 - 15.7 - Buildings 197.6 62.4 260.0 1.0 0.3 1.3 24.0 Training and consultants 4.7 115.4 120.1 0.0 0.6 0.6 96.1 06M main works 1580.2 526.8 2107.0 8.1 2.7 10.8 25.0 Extension services (operation) 257.7 223.4 481.1 1.3 1.1 2.5 46.4 Total Base Cost 26509.6 17277.1 43786.7 135.9 88.6 224.5 39.5 Physical Contingencies 3210.1 2219.3 5429.7 16.5 11.4 27.8 40.9 Price Contingencies /2 4744.8 2925.0 7669.8 24.3 15.0 39.3 38.2 Total project cost 34464.9 22421.4 56886.3 176.7 115.0 291.7 39.4 Front-end fee - 55.4 55.4 - 0.3 0.3 100.0 Total Financing Required 34464.9 22476.9 56941.7 176.7 115.3 292.0 39.5 /1 Table contains rounding errors. /2 Estimated in dollar terms at an exchange rate of US$1=IL 195.0. Because local inflation is expected to be higher than international inflation, the actual TL amounts will be higher, the difference being offset by changes in exchange rate.  - 31 - are well versed in such works which are small and in scattered locations. Furthermore, no foreign contractors would be interested in bidding on small and localized works which must be completed in a short period of time between crop seasons. Up to 90 percent of subsurface drainage work and up to 25 percent of land levelling work (estimated at US$30.1 million equivalent) may be undertaken by force account (which is a considerable reduction from all previously Bank-financed projects with on-farm development by force account reduced from 100% force account to 41% in this project). Contractors will be encouraged to undertake subsurface drainage works (see para 5.02b). In order not to interrupt progress on the project, all contracts signed after January 1, 1983 which were awarded in accordance with the above procedures would be eligible for financing under the proposed loan. The amount of retroactive financing for such advanced contracting is estimated at up to US$4.0 million. Details of the procurement packages are shown in Annex 3. 4.19 Ongoing construction work, contracted or undertaken by force account before 1983 has not been included in the package to be financed by the World Bank loan although its timely completion is essential for the project's success. Assurances were obtained during negotiations on the timely completion of these essential works and adequate operation and maintenance thereafter and that Government will include the necessary funds, estimated at US$10.1 million equivalent, in its budget (para 8.0ld). I. Implementation Schedule 4.20 The project would be completed in five years (1983 to 1987) as per implementation schedule in Chart No. 24416. An estimated schedule of expenditures is presented in Annex 2, Table 1. The projected program for irrigation works and on-farm development are shown in Annex 4. A summary of both is presented below. Calendar Year 1983 1984 1985 1986 1987