Document of The World Bank FOR OFFICIAL USE ONLY Repwt No. 5857 THE WORLD BANK PROJECT PERFORMANCE AUDIT REPORT INDIA THIRD AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT (CREDIT 947-IN) September 18, 1985 Operations Evaluation Department This dwoe has a restricted distribnlin and may be used by recipient only In the performance of their Oica dumti. Its cwteafl -a aft ohetwise be disclosed without World Bank saffihdation. ABBREVIATIONS AND ACRONYMS AID - Agency for International Development ARDC - Agricultural Refinance and Development Corporation CALCOB - Committee on Agricultural Loans through Commercial Banks CB - Commercial Banks CIDA - Canadian International Development Agency DOM - District-Oriented Monitoring EEC - European Economic Community GOI - Government of India IRDP - Integrated Rural Development Program KFW - Kreditanstalt fuer Wiederaufbau LDB - Land Development Bank MI - Minor Irrigation NABARD - National Bank for Agriculture and Rural Development ODA - Overseas Development Administration (British) OED - Operations Evaluation Department PCR - Project Completion Report PLDB - Primary Land Development Bank PPAM - Project Performance Audit Memorandum PPAR - Project Performance Audit Report RBI - Reserve Bank of India RRB - Regional Rural Banks SBI - State Bank of India SCB - State Cooperative Bank SFDA - Small Farmers Development Agencies SGO - State Groundwater Organization SLDB - State Land Development Bank SOM - Scheme-Oriented Monitoring FOR OMFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT INDIA THIRD AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT (CREDIT 947-IN) TABLE OF CONTENTS Page No. Preface .............................. i Basic Data Sheet ..........................................*....... ii Highlights ........................................................ iii PROJECT PERFORMANCE AUDIT MEMORANDUM I. PROJECT SUMMARY .......................................... 1 II. MAIN ISSUES ............................................. 6 A. Project Design ....................................... 6 B. Overdues and Bad Debts ............................. 7 C. The Interest Spread ................................. 10 D. Conclusions ............................. .. 11 Attachment 1: Comments from the Borrower .......................... 13 PROJECT COMPLETION REPORT OVERVIEW ............. ............ 21 PROJECT COMPLETION REPORT I. Introduction ............................ 35 II. Project Implementation ................................ 37 III. Project Benefits ............................ ......... 44 IV. Institutional Infrastructure .............................. 46 ANNEXES Map This doament has a restricled dtribution and may be used by reipients only in ft perforannce of their ofricia duties. Its contents may not otherwise be discosed without WorkI Bank athorination. PROJECT PERFORMANCE AUDIT REPORT INDIA THIRD AGRICULTURAL REFINANCE AND DEVELOPENT CORPORATION CREDIT PROJECT (CREDIT 947-IN) PREFACE This is a Project Performance Audit Report (PPAR) on the India Third Agricultural Refinance and Development Corporation Credit Project (ARDC III) for which Credit 947-IN in the amount of US$250 million was approved in July 1977. The final disbursement was made in March 1982 when the Credit was fully disbursed. The audit report consists of a Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department (OED), a Project Completion Report (PCR) Overview prepared by the Bank's South Asia Regional Office and the PCR itself, which was prepared by the National Bank for Agri- culture and Rural Development (NABARD), an organization formed in 1982 which assumed the duties previously fulfilled by the Agricultural Refinance and Development Corporation (ARDC). The audit memorandum is based on a review of the Appraisal Report (2404a-IN) dated June 21, 1979, the President's Report (P-2605-IN) of June 28, 1979 and the Credit and Project Agreements of August 20, 1979. Correspondence with the Borrower and internal Bank memoranda on project issues, as contained in relevant Bank files, have been studied. Bank staff associated with the project have been interviewed. An OED mission visited India in February/March 1985. Discussions were held at NABARD head- quarters in Bombay while visits were made to Maharashtra and Uttar Pradesh to meet officials from land development banks (LDBs) and commercial banks (CBs). Several farms where credit had been provided under ARDC III were visited in these two states. The mission also held discussions in New Delhi with the Government of India's Department of Economic Affairs and with staff from the World Bank's resident mission. The PPAK agrees with the principal conclusions in the PCR Overview, although it should be noted that the Overview prepared by the Bank staff takes a less favorable view of the project outcome than the PCR itself, which was prepared by NABARD. In addition to summarizing the objectives and results of the project, the PPAM discusses problems relating to the design of the project, assesses its agricultural impact, and analyses problems experi- enced in credit administration. A copy of the draft audit report was sent to the Borrower on June 3, 1985. Comments received from NABARD are included as Attachment 1. The audit gratefully acknowledges the assistance provided by Government officials, staff from NABARD, land development banks and commer- cial banks, and the many farmers who provided information to the mission. PROJECT PERPORMANCE AUDIT REPORT INDIA THIRD ACRICULTURAL REFWRANCE AND DEVEPENT CORPOATION CREDIT PROJECT (CREDIT 947-IN) BASIC DATA SHEET EY PROJECT DATA Actual or Actual as Z Appraisal Estimated of Appraisal Estiaste Actual Estimate Total Project Costs CUSS million) 666.0 758.01a 110 Credit Amount (USS million) 250.0 250.0 1001 Pn,e Board Approval 07/12/79 07/12/79 L.ate Etfectiveness 11/07/79 01/02/80 Date Physical Components Completed - 12/31/81 Closing Date 06/30/82 06/30/82 Economic Rate of Return (2) 292 to over 502 negative to over 502 FimRncial Rate of Return 182 to over 50% sng.tive to 442 Numper of Direct leneticiaries 1.1 0.6 73Z (million families) CUMULATIVEDISBURSEHENTS FY80 Fat FY82 Appraisal Estimate (USS milr3 ) 50.0 155.0 250.0 Actual (USS million) 47.0 120.0 250.0 Actual as 2 of Estimate 94 77 100 Date of Final Disbu-sement: 03/17/62 Principal lepaid: Virst instalment due on 08/15/89 KtSSION DATA Specialisa- Perfor- Date No. of Handays tions mance Types of (o./Zr) Persons In Field Represented /c Rating Le Trend If Problems & Preparation/b Appraisal 11/78 11 250 A,B.C.D,C,F.G Subtotal 250 Supervision 1 12/79 2 4 A.F 2 2 K Supervision II 07/80 2 30 A.8 I I Supervision IL/d 04/81 1 2 H-0 Supervision IV 02/82 2 14 A.C 1 2 H-0 Subtotal 48 TOTAL 298 OTHER PROJECT DATA Borrouer Covernment of India Executing Agency: ARDC (now NABARD) Fiscal Year of Borrower April 1 - March 31 Name of Currency (Abbreviation) Rupee (Ra) Currency Exchange Rate: Appraisal Report USS1.00 - Re 8.60 Appraisal Year Average US51.00 - Ra 8.20 Intervening Years Average US$1.00 - as 8.35 Completion Year Average USS1.00 - Re 8.90 Follow-on Project: Name: ARDC IV Credit Project Loan/Credit Number In. 2095-IN - Cr. 1209-IN Loan/Credit Amount (USSM) 350.0 Date Board Approval: 02/23/82 /a lovestments eligible for IDA financing only. 7b Preparation carried out during supervision of ARDC 11 and other projects. Ic - Ag. Credit Specialist, B - Cooperative Specialist. C - Agriculturist. D - Economist, E - Financial Analyst. F - Groundwater Specialist. G - Training Specialist. Id Progress reviewed during appraisal of ARDC IV Project. Ie I - problea-free or minor problems; 2- moderate problem and 3 * major problem. 7 I - improving; 2 - stationary; and 3 - deteriorating. 7 - Financial; M - managerial; T - technical; P - political; and 0 - other. - iii - PROJECT PERFORMANCE AUDIT REPORT INDIA THIRD AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECT (CREDIT 947-IN) HIGHLIGHTS The Third Agricultural Refinance and Development Corporation Credit Project (ARDC III) was the third in a series of national agricultural credit projects to be supported by the Bank Group in India. The project, which was expected to cost US$1.005 billion, was supported with an IDA Credit of US$250 million. In addition, parallel financing was provided by several bilateral donors and the European Economic Community. Funds were channelled through ARDC to participating financial agencies, primarily land development banks (LDBs) and commercial banks (CBs), which made loans to farmers. The project was intended to finance a two year time slice of ARDC's lending operations covering the period January 1980 to December 1981. The majority of loans were used to finance minor irrigation systems, especially shallow tubewells and dugwells, although a wide variety of other investments, including plantati, a crops, horticulture, dairying, poultry and fisheries were also supported. About 1.1 million farmers were expected to benefit from the project, with at least 50% of the project funds being used for small-scale farmers, while 50% were to be allocated to the less well developed states. The project also included a large training program. The project was implemented largely as planned and the IDA Credit was fully disbursed before the Closing Date. Actual expenditure under the project was about 10% higher than forecast at appraisal and most of the lend- ing targets were achieved, including those for lending to small-scale farmers and less developed states. Loans were provided to about one million farmers, compared with a target of 1.1 million farmers set at appraisal. However, not all of these farmers derived worthwhile benefits from the project, for some of the investments were unsuccessful, while completion of others was delayed. Serious problems have also been encountered with credit administra- tion, especially with the very high incidence of overdue loan repayments. Nevertheless, the overall economic rate of return from the project has probably been favourable, with individual investments showing economic rates of return varying between negative for unsuccessful investments to more than 50% for the most successful. Some of the lessons learned and other points of interest are as follows: - Due to the complexity and very large scale of the project it has not been feasible for IDA to supervise the project effectively. Consistent with the sector lending approach adopted for - iv - this project, IDA delegated primary responsibility for supervision of the banks which make loans to farmers to ARDC (now NABARD). However, ARDC has itself had difficulty supervising these banks. (PPAM para. 12). - All of the credit instituLions involved in the project kept their accounts up to date, but very little data is available concerning physical and financial performance. Data availability is poor both because basic data is lacking and because it is difficult to aggregate data with such an enormous number of different credit institutions. Almost no progress has been made with computeriza- tion. (PPAM para. 12). - Most of the credit institutions have had insufficient field staff to supervise credit operations effectively. This problem has been aggravated by the very rapid growth in the volume of lending through ARDC in recent years. In addition, the interest differen- tial under which the participating banks operate appears to be insufficient to cover all of the staff and other costs which would be involved with a veil run credit program, as well as providing a margin to cover bad debts. (PPAM para. 15). - The high overdues on loan repayment have been caused by several different factors, but especially because the lending institutions have not taken effective action to ensure prompt repayment. There has been considerable wilful default on repayment and it has been difficult for banks to realize land provided as security. (PPAM para. 13). - Although overdues have been unacceptably high, the limited data available suggests that the greater part of the overdue amounts will be repaid eventually. Nevertheless, a significant element of bad debts must be expected. (PPAM para. 14). - Minor irrigation based on shallow tubewells has been more success- ful than dugwells, which are more expensive and have a higher failure rate than tubewells (PPAM para. 8). - Loans provided under the Integrated Rural Development Program (IRDP) appear to have been relatively unsuccessful due to haphazard administration of credit and excessive preoccupation with meeting lending targets. The majority of these loans were used for live- stock production (PPAM para. 9). - ARDC III has been followed by ARDC IV, which has already been completed, while a further follow-on project (NABARD 1) is being processed at present. Under this project it is proposed that dis- bursement by the Bank would be conditional upon implementaion of a comprehensive review of the agricultural credit system, and intro- duction of progressively stricter criteria governing eligibility for NABARD refinance for term lending (PPAM para. 16). - 1 - PROJECT PERFORMANCE AUDIT MEMORANDUM INDIA THIRD AGRICULTURAT REFINANCE AND DEVELOMENT CORPORATION CREDIT PROJECT (CREDIT 947-IN) PROJECT SUMMARY Project Description 1. The Third Agricultural Refinance and Development Corporation Credit Project (ARDC III) was the third in a series of national agricultural credit projects in India to be supported by the Bank Group. The first of these national credit projects, ARDC I, was started in 1975 with an IDA Credit of US$75 million, and this was followed in 1977 with ARDC II with a credit of US$200 million. ARDC III, with a Credit of US$250 million, was started in January 1980 and it provided support for a two year time slice of ARDC's agricultural lending operations. This was followed by ARDC IV, which provided a credit of US$350 million to support another two years' lending operations. This project has also been completed (although the Project Completion Report has not yet been prepared) and a further follow-on project is being processed at present. Prior to 1975 these national credit projects had been preceded by a series of credit projects in individual states. 2. ARDC acted as the refinancing agency through which project funds were channeled to the financial institutions, primarily co-operative Land Development Banks (LDBs) and Commercial Banks (CBs), which provided loans to farmers. These were all medium term loans to be used especially for develop- ment of minor irrigation, but also for other diversified purposes, including fisheries, dairying, poultry, and horticulture. Certain specific types of lending, including farm mechanization and forestry, were not eligible for reimbursement by the International Development Association (IDA) even though they were included within the scope of the overall project cost. About 1.1 million farming families were expected to benefit from the project, while at least 50% of the proceeds of the IDA Credit were to be provided to small scale farmers.1/ About 50% of these funds were also to be used in less developed states. In addition to the main component for farm credit the project also provided US$2.0 million for scaff training, to be used primarily for in-service training of about 3,000 senior/middle level staff and 7,800 junior staff from ARDC and LDBs. 1/ Defined in Schedule Two of the Project Agreement to mean farmers whose incomes did not exceed R 3,100 in 1977/78 prices. -2- Project Cost 3. At appraisal the project was expected to cost US$1,005 million and this was to be financed 25% by IDA, 46% by ARDC/Government, 15% by partici- pating Banks and 14% by borrowers. However, it was expected that at least part of the contribution allocated to Government/ARDC would be obtained from several bilateral donors. The project cost data provided in the PCR do not permit actual costs to be compared with those estimated at appraisal, for project costs have been defined differently in the PCR, so as to include only those items which were eligible for reimbursement by IDA. On this basis, the PCR indicates that actual expenditure under the project was US$758 million, about 10% more than the amount of US$686 million allocated for eligible items at appraisal. The project was completed within the planned two year period and the IDA Credit was fully disbursed before the Closing Date. Furthermore, parallel financing was obtained from the United States, the United Kingdom, Canada, West Germany, the Netherlands, Switzerland and the European Economic Community. All of the donors together provided the equivalent of 93% of the ARDC/Government contribution for eligible categories of expenditures under the project. Achievements 4. Although data availability concerning the project has been very poor, most of the lending targets set for the project appear to have been met. The PCR estimates that about 1.0 million families benefitted from the project, compared with the target of 1.1 million families set at appraisal. The project exceeded the target for lending to small scale farmers (60% com- pared with the target of 50%) while it almost achieved the target for lending to less developed states (48% achieved compared with the target of 50%). 5. Minor irrigation was the most important type of investment financed under the project, although the proportion of funds (those eligible for reim- bursement by IDA) used for this was only 68% compared with about 80% planned at appraisal. About 550,000 irrigation investments were financed under the project, including 176,000 new dugwells, 202,000 pumpsets, and 65,000 shallow tubewells. About 80% of the investment in irrigation was concentrated in six states (Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Maharashtra, Bihar, and Orissa). Lending for purposes other than irrigation has been consider- ably higher than expected, for about 31% of the eligible project funds were used for this purpose, compared with 19% planned at appraisal. Diversified lending included a wide range of different investments, such as livestock, tea and plantation crops, horticulture, and fisheries, but only 49% of these funds were provided to smallholders, compared with 65% for minor irrigation loans. The major category of diversified lending to smallholders related to loans made under the Integrated Rural Development Program (IRDP). This pro- gram, which was started in 1979, aimed at providing assistance to the rural poor through a combination of subsidies and loans. The largest element in the loan program under IRDP has been for livestock loans. Almost half of the funds used for diversified lending were concentrated in three southern states (Karnataka, Andhra Pradesh and Tamil Nadu). - 3 - 6. All of the above figures for beneficiaries, etc., are estimates. Accurate data could not be obtained, partly because such a large number of agencies were involved in providing loans under the project, and because the time slice approach to funding used under the project means that not all projects were started and completed during the project period. The PCR Over- view suggests that the above estimated numbers of beneficiaries, etc., which have been taken from the PCR itself should be reduced by 20% to allow for unsuccessful and incomplete investments. The audit agrees that an adjustment of this magnitude is probably realistic. Training 7. In addition to the farm credit program funded under the project, a large training program was carried out under which about 2,400 senior/middle level staff and 8,900 junior staff from ARDC and LDBs attended in-service training programs. Despite this training program, all of the agencies participating in the project, especially the LDBs and CBs, suffered from serious shortages of staff, especially field staff. Agricultural Impact 8. Although a number of evaluation studies of samples of project farmers were carried out, no reliable comprehensive statistics are available concerning the impact of the project on agricultural production. The PCR estimates that at full development the project will produce an additional 3.0 million tons of food, compared with the level of 2.8 million tons expected at appraisal. However, the estimate in the PCR should probably be reduced some- what to allow for unsuccessful investments. 9. Nevertheless, the project does seem to have had significant impact on production. This is especially true for irrigation investments, which accounted for about two thirds of all project investments (those eligible for reimbursement). About one quarter of all new minor irrigation systems financed under the project were shallow tubewells (see PCR para. 2.07). These have been very successful, for they are generally installed in areas in the Gangetic plain where reliable groundwater resources are available. 10. About three quarters of new minor irrigation systems installed under the project were dugwells in hardrock areas. Although the majority of these have probably also been worthwhile investments, a much higher propor- tion of these were unsuccessful compared with tubewells. Accurate data were not available for the failure rate of dugwells. Estimates provided to the audit mission suggest that about 5% may have failed completely, while another 15 - 20% were either incomplete or completion was substantially delayed. However, the audit mission was not able to verify these estimates. The relatively high incidence of incomplete wells was caused by several factors, especially inflexible lending procedures under which loans were approved according to standard norms for well construction costs. Thus, if a well proved to be more expensive than expected it may have proved time con- suming, or impossible, for the farmers concerned to obtain the additional financial support required.2/ Another factor which had a significant impact on the number of incomplete wells was delay in connecting electricity, even though prior agreement had been obtained from the authorities concerned that the supply would be connected promptly. In some cases this problem has been overcome through using diesel engines, but this has not always been feasible. The audit mission visited one farm where physical construction of a well had been completed for three years but electricity had still not been installed. Clearly, a high incidence of failed or unproductive wells causes serious problems if these have been financed largely with loan funds, as has been the case here. For this reason, the idea of establishing a failed wells compensation scheme has been discussed for a considerable while, and ARDC has drawn up proposals for a model scheme. However, most states have still not established failed wells schemes, or if they have, inadequate funds have been made available to support these. 11. The agricultural impact of diversified agricultural lending has probably been less than that for investments in irrigation because a signifi- cant proportion of these investments have been for the IRDP program. Although IRDP is in principle an excellent program aimed at helping the rural poor, it seems that investment proposals have not been adequately scrutinized due to excessive preoccupation with the need to meet lending targets. Misuse of loan funds also appears to have been relatively common under IRDP. How- ever, as IRDP was in its early stages during the period when ARDC III was implemented, the negative influence of IRDP was less important then than it was subsequently. Groundwater Resources 12. As there has been a substantial amount of groundwater development in India it has been necessary to take steps to prevent over exploitation of water resources. The idea of introducing legislation to control extraction of groundwater was proposed at appraisal, but the state governments were unwilling to accept this. Steps were therefore taken under ARDC III to ensure that credit was provided for irrigation investments only in areas where adequate groundwater resources were available, and even in these areas where irrigation was developed, wells had to be a minimum distance apart. Clearly, these measures do not allow any control to be exercised over ground- water development which is financed without credit and groundwater legisla- tion would permit more comprehensive control to be exercised. Problems with Credit Administration 13. Although the project achieved most of its lending targets, and all of the credit agencies involved kept adequate accounts, serious problems were encountered in administering credit, especially with the inadequate quality of loan appraisal and supervision and the very high arrears with loan repay- ments. The quality of lending operations appears to have been poor primarily 2/ In the comments in Attachment 1 NABARD has drawn attention to the fact that participating financial institutions have been asked to provide supplementary loans where necessary. - 5 - because the LDBs, CBs, and other agencies which made loans to farmers had too few field staff to give adequate attention to appraisal and follow-up of individual loans. While it is considered desirable to have not more than 500 accounts for each field officer, many branches of LDBs and CBs had over twice this number per officer. These staffing problems have been seriously aggravated by the rapid growth in the volume of lending through these agencies in recent years.3/ 14. The incidence of overdue loan repayments has also been extremely high both for LDBs and CBs throughout the whole period when IDA has supported national credit projects through ARDC. However, LDBs and CBs have made timely repayments to ARDC which has not itself experienced a problem with overdues. Statistics are available only for amounts overdue for the overall agricultural lending programs, not for lending under particular projects such as ARDC III. The statistics available for LDBs indicate that during the 10 year period from 1975 to 1984 the overall average overdues to State LDBs have generally been in the range from 40% to 50%, while overdues to primary LDBs have been somewhat lower. 15. The results have been much better in some states than in others. For example, in the last ten years overdues for primary LDBs in Haryana have never exceeded 26% and have been much less in most years. Likewise, in Uttar Pradesh LDB overdues have exceeded 30% in only two of the last ten years. On the other hand, overdues for primary LDBs in Assam have exceeded 60% in seven of the last ten years, while in Tamil Nadu overdues have exceeded 70% in three of these years. These differences have resulted partly from variations in the physical environments in different states. For example, several states in the North have benefitted considerably from the easily exploited irrigation potential in the alluvial areas of the Gangetic plain, while in other areas the irrigation potential has been much lower or it has been more difficult to develop due to the presence of hard rock. Attitudes towards credit have also varied and some states have demonstrated more determination than others in enforcing credit discipline and insisting on sound management of credit institutions. 16. A similar picture is presented by the data available for overdues to CBs. Data are only available for agricultural lending through CBs from 1975 to 1981. These show that the overall average rate of overdues for all CBs has fluctuated within the narrow range from 47% to 50%, but the perfor- mance has been much more variable in different regions of the country. There have not been any obvious trends in the overall incidence of overdues for either LDBs or CBs over time. Under ARDC III refinancing of poorly perform- ing LDBs (but not CBs) by ARD was either restricted or cut off through the use of sliding scale refinancing criteria based on previous repayment perfor- mance. Although the incidence of overdues has been unacceptable high, the greater part of these overdue amounts will probably be repaid eventually. Nevertheless, a significant element of bad debts must be expected. 3/ In the comments in Attachment I NABARD mentions that steps have been initiated to strengthen the staffing of participating banks. - 6 - 17. Economic Rates of Return: The PCR has reestimated economic rates of return (ERRs) ranging from 25% to 50% for project investments, which is similar to the range forecast at appraisal. Howevec, as observed in the PCR Overview, this is an optimistic assessment, for the PCR has not taken into consideration any failed or unsuccessful investments, some of which must have shown negative rates of return. Furthermore the PCR Overview (para. 34) has drawn attention to an eirlier OED RerortJ/ which highlighted (page iv) significant methodological problems involved in estimating ERRs for credit projects. The report suggested that these have resulted in "built-in optimism in evaluating the results of agricultural credit projects." For the same reasons, a similar upward bias probably exists in the ERR estimates for this project. Despite this bias the audit believes that the overall economic imprct of ARDC III has still been favorable, even though no reliable overall ERR estimate is available for the project. II. MAIN ISSUES A. The Project Design 18. Prior to the start of ARDC I, IDA had been supporting a series of agricultural credit projects in individual states. However, this had proved to be administratively cumbersome, for it required that a large amount of resources be devoted to project appraisal and supervision, while it was difficult to have a widespread impact on agriculture. For this reason, it was decided that it would be preferable to change to a nationwide credit system where ARDC fulfilled the role of financial intermediary between the Government of India (GOI) and the financial institutions (LDBs and CBs, etc) which made loans to farmers. This changeover has facilitated the channelling of a large volume of credit funds from IDA and other donors through ARDC and the banking system to the farming community, and this has no doubt made a contribution to the significant progress made in Indian agriculture in recent years. 19. The new system does have drawbacks: Firstly, the scale of lending has been increased very rapidly and the quality of lending seems to have suffered as a result, especially because the staff resources available to the credit institutions have not been developed fast enough. Secondly, super- vision of ARDC III has been difficult both for IDA and ARDC. With the sector lending approach adopted for this project IDA has delegated to ARDC primary responsibility for supervision of the institutions which make loans to farmers (LDBs and CBs, etc.). However, it has been difficult for ARDC to perform this supervision function effectively on account of the scale and complexity of the project. For example, ARDC III involved lending to about one million farmers through more than 30,000 branches of credit institutions 4/ Report No. 3415, Agricultural Credit Projects: A Review of Experience in India, April 1981. - 7 - in a country where there is considerable diversity in the type of agriculture from state to state. The situation seems to have been made more difficult since ARDC was reconstituted as NABARD, for the new institution has been given increased responsibility but has encountered significant initial staffing problems. 20. IDA's supervision functioa has been directed primarily at ensuring that ARDC promoted the adoption of sound procedures for administering credit 9nd acted effectively as the apex lending institution. However, even with this reLatively limited supervision function, it has been difficult for IDA to supervise the project properly given the vary large nationwide scale of operations. IDA supervision missions have usually involved two people with only one or two weeks in the country. Furtl-armore, since this series of projects has been based on supporting two year slices of ARDC's lending program, there has also not been sufficient time to learn from the experience of one project before embarking on the next. Thirdly, formidable problems are involved if adequate data are to be obtained to monitor progress with such a large number of individual investments financed through an apex organization. 21. All of the credit institutions maintain their records and accounts manually and very little progress has been made with computerization. Thus, little additional information is available apart from that traditionally provided in the financial accounts.3/ For example, the level of overdues is not available for specific projects, such as ARDC III, but only for the over- all performance of each institution. Likewise, data are not available show- ing repayment experience over the course of time for any specific lending program. Similarly, data on physical project achievements, such as the number of wells which were completed successfully are often not available. In these circumstances supervision missions (and the audit mission) are obliged to make judgements ou NAEARD's total operations largely on the basis of impressions, rather than on more !actual evidence. B. Overdues and Bad Debts 22. Overdues have been high throughout the whole period during which the national credit rojects have been implemented through ARDC, generally running at around 40% tu 50% for both LDBs and CBs. Many factors have contributed to this unsatisfactory performance, including the following: (a) Unfavorable production conditions have played a part, especially in the more drought prone areas.6/ 5/ In the comments in Attachment 1 NABARD states that a consulting firm has been engaged to design a computerized management information system. 6/ In the comments in Attachment 1 NABARD has mentioned that the partici- pating financial institutions have been asked to carry out a case-by- case analysis of all overdue accounts and arrange to reschedule repay- ments wherever this is essential because of the effect of natural calamities or other causes which warrant special treatment. -8- (b) Political influences also have bad a negative impact on repayments, especially during election periods in certain states. (c) The very rapid growth and somewhat haphazard procedures adopted for lending under IRDP also seem to have been increasingly important in later years. (d) There has also been considerable variability in performance between different states, although provision of refinancing from ARDC has been curtailed or withheld completely from the institutions with the worst performance through the use of refinancing eligibility criteria based on repayment performance.7/ However, these criteria were not very harsh. Refinancing was not terminated completely for a branch of a credit institution unless overdues exceeded 50%, while refinancing was unrestricted where overdues were 25% or less.8/ (e) The audit gained the impression that there has been considerable wilful default on repayment, especially among more influential farmers. The fact that the interest rate payable on project loans is lower than rates generally applicable to other forms of credit has probably contributed to delays in repayment. (f) As most credit institutions have suffered from serious shcrtages of field staff, the quality of lending operations has been poor, lend- ing procedures have tended to be too standarized, and repayment periods have sometimes been too short.9/ (g) In some cases credit institutions may not have felt any sense of urgency about collecting repayments which were overdue, for the customers may have been creditworthy, and it may have been accept- able from a business standpoint to permit some delay in repay- ment.10/ However, most importantly, even where banks were anxious to collect overdue repayments, it has generally been impossible for them to do so quickly, on account of a number of administrative, legal, political and social obstacles which they confront. Land is generally provided as security for loans, but it is not easy to realize this security. The banks generally do not initiate any action against defaulters until they have been in arrears for about 7/ It should be noted that some rescheduling of debts has been carried out in several states and this will have influenced the level of overdues reported. 8/ For further details concerning these eligibility criteria see the PCR Overview paras. 28-30. 9/ In Attachment I NABARD states that participating bEank have been instructed to ensure that appropriate repayment periods are used. 10/ The banks may also charge higher interest rates on overdue amounts. -9- 18 months to two years. In many cases when proceedings have been started and borrowers realize that the banks are serious about recovering amounts overdue, the outstanding debts will be paid off. However, in some areas people may refuse to buy land which is offered for sale by credit agencies, while in other instances it may be unacceptable politically to dispossess smallholders. At present in most states it is normally not possible for credit institutions to insist on prompt repayment of loans. 23. While the incidence of overdues is unquestionably high, the problem seems to be to a large extent one of delay in payment rather than complete default. However, as discussed below, even a relatively low incidence of bad debts can create serious financial problems when banks operate with a narrow spread between their borrowing and lending interest rates. Unfortunately, the available statistics do not permit a careful analysis to be made of this problem. Statistics are not available which show how the repayments for particular rypes of loans, or loans made in a certain period, have performed over time. Thus, it is not possible to see what proportion of repayments which were overdue in one year were repaid in succeeding years, and how much had been overdue for such a long period that it must be treated as a bad debt. Aggregate statistics provided by ARDC indicate that about 9% of the total amount overdue to LDBs in 1982/83 had been overdue for five years or more, and these must be regarded as hardcore overdues or bad debts. 24. Although old overdues represent only a relatively small percentage of the total overdues, this comparison is not completely realistic, for the volume of lending has been increasing over the five year period concerned and old overdues as a percentage of total overdues would appear larger if the volume of lending had remained constant each year. Furthermore, some rescheduling has been undertaken' (frequently to alleviate the effects of drought) while in some states a significant proportion of long outstanding overdues have been put in blocked accounts with state governments assuming responsibility for repayment.11/ Nevertheless, old overdues, which must include a significant element of bad debts, seem to represent a relatively small proportion of the outstanding loan portfolio. For example, the audit mission visited the LDB in Uttar Pradesh, which is apparently one of the best in India. Total overdues for this LDB were equivalent to about 7% of the value of loans outstanding, while about 10% of these overdues were more than five years old. Thus, old overdues are equivalent to only 0.7% of the current value of the loan portfolio. 25. The audit mission also visited the LDB in Maharashtra, which is not one of the better performers. In this case the total overdues amounted to about 10% of the value of the outstanding loan portfolio, while about 25% of these overdues had been outstanding for five years or more. Thus, even for 11/ Where rescheduling has taken place this will have directly reduced the incidence of overdues. Rescheduled loans will have overdues only if repayments fall into arrears with the new repayment schedule. Where overdue loans have been placed in blocked accounts overdues will have been reduced only to the extent that state governments have repaid them. - 10 - this indifferently performing LDB the old overdues were equivalent to only about 2.5% of the outstanding portfolio. The audit acknowledges that the bad debts position would have appeared worse if it had been possible to take account in these calculations of the effect of debt rescheduling, blocking of accounts by state governments, and the increasing scale of lending operations._2/ Despite these data problems it seems realistic to conclude that on average bad debts represent a relatively low, but still significant, proportion of the outstanding loan portfolio. All of the LDBs and CBs with which the audit mission discussed this issue stated that they were confident that they had more than adequate provision in their accounts to cover possible bad debts.13/ Nevertheless, the audit belives that some of the poorer performing institutions may well be confronted in future with a bad debts situation which would be unmanageable without financial assistance from state governments. C. The Interest Spread 26. Under ARDC III the participating banks making loans to farmers were expected to operate with a spread between their borrowing and lending interest rates of three percentage points. Although the audit has not been able to make a detailed study of this subject, it appears likely that the interest spread has not been adequate to cover all of the costs involved in administering credit and to allow for bad debts. All of the CBs interviewed by the audit mission stated that agricultural lending was relatively expensive, due to the large number of small loans, while the interest differ- ential for these loans was much lower than for other types of lending. Thus, they were obliged to subsidize agricultural lending from profits earned on non-agricultural operations. However, as many of these CBs were publicly owned (nationalized), they were willing to increase agricultural lending in accordance with Government policy directives, even though this was unprofit- able. 27. Nevertheless, the unprofitable nature of agricultural lending must discourage the CBs from devoting adequate resources to agricultural opera- tions. The LDBs, on the der hand, had no non-agricultural source of income 12/ In the case of Uttar Pradesh data available for the most recent three year period indicate that this LDB has not received any funds from the state government on account of blocked accounts, although rescheduling has taken place equivalent to 5% of the net repayment demanded over the three year period. For Maharashtra LDB rescheduling and blocking have been more important, for they have been equivalent to about 23% of the net repayment demanded for the three year period. Payments made to the LDB by the state government have been equivalent to 11% of total net repayments demanded and 21% of recoveries actually received over this period. 13/ In the case of commercial banks loan repayments are insured to the extent of 75% of the overdue amount by the Deposit Insurance and Credit Guarantee Corporation. However, doubts have been raised about whether this will continue to be a financially viable operation with the increasing level of agricultural lending and the high level of overdues. - 11 - with which to subsidize their agricultural operations. In this case the narrow interest differential has probably caused them to reduce lending costs, especially staff costs, as much as possible. This seems unfortunate, for all of the institutions making loans to farmers appear to have performed indifferently in both appraising and supervising credit. The credit system would probably have performed better if the participating banks had been provided with strong encouragement to improve the quality of credit admin- istration, and a higher interest differential seems an appropriate mechanism for doing this. In this connection a credit pilot project has been started under ARDC IV in three areas of India (one district in each of three states) in order to assess the impact and cost effectiveness of providing adequate staff, transportation and other facilities to help improve lending pro- cedures. The audit felt that this was a very worthwhile experiment which should help to improve administration of credit in future. D. Conclusions 28. Under ARDC III funds were channelled through ARDC to participating financial institutions, enabling them to make loans to about one million farmers. Although no comprehensive statistics are available concerning the agricultural impact of this lending program, it appears to have been rela- tively successful, largely because two thirds of the funds were used for investments in minor irrigation. These have generally been productive, although some, especially in hardrock areas, have been unsuccessfull, while others have not been completed. The lending program has also included an increasing element for lending under the Government's IRDP program. The quality of these investments has been mediocre, due to excessive emphasis on meeting lending targets and inadequate scrutiny of investment proposals. 29. There have been serious problems with credit administration, although lack of data makes it difficult to analyse these issues carefully. The main problems have been: (a) Overdues on loan repayments have been unacceptably high and effective steps have not been taken to reduce these. (b) Although a considerable proportion of the overdue repayments will probably be repaid eventually, there will still be a significant element of bad debts. (c) The spread between borrowing and lending interest rates for LDBs and CBs appears to have been inadequate to cover the costs of staff and other facilities needed for a carefully supervised credit program,and to provide for bad debts. 30. ARDC III has been followed by ARDC IV, which has already been completed, while a further follow-on project, NABARD I, is being processed at present. Under the the latter it has been proposed that a thorough review of the agricultural credit system in India would be undertaken with the aim of formulating a specific timebound program of recommendations to address the problems of the ccedit system. In addition, more stringent eligibility criteria for participating financial institutions would be introduced. - 12 - Disbursement would be conditional on adequate progress being made with the review of the credit system and introduction of new eligibility criteria. The audit agrees that measures of this sort should be introduced, and in fact are overdue, if the credit system is to be put on a sounder footing. BORROWER'S COMMENTS *MOST IPNDIA=* DO ITo. 5/2/85-PB- Attachment I - 13s- - Page 1 Government of India (Bharat Sarkar) Ministry of Finance (VItts Mntralays) Department of Economic Affairs (&rthik Karya Vibbag) A. K. Pal Under Secretarys 7( ftkF* /New DeHi August 14v 1985.- Dear Mr. Watanable, Kindly refer to your letter of 3rd June, 1985, regarding comments on PPAR in respect of THIRD Agricultural Refinance & Development Corporation Credit Project - Cr. 947-IN. I as enclosing a co,y of comments, received from ofx-Lu uL L.ae kABAw, Bombay, for being incerporated in th e PPAh. With regards. (A.K. Pal) Mr. Yukinori blatanable, Directcr, Operations Evaluation Deptt: The Lorld Bank, IBRD / IDA, 1818 H Street, N.V., Washington, DC, USA : 化 濺 ，突 淡丸 l 樣 文 文 Attachment I Page Z om agna~ on dra" MM lp 0 lp 4~ by ~Gu~ ~ n~mum ca du ~Id m =~§km 93 På~~ 10 08 ~ MM MftaW 1» ~ hlth 1=~« et D~~ hw~ « ~2«~ 1~89 prom~~ «~ ~ Imm ~~ to c~md am~ ftr w"& ~~Wc408 C~** om arg*~* mm :Le~ im~muom *D max b~ 10 g~ ~Gag"~ 1~ 861=~ q~Ery ftr ~WILOmff This has-been Iwtruau~ 19~ by MMAM u~ »ju~4 noted In a foot- note to para. 10 Doac~ IL98318*hr~ 3~ ta all 2M pg^#~ %~ J~ ~~ of the PPAR. ~ P~Ualpatln b~ hm »19~ Ruppluffl~ 10~ ftv cd WIIID 19 <»9«w~ ~ a ~ *D bo NM16~ by om rimmiff bc~w These coments 2) pm* 11 at PVAR go~ 1» m~ or JLOM ft~ ~W Zamo mm acknovledge that deficiencies ~LÄ~ 069~ OUt On M~ ror*~ Mat CM bUM exist In IRDP as noted in the ObSCIVNIVO at brl~ag Om p~ et of tM ~«ky ?PAR. h« bom egbl~ Zu my am% Om jpjL m~ comn~« =d gom ca ~ «w 428D Omffim et ~ im~ u zon~ ~la~ c~ ~ o~ ~wainte la Ikhe 1~cem~tjon at ZRD ~Wo~9 3) ~4 13 rGf~ ta OM P=bl~ ulth «~t åäm~*~1m with g~ aula ~~M to ~ Imm~te tmu ~fr with ~ p~cipu~ b~ MM-'Uff in 2~ or ~~ m~"61m, ~8 It, In a footnote to 19 t~ %hat ~ Gjoeft~ at 0» VIth para. 13 the PPAR bas noted that ~ p~ elpat~ b~ hag g~ Ulth VOIMM at ILOMMLU9# steps have been Initiated to tM~ hm b~ 819DMGMC qu~ tativa ~rovemait in ~ ~ f with Improve the staff Ing of ME~ at EtUf h« b~ be~ 88~ ~ by tM participati ng han". b~ * UtMtå hava tb~ CAMM ad C==OrJD *D prescrOm ~d nora cif 500 4=mmtu för *am 1161d 0*1~ 9 ~pu b~ b«n InItä~ by Om b~ ta ut~q~ tMIr fleld utaff et=* ffi= - 16 - Attachwent I Page 3 peceae Ss gentSSUg and ean bèe sle only ever s period of timl f*w geessme et h d n suply wstratSene and the pcdsem~es wegeva~d to be feliffi by the bak#. d> Pera 19 gefeg es t tha r on in thm q~h1r of 1«~g-a monegOeM to tea teaee Sa Uhe s"al of lndig. At ee of mED* h# d taff The audit feels Ot^ngTh heM be~n aspatee eately GDd the meabs5 Tsov~*ase *wp"rt that this coument is some-Mån (mD) b= bm OMUEiMIke% T» agg~ OffloSs hUe als een what ambiguous, although it wad und stff th o~es.sal a el an fiatcal bekpounl hava does acknovledge that inadequate ben tak~n D Mfp p~e With ~D. n0nesein vIMC Of RjperGm. gt 19 staff resources were available Ug&C t with Me staff ~ e I pe*ition lering ea -m~Ieatti during ifplementation Of >3DC-M2 the 91p~V1vCM ftMtJO Df AR1 am (=s a that of the parti- of ARDC III. s.tpating banhs> would have bean mer. ef festive. It mest, bauver, be Gpprsate thot aIM ths ~traiat Uhm ste ~ fperation= In ersesUine *os (ea the beame as waln> di kaep pass with Ure straeses n streine of Gntrre~ed voastf å cnoaar.. A footnote to 5) Pmr* 21 refers ta t~e g rlgaUon of ~me afomation sys a para. 21 of the PPAR notes AAD. ~he c~ter bael data iufoguation sfatm hes ba~n rg~vug that the initial steps the attntion of tM .iagm.a of NAARD. Pzefessional staff end maw have been taken to design a mUa~y b~ms been m Gqured MUrde thie md. Recently a «on9ultant computerized information f£U hag been egagd to dsaiga a C~otur base Nagment 2nformation system. Syste. 4) Para 22(e) refers to tme nfeavormbe psoMMts «onditSnjo~ ineraesng everdse E this cnnuection it may be etat--d that NAeD This has been hies sinne elsised thme finaeneing banks to taea up a saea-.bymcase analysie noted in a foot- note to para. of overdeea meam to Nom - reslltut picture of verdues. 29.t in- 22. deces umoessary rese-da-s and pspot of the overdae iSatl-- sente In ans of natural ~lemåtias md other d86rving s*e. ~e e~~rcise la a progre~9 and ls mering co~petion in the eas of ac 5LDIa. . .3/- - 17 - Attachment I Page 4 7. Pare 22() seers to the refamaee e rt&e AsguVoM by ARW/ The audit still IASAMD as be&ag Met WRY hrho It maybe Mae that the geeImma41 believes that the criterta was arrIved at et0M d l iri vlth. ater alAs. the War& refinancing criteria were Bak, Sh basle objective et the er1tuir S met tO Abh the sett relatively lenient. Jae for the borroere aMt to restIet the sases to eseAt to sea MWsVfters _ho are defeoulung ard metivate the partlepolatag AUtiJtAes to Amerease the seoeay efforts The audit agrees So Para 22() Minerriag to the GDoolderable Wiful defealt egg Caags that statements about wilful an MwS baged OR a InpWWSW0B thAm 0 oadGAose default are ased orn han 9* Poe 22(f) reers to the apqaGMt pOre8 eIg UO shOrte rt may on factual evijenW sta that MABARD bs" Isued AustsacteMe to IX apsputate repap. and the text of the PPAM has been amended to indicate this. Nevertheless, Wbm "h port"aa q bean bt" ag"s bee aftlged to stactLy the audit gained foller the repament periods Indeated by AEAD, Weeby simag the a strong impression that MsMeLaOs Walable to the baks in tha Zegard. W beaf have also wilful default was significant. be advised onder ease.by.ease mblysts to exteI the XepaymMt perled See the footnote to para 22 f. In IsUvidal easa based on the maris of seao case. The audit does 10) Pare 22(g) refers to same iastatitIons noS In a positien hO IMast not agree with this statement. on peaSpt repaymet t lonms. TeM position IaUste An the MAR Is not ecorcnt and there Is no Intance where the aredit lastLatims have not lnlstad on pcompt cepament of loams Although, as 21) Para 23 of the PPAR refers to lash of statIlstes to siw how the mentioned here, NABARD had repaymt for particular type of loans or loan made In a eartain recommended that more complete period have perfowmed over tUme. It is presumed that this obeewation .data be provided concerning over- refers to age-we as purposeDVse cleasficeton of overdess "he dues, tie informa- Cion referred to Organisttas eA neanagemt tWies e0Carried out by WMARD an thf in para. 23 was not in fact cassultAnts appoltad by MAMRD had remoraded that suh data vis* available. perae.ee and agemwise elassirloto of overde amy be eamoUed. BSh IaforatW/date is required to be waumItted by all SLDs. - 18 - Attachment I Page 5 12e.para 2(e) rater. that effe ve stpa he.e t beun tae to g dmh %..'SKIe5. MAD M -ef 2.15* era *oe~ Nevertheleas, mG amumad U th ..Mel Of erdmB. Uala is le be m overdues still remain very ~n6=l WIch eli @Da.a en~* Mam NerId 9fnk M~emata. high. A ber of stp he be~n t~en by maamD 8 germn a f 2nia to ueese dm level of ergme mG the tir14 Dank have been bat infersIe of thmeee stepa. The audit 13 Par 2(b) ~frs to the liMly prese~ of ig.IfICUt bud debt believes that some financial ja dh e~ lom portf ow U =W bo at ta 4 og n institutions could be con- ef OV* e 8» hd e~ bl m erty ~ r ~ qm m mG es fronted in future .ith e We ea.t be t.eaes . bed sbte. SOeMer. s. unmanngeable problems with bad a a« to bg lagewtale. ~ adm~ eaer~ oeatd debts (PPAM, para. 25). by me flu~m~iu b~u on y to y~ b~sU om m ft over sveilable under DICOCI will be Ln a poeitin to take oare of sucfm bud debta. 14. Para 9(a) ref er to the Eneuate inteet spread NUM1ebie with de flau~oSng banks. xt may be not~d that the fixs« of inte rest rtes la beod the p~rview f aNAm M adt REI la onmlttim with cvrr of TfS*t fines thj e reLtivae ntUrest ras. 15. Para 3 of dm ~DA Overvie of the "o"'-T2 ACR r~era to the overes being chro@is, pervadig md 1arg. n asale resultag Sa umluzuienung of the baste priumiples of agretatral ared it. the world Bak ls uare that ND ~ and Garimeat of Z~ina have tUksm stupa to 1Suprove the quality of iending adi remou the level of over- 16. Pra S of the 2DM Overie vf PC ma sssud a reGtioa of 20% la the n~r of unit9 on e~mft of failures of Invemta* mi- 8itliseti c of loa nd ftw~te investm t irrespective of dm type of invstet. Bag minor irrigatUor nvestmnts dm t aure .s/- - 19 - Attachmeat I Page b of iuvestaut to relevt SP reget 2f only m ~rt~Am categris, e.g. dagVele, sgmlaS våith paseet. aie weaten of d.glle la bard uouk er.as. 2neaete# svestmnt s aso selevant esiy Sa speet of he ~tegors « h for thees items ftavestamat I.. beree Sa mr than one te~taea. ihe ~ewt~o et ~ua~otr&~ a te mer Of mdte to pgavide ftr cafat.e~us ~od &mage~e £av%st- mente *b =h*~ufore Oppeite Mly tr åavet~te la dg1Ul% ~.g- veile witth peete a zewumetm ot dgue11. Zn view at te agLI- The Bank's g fioe pGepOtion ofui taeus S: eeum a e gstetten period regional staff believes that ivolvd in ~ a~ ot L5Ø p0~ pos ftimng~ag f a te ~ g the original reduction of 20% hll@ X kbeSø. GIGV for re«A i the =a of ph~ysism is more realistic than the figure ~nita sh~ t Usummil1 eed SS. «m m for avestient Sa deep of 5: suggested here. tse11 mai r19er lifte are praly stteed f en.tiet in f£~W et stat aorprte bes and in u ees. espe for o %s- uilisttame fa atleros Su virtually guled out. Dsto d.lq'e Sn eas-. euttan, som S.vest.mmtse5 esna emsn-pite seget thme me ofdi project period whimim woul.d be comLete later. ~amng diversifed Lavesta mente osvering dairy, pomitgy, n=Lnries theste), platSton .g. tem. coffee an omoont) thme semd redesetta of 20% Sa very asee thme hiLs side .omerag thme geaeral evidemus avmSlable frem varioL field senua- Jn vie of the. save, a unifoum redestion of 20% Sa thme eett- mate. on saeba of unLtes coq,let.d, a psvided La the. PPMmalner- estsaetse thme benefits aoraag frem thme roject ani Le verv ash om thme highm sIde. LA Ladicated aboeeeareetom of ubomt five percent 18 thme number of unite completed vould.be moe appmoprl ate mhe reaUtt. 17. Para 16 of thme @vervi u et e te thme aan eettSing lie et svaluattom units Sn ULLmS. hes position Sadte.ated by the esveåw £8 not corseet and mo far 11 ELEme have emt up much .valuti.on units La eddition to 3 Rxas. . .6/-. - 20 - Attachment I Page 7 1e Varem US and 1 f thae 1veew defer to * eebk et tm qefh~. 14entftel Sa the %5.Dst .veleattgDO m uedies. å senaly mMD has take etin initiatvem to s gove thme S.1ow. eatte en the findag of tie stuie. In reapet of ead of the evuaeties * ~pMrte Para. 18 of the re1aS by UAnD x~ mnd ~e cive fom "e comSr~ b~h d PCR Overview has been amended to goeeu~ =intigateSS om maj~r findings f the st~ey sft m the indicate that some evaluation aatiga pg e 1q~Iged to be lait td Is iSmI~ätsd to . units have been set up recently. Seta Gbuegs~ with p~ Op~rtoM and V&Ci~g aeB peg» a~t in the Mead Offime ~ to the cO~erne egi1-Of fie0 of fMMD xa the Geae of DOM etudie. Dh e.vete of the stedy are u9Mal Y diusussed in te mtMetSg of the aAfAD e~ fierm amd repgeeeftatives of the fem2«u~g baar. an e diutrict effIsers. S-e aadle~.stp aation ss tme obseevations is lecide Sa this maettag so taat the ome eaed banks ad the diff1ert d.partete of thme State Geeraat ea. tak. auwtable stepsa the matre 19. Pera 22, Ztem (MU) of th overview refes to failure of MDC ta Although these t~SeY Up-date 1~estmt ceta Which at t~s resulted a ba~k ge comttees have ,the authority to tia~~ing metfei . it may be stated that mte Uit et ettees update cost norms, there was still st up at eMUh egonal Of~fc et¥ oce ta 6 1estau er earlier if significant under- financing of %vasea ifo Updating the os»t norme anf a dicretionary 20 per 6ent investmets under the project. Emst eswelation eathoried to aegional Ofttem for aprwal of - crw,, . .c a. D - 21 - INDIA THIRD AGRICEULTURAL RFIWCE AMD DEVELOPMENT CORPORATION CREDIT PROJECT IDA Overview of the ARDC Project Completion Report 1/ General 1. The Project Completion Report (PCR) on the Third Agricultural Refinance and Development Corporation Credit Project (ARDC III) was prepared by ARDC. This overview is intended to supplement ARDC's review results with IDA's observations. 2. The PCR summarizes the implementation and results of the ARDC III Project and discusses the main issues. The project was the third in a series, after the ARDC I Project (Cr. 540-IN in 1975-1977) and the ARDC II Project (Cr. 715-IN in 1977-1979). These national scale agricultural credit projects followed IDA's decision to provide country-wide lines of credit for specified purposes, rather than separate credits for individual States, ten of which were financed by IDA between 1969 and 1975. The decision to have nationwide agricultural credit projects reflected IDA positive assessement of ARDC's capabilities as demonstrated in the State credit projects and took into account the high administrative costs to IDA of separate State projects. It was further based on the need to greatly expand credit to support India's agricultural development. 3. Generally, the PCR prepared by AKDC reports favorably on the project, in that it largely achieved the physical targets, utilized the Credit fully within the original time-frame, and likely meets crop production expectations. The PCR also describes the problems agricultural credit con- tinues to face, notably high levels of overdues, insufficient supporting services to agricultural production and the inadequate quality of lending and credit administration. However, it does not bring out that, these problems have become so chronic, pervading and large in scale that they threaten to undermine the basic principles of agricultural credit, largely because past measures to reduce them have been ineffective. 1/ This supplement has been prepared by South Abia Regional staff. The original version of the PCR prepared by ARDC, with minor editorial changes, is attached to this overview. - 22 - 4. Total project costs were estimated at appraisal to be Rs 8,643 M (US$1,005 M) and covered all investments for which ARDC would provide refinance. However, IDA disbursements did not cover all of ARDC's refinanc- ing of medium and long-term agricultural credit during the period, since there were specific exclusions, including tractors, rural electrification, storage, market yards and forestry (DCA, Schedule 1). It was estimated at appraisal that total costs for investments for which IDA would disburse would total Rs 5,898 M, of which ARDC would refinance Rs 4,300 M (PCR para 1.07). In the event, total ARDC refinance provided under the project for investments for which IDA disbursed were Rs 4,547 M or about 6% above appraisal estimates. Total investment costs for those investments have been estimated at Rs 6,323 M. However, because the actual value of the Indian Rupee in comparison to the US Dollar was higher than estimated at appraisal I/ disbur- sements of Rs 4,170 M were sufficient to fully utilize the IDA Credit of US$250 M. IDA disbursements, at different rates of exchange were equivalent to Rs 2,085 M or about 33% of total investment costs compared to 35% estimated at appraisal. However, several other agencies (USAID, ODA of UK, CIDA of Canada, KFW of FRG, The Netherlands, Switzerland and the EEC) provided a further Rs 2,153 M in parallel financing to cover ARDC-s expendi- tures. Thus, based on IDA's appraisal report, total financing was equivalent to Rs 4,238 M which is 93% of ARDC's eligible financing, 67% of eligible total investment costs, or about 46% of ARDC's estimated total refinancing (including non-eligible investments) of about Rs 9,162 M. Although disburse- ments were initially slow, the Credit was fully disbursed on schedule. Objectives and Achievements 5. The project aimed at supporting ARDC's ongoing refinancing for minor irrigation and other agricultural, livestock and fisheries develop- ments. ARDC refinances schemes prepared by participating banks. These schemes were designed to help increase agricultural production and raise productivity of farmers, particularly small farmers and those living in less developed areas. The project's aim was also to help institution building and improve the performance of ARDC and the participating banks, strengthen State Groundwater Organizations (SGOs) and improve the quality of investments, particularly in minor irrigation, through the establishment of State techni- cal support systems in all States. (SAR, paras 5.08 and 5.12): 6. The following quantitative targets were set at appraisal: (a) project beneficiaries to be about 1.1 M rura. families; 1/ The actual average exchange rate for reimbursements was US$ 1 = Rs 8.34, as against US$1 = Rs 8.60 assumed at appraisal. - 23 - (b) at least 60% of the project funds to be directed to small farmers (meaning any farmer whose annual pre-investment net income did not exceed Ra 2,000 at 1972 prices); (c) about 50% of lending to be for less developed areas; (d) about 3,000 senior and middle level and about 7,800 junior banking staff of participating financial institutions and ARDC to be trained. 7. The targets set for lending to small farmers were achieved (60%; PCR, para 2.22) and those for less developed areas almost reached (48%; PCR, para 2.20). Some 2,400 senior and middle level staff participated in train- ing courses, seminars and workshops, and about 8,900 junior level SLDB officers received training (PCR, para 2.23). 8. In the absence of regular periodic progress reports from the par- ticipating financial institutions on physical investments financed and imple- mented, ARDC calculated the estimated number of units financed, both in minor irrigation and for diversified purposes by dividing the actual total amounts disbursed by ARDC for each category of investments by the average estimated unit cost (PCR, Annex 1, Tables 7 and 8). In this method of calculation ARDC did not make any allowance for incomplete, infructuous or failed investments or misutilized loans. Based on various sources of information such as ex-post scheme evaluation studies, Organization and Management (O&M) studies of weak SLDBs and other related reports prepared in India in recent years, a 20% reduction in the estimates for physically completed investments project beneficiaries and project impact on production and employment, as given in the PCR, is considered appropriate. Therefore, it is estimated that 0.88 H farmers benefitted from the project, that 0.45 M investments in minor irrigation were refinanced (PCR estimate 0.55M, Annex 1, Table 7) and that the total annual value of incremental output of the project (at 1978 prices) would be Rs 6,528 M (PCR estimate Rs 8,160 M, para 3.03). 9. The appraisal estimates of financial rates of return (FRR) were 18% to over 50% depending on the type of investment. It is not possible at this stage to measure the ex-post FRR because many of the project investments would take 4-5 more years to reach their full development. Some of them, such as investments in plantations would take much longer. ARDC, therefore, chose to calculate the FRR on the basis of measurable benefits associated with loans refinanced 2-3 years earlier for similar investments. The ex-post FRR estimated by this means ranged from 16% to 44% for complete and fructuous investments. It is estimated that about 20% of all investments did not yield any measurable benefits (para 8). 10. A similar proxy method has been used in estimating the economic benefits and costs. Economic prices of the traded goods have been updated to reflect the international price developments and the changes in local - 24 - faragate prices of milk, eggs and fish. The standard conversion factor applied was 0.8, and shadow prices of 80% for skilled labor and 60% for unskilled labor were used. The ex-post ERR so estimated for different project investments range from 25% to over 50%. These were slightly lower than those brought out in appraisal models. The calculations were based on complete and fructuous investments only, and do not take into account about 20% of investments which were incomplete, failed or misutilized, or the administrative costs of lending, which according to tentative Bank estimates annually amount to 3-7% of investment loans outstanding. Emphasis on Lending to Small Farmers and Less Developed States 11. The project continued to demonstrate that, if deliberate efforts are made, much can be done to direct increasing amounEs of financial resour- ces to weaker sections of the population and to less developed areas. 12. Following the policy adopted under ARDC I and II Projects, ARDC continued to emphasize the importance of assisting small farmers, by for- mulating specific schemes to meet their needs. GOI and ARDC provided various incentives to beneficiaries and for participating banks to implement schemes benefitting small farmers, which included: (a) GOI investment subsidy, channelled through the participating finan- cial institutions to beneficiaries, ranging between 25% and 33-1/3% for small farmers, and 50% for tribals; (b) higher level of refinance (up to 95%) in respect of schemes benefitting small farmers, for investments eligible for investment subsidy; and (c) longer maturity periods, up to 15 years for minor irrigation investments. In addition, banks provided 1% of their lending to small farmers at conces- sional interest rates (4%) for diversified purposes. However, ARDC could not refinance those loans under the DCA. Items (b) and (c) were specified in the PA (Schedule 1). The SAR neither mentions nor addressed the issues related to subsidies (para 17). 13. Stronger efforts made by Commercial Banks (CBs) and the wider coverage provided by newly created Regional Rural Banks (RRBs) contributed to the increase in channelling resources for investments to the weaker sections of the rural population. 14. Some of the problems encountered in small farmer lending which require greater attention in the future were: (i) deficiencies in sub-loan appraisal by participating banks, insufficient supervision and post- - 25 - investment follow-up; (ii) inadequacy of agricultural support services (exten- sion, veterinary assistance); (iii) unsatisfactory collective marketing arrangements and linkages between marketing and banks to facilitate loan collection; (iv) lack of working capital loans; and (v) for dairy develop- ment, inadequate availability of good quality dairy animals and unsatisfac- tory purchasing arrangements. 15. The above problems particularly affected investments made under the Integrated Rural Development Program (IRDP), which in 1979 was formed as an amalgamation of a multitude of existing poverty alleviation schemes. Between 1979 and 1982 the share of ARDC refinance for IRDP investments increased from about 1% to 16% of annual ARDC disbursements. IRDP has been a driving force behind the rapid growth of refinancing during ARDC III. 16. IRDP's principle objective was to identify families below the poverty line in each of India's 5,011 blocks (subdivision of a district) to select 600 farmers in each block on an annual basis and provide these selected beneficiar:ps with productive investments, which would allow them to cross the poverty line. Selection of beneficiaries and preparation of investment proposals are handled by the District Rural Development Agency (DRDA). Block, District and State plans are drawn up annually to specify the types and numbers of investments to be financed. Banks and ARDC participate in the planning process at the district and State level. Investments proposals are submitted to banks for financing; beneficiaries receive sub- sidies amounting to between 35% (small farmers) and 50% (scheduled tribes). Recent evaluation reports indicate that the program encountered several major problems, which, because they received limited attention during the first years of the program, have continued during the past three years, when IRDP's share of ARDC/NABARD disbursements increased to 24%. Many IRDP investments did not yield adequate benefits, either because of insufficient financial assistance the selection of investments was inappropriate or supporting services were inadequate. During te first years of operation financing for animals (dairy, bullocks, sheep, camels etc) comprised about 80% of IRDP operations. Banks were often pressed into accepting investment proposals to reach their lending targets and lacked sufficient staff to adequately appraise individual apglications. As a result, at least 20% of bank loans were misutilized and incremental benefits were frequently less than expected. Preliminary results of a recent review by the Planning Commission indicates that recovery of loans provided under IRDP has not been much different from those under other schemes, despite the high subsidy. The relatively small size of IRDP during the start of ARDC III and the fact that IRDP was ini- tially not seperated in ARDC statistics might have been the main reasons for its virtually unnoticed growth and the limited attention paid by ARDC and the Bank to its initial institutional problems. DOM studies (para 19) only started to address IRDP related problems during the past three years. No supervision report mentions IRDP's operations. But this lack of attention has had the result that inadequate arrangements to improve the quality of - 26 - this type of lending have continued during IRDP's rapid growth and are more difficult to rectify at this moment. 17. Subsidies have become a major source of capital for the agricul- tural sector. The rapid growth of agricultural investment and institutional finance substantially increased the importance of subsidies for agricultural capital formation, which has continued during ARDC IV. A multitude of direct and indirect subsidies are being provided by the central and State govern- ments and it is estimated that of institutionally financed agricultural investment during the ARDC I to IV line of projects, direct subsidies amounted to about 20-30Z of total costs, while indirect subsidies, which particularly affect minor irrigation investments, amount to 15-25%. Given the importance of subsidies in agricultural investment, the SAR should have provided a description of the use of subsidies to provide a more balanced picture of credit operations and should have reviewed their effect on selec- tion of investments and repayment discipline. Monitming .anAL. Evaluatia 18. An area where progress was achieved during implementation of the project was in the conduct of ex-post evaluations of individual schemes, carried out by ARDC and by monitoring and evaluation cells established in participating CBs (PA, para 2.13). Although they usually deal with invest- ments made up to six years earlier, they do provide an in-depth analysis of the viability of investments. Nevertheless, their conclusions appear to be somewhat too optimistic since they neglect to analyze effects of misalloca- tion and actual investment failures. The standard and quality of the studies, however, demonstrates the ability of ARDC and CBs to properly evaluate the technical and financial dimensions of ARDC financed investment schemes and to provide valuable findings and recommendations for improving the quality of lending and the performance of the banks and other agencies involved. Unfortunately, ARDC has been slow in establishing satisfactory procedures for feedback of the problems identified in the ex-post evaluation studies. Although SLDBs were offered financial assistance from ARDC's R&D fund for setting-up evaluation units, it is regrettable that no significant action was taken by them in this regard during the project period. Since then 11 SLDBs and 3 RRBs have set up evaluation units. 19. During implementation of the project, ARDC introduced district- oriented monitoring (DOM) with effect from January 1981, under which samples of important investments, schemes and bank branches are selected for field study supplemented by visits to loan beneficiaries (PA, para 2.13). The basic concept of DOM is an integrated review of on-going schemes in a dis- trict, to (i) assess their physical and financial progress, (ii) ascertain small farmer coverage, (iii) identify problems; and (iv) prepare an action program to be implemented by all project entities for improving future per- formance. During 1981, ARDC succeeded in carrying out 47 DOM studies. ARDC then found it necessary to revise the methodology in order to economize on - 27 - time and manpower and to include participating banks in the conduct of the DOM studies. As in scheme evaluations, ARDC has not yet Oucceeded in estab- lishing satisfactory feedback procedures to use the results of the studies. 20. Submission of ARDC's periodic project progress reports to IDA was timely but the reports provided information only on the progress in disburse- ments to participating banks for the different categories of investments. Monitoring of physical aspects of investments and recovery of loans from beneficiaries remained unsatisfactory. Although participating banks were expected to submit periodic reports on the physical and financial progress of schemes, they generally failed to prepare reports regularly and timely. There were often inaccuracies in the information supplied. These sbortcom- ings severely curtailed their usefulness for ARDC's desk monitoring. In order to improve monitoring and reporting procedures, ARDC was required under the follow-up ARDC IV Project to appoint a committee to review reporting requirements and propose revised standard formats. Pursuant to the recommen- dation of this committee, ARDC introduced improved reporting procedures in late 1982, but compliance by banks remains unsatisfactory. One of the reasons for the continuing poor performance is brought out in the committee's report: "... In our view, one of the reasons why banks do not take monitor- ing and information work seriously is that performance of different offices is judged in terms of disbursements according to targets and not the real achievements resulting therefrom. Furthermore, NABARD I/ does not mete out any punishment to the defaulting institutions. For instance, if NABARD were to reduce the rate of refinance to those banks which consistently default on filing returns or on monitoring work, the message will spread that NABARD means business and that it treats monitoring as much an important job as disbursements.... 21. At appraisal time, IDA made specific recommendations for improving AR)C's management information system and introducing computerized data processing. In 1979, ARDC initiated some action towards automated data processing, but no progress has been achieved to-date. A computer was pur- chased and installed in late 1982, but NABARD's efforts to develop the software for its operations have failed. NABARD attributes the failure to unsuitability of the hardware and is currently considering the purchase of another computer. NABARD's management information system has shown little improvement and is considered inadequate for maintaining proper control over its lending operations; information necessary for decision-making often 1/ NABARD - National Bank for Agriculture and Rural Development, started operations on July 12, 1982. ARDC's operations, assets and liabilities were taken over by NABARD. - 28 - requires manual compilation, from sources in different institutions or areas and takes considerable time to complete. Inaziratignal-Raeaum 22. ARDC has made progress in strengthening its technical and administrative staff, particularly in its regional offices and has decentral- ized the scheme sanctioning by enhancing sanctioning powers of regional offices. However, ARDC has been largely ineffective in addressing the fol- lowing institutional problem: i) enhancing the technical and administrative capabilities of participating bank branches, including agricultural staff, required for sound implementation and supervision of investment schemes; (ii) enforcing compliance with specific terms and conditions stipulated in ARDC's scheme sanction letters; (iii) failure to timely update investment cost norms which, at times, resulted in banks under-financing investments; and (iv) setting criteria for training activities for formal training and on-the-job training, particularly for junior level staff and field officers of participating banks and ARDC's own staff to improve their performance and raise the quality of lending. 23. A noteworthy development during project implementation was the increasing participation of CBs and RRBs, and in particular, their growing involvement in lending to the weaker sections of the rural population. CBs made commendable efforts to increase the number of specialized agricultural staff, but still remained seriously understaffed to effectively deal with their rapidly expanding agricultural loan portfolio. CALCOB 1/ completed a study in 1980 on overdues in agricultural term-loans of CBs which indicated that absence of supervision and follow-up was one of the main causes for high overdues and this was due to inadequate/untrained staff at the branch level. CBs are fully aware of this as well as other weaknesses and deficiencies in their lending procedures for agriculture and are making efforts to strengthen the number and quality of their agricultural staff. 24. The lack of staff of CBs and in some cases LDBs and RRBs during ARDC III were and still are the result of an interest rate and margin struc- ture which makes it increasingly difficult to devote adequate staff resources to agricultural lending. Lending margins provided to participating banks by ARDC were about 3% (PA schedule 1). The margin structure was surveyed during ARDC II, and for ARDC III, GOI agreed to review the findings of the survey and make recommendations concerning future margins by June 30, 1980 (DCA: para 4.02). The commission felt that a 3.5% spread would be adequate for an LDB with a reasonable turnover and reasonable bad debt situation, and at current staffing patterns. During ARDC IV, the margin structure was raised and the average spread to LDBs increased to somewhat over 4%. More recent J1/ Standing Committee on Agricultural Loans through Commercial Banks. - 29 - informal investigations of staffing patterns of rural bank branches revealed that field officers handle between 600 to 1,500 active accounts and in some cases branches have no field officers at all. Proper loan administration and supervision requires that a field officer should not handle more than 500 accounts. Banks readily agree that 3% margins are inadequate to cover head office overheads (for which about 1.5% is usually deducted) and the cost of running a branch, particularly if the branch deals predominantly with small farmers, loan amounts are small and beneficiaries are spread out over a large area. CBs heavily cross subsidize agricultural lending from other lending operations, but LDBs and RRBs do not have such possibilities. India's largest commercial bank (State Bank of India) has recently provided guidelines which specify that field officers should not handle more than 500 accounts. In neighboring Pakistan margins available to branches are 7%, in Bangladesh 9%. Insufficient field staff has been a major factor affecting lending quality, loan recovery and the quality of service provided by banks to the branches, and without arrangements to increase the margins to bank branches, no major improvements in the quality of lending can be expected. IDA did discuss this issue in the SAR (para 6.12), but the analysis assumed 1979 staffing patterns are adequate. With hindsight one could argue that it was unfortunate IDA accepted the survey results without investigating the validity of some of its assumptions. 25. Lending margins also directly affect the financial position of banks, in that they do not allow banks to build up adequate reserves for bad debts. The unsatisfactory progress in loan recovery (para 27) reflects the very limited ability of Indian banks to execute the loan security and use it to recover the loan. Obviously, not all overdue loans are bad debts. Most long-term loans of LDBs and CBs are secured by land morgaged to the bank. However, in reality banks are unable to recover debts through selling the land. Not only is the procedure extremely time consuming and costly, but sale attempts are unsuccessful because local pressure groups usually succeed in discouraging prospective buyers from bidding or from taking possession of the land. 26. Indian banks are prohibited by law to disclose their bad debt estimates or bad debt reserves. LDBs appear to have very small bad debt reserves; they do not write-off loans which they claim are fully secured. CBs and RRBs do not disclose write-offs or reserves. Given the overdue position of most banks and the precentage of failed and unfructuous invest- ments, the lack of adequate realizable loan security and the apparently limited debt reserves, particularly in the LDBs, the financial position of banks in the long run might be affected. The fact that LDBs do not show the effect in their books is the result of continuing acceptance of auditors of the notion that adequate security is available for all loans, even those which have not performed for many years. The issue of loan security has serious implications for the long-term financial structure of the agricul- tural banking system, its capitalization, and the interest rate structure. The SAR for the ARDC III does not mention the issue, and no steps were - 30 - proposed or taken to initiate a solution. This position could be defended if high overdues were a relatively recent phenomena. However, since they have been high during most State credit projects and the ARDC series of projects, IDA should have paid attention to this issue when it became clear that over- dues could not be reduced by executing security. LQaq Ap-gayar.s 27. Improvements of loan recovery by the participating banks, and more specifically by the SLDBs, has been the focus of major attention in this as in earlier Credit Projects. The project attempted to address the overdue issue by: (i) instituting revised eligibility criteria; and (ii) rehabilitating those banks with very high overdues. This approach was justified in the light of a study which was carried out in 1975. 1/ The study disagreed with the notion of State Governments and ARDC that the high level of overdues was mainly attributable to external factors, particularly natural calamities coupled with the reluctance of banks to reschedule loans in cases of genuine hardship. Although natural calamities have been a factor, the study stated that: "the studies conducted on behalf of the Committee have revealed that the problem of overdues in Land Development Banks is common to all states, whether they are cooperatively well developed or less developed. Overdues are high even in areas where the banks are undertaking intensive lending operations under ARDC-refinanced schemes which envisage adoption of detailed appraisal of loan proposals and close supervision over the use of investment credit by the beneficiaries. The increase or decrease in overdues appears to have no substantial relationship to natural calamities. A sig- nificant factor that stands out from the analysis of overdues made during the studies is that while the failure of crops due to natural calamities or unfavorable geophysical conditions may account for overdues to some extent, the prevalence of high level of overdues in primary banks is basically due to defective loaning policies, ineffective field supervision and lack of con- certed efforts and will on the part of the banks board of directors and staff to recover loans which are due for payment." glizttilitig .Qitea 28. Sliding scale eligibility criteria were introduced under ARDC I and continued under ARDC II as a condition for ARDC financial support to SLDBs. The main objective of the criteria was to provide an incentive to SLDB branches or Primary Banks to increase recoveries by linking future refinancing volume to their collection performance. ARDC I Agreements included provisious for more stringent criteria to come into effect at a later date, but these were overtaken by the ARDC II Agreements signed before 1/ Report of the Committee on Cooperative Land Development Banks - RBI - 1975. - 31 - the specified date. ARDC II Agreements also provided for more rigid criteria from October 1, 1978, about 16 months after Credit signing, but before that date revised criteria were agreed upon between IDA and GOI and the more rigid criteria were deleted. Eligibility criteria for ARDC III were initially intended to be identical to the revised criteria applied for ARDC II. During negotiations it was agreed that revised criteria would be applied from October 1, 1980 which included the following additional conditions: (i) Any cooperative institution which had an agreed RBI/ARDC rehabilitation program would be eligible to participate, to a limited extent, in the project; (ii) if 50% or more of LDB lending units (branches or primary banks) became ineligible under the sliding scale criteria or if overdues at the SLDB level were 50% or more, ARDC's refinancing would be subject to the State Government having agreed to a time-bound rehabilitation program, acceptable to ARDC; and (iii) the criteria would be reviewed by the Debenture Norms Committee from time to time with the objective of achieving an actual collection rate of not less than 65% by the end of the Project period. 29. However, in September 1980, GOI requested that application of above conditions be deferred to September 30, 1981. IDAs response could be under- stood to contain tacit agreement to GOI's request with the result that criteria agreed for the ARDC III were not applied and the revised criteria of ARDC II remained in effect until completion of the project. 30. Eligibility criteria have not been effective in improving loan recoveries; various formulae hardly imposed serious limitations on lending by SLDBs with unsatisfactory recoveries. The decline in the volume of lending by SLDBs with poor performance should not be attributed only to restrictions imposed by eligibility criteria but also to other factors. Available data indicate that some branches or primary banks did not fully utilize their lending eligibility. Although it is conjectural whether the application of the more rigid criteria would have resulted in improved recoveries, IDA should have put to a test the criteria agreed to for ARDC III, which were to come into effect on October 1, 1980, particularly at a time when loan recovery did not improve. Rehaii,tat,ian .;ams 31. Under the project, special attention was to be directed to five SLDBs (Bihar, Gujarat, Karnataka, Maharashtra and Tamil Nadu) with exceed- ingly high overdues and improvements were to be attained through the implementation of rehabilitation programs as specified in the eligibility criteria (para 28). The details of these rehabilitation programs were not specified in the SAR, nor did IDA express an opinion on the objectives of the programs. As it turned out the proposed programs in some instances only dealt with symptoms, without addressing the more important underlying problems. Execution of institutional rehabilitation programs was the respon- sibility of the banks concerned, although ARDC was strongly involved in the design of the programs. The programs dealt with removal of obstacles towards - 32 - taking coercive action towards long-term defaulters, blocking of chronic overdues, L/ the government taking over responsibility for loans issued at the government's insistence or providing financial assistance, rephasing of loans and handling of incomplete investments. Limited attention was paid to basic institutional problems, like lack of field staff, inappropriate super- vision and appraisal practices and inappropriate incentives to bank staff (which are usually not related to recovery). In the event, State governments were slow and to some extent reluctant to implement the programs and none of the States formally agreed to the programs during ARDC III, which might have contributed to GOI's request to postpone implementation of the new eligibility criteria (para 29). Nevertheless, steps were taken to implement parcs of the proposed programs. The focus on technical, financial and legal aspects allowed banks to take limited action without having to institute major changes in their day to day operations. The experience during ARDC III raises questions concerning ARDC's ability to design and institute effective rehabilitation programs, which raises the wider issue of the dg :EA=g super- visory role of ARDC in agricultural credit and their effectiveness in instituting adjustments in basic credit operations of its client banks. That role, and ARDC's effectiveness were never questioned in the appraisal and the subject does not appear in supervision reports. One can raise the question whether in India's political system of checks and balances it is realistic to assume that a more dominant role of a "center" organization would and will be accepted by banks controlled by the States. In view of ARDC's performance during ARDC III, IDA should have looked into this issue, which strongly affects the performance of the agricultural credit system. The importance of rehabilitation was recognized during ARDC IV, which included a major rehabilitation program for six SLDB9. Unfortunately, the effectiveness of these rehabilitation efforts during ARDC IV was not enhanced by parallel financial eligibility criteria, while ARDC's capacity to control institu- tional changes appears to have been insufficiently strengthened. 32. During appraisal and supervision of the ARDC III project, IDA has given substantial attention to the level of overdues, not only in some LDBs but also in selected CBs and RRBs. In supervision reports it is reported that an increasing number of branches failed to operate according to sound banking practices and had unacceptably high overdues, but it appears that IDA and ARDC underestimated the seriousness of the situation and were unable to take steps of enforcing stronger credit discipline, strengthening of ARDC's role and improving the effectiveness of rehabilitation efforts. By accepting rehabilitation programs as part of eligibility criteria, it was assumed ARDC could be effective in turning the operations of inadequate LDBs around, which in fact it could not. 1/ Chronic overdues are transferred into a blocked account and State Govern- ments pay to SLDBs any shortfall in collection of dues, generally over a period of five years. - 33 - Sahatitution..and. .Addit.ionalits .af. .Enda 33. OED in its report on agricultural credit projects in India I/ has commented on the methodological approach in project benefit calculation and the report discusses in detail the question of attribution and additionality of funds. The conclusions reached by OED on this subject also apply to the PCR for this project. ladazalance. .af .IMA. 34. During implementation of ARDC II and continuing under ARDC III, IDA relied increasingly on ARDC for field supervision. Considering the many unresolved institutional problems and deficiencies in ARDC and the par- ticipating financial institutions and their deteriorating recovery perfor- mance, more intensive and frequent IDA supervision would have been fully warranted. This might explain'why IDA appeared unable to make a comprehen- sive assessement of the potential risks and problems of the project, and, in hindsight, relied too heavily on ARDC to analyse and tackle its problems, while ARDC lacked the means to do so effectively. More frequent supervision and a division of labor on supervision missions between staff who deal with technical details and those monitoring general progress and institutional strength might have been more effective for a project of this size and complexity. 1/ Agricultural Credit Projects - A Review of Recent Experience in India - Report No. 3415 - April 8, 1981. N - 35 - INDIA PROJECT COMPLETION REPORT THIRD AGRICULTURAL REFINANCE AND DEVELOPMNT CORPORATION CREDIT PROJECT (947-IN) I. INTRODUCTION 1.01 Backaround. The Third ARDC Credit Project was approved by IDA in August 1979 and it was implemented by ARDC between January 2, 1980 and December 31, 1981. Like its two predecessor projects, the main objectives of this Project were to: (i) increase agricultural production; (ii) further encourage institution building; (iii) improve the quality of investments, particularly in minor irrigation; and (iv) further step up the flow of credit to small farmers and less developed areas. 1.02 With the sanction of Gujarat Agricultural Credit Project by IDA in 1970, an enduring and fruitful association emerged between the World Bank Group and ARDC. Thus, by December 1981, ARDC had participated in the implementation of 40 World Bank Group assisted projects with financial commitment of the World Bank of about US$2.0 B. J 1.03 The three general lines of credit (ARDC I, II and III) envisaged financing of investments throughout India. They gave considerable latitude to ARDC to sanction schemes for eligible purposes within the overall lending program approved by IDA. The 'General Lines of Credit' with increasing amounts of IDA credit reflect the World Bank Group's growing confidence in the technical and administrative capabilities of ARDC. 1.04 Project Preparation. The Project Report on ARDC III was prepared by ARDC and had to be dovetailed into ARDC's per -,-ective lending program. An indicative lending program was drawn up by ARDC, in consultation with state governments and financial institutions for the 5-year period ending 1982-83, taking into account the objectives and priorities set forth in the Sixth Five-Year Plan. While working out this program due weight was given to ARDC's past performance and its ability to step up lending operations over the next 5-year period, leading capabilities of financial institutions, potential for development in different states and infrastructural facilities available. The lending program envisaged a total disbursement of Re 27 B over the 5-year period, 1978-79 to 1982-83, as shown below: j/ These included 12 State Agricultural Credit Projects, 7 command area development projects, 3 dairy development projects, 3 fishery projects, 3 seeds projects, 2 irrigation projects, 2 horticultural projects. 2 market yard projects, 1 sericulture project, I integrated cotton develop- ment projects, 1 multistate cashew project and 3 general lies of credit. Seventeen credit projects had been completed by end-December, 1981. - 36 - Programmed Annual lJunt Disbursements (Ra M) 1978-79 3,449 1979-80 4,845 1980-81 5,640 1981-82 6,269 1982-83 6,75 26,962 The above projections assumed a compound growth rate of 19% per annum in ARDC's operations during the relevant 5 years, as compared to the achievement of 24% during the preceding 5-year period. 1.05 The indicative lending program for 1979-80 and 1980-81 formed the core of the project report for the Third General Line of Credit. The project sought a credit allocation of US$250 N (25% higher than in ARDC II), which, at the rate of 50% of IDA reimbursement, would support ARDC disbursements of Rs 4,300 M. Since ARDC was planning to disburse about Rs 10,485 M during 1979-81, it was confident that it could easily achieve disbursement of Re 4,300 N within the two-year project period. 1.06 Issues Durin Appraisal and -Weotiatigns. The Project Report was submitted to IDA in September 1978 and the project was appraised in January/February 1979. Negotiations took place in April 1979. As on pre- vious occasions, discussions during appraisal/negotiations centered on the rate of IDA reimbursement to ARDC (which was limited to 501 compared to 551 under ARDC II), eligibility criteria for participating banks, criteria for orderly exploitation of groundwater resources and the share of small farmers and less developed areas. It was agreed that an mount up to 601 of the credit (501 under ARDC I and II) would be disbursed to mall farmers, the definition of a small farmer remaining unchanged. It was also agreed that 401 to 501 (as against 25% in ARDC II) of lending would be made in less developed states. 1.07 The total cost of investments to be made under the project at the grass root level was estimated at Rs 8,643 N (US$1,005 M) (Annex 1, Table 1). Of this, the cost of the project investments eligible for IDA credit would be - 37 - Re 5,898 M (US$686 M) V/. About 63.0% (Rs 5,450 M) of the total project cost was earmarked for minor irrigation and land development, 36.7% (Ra 3,171 M) for diversified purposes and 0.3% (Rs 22 M) for training and equipment. II. PROJECT IMPLEMENTATION 2.01 Disbursements and Financina. The project, which became effective on January 2, 1980, was closed on December 31, 1981 as scheduled. Total ARDC disbursement under the project 2Z amounted to Rs 4,547 M, about 6% above the anticipated amount of Rs 4,300 M. However, in view of the appreciation in the external value of the Indian Rupee ./, disbursements of Ra 4,170 H were sufficient to fully utilize the IDA credit of US$250 M. 2.02 Total cost of ARDC supported investments amounted to Rs 6,323 M, higher by 8% than estimated at appraisal: J The estimate was expressed in current (1978) prices, but with a price increase contingency at an annual rate of 5%. The project included financing of storage and market yards, forestry, farm mechanization and energization of pumpsets not eligible for IDA reimbursement. The SAR estimated total project cost was Rs 8643 M, including the purposes not eligible for IDA finance. Assuming that the IDA credit represents 50% of ARDC refinance and that the share of borrowers and banks would be as shown in para 5.29 of SAR, at the exchange rate of US$1 - Re 8.60 adopted in SAR, the total cost of the project eligible for IDA finance was estimated at Rs 5,898 M (US$686 M). This estimate has been used throughout the PCR to represent SAR estimate of the cost of the IDA-slice of the project (Anaax 1, Table 2). 2f Refers to IDA-slice of the project and excludes investments not eligible for IDA-financing. All future references to project relate only to the investments eligible for IDA financing. 31 The actual average exchange rate for reimbursements was US$1 - Re 8,344 as against US$1 - Rs 8.60 assumed at appraisal. - 38 - Proiect Cost ARDC Disburgments IDA Credit Apraisal Actual Appraisal Actual Ameraisal Actul (Rs N) (Rs M) (US$ N) Minor Irrigation and Land Development 4,778 4,321 3,564 3,241 207.2 177.0 Diversified Investments 1,098 1,985 714 1,289 41.5 72.3 Training and Equipment 22 17 22 17 1.3 0.7 Total 5,898 6,323 4,300 4,547 250.0 250.0 2.03 The pattern of investments actually financed under the project was in part different from that anticipated. Thus, minor irrigation and land development together accounted for 68% of the total project cost, as against 81% estimated. Consequently, the share of diversified investments was cor- respondingly higher (Annex 1, Table 3). Expenditure on training (Ra 17.7 M) was marginally higher than the estimate (Rs 16.8 K). No expenditure was incurred on irrigation equipment. 2.04 As actual project costs were higher than anticipated and on account of larger disbursements for diversified purposes, the pattern of financing was somewhat different and both the borrowers and the financing institutions were required to contribute a larger share than was estimated at appraisal: Estimated and Actual Project Cost (Rs M) Borrowers Banks ARDCIGOIfIDA Total Avpraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Minor Irrigation and Land Development 579 518 635 562 3,564 3,241 4,778 4,321 Diversified Purposes 186 339 198 357 714 1,289 1,098 1,985 Training - - - - 22 17 22 17 Total 765 857 833 919 4,300 4,547 5,898 6,323 MMmv W9 IMUM n og= - 39 - 2.05 The pace of ARDC disbursements was slow during the initial project period. It picked up after March 1980 and gained momentum since September 1980. Thus, during January to December 1980, actual reimbursement of IDA credit was only 29% compared to 36% projected. 2.06 Minor Irrigation. The actual cost of minor irrigation units newly constructed or renovated amounted to Re 4,210 M, as against the appraisal estimate of Re 3,639 M j/. ARDC refinance (Rs 3,157 M) covered 75% of the cost. 2.07 Given the actual cost of investments, the units financed g/ under the project are estimated at 0.55 M, as against the appraisal estimate of 0.53 M. Lining of water courses and construction of field channels for more efficient water distribution was provided for an area of 15,000 ha. Statewise details of completed unit equivalents are given in Annex 1, Table 7. Summary of completed unit equivalents is shown below: Investments Units New dugwells 176,275 Pumpsets 201,605 Dugwells and pumpsets 46,025 Development of wells 60,170 Shallow tubewells 64,635 Deep tubewells 1,155 River lift irrigation units 200 Water distribution system (ha) 15,155 2.08 The total number of direct beneficiaries from minor irrigation investments is estimated at 580,000 (no appraisal estimate available). Investments in minor irrigation are estimated to have created additional irrigation potential of about 0.93 M ha (appraisal estimate 1.09 M ha). About 65% of ARDC disbursements for minor irrigation was to small farmers. 2.09 Statewise, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh and Maharashtra accounted for 63% of the total investment in minor irrigation. Bihar and Orissa accounted for another 18% (Annex 1, Table 4). These six states together accounted for about 80% of the total investment in minor .Jf Excluding provision for price increases. 2/ Due to the credit being a slice of the continuous lending program, the term "unit equivalents" is used to describe the number of units financed during the period if those incompleted during the previous period and the ones only started during the project period, are converted into complete units. - 40 - irrigation. It is noteworthy that 572 of ARDC refinance for minor irrigation was in 13 less-developed states. 1 2.10 On the basis of revised groundwater evaluation by SGOs the dis- tricts were categorized as white, grey and dark areas, according to the stage of groundwater development. As agreed at appraisal, a "Groundwater Over-Exploitation Committee" was appointed to "refine the knowledge of groundwater situation and potential for minor irrigation investments". On the basis of assessment of groundwater resources, the committee recommended new norms for groundwater evaluation for different rock formations and under different soil conditions. Based on the norms suggested by the Committee, SG0s prepared revised estimates of groundwater potential for individual states (Annex 1, Table 9). According to these estimates, the groundwater balance at the all-India level is estimated at 22.67 M ha. 2.11 Although there is considerable scope for groundwater exploitation in most States, in some States (Haryana, Punjab and Tamil Nadu), the groundwater exploitation has reached a critical stage. Considering the need for more vigorous evaluation of groundwater resources, SGOs were requested to initiate micro-level studies in dark areas, with GOI providing a 50% matching grant to states for carrying out groundwater research studies. At the initiative of ARDC, SG0s in Haryana, Karnataka, Orissa and West Bengal have considerably strengthened their staff. 2.12 As agreed at appraisal, ARDC appointed an informal working group comprising representatives of GOI, ARDC, REI and SGOs to suggest an accept- able definition of failed wells, and %o prepare a model Compensation Scheme for failed wells. 2/ 2.13 Qualitv Control of Pumpysets. ARDC initiated pilot project studies in select blocks of six states with the objective of studying the efficiency of the existing pumpset installations and preparing a matrix based upon bydrogeological and agronomic aspects for proper selection of the pumping units for future installation. The findings of the studies were published in a report entitled "Pilot Project Studies for Quality Control of Agricul- ture Pumpsets". The report contains blockwise details of cropping pattern, water requirements of crops, required discharge, groundwater regime, design of MI structures, requirement of horsepower of the pumpsets and proper size of the suction and delivery pipes for the studied blocks/districts. The data should serve as guidelines for selection of agricultural pumpsets by project !f These are Assam, Bihar, Himachal Pradesh, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, West Bengal, Maipur, Meghalaya, Mizoram, Nagaland and Tripura. 3] The model Compensation Scheme was finalized in June 1983. - 41 - beneficiaries and banks financing minor irrigation investments in the selected districts. 2.14 Land Development. The total cost of land development financed under the project amounted to Re 111 X, substantially lower than the appraisal estimate of Re 451 H. Statevise, about 68% of ARDC disbursement for land development was in Naharashtra and Andhra Pradesh and 24% was in Punjab. Among the less-developed states, only Rajasthan and Orissa par- ticipated in the land development program, their share, however, being only 2% (Annex 1, Table 4). 2.15 Diversified Investments. Due mainly to the considerable increase in the pace of disbursements by CBs, the lending targets for diversified purposes were exceeded. Accordingly, the actual IDA credit for diversified purposes amounted to US$72.3 N compared to US$41.5 N projected at appraisal. The total cost of diversified investments amounted to Rs 1,985 X, 82% higher than the appraisal estimate of Rs 1,098 H. 1, The share of small farmers in diversified investments was only 49% compared to 65% under minor irrigation. The lower share of small farmers is due to the fact that for a large part of ARDC financed investments (plantation/horticulture, poultry, fisheries, etc.), the scope for financing small farmers is limited. 2.16 About 47% )f the diversified investments were concentrated in the three southern states (Andhra Pradesh - 23%, Karnataka - 12%, and Tamil Nadu - 12%). The share of less-developed states was 27% (Northeastern states - 8%, Orissa - 7% and West Bengal - 5%) (Annex 1, Table 4). Thirty-two percent of the total ARDC disbursements for plantation and hor- ticulture were in Assam (tea plantations), followed by West Bengal (18%) and Karnataka (15%). About 30% of the disbursements for livestock was in Andhra Pradesh, 12% in Gujarat and 8% each in Rajasthan and Maharashtra. Disburse- ments for poultry were mostly concentrated in Andhra Pradesh (49%), followed by Maharashtra (17%) and Tamil Nadu (11%). Under fisheries, 24% of ARDC finance was disbursed in Karnataka, 20% in Orissa and 10% in Gujarat. Under "other" diversified purposes (which included disbursements for IRDP) 24% was in Andhra Pradesh, 23% in Tamil Nadu and 13% in Karnataka (Annex 1, Table 5). 2.17 Implementation Issues. Monitoring and other studies conducted by ARDC, periodit implementation reviews carried out by ARDC regional offices and discussions at the State/District-level Co-ordination Committee meetings have brought out the following common problems: (i) ineligibility/restricted eligibility of many PLDBs because of poor loan recoveries; (ii) inadequate branch network of CBs in some rural areas (particularly, in backward and hilly regions); (iii) lack of infrastructural facilities (transport and j/ The total anticipated cost of diversified investments is shown in Annex 1, Table 2. - 42 - communications and marketing infrastructure); (iv) non availability of up-to-date land records; (v) delays and difficulties experienced by borrowers and bank branches in obtaining the records from revenue authorities; (vi) lack of adequate training and experienced staff in bank branches for effective supervision; (vii) non-recourse to/non-availability of short-term production credit for borrowers of investment loans; and (viii) absence of an efficient extension service. 2.18 For minor irrigation, particularly dugwell schemes, the main problemo were under-financing by banks due to a rise in =nit costs, shortage of construction materials and delays in energization in some areas. This gave rise to incomplete investments or a substantial delay in the completion of investments (e.g., Karnataka, Rajasthan). The progress in land develop- ment work was hampered by lack of technical guidance for land levelling and bunding undertaken by farmers and rheir reluctance to entrust land levelling work to CAD authorities. Under diversified investments the problems were non-availability of cross-breed/improved variety of animals, inadequate availability of fodder (particularly in the case of marginal farmers and agricultural laborers) and inadequate arrangements for supply of concentrates at reasonable prices (dairy and sheep), insufficient number of hatcheries, high feed cost and inadequate marketing facilities (poultry); inadequate landing facilities, shortage/high cost of diesel oil and inadequate storage and transport facilities (fisheries); lack of training to farmers on manage- ment practices (dairy, poultry and sheep breeding), unsatisfactory veterinary services, inadequate institutional arrangements for linking production, marketing and loan recovery. 2.19 Follow-up Action. The following are some of the important remedial measures initiated by ARDC/GOI/State Governments: (i) rehabilitation of weak SLDBs; (ii) branch expansion program of CBs giving an even greater tilt towards rural areas in the Sixth Plan and emphasis on the role of RRBB in development lending; (iii) efforts to rehabilitate incomplete or infructuous investments in minor irrigation with the provision of additional finance, wherever necessary; (iv) a systematic program of compilation and correction of land records envisaged in the Sixth Plan; (v) setting-up of standing committees at ARDC regional offices for periodic review of unit costs to reduce the scope for under-financing of investments; (vi) encouraging the production of cross-breed cows in order to augment their supply; (vii) providing for tie-up between production, marketing and recovery; (viii) emphasizing effective monitoring of investments, particularly at the farm level and urging banks and state governments to recruit adequate number of supervisors for this purpose; and (ix) reorganization and strengthening of the extension service in several states on the lines of the T&V system. 2.20 Lendin in Less-Developed Areas. The expectation that about 40% to 50% of lending would be in less developed States was achieved. Thus, for the 13 less developed states (para 2.09), ARDC disbursements amounted to Rs 2,186 M, about 48% of the total disbursements made under the project - 43 - (Annex 1, Tables 10 and 11). A substantial part (83%) of the disbursements in these states was for minor irrigation, mostly in Uttar Pradesh (28%), Madhya Pradesh (23%), Bihar (16%) and Orissa (10%). Plantation and horticul- ture - the next most important investment activity - accounted for 8% of the total. The north-eastern states accounted for 5% - almost entirely for plantation and horticulture. The low disbursements by north-eastern states may be attributed to the lack of adequate infrastructural facilities for scheme formulation and continued preference on the part of the farmers for Government assistance rather than bank finance. 2.21 Lending to Small Farmers. The project objective of increased small farmer participation was achieved and about 60% of total ARDC disbursements, as anticipated, were to small farmers. Their share under minor irrigation was 65% and under diversified investments about 49%. According to the data reported by the banks, there were considerable variations in small farmer participation between States. Thus, only 8 states achieved the target of 60% or more, whereas in 12 other states the share of small farmers was less than 60% (Annex 1, Table 12). The lover share of small iarmers in the latter states was mainly due to the predominance of lending for diversified purposes. 2.22 The identification of small farmers by financing banks suffers from two major deficiencies. Firstly, despite clear instructions many bank branches of both SLDBs and CBs continue to follow the SFDA or IRDP definition which is more restrictive than the ARDC definition. This results in under-reporting the share of small farmers. Secondly, almost all the bank offices identify small farmers on the basis of land mortgaged as security rather than the total of family holdings. This tends to over-estimate the share of small farmers. On balance, however, studies have indicated that errors are mutually offsetting. To estimate the magnitude of small farmer lending during July 1980 to June 1981 (which covers one half of the ARDC III project period), field studies were conducted by ARDC in early 1982 in 17 states (Andhra Pradesh, Assam, Bihar, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Manipur, Karnataka, Kerala, Madhya Pradesh, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal) and covered 143 bank branches of CBs and SLDBs (purposively selected on the basis of the highest schematic lending during 1980-81) and 6,485 randomly selected loan beneficiaries under the project. The study revealed that 53% of the selected bank offices applied the SFDA definition rather than the ARDC definition for identifying small farmers. Secondly, the banks used the area of land mort- gaged rather than the total holdings of the family. The use of the former resulted in under-reporting and the latter in over-reporting lending to small farmers. After adjusting for the two types of errors, the estimated share of small farmers in the bank loans disbursed during 1980-81 came to 71.4%. 2.23 Training. Expenditure under the training component amounted to Ra 17.7 M, slightly higher than anticipated (Ra 16.8 M). During the ARDC III project period, 72 courses for the senior and middle level staff of SLDBs, - 44 - CBs, RRBs, and SCBs, were conducted in which 1,528 officials were trained. besides 400 officials from ARDC/RBI/State Governments. About 77% of the trainees underwent the specially designed Agricultural Projects Course (APC). In addition, 3 refresher courses, 3 condensed APC courses, 9 seminars and 5 workshops were conducted in which 573 persons participated. In the junior level training program, 8,900 junior level staff of SLDBs were trained in various training centers of SLDBs. 2.24 ARDC continued to monitor the training activities conducted at CAB, Pune and SLDB training centers and also undertook sample studies to evaluate the impact of training which showed that nearly 50% of the trainees made good use of their training in their day-to-day work. About 85% of the respondents reported that training contributed to improving the quality of their work and most of the trainees felt that the training had improved their knowledge and professional skills. 2.25 Eguipment. The project provided about Rs 5.0 M for the purchase of equipment for SGOs, SLDBs and ARDC to enable them to more efficiently implement programs for groundwater resources evaluations. The amount ear- marked was not utilized, as SGO had adequate state budgetary allocations for purchase of necessary equipment. 2.26 Compliance with Covenants. ARDC complied with all covenants, except the covenant regarding formulation of the model compensation scheme for failed wells (Section 2.10 of the Project Agreement), on which action was still in progress at the time of completion of the project. III. PROJECT BENEFITS 3.01 Physical Impact. Investments in minor irrigation and land develop- ment are estimated to have created new irrigation potential for 1.05 M ha. Investments in other farm activities have resulted, inter alia, in bringing 0.06 N ha under plantation and horticulture (coffee, tea, coconut etc.) and in acquiring 0.15 M milch animals, over 3.7 M layer birds, 1.0 M sheep, 0.06 M bullocks and bullock carts and 1,100 mechanized fishing boats. These investments have directly benefited about 1.0 N persons (appraisal estimate 1.1 M), mostly from the minor irrigation program (0.65 M). A large propor- tion of the beneficiaries (estimated at 0.60 M) belonged to the weaker section of the population (small and marginal farmers and agricultural laborers). 3.02 Benefits from investment activities, except plantation and hor- ticulture, start flowing soon after the investment is made. However, in the case of minor irrigation, it takes 3-4 years to reach close to optimum level of utilization. In the case of plantation and horticulture, the initial gestation period itself generally ranges between three and six years; it may - 45 - take another 2-5 years for full development to take place. As the project period was just over two years, most investment activities undertaken have just started generating incremental income. 3.03 Investments in minor irrigation are expected to lead to more inten- sive use of land and bring about a marked shift in favor of high value yield- ing crops, notably high yielding varieties of wheat and paddy among the food grains and sugarcane among the cash crops. Use of modern inputs, par- ticularly fertilizers, is also expected to increase substantially. All these changes are expected to result in a significant increase in crop production. Thus, at full development, additional foodgrain production, mainly paddy and wheat, is estimated at 3.0 N tons (appraisal estimate 2.8 N tons). The value of annual additional crop production is estimated at Ru 6,370 N j (appraisal estimate Re 6,250 M at 1978 faragate prices). From diversified investments, additional production of eggs is estimated at 860 M, milk at 194 N liters, of prawns by about 9,900 tons, other fish by over 25,000 tons and coffee by 17,770 tons. Part of the additional output from diversified investments (e.g. coffee, tea and shrimps) would be exported or would reduce imports (copra, cashewnut and milk powder). The value of incremental output from diversified investments at full development is estimated at about Rs 1,790 N (appraisal estimate Rs 830 M). The total annual value of incremental output resulting from all investments under the project at full development is estimated at Ra 8,160 NJ (appraisal estimate Rs 7,100 N at 1978 prices). 3.04 Financial and Economic Analysis. As the project is a two-year investment program, the estimation of its benefits as well as the financial rate of return (FRR) and the economic rate of return (ERR) are based mainly on the ex-post evaluation studies conducted by ARDC. Investment activities undertaken during the project period were both financially and economically viable, although in most cases rates of return were found to be somewhat lower than assumed in appraisal models. FRR ranged between 16% and 44% (as against the appraisal estimate of 18% to over 50%). ERR ranged between 25% to over 50% (as against the appraisal estimate of 29% to over 50%). The lower rates of return than in appraisal models may be attributed to the more realistic data stemming from field studies for ex-post evaluations. 3.05 Sensitivity analysis indicate that most of the project investments would remain financially and economically viable in the face of a 15% increase in investment costs or 15% decrease in the value of benefits, although some investments (particularly poultry and mechanized fishing boats) display high sensitivity to reduction in benefits due to high capital-output ratio (Annex 2, Table 1). If All valuations at 1978 prices. - 46 - 3.06 Emplo3ment Effects. The investments made under the project are estimated to have provided gainful employment (non-recurring) for nearly 370 M mandays. At full development, these investments would create additional employment of a recurrir. nature for about 190 H mandays annually (appraisal estimate 115 M mandays). These employment opportunities have benefited and would continue to benefit mainly small and marginal farmers and landless laborers. IV. INSTITUTIONAL INFRASTRUCTURE Agricultural Refinance and Development Corporation jJ 4.01 The Project was prepared by ARDC. The Corporation also bore the primary responsibility for its implementation which included strengthening of the institutional infrastructure (particularly the SLDBs), assisting the participating banks and State Governments in formulation of sound development schemes, appraising their technical and financial viability, monitoring the implementation of schemes sanctioned and evaluating their benefits. ARDC also took steps for ensuring (i) orderly exploitation of groundwater resources, (ii) adherence to quality standards in investment works under- taken, and (iii) increased flow of credit to the weaker sections of the rural population and to less developed areas. 4.02 Scheme Formulation. In order to improve banks' capabilities in project formulation ARDC intensified its program of training in project work. ARDC has also encouraged State Governments to set up separate project preparation and monitoring cells. Although impact of these efforts would be felt gradually, there has already been a perceptible improvement in the quality of schemes submitted to ARDC. Besides training, ARDC also issued detailed guidelines and checklists for the preparation of different types of schemes. More recently, initiative was taken to issue guidelines for the preparation of innovative schemes (e.g., dry-land agriculture, pasture development, development of orchards under drip irrigation, development of pearl oyster culture, brackish water prawn and fish culture). Formats for refinance application have been standardized. To facilitate scheme prepara- tion by banks and State Governments, ARDC published a volume of all the important circulars issued up to December 1980. To enable banks to prepare viable schemes relating to diversified investments, ARDC prepared pamphlets 1 ARDC's organization, management and its developmental role have been described in detail in other Bank/IDA reports, the latest being the Staff Appraisal Report on Fourth ARDC Credit Project (Report No. 3629-IN). - 47 - on rubber plantations, coconut, cashew, piggery and sheep development, bring- ing the total of such pamphlets issued so far to ten. ARDC also published a number of publications on the technical aspects of irrigation. 4.03 Appraisal. All schemes are appraised by ARDC on the basis of techno-economic norms evolved by it. Appraisal covers not only technical feasibility and financial/economic viability, but also an assessment of the administrative and organizational capabilities of supporting services, including input supply, short-term credit and extension. Field visits are organized to check the assumptions made in the scheme evaluations or to collect supplementary data. Techno-economic norms are also being tested during monitoring and evaluation studies, and updated if and when varranted. 4.04 In view of the fast growth in the number of schemes submitted to ARDC for sanction /, it strengthened its staff and further decentralized scheme sanctions so as to facilitate quick appraisal and sanction. During implementation of ARDC III, the number of officer staff increased by 203 to 962, most of whom were posted to regional offices. Thus, between June 1977 and December 1981, there has been nearly a three-fold expansion in ARDC staff (Annex 1, Table 17). The delegation of powers fox scheme sanctions to regional offices, introduced in January 1979 (to which a reference was made in ARDC II PCR), was enhanced with effect from April 1, 1981. A Director of a regional office now has authority to eanction schemes up to Rs 2.5 M in the case of minor irrigation (as against the previous limit of Rs 2 M) and a Senior Director up to Rs 4 M. The limit for diversified purposes, which was Ra 1 X previously, now ranges from Rs 1 M to Rs 3 M, depending upon the purpose. Mainly as a result of posting Senior Directors 2/ to most regional offices and with the enhanced scheme sanctioning powers, the number of schemes sanctioned by ARDC nearly doubled from 4,517 during ARDC II to 8,550 in ARDC III project period. 4.05 Monitoring and Evaluation. ARDC attaches considerable importance to project monitoring and evaluation as two vital stages in the performance review of projects, which provide useful feedback for improving the perfor- mance of on-going schemes and better planning of similar projects in the future. Monitoring is done through desk reviews, supplemented by field studies of selected investments and schemes, with the objective of identify- ing operational problems and constraints and finding timely solutions. 1/ The number of schemes sanctioned by ARDC increased from 100 during 1970-71 to 4,494 during 1980-81, or at an annual compound growth rate of 46Z. 2/ In NABARD, Senior Director is designated as Deputy General Manager. - 48 - 4.06 ARDC attempts to review the progress of on-going schemes on the basis of periodic reports (showing financial &id physical progress of on-going schemes) submitted by participating banks. However, depite all efforts, the financing banks, particularly CBs, fail to file the prescribed returns regularly and in time. Partly, this is due to: (i) the bookkeeping system, especially in CBs, which is not attuned to meet the requirements of ARDC; (ii) pressure on PLDBs/CB branches to submit a large number of returns to different agencies (RBI, central and State Governments, project agencies); and (iii) low priority given by the managers of PLDBs/branches to statistical returns. ARDC simplified the returns in early 1979 and has also requested banks to make suitable changes in their bookkeeping system. 4.07 Because of poor coverage and sporadic selection of schemes, the utility of scheme-oriented monitoring (SOM) was found to be limited. Hence, ARDC switched over to district-oriented monitoring (DOM) vith effect from January 1981. Under the new approach, samples of important investments, schemes and bank branches in a district are selected for field study, supple- mented by visits to farmers. On the basis of desk reviews and field studies, monitoring of all the on-going schemes in the district is attempted through DOM. Forty-seven DOM studies vere carried out during 1981, and it was decided to progressively increase the coverage of districts to 33-1/3% (135 districts) in 1982, 40% (162 districts) in 1983 and 50% (202 districts) from 1984 onwards. To facilitate achieving these targets, steps were taken in early 1982 to: (i) rationalize the methodology of DOM to economize on time and manpower; (ii) conduct joint monitoring with participating banks; and (iii) prepare joint reviews of DON studies with banks and project entities to facilitate speedy and effective follow-up. It is also envisaged that selective technical monitoring would be conducted in districts where technical problems have been identified during DOM studies. 4.08 Given the present and prospective level of schemes sanctioned, the responsibility for monitoring is too heavy to be carried out by ARDC alone. The participating banks will also have to share part of this responsibility. With this und in view, ARDC continued to urge the banks, both CBs and SLDBs, to set up their own monitoring and evaluation cells, and most of the nation- alized CBs have already set up such cells, and have been undertaking ex-post evaluation studies. To assist the SLDBs in setting up such cells, ARDC has offered to subsidize ihe cost of such cells, out of its R&D fund (para 4.10). 4.09 Seventy-seven ex-post evaluation studies (25 by ARDC, 38 by CBs ard 14 by research institutions) were conducted during implementation of ARDC III. Some improvements in evaluation methodology (e.g., improved sampling design, c.wmputerized tabulation of field data in some cases, disaggregated analysis and application of quantitative analysis) have been introduced and ARDC conducted two courses during 1981 for the professional staff of CBs' evaluation cells. - 49 - 4.10 The Research and Development (R&D) Fund, created by ARDC in 1977, supports studies in the area of rural development and provides financial assistance to SLDBs, RRBs and SCBs to strengthen their technical staff involved in project preparation, appraisal, monitoring and evaluation. Sub- sidies have already been approved for 6 SLDBs and 2 SCBs, to partially cover the cost of key personnel. Furthermore, six research projects have already been approved: (i) a research study of dugvells in a district in Gujarat; (ii) a study of regional variations in the agrarian structure; (iii) an analysis of evaluation reports prepared by CBs; (iv) a techno-economic study of private cattle breeding farms; (v) a study for identification of farmers whose lands have been mortgaged to private parties; and (vi) a study for modernizing the system of land registry. In order to explore the possibility of identifying research projects which would be operationally useful to ARDC, a seminar of reputed agricultural economists and agricultural scientists was held in early 1982. 4.11 Some of the important policy decisions taken by ARDC during ARDC III were: (i) a higher scale of refinance to SLDBs (from September 13 1981); (ii) facility of interim finance to SLDBs (from January 1, 1980); (iii) deferment of redemption of special development debentures by SLDBs arising out of the postponement of loan repayments from farmers affected by natural calamities; (iv) enhancement of the period for pumpset loans from 7 to 9 years; (v) extension of refinance facilities for construction of warehouses/godowns, mechanical compost -lants and construction of milking sheds by village milk cooperative societies; and (vi) revision of the inter- est rate structure. 4.12 Resource Mobilization. The rapid growth in the loan business of ARDC has been made possible by its efforts to raise additional resources. Total resources raised by it (net of repayment to GOI/RBI) increased more than five-fold from Rs 1,064 M in 1974-75 to Rs 5,372 in 1980-81 (Annex 1, Table 13). The pattern of resource mobilization indicates two notable fea- tures. Firstly, notwithstanding availability of funds from the Bank Group and bi-lateral donors, a large proportion of resources is raised locally (56% in 1980-81, although somewhat lower than 65% in the previous year and the peak level of 74% reached in 1978-79). Secondly, an increasingly larger proportion of local resources emanated from repayments of loans to ARDC, accounting for 67% of the total locally raised resources in 1980-81. Debt-equity ratio stood at 14:1 in 1980-81, lower than the statutory ratio of 20:1 (Annex 1, Table 15). 4.13 National Bank for Ariculture and Rural Development. The NABARD came into existence on July 12, 1982. It is formed by the amalgamation of ARDC - the term-lending agency, the Agricultural Credit Department of RBI (which refinanced short-term agricultural credit) and the Rural Planning and Credit Cell of RBI which dealt with RRBs. The NABARD will refinance short, medium and long-term credit for agriculture and rural development. Its main advantage lies in establishing a close coordination between short-term and - 50 - long-term credit. NABARD would cover the entire spectrum of integrated rural development, including finance for agriculture, cottage and village industries and rural artisans. To enable it to perform this expanded developmental role, it has an authorized share capital of Re 1,000 M (which could be raised by GOI upto Rs 5,000 M) subscribed in equal parts by GOI and RBI. Although it is an independent institution with its own staff, NABARD would have organic links with RBI. 4.14 Stata Lafd Development Banks (SLDBa). SLDBs have traditionaly been the main source of institutional credit for agricultural investments. Total loans disbursee by them increased from Re 2,489 H in 1976-77 to Re 3,627 H in 1980-81, the latter being more than twice the amount disbursed in 1970-71 (Re 1,683 M). Over the five year period 1976-77 to 1980-81, lending increased in all the states (notably, Andhra Pradesh and Maharashtra) except Bihar, Karnataka, Madhya Pradesh, Tamil Nadu and West Bengal. The decrease in lending in the above five states was due mainly to the ineligibility of some PLDBs for lending on account of high overdues. This growth in lending has not, however, been accompanied with the desired extent of a diversifica- tion in the loan portfolio. Thus, during ARDC III, only 14% of ARDC refinance drawn by SLDBs was for diversified purposes. 4.15 The growth in SLDBs' loan operations was partly facilitated by the ARDC programs (particularly in Andhra Pradesh, Uttar Pradesh, Haryana and Rajasthan). Thus, the share of special development debentures in the.total borrowings of all SLDBs increased from 37% in 1976-77 to 44% in 1979-80. The share of SLDBs in total ARDC disbursements declined over the years. Thus, from three-fourths in the early 1970s, their share in ARDC refinance decreased to 38% in 1981-82. This decline may be attributed to: (i) the greater participation of CBs in ARDC's program; and (ii) ineligibility of many PLDBs for lending due to high overdues. 4.16 The increase in the overdues of SLDBs since 1976-77 has been a matter of concern to ARDC and RBI. At SLDB level, the overdues increased from 40% of demand in June 1977 to 50% in June 1980. At PLDB level the increase was even more pronounced from 37% to 52%. Rehabilitation programs provided for the "blocking" of chronic overdues and for rescheduling of loans, which resulted in a decrease of overdues to 48% and 43% at SLDB and PLDB level respectively, although cash recoveries from loan beneficiaries did not increase. 4.17 Though the 1979 rehabilitation programs were evolved after a con- sensus with the state govermnents and SLDEs they were effective only to the extent of checking further deterioration and proved to be inadequate to improve the collection performance to the desired levels. Many factors were responsible for this. The damage to crops due to drought and other natural calamities had not been assussed in time mainly because this involved con- siderable amount of statistical compilation work. SLDFs did not, therefore, extend the facility of prompt rescheduling of debts wherever needed. This - 51 - unnecessarily resulted in increasing the overdues. There are many other reasons for overdues: wilful default, political climate, remission of over- due interest and write-off of short-term debt by some state governments and unsatisfactory SLDB organization and management resulting in poor loan appraisal, supervision and recovery. The most important reason, however, is drought and other natural calamities. The mounting overdues has, in turn affected adversely the financial viability of PLDBs. The proportion of PLDBs earning profits declined down from 57% in 1976-77 to 44% in 1979-80. 4.18 State Co-operative B..nks (SCBa). The participation of SCBs in ARDC III was nominal and confined to a few states only (Orissa, Andhra Pradesh, Kerala, Tripura, Manipur, Assam and Meghalaya). Total ARDC disbur- sements to all SCBs under the project amounted to Rs 70 M, which constitutes only 1.5% of the total. About 90% (Rs 62 M) of ARDC disbursements to SCBs were concentrated in Orissa. Among the SCBs, overdues in the North-eastern states, Bihar, Delhi and Bimachal Pradesh were over 50% at the end of June 1980, while those of other SCBs less than 35%. The rising overdues in some states, inadequate staff with the necessary expertise for schematic lending and lukewarm attitude of some banks to enter into the field of medium and long-term investment credit were the main factors responsible for the poor participation of SCBs in the project. 4.19 Commercial Banks (CBs). The CBs have now emerged as the most important source of institutional finance for agricultural medium- and long-term investments. Total agricultural credit (direct finance) .j provided by them more than doubled from Rs 5,078 M in 1976-77 to Rs 12,750 M in 1980-81 (April-March). Their share in ARDC refinance has been steadily increasing in the last six years (from 41% in 1976-77 to 52% in 1981-82) and it now exceeds that of SLDBs. In fact, CBs were primarily responsible for stepping up disbursements for diversified purposes under ARDC schemes. 4.20 The agricultural loan portfolio of CBs is much more diversified than that of SLDBs. Out of the total ARDC refinance availed of by CBs under ARDC III, 44% was for diversified purposes, against only 14% in the case of SLDBs (Annex 1, Table 6). Expansion of CBs' lending to agriculture owes much to: (i) GOI/RBI stipulation of a minimum level of lending to priority sec- tors, including agriculture; and (ii) multi-agency approach of GOI/R3I/ARDC to assist agricultural development. To support this policy, in its branch expansion program RBI has been giving priority to licensing new branches in rural or semi-urban areas. Thus, during ARDC III project period, the number of CBs' branches increased by 4,416 to 33,576; of this increase, over 70% (3,113) was in rural areas. The CBs have certain advantages which have helped them to step up their lending operations. Firstly, they can provide 1/ Direct lending to farmers in the form of medium and long-term loans and crop loans. - 52 - both term loans and production credit from the same branch. Secondly, they have greater flexibility than SLDBs in the matter of collateral as CBs can use their discretion in regard to the type of security, unlike the SLDBs which are required by law to take land mortgage as security. Thirdly, with a better resource position they could strengthen their technical and field staff to process and service agricultural loan accounts. Thus, between December 1977 and December 1981, the number of agricultural field officers/rural development officers of the State Bank of India (SBI) increased by 113% (to 4,194), of 5 subsidiaries of SBI by 239% (to 346) and of 7 major nationalized banks .; by 85% to 2,388. 4.21 CBs have also been facing problems with loan recoveries. The level of overdues, at the all-India level, has remained static in recent years or improved only marginally. Thus, the overdues as percentage of demand which were 48% at the end of June 1975 and 1976, went up to 50% by June 1977, declined to 47% in June 1979 and rose slightly to 48% in June 1980. The overdues at end-June 1980 were particularly high (more than 60%) in Madhya Pradesh, Bihar, West Bengal and North-Eastern States. The standing committee (CALCOB) set up by ARDC in April 1979 commissioned a study in 1980 on causes of overdues in agricultural term loans of CBs. Based on the recommendations made in the report, suitable guidelines were issued to CBs for improving their recovery performance. ARDC also advised CBs to furnish in the scheme proposals information regarding recovery performance of participating branches and to indicate in the case of branches having overdues of over 50%, causes for such high level of overdues and steps taken/being taken for improving the recoveries of such branches. Among other measures suggested by CALCOB to improve the reporting system in CBs is the introduction of DCB jJ registers for agricultural loans beginning from 1980-81. 4.22 Regional Rural Banks (RRBs). First established in 1975, the number of RIBs grew from 60 with 2,420 branches at the end of December 1979 to 107 with 4,795 branches at end-December, 1981. Although their participation in ARDC programs has been gradually increasing, their share is as yet only nominal (6%) under the ARDC III project. RBI has been urging the RRBs to have increased recourse to ARDC refinance. As a measure of incentive, for compact area development schemes like command area development and lift irrigation, etc., the RRBs have been permitted to finance also other than small farmers, although such schemes should be predominantly for the benefit of small farmers. Further, with a view to improving their capabilities in schematic lending, three seminars were conducted by ARDC at Ryderabad, Calcutta and Lecknow in December 1981. 2/ Allahabad Bank, Bank of Maharashtra, Canara Bank, Punjab National Bank, Syndicate Bank, Union Bank of India and United Bank of India. J Demand - Collection - Balance. AMBI 1 Tab=le I - 53 - INDIA TERD ARDC CDIT PROJECT Project Cost - Appraisal Estimtes Rs Million * US$ Million Minor Irrigation Minor Irrigation 3,639.0 423.1 Land Developiment 451.0 52.4 Pumpset. electrification 758.0 88.1 Soil Couservatin/realmation 85.0 9.9 Subtotal 4,933.0 573.5 Diversified Lending Plantation/horticulture 224.0 26.0 Farm Mechanization 879.0 102.2 Livestock 485.0 56.4 Fisheries 282.0 32.8 Poultry 263.0 30.6 Storage 372.0 43.3 Yards 299.0 34.8 Others 61.0 7.1 Subtotal 2,865.0 333.2 Trainiag 17.0 2.0 Equipment 5.0 0.6 Total Before Contingencies 7,820.0 909.3 Price Contingencies 823.0 95.7 Total Project Cost 8,643.0 1,005.0 Note: The US$/Rupee exchange rate assmed at appraisal was 1 US$ - Ks 8.60. -54- nm ANUXB 1 TIED ARDC CEDIT PROECT Cost of Investmenta Eligible for IDA Financing Apraisal Estimates 1/ Rs Million US$ Million ADC ARDC Total Reft- IDA Total Refi- IDA _Cort =e Cred_t Cogt n~e Cet Minor irrigaton &- Land Development 21 4,777.3 3,563.8 1,781.9 555.5 414.4 207.2 Diversified Lending 2 1,098.2 713.8 356.9 127.7 83.0 41.5 Trainng & Equipoent 22.4 2. 11.2 2.6 2.6 3 Total 5,897.9 4,300.0 2,150.0 685.8 500.0 250.0 Baed on appraisal estimate of shares of IDA credit, ARDC/GOI, participating baks and borrovers in the fiu=ming of the project components eligible for ID finae. 2/ Includes provision for price increase contingencies. - 55 - ANHWX 1 Table 3 INDIA THIRD ARDC CREDIT PROJECT Actual Cost of Investments Eligible for IDA Financing Is Million US$ Million ARDC IDA ARDC IDA Total Disbur-- Credit Total Disbur- Credit Purpose Cost sements Eligible Cost sements 1/ Utilized Minor Irrigation Minor Irrigation 4,209.7 3,157.3 1,578.3 504.5 378.4) Land Development 111.1 83.3 41.6 13.3 10.0) Subtotal 4,320.8 3,240.6 1,620.3 17 388.4) 177.0 2/ Diversified Purposes Plantation/ horticulture 466.5 286.1 143.0 52.8 34.3) Livestock 446.5- 302.9 251.51 55.9 36.3) Poultry 256.6 166.6 83.3 30.8 20.0) Fisheries 257.0 166.9 83.5 30.8 20.0) Others 564.2 366.4 183.2 67.6 43.9) Subtotal 1,984.9 1,288.9 644.5 237.9 154.5) 72.3 2/ Training 17.7 17.7 8.8 2.1 2.1 0.7 Total 6,323.4 4,547.2 2 273.6 757.8 545.0 250.0 Note: Figure in brackets represents amount claimed from IDA. 1/ Conversions have been made at the average exchange rate of US$1 Rs 8.344. 2/ Detailed breakdown not available. - 56 - ANNER 1 Table 4 ERDE - TED ADC CREDIT PROJECT State-wise Details of Actual Project Costs and ARDC Disbursements HEnor Irrigation 1/ Diversified Purposes Total AFDC Dis- Total ARDC Dis- State Cost 4/ bursements Cost 51 bursements (Rs Hilion) Andhra Pradesh 633.3 475.0 462.8 300.5 (21.4) Assan 21 5.1 3.8 159.1 103.3 Bibar - 469.0 351.7 39.4 25.6 Gujarat 178.8 134.1 103.6 67.3 Navyans 202.5 151.9 47.6 30.9 (4.9) w11chat Pradesh 0.1 0.1 11.7 7.6 . Jam & Kasbmir - 1.4 0.9 Marnataka 121.3 91.0 240.8 156.4 Kerala 32.1 24.1 87.6 '56.9 (0.1) Madhya Pradesh 664.2 498.1 5.4 3.5 Maharashtra 619.5 464.6 134.9 87.6 (35.0) Orissa 284.9 213.7 145.1 94.2 (0.7) Ponjab 105.5 79.1 58.7 38.1 (19.9) Rajasthan. 154.8 116.1 48.7 31.6 (1.1) Tamil Nadu 16.0 12.0 237.8 154.4 (0.2) Xttar Pradesh 818.8 614.1 70.4 45.7 vest Bengal 14.8 11.1 99.7 64.8 Union Territories 3/ 0.1 0.1 30.2 19.6 Total 4,320.8 3,240.6 1,984.9 1,288.9 (83.3) 11 Includes land development. Ti Includes Manipur, Meghalaya, Misora and Tripura. 31 Includes Delhi, Goa and Pondicherry. i 'Estimated at 133-1/3Z of ARDC refinance. Il Estimated at 154 of ADC refinance. Note: Figures in brackets represent ANDC disbursements for land development. INDIA THIED ARDC CUeDIT MoJECT State-vise and Furpoase-we AD Dietebr at~ Total HIMOR IUIGATION OMVUMFIED U~gaSES for iner 1,Znd .Diver. Btate/Union Irri- Devel- Gheep viah- Ilautadtaa 6 etteUlter! altted erSad Territory gatjio. ogf,nt Total hul,tEr areediaz £ . ,rie a gCogut Coffes atbe Total athofg gJ __g_ggg Thtal. Andhra Fradeh 453.6 21.4 475.0 81.8 53.0 38.3 13.2 - 1.9 - 335 35.4 89.8 300.5 775.5 Asam 3.0 - 3.0 - 0.1 jf 1.4 1.0 91.3 - - . - 91.3 3.8 91.6 100.6 bihar 351.7 - 351.7 0.1 0.3 6.9 0.9 - - - 3.9 3.9 3.9 25.6 317.3 Delhi - - - 0.1 - 0.9 - - - - - - - 1.0 1.0 Coa 0.1 - 0.1 0.6 - 0.3 14.0 - - - - - 2.9 17.8 17.9 Gujarat 134.1 - 134.1 3.8 0.3 36.2 17.4 - - - - - 9.6 67.3 201.4 unrygne 147.0 4.9 151.9 2.1 - 22.2 - - - - 1.5 1.5 5.1 30.9 182.8 Himaehal Fradeah 0.1 - 0.1 1.6 - 1.5 - - - - 3.3 3.2 1.3 7.6 7.7. Jammu 6KaOhir - - - 6 - - 0.4 - . - - - - - 0.5 0.9 0.9 Karnataka 91.0 - 91.0 12.0 3.9 5.8 39.7 0.6 7.8 4.6 31.0 44.0 49.0 156.4 247.4 Kerala 24.0 0.1 34.1 0.6 - 4.8 11.6 - n 0.8 må 22.0 17.9 56.9 81.0 Maharamhtta 429.6 35.0 464.6 28.6 0.6 24.2 7.4 - - 13.6 13.6 13.2 07.6 3532.2. Hadhya Fradeoh 498.1 - 498.1 1.4 - 0.6 - - - - - 1.5 3.5 s01.6 Kautpur - - - - 0.1 1/ - 0.1 - - - 0.3 0.2 0.2 0.6 0.6 Orlaga 213.0 0.7 213.7 0.1 1.6j/ 11.9 34.1 - 0.8 - 15.7 16.5 30.0 94.2 307.9 Punjab 59.2 19.9 79.1 11.8 - 15.0 - - - - 0.4 0.4 10.9 38.1 117.2 Iajafthan 113.0 1.1 116.1 0.1 14.5 10.6 - - - - 0.2 0.2 6.2 31.6 147.7 Taml Nadu 11. 0.2 12.0 17.7 6.3j/ 17.0 15.6 Bå 1.8 3.3 NÅ 11.8 85.8 134.4 166.4 Pandicherry - - - - - 0.1 - - - - - - 0.7 0.8 0.8 Uttar Prad*8b 14.1 14.1 1.8 0.4 1/ 19.9 0.3 - - - 0.9 0.9 22.4 45.7 6M9.s veat sehgal 11.1 - 11.1 2.4 - 1.3 9.0 28.9 - - Pl.4 80.3 1.6 64.8 75.9 Tripura 0.8 - 0.8 - 0.1 - 2.6 0.9 - - 0.9 0.5 4.1 4.9 Nghalaya - - - - 0.5 - - - - - 0.5 0.5 - - - - - - -- - --- - 5 Total 3.157.3 83.3 3.240. 16..6 Øl_J 220, 16 . 31.7 12.3 8.6 I1$.5 32861 367.0 1._U.9 4.529.5 1/ For pia&erys lacludeo a small amunt for piggery. Gobar gs o plant , agro-service center , ballock * a d hlleok arte, ete. INDIA THIRD ARDC CREDIT PROJECT Agency-wise ARDC Diabursements (Re million) state/Union BLD3e Commercial Banks SCBe Total Territory M.I. D.P. Total o a. NaT Je. D.P. Total H.I. D.P. Total Andhra Pradesh 402.6 105.4 508.0 72.4 192.1 264.5 - 3.0 3.0 475.0 300.5 775.5 Asasa - - 3.0 97.1 100.1 - 0.5 0.5 3.0 97.6 100.6 Bihar 129.3 1.9 131.2 222.4 23.7 246.1 - - 35.17 25.6 317.3 Chandigath - - - * - * - - - - - * Delhi - - - - 1.0 1.0 - - - - 1.0 1.0. Coa - - - 0.1 17.8 17.9 -. - . 0.1 17.8 17.9 Gujarat 4.9 7.3 12.2 129.2 60.0 189.2 - - - 134.1 67.3 201.4 Haryana 114.7 19.8 134.5 37.2 e1.1 48.3 , - - 151.9 30.9 182.8 Himachal Pradesh 0.1 0.7 0.8 - 6.9 6.9 - - - 0.1 7.6 7.7 Jamu 6 Kashtir - 0.3 0.3 - 0.6 0.6 - - - - 0.9 0.9 Karnataka 71.4 45.9 117.3 19.6 110.3 130.1 - - - 91.0 156.4 247.4 Kerala 17.9 20.1 38.0 6.2 34.8 41.0 - 2.0 2.0 24.1 56.9 81.0 Madhya Pradesh 180.6 - 180.6 317.5 3.5 321.0 - - - 498.1 3.5 501.6 Maharashtra 392.8 17.4 410.2 71,8 70.2 142.0 - - - 464.6 87.6 552.2 Nanipur - - - - - * * 0.6 0.6 - 0.6 0.6 Neghalays - - - - 0.4 0.4 - 0.1 0.1 - 0.5 0.5 Hizoram - * - * 0.5 0.5 - - - . 0.5 0.5 Nagaland - - - - - - - - - - - - orilea 83.9 44.4 128.3 76.3 40.9 117.2 53.5 8.9 62.4 213.7 94.2 307.9 Pondicherry - - - - 0.8 0.8 - - - 0.8 0.8 Punjab 51.8 14.6 66.4 27.3 23.5 50.8 L - * 79.1 38.1 117.2 Rajasthan 72.6 1.4 74.0 43.5 30.2 73.7 - - - 116.1 31.6 147.7 Tamil Nadu 11.5 16.7 28.2 0.5 137.7 138.2 - - - 12.0 154.4 166.4 ' Tripura. 0.4 - 0.4 0.1 3.4 3.5 0.3 0.7 1.0 0.8 4.1 4.9. 'Utter Pradesh 462.2 19.6 481.8 151.9 26.1 178.0 - - - 614.1 45.7 659.8 veast Hengal 4.9 20.3 25.2 6.2 44.5 50.7 - - - I11.1 64.8 75.9 Total 2s001.6 Titf T"3YT TT1T, ITT T,1.T 1i ". U9M W.7240W6 T30 118 T 52.5 Notes N.. * Minor Irrigation and Land Development D.p. - Diversified Furposes / LI ** p INDIA THIRD ARDC CREDIT PROJECT Eatisated Unite of Hinor trrigation financed Duauella Persian Renovation shallow Deep Lift Irlge- Watew Distr- Mialag of Duguells Pumpsats 6 Pumpsets Wheels of Wells Tubevella Tubevells ties gato butles systm Water Coauses States (NO) (NO) () (N) (NO) (1a) (hs) (ba Andhra Pradesh 38,270 31,440 - - 17,660 6;110 * * * * Assa & Tripura - 23 - - - 500 - - - Bihar - 2,560 475 - 175 2,715 35 - * - cos is 10 - - 5 - - - - - Cujarat 630 1,195 3,410 - 245 - 330 is 850 - Haryana - - 1,010 - - 14,130 380 - 60 10 Himachal fredesh 15 - - - -. * - a - - Karnataka 54,335 32,805 - - 1,370 a - a - - Kerale 1,035 9,090 - - 1,363 - - * a Madhya Pradesh 33,520 66,310 - 3,405 20,290 - 275 - 45 a Maharashtra 10,220 35,815 2,495 - 15,405 120 - 283 365 - Orissa 27,000 2,415 - - - 2,65S - *- - Punjab - - - - 920 is - 12,730 Rajasthan 6,975 8,880 - 30 2,800 150 - 1,00 Tamil Nadu 410 340 - 3 655 is - J. * Utter Pradesh 3,540 10,060 38,635 50 - 36,120 - - , - vest Bengal 90 60 - - 1 )210 Total 176,275 201,605 46,025 3,490 40,170 64,633 1,155 200 2,330 12,625 - ma mina. ma m m m -e INDIA THIRD ARDC CREDIT PROJECT Diversified Investmants - Estimated Units Financed Dary sheep Poultry Fisheriee Gober aso vallekeal states Tea Coffee Coconut Others (Animale) (Animals) (birds) (bat) Pleats Carte AndhTa Pradesh - - 2,365 8,700 24,600 545,020 1,929,240 - 400 30,060 Asam 16,800 - - - 690 - - - 7 400 ihar - * - 5,320 3,310 2,220 * 475 2,00 Gos - - - 200 - 17,240 110 - - Gujarat - - - - 28,400 3,370 110,580 155 2,630 695 Haryana - - - - 18,990 - 2,500 * * - Karnataka 90 3,205 3,940 4,855 3,000 140,420 284,880 330 820 3,100 Kerala - 12,400 - - 3,070 - 13,340 210 35 - Maharashtre - - - 500 10,850 - 13,040 815,520 25 425 2,055 Madhya Pradesh - - * - 480 - 40,560 - 480 105 Orieas - - 630 - 9,400 11,900 - 127 2f 10 3,960 Punjab - - - 60 7,60 - 263,270 - 85 so Rajasthan - - - - 5.150 143,830 4,000 - - 5,480 Tamil Hadu - 550 50 - 13,410 129,210 178,510 70 400 1,165 Uttar Pradesh - - * - 15,560 4,030 40,020 - 350 2,045 Uest Beagal 2-335 - - ,250 2,130 26,400 70 1200 Total 19,225 16,155 6,985 17,365 148,900. 94,190 3,128,280 1807/ 6,010 40,135 c 3/ Includes betelvine, apple, pineapple, muae, eta. / soats and trawlers. 3/ -Besides boats, piseciculture am about 2,200 be was also flanced* . * I - 61 - AMi 1 TabIs 9 TIED ARDC CREDIT PROJECT Ground Water Potential in States - 1980 (N bea) Stage of Ground Ground Wate Gres RecovershLe Ezstting Net Water Development State Racharge Recharge x Extractio Balance (Z) Andhra Pradesh 4.61 3.23 0.72 2.51 22 Assea 1/ 1.36 0.95 0.08 0.87 8 Bihar 2.91 2.04 0.74 1.30 36 Gujarat 1.63 1.14 0.54 0.60 47 Naryana, 0.77 0.54 0.62 (*)0.08 115 Jmm a Kair 1/ 0.25 0.17 0.01 0.16 6 Karnatak 1.57 1.10 0.15 0.95 14 Karala 1.05 0.73 0.03 0.70 4 Nadhya Pradesh 8.20 5.74 0.42 5.32 7 Naharashtra 4.95 3.46 0.67 2.79 19 Punjab 1.40 0.98 0.89 0.09 91 Orissa 1.95 1.37 0.10 1.27 7 Rajasthan 1.43 1.00 0.37 0.63 37 Tamil Nadu 1/ 2.60 1.82 1.35 0.47 74 Uttar Pradesh 9.56 6.69 2.68 4.01 40 West Bengal 2.15 1.51 0.43 1.08 28 Total 46.39 32.47 9.80 22.67 30 1/ Indicates figures of old estimates of groundwater resources not based upon revised norms. 2/ 70Z of Gross Recharge. 62 - AN= 1 Table 10 INDIA THIRD ARDC CREDIT PROJECT Project Costs and ARDC Disbursements In Less Developed States (Re N) Total- - AXDJC Investment Cost Disbursements Asa, Manipur, Meghalaya, Misoras, Nagaand and Tripura 164.0 107.1 Bihar 508.4 377.3 Himachal Pradesh 11.7 7.7 Jamnu & Kashmir 1.4 0.9 Madhya Pradesh 669.5 501.6 Orissa 429.9 307.9 Rajasthan 203.4 147.7 Uttar Pradesh 889.1 659.8 West Bengal 114.6 75.9 Total 2,992.0 2,185.9 Percentage of Total Project Cost and Disbursement 47.5% 48.2% Table 1.1 - 63 - THID ANDC CREDIT PROJECT ARDC Dlburcemenat In Laa Dveloped States (Re M) NLor platacos P~ult7, Other, Irrigation and and Showp DIversifed States/P~uoes Land Developffnt Erticultur FIgheries DaI" _Plir7 ActivitIs - Asam 1/ 3.8 92.4 3.7 2.4 0.3 4.5 107.1 Bihar 351.7 3.9 0.9 6.9 0.4 13.3 377.3 Hiame0al P1ah 0. 3.2 - 1.5 1.6 1.3 7.7 J Zau&Kamheit - - - 0.4 0.9 ladhya Pradesb 498.1 - - 0.6 1.4 1.5 501.6 Orlma 213.7 16.5 34.1 11.9 1.7 30.0 307.9 Rajaathan 116.1 0.2 - 10.6 14.6 6.2 147.7 Uttar Pradas~ 614.1 0.9 0.3 19.9 2.2 22.4 69.8 West engali 11.1 50.' 9.0 1.5 2.4 1.6 75.9 Total 1,808.7 167.% 48.0 55.7 24.6 81.5 2,185.9 1/ Includes anipur, Någhlaya, isorma, Någa..n and Tripura. INDIA ]MIRD ARDC CREDIT PROJECT Anall Farmer qprermu@ (Ra H) Minor Irrigation Diveriftled Purposes Al urpose State/ Total ARM uaurseme1ts Total AFDM Disursements Total Aug ' vlowassate Union Territor Disbursements to Eall FamEve Disbursevents to Small Famere Disburseat to eall Farmers I Andhra Pradesh 475.0 304.0 64 300.5 159.3 53 775.5 463.3 so Assam 3.0 0.3 10 97.6 * - 100.6 043 - Bihar 351.7 197.0 56 25.6 22.5 59 377.3 219.1 59 Delhi - - - 1.0 0.5 50 1.0 0.5 so Goa 0.1 0.1 100 1.5 2.5 14 17.9 2.6 15 Cujarat 134.1 68.4 51 67.3 269 40 20104 95.3 47 Haryana 151.9 77.5 51 30.9 19.2 62 182.6 96.7 53 Himachal Pradesh 0.1 0.1 100 7.6 3.7 49 l.7 3.8 49 Jamu & Kashir - - - 069 0.9 100 0.9 0.9 100 Karnataka 91.0 68.2 75 156.4 71.9 46 147.4. . 140.1 57 Kerala 24.1 19.0 69 6.9 31.9 56 51.0 50.9 63 Madhya Pradesh 495.1 343.7 69 3.5 0.6 17 501.6 344.5 49 Maharashtra 464.4 223.0 48 87.6 23.7 27 552.2 245.7 45 Manipur - - - 0.6 0.2 33 0.6 0.2 33 Neghalaya * - - 0.5 - - 0.5 - - Niora* - - - 0.5 - - 0.3 - - Orasa 213.7 153.9 72 94.3 75.4 80 . 301.9 329.3 75 Funjab 79.1 26.1 33 38.1 17.5 46 11743 43.6 37 Rajesthan 116.1 88.2 76 31.6 25.3 80 147.7 113.5 717 Tamil Nadu 1f 12.0 7.6 63 155.2 100.6 70 167.2 116.2 70 Tripura 0.8 - - 4.1 0.2 5 4.9 0.2 4 Utter Pradesh 614.1 509.7 83 45.7 31.5 69 659.0 541.2 SU veast Bengal 11. 5.0 45 64. 13.0 20 15.9 18.0 24 4 All India 3,240.6 2,091.8 65 1,288.9 635.6 49 4 9 2,727.4 0o jJ Includes Pondicherry AWHEE 1 Table 13- - 65 - INDIA THIRD ARDC CREDIT PROJECT Resources Mobilisation by ARDC (Rs M) Sources 197i-77 1977-78 1978-7g 1979-80 1980-81 RBI/Bonds (Net) 782.0 648.3 907.5 908.0 868.2 Repayments from Borrowers 480.0 829.0 1,118.0 1,544.0 2,017.0 Share Capital and Reserves 127.2 167.7 209.0 130.6 144.0 Special Loan Account 1/ 15.2 31.0 19.5 1.0 3.8 Total Local Resources 1,404.4 1.676.0 2,254.0 2,583.6 3,033.0 Add: IDA/Bilateral Credits (Net) 899.1 876.0 797.5 1,422.1 2,339.3 Total 2,303.5 2,552.0 3,051.5 4,005.7 5,372.3 Local Resources as a Percentage of Total Resources 61.0 65.7 73.9 64.5 56.5 1/ Loans from Central and State Governments for financing of farm development works in respect of ineligible farers in Command Area Projects. Tabe'14 - 66 - TEIRD AMDC CREDIT PROJECT Agricultural Refinance and Dvelopment Corporation - Cach Flo~s (Ra a) 1976-77 1977-78 1978-79 1979-80 1980-81 Resource. I 900.0 995.7 951.5 1,650.0 2,448.0 RBI/Bofdf 940.0 856.3 1 190.5 1 246.0 1 301.2 Total Borrownga i,T 0 1,=52.0 , Y,WIU Iepaymnts by Borrovers 480.0 829.0 1,118.0 1,544.0 2,017.0 Share Capital 100.0 125.0 100.0 - - Subtotal 2, 2Ó0 2,i.0 3,360.0 4,440.0 5,766.2 Transfer to Reserves 2/ 27.2 42.7 1/ 109.0 1/ 130.6 144.0 Special .oan Account 15.2 31.0~ 19.5 1.0 3.8 Total Cash Inflov 2,TiE.,f 2,8797 3,488.5 4,571.6 5,TI4.0 Disburseets IDM Schegms 1,562.0 1,330.8 1,640.0 2,400.0 2,840.0 Non-KD Schems 646.2 1.012.2 1,210.0 1,720.0 2,150.0 Total Disburuements 2,208.2 2,343.0 2,850.0 4,120.0 4,990.0 Reayments to: GOi 0.9 119.7 153.5 227.0 108.7 Ml 15.0 208.0 283.0 338.0 433.0 Total Cash Outflov 2,7.T 2,70. 3,TMfl5 4,D. 5,3317 Surplus (+) (+)95.3 (+)209.0 (+)202.0 (-)113.4 (+)382.3 DefIcit (-) of Cash Inflov over Outflov 1/ Includen R 10.0 M tranferred to Research and Development Fund during the year. 21 UndIstributed profits tranferred to reserves. e1 ANWB 1 Table 15 - 67 - THIRD ARDC CREDIT PROJECT Agricultural Refinance and Developmnt Corporation Condensed Balance Sheet (ase ) 1976-77 1977-78 ;978-79 1979-80 1980-81 Assets Cash on band and at banks 2 1 42 27 55 .IDA loan 969 1320 1,858 2,731 3,623 IDA debentures 3,293 3,784 4,293 4,825 5,508 Other Loans 999 1,522 1,995 2,816 3,730 Other debentures 1,961 2,110 2,320 2,664 3,065 Interest accrued on loans 70 98 139 192 251 Interest accrued on debentures 286 244 250 299 345 Other assets 54 355 509 392 706 Total Assets 7,554 9,434 11,406 13,946 17,283 Liabilities and Capital Liabilities Bonds and debentures 1,817 2,023 2,464 2,860 3,211 Deposits 29 39 52 69 69 Loans from CO (1) IDA loans 2,587 3,578 4,520 5,449 6,755 (11) *Other loans 813 698 504 .997 2,030 Loans from REI (1) Long-term 1,726 2,168 2,635 3,147 3,664 (ii) Short-term - - - - Other Liabilities 161 339 453 394 375 Total Liabilities 7,133 8,845 10,628 12,916 16,104 Equity Paid-up Shares 350 475 575 575 575 Reserves and undistributed profits 71 114 273 455 603 Total Equity 421 589 848 1,030 1,178 Total Liabilities and Equity 7,554 9,434 11,406 13,946 17,283 Debt/Equity Ratio (Statutory Ratio 20:1) 17:1 15:1 14:1 13:1 14:1 68 -Table 16 T.IRD ARDC CREDIT PROJECT Agicultural Refim=e and Developmnt Corporation Codesed Statment of Incoue and Expenditure 1976-77 1977-78 1978-79- 1979-80 1980-81 de--) Interest Eared on (i) IDA. Loane/Debentures ) 195.9 190.9 178.4 549.1 399.9) (i) Other Loan=/Debenture ) 327.3 450.5 609.2 405.8 Other Ince 9.6 23.7 46.4 62.7 94.8 Total Income 409.5 546.9 687.8 850.3 1,049.7 Egpenditure Interest Paid on (i) GOI/ID Loas 146.2 194.2 243.4 311.3 429.6 (ii) nBI LOan 75.4 93.9 123.2 159.3 183.5 (iU) ands and Debetures 84.4 112.1 138.6 155.2 180.0 (iv) Special Loa Account 0.3 1.6 3.7 4.6 4.7 (v) Research & Dev. Fund - - - - 2.9 Salaries and Staff Benefits 14.7 17.1 26.5 40.9 54.0 &eneral Ezpenses .1 8.7 12.5 15.3 17.9 Total Expenditures 331.1 427.6 547.9 686.6 872.6 Profit Before Tax 78.4 119.3 139.9 163.7 177.1 Transfer to Special Reserve 19.7 30.0 - - Tax 34.0 51.7 - - - Profit After Ta= 24.7 37.6 139.9 163.7 177.1 Dividend 17.3 24.8 30.9 33.1 33.1 met Srplus 7.4 12.8 109.0 130.6 144.0 INDIA . THIRD ARDC CR8DIT PROJECT Stafftng Pattera of ARDC JuGG 30, 1977 med Of fice 1gionel¯ Of ficem Totel ¯¯¯ -mu -Ojer are . . vs Tg Otkul ge senior Director/Directore 5 13 20 1 11 12 6 a6 33 Deputy Directors 2 35 37 3 20 23 1 35 60 Developuent Officer@/ 8icullteurl zeonceLett 4 63 69 3 36 38 6 101 107 Mst. Deelopenut OfIcer a 73 75 1 49 50 3 123 Total. 13 188 201 7 116 123 20 304 324 peember 31 1979 lentor Director/Directora 7 20 27 1 13 14 8 33 41 Deputy Directern 2 38 40 7 50 57 9 88 97 Developmet Officers/ Agrlealtural xeumnta 5 140 145 11 118 129 16 258 274 ast. Davelopmet Officer* 1 l 6 143 149 10 337 347 Total 1l 392 410 23 324 349 43 716 79 Deember 31, 1981 Sator Dirator/Directora 6 40 46 1 22 23 7 62 69 Deputy Divectora 1 52 53 7 81 Da 8 133 141 Developmat Ofttcern/ Aricwulturl Nemseoltc 6 148 154 35 143 178 41 391 332 Ast. Developmet Officara 200 203 12 203 3 17 403 420 Total 18 440 458 53 449 502 73 889 t2 "t1ao &10& CUD1t m«EJU , vitopajak end 11t46sel Dato@ o# k=er aveatuamt W Ineresmed Døbt Mervice laet 4avt.tt 0eet uaveatmia gatt ovestmet Stum1 mit Cies Imam Y sadie* Y Cvelrage K lsl cate Cum, + 1a valm Sa Etimest@ Cet * ie tlus - In ... ... -e .....-. - -...-.... -- .-..- . 6V du g al and u"gfmt najaetbas 4.g1 ba 1 Is,50 4,310 1,815 3,3 36 33 30 31 33 38 .WgIel "ujasskafi ».36 me 6,300 3,745 1,195 3.3 »1 3 33 43 57 34 . ffpaet en enisthe IMI1 (P) Bajeathan 4.31 ha / 5,300 1,368 410 3.0 21 18 (-) 35 0 <-) I. Ramavatige ef ul and rumeS 1ai Wd 1.11 k& 9,410 ,3935 160 3.1 33 19 (-) over 0 Ope 0 3 I. Mhalle* tC66111 aud diasel pøpat wast 3em8£ 1.10 h 6,500 3,111 1,003 3.0 3S 33 3 05a5 50 Oens 0 43 1. Lift trrlgatioe Kabareashtra 1.46 ha / 4,770 1.910 1,0tø 1. 34 30 I Oge 0 Osse n 0 4t I. Caftee plantetiea Tasti kde 0.41 ka 5,800 3,105 9355 2. .0 19 51 4 33 33 I. Cieeemt planteuia garattaka 0.41 14 4,639 3.113 1,110 1. 19 16 1 35 31 33 i. Grad tltiveateo (Thansme se1dle68) uaraeaka 0.41 ha 36,01 13,40 6,*306 . 39 35 39 46 41 33 10. Mathamnted fihig bsa Mralt 9.6 a 125,760 29,430 34,350 1.2 31 33 (-) Ses 50 ivee 50 39 1i. Diry Uttar I graded 1c6dsk Nuirrah taffele 3,051 U 1,043 814 1.3 3 30 5 41 34 le 13. sheip searla AdhG I Mam* Fradeth 30 gud@ 4,335 3,341 1,3180 8.6 33 39 3Y 3i 33 33 13. pauhtry madbye 1,63 j/ - pradeak lalegi 70,533 13,111 9,940 1.3 16 13 (.) 30 3 -) lå. Enaltry aisrctra 300 Layaes 14,080 4,180 3,551 1.3 34 33 9 49 i5 15 15. Liid develepa*t Andbre Fra44a 1.00 k& 3,950 3,316 414 3.6 44 35 16 *ver 50 øm 50 43 li hist@* to benefit mam*. 1/ var tarmer. n Etuditg NYDA 6u0idg. At ftlt devealapr t. ette ef et fiefiatal ia<e to dokt gervice. / Nadumstte. 7p ear gasll farer ulth UMlA aubdldy. Metal Itea I to 3 end * te 13 øre lidsd sv t-pi satout«e tadfi emfdstad by AMIC, ita 3 om weet sawgal mg, teaf 4 by Aar-Cdeas Ome esager, taer s ad itum 13 by etage Uak ef 10id, tet«6 14 ad t$ #re å00'@ at ates, baed Ifald @ait, ose. AMM=E 2 Page 1 of 2 - 71 - INDIA THRUD ARDC CREDIT PROJECT Evaluation Study of Groundwater Irrigation In Rota District, Rajasthan Iaportant Survey Data Moth/year of sanction of the scheme by ARDC : March 1968 Mouth/year of closure of the scheme : June 1973 Reference year of the study s July 78 - June 79 Wlls with Pumpsets Wells traditional lifts only on with Incoa- Success- existing pump- items Failed plate full wells sets 1. Number of borrowers under the scheme 150 514 271 214 99 2. Sie of the sample 18 61 32 22 - 3. Average size of holding (ha) 3.50 3.37 3.36 4.20 4.20 4. Average benefitting area (ha) - 1.65 2.02 2.25 2.25 5. Cost of investment (Ra per unit) 4,050 6,990 8,300 5,200 13,500 6. Average quantity of well water pumped out (ha-cms) 1/ - 9.87 26.63 35.79 35.79 7. Cropping Intensity (Z) (i) "With project" conditions (a) Directly benefitting area - 132 160 164 164 (b) Benefit zone - 122 137 140 140 (i) "Without project" conditions - 101 101 137 101 8. "With project" farm business Income (Rs per ha) (1) Directly benefitting area - 1,050 1,778 2,260 2,260 (i) Benefit zone - 827 1,321 1.494 1,494 9. Incremental income (Rs per ha) Ci) Directly benefitting area - 556 1,284 482 1,766 (i1) Benefit zone - 321 877 173 1,000 - 72 - A~UE 2 Table 2 ftae 2 of 2 Wells th Puapets Wells traditional lifts only on with ~e- Success- exiatiag pump- Items Failed plete full ml.9 geta 10. Additional o-far= eployment (kn/days per ha) (1) Direetly benfitting arma - 69.2 98.8 14.6 113.4 (11) 3~uefit zona - 48.9 71.4 11.4 78.0 11. Finficitl rate of return (M) (1) Diretly befittng area - 10 27 21 25 (ii) Benefit zon - 11: 29 21 26 12. Total scheme impact - Net additions to: C) Irrigated arma (ha) 666.4 (CU) Somn area :(ha) 931 Ciii) Foodgrains production (tons) 2,932 (iv) Iuc1e~a.l inco m (Ra m) 1.96 (v) Inerme1tal ou-farm e~ployment (mun/years) 2/ 807 11 EZ=I1ding transit loss.. 2/ Ona umu/year - 250 mae/days. Nota: All valuation are at 1978-1979 pricas. AMN 2 - 73 - INDIA TRIRD ARDC CREDIT PROJECT Evaluation Study of Ground Water Irrigation in Nadural District, Tamil Nadu Imortaut Survey Data Moth/year of sanction of the scheme by ARDC : September 1970 Monthlyear of closure of the scheme : June 1976 Reference year of the evaluation study : 1979-80 New wells Renovated with pump- wells with Items sets pumpsets 1. Number of borrowers under the scheme -958 38 2. Sie of the sample 80 10 3. Average size of holding (ha) 1.76 2.74 4. Average benefitting area (ha) 1.00 1.11 5. Cost of investment (Rs per unit) at current prices 12,951 9,410 .6. Cropping intensity (%) 203 164 7. Faza business income (Rs per ha) 7,948 5,276 8. Without project income (s per ha) 1,460 3,125 9. Incremental income (Re per ha) 6,488 2,151 10. Additional on farm employment (I) Nourrecurring (per farm) 634 291 (11) Recurring (per ha) 309 193 11. Financial race of return (%) 49 23 JL... Total scheme impact - Net addition to: (a) Employment recurring (Annual) 1,083 man yeirs (b) Employment non-recurring 2,367 man years (c) Value of produce Rs 5.7 H ANSE 2 -74- Table4 INDIA THIRD ARDC CREDIT PROJECT Evaluation Study of Lift Irrigation in Pune District Important Survey Data YSPP 1/ JSPP 2/ Month/year of sanction of the scheme by ARDC : 1976 Nonth/year of comencement of investment work : Aug 74 Aug 74 Date of sanction by financing bank : 8/29/74 8/09/74 Reference year of the study 1979-80 Item 1. Number of borrowers under the scheme 62 2. Size of sample 43 3. Cost of investment Re 0.233 K 4. Average size of holding 2.47 ha (1) With project condition (a) Irrigated: 2.25 ha By project 1.46 ha By other source 0.79 ha (b) Rainfed 0.22 ba (ii) Without project condition (a) Irrigated by other source 1.59 ha (b) RaInfed 0.87 ha 5. Irrigable command area 85.8 ha 6. Cropping intensity (1) With project 269Z (11) Without project 132Z 7. Incremental income (Ra per ha) 1,307 8. Financial rate of return 24Z 9. Total scheme impact - Net additions to: (1) On-farm employment (man/years) 36 (11) Irrigated area (ha) 28.40 (iii) Value of-production Rs 0.229 K I/ 7SPP - Yeshwant Pant Puravatha Seva Sahakari Sanstha Ltd. 2/ JSPP - Shri Jagdamba Seva Sahakari Pan4 Puravatha Sanstha Ltd. ANNEX 2 75 Table - 75 -. THIRD ARDC CREDIT PROJECT Evaluation Study of Coffee Plantations in Palani Hills, Tamil Nadu Important Survey Data Moth/year of sanction of the scheme by ARDC : October 1969 NMth/year of closure of the scheme : June 1975 Reference year of the evaluation study : 1980-81 New Plantation Items (Arabica) 1. Number of borrowers under the scheme 381 2. Size of the sample 60 3. Average size of holding (ha) 3.65 4. Average benefitting area (ha) 2.08 5. Cost of Investment (as per ha) at current prices 14,326 6. Incremental income (at full development) Sample average (Ra per ha) 6,373 7. Additional on-farm employment (man/days per ha) (i) Non-recurring 2,357 (:i) Recurring 330 8. Financial rate of return 20Z 9. Total scheme impact - Net additions to: (1) Area brought under coffee 532 ha (ii) Coffee production 591 tons Note: All valuations at 1981 prices ANNE 2 -76 - Table 6 INDIA T1IRD ARDC CREDIT PROJECT Zvaluatiod Study of Coconut Development in Chitradurga. Hassan and Tumkur Districts of Karnataka Iportant Survey Data Month/year of sanction of the scheme by ARDC : July 1967 !onthlyear of closure of :he scheme June 1972 Raference year of the study : 1980-81 Item 1. Number of borrowers under the scheme 1,207 2. Size of sample 102 3. Average area under coconut (ha) 1.73 4. Average size of holding (ha) 3.61 5. Number of plants per ha 119 6. Cost of investment per unit (ha) e 11,458 7. Annual gross Income (per ha) Rs 5,846 8. Annual cowc of maintenance (per ha) Rs 627 9. Incremental income (per ha) Ra 5,219 10. Additional on-farm employment (man/days per ha) 1,255 11. Financial rate of return 19Z 12. Total Impact of scheme - Net additions to: (1) Coconut production (Number) 7.1 M (i) On-farm employment 5,600 man/years Note: All valuations at 1981 prices. - 77- AN=E 2 TBIRD ARDC CREDIT PROJECT Evaluation Study of Development of Grape Cultivation in BiJapur District, Karnataka Mportant Survey Data 1. Tear of sanction of the scheme by ARDC : 1968 onth/year of closure of the scheme : March 1977 Reference year of the study : 1979.80 Thompson Item hnab-e-Shahi Seedless 2. (I) Number of borrowers under the scheme 1/ 155 64 (11) Number of sample beneficiaries - 45 20 3. Average size of holding of ample beneficiaries (ha) 13.45 4. Average area under grape per sample beneficiary (ha) 0.47 Cost of Investment 5. 1979-80 prices (s per ha) 55,970 65,035 6. Yield of graoes per ha (kgs) (at full development) (1) Assumed 19,760 14,820 (ii) Actual (during 1979-80) 14,300 14,795 7. Gross value of produce (per ba) Re 44,732 69,283 8. Current cost of cultivation (per ha) Rs 22,329 34,209 9* Farm business income (per ha) Re 22,403 35,074 10. Net incremental income (per ha) Re 18,648 31,320 11. Financial rate of return (i) Anab-e-Shahi 221 (11) Thompson seedless 391 (iii) For the scheme as a whole 272 12. Total scheme impact 2/ - Net additions to: (I) Output of grapes 1,280 Tons (11) On-farn employment generated (a) Non-recurring (for initial two years) 1,442 man/years (b) Recurring 483 man/years Note: All valuations at 1980 prices. 1 Relates to number of borrowers who had availed of all the instalments. 21 Relates to the samole as a who- -78 - ANNEX 2 INDIA THIRD ARDC CREDIT PROJECT Evaluation Study of Fishery Scheme in Kerala State Important Survey Data Mechanized Country Boat Craft Month/year of sanction of the scheme by ARDC : Oct. 1974 Jan. 1976 Month/year of closure of the scheme : Sept.1978 Dec. 1976 Reference year of the study : 1978-1979 1978-1979 1. Number of borrowers under the scheme 118 100 2. Size of the sample 25 10 3. Size of the boat 31-1/2 ft 25 ft 4. Cost of investment (Rs) (1) Engine 60,310 - (iL) Hull 47,860 1,083 (III) Nets and othez Implements 15,610 542 Total 123,780 1,625 5. Fish catch per year (Ra) (1) Prawns 114,340 4,830 (ii) Others 33,890 2,070 Total 148,800 6,900 6. Operating Expenses (Ra) 118,800 2,730 7. Net business income (Ra) 29,430 4,170 8. Financial rate of return 27% above 50% 9. Employment generated (man/years) 708 168 Note: All valuations at 1979 prices. 'AMEZE 2 - 79 -al Page 1 of 2 INDIA THIRD ARDC CREDIT PROJECT Evaluation Study of Dairy Development in MHathurs and haziabad Districts of Uttar Pradesh Important Survey Data P.N.B. 1/ S.B.I. 2/ Moth/year of sanction of the scheme by ARDC : Feb. 1977 June 1978 Mouth/year of closure of the scheme : June 1978 Jan. 1979 Reference period of evaluation study - From June 1977 to (Most recent completed lactation) : September 1980 - Valuation of costs and benefits : At constant 1980 prices Categories of Animals Total High Medium Low Abnormal all Cate Item Yielders Yielders Ylelders Animals gories 1. Total number of animals financed under both the schemes - - - - 1,035 2. Estimated number of inimals In each category 420 270 60 281 1,035 3. Size of the sample of borrowers with respective categories of a-Mmal 42 30 5 28 105 4. Number of scheme animals held by the selected borrowers 52 32 7 33 124 5. Average price per animal 3,700 2,550 2,300 - - 6. Inter-calving period (days) 409 476 464 - - (1) In-milk days 252 252 244 - - (ii) Dry days 157 224 220 - - 7. Yield per in-milk day per animal (litres) 7.61 5.18 3.36 - - 8. Gross receipts from milk per animal - (Ra per annum) at 1980 prices 3,182 1,841 1,223 - - 9. Net annual income per animal 3/ (Ra per annum) 1,062 287 (-)265 - - - 80 -- AIERX 2 Page 2 of 2 Categories of Animals Total High Medium Low Abnorea all Cate Ites Yielders Yielders Tielders Animals ories 10. Annual employment per animal (Mmidays) 114 91 91 - - 11. Financial rate of return (%) 43 23 - - - 12. Total scheme impact: (1) Milk production per annum (litres H) 0.748 0.324 0.083 - - (i) Income per annum (Rs M) 0.461 0.052 (-)0.055 - - (III) Employment per annum (manlyears) 220 148 64 - - I/ P.N.B. - Punjab National Bank 21 S.B.I. - State Bank of ndia 31 Net of material cost and expenses on veterinary treatment and cattle Insurance. Imputed value of family labor, depreciation and interest cost are disregarded. - ANNEX 2 - 81L - Table 10 INDIA THIRD ARDC CREDIT PROJECT Evaluation Study of Sheep Breeding in .Nalgonda District of Andhra Pradesh Important Survey Data Month/year of sanction of the scheme by ARDC : Nov. 1974, revised sanction Feb. 1976 Month/year of closure of the scheme : April 1978- Reference year of study : 1979-80 Unit Size Cate- Cate- Tota gory A gory B All Catt Ites -1 + 30---- 1 + 25 1 + 20 gorie- 1. Total number of borrovers financed under the scheme - - - - 537 2. Estimated number of borrowers under each category 97 247 48 145 537 3. Size of sample of borrowers 14 35 7 21 77 4. Flock size at end 1979-80 42 41 42 37 40 5. Average cost of investment at 1979-80 prices (Rs) 6,645 6,041 5,345 4,335 5,545 6. Technical parameters 1979-80 (1) Lambing (Z) 69.2- 68.2 74.3 73.1 70.0 (ii) Lamb mortality (Z) 13.6 12.3 13.5 12.6 12.7 (iii) Adult mortality (%) 4.9 3.3 2.8 4.1 3.8 7. Gross income per sheep unit during 1979-80 1/ (Rs) 3,487 3,390 3,490 3,074 3,331 8. Maintenance costs per sheep unit during 1979-80 2/ (Rs) 980 955 1,000 807 924 9. Net business income per sheep unit during 1979-80 (Ra) 2,507 2,435 2,490 2,267 2,408 10. Financial rate of return (Z) 25 25 32 33 28 11. Total scheme impact - Net additions to: (i) Income per annum Ra 1.18 M (ii) Animal stock, net of mortality (No) 8,900 (iii) Employment per annum 400 man/years 1/ Including changes in the value of stock. -82- ANNEX 2 Table 11 INDIA THIRD ARDC CREDIT PROJECT Evaluation Study of Poultry Farming 1/ In Jabalpur District of Madhya Praddesh Important Survey Data Monthlyear of sanction of the scheme by ARDC : May 1978 Period of scheme implementation : 1977-1980 Reference period of the study : 1980 Items 1. Sample size 15 2. Average unit size (1) Anticipated (No. of birds) 1,000 (ii) Actual 1,635 2/ 3. Average unit cost at constant 1980 prices 3/ Ra 70,532 4. Average size of loan Rs 29,231 4/ 5. Laying percentage 72% 6. Number of eggs produced per layer per year (4-year average) 230 7. Mortality rate among birds (4-year average) 7.9% 8. Damage of eggs (4-year average) 1.4 9. Average price of 100 eggs (Ra) 38 10. Gross income per annum (4-year average in Ra) 82,043 11. Operational cost per annum (4-year average in Rs) 69,932 12. Net income per annum (4-year average in Ra) 12,111 13. Financial rate of return (%) 16% r Data relates to medium units only. 2/ As at the end of September 1980. 3/ Excluding the cost of land. 4/ Excluding cash credits amounting to Ra 20,460 provided for the purchase of chicks and feed for six months etc. Source: State Bank of India Study Report. AFGHANISTAN3 r PAKISTAN Äro BOMBAY*' -- IBRD 12630R2 INDIA THIRD AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION CREDIT PROJECI Generalized Occurrence of Groundwater, Rainfall, Evaporation and ARDC Regional Offices Large to moderate woll ynelds Alluvmn of nalar rver Nllgysid cooslal armas e 4 L h MD~erne well y~ed E:_"¿ Connolda~ed wsdirmnt, (andslonm, etc) Silv1Sall yelst Pcmnular ha rocks (grame. schist, etc) 1 Deccan trop (bamlt and rulaled voicumr) Thi allussim and dunc snd of dS rt orm PUJk .~Onouz areas Annual rmtell en mll.meters Ä--no Anial Mtporalon in centamcihr' 1( AR DC Regional offices - Stas and Urno Ternlory bouacres DE niem~nonal boundares A rr NEPAL- PR SHAN P S BHUTAN L SrH. iv JWR Yr91 HA . *X ANGLADESH 1 HAO Rf0ES BHOPAL WEST <LV 5 ?ENGA( k- - MACY PRADESIf ENGA 31 CALCuTTA- BURMA or tsS ~;H BHANEswAR 2<" fMfleA RA SH 3 s ERABAD LMGUCIREMADRAS rN D -~ SRI LANKA \ f 3A0 MILES 0 190 21% 10 3W AM 5W) MARCH 1985
Группа Всемирного банка · Project Performance Assessment Report
India - Third Agricultural Refinance and Development Corporation Credit Project
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