India - Upper Krishna (Phase II) Irrigation Project

)- ,& /5"t Docunmnt of The World Bank FoR OFFIClAL USE ONLY LAv/ Z 0 S' - I ~4 . Z / ' ^ IAI Report No. P-4870-IN MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$165 MILLION AND A PROPOSED CREDIT OF SDR 119 MILLION TO INDIA FOR AN UPPER KRISHNA (PHASE II) IRRIGATION PROJECT APRIL 14, 1989 Tis document has a restricted distribution and may be used by reciplents only in the perfonnance of their official dutis Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQlUVALENTS US$1 IRS 14.6 WEIGHTS AND) MEASURES 1 Hectare (ha) = 10,(io0 M2 1 Metric ton (mt) = 1,000 kg i Kilometre (kn) 1,000 metres GDP - Gross Domestic Product GOI - Government of India GOK - Governmentof Kamataka IBRD - Inratdonal Bank for Recons tion and Development ICB - htrnonal Compeiitive Bidding IDA - Internatonal DevelopmentAssocion LCB - Local CompiveBidding PAFS - - ProjectedAffectdFa O&M - Opet and M ta R - Re t and Rehabltatio SDR - Special Drawing Right UKP - Upper Krishna Project EISCAL YEA April 1 - March 31  FOR OFRCIL USE ONLY VlQPSA PR=AMPOECmrERQ&MMN ROE Eonow. ndia, Actng by its Pziet kfdcis: Goovernent of Kamatabk IBRD) Loan US$ 165 Millionequivalent IDA Crdit SDR 119 Million (US$ 160 MilLion equdvalet) TS: IBRD Loan: 20 yeas including a 5-year grce perad, at the BanWs stadad veab intnerru IDA Credit stdd with 35 yes mtwriy GOI to 0OK as Pa of central assistance to stes eepmtson ems and conditions appial atte tm GOI wouldbearto exchange ris 5ing Plan: GOIVGOK US$ 205 milion Craedit Insds USS 1U million IBRD/IDA US$33 millisn Total USS 542 million Of Re=n: 13% Report No. 7406 IN Mao: No. IBRD 19864 IThis document has a resttd distribution and may be used by recipints only in the performance of their oflcbl dulies Is contents may not otherwise be disclosed without World BDk authonlc on.  MEMORANDUM AND PECOMENDATION OF WE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCI1ON AND DEVELOPMENT AND OF THE INT?RNAIONAL DEVELOPIMENTASSOCIATION TO THE EXECUTIVE DIRtECTORS ON A PROPOSED LOAN/CREDrT TO INDIA FOR AN UPPER KRISHNA (PHASE ) IRRIGATION PROJECr 1. The following mnd and idcommendation on a proposed loan of US$ 165 million equivalent and development credit of SDR 119 milion (US$ 160 million equivalent) to India is submitted for approval The proposed loan would be for 20 years, including a five year gace perod, at the Banks standard varable interest me. The proposed credit would be on stadard IDA ters with 35 yeas maturitv. The Loan/Credit would help finance Phase II of Stage 1 of the Upper Krishna Irrigation Project in the state of Karnataka. 2. Backgmud Agriculture in India accounted for about 35% of GDP and 25% of exports in 1986, and employed about 65% of the labor force. Agrictural production has grown steadily at around an annual rate of 2.5% from 1971 to 1984. This impressive performance is mainly the result of substantial increases in the cropped area coming under irrigation, supported by increased use of high yielding varieties, ferdlizer and improved farming practices. However, the contnuing increase in the demand for food in the country requires that agricutural productvity and production be increased substantially in the medium to long term. 3. In India about 60 million ha are now under irrigation. The Government of India (GOI) has continued to invest heavily in expanding imigation systems: in the Seventh Plan (1976-1980) irigation investments totalled Rs 116 billion (about 10% of gross public investment). However, there has been an important shift in the focus of these investments, with the emphasis shifting from constructing new systems to completing on-going projects, and imprving exisdng systems dough better water management aimed at improving the reliability of delivery of water to farmers. The Bank has strongly supported these initiatives. 4. The state of Karnataka has a potentially inigable ara of about 5.5 million ha of which about 40% are presendy under irrigation. The Upper Krishna Project (UKP) which envisages the development of the irrigation potential of the Krishna river has been planned in 2 stages, with each stage to be caried out in a number of phases. At full development of the UKP an esimated additional 1 million ha would be brought under irrigation. At present, Stage 1 of UKP's development has been finned up, aimed at irrigating about 400,000 ha. Phase 1 of Stage 1, which envisages to irrigate about 100,000 ha commenced in 1965 and in the early period of implementation, progress was slow due to institutional weaknesses, changes in design and shortages of funds. Bank Group involvement began in 1978 under the Karnataka Inrigation Project (Credit 788-IN) and the pace of implementation improved, though achievements would have been more impressive if not for institutional weaknesses such as the lack of effective project management and planning, poor procurement practices, and technical deficiencies. At credit closing in March, 1986 about 60,000 ha of the anticipated 100,000 ha in Phase I had been brought under irrigation. Subsequendy, construcdon activities continued and the Phase I target of 100,000 ha has now been achieved. Phase II envisages the irrigation of a further 150,000 ha.  -2- 5. rrigation development of the Krishna river, which entails the construction of dams, and canals, will lead to the sub nce of many villages and fam land, displacing people fiom their homes and means of livelih It is estimated that about 40,000 families (240,000 people) would be displaced as a result of Phase I and II of Stage I of the development of tfie Upper Krishna river. The implementaton of the resetdement and rehabilitation of te affected populton has experenced many problems in the past which has resulted in many undesirable consequences. Durng Phase I of the UKP, the resettement program consisted of compensation for propey losses which was inadequate, and construction of resetdement villages near villages of origin, which ignored the necessity to provide a means of eamning a livelihood near the place of residence of the displaced population. Though the original compensation paid was subsequendy enhanced by the courts, for many people the court enhancement came too late to allow them to buy replacement farm land elsewhere. Avaiable evidence indicates that except for a few larger land owners, the majority of the affected people, consisting of small and medium land owners, landless laborers, artisans and service workers, were unable to regain their pre- projct means of livelihood. Ihe magnitude and complexity of the human setdement requirments as a consequence of the irrigation development were not well understood at the onset of the resetdement and rehabilitation (R&R) effor, wbich ultimately resulted in the poor implementation of the R&R program 6. Rationale for BankIDA Involvement. The proposed project reflects the Bank Group's assistance strategy to support Gors efforts to target investments in the agricultural sector toward developing a teslient agricultural producdon environment aimed at alleviating rral poverty. The project also reflects the Bank Group's strategy to assist India in muinmizing the adverse impact of major development projects on human pDopulations and the environment. The project offers the only pracdcal option for the dcvelopment of Kanataka's economically disadvantaged arid north, where the average per capita income is less than half the averagefor the country as a whole. Bank/IDA involvement would also induce significant initiatives in the operation, maintenance and management of this vital irgaton system, leading to impmve-ments in the reliability of water availability to famers and in the efficiency of water use. Bank/IDA involvement would also ensure that the resettlement and rehabilitation process for the displaced population is well planned, adequately financed and satisfactorily executed. 7. Project Objectives. Key project objectives would be to increase agricultural production, incomes and direct employment opportunities for some 40,000 families and indirecdy for an even larger number of beneficiaries, through the expansion of irrigation by some 150,000 ha in the State's drought prone north, and strengthen the state's technical and managerial skills in project management, planning, design, construction, operation and maintenance of irrigation projects. In addition, a major objective would be to provide the means for the physical relocation and reestablishment of the social and economic resource base of the popultion displaced as a consequence of the project. 8. ctiD tion, The proposed project would finance Phase n of Stage 1 of the UKP. The major rigation components are as follows: (a) the construction of a dam, distributary canals, laterals and field irrigation channels for some 148,000 ha; (b) institutional credit for on-farm development for about 116,000 ha which includes land shaping, farm irrigation and farm drainage; (c) construction of about 460 kan of rural roads and the imprvement of about 140 km and reconstruction of about 76 km of existing roads; (d) establent, construction of facilities, provision of equipment and maintenance of a Water and Land Management Institute; (e) provision for aerial photography and photgrarnmetric mapping of about 650,000 ha, (f) prvision of material and equipment for operation and maintenance of the inigation systems and for establishing a management information system; (g) prcvision of equipment for an anti-malaria campaign; and (h)  -3- technical assistance. lhe R&R MMents would ain to rehabilitate pmject affected people by pr?viding productive resoures drwugh which their economic md soci*i productivity can be restore. Land owners who have lost all or part of their land would be given land. Ohers would be given a choice of altenative income geneating schemes that would enable thiem to at least reach pte-project income levels Displaced families would be provided houselots. The costs associated with the provision of suitable inriastrucure in the settlement villages, port of famiies and their livestock and salvaged building mateials, and the provision of food, fuel and fodder rations duning the transitional resettlement period would also be provided under the project. he project would be carried out over 7-1/2 years. The total cost of the project is estimated at US$542 million. A breakdown of costs and the fing plan are shown i Schle A. To expedite piject mobilizaton, the BaA would retoactively finance project component expendtres, up to a limit of US$ 1.5 million prvided that these expenditures were contacted no more than 12 months prior to signing of the loan/credit and followed Bank/IDA procuremnt procedures and guidelines. These expendimres include procurement of consulting services, purchase of equipment and vehicles and imited civil works (mainly under the R&R component). Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in India are also attached (Schedules C and D). A map of the project area is attached. The St'ff Appraisal Report (No. 7406-IN, dated April 12, 1989) is being distributed separately. 9. Agd Agios. The Govemment of Karnataka has agreed on the following actions: with rpe to irrigaio dm ent. (a) to vest the necessary authority in the project management to en~force strict quality control standards and to plan future inigation development in the state; (b) to design and construct all irrigation systems to appropriate engineering standads; (c) to establish water-user-groups in the irrigation command areas at least one yearin advance of actual construction activities; (d) to introduce appropriate rotatonal water management systems to ensure equitable and timely water supplies to farmers; (e) to take appropiate steps to consult and include fanners in decision maling with regard to location and construction of field channels; (t) to synchronize the planned investments under the project to ensure earliest possible utilization of the investments and to keep pace with the resetdtement ad rehabilitation of displaced people; (g) to recover full operaon and maintenance (O&M) costS through water user charges; (h) to establish a separate O&M organizadion as appropriate; (i) to repair and maintain the systems including the canal reaches; (j) to establish anti-malaria units where necessary and take steps to control and eradicate the disease in the affected areas; with respect to the R&R aspects of the xie . (k) to provide adequate funds and assistance for land owning project affected families (PAFs) towards the purchase of irrigable land (or its rainfed equivalence) in the command area; (1) to provide adequate funds for landless (and small landholders) PAFs towards income generating schemes; (m) to resettle families and family groups in acceptable relocation sites and, (n) to establish Resettlement Committees to assist the affected people and liaise and negotiate vth local authorites on layouts of public amenities. 10. Benefits. By irrigating about 150,000 ha of very low productivity drought prone farm land, greatly increase the incomes of more than 40,000 rural families who own and faim land. The indirect employment benefits to agricultural laborers are also expected to be substantiaL The project would yield substantial production benefits resulting from the increased production of millet, sorghum, grundnut, sunflower seeds, maize, cotton, chickpeas, vegetables, and fodder. The project would also alleviate the adverse consequences induced by the displacement of people as a result of the development of the Upper Krishna river, by at least restoring their standard of living to preproject levels. It is anicipated that as a consequence of the general benefits arising out of the project , many of the displaced population would ultimately significantly improve their standard of living.  -4- The p~jeet also would be nprovidg for and thereby encouraging the displaced fanilies to disprse over a larger arearelieving the Notic pressure in the area around the storage resevors. The internal economicrate o.etumn is 13%. 11. Bkk. The main risks relate to the impact on achieving project objectives as a result of cost over-rums and delays in constmucon work of the iirigafion components leading to a decine in agculual benefits due to poor water use and mana-t. he design and fomiulion of this project have been based on the accumuated experience of the past Bank Grop involvement adequate safeguards have been in . n partcular, sigrdimprov ts in project management and system opons and tenance are planned under this project These initiadves would help minmize these risks. With rWespect to the R&R components, the main rsks relate to unanticipated events and factors which impact on iniiatives of this type. The project has been designed to minimize the riskthatanyfamily affectedbytheprojectwoulddfa to regain their prepoject stadard of living. However,\since any R&R does involve individual choice and initiative by the afected families, some individual failres cannot be discounted. To nimize such occunce, a pilot opeaon was initiated, with assisnce and monitoring from a local NGO, and the lessons learned from this opration have been incorporated in the prqject The risk also exists that R&R a.tivities would suffer from inadequate governmental support. However, the publicatuon by the State Govenmment of the detailed rules to be followed in resetling affected people provides a clear definition of comrehensive rehabilition measurs, and provides a legal frameworc to define and ensure the rights of those affected. 12. RecOMM. I am sadsfied hat the proposed loan and credit would comply with the Artcles of Ageement of the Bank and Assciation respectively and recommend that the Executive Di rs approve the proposed loan and credit. Barber B. Conable President Atachmes Washington, D.C April 14, 1989  i MM KRUIa- w Mu rI- F4eiDp Total A A) DamDa 15.7 13.2 28.9 ((a) Shaba"sr 3fcb Can b 48.0 6.2 54.2 (iii) Mudb Blmncb Caa b 49.9 8.8 58.7 (fv) Jbd B ( b 79.9 16.2 952 (v) RoIs 26.1 52 31.3 (vi) Mppin 1.1 2.5 3.6 (vii) SOde 0.9 0.1 1.0 (vii) Ant-MaiaCatumlg 3.1 0.1 3.2 (5x) Walmi 6.0 2.3 83 (x) ENIbtlm for O&M 12.6 2.2 14.8 B. 3uSLajiab dl 60.1 0.2 60.3 P.ydel Ca30.1 6.4 36.5 0ko 132.1 14.1 1462 Lorad F-ip Total OOWOK 20S -205 P _omzleft 12 -12 BaDu*A 248 77 325 * desUaSmm9d dis .oUS$92mhiOilL b ncludedQ ofam woc*s wmouwt to USS 6.1, 1.1. wad 0.4 millbn mpvIdy.  LQ~~~~DMidd" (USS MILO Pcuemnt Metod a ToWi ProiF-etEment imu b Ac Civil Works 232.2 103.1 6.0 12.5 353.3 (197.5) (87.6) (-) () (285.1) On-trm Development 12.0 12.0 - (-) - ~~~~~~~~(-) Equipment & Ve,icles 5.0 4.5 3.0 12.5 (42) (3.7) (0) - (7-9) Instionl Support - 4.5 - 4.5 and Train (4.5) (4.5) Engieving Adminisation - - 39.3 39.3 (-) (-) Recurn COSt 19.7 (19.7) (-) (-) B. Bk Cmpia and - 52.3 52.3 Land Puses civil Woeds 32.4 - - 32.4 (27.5) ' (1.5) Income Ge g - 7.7 ' 1.7 schm() () Tsoal Cos - - 8.1 - 8.1 (,-) (-) Red tI Costs 0.4 0.4 (-) (-) Totial 2372 140.0 41.3 123.7 542.2 (201.7) (118.8) (4 (-) (325.0) Cow= Amunt % Civi Works by ICE 312.6 8S%a(ontts Equipment A vehicles 7.9 100% Foreig Expendtrs. 100% ex-facory costor 65% local expenmitues, Insutiona Support (O ) 4.5 100% Of expendinuu mQ~R" FjX2 FYewf1SF5 EX2f rX9