India - Uttar Pradesh Social Forestry Project

Document of The World Bank FOR OFFICAL USE ONLY Repwt No. 8809 PROJECT PERFORMANCE AUDIT REPORT INDIA OTTAR PRADESH SOCIAL FORESTRY PROJECT (CREDIT 925-IN) JUNE 28, 1990 Operations Evaluation Department This document has a restricted distribution and may be used by reciplents only In the performance of their official duties. Its contents may not otherwise be disclosed without World Dank athorization. CURR Y 101VALE Appraisal Year (1979) US$ - Rs 8.6 1980 Rs 7.9 1981 Rs 9.1 1982 Rs 9.7 1983 Rs 10.5 1984 Ra 12.5 GOVERNMENT OF INDIA FISCAL YEAR April 1 - March 31 WEIGHTS AND MEASURES Metric System ACCF - Additional Chief Conservatory Forests ACP - Assistant Conservator of Forests CCF - Chief Conservator of Forests ERR - Economic Rate of Return FAO - Food and Agriculture Organization of the United Nations FAO/CP - Food and Agriculture Organization Cooperative Programme FD - Forest Department FEW - Forestry Extension Worker GOI - Government of India GOUP - Government of Uttar Pradesh IDA - International Development Association IFS - Indian Forest Service NEU - Monitoring and Evaluation Unit NABARD - National Bank for Agriculture and Rural Development NCA - National Commission on Agriculture NCAER - National Council on Agricultural Economics and Research NREP - National Rural Employment Program PIR - Planning and Information Resources Office PQLI - Physical Quality of Life Index RLEGP - Rural Landless Employment Guarantee Program SAR - Staff Appraisal Report SCF - Standard Conversion Factor SFD - State Forest Department T&V - Training & Visit TER - Training Extension and Research UP - Uttar Pradesh FOR OFFICLAL JS ONLY THE WORLD BANK washagton. D.C. 20433 U.S.A. Ogice of Disctwse l Opertaon Evanntif June 28, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report on India Uttar Pradesh Social Forestry Project (Credit 925-IN) Attached, for information, is a copy of a report entitled "Project Performance Audit Report on India - Uttar Pradesh Social Forestry Project (Credit 925-IN)* prepared by the Operations Evaluation Department. Attachment This document has a restricted distribution and may be used by Ocipients only in the perfonnangc of their official duties. Its contents may not otherwise be disclosed without World Bank authouiation. FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT INDIA UTTAR PRADESH SOCIAL FORESTRY PROJECT (CR, 925-IN) Table of Contents PaPe No Preface ....................................................... i Basic Data Sheet .............................................. 111 Evaluation Summary............................................ v PROJECT PERFORMANCE AUDIT REPORT I. SCOPE OF THE AUDIT REPORT .............................. . 1 II. PROJECT BACKGROUND: DEVELOPMENT CONTEXT FOR SOCIAL FORESTRY ................................................4 Forest Resources in India ...........................4 The Concept of Social Forestry ..................... 5 The Role of Government ............................. 6 Status of Policy and Legislation ....................7 Investment in the Forestry Sector ...................9 Forestry in Uttar Pradesh ...........................9 III. PROJECT APPRAISAL AND IMPLEMENTATION ....................10 A. Project Appraisal .................................. 10 B. Project fuplementation ............................. 11 Village Woodlots: Self-Managed Schemes 12 Improved Woodstoves and Crematoria Facilities ...... 13 Forestry Research ...................................14 Monitoring and Evaluation ...........................15 Marketing and Distribution ..........................15 IV: OVERALL ASSESSMENT OF PERFORMANCE .......................16 V: FINDINGS AND ISSUES .....................................19 A. Development Problems and Issues .....................19 Objectives and Means: Theory ai'4 Reality .... 19 Institutional and Organizational Problems 22 Implementation Approach and Technology Transfer .... 26 Socioeconomic Dimensions of Social Forestry ........ 28 B. Major Determinants of Performance and Sustainability 30 Project Sustainability ............................. 31 C. Summary of Lessons and Implications ................ 32 References.................................................... 34 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authoriation. PROJECT PERFORMANCE AUDIT REPORT INDIA . UTTAR PRADESH SOCIAL FORESTRY PROJECT (CR. 925-IN) Preface This is the performance audit of the first f%,restry project financed by the Bank in the State of Uttar Pradesh, India. Credit 925-IN was approved on June 5, 1979, in the amount of US$ 23 million. The credit was closed on December 31, 1984. The audit report (PPAR) prepared by the Operations and Evaluation Department (OED) is based on the Project Completion Report (PCR) prepared by the State Government and complemented by a report by the Asia Region, as well as -he Staff Appraisal Report (No. 2386a-IN), the President's Report (No. P-2562), and the Credit Agreement of June 2, 1979. Correspondence with the Borrower and internal Bank memoranda on project issues as * contained in relevant Bank files have also been consulted, and Bank staff associated with the project have been interviewed. An OED mission visited India in January-February, 1990. Discussions were held with project and Government officials, including field staff who were interviewed during visits to the project sites. The information obtained during the mission was used to test the validity of the conclusions of the PCR. The audit concurs with most of the points made by the combined PCR. However, several sectoral and project issues have been selected because of their importance for this and other Bank-supported projects. The valuable assistance provided during the audit mission in- country review by the Government of India and the executing agencies is gratefully acknowledged. In accordance with standard OED procedures, copies of the draft PPAR were sent to the Government, but no comments were received. - LUi - PROJECT PERFORHANCE AUDIT REPORT INDIA UTTAR PRADESH SOCIAL FORESTRY PROJECT (Credit 925-IN) Basic Data Sheet * REY PROJECT DATA Apraisal Actual as etimate 2gg of SAR Total Project Cost (US$ million) 46.5 59.2 120 Credit Amount (US$ million) 23.0 100 Date of Board Approval (molda /yr) 06104779 Date of Effect nso (mo y)01 0 Date Physical Components ed (moldaylyr) 03)31184 12/31/84 Credit Closing Date (moldayr) 12/31 84 12131/84 Economic Rate of Return 12.42 10 81 Institutional Performance good STAFF INPUTS (Staff veeks) I*eapraisal 6.4 Appraz al 77.1 Negotiation 0.6 Suervision 10.2 8.3 15.8 18.4 3.2 10.55 3.2 OtpWr (FAO/CP) 7.5 - - 0.6 0.3 Total 7.5 84.1 10.2 8.9 15.8 18.7 3.2 10.55 3.2 CUMULATIVE DISBURSEMENTS Y80 FY8 Y82 FY83 FY84 FY85 Appraisal Estimate (US$ million) 0.5 2.7 6.4 11.2 16.5 23.0 . Actual (US$ million) 1.3 4.5 9.0 13.7 19.2 23.0 Actual as 2 of Estimate 260 167 141 122 116 100 NoMISSION DATAof Wndays i Perfomance a of (Mgar) Sent by Pem In Field /aeene R~ ating 1_ T~rn k Probems a Identification 05-06/78 FAD/CP 2 30 3 ration 09/78 FAD/CP 3 54 BE 10/78 IDA 5 110 A,B,C,E raisal follow-up 03/79 IDA 2 Be S vision 02 80 IDA 1 6 A 1 - S evision II 1180 IDA 3 18 A'B.C 1 2 evision III 12/81 IDA 2 12 A,C 2 2 F evision IV 04182 IDA 3 18 A,D 2 3 F H 0 rvision V 12/82 IDA 4 24 B,D,Z 2 1 M C T Supevision VI 12/83 IDA 1 4 A 2 1 P pevision VII 01 84 IDA 2 8 A, 1 1 T Supevision VIII 0984 IDA 2 34 B,E 2 2 N Comletion 04-05/86 FADICP 1 23 1 2 2 M OTHER PROJECT DATA Borrower t Government of India/Government of Uttar Pradesh Fiscal Year of Borrower : April 1 - March 31 Name of Currency : Upees (Rs.) Currency Exchange Rates : Appraisal Year US$1 - Rs 8.60 Intervening Years Average : FY 79 US$1 a Re 8.10 F 80 US 1 Is 7.90 FY 81 US 1 Rs 8.95 FY 82 US 1 Re 9.65 FY 83 USI *e 10.30 FY 84 VSj1 * Re 11.90 FY 85 US 1 R Ra 12.20 FY 86 1U11 Re 12.40 Ia A Ariculture, B- Forestry, C - Sociology, D - Rural Development, E - Economics, F - Consultant, 0 t Iacal Analysis 1 - Problem-free or Minor Problems, 2 - Moderate Problems, 3 - Major Problems 1 Improving; 2 - Stationary; 3 - Deteriorating F * Financial; F - Managerial; T - Technical; P - Political 0 - Other *10 analysis excludes farm forestry. PROJECT PERFORMANCE AUDIT REPORT INDIA UTTAR PRADESH SOCIAL FORESTRY PROJECT (CR, 925-IN) Evaluation Summary Introduction 1. The Social Forestry Project was the first forestry operation to be financed by the Bank in the State of Uttar Pradesh, India. The state has faced two significant problems: a continuous depletion of its natural forests and a crisis of significant proportions in fuelwood supplies. This project, as part of the social forestry program of the state, represented a concerted response to the situation and a first attempt to carry out social forestry on a large scale. 2. Social forestry is a program designed to create the necessary . conditions for tree planting outside the traditional domains of the forest lands. This program often includes tree planting in farmers' fields; in village lands held in common property; in areas near main roads, railways . and irrigation canals; and in wastelands that are poor in terms ot soil and productivity. At the time the project was designed, it was expected that social forestry would lead to the attainment of several objectives, responding to the fact that the lands in questions were used (and still are) by many different groups in society (e.g., livestock herders, farmers), and that the rights of ownership and use were multiple. Central to the design and implementation were the need for an active participation of the local population, and the pilot and sector loan nature of several activities. Project Objectives 3. This project had two principal objectives, one related to afforestation and the other to institution building. The priority given to afforestation was in response to the existing fuelwood and fodder crises. In addition, it was explicitly recognized that the project was designed to provide benefits to the poorest sections of the population through employment and establishment of plantations which were income earning in the short term. 4. The principal components of the project were: Planting 48,600 hectares in public and village lands, including a minium of 3000 hectares of pilot community self- planting in village common lands; to demonstrate to the rural population the benefits from afforestation; and to distribute 8 million seedlings for planting on private lands equivalent to 4000 hectares; - vi - - Securing the cooperation of the population for social forestry plantings by involving the villages in planning and execution; and - Building an organization required to support a long-term social forestry program through on-the-job training of foresters in community development. 5. Total project costs were estimate* st US$ 46.5 million, of which less than US$ 0.18 million was in foreign exchange. About 51 percent of the total project cost was financed by IDA, and the remaining amount was contributed by the State Government of Uttar Pradesh. The actual cost of the project was estimated at Rs. 479.72 million compared with an initial estimate of Rs. 395.18 million. Though all expenditures for additional plLnting led to a cost overrun, these are considered justified. Project Imlementation 6. Most of the physical targets of the project were accomplished. However, several components that either failed, or were not implemented, proved to be central to the performance and the sustainability of the program. These components were: self-managed village woodlots, improved woodstoves and crematorias, forestry research, monitoring and evaluation and marketing and distribution studies. Most of the constraints faced during implementation were institutional and organizational. The most important institutional constraint was the dispute over property and user rights over the land and the forest resources at the village level. The most important organizational constraint was related to the ability of some government agencies (e.g., agricultural research) to adequately service the project. Project Results 7. The overall performance of this project has been rated satisfac- tory. Six basic considerations justify the rating: the targets as defined during appraisal and as stated in the mid-term evaluation and supervision reports were accomplished to a large extent; the demonstration effects regarding tree planting in all areas of economic activity were significant; the program has created assets in a very effective way and has therefore contributed to the process of capital formation in the rural sector; the significant set of benefits from the positive changes in landscape; the overall economic impact in farmers fields, in village commons and in the forest was also significant; and the effectiveness and flexibility demonstrated by the staff from the Forestry Department and, to some extent, by Bank staff were unprecedented. 8. Despite the above-mentioned benefits, the audit questions the level of economic returns as calculated in the PCR, on the grounds that (i) prices are lower than assumed in the economic analysis, and that (ii) the PCR attributes some benefits to the projects that are really not incremental in nature. The audit concludes that the rate of return of this project is equal to the assumed opportunity cost of capital. - vii - Sustainabiliw3 9. The activities implemented by the project are likely to be sustainable. In the farm forestry program, farmers are aware of the economic value of trees, and are behaving according to market signals as these affect profitability. In the village woodlots, sustainability depends mainly on the ability of the Forestry Department to progressively transfer the management of the lots to the participating beneficiaries. The sustainability of the plantations near the roads, canals and railways is acceptable, although in the long term there are many exogenous factors that will play an important role (e.g., extent of climatic changes and severity/frequency of droughts). The audit states that the principal determinants of sustainability in a social forestry program of this type are mainly related to the level and composition of three forms of capital: natural, institutional and cultural. In some sense this is relatively unique to social forestry. Findings and Lessons 10. There are four major issues discussed in the audit memorandum. Firs, the extent to which there were too many objectives and the extent to which the means chosen to attain those objectives--particularly the sectoral and macroeconomic objectives- -represented only necessary but not - sufficient conditions. The correspondence between the objectives and means in forestry projects requires much more attention than it is given now. Seco., the Bank underestimated the role and complexity of institutional arrangements, particularly of those dealing with property rights over the village lands. As a result, several project components were not implemen- ted as appraised and new problems have arisen with the achievement of full implementation. Another institutional issue was the limited effectiveness of the panchayat in implementing the project. This emphasizes the need to establish an adequate social unit for implementation very early in the project cycle. Thir_, the project was too target-ridden and as a result several problems were created in terms of the tree species planted, the coverage of the project, and who benefited from the project. Within this context, the audit notes the important role by the tree nurseries in technology transfer. Because most nurseries have not been properly managed, the plant/genetic material is deficient. Fourth, the project did not achieved the desired targets in those components that were specifically designed to benefit the poorest of the poor. This raises questions on the ability to use social forestry alone to change long-standing patterns of income distribution. Finally, three socioeconomic aspects are discussed: the economic returns of the project, the role of marketing and distribution and the equity impacts. The level of performance in all those areas was below expectations. PROJECT PERFORMANCE AUDIT REPORT INDIA UTTAR PRADESH SOCIAL FORESTRY PROJECT (CR. 925-IN) . SCOPE OF THE AUDIT REPORT 1. Decision makers in India and the public at large have come to the realization that land, water, forest and vegetatiLn are being depleted at an increasing rate. The depletion of the forest is accompanied by a rural sector energy crisis of significant proportions. One response to this situation has been the formulation and implementation of a social forestry program in almost every state of the Union. Social forestry has long been active in India; the Bank's participation begar. in 1979. This widely known program aspires to be the most important contr!' ution to the solution of these problems. 2. There is neither an accepted definition of the term "social forestry" nor a consensus about how "social" social forestry should actually be. The term, however, generally refers to -,' following aspects of forestry development: (a) activities outside th- tatural forests or areas classified as forest lands, (b) activities with a high degree of participation from the local communities (e.g., village forestry or commu- nity forestry) or from individual farmers (e.g., farm forestry), (c) acti- vities that produce wood for fuel purposes, particularly for low-income rural households, (d) activities that contribute to the "social good", such as the improvement of the natural environment, or the conservation of land and forest resources, and (e) activities that through forest devc-opment would help generate sustainable assets for the very low-income rural population. 3. Soc.al forestry activities are multidimensional and complex; they involve much more than just planting trees. Development performance is influenced by important intersectoral linkages including energy, industry and agriculture, and effectiveness in imnlementation is affected by sec- toral policy leakages related to changes in land use, property rights and resource allocation. S3stainabiLity relies more heavily on the nature of human, natural, and especially institutional and cultural capital; physical and financial capital are necessary, but alone they provide no guarantee of sustainability. Although not unique to social forestry, the greater impor- tance of these other forms of capital distinguishes social forestry from other forestry development programs such as industrial plantations and other rural sector activities as well. These additional dimensions render the evaluation process more complex, particularly with regard to the as- sessment of the validity or relative importance of objectives (e.g., pro- duction of energy, environmental improvements, equity) and the effective- ness of the project components chosen to attain those objectives. S2- 4. This social forestry project can be defined in several ways, depending upon the manner in which one interprets its objectives over space and time. One way is to assume that this operation is a tEaditional groiect; i.e., having spatial and time boundaries similar to those of any other project. One drawback to this characterization is its failure to recognize important socioeconemic linkages (e.g., changes in land alloca- tions when "land" is used as the unit of account in the evaluation process) and its tendency to limit the extent to which one can identify the ultimate causes of performance, if new operational and policy dimensions are to be designed and implemented. It is also possible to define this operation as a i1lot prolect. In this case, most components represent means to test the ability of instruments and to learn from their results. As a pilot project, several activities are likely to be found unsatisfactory; this is an accepted part of thu trial and error process. Similarly, changes in strategy in mid-course or redefinitions of tasks that prove to have low returns may well indicate a "healrhy, degree of flexibility needed in pilot operations, rather than a deviation from, or a failure to attain the or.ginal design. One might also regard this operation as a sector loan to the forestry sector. An evaluation of a sector operation would necessarily emphasize a critical assessment of the strategy (if one exists), the policy and institutional framework, and the social infrastructure, including the role of the state. Interpreting this project as a sectoral operation is also justified by its open-ended time frame and its broad coverage; Uttar Pradesh is larger than many Bank client countries. 5. A comprehensive evaluation addressing all the above-mentioned dimensions goes beyond the scope of this audit and it would require reliable data. Unfortunately, data is not available because during the first phase of the social forestry program, monitoring and evaluation acti- vities were either absent or ineffective. While this situation does not invalidate the conclusions presented in this report or in the PCR, it does illustrate the urgent need to carry out a comprehensive study of the whole social forestry in India soon after the completion of most on-goilg projects. 6. This audit assesses the development performance of the individual project in question, although _. also raises a series of issues that require more investigation and whose context must be the social forestry program as a whole. To strengthen the validity of the findings, this audit relies on information from the project completion report prepared by the Government of India, the World Bank response to the PCR, the project files, as well as a review of a number of documents (see Reference section) and the findings of the field mission to India of January 23 - February 15, 1990. It is hoped that this discussion and the lessons presented will help the implementation of the second and third generation of on-going social forestry projects. 7. The presentation is divided as follows: Part II addresses the the development context within which the project was designed and implemented (i.e., the hypotheses of the "without project" situation); Part III makes reference to the appraisal process and to achievements during implemen- tation; Part IV summarizes the performance assessment; and rart V discusses the major findings and issues. - 3 - 8. It is important to note that the text of this audit is very similar to that of the Gujarat audit. There are several reasons that explain the approach taken. First, the two audits concentrate on a limited number of development performance related issues. Clearly, there are many more issues facing social forestry development in India, but to present all those issues will distract the policy dialogue to areas that are believed secondary at this stage. However, those areas that are well covered in the PCRs are not repeated here. Secona, the two audits focus on issues affecting the forestry sector at large. The solution to these issues are thought to represent necessary conditions for the achievement of most sectoral and project objectives. Third, the two PCRs and their overview prepared by Bank staff were essentially the same for both projects, representing a first levol of selectivity in the evaluation process. That sel ctivity was overall accepted, given the similarities in objectives, instruments and policies prevailing during the preparation, appraisal and implementation processes. 9. Nevertheless, there are important differences between the two cited projects that should be noted. First of all, during appraisal the social forestry project in this project was much more explicit in designing activities that would benefit the poorest of the poor (i.e., the Antyodhayas). In particular, the poor were to directly benefit from additional employment (direcLly targeted to the poor) and from small scale productive activities (e.g., planting of trees for sericulture). A discussion about the effectiveness and development impact of those components is presented in this audit and should be of interest to all those social forestry projects that are geared to benefit the poor. Second, there are differences between the two audits regarding the proposed financing framework. In the case of Gujarat, it was expected that a significant proportion of funds would be provided by the panchayats, while in this project, it was financed by the State Government and the Bank. The idea behind local financing was to increase the level of commitment by the people that were to benefit. However, since the audit mission concluded that the level of commitment at the local level depended more on institutional and sociocultural factors than on financing, this issue has not been addressed in any level of detail. However, the sections dealing with institutional and socioeconomic issues are explicit about this problem. Third, the projects had different pricing policies for seedlings. In this case, the charges were explicitly presented in the appraisal report, while in Gujarat this item was less explicit. The audit mission concluded that pricing of seedlings is an important issue that needs to be studied at the project and sector level (and probably at the country level), although pricing as such was not a major determinant of performance of the projects in question. This is not to say that pricing of seedlings, and pricing policies in general, are not important, particularly for the second generation projects. Adequate sector work is needed in this area. The audit emphasizes this issue when discussing the role of marketing. Finally, the performance of extension is perceived to be different in both projects. The audit believes that the subject is well treated in the PCRs and that this did not warrant further elaboration in this memorandum. II. PROJECT BACKGROUND: DEVELPMEnT CONTEXT FOR SOCIAL FORESTRY 10. There were several facts and perceptions that played a major influence in defining the nature and scope of the project. Although these have been identified by the PCR in one form or another, it is important to repeat those (particularly the perceptions) that are central to understand- ing the main findings of this audit. This part addresses them under the following categories: the forest resources in India, the concept of social forestry, the role of government, the status of policy and legislation, the investments in the sector, and forestry in Gujarat. A comprehensive dis- cussion of those subjects goes beyond the scope of this audit. The vacuum created by the lack of sector work make comprehensiveness a goal difficult to achieve. Forest Resources in India 11. The pressure on the country's forest resources was perceived as extremely critical, and this project was to play a central role in changing past trends. Population growth and the corresponding demand for fuelwood and food, the increasing overpopulation of cattle ir non-agricultural lands, and the continuous conflicts over property rights were identified as the most significant factors leading to the rapid depletion of forest resources. Thus, India was facing an environmental crisis where the rates of soil erosion and sedimentation were increasing, and the risks from floods and other climatic changes were clearly visible. This environmental crisis was compounded by a disproportionate demand for fuelwood by rural and urban households, and by the landless' encroachment into the forest for subsistence needs. In areas where forest resources were already depleted or absent (i.e., agricultural lands, barren lands) the environmental/ fuelvood crises was directly linked to farmers consumption of cow dung, agricultural residues and other agricultural wastes; all of which were being used as fuel rather than as fertilizer. This pattern was expected to cause significant changes in land productivity and thus in food supplies. 12. The pressure on the scarce natural forest resources was central to the design and preparation of the project. Depletion of the natural forest represented a major cost to society, as forests were defined as part of the social good. Central to the debate was the assessment of available forest resources. How many hectares were under natural forest wes a question that policy makers, and even researchers, could never reach any definite conclu- sion. Hard and reliable data regarding how much land was under natural forest was unavailable and monitoring of biomass was also absent. Since the principal development constraint in the forestry sector was defined to be a "supply" problem--and the social forestry program was perceived as a major way to increase the supply through tree planting--the answer to that essential question was never given the priority that it deserved. 13. Even today, the extent of forest resources in India is subject to much debate; there are several different forest classifications and the assessments of tree stands vary considerably. In most reports published at the time, it was invariably quoted that India had 75 million hectares under forests, despite the ever-explicit acknowledgement of the continuous and -5- increasing pressures from population growth and livestock. Recent studies, also subject to much debate, have estimated that only 35 million hectares have reasonable tree cover, and possibly about six uillion hectares retain a full complement of true forest. The response to the situation has been diverse, but in recent years several ordinances have been issued limiting the extent to which people are allowed to harvest .s. 14. The same controversy permeates discussions on fuelwood consumption and on the extent to u .i forest sector programs have actually reduced the fuelwood deficit. T Ns -.oual Council of Applied Economic Research esti- mated that the wood -. 'urce requirements in 1978/79 revealed a crisis of serious proportions iu country: total fuelvood consumption was at 90 M tons; one third of t'-is in the form of logs, the rest in twigs and branches. In addition, 71 N tons of cow dung were burned. Demand projec- tions for the year 2000 estimated that 200 M m3 of fuelwood would be con- sumed without allowing for any substitution between the wood and the dung. If there was a concerted effort to replace 50 percent of the total amount of dung consumed as fuel, another 30 M m3 of wood would be needed as fuel. These perceptions were very much colored by the fact that non-commercial energy accounted for at least 80 percent of the fuel consumed in rural areas and 50 percent in urban areas. At the time, most of the supply was coming from reserve forests and from trees grown in private and communal lands. As the fuel consumption pattern was highly correlated with relative income, and most of the fuelvood was collected by women, the distributional impacts of the crises were central to the justification of social forestry. 15. A very important set of dimensions in both crises was related to the disregard for their spatial and intertemporal nature. Most documents that served as the basis for the design of the project focussed mainly on large aggregates rather than on pointing out the diversities involved. As a result of this lack of recognition, the effectiveness of several compo- nents proved to be limited. Hypotheses and development scenarios were accepted without much analysis, and most of the debate focused on data and information dealing with "averages". This approach was, and still is, inadequate and therefore the issue has been highlighted by this audit as key in the assessment of development performance. More particularly, one basic assumption during preparation was that any increase in tree planting, regardless of the spatial and intertemporal characteristics, would diminish the pressure on the natural forest and, consequently, would reduce the fuelvood crisis in a significant way. This assumption has proven to be misleading and, in several instances, also incorrect. The nature of the environmental and energy crises in one part of the state is very different from another part, and there are no programs that can be applied uniformly across the board. The Concept of Social Forestry 16. The idea of social forestry in India came much before Bank involvement in the sector. The program was designed with a large number of objectives in mind, the most important being environmental improvements, significant reduction of the fuelvood deficit, and increasing the welfare of the poor. In addition, there was an increasing awareness among many administrators that the attainment of those objectives was only feasible if the forestry program would go far beyond the optimal exploitation of the - 6 - natural forest (i.e., forest land under the Government jurisdiction). Therefore, the development of forestry activities outside traditional forest reserves became central to the program, and the active participation of the local population became not only necessary, but a condition to the success of the whole program. It was the National Commission (NCA) on Agriculture that officially coined the "social forestry" concept in 1976; the concept denoted tree raising programs to supply firewood, fodder, small timber and minor forest produce to rural populations. The activity of raising trees included farm lands, village wastelands and community forest areas. According to the NCA, the scope for social forestry program was to include farm forestry, extension forestry, reforestation of degraded forests and recreation forests. Farm forestry included motivating farmers to take up plantation work on boundaries of their field and wastelands. The extension forestry envisaged plantation on government wasteland, panchayat land/village commons, roads, canal banks and railway lines. The program also included improvements in the quality of life in urban areas by developing recreational centers in forests and preserving wildlife. The Role of Government 17. The Government was envisaged to play a central role, particularly given the fact that the project was going to be the first large scale attempt to plant trees outside the forest areas. The traditional role of the government in forest protection and in the afforestation of degraded forest were also identified as important tasks of the government Forestry Department (although the domain of action is a subject of great controversy today). The planting of trees on farm, village and communal lands was encouraged by the government as early as 1950s. But it was not until the mid 70s that the government made a major effort to go beyond traditional reserve forest areas and to seek the active participation of the local population. This was in response to the above-mentioned NCA Report. The change in priorities was accompanied by several institutional and organiza- tional reforms. At the Forestry Department level, the government recom- mended at the time its reorganization in each state whereby two wings were recognized: one to remain in charge of traditional production forestry and wildlife activities and another to develop social forestry. As the project was fordulated, the major target for institutional development was the social forestry wing. 18. The role of the government was conceived to be multidimensional in nature. In areas classified as forest lands and state lands (e.g., canal and railway sides) the government was to implement all the envisaged acti- vities, including plantation establishment, management, regulation, protec- tion and law enforcement. In the areas where land was held in common property, the role of the government was defined less clearly, with a prime role in motivation, technology transfer, and limited participation in establishment and management. And in areas of private property, the government would only deal with extension and technology transfer. As it turned out, dealing with aspects beyond the traditional role of the forestry departments required a major change in mentality and approach. This change really took place and, in many instances, objectives were achieved only as a result of a very effective forestry department. As time - 7 - vent by and as several international donors got involved in different aspects of the social forestry program, the social forestry wing grew (probably disproportionately) by comparison to other wings of the department. 19. The role of the government in social forestry has evolved con- siderably in response to gains in experience, to changes in the socio- political environment and to the policy dialogue with the Bank and other donors. Changes have also responded to the progressive importance of NGOs, although this has been a more recent phenomenon that has not affected the first phase of the program. Another powerful force of change is the poli- tical milieu within the state. Government commitment and vision of the program's very long-term goals have greatly influenced the involvement of decision makers and the public at large. Status of Policy and Legislation 20. During project preparation, very little emphasis was given to the role of policy and legislation; i.e., institutional arrangements. Several assumptions were made about land ownership, property and user rights, prices and incentives, regulations and law enforcement, and the like. Project design assumed that the State owned most of the forest land or that other claims were not very important to the proper implementation of the project. it was also assumed that there were no major institutional problems in establishing tree planting programs in the land held in common. The Bank was much more a firm advocate of those assumptions than the government was. This is demonstrated by the important change in the size of the component dealing with village self-help programs by comparison with what the government originally proposed. As stated later on in this report, nothing was far from reality and the lack of success in some of the components was due mainly to those assumptions. 21. It was perceived at the time that the policy environment was conducive to the successful implementation of the project. Very few policy issues were studied during preparation and appraisal, and there was r1o Bank request to prepare a policy or a strategy before the project was ready to be implemented. Perhaps the r%tionale was that the crises were so deep and so widespread that planting trees had to be done, regardless. As a result, the Bank did not allocate the necessary resources to carefully study the very large number of institutional changes that had taken place in the forestry sector, the fragile institutional stability that those changes caused and the serious controversy those changes had and will continue to generate. Since this audit concludes that one of the principal determin- ants of performance and sustainability of this project is the institutional environment surrounding the project, a summary of important institutional changes are presented here. 22. Several commissions and committees on forestry have been set up periodically to define the nature of forest lands and review the use and ownership rights of forests and forest produce. In general, before the advent of the British rule in India, the regulation of the people's use of forest was mainly through local customs. In the late nineteenth century, the British introduced a system of forest administration and passed a series of Forest Acts to regulate the exploitation of the natural forest -8- and implement the needed management and conservation. Most of the approach was related to production and marketing of high-value forest products. The Forest Act of 1875 divided the forest into three main categories: reserved forest, protected forest and village forest. The forest acts passed later increased the government control over forests and strengthened the forest department's authority to assign rights. In 1928, The Royal Commissiin on Agriculture was the first to sow the seed for fuelwood and extension forestry in India, and recommended the design of most of the components included in the project. The commission also recommended that the best method of establishing village forests was by handing over to village management or the panchayats certain wooded areas than under the management of the Forest Department. In 1935, with the formation of the provincial legislatures, forestry was included under the provincial list and the provinces made their own laws to regulate the forest. 23. After independence, the National Forest Policy of 1952 became an extension of the previous policy and it envisaged that a balance and com- plimentary in land use was important, and that the claims of communities living in and around forests should not conflict with these objectives. The policy also recognized the need for establishing tree planting programs not only to sustain the supply of timber but also the needed supplies of fuelwood and fodder. In accordance with the policy, the management of village forests or fuel forests was to be entrusted to village panchayats with prior considerations and appropriate safeguards. The Scheduled Areas and Scheduled Tribes Commission in 1960 criticized the gradual extension of government authority over forests which was, in effect, detrimental to tribal life and tribal communities over forests. On the other hand, the National Commission on Agriculture came out with a number of recommenda- tions in 1976 which were quite opposed to those made by the Scheduled Areas and Scheduled Tribes Commission. It advocated commercialization of forests at all costs and recommended regularization of forest dwellers' rights over forest produce. The basic objectives of the national forest policy put forth by the NCA were to develor forests to meet wood and wood-based indus- trial needs of the country, to meet fuelwood, fodder and timber needs of the rural community and to serve the protective and recreational requirements of the local villages. 24. In 1976 the subject of forests was transferred again from the state list to the concurrent list. It decreased the states' powers and enhanced the powers of the central government over forests. This was followed by the Forest Conservation Act of 1980 which prohibited the state governments from the use of forest lands for any other purposes without the prior approval of the central government. Amidst controversy that the forestry policy was detrimental to the tribal community, the Committee on Forest and Tribals (1980) and the National Commission on Development of Backward Areas (1980) both reviewed the forest policy with reference to the tribal economy but produced conflicting recommendations. The CFTI recom- mended a forest policy and system directed to benefit the tribals from forestry resources, whereas the NCDBA suggested to curtail the rights of the tribal communities over forest land and produce. The Committee for Review of Rights and Concessions in Forest Area recommended in 1981 that the exercise of rights and concessions should be restrictee only to those tribals and agricultural and rural people residing within a maximum of 8 kms from the existing forests. -9- 25. The draft National Forest Policy of 1988 aims to ensure environ- mental stability, ecological balance, efficient utilization of forest produce, and meet the fuelvood, fodder, forest produce and small timber needs of the rural and tribal populations. The stated national goal is to have a minimum of one-third of the total land area of the country under forest cover. The policy also envisages that all village and community lands not required for other productive purposes should be brought under tree crops and fodder resources. The government is committed to support the village community management of the village forests with technical assistance and other inputs, and the revenue generated to be given to the panchayats that own the lands. The policy also considers ownership rights over trees for individuals, particularly from the weaker sections of the community. Investment in the Forestry Sector 26. The project represented a quantum change in public investment by comparison to past records. In the past, the forestry sector had received a relatively low proportion of the resources allocated to the rural sector. In fact, even within the Bank the forestry sector had not received the status that it received after the Policy Paper issued in 1978. An impor- tant aspect of that policy statement was to increase the investment * resources to the forestry sector. 27. The GOI had budgeted for the forestry sector since the first year . plan in 1951. In nominal terms, the outlays in the forestry sector have increased several fold (i.e., Rs 7.64 crores in the First Plan to Rs. 692.5 crores in the Sixth Plan), although in total investment the increase has not been proportional to the perceived benefits from forestry. The share of the forestry sector to total public outlays has on average been less than one percent. Therefore the project was designed and implemented with- in a policy environment that did not reveal high priority for the develop- ment of the forestry sector. This had important implications for demon- strating that there were alternative ways to successfully invest in forestry and that it was possible to have "bankablew projects. Forestry in Uttar Pradesh 28. Uttar Pradesh is the most populated state in India. There axe over 112,000 villages with an average of 700 people, and livestock forms an integral part of the rural economy and village life. Forests occupy 17 percent of the total area,- and with increasing human population and livestock pressure, there is a large scale encroachment process taking place. The per-capita forest area amounts to 0.14 hectares, far below the national average. One of the most significant features of forest land in Uttar Pradesh is its distribution among different regions. Most forests are in the Hills and the north and far northwest, and to a lesser extent in the eastern part of the state. In the Gangetic Plains, where 85 percent of the human population is located and the demand for forest products are the greatest, forest land occupies less than 7 percent of the total area. Also, yields of tree varieties used for commercial purposes are rather low in the Hills due to high altitudes and unsuitable growing conditions. - 10 - 29. Nevertheless, the forestry sector plays a significant role in contributing to the state economy, by supporting a number of large scale industries and several small scale operations and cottage industries. Needless to emphasize the role of forests in preventing land degradation and other environmental problems (e.g., floods). 30. Rural households meet almost 95 percent of their fuel needs from non-commercial fuels: fuelwood representing 42 percent; vegetable wastes, 29 percent; and cow dung, 24 percent. There are great variations in con- sumption levels across regions and in composition of the fuelvood budget of the typical rural family. In the hills, energy consumption is 30 percent higher than in the plains because of colder temperatures, and most of that consumption is fuelvood. In the plains of Western Uttar Pradesh, the sig- nificant sources of fuel are agricultural residues and cow dung; fuelwood plays an insignificant role. 31. The very significant demand for wood to satisfy industrial pur- poses plays a major role in the forestry economy. The estimated annual demand for industrial-wood was 4 to 5.5 million m3 in 1985, with a total production of around 1 million m3. By the year 2000 demand for fodder is expected to be twice that of the supply. 32. It is interesting to note that shortages of forestry products were realized as early as 1938, when the Forestry Department created a division to establish 2,300 hectares of forest land and create fuel and fodder reserves. But it was not until 1976 that the social forestry program was launched formally. The program included fuelwood plantations, road side planting, afforestation of ravines and degraded forests and distribution of seedlings. Shortage oZ financial and other resources kept the program small. III. PROJECT APPRAISAL AND IMPLEMENTATION A. Project Anraisal 33. This project was appraised back-to-back with the Gujarat Community Forestry Project (Cr. 961-IN). The objectives -sere for the most part the same, but several differences are important to note. The Uttar Pradesh Social Forestry Project had two principal objectives, one related to afforestation and the other to institution building. The priority given to afforestation was in response to the existing fuelvood and fodder crises along with shortage of forestry-based raw materials for cottage industries. The emphasis on fodder was noticeable in this context due to the prominent role played by the livestock economy all along the state. However, in addition to these objectives, it was explicitly recognized that the project was designed to provide benefits to the poorest sections of the population (i.e., Antyodayaa). These benefits would come from employment and from the establishment of plantations which were income earning in the short term (e.g., plantation of mulberry trees for sericulture). - 11 - 34. The attainment of these objectives were to result from the following actions or components: (i) Planting 48,600 hectares in public and village lands, including a minimum of 3000 hectares of pilot community self- planting in village common lands; to demonstrate to the rural population the benefits from afforestation; and to distribute 3 million seedlings for planting on private lands equivalent to 4000 hectares; (ii) Securing the cooperation of the population for social forestry plantings by involving the villages in planning and execution; and (iii) Building an organization required to support a long-term social forestry program through on-the-job training of foresters in community development. 35. Although the objectives and components of this project are similar to those of other social forestry projects in India, this project placed greater emphasis on the institution building aspects of the program, the necessity to implement activities that would generate income and improve the welfare of the poorest of the poor, and the recognition that several of the project componen s were experimental in nature. In this regard the appraisal project of the document differs significantly from that of the Gujarat Community Forestry Project. 36. The total cost of the project was estimated at US $ 46.5 million, of which less than US $ 0.18 million was in foreign exchange. About 51 percent of the total project cost was financed by IDA, and the remaining amount was contributed by the State Government of Uttar Pradesh. To ensure the early start of the project and speedy effective implementation, retro- active financing was agreed upon. The actual cost of the project was esti- mated at about Rs 479.72 million as against an initial estimate of Rs. 395.18 million. Though all expenditures for additional planting led to a cost overrun, these are considered justified. B. Project Implementation 37. The audit agrees with the main conclusions of the PCR regarding implementation. However, since the PCR's main emphasis was on the extent to which the project achieved the physical targets, several dimensions of implementation got lost. This report singles out five areas that prove to be central in terms of the problems this project (and its successors) faces today. These areas are: self-managed village woodlots, improve woodstoves and crematorias, forestry research, monitoring and evaluation and marketing/distribution studies. 38. If one looks into the resources committed to the above-mentioned components it would be easy, though misleading, to concluded that there were not important implementation issues in this project. It is true that these components did not claim a significant proportion of the project - 12 - resources, or that the failure to implement them did not generate major losses to the economy. However, given the pilot and the sector nature of this project, the analysis of why those component failed, or what oppor- tunities have been missed or what new problems this has created, his audit explicitly addresses the inadequate performance of each of e above- mentioned components. In some cases, the reasons why these implerentation issues are important go beyond the narrow confines of an individual compo- nent. For example, the failure in implementing a component often demon- strated that the necessary conditions were absent and a large scale appli- cation, or replicability, prove to be disastrous. Also the failure to adequately implement a particular component has resulted in a major vacuum (conceptual/knowledge as well as practical) in several organizational and institutional aspects of the program (e.g., excessive participation by the Forestry Department, economic pricing of seedlings, lack of village parti- cipation), and no feasible solutions have yet been found. Village Woodlots: Self-Managed Schemes 39. As the program suc.eeded in tree planting within areas having no conflicts of property rights (e.g., farmers fields, state forest lands), the achievements in other areas left much to be desired. A typical case was the so-called self-managed village woodlots, established within the confines of panchayat or village lands, both owned in common. The disputes over property rights were never resolved because of (i) a major misunder- standing of the nature and dynamics in the allocation and use of natural resources held in common property and (ii) historic changes in the assign- ment of rights that have never been totally accepted by the population affected (see Part II and Part V). 40. The Bank had a limited understanding of how to deal with common property resources in general and commonly owned land, in particular. To resolve impasses resulting from internal pressures to demonstrate the importance of people's participation in the establishment and in the management of plantations, a "village contract" was introduced as an instrument of management as well as a declaration of user rights. This instrument was introduced very late during the design and appraisal. Documentation in the project files, and information gathered during the audit's field mission, demonstrate that these contracts were never widely accepted by the beneficiaries or believed (by decision makers) to be effec- tive in managing or using common property resources. The village con- tracts became a convenient device to convince the critics that low income people would benefit from the project. Experience shows that despite a genuine effort, by the Bank and the Government, to provide the necessary institutional arrangements for people to participate in the project, reality proved to be much more complex institutionally, legally, politi- cally and socially. 41. It is well known now that the village woodlot schemes failed to achieve the desired objectives (in-luding equity). To comply with project targets, this component was implemented by the Forestry Department, with no real participation of villagers. _he Department not only established the village woodlots but it also managed them during the whole period. Even today the Department manages most village woodlots, despite the fact that the financial cost of management is insignificant and that the management - 13 - activities needed are very easy to carry out. The village councils are reluctant to establish and manage the village commons due to the uncertain- ties regarding property rights and, thus, these councils use the Forestry Department as a shield and as a police force for protecting the woodlot. During implementation, the Bank was more interested in proclaiming the success of the farm-based forestry component that had taken off extremely successfully, than in dealing with ways and means to solve this particular problem. 42. Very few woodlots have been harvested. Those that have been harv- ested have been done by the Forestry Department. Auction is most commonly used form of sale. The proceeds from the auction are given to the village panchayat, after a deduction of costs and several other charges. It is the panchayat that decides how to spend or reinvest those proceeds. In all the areas visited during the audit mission, the proceeds from harvesting were never re-invested in forest activities (e.g., replanting, afforestation), and the extent to which any part of the proceeds has benefited the poorest of the poor was not ascertainable. If such economic behavior could be taken as the village's preferences, the message seems to be loud and clear: no more village-managed forestry will take place until and unless property rights are well defined. The implications are many and far-reaching; these conflicts are deep-rooted in the type of constraints India faces in addressing the energy and environmental crises. The implications regarding the achievement of the equity objectives are not less important. Since there is a firm belief that those crisee can only be solved if the vast and diverse lands held in common become an integral and sustainable part of the social forestry program, the issues surrounding common property should be central in strategy and policy formulation. The specific implications for project and program sustainability are discussed later on in this report. 43. At the time the project was implemented, there was less than sufficient interest to learn from the above-mentioned experience. Even today, very little has been genuinely understood as regards the management of the commons and the most effective ways for people to participate. This is in spite of the numerous research and studies done under India's condi- tions. The project should have spent more efforts in resolving those issues, since it is not the village woodiot component per se that really matters, but how its failure shows the real inability to expand the program to millions of hectares that remain marginal to the development process. Improved Woodstoves and Crematoria Facilities 44. Here again the failure to adequately implement this component goes beyond its relative small size. One could acknowledge the implementation failure and go on, since the cost embodied and the foregone benefits within the confines of this project are, on face value, not that large. However, if one conceives the two components as a way to increase the efficiency level in energy use, failure to implement these activities may have impor- tant consequences. The use of "improved" woodstoves was a very popular item to disseminate by many donors' financed projects at the time, and their popularity is still high. However, the overall results have been meager and little is known about the overall impacts of such items on the economy's energy balances. The research on improving the design and the features of these stoves continues, and several NGOs are involved. * 14 - 45. During appraisal, the improved woodstoves were advocated as central elements of a strategy dealing with efficiency in energy use. In practice, neither the Bank nor the project authorities put much effort in creating the conditions for successful implementation. It may be a fact that the expected number of units were in fact distributed, but no monitor- ing of their use and effectiveness has been carried out. The main question is one of defining the extent to which these components were really experi- mental in nature. From the viewpoint of energy efficiency the parallel question is one of defining if there were other alternatives to improve energy use of woodfuel in the rural areas of India. If there are no other alternatives, the failure to adequately implement these components has major implications for the long-term sustainability of fuelvood programs. In this context, there is a limit to the extent to which programs are con- ceived as purely supply-sided. The limit is given by the issues raised in the previous sections, as well as those raised in Part V of this report. 46. It is imperative that the demand side of energy use (and efficien- cy) be dealt with in a comprehensive way. This would require an approach to sector work which includes all the energy subsectors. As stated below, this type of sector work was totally absent during the design and implemen- tation of the project. Even though today fuelvood represents a significant proportion of the total energy consumed in rural households, all forms of energy must be considered. This is particularly important given the increasing evidence that a large proportion of forestry resources are used by industries and services, in addition to rural and (low income) urban households. Moreover, sector work should necessarily focus on the nature and implications of the existing incentive structure (e.g., production and use of energy in agriculture, relative prices, property rights). Informa- tion on all these essential aspects are only very recently becoming available. Needless to note the importance to carefully design and review the studies in this area. Forestry Research 47. There is an overwhelming consensus that this compcnent clearly failed. Applied research that could have benefited the project was totally absent and the PCR is very explicit in this regard. As far as the project itself is concerned, the project did not create an institutional infra- structure capable of attracting good researchers or maintaining continuity of research activities. Again, this is a major loss in that it is scill a matter of debate if the potential for genetic improvements, tree species portfolio for different environments, potential for integration between forestry and agriculture, socioeconomic research, and the like, has been fully achieved. 48. The importance of forestry research of the type needed by the social forestry program cannot be overemphasized. As is well known, research is an activity that requires funding, continuity, and adequate management, if it is to succeed in the long term. It is more than a decade since the social forestry program began, and very little progress has been achieved. - 15 - lonitorinJg and Evaluation 49. This is another component that clearly failed to achieve its objectives and targets. It seems that the Bank under estimated the uniqueness and the difficulties embodied in a component of this nature. Compounded by a very low priority (as reported in other audits, this is not unique to forestry projects), the M&E unit of the project failed to provide the necessary information for effective implementation and management of activities. 50. The audit also questions the very centralized structure of the M&E structure. Although some degree of centralization is needed to ensure technical quality of both the monitoring and the on-going evaluation activities, excessive centralization mutilates the capcity of the M&E system to help those who are managing and implementing the project. In particular, it must be noted that the size of the State in question is as large or larger than many Bank member countries. In this context it is difficult to see how middle-level managers (at the Region Chief Conservator of Forestry and the Adjoint Chiefs and District Forestry Officers levels) can benefit from M&E. 51. Monitoring and evaluation activities should be given full support by the Bank. To effectively carry out these activities in social forestry . is a task of major proportions given the multidimensional nature of the program. There is a demand for a variety of expertise (including fores- ters, soil scientists, ecologists, sociologists and economists), and a need . for a holistic approach if those activities are to yield relevant informa- tion and data for management and ex-post evaluation. As stated in Part I, the weak performance of this component has greatly impaired this audit from an in-depth assessment of several aspects of this project. 52. The Bank and the State Government are launching a significant program in this area, and the Bank operational and government staff involved should be commended. Marketing and Distribution 53. Because there was no sector work done during the preparation of this project, very little was known at the time about the marketing and distributional aspects of forest products including woodpoles and fuelvood. The project did include a marketing study that was never carried out. Again, one may at face value ignore the failure in implementing this compo- nent on the grounds that it was only a study and its costs was minimal by comparison to the total project costs. The Bank and the Go- ernment paid very little attention to the execution of the study, and only at the very * end of the implementation period did discussions with those concerned take place. (It is important to note that the mid-term evaluation did raise the issue of marketing within the context of an eventual saturation of such * market due to excessive production. However, it is clear that in practice the study was not given sufficient priority.) The marketing study has not yet been completed, althoug, a draft is now available as part of the subse- quent social forestry projects. - 16 - 54. The negative effects resulting from giving a very low priority can be felt now when a very large volume of wood is reaching the market. Since trees are medium- to long-term assets, the need for early marketing studies is essential to avoid the sudden collapse cf the market as is happening in certain areas of the country. The marret is very imperfect as demonstrated by several indicators of structure and performance. One of the manifesta- tions has been a steady decline in the prices of wood-related ptoducts' during the last three years. As this is not being given sufficient import- ance, the fluctuations in the market are alarming some farmers and policy makers who are proposing solutions that may prove to be very costly in the long-term. One of the solutions proposed is to create an official channel or purchasing power and thus counterbalance the market cyc e. The history of marketing boards has proven to be disastrous in a number of cases. However, until and unless a comprehensive study is carried out, the adop- tion of alternative procedures to stabilize the market may prove risky and expensive to the economy. 55. There are four aspects of the project the appraisal report gave much prominence although no specific component, or program, was designed. These were livestock, management of the natural forest and environmental improvements, checking the demand for alternative sources of energy, and benefiting the poorest of the poor. In particular, and as an example, there was no specific project component to deal with livestock development, although the rationale of the project was such that the expectation was that tree planting (e.g., fodder trees) would benefit the livestock herders. Similarly, the significant expansion of the supply for fuelvood was assumed to benefit the poorest of tLe poor, for whom fuelvood-based energy figures very prominently in the household consumption patterns. Experience shows that without a specific program these aims are very diffi- cult to achieve. As explained in Part V, there is a weak record on all the above-mentioned areas of the project. IV: OVERALL ASSESSMENT OF PERFORMANCE 56. This audit rates the performance of the Social Forestry Project in Uttar Pradesh as satisfactory. This project represented the first major attempt to expand on a large scale the already existing social forestry program in that State. Several aspects of the project were conceived as experimental in nature and the audit has taken this feature into account. This operation needed a flexible approach to design and implementation and this aspect was explicitly -incorporated at the appraisal stage. This section highlights the most important aspects which make this project satisfactory. 57. FirMt, the program accomplished to a significant extent its targets as defined during appraisal and as stated in the mid-term evaluation and supervision reports. Changes of direction were agreed with the Bank at each level of implementation. For example, more emphasis was given to the development of the farm forestry scheme, as the demand for seedlings surpassed anticipated levels. The achievement of those targets was not then and is not now an easy task, as exp .cience in other countries has demonstrated. The achievement of those tarjets becomes in hindsight - 17 - even more significant when the very diverse ecological, social and institu- tional conditions are considered. This was the first attempt by the . Forestry Department to deal with forestry and tree planting activities outside the traditional forests areas. The areas outside the forests are most difficult to access, due to disputes over property rights (i.e., . village lands) or over development priorities among other farming systems (i.e., land owned by individual farmers). This program was implemented at a time when the population targeted to benefit did not yet plant trees as an indigenous form of asset creation. The program changed the attitudes towards tree planting significantly, and cultivation and preservation of trees is now ingrained in the minds of rural people. 58. Secn , the demonstration effects of the project cannot be over- looked. The audit mission visited several areas in which individual farmers or communities not originally selected in the program are implemen- tir.g several aspects of the social forestry program on their own. This demonstration effect is also indicated by the increased demand for seed- lings in nurseries managed by the Forestry Department, and by the demand for the establishment of new nurseries in remote areas of the countryside. In the case of relatively wealthy farmers, the program has taken its own course; market forces determine the extent of benefit received and the ability to sustain the program. In some of the very prosperous areas (in terms of farming incomes), the demonstration effect has been so decisive * that the activities and services formerly administered by the Forestry Department have been totally replaced by the private sector. In some areas, private farmers are paying a premium for research and genetic . improvements of tree varieties and for advice on marketing and distribu- tion. This audit does not desire to imply that the demonstration effect of this particular project is evenly distributed (over space or social classes) or even that such a distribution was expected. There are always exogenous (e.g., availability of land, climate, irrigation) and endogenous factors that determine the rate and extent to which technological change is dissem:nated. However, evidence shows that farmers are quite knowledgeable about tree varieties, genetic aspects of seedling production, and methods of improving the productivity of the social forestry program. 59. Thir4, this operation and the social forestry program in general have accelerated the process of capital formation in the rural sector. This has generated significant benefits from both efficiency and equity standpoints. In a world where it is becoming increasingly difficult to create economically viable and sustainable assets in the rural sector, this dimension of the program has been seldom recognized. A major source of poverty is the lack of capital and asset accumulation, and this project offered opportunities for both. Capital formation has also happened in very remote areas of the state. Trees have become real economic assets (environmental bcnefits aside) for both the rich and the poor. Moreover, these assets offer farmers--particularly small farmers--a form of insurance against inclement weather anC unexpected expenditures or shortages of cash (e.g., marriage of daughter). As such, farmers have recognized the bene- fits and the costs embodied in those assets, despite the longer gestation period. In some areas trees compare very well to other cash crops, regard- less of farm size. However, the economic environment is changing and the glut in some areas has resulted in lower rents to be captured in the short term. Information shows that this rent is still far from zero. Even in - 18 - areas where farmers have complained about the negative effects of eucalyptus (see details in Part V), they were reluctant when asked if they were willing to get rid of those trees. 60. Fp.rth, the project has generated significant positive changes in landscape. These changes are due to the extensive spread of tree planting on adjacent areas of villages, roads, railways and irrigation canals. The provision of shade for the people and animals and the rational exploitation of fuelwood and fodder by the very poor should be recognized as important benefits. This aspect of the project is particularly relevant during years of severe droughts, where project plantations have become buffer zones of drought relief. Lack of data makes these benefits difficult to quantify in monetry terms, but discussions with village people in general, and with women and livestock herders in particular, demonstrate that the size of these benefits are significant indeed. 61. ifth, the economic impact of project activities on farmers' fields, village commons and in the forests are large in net terms. Although this audit questions some of the economic benefits attributed to this project by the PCR, in some areas the social forestry program has been the only vehicle for sand dune stabilization, wind breaks, soil erosion control, and land reclaaation and rehabilitation. Most of these benefits will be realized in the long term and, given the lack of data on the tech- nical and economic parameters defining those benefits, it is at this point difficult to attempt a comprehensive economic evaluation. In some cases the ERR will shed little light on this matter. The level of long- term benefits will be higher in areas characterized by a poor natural environ- ment where rainfall patterns are very erratic and where other forms of farming activity are very risky. These less favorable environments ( e.g., the wastelands) coincide with areas in which the livestock population is large, and where it is critical to maintain the carrying capacity of the land if the rural poor are to benefit or survive. This project provided the road map to test approaches to the implementation of an environmentally sustainable system. The Implementation of the social forestry program in such areas, though far from perfect, also demonstrates the solid implemen- tation capacity of the Forestry Department. In most of the wastelands, there seem to be very few options for sustainability except for tree plan- ting. Other forms of land rehabilitation may prove to be prohibitive'y expensive. 62. Finally, it is worthwhile to mention flexibility in implementa- tion. OED has repeatedly commented on this srbject in the last few years. Projects of this nature should be designed in such a way that implementa- tion becomes flexible according to the changing circumstances. In many respects, this project is a good example of how flexibility was used in a wise manner. To start, the concept of the project required a major change in the traditional approach used by foresters in India. Despite historic records, the Forestry Department showed a tremendous willingness to venture beyond the traditional domain of state forests, and demonstrated it in practice. The Forestry Department was able to move from the role of forest guards to advisors and promoters of forestry development in farmers fields, a transition which will have significant beneficial impacts for rural development in India. . 19 - V: FINDINGS AND ISSUES 63. As the project reaches full development, the number of important findings and issues increase. This audit has selected a small number of issues having the following things in mind. First, this report does not make reference to issues and findings that are well covered by the PCR; this report should be seen as complementary to the PCR. Second, the issues selected here are believed to be important to today's Bank/country dialogue, and hopefully the discussion presented here may help in the design of a strategy for the sector. Finally, in selecting the issues, the audit considers mainly those that should have been taken into account at the time the project was designed and appraised (i.e., foresight rather than hindsight). This section is divided into three main parts: a discuss- ion of the most important problems and issues, a short presentation of the principal determinants of performance and sustainability, and a summary of lessons and implications. A. Development Problems and Issues 64. This section focuses on four major issues: (i) relationship between objectives and means, (ii) institutional and organizational problems, (iii) implementation approach and technology transfer, and (iv) . socioeconomic dimensions of social forestry. Objectives and Means: Theory and Reality 65. The project was designed to consider a multiplicity of objectives. The principal objectives were: (i) to significantly decrease or if possible to eliminate the fuelvood deficit in the state, (ii) to satisfy the increasing demand for major and minor forest products, (ili) to create employment opportunities in the rural sector to benefit particularly the poorest of the poor, (iv) to improve the natural environment, and (v) to enable beneficiaries' participation in tree planting and plantation manage- ment. Accompanying these objectives were several expected results, includ- ing a significant decrease in the pressures causing rapid exploitation of the remaining natural forest, an increase in agricultural productivity as a result of a major shift away from sources of fuel that were otherwise (believed to be) used as fertilizer, and a substantial increase in the welfare of the poor. The above-mentioned objectives and expectations have been repeated in subsequent social forestry projects, including the recent National Social Forestry Project. 66. There are at least two important problems with the approach taken. It caused an unnecessary increase in complexity and an accompanying risk that those implementing the project (as -ell as those who now criticize the social forestry program) might interpret the objectives differently. During the audit mission many participants were asked what they thought was the main objective of the project. The answers varied from one extreme of greening rural India to the creation of assets for the poorest sections of - 20 - the population. More common responses included achievement of self- sufficiency in fueluood and elimination of most of the environmental problems. The second problem in approach concerns the weakening of the relationship between objectives and means by using alternative units of account, which lead to very different conclusions regarding the development effectiveness of the project. For some the unit of account for this project is "energy*, more specifically fuelwood. For others the unit of account is "land use", more specifically the planting of trees as an optimal way to use the existing land. In both cases, the project assumed that forestry activities were merit wants and that planting trees was the most economically effective way to optimize either unit of account. The audit notes that the above-mentioned problem did not affect the first phase of the social forestry program. However, the lack of clarity in deciding priorities is affecting the normal implementation of the entire program--a program that is under heavy scrutiny and criticism. 67. If the unit of account is energy, and the principal objective of the project to reduce the fuelvood deficit in rural India, several aspects should have been studied more carefully during preparation and appraisal. The most important question is whether tree planting is the most effective way to reduce the fuel deficit, over space and time. The key, but ques- tionable assumption made was that there existed no substitutability between possible sources of energy. There was little known about the relative merits of supplying other sources of energy, the economic and financial implications of having or not having expanded the supply of other energy sources. The next question for a program of "grass roots" orientation should have been: do the rural people in India plant trees for fuelwood, or is fuelwood a derived product after other economic considerations are taken into account? If fuelvood is a by-product and not an essential element in the decision to plant trees, the implications are far reaching, particular- ly with regard to such aspects as when the trees will be cut, how much will be burned as fuel, what will reach the market, and so on. There seems to be a consensus among social scientists that the main objective of an indi- vidual planting trees is not fuel, but the creation of an economically attractive asset. In practice, this perception has translated into an economic behavior (totally rational and consistent with the prevailing economic environment) principally depending on the individual's capacity to capture the existing rent. The level of this rent depends mainly on the supply and demand of lumber and woodpoles rather than on market structure and performance of alternative fuels. 68. Given the above-mentioned dilemma, it is essential to understand whether the project is solving the fuelvood crisis and subsequently i.1 it is decreasing the pressures on the natural forest and also benefiting the poor. The answers to these questions are not simple, particularly because there is a lack of good data. One important aspect of the problem is that decision-makers and the Bank have not understood the spatial and inter- temporal dimensions of the fuelwood equation in rural India. Expansion of a tree planting program is only one necessary condition for decreasing the fuel deficit; clearly it is not sufficient. There are areas in which it is far more effective to use other sources of fuel, and there are other areas where the expected substitution between dung and agricultural residues will never take place due to cultural and economic reasons. From a spatial point of view, the pressures on the natural forest will not decrease until - 21 - a specific program in the areas surrounding it is implemented. The fact that in one corner of the state there is a potential supply of fuelvood will not necessarily alleviate the crisis in another part of the state. Transaction costs are high. Similarly, if the prices paid for mature trees decrease, as is the case now, the farmers may hold on to those trees much longer than the assumed rotation. Consequently, statistics showing larger number of trees cannot necessarily be translated into more fuelvood available today. 69. Finally, it is impossible to know with certainty whether the poor households actually benefit to the degree originally envisaged. Intuitive- ly, the fact that there are more trees accessible to the poor (road side, canal side plantations) makes it quite probable that the poor actually benefit from the social forestry program. Though this needs to be care- fully studied, it is important to note the fact that the farm forestry component was the most successful component of the project, and made a traded commodity out of a traditional subsistence commodity that was rarely traded in the market. Since fuelwood is a by-product, the potentially negative effects to those with low purchasing power, marginal to the market economy, may prove to be high. 70. If the unit of account is land use, several other elements warrant careful consideration. In this instance, the project should be assessed with regard to the best ways to use the land (e.g., forestry, agriculture and livestock). Questions have been raised regarding past forms of land classification, and whether these forms are truly adequate to handle the problems the project was supposed to resolve. Given population pressure and the need to satisfy basic needs, there is no doubt that the pressure will continue over the conversion of forest lands and village lands held in common into agricultu: ' lands. There is a very high correlation between availability of higher quality land, from an agricultural production point of view, and the conversio- away from forestry. In agriculturally prosper- ous parts of the state there is essentially no land available for tree planting. In areas where the quality of the land is poor, land availabili- ty tends to be high, although conflicts regarding land use also tend to be more acute. In areas where the land is of poor quality and there are no significant disputes over property rights, the options for social forestry as defined in the appraisal report are very limited. At times the soils are so shallow and infertile that there are few tree varieties that can survive at a reasonable cost. The social forestry program should be seen as a land rehabilitation activity more than a forestry activity proper. One implication is that traditional notions of economic returns should be disregarded L benefits are to materialize in the long term. 71. Another implication of land as a unit of account, in a program mostly implemented outside the traditional forest areas, is the interplay of tree planting and agriculture. Whose domain is the land in question, who is to give advice, what is the most profitable way to use the land, how does the farmer reconcile the long-term objectives with the short-term needs for cash income, should the Forestry Department be involved at all in areas typically allocated to farming, whose extension advice should really count, and perhaps the most critical question, is tree planting and conser- vation in farmers' fields part of the social good or just another cash crop. These are just a few of the questions raised in the national debate - 22 - on social forestry. There are no simple answers to these questions, but it remains clear that there is a boundary problem and that the old boundaries no longer apply. Part of the social forestry program is carried out in land under forest, agriculture, in revenue departments, village-owned, land used for livestock raising, and the like. The institutional arrangements (or the lack thereof) have become the principal determinant of this program's effectiveness. 72. There is no land that rests idle; there are always claims on the land--in many cases multiple claims. This given, if one combines the energy and land-use dimensions of the social forestry program, one comes to the realization that many hypotheses should be critically revised and that the objectives of the project should be reviewed accordingly. As it stands now, the program may be facing serious contradictions as different objec- tives are interpreted differently, and the program may be of questionable validity as the means are too insignificant by comparison to the objec- tives. It may take years before there is any evidence that the energy crisis has been alleviated through tree planting, and before one can clearly perceive that the pressure on the natural forest has actually diminished and that the very poor benefit from this project. The trade- offs involved can be properly assessed only with a vision of the direction where development should take--a holistic framework that can shed light on the whole as well as the parts. Sector work and the formulation of a national policy/strategy are in this case indispensablet Institutional and Organizational Problems 73. Institutional Problems. The Bank underestimated the institutional complexities of this project and the solutions proposed often proved ineffective. This is particularly true with regard to the "village contracts" and the "incentive structure" prevailing during implementation. In reality the program took off in areas where the system of property rights was straightforward and simple (e.g., stace or private property). As the program in the private domain was developing so successfully, other areas were left behind. To illustrate this point this audit will concen- trate on those areas where there exist either common property rights or where the system of property rights is neither clear nor highly disputed. 74. The vast majority of land outside the domain of agriculture and food production is governed by an intricate system of property rights. Given the magnitude of the energy, environmental and equity problems in rural India, it is only the - non-agricultural land which would, in prin- ciple, be capable of sustaining the social forestry program. However, that area of the project was mostly ignored. Expecting the energy crisis to be resolved by allocating private lands to tree planting is totally unrealistic. Similarly, expecting the crisis to be resolved by exploiting the scarce land under natural forest is also out of the question. It is on the remaining lands--village lands, wastelands and revenue lands--where the hopes for a solution lie. 75. In dealing with the institutional issues already apparent during preparation and appraisal, the Bank brought to the table of negotiations the so-called "village contracts". These contracts attempted to provide - 23 - the institutional foundations for the solutions to such problems as who owns the land, who owns the tree plantation, who will benefit from the , plantation, where should the proceeds from the plantation be allocated after harvest, and what are the obligations of those participating in the tree planting schemes. Experience shows that these contracts fail to . provide the solution to the problems and that the Bank did not continue its efforts to find other alternative solutions. Even today, after completion of two or three phases of the social forestry program, the issues related to the instability of rights have not been resolved satisfactorily. This issue has no simple resolution; indeed, given the circumstances in India it is possible to see how it might never get resolved. However, if this is the case, a change of strategy is imperative to avoid the total depletion of forests and to actually and effectively deal with the rural energy crisis. Several findings may be useful to note about the limitations of the contracts as conceived in the first phase of the program. 76. The first limitation of contracts dealing with property rights is that they are only honored in areas where the political system and the public consensus is relatively clear and in the direction proposed by the contracts. Otherwise, the contract is circumvented or clearly ignored. This is the case, for example, in areas where the Forestry Department has been granted authority over the establishment and management of village plantation schemes, all with the blessing of the village panchayat authori- ties. Unfortunately, this defeated the purpose of the village self-help schemes which were designed to involve the people's participation in each and every aspect of the plantation. Another weakness of these contracts . was that, while they did establish the obligations and the formula for the distribution of proceeds, they failed to identify who had the rights in the first place. The results were not surprising; there was practically no participation by the potential beneficiaries, whoever they might be. An additional consequence of this failure to explicitly recognize the initial set of rights was the people's reluctance to manage and, in many cases, harvest the trees, in order to avoid suits brought forward by the panchayat or village authorities. However, as a result the Forestry Department is being sued in many cases and the District Forest Officers spend a great deal of their time in courts defending property right cases. It is clear that if the creation of an asset is the central theme of a contract, the *partners" must be explicitly mentioned. A third weakness of the village contracts is that they targeted the panchayat as the managers of the plan- tation, in spite of their inherent inability to manage, the political instability rendering long-term programs difficult to sustain, and the lack of representation of certain groups of beneficiaries such as the landless and livestock herders. This .is not a new issue and it will be discussed below in some detail. One point remains extremely important from this experience: the fate of the common property system remains dependent on the level and the composition of expenditures and investments over a long period of time. If the rate of investment and reinvestment is closer to zero, the resources will be depleted at a faster rate. Since the reinvest- ment rates depend upon the preferences as expressed at the panchayat level, it is that level which determines the future of social forestry. Findings from the audit mission indicate the panchayat rarely reinvest the proceeds from forestry into new forest plantation. Other priorities such as irriga- tion, roads and buildings tend to absorb most of the value added generated by the forest plantations. - 24 - 77. The above-mentioned experience illustrates several important conditions necessary in preparing contracts: explicit definition of owner- ship and usufruct rights, definition of the social unit in charge, defini- tion of the management system and individual responsibilities, identifica- tion of user groups, definition of assets to be created with the eventual proceeds, and a flexitle system for choosing "partners". 78. As the project was initially conceived to involve an expansion of the supply of forest products, and therefore, of planting trees, very little was known about the incentive structure prevailing in the system during preparation. Again, sector work could have provided some answers. A rural sector energy study was necessary to evaluate the most economic and socially accepted form of energy and in its absence the implicit assumption was that fuelvood was the most effective option. This may have been true for some areas where fuelwood is available and gathered from the forest, and where markets for the product are often small. Experience clearly shows that this proposition does not lend itself to generalization, and an acceptable answer can -only be given if the whole system of relative prices in the energy sector were to be studied. Similarly, if the unit of account was land use, the relative importance given to tree planting must be evalu- ated against all other forms of land use. Beneficiaries are only going to plan'. trees "if the price is right". Therefore, agricultural sector pricing policies have played a definite role in changing land use in the rural sector, but very little of this pheromenon has been studied. Finally, this also applies to the assumptions with regard to the use of cow dung, either as fuel or as fertilizer. In many regions the set of relative prices and incentives is such that no substitution will take place, at least not in the near future. 79. Organizational Issues. Two organizational issues are particularly relevant to discuss: (i) the optimal social unit for the execution of a social forestry project and (ii) the ideal role of the Forestry Department and inter-organizational coordination. Experience with this project has provided some useful insights, though further analysis of these organizational issues is necessary. These two issues are now a major concern of policymakers and the public at large. 80. Given the institutional problems outlined above, it is essential to know the most adequate social unit of account in a social forestry project. As stated above, a critical element of a social forestry program is the participation of people, and concomittantly, the capacity of the system to find the necessary distributional arrangement so common property can be maintained and the optimal management of the natural resource base achieved. There are no easy solutions but it is clear that this type of project is not managed optimally at the panchayat level. This is particu- larly so if the environmental and social objectives are to be achieved. Given the prevailing political system in India, any move away from the panchayat structure may result in more problems than solutions to the issue at hand. However, one must understand the sort of limitations that a poli- tical body of this nature entails. The Government and several NGOs have already experimented with a social unit that is closer to the village structure. In this case the village people that own land in common feel closer to the decision-making process than in cases where the panchayat - 25 - groups together a large number of villages. However, recent sociopolitical research is even questioning the village structure, and the concept of "user group" is now being proposed. This concept is borrowed from the relatively successful experience with user groups in irrigation develop- ment. The situation in India reveals that all three approaches are used indiscriminately and only a few , --ps are monitoring and evaluating the experience. Preliminary discussions at the field level demonstrate that the adoption of user groups may end up creating new problems associated with the fragmentation and isolation of decision making, ignoring the intersectoral linkages and leakages, and isolating potential beneficiaries from the avai,.able financial resources. 81. This issue becomes more complicated in areas where there exists a great dispute ever property rights or where law enforcement (e.g., forest protection) costs are prohibitively high. The management of the forest and the so-called wastelands provide excellent examples. When the Forestry Department has to protect and manage vast areas of land, the costs are relatively high. In the wastelands, where the property rights are multiple, reflecting the very large number of claims over access and use of the land, the three systems discussed above are extremely ineffective or inequitable. In these specific areas, it might be worthwhile to try some indigenous system of joint management between the state and the beneficiaries. This is not uncommon in areas that have not been affected by institutional arrangements imposed in the last half century. Important pieces of research are available that demonstrate that this proposal can work in India and in other Asian countries. 82. The public debate concerning the role of the Forestry Department and interagency coordination has come to occupy the front page of many newspapers and journals. When this debate focuses on land use, the central issue is the sphere of influence of the Forestry Department at the farm level. Again, there are no easy answers, but as the system avoids finding adequate answers, numerous coordination and implementation problems result. If one system uses an NGO, and it is policy of the agency not to charge for services or for seedlings, farmers end up neglecting programs that do charge for those items. As there is no policy, in practice some of the schemes run counter to what the Bank and the country originally intended to do. This is happening at several levels, the most important being pricing and subsidies, role and participation of beneficiaries and technology transfer. Although the audit is not suggesting an approach that can be carbon copied everywhere, the situation demands an open and effective discussion before the assets already created lose their expected value (e.g., organizational disputes resulting in cutting trees at the wrong time, farmers being advised that one variety of trees is harmful and should not be adopted, without any scientific evidence to support the claim). 83. The above-mentioned issues are compounded as the roles of the state and the central government are redefined, and as the number of agencies (public and private) participating in the program increase geometrically. The definition of state and central government roles in forestry is particularly relevant in areas related to policy and strategy, where it is still a matter of debate as to which areas of policy and strategy belong to the domain of one or the other. Finally, the popularity of the social forestry program is still quite high in the private sector - 26 - and in the international donor community. There are a number of agencies involved--some through one government program and others through another group of government programs*-such that it is even difficult to know with certainty which tree plantations were effectively financed by the project. Implementation Alaroach and Technology Transfer 84. Most of the criticism of this project centers around two broad areas: the way in which the project was implemented and the inadequate attention paid to some technology and technology transfer issues. Needless to say these are interrelated, but they have been separated to emphasize some important findings and lessons. 85. The whole implementation process was driven by targets. This project was target-driven from day one, which was not always harmful. In particular, target orientation was necessary to cover large areas of tree planting, to have a well managed and monolithic approach to technology dissemination, to create the necessary critical mass for adoption and dissemination of project activities and to try a large number of approaches and instruments. As a result, the project demonstrated to farmers the value of trees in all their dimensions (e.g., profit making, environmental- ly). The Forestry Department, as well as the farming community, changed their views and attitudes regarding forestry development. This change in mentality is so evident that it may be the central reason for the heavy criticism faced by the project today. Many groups in the rural sector are able to articulate their preferences and experience with tree planting. Clearly this is a sign of success resulting from a strong, unified effort to comply with the original targets. 86. However, the target orientation brought significant negative side effects to the whole program. These negative effects were compounded by the fact that since trees take a long time to mature, the focus of tackling problems naturally shifted to some point "in the future". The future is now for many areas covered by the program, and the target orientation resulted in an excessive emphasis on the input side of the program (e.g., distribution of seedlings) rather than on the output side of the program (e.g., planting rates, survival rates, yields, who benefits). This permit- ted a false sense of accomplishment. In addition, target orientation meant to implement planting schemes that were not necessarily optimal from the farmers' point of view. This is the case of areas in which the advice to farmers was to maximize the biomass (through very close spacing of trees) rather than to optimize profits. As a result, many farmers now have plan- tations that can only benefit from bulk harvesting rather than harvesting for roundwood and poles. Moreover, compliance with targets very often required that the adoption rates and the take-off of the program be quite high. To accomplish this, one or two varieties of trees were recommended and made available to farmers. These varieties (such as eucalyptus) were planted everywhere without regard for climatic and other environmental considerations. The result is not entirely negative, as the fast growing tree varieties recommended did convince the farmers and the population at large that tree planting was indeed an attractive proposition. However, these varieties were planted in areas where the survival rate was minimal and the potential for tegative environmental effects high. Finally, the - 27 - incentive structure for those who were implementing the program favored planting more than the protection and sustainability of the system. These people were rated by hectares planted rather than the quality of the work. In this context, it was thus far more important at the local level to achieve coverage of large number of hectares than to consider economics and long-term impacts. 87. This has generated a major controversy regarding the extent to which this project has transferred the best available technology. This audit does not have a definite opinion in this regard, but as several docu- ments point out, including the portion of the PCR written by the Bank, this is a very relevant issue. The audit mission, however, found that the tree nurseries financed by the project played a central role. In fact in this type of program of statewide coverage and participation of multiple types of beneficiaries, the nursery represents the 1abrain" of the program. In this regard, the Bank and the government underestimated the importance of those nurseries as regards transfer of technology, extension and applied research, dissemination of the program and the like. But a few difficult dilemmas are now apparent. On the one hand, to maximize the coverage of the program a large number of tree nurseries are required. To fulfill those requirements would require finding new partners in this venture including farmers, schools and other local organizations. The larger the number of nurseries, the higher the possibility for farmers and communities to plant trees. On the other hand, as the number of nurseries increases, the supervision over their quality, plant and genetic materials and effect- iveness in general diminishes drastically. In fact, in many parts of the program the kissan or decentralized nurseries are in poor shape and farmers have complained about the poor quality of genetic material and advice. 88. This problem is not unique to the nurseries managed by individual farmers. The Bank paid little attention to the quality of nurseries as long as these had sufficient numbers of seedlings to be planted in the field at the appropriate time. However, nurseries have proven to be very sophisticated operations, and their production of good seedlings requires careful attention to seed selection, planting, water regime, soil quality, adequate transplanting, and so on. Several complaints are now made by farmers, who paid little attention to these aspects, and who believed that the sole objective was to plant trees. In fact, some of the richer farmers now have their own nurseries, thus assuring quality and quantity of seed- lings. Similarly, with regard to research, farmers are now contracting out the research rather than using official channels. This demonstrates that trees are profitable and that farmers are willing to pay for necessary services, as well as that the traditional services need to be drastically improved. These are *second generation" problems. 89. The implications of this experience are far-reaching. However, this experience is particularly important for defining the Bank position with regard to the establishment of decentralized nurseries on a large scale. This audit is of the opinion that such a strategy may backfire in the medium and long term, as farmers become more interested in quality rather than quantity. The strategy with regard to the significant expan- sion of decentralized nurseries may need further thought and discussion. - 28 - 90. The audit acknowledges the heated discussion that is taking place in India with regard to the indiscriminate planting of eucalyptus. There are many groups in India that are very much opposed to the planting of eucalyptus on the grounds that it draws down the water table, thus causing negative effects on surrounding crops, that it is planted in irrigated areas that otherwise should be allocated to food production and that it causes significant decreases in yield of crops through depletion of micro- nutrients and excessive shade. Despite many efforts, the audit mission did not find hard and credible scientific evidence that proves the above- mentioned claims. It is true that shade decreases the yields of adjacent crops, but this is not due to the eucalyptus per-se so much as the close spacing of the trees. This can be easily solved by cutting trees where needed. The claim that there are negative effects through competition on nutrient consumption could be found neither true nor false as the evidence is not available. Finally, the impact on the water table can be both positive and negative. In areas where the water tablV is very high and is prone to salinity and water logging, planting eucalyptus has been a blessing. In other areas this is difficult to ascertain, since it is impossible to isolate the effects of the trees from those of the increasing number of tubewells. Socioeconomic Dimensions of Social Foretry 91. Three aspects of the socioeconomic dimensions of the program deserve mention. These are the economic benefits of the project, marketing and distribution and impacts on equity. In all cases the audit identifies points of contention that require much more study if definite conclusions are to be reached. 92. Rate of -Return Calculation. Recent evidence shows that the project ERR has been overestimated on two grounds: prices and yields. Some observations demonstrate that the market for forest products, in- cluding fuelwood, has been saturated in several areas covered by the project. This resulted in a sharp decline in prices, most of which occur- red after the completion report was drafted. In some cases the prices are 20-50 percent less than those assumed at completion. Sensitivity analysis using the information that is available shows that the ERR of the project has been overestimated and that such a rate is closer if not equal to the opportunity cost of capital. This assessment is made without accounting for the indirectly quantifiable benefits generated by the project. The variability of yields, on the other hand, is so high that, though the audit does not formally challenge -the PCR, it recommends that a comprehensive study of the economic returns of the program (including this project) be carried out. 93. The Bank paid little attention throughout the project cycle to the implementation of the proposed marketing study. This can be explained in part by the perceptions during implementation that one could postpone dealing with the study as long as little harvesting had taken place. However, experience shows that this was a very unwise decision. Today many farmers are reluctant to get involved in the program or reinvest in forestry activities once they have harvested the existing trees. Another response that may run counter to what the Bank and the government are - 29 - trying to accomplish is the notion of creating a marketing board to set prices that are much higher than what the market can bear. One can imagine the negative consequences that this decision might have. The issue of marketing is central to the sector work needed in the sector. 94. Finally, it is important to remark that the program is being heavily criticized, on the grounds that the advocated equity impacts are nil or negative. A credible assessment of the equity impacts of the program would require not only consideration of this project but All forestry projects under implementation. To say that so many small farmers received seedlings and therefore the program is equitable or inequitable is obviously superficial. If the Bank continues to advocate that a central objective of social forestry is to benefit the rural poor, it is iwerative that a study of equity impacts be carried out as soon as possible. 95. Benefiting the Poorest of the Poor. This project was quite explicit on the ways it expected to deal with the equity objective; i.e., helping the poorest sections of the population. The project recognized first that trees taken some time to mature and, thus, real and financial benefits would not materialize as quickly as those earned by other agricultural commodities. Second, there was a very large proportion of the population without direct access to existing natural resources, who would therefore not benefit from the social forestry program. Finally, the . equity objective could be better attained through specific changes in technology (e.g., planting of a high proportion of trees that are consumed only by the poor, such as prosopus) or through direct intervention of . economic activities designed for the poor (e.g., plantation of Arjun and Malbery trees for sericulture). This approach of direct intervention differs from more traditional schemes, as it places less emphasis on the market mechanism for redistribution of wealth. 96. Based on the available information, the project did not attain the equity objective to its fullest extent. The tree plantations at the village level are too small in comparison to the demands and consumption levels of individual households. Thus, whenever a particular area is harvested, it is the most influential group that benefits. In other instances, when the proceeds from the harvest go to the panchayat, it is even more doubtful that the very poor will directly benefit (although they may benefit indirectly, as expenditures in general development material- ize). In addition, many of the plantations are facing technical and social problems. Despite some of the technical problems which could be resolved, the socioeconomic problems are more complex and intractable. Very low income families are basically laborers and, at best, sharecroppers. This requires that they be available during planting and harvesting; these periods are equally demanding on their own plantations' activities. * Because for those poor families the need for cash on an everyday basis is acute (i.e., a very high rate of social time preferences), these families often abandon their ovi plantations. The income these families get during * the period of implementation up to full development of the plantations is apparently not sufficient to modify long-accepted practices. Finally, another very important factor determining the above behavior is related to the value these families place on their time allocated to leisure. The project plantations have drastically increased the time allocated to work; in some areas it has been doubled by having to work on both the project - 30 - plantation and on the other agricultural fields. The additional work required is also related to the type of technology embodied in the planta- tions (i.e., labor-intensive rather than labor-saving). 97. There are several aspects such as equity that cannot be dealt with in a comprehensive fashion. The project activities do not even represent the necessary conditions for attaining the objective. B. Maior Determdinants of Performance and Sustainability 98. Many of the issues and problems presented in the previous section could have been adequately addressed if the Bank had carried out additional more sector work. This was a project prepared without specific sector work, except for the Forestry Policy Paper issued in 1978. That paper presented the principal conditions and constraints facing the forestry sector, and discussed the main elements of a strategy and policy framework to accelerate forestry development and benefit the rural poor. As such, the policy paper identified several areas for Bank financing, most notably in the areas of social forestry and environmental forestry. The active participation of the Bank in the project in question should be seen as an opportune and definite response to the policy statement of 1978. Those involved should be commended particularly because many aspects covered by the project were new and extensive experimentation was planned. The rela- tive success of this project is due to such efforts as well as a major participation and commitment by the State Government in charge. Project identification and design were completed mainly by the country. However, neither the efforts made by the government nor the Bank policy paper could replace the necessary sector work or coupensate for the lack of it. In fact, when this project was presented to the loan committee, the principal issues raised were related mostly to sectorwide issues rather than to the specific technical aspects of a project of this nature. In the future, any action in the sector should be either a condition of, or accompanied by, solid and comprehensive analysis of the sectoral issues and constraints. 99. Another factor that greatly influenced performance, and that which is the main cause for the heavy criticism this program faces, is the total policy and stre.tegy vacuum. As presented in Part II, there is no doubt that the sector has been legislated through ordinances, laws, rules and regulation, with a complementary support of a very large number of reports and recommendations resulting from a large number of commissions and government committees. However, these do not necessarily amount to a national and a state policy statement. Moreover, all those documents and declarations do not amount to a comprehensive strategy for the sector, which must encompass the following issues: (i) identification of sector participants, (ii) the most important objectives of sector development and social forestry, - 31 - (iii) economic and social incentives enabling accelerated develop- ment and increa.ed welfare in the short and medium term, (iv) identification of policies in other sectors affecting perfor- mance of the forestry sector, and (v) the real economic returns of the activities currently carried out. Some scientists have postulated that the development frontier of a social forestry program has three main stages: tree planting and adoption of a tree culture, people's participation in planting and management and environmental management and development. As far as the first phase of the program is concerned, there is no doubt that it was achieved successfully. However, the lack of policy and strategy has resulted in a very unsatisfac- tory manner of addressing the other stages of the development in social forestry. The imperatives related to the social and environmental aspects of the program are such that it is impossible to continue for too long without a national policy. Project Sustainability 100. The Annual Review of Evaluation Results for 1988 stated that . experience shows that achieving sustainability required the attainment of a balance across all forms of capital participating in the development process. Six major forms of capital were identified: physical, financial, . human, natural, institutional and cultural. The same review discussed the principal determinants of sustainability at the project and sector levels; it emphasized the differences across sectors by indicating the most impor- tant form of capital influencing the sustainability of activities, and to what degree. In addition, the concept of sustainability of development was analyzed, bearing in mind the importance of proper management of the natural resource base of all countries. Environmental degradation and the increasing risks resulting from exceeding the carrying capacity of existing environments were singled out as important problems in economic development. 101. Based on the conceptual framework of the Review and on the on- going special study on Bank Experience in the Forestry Sector, it is possible to state that the most important forms of capital determining the sustainability of social forestry projects are natural, institutional and cultural. This does not necessarily imply that the other forms of capital are not important. More specifically, the capacity this program will have to sustain the development effort critically depends on the extent to which people will participate in and maintain the program, and on how the incen- tive structure and institutions affect the attitudes and behavior of those who are to benefit. Experience with this project clearly demonstrates that success was very limited in areas where the land, water, forest and vegeta- tion were under a common property regime. Experience with this project also demonstrates that the project was very effective and it will be clear- ly sustainable in areas where the institutional and cultural capital created the necessary conditions for take-off; i.e., the farm forestry component and the afforestation program in degraded forests. In addition, - 32 - the project also demonstrated that whenever there is uncertainty and dis- pute over ownership, allocation, and use of assets, or major cultural differences in attitudes towards the forest and its role in development, social forestry faces paramount difficulties. Since this report is the audit of the first project and not of the social forestry program, the conclusion is that all the activities already implemented are likely to be sustainable. 102. Several aspects should be noted. First, the cost of achieving sustainability may be too high in those components where the Forestry Department is managing for the villages. Second, sustainability of the farm forestry component may depend basically on the structure of economic incentives prevailing at any given point in time. In other words, sustain- ability in this case is related to events and conditions within and outside the forestry sector. The notion of sustainability will depend on how much of the farm forestry activity is perceived to be for the social good; otherwise private incentives will decide the future of that program. Third, the sustainability of forestry as an one of society's common insti- tutions has been greatly enhanced. As stated earlier, the large majority of the rural communities are involved in one form or another in the social forestry program. The cultural change has already taken place. The situ- ation is less clear regarding the long-term sustainability of the natural forest. Although it is difficult to trace such a problem to a single project, it is no exaggeration to say that the project has done very little in decreasing the pressure on the forest. In fact it may have increased the pressure on the traditional forest lands by not increasing the supply of fuelvood in the areas surrounding the forest. The sustainability of the natural forest will require a more comprehensive program than social forestry. This project had recognized this potential benefit as a "residual" of the program rather than as its primary objective. However, it is central that the Bank, in its policy dialogue with india, gives the highest priority to the issue of sustaining the remaining natural forest. C. Summary of Lessons and Implications 103. There are several lessons and implications that can be drawn from the experience with this project. The most important are: - Sector based loans cannot be prepared without the necessary sector work or without an acceptable policy framework at the sector, state and national level. - The institutional aspects of projects of this nature become be the principal determinants of performance and sustain- ability. The institutional aspects of particular importance are: incentives and property rights, organizational aspects of project executiot, government commitment, and people's participation. The Bank tended to underestimate .;he role those aspects play in devulopment performance and sustainability. - 33 - Aggregating a large number of objectives tend to increase the complexity of the project unnecessarily, while decreasing the effectiveness of the means that are to attain those object- ives. The vacuum left by the lack of sector work made it impossible to settle the trade off among such objectives as achieving fuelvood energy self sufficiency, benefiting the poorest sections of the population, and improving the state of the natural environments. It is very risky to underestimate the role played by tech- nology. Even in cases where the central theme is tree planting on a large scale, it is important to transfer to farmers the best technology available at the time. Although the negative consequences may be felt after the implementa- tion period, this aspect is central to the success of any forestry program. Target-driven implementation philosophy may prove to be disastrous ir the long term. Although coverage is central to the first stage of a program that needs a rapid rate of adoption, focusing on the quality-related aspects of the program results in a much higher pay-off. There is a limit to that which a forestry project should be expected to accomplish. If there is a long string of aims, beneficiaries' expectations increase and major frustrations result as these aims cannot ever be achieved. - 35 - REFERENCES Adam, Michael, 1976, Wanderia in Eden: Three WaRs to the East Within Us, Knopf, New York. Agarwal, Anil, Oct. 1985, "The Fifth World Conservation Lecture: Human- Nature Interactions in a Third World Country," Centre for Science & Environment, New Delhi. Agarwal, Anil, Jan. 30, 1987, "Gandhi, Ecology & the Last Person," 13th Gandhi Peace Foundation Lecture, Centre for Science & Environment, New Delhi. Agarwal, Anil and Narain, Sunita, Sept. 1989, Towards Green Villages: A Strategy for Environmentally Sound and Participatory Rural Development, Centre for Science and Environment, New Delhi. 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