India - Integrated Watershed Development (Plains) Project

Document of The World Bank FOR OFFICIAL USE ONLY 4mA/ 3/9?7- /M C/t Z ( 63 / ~ // Report No. 8326-IN STAFF APPRAISAL REPORT INDIA INTEGRATED WATERSHED DEVELOPMENT (PLAINS) PROJECT APRIL 20, 1990 Agriculture Operation$ Division Country Department IV Asia Regional Office This document has a restricted distribution and ma} be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Currency Equivalents US$ 1 = Rupees (Rs) 16.65 GOI, States - April 1 to March 31 Weights and Measures The metric system is used throughout the report List of Abbreviations and Acronyms CPRM Common Property Resource Management GIS Geographical Information System GLDC Gujarat State Land Development Cerporation GOI Government of India MOA Ministry of Agriculture (GOI) MTR Mid Term Review NGOs Non Government Organizations NTFP Non Timber Forest Products SOEs Statements of Expenditure N WPCO Watershed Planning and Coordination Organization a Gllossa;y Kharif Monsoon Season Rabi Winter Season with some Precipitation This report is based on the findings of a Bank appraisal mission, which visited India in October/November, 1989. The mission consisted of Messrs./Mme B. van de Poll, T. Estoque, R. Ng (p/t), G. Morgan (p/t), J. Alexander, P. Kohli, P. Guhathakurta (p/t) (Bank), and A. Molnar (consultant). Assistance was also provided by W.Magrath and A. Banerjee.  INTERATD WTERHED -DEVETOM N ANS I PROJECT STAFF' APPRAISAL REPORT TahlA of ContentR Page No. I. LOAN/CREDIT AND PROJECT .................. . 1 II. THE AGRICULTURAL SECTOR . 3 Agriculture in the National Economy . . 3 The Rairfed Subsector . . 3 Watershed Development Programs in Participatinq States . 4 Experience with past Bank Lending . . 6 III. .THE .RQ.CT 7 Rationale for Bank Involvement and Origin. . 7 Project Area . . 8 Project Objectives, Design and Description. . 8 Detailed Features . . 9 Project Costs and Financing ...................... 12 Procurement .............. ............. 12 Disbursement ................... 13 Retroactive Financing and Special Account . .14 Accounts and Audit . .14 Project Organization, Implementation, Budgeting and Management . .14 Project Benefits and Justificationf$.. on 18 Institutional and Environmental Impact . . 19 Impact on Women . .20 Project Risks .............. .. ................. 21 IV. AGREEMENTS AHD RECOMMENDATIN .................... 22 ANNEXE=: ANNEX I: The Project Areas .................... 23 ANNEX 2: Watershed Development Technology and Menu of Treatments .30 AlknEL._: Physical Survey, Site Development Planning, and GIS Development .53 ANNEX 4: Consultative Planning and Joint Management of non arable Lands .......... ........ 66 AEX 5: Training and Technical Assistance .70 ANNEX 6: Adaptive Research .76 ANNEL 7: Organization and Management .79 A=UK 8: Monitoring and Evaluation .87 ANNEX 9: Project Costs .94 ANNEX 10: Crop Budget Analysis .................. 100 ANNEX 11: Economic Analysis ..................... 104 ANNEX 12: Cost and Benefit Sharing Arrangements .... . 107 ANNEX 13: Schedule of Disbursements ............... 110 ANNEX 14: Documents Available in the Project File ... . 111 CHART: Organization Diagra;n .......................... .112 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  INTEGRTD WATERSHED DEVELOPMENT (PLAINS) PROJECT STAFF APPRAISAL, REPORT I. LOAN/CREDIT AND PROJECT SUMMARY RorroWer: India, acting by its President. Project Beneficiaries: The Governments of Gujarat, Orissa and Rajasthan. Amount: IBRD Loan US$ 7 million equivalent IDA Credit SDR 42.6 million (US$ 55 M equivalent) Terms: IBRD loan: 20 years, including 5 year grace period at the Banks variable interest rates. IDA credit: Standard, with 35 years maturity On-lending Terms: Government of India (GOI) would onlend funds to the three participating states under prevailing terms and conditions. GOI would assume the foreign exchange risk. Project Description: The main goal of the project will be to stabilize selected watersheds in the three participating states through a menu of land treatments, emphasizing soil and moisture conservation and by introducing more sustainable land management systems, including seeking long-term, community based, management solutions for public non-arable lands. The project consists of the establishment of vegetative contour barriers and demonstrations of associated production systems, such as agro-forestry, alley cropping and dryland horticulture on arable, private land; together with land treatments such as vegetative soil and moisture conservation measures, afforestation, silvipasture development on non arable, public land; and structural and vegetative treatments for stabilization of natural drainage lines both on arable and non-arable land, and nurseries. The project would also support facilities and strengthen implementing agencies, including non government organizations (NGOs), physical and participatory watershed planning and monitoring capability, research, and training.  - 2 - RiRks: The major risks facing the project are: a) potential delays in adoption of soil and moisture conservation techniques, which will be addressed by large scale demonstrations, fine tuning of technologies to location specific conditions, training and extension; and b) long term sustainability of land treatments, particularly on common and public landa, which will be addressed by introducing consultative planning and beneficiary approaches in the project which should lead to more viable joint user/management systems of common property resources. Estimated Project Costs:1 -------Rs million ------- -----US$ million---- Local Foreign Total Local Foreign Total Foreign Exchange (%) Watershed Dev. 751.4 39.7 791.1 45.1 2.4 47.5 5 Works Technical 26.9 1.4 28.3 1.6 0.1 1.7 5 Support Project Impl. 296.7 6.1 302.8 17.8 0.3 18.1 2 Support Training and A=7 22I 76.4 2_. 1.8 4._ U Tech. Assist. Total Base 1122.2 70.4 1198.6 67.3 4.6 71.9 6 Costs Physical Cont. 150.0 9.4 159.4 9.0 0.6 9.6 6 Price Cont. 3a3-7 292. 413-4 2LA n.g 2= 2 Total Project 1655.9 115.5 1771.4 85.7 6.1 91.8 7 Costs Financin P_lan: Local Foreign Total -----(USS) million------- GOI and Participating States 24.1 0.0 24.1 Beneficiaries 5.7 0.0 5.7 IBRD 7.0 0.0 7.0 IDA 48.9 6.1 55.0 TOTAL 85.7 6.1 91.8 Estimated Disbursements: (US$ million) FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 Annual 2.5 1.2 7.4 8.7 8.7 11.8 12.4 9.3 Cumulative 2.5 3.7 11.1 19.8 28.5 40.3 52.7 62.0 Eronomic Rate of Return: 18% 1 Inclusive of taxes and duties of about US$3.4 million.  II. TIrd AGRMICLTALr3 RRLTnR AgrionltuXe in the Natinnal EQonomv 2.1 India's GsDP grew at about 3% per annum in the 1950's and 1960's, accelerating to 4.5% in the 1980's 2ue to rapid growth in manufacturing and services. Agricultural growth has averaged 2.4% per annum over the last two decades, slightly ahead of the population growth rate of 2.2%. Despite comparatively modest growth, agriculture remains important for the Indian economy. Agriculture's share of GDP (33%) masks the extent to which India's population of 810 million rely on the sector. About 75% of India's people live in rural areas, and 64% are directly employed in agriculture. These workers tend to be poor (78% of India's poor are in rural areas) and female (one-third of the agricultural labor force are women, and agriculture remains the main source of employment for rural women). Per capita income grew to US$300 by 1987, but there has been only limited improvement in the living standards of the poor, 280 million of whoa live below the poverty line. Agricultural exports account for 22% of total exports, and have been declining. 2.2 India has a land area of 3.27 million km2, of which about half (150 million ha) is cultivable and of which about one third is provided with irrigation facilities. Agricultural development plans of the GOI and State governments have promoted food production, with the aim of achieving food security, augmenting agricultural exports, alleviating poverty, and creating employment, especially in rural areas. Key elements of government strategy have been the expansion of irrigation, improved technical packages (high- yielding varieties, fertilizers and plant protection chemicals), and strengthened institutions and services (extension, research, seed production, credit, and marketing). As a result of these efforts, the annual growth rate in food grain production over the last 15-20 years has averaged 2.7% ("Green Revolution"), and India has become self-sufficient in grains. High population densities and limited land supplies mean that future growth must depend largely on intensifying production on both irrigated and rainfed land, from crop diversification, and from increased efficiency. Thus, GOI's long-term focus has shifted to stimulating agricultural growth and ensuring sustainable development, through improved water use efficiency, development of rainfed agriculture, natural resource conservation, environmental protection, and further strengthening of public agricultural support services. Investment programs to address these elements will be receiving high priority in the Eighth Five-Year Plan (1990-95) now being prepared. The Rainfged Subsector 2.3 Rainfed Production has become increasingly important in India as even at full irrigation development some 50% of farm holdings and 75 million ha of croplands will remain fully dependent on rainfall. Productivity from these arable areas together with the increasingly degraded forests, pastures and other wastelands (around 100 million ha of non arable lands) on which many people and livestock rely, is very low, although by virtue of the large areas involved, they still contribute over 40% of total food production and provide most of the country's fuelwood and fodder. Given that the rural population will, for many decades, continue to grow and that even localized drought can have extremely serious consequences on people's health and economic situation,  development programs that take account of the predominantly rainfed-based existence of India's rural population have major importance for income growth and environmental stability. 2.4 GOI and State Governments have increasingly recognized the need to develop the potential for ra'nfed agriculture and to arrest the alarming rate of environmental degradation in these areas; in company with these developments, much greater emphasis has recently been given to the watershed as the basic physical-biological and socio-economic unit for planning and management of natural resources. Some important programs were initiated during the latter part of the Sixth Plan period, including the Pilot Project of Watershed Development in Rainfed Areas which was launched in selected watersheds in the States of Karnataka, Andra Pradesh, Maharashtra and Madhya Pradesh. In 1987, under the Seventh Plan, a National Watershed Development Program was launched in 99 Districts of 16 States, and includes land management works and crop improvement programs on arable lands as well as development of non-arable lands. The Eighth Plan will continue this program throughout the country. Watershed Development Prgrams in Partici2ating States 2.5 A very limited national watershed sponsored development program has also Feen carried out in the three participating states and some of their common features and obstacles in agriculture development are deacribed below. A more detailed state and project description is given in annex 1. 2.6 Farm Incame and Wage Emplovment. Farm incomes from rainfed agriculture in the project areas are mainly affected by the constraints of rainfed areas themsel'i'es, namely the frequency of drought, marginal and sloping lands and erosion caused by run-off, generally result in low crop yields. A further constraint is the limited access by farmers and the rural poor to complementary farm income from common property resources on non arable lands (public and common lands) such as subsistence fuels, fodder, headloading wood for sale and minor forest products either because of the degraded status of the surrounding common, village or forest lands and or the lack of accessibility to forest lands imposed by forest policies. Despite the latter and due to the ever increasing demand for fuel and fodder, continuing encroachment of lands for agriculture and cozmnercial uses both demand and extraction far exceed the annual biomE 3S generation in these forest lands and results in their gradual degradation. In all project areas income and production inputs generated from livestock are important ( dairy products, dung, draft power and wool). The lack of feed supply for these animals is a major constraint, particularly in raiTAfed farming. Farm income derived from horticulture and agro forestry is very small in the project areas but there is good potential. Off-farm wage employment is limited in the project areas and consists mainly of seasonal wage labor in agriculture and forestry. Of importance is the relatively high proportion of self- and indirect employr;ent of women in forestry and livestock activities, a factor which so far has been given little attention in watershed development. 2.7 Land Use and Tenure. Land use varies considerably in the project area. The Gujarat subproject has the most private arable land (>50%) and Orissa the least (<30%). Orissa also has the highest percentage of forest land. Each village through its patwari keeps basic village land records, giving details of land in the village whether privately owned or belonging to government or village community. Generally these land records are out of date. Farm holdings are small between 1-2 ha and used for millet/cos-^se cereals  - 5 - production (Kharif/monsoon season) and wheat (rabi/winter season) in the drier areas and paddy and maize in areas with more rainfall in Orissa. Better land management practices e.g. in-situ moisture conservaticn, combined with improved inputs and some land use changes would substantially improve and stabilize crop yields in rainfed farming. Forests are mainly publicly owned and managed by the respective State Forest Departments. Together with some pockets of revenue and village common land, these are one of the main sources of fuel wood, fodder and non timber forest products (NTFP) for the rural population. Under the Land Revenue Code, the Collector (para 2.8) is empowered to set aside unoccupied lands in a village for forest, grazing or other community purposes. Tenure is not always clear in public lands owir; to encroachment. Apart from the techi:alogical axnd environmental improvements to be made in these areas one of the uiiain problems to overcome is the lack of understanding and agreement between villagers and government officials on the z 4u= and facto use and management of these common property resources (CPR). 2.8 Institutional Arrangements. The respective roles and coordination 7 of the various line agencies (Agricultural Extension, Soil Conservation, Animal Husbandry, Horticulture and Forestry), user groups and local governments involved in watershed development are the most difficult issues to resolve. For line agencies the main problem is overlapping territorial and developmental responsibilities which handicap the implementation of programs which are themsalves strongly hierarchical. Line agencies do little diagnostic survey work, show little local flexibility and lack overall strategic planning. The district is still the basic administrative unit in the state and the Collector (and District Magistrate) is the chief representative of the government in the district. He is responsible for land manaqement, development programs and maintenance of law and order. While most of the development flnctions in the district are carried out by the line departments, the Collector is required to coordinate them, but in reality he has little time to do so. There is a local 2Qverrment (Panchayatl administration in all project states. The Gram Panchayats consist of a number of villages, are the lowest level of this hierarchy followed by bodies at the "block" and district level. All carry out some civic and economic activities. The bulk of panchayat income comes from land revenue, other taxes and various grants from the state. Generally the Gram Panchayats have shown little interest in development work or in acting as a motivator and coordinator of village people. In addition to the elected Panchayats, the project areas also have formal and informal user groups often operating at village level, as well as various NGOs. It is these local level institutions which may be most suitable for playing the key role in bringing about sustainable management of common property resources. 2.9 Agricultural Services. Agricultural extension is based on the training and visit approach in all three states but generally lacks a clear development focus for rainfed farming. The capacity of agriculture research institutions to address location specific technological problems is weak in the project areas but is being strengthened under the on-going National Agricultural Research Project (CR 1631). While arrangements for the supply of agricultural inputs are generally adequate, a number of other support services from the line departments could be improved, particularly with respect to inter active planning and sustainable management of CPR, soil and moisture conservation, pasture development and range management.  EoerieriAoe with east BLnk Lending 2.10 Bank Supported Proiects. The Bank has been supporting agriculttral development in India since the early l9i0's. To date 120 projects have received IBRD/IDA financing amounting to USS 9.0 billion equivalent t80% IDA and 20% IBRD). Of the 120 projects, 49 were mainly for irrigation (US$ 4.5 billion equivalent or 50% of total agricultu:al lending). The remaining 71 projects can be subdivided as follows: (a) 39 for agricultural support services (credit, researcn and extension) at USS 2.6 billion equivalent; (b) 19 for commercial agriculture (seeds, fisheries and agro-industry) at US$ 755 million equivalent; (c) 8 for forestry and resource conservation at US$ 350 million equivalent; (d) 4 for livestock development at US$ 430 million equivalent; and (e) one for drought assistance at US$ 350 million equivalent. The basic thrust of Bank involvement has been to: (a) increase the area irrigated and improve water use efficiency; (b) deveiop the institutions entrusted with agricultural supp')rt services and enhance lending capabilities of the public lending agencies; (c) increase the producticn of seeds, fish and silk and improve storage, processing and other agricultural rarketing facilities; (d) afforest degraded areas to reduce soil erosion and to increase production of fuelwood and timber; and (e) increase animal production, primarily milk, improve marketing and strengthen the dairy cooperatives. The drought assistance project aimed at assisting Gol in meeting the costs of construction/rehabilitation resulting from the three consecutive years of severe drought (1985/86-1987/88), supporting Government's long term strategy for increasir.g Tndia's resilience to droughts and sustaining and enhancing the momentum of economic reforms. 2.11 The projects in the field of resource conservation and forestry consisted of the Drought Prone Area Program (Cr-526 closed), the Kandi Watershed and Area Development Project (Ln-1897 closed), the Pilot Project for Watershed Development in Rainfed Areas (Cr-1424), the Himalayan Watershed Management Project (Ln-2295), along with a series of Social Forestry Projects of which the most recent is the National Social Forestry Project (NSFP) (Cr- 1611). The Bank has attempted to take stock of the above through the Review of Rainfed Agriculture and Watershed Development (Report 7138-IN, February 24, 1988) and the Wasteland Development Review (Report 6945-IN, January 14, 1988) and the NSFP Mid Term Review (MTR) of October, 1988, prepared in conjunction with USAID. 2.12 IMplementation Problems and lessons learnt. Many projects have encountered implementation problems causing delay in disbursement and completion. Problems of a general nature include: (a) delays in project mobilization; (b) delays in procurement; (c) poor quality irrigation and civil works; (d) institutional weaknesses; (e) inadequate local funding; and (f) insufficient preparation of resettlement and rehabilitation components. The major lesson learnt from the implementation of the forestry and resource conservation projects is that productivity and production stability, even in the rainfed/dryland areas, can be considerably enhanced provided that v account is taken of the above general problems and the following specific U problems and lessons are reflected in the design and scope of new projects. - I  1. On-Farm Technology - Conservation technology in India has focussed yrimarily on structural works for controlling and disposing of run-oft rather than capturing the maximum amount of moisture in the soil and retaining it for as long as possible to support crop growth. Past conservation treatments had the added disadvantage of being poorly suited for small farmers and the strains of fast population growth on natural resources; 2. Off-Farm Technology - Treatment of off-farm areas (non arable lands) has focussed too heavily on tree planting per se, and has not provided sufficient protection against erosion, met the fodder needs of livestock owners or been accompanied y in-sits moisture conservation practices to encourage higher seedling survival and improved growth performance. Treatments are unlikely to be sustained unless they meet the needs of local land users and generate community responsibility for protection, management and maintenance; 3. Financial Constraints - The scale of the problems to be tackled far outstrips the resources available. This problem will continue unless more cost-effective remedies are applied. Alternative, and lower-cost, technologies using vegetative barrier hedges (particularly vetiver grass) along the contour coupled with contour cultivation and planting .ave now been successfully tested and are well suiced to both arable and ,n arable land; 4. Institutional Constraints - Planning, organization and management have been issues of major concern in all projects. In particular, the individ'tal and synergistic impact of watershed treatments has been impaired by poor coordination between line agencies, and there has been a marked absence of land user participation in treatment planning and implementation. overcoming these problems is one of the pivotal requirements of succesful watershed development. III. THE PROJECT Rationale for Bank Involvement and Origin 3.1 The strategy for Bank's assistance to the agricultural sector in India is to support policies and investments that promote economic growth and social development in the context of macro-economic stability. The emphasis is on efficient resource allocation, increased efficiency in the public sector and appropriate targeting and delivery of 'upport systems to the poor. The proposed project fits well within that framework. The earlier projects dealing with resource degradation and watershed management have all confirmed that resource development is both critical and complex and have generated ideas and possible solutions for introduction in a series of projects. These projects are a logical extension of earlier work. They are opportune, coinciding with the start of the Eighth five-year development. They will allow the Bank to continue to assist India in developing technical, administrative and socio- economic applications that will contribute to halting the rapidly deteriorating environment and natural resource base while enhancint' productivity. Together, this project and the proposed Integrated Watershed Development (Hills) Project (report 8202-IN), would cover a wide variety of geographic and socio-economic conditions in India. These projects would also make a considerable impact on:  a) tne alleviation of poverty since Lhis is exacerbated by the generally deteriorating ecological conditions; b) the environmental stabilization of vast tracts of degraded land; and c) institutions and policies for better management of the natural resource base and for ensuring equitable access to these resources. 3.2 With the generation of successful rainfed soil and moisture concervation technologies in the pilot watershed projects and the start of the National Watershed Development Program in 1987, several states showed interest in adopting these technologies and programs. As a result the three participating states started to prepare watershed development programs in 1988 (Annex 14). These were reviewed by the Bank in November 1988 and led to preappraisal in July 1989 followed by appraisal in November 1989. Project-Area 3.3 The project would be implemented in the states of Gujarat, Orissa and Rajasthan (Annex 1). Each State has selected priority watersheds for inclusion in the project- Generally four RilStaas per state have been selected, each comprising a sub-watershed, or cluster of micro-watersheds, within the range 2500-7500 ha. Each pilot sub-waterzh-ed is part of a larger watershed expansion area varying in size between 20000-30000 ha. Each state has different ecological conditions to address. The project area in Orissa is the most hilly, forested and has the highest rainfall, about 1200 mm. It is however, a drought prone area, has a largely tribal population and contains many special degradation problems such as wide scale shifting cultivation within the forest lands. The areas in Rajasthan and Gujarat on the other hand are more undulating, have more arable land and have to deal with the driest growing conditions (400 mm) often in association with heavy concentrations of livestock, particularly small ruminants. Each requires a different approach for improving the degraded resource base. Proiect Objectiy_es. Design and Descripation 3.4 The project aims to slow down and possibly reverse ecological degradation in a variety of agro-ecological zones by promoting sustainable and replicable production systems. The project would seek to introduce improved land management practices in selected watersheds through development of cost- effective, replicable and sustainable technologies, with particular emphasis on vegetative soil and moisture conservation measures, such as Vetiver grass (Vtiver.ja zizanioideal improving ground cover and encouraging land use that responds to people's needs and the land capability. The project would concentrate on rainfed/dryland areas but address all lands in need of treatment, irrespective of ownership, i.e. it would cover private, public and communal lands. 3.5 A major institutional objective, is to introduce effective arrangements for inter-agency coordination in watershed planning and plan implementation, and to ensure the full participation of watershed land users and their agreement to all stages of development. Resource management arrangements to ensure that development initiatives are community based and sustaix.ed in the long term will be developed; balancing the diverse interests of different groups of .and users, including the resource poor who are often ignored in traditional development strategies. 3.6 iject Duration and Phasing. Although the project seeks wide-scale coverage withir. the participating states, work would be initially concentrated  in selected pilot areas in which technologies and operating procedures can be demonstrated and refined and training provided to governzuent and non government agencies. To accommodate this demonstration and learning phase, the Project would span a 7-year investment period, an initial 3 year pilot demonstration phase followed by a 4 year gxoansion ohase; a mid-term-review would be conducted at the end of PY3 and wo_ld include thorough evaluation of pilot performance and make revisions, as necessary, for the expansion phase. 3.7 Ir many respects, watershed uevelopment is a continuous process, rather than a discreet rehabilitation venture, but because of the range of problems to be addressed, and their demands on skills and services, intervention in each watershec. location would be undertaken on a campaign basis - ie. a time-bound period of intensive promotional and implementation wcrk which will need to be sustained thereafter by regular services equipped with the necessary skills to address new problems or to re-enforce the treatments initially installed. Many of the proposed treatments, however, do not depend on a wate,hed approach for their implementation; for example, a major advantage of the vegetative approach for on-farm soil and moisture conservation (para 3.9) is that it can be introduced on a field by field basis without depending on compliance and participation by adjacent farmers. It is important that technologies, after being refined during the pilot phase, be extended independently, and be part of the routine development work of concerned line departments rather than be confined to the slower, and more selective, area coverage of a watershed program. Accordingly, the project would support during the eaxansion phase: a) on-and off-farm stabilization treatments within newly selected watersheds; b) expansion of on-and off-farm land management treatments, employing technologies established during the pilot phase, into other rainfed farming areas of the participating states. The speed of development would vary among states, as adoption rates may be higher in one state than another. To provide an incentive to states with a faster development pace, they would be able to draw down development funds at a faster rate (para 3.16). The achievement of the expansion phase targets is based on the assumption that the strategic and micro planning capability foL further watershed treatment will be irproved during the pilot phase. During the latter, studies will also be carried out on issues that will affect the expansion capability e.g. CPRM, la.d tenure, economic benefits and incentives of watershed treatments. 3.8 Prolent Description. To achieve these objectives the project would consist of: (a) watershed development works consisting of a menu of eligible land treatments to arrest the productivity decline on arable, private lands and to restore ground cover on non arable (public and communal) lands; (b) technical support mainly through improvements in location specific research and nursery development; (c) projeact implementation support to strengthen project administration, including NGO's, physical planning and a geographical information system (GIS), and .nonitoring and evaluation (M&E); and (d) Training and technical assistance mainly to promote soil and moisture conservation technologies and participatory planning and sustainable resource management arrangements. Detailed Features ?.9 Watershec DevelQpment Works (US$57.6 M; 63% of total costs). The project would support investments to treat about 12 selected watersheds, four each per state, covering about 265000 ha. Treatments used would be selected from a list of eligible treatments and applied to private, public and common land. Details of treatments are given in Annex 2. Treatment of private arable land would primarily aim to introduce a system of contour farming. The main activity  would be the establishment of contour vegetative barriers which will pLovide guidelines for contour cultivation and also provide slope stabilization and erosion control. Complementary activities would consist of on-farm demonstrations of impLoved inter-hedge land management practices (e.g alley cropping), appropriate changes in land use (e.g. agro-forestry and dryland horticulture, particularly in the marginal areas), improved crop production methods ano inputs and some livestock improvements in Rajasthan. Trgatment of public (dearaded forest) and common land would mainly be limited to marginal lands or those located in the upper catchments and subject to severe erosion, where it is essential to re-establish the vegetative cover. Treatment would be mainly by planting perennial tree crops 'reforestation) and/or appropriate permanent pasture to provide protection and increase forage production. Rehabilitation of these areas would be through planting on the contour and not by the traditional grid system. It would mt.an a shift from traditional uni- tier to multi-tier canopies, accompanied by vegetative in-situ soil and moisture conservation practices. Plantings would therefore be carried out in conjunction with contour 'V' ditches backed with vetivez grass barriers and through the most effective site specific combination of forest/horticulture species and shrubs and other ground cover (fodder/forage grasses and legumes) which would address the fuel, fodder and NTFP needs of the people as well as improve environmental protection. To protect areas against uncontrolled grazing, emphasis will be placed on the introduction of live/social fencing. To furnish the planting material re-;4rements, the project would emphasize seed production and nursery development ar.a efforts would be made to privatize these operations. Treatment of the natural drainage lines and associated gullies on both private and public lands would also be an important component of watershed stabilization and would involve a combination of vegetative and structural measures. Gully stabilization should commence at the top of drainage lines and the most appropriate treatments would be vegetative, brushwood and small masonry check dams in the upper catchment areas, with larger masonry structures and earthen run-off management/water harvesting structures in downstream areas. Gully stabilization will be planned as an integral part of the treatment of the surrounding areas, with vegetative protection/stabilization treatments carried out first and then follcwed by engineering structures if required. Investments for the treatment of drainage lines would be limited to 25% of total watershed treatment costs, and any expenditures above this level would require prior GOI/WB approval. An assurance to this effect was obtained at negotiations. 3.10 Other Treatments. (US$4.4 M; 5 % of total costs). Although the above constitute the primary treatments for watershed stabilization, in any one area the causal factors and treatment remedies could be very wide-ranging and involve a potentially large number of implementing agencies. For example, poor road alignment and deficient roadside drainage are often important contributory factors in gully erosion; likewise, some important initiatives in energy saving/alternative energy technology (biogas plants, fuel efficient stoves) have been introduced into rural areas to reduce demand for fuelwood. The list is extensive, but while all have merit within a watershed development project, they carry the danger of diverting priorities and over burdening management. In order to embrace the opportunities, but avoid the pitfalls, these ancillary needs will be met from a reserve fund amounting to about 5% of total costs. The resources of the fund would be used for additional activities such as minor roads, village input/storage/water supply improvem.ants and energy saving devices as well as for expansion of successful project components outside the selected watersheds. The drawdown from this fund would be subject to the submission of specific project proposals which in turn would be subject to approval by GOI/WB during their annual review missions. Agreement to this effect was obtained at negotiations that this will be a condition of disbursement for each individual state.  11 3.11 Technical Support (US$2.1 M; 2% of total costs). Apart from technical support to farmers through dissemination of soil and moisture conservation practices and improved crop demonstrations, the project would include funds for nurseries to supply planting material for vegetative soil and moisture conservation, silvi-pasture, horticulture and forestry. To ensure that the best exotic material is used it will be necessary to evaluate established provenance trials and import seed from the most promising source. Indigenous species will also require attention. In this case outstanding shrubs/trees will be selected and special attention given to the timing of harvest and processing (cleaning) of the seed. These tasks should be undertaken by seed suppliers and commence not later than December 31, 1991, under specific TORs (annex 2) and assurances to this effect were obtained at negotiations. With respect to research, (Annex 6) institutional responsibility for conducting production oriented research at state level rests with tha zonal research stations under the state agricultural universities. These, and their associated sub-stations are already funded, under the National Agricultural Research Project. Supplementary support under this project would, therefore, be confined to operational research funding, and since many of their research mandates are already directly relevant to the project, support would be restricted to priority research topics not yet adequately addressed in the zonal programs: i) identification and evaluation of various plant species (grasses and shrubs) suitable for effective vegetative soil and moisture practices; ii) identification of suitable species for agro forestry, fodder and silvi-pastoral development; iii) development of optimal, location specific land use systems suitable for the project zones; and iv) impact evaluation of technologies introduced for soil and moisture conservation. Each selected topic, which would build on existing research knowledge, would be contracted out to the concerned state agricultural universities under agreed trrms of reference which will be time-bound and include arrangements for annual review and future direction by an appropriate panel. 3.12 Support for Project Implementation (US$22.1 M; 24% of total costs). To improve project administration and implementation, offices, incremental staff, vehicles, equipment and operating expenses would be made available to the state level agencies/departments responsible for project execution. Particular attention would thereby be given to i) the coordination of the various line departments involved in project execution (para 3.23); ii) survey, physical planning and geographical information systems (GIS) (para 3.26); iii) consultative or micro planning and local institutional arrangements, including NGO's (para 3.27/8) and monitoring and evaluation (para 3.29). 3.13 Training and Technical Assistance (US$5.6 M; 6% of total costs). Because the technologies and participatory approaches to be introduced in the project are new, adequate levels of training and technical assistance are keys to project success, particularly in the pilot phase. Training would be important for: (i) locally testing and refining treatment technologies and creating the tools and proceclures for consultative and physical planning (including GIS); (ii) imparting the knowledge and skills to other field, research, training and NGO staff as needed as they would be responsible for extending project actions during the expansion phase; (iii) extending technical and institution- building skills, particularly to farmers and beneficiaries; and (iv) monitoring and impact evaluation staff who would set up the monitoring and impact evaluation framework for the project. Except for M&E and contracts for state level GIS institutes, consultants would be recruited through the office of the 'Watershed Development Council in MOA.  - 12 - 3.14 Where in-state expertise is limited, technical assistance and international training would be provided by the project for land use planning/GIS, adaptive research, local institution building and _onsultative planning, and nursery development. Consultants with India-wide expertise would be provided to the states in the various fields, mainly in the pilot phase of the project, and a few short-term, expatriate consultants in GIS and institution building for non-arable land management. The technical assistance component would also cover the cost of special studies (para 3.7) and the GIS hardware/software needed for land use planning. Project Costs and Financing 3.15 Proiect Costs. Total project costs (see chapter 1) including physical and price contingencies are estimated at RS1771.4 million (US$91.8 M) of which US$ 6.1 M would be in foreign exchange. Estimated duties and taxes amount to Rs65.7 million (US$3.4 M) and total project cost net of taxes is therefore US$ 88.4 M. The breakdown of costs by state and component is shown in Annex 9 and is summarized in Chapter 1. Costs are based on actual June 1989 prices and include appropriate physical contingencies. Price contingencies are based on projected annual Indian FY inflation rates for local costs of 6% in 1989/90, 7.2% in 1990/91, 7% in 1991/92, 6.9% in 1992/93, 6.6% in 1993/94 and 6.5% in 1994/95; 6.4% for 1995/96 and 6.1% for 1996/97 and for foreign costs of 5.4% in 1989/90, 6.5% in 1990/91 and 4.4% therearter. 3.16 Financing. The proposed IDA credit and Bank Loan of US$ 62 million would finance about 70% of total project costs net of taxes and be made available to GOI on standard terms and conditions and onlent by GOI to the three states under standard terms and arrangements (see financing plan in Chapter 1). The project beneficiaries' contribution of US$5.7 would be provided or recovered in kind or cash based on cost recovery arrangements as agreed between the states and the beneficiaries. The states' contribution would be included in budgetary allocations for project activities and funds for project implementation would be channeled through each of the state's Watershed Planning Coordination Organization (WPCO), para 3.23. Incremental costs for sustaining activities established under the project following its completion would be met either by the state from its budgetary resources or by beneficiaries from their incremental benefits as a result of the project. In the interest of disbursing project funds in response to emerging demand in each state, assurances were obtained at negotiations, _hat the MTR will include recommendations to reallocate the Credit/Loan within the agreed Credit/Loan amount, on the basis of individual state performance during the first three years and that such recomme-iations would be implemented. Procurement 3.17 Watershed development works (US$61.5 M), including civil works for buildings (US$2.8 M) would be scattered over the three states and a large number of selected watersheds. As the works are diverse in nature and dispersed over the seven year project period they would not attract foreign bidders. They will be undertaken by line agencies under force account. Similarly the size of each package for equipment, goods and materials (US$2.4 M) would be too small to attract international bidders, therefore they would be procured by loc3l competitive bidding (LCB) procedures acceptable to the Bank. Most of the vehicles (US$ 1.0 M) would be used in rural areas where ready availability of spare parts and maintenance is a necessity. Hence, operational efficiency, dictates vehicles of types that are locally available and in use by  - 13 - the implementing agencies and therefore all vehicles would be procured by LCB. For small items that cannot be conveniently packaged under LCB in amounts exceeding US$20,000 and up to an aggregate of US$ 1.0 million, local shopping procedures satisfactory to the Bank would be used. Seed and planting material (US$ 0.1 M) not available in India would be procured through international shopping. All bidding documents and analyses would be retained by the implementing units for possible inspection by annual Bank review missions. Consultancy services (US$2.8 M) would be procured in accordance with Bank/IDA guidelines for the use of consultants. .18 The balance of project costs (US$21.2 M) would consist of training, (US$0.8M), incremental staff salaries and vehicle and other operating expenditures (US$20.4 M), and except for staff salaries would be procured under local procurement procedures satisfactory to the Bank/IDA. GOI and the state governments have provided assurances at negotiations that these procurement arrangements would be followed. The procurement arrangements are summarized below; figures in parentheses indicate amounts to be financed by the Bank: (US$ millions) Procuremant Method Total Project Element IC. C B N.A Cost Watershed Works 61.5 61.5 (43.0) (43.0) Civil works 2.8 2.8 (2.2) (2.2) Equipment/materials 2.4 2.4 (1.2) (1.2) vehicles 1.0 1.0 (0.7) (0.7) Training 0.8 0.8 (0.8) (0.8) Technical Assist/NGOs 2.8 2.8 (2.8) (2.8) Planting Materiala 0.1 0.1 (0.1) (0.1) Recurrent costs 20.4 20.4 (11.2) (11.2) TOTAL 3.4 68.0 20.4 91.8 (1.9) (48.9) (11.2) (62.0) Dis2ursement 3.19 Disbursements under the Credit would be made for: (a) 70% of expenditure on watershed development works; (b) 100% of expenditure on consultants, NGOs, training and GIS; (c) 100% of foreign expenditure or 100% of ex-factory costs or 50% of expenditures for locally procured vehicles, equipment, furniture and materials;  14 (d) 80% of expenditure on civil works for buildings and housing; and (e) 55% of expenditure on incremental staff and operating costs. 3.20 Disbursements against expenditures for equipment, goods and other materials' contracts exceeding US$100,000 would be fully documented, as would disbursements for vehicles, consultants and training. For all other expenditures, IBRD/IDA would disburse against statements of expenditure (SOE) in an agreed format. Supporting documents for SOE's would be available for inspection by supervision missions and auditors, and retained by participating states for one year after Bank receipt of the audit report for the fiscal year in which the last withdrawal from the Loan/Credit account was made. Disbursements are projected over a period of 7 1/2 years from September, 1990 to March, 1998 (Annex 13). Project completion is expected by September, 1997 and Loan /Credit closing by March, 1998. Retroactive Financing and Special Account 3.21 To expedite project start up, the Bank and IDA would retroactively finance project expenditures incurred after July 1989 up to a limit of USS 2 million equivalent, provided that acceptable procurement procedures and guidelines were followed. These expenditures would include procurement of vehicles and equipment, consultancy services and workshops for training and initial establishment of nurseries for planting material and other preparatory activities and operating costs. In order to facilitate timely payment of project expenditures a Special Account amounting USS 3 million (equivalent to 4 months expenditure) would be established in the Reserve Bank of India. Replenishment to the Special Account would be made quarterly or when the account is drawn down by about 50% of its initial deposit, whichever occurs first. Accounts and Audit 3.22 The state WPCO's would be subject to normal government control and auditing procedures. Separate records and accounts would be maintained for project expenditures identifying all transactions pertaining to Bank/IDA financing, which with the supporting documentation would be retained for possible review by Bank supervision missions. The existing auditing arrangements would continue, and an audit in accordance with generally accepted auditing principles and auditing standards would be made of the project accounts, special accounts and SOE's submitted to the Bank/IDA for each fiscal year. Assurances were obtained at negotiations from GOI and the participating states that certified copies of the audited accounts and SOE's for the project would be sent to the Bank/IDA not later than nine months after the end of each fiscal year. Protect Organization. Imolemntation. Budgeting and Management 3.23 Or2anization at Central, State and District levl. Details of the organizational arrangements are given in Annex 7 and shown in the chart (Page 112). Overall responsibility for coordination and execution of the project would be the Watershed Development Council in MOA at the centre. In all three participating states the project would be implemented by a single agency supported by specialist staff on deputation from other line agencies (para 2.8) and in each case the administrative department discharging nodal responsibilities will be the Department of Agriculture. A multi-disciplinary and integrated organization - Watershed Development Planning Coordination  15 Organization - would therefore be established in the Directorate of Soil Conservation in Orissa and in the Directorate of Agriculture in Rajasthan, while in Gujarat it would be located in the Gujarat State Land Development Corporation (GLDC), as this corporation performs the same furct.Lon as the soil conservation wing under the Department of Agriculture in the other project states. WPCO would initially consist of a small team of specialist staff, headed by a project coordinator with the rank of additional director, and would have operational responsibility for the project's watershed development program, including planning, supervision, M&E and financial control. It is intended that WPCO would also gradually become responsible for the planning, coordination and project formulation for watershed development in the entire state. WPCO would comprise three cells as follows: i) A planning ce,l responsible for strategic planning and for suppport activities, such as technical record management, GIS, and cartography; and ii) A management cell responsible for formulating site development and annual action plans, field supervision and allocation and control of funds; and iii) A monitoring and reporting c12. responsible for physical and financial progress monitoring, and technical assessments. WPCO would also be responsible for contracting and supervising implementation evaluation. Similarly, multi-disciplinary task forces will be constituted at the watershed level under the operational control of a project officer with staff deputed from the concerned line departments and headed by a project director. The task force, which would consist of specialist staff in, inter alia, micro planning, human resource development and extension, would be responsible for the preparation of operational watershed treatment and management plans in conjunction with the relevant line agencies' staff in the district, the district collector, gram panchayats and village user groups. To this unit would be attached local-level NGOs involved in community mobilization, farmer and community training and institutional building activities supporting the work of the line agency staff (para 3.28). Agreement was obtained at negotiations that the appointments of the project coordinators and directors with terms of reference satisfactory to IDA would be a condition of disbursement for each individual state. 3.24 To improve the integration of line department activities in the watersheds, not only for the project but for any watershed development in the state, including centrally sponsored schemes, each of the states would establish a state level policy steering committee under the chairmanship of the Chief Secretary or Agriculture Secretary and its secretariat would be the WPCO. Each year this committee would review the strategic watershed plan and or its update, the project's annual work program, budget and progress, including major watershed policy and technical issues. Similarly, at district (already exis_ing) and subwatershed level, project management will be assisted by coordination committees which would strengthen the integrated and interactive watershed development approach with line agencies, revenue departments and local institutions. Assurances were obtained at negotiations that state governments would make adequate provisions in their annual budgets to implement the annual watershed development program and to sustain this development at the end of the project. 3.25 Although the project will be implemented through an unified task force approach, some realignment of duties between departments and change of emphasis would be desirable for watershed development in the long term and should be reviewed during MTR. Specifically, the dissemination of vegetative soil and moisture conservation hedges and contour cultivation on private land should become the responsibility of the Agriculture Departments' extension service, while responsibility of drainage line treatment on both private and  - 16 - public lands should be left to the Soil Conservation Department. Responsibility and leadership for nursery development, planting material quality control and availability for vegetative barriers and fencing, forestry and dryland horticulture species and fodder and forage to be supplied at both the private and public level may ultimately be given to the Forestry/Agriculture/Horticulture Departments. It is expected that workable institutional arrangements will only be developed through a gradual learning process. While the MTR (para ^.31) will make specific arrangements on changes needed these may be premature and not implementable within the project period. 3.26 Site Survey. Physical Planning and GIS Development (Annex 3). The project aims at building an improved institutional capacity for preparing site development plans by providing equipment, txaining and technical assistance to strengthen the quality of site survey and physical planning of the project expansion areas. In most areas this will involve strengthening existing line agency functions. It is expected that the project will develop closer linkages between information on the physical characteristics of the watershed development sites and the views and concerns of local residents through a process of consultative planning (para 3.27). The project will also support the development of prototype GIS for watershed planning and management. The GIS would form the basis of a watershed management information system. It is expected that the GIS would introduce production efficiencies in database management, in cartographic production, in dissemination of information, and in developing watershed rehabilitation plans. The GIS will be developed with a long term view of developing improved information management capabilities throughout the project states. 3.27 Consultative Planning and Beneficigrv Participation (Annex 4). For the successful introduction of improved land use practices on non arable lands and to improve the process of delivery of information regarding new practices on arable lands, an approach will be needed to involve beneficiaries and local institutions in the planning and implementation process and tc establish viable systems of joint/user management of the non-arable lands being treated, including village, panchayat, revenue and forest lands. These lands serve as common property resources in that they are subject to use by a number of individuals holding use rights independently, but are not subject to individual possession. In practice, the usage in India has become of an 'open access' nature, characterized by unrestricted and/or unregulated use. One of the main goals of the project is to strengthen communal systems of resource management on treated lands, so that the resource is managed jointly by a clearly identified group of local users and by the concerned government land authority. This requires a set of institutional arrangements that regulate use while excluding those who are not members of the group, thereby addressing both local needs and government priorities for land and product use. 3.28 A CPRM study was carried out during project preparation, which generated some specific criteria for viable, institutional arrangements and consultative watershed planning procedures. Drawing upon the findings of this study and the work being carried out with Ford Foundation support on CPRM models elsewhere in India, the project will generate models for joint management with appropriate written, legal agreements and support the necessary institution building, including formalizing the legal status of user groups where needed to undertake joint management, with the help of local NGOs. A group of experts -- some of whom may be from the respective states -- will be recruited through MOA to provide technical support for the following tasks: (a) developing consultative planning methods and curricula for training field-level  - 17 - staff in their use; (b) assisting in training of trainers; (c) developing models for joint management, including legal agreements; (d) coordinating the work of NGOs with technical field staff on community mobilization and institution building; and (e) facilitating the exchange of experiences among project states (para 3.14). Umbrella NGOs in each state would provide expertise to local level NGOs and assist in their coordination. At negotiations agreement was reached that the terms of reference including the composition of the team and the operational framework for their recruitment and work in the states would be a condition of disbursement for each individual state. Agreement was also reached that operational models for joint management of non-arable lands be developed with assistance of the group of experts, tested and agreed by the state governments. These would include _irmats for written, agreements concerning the legal constitution of user groups as a condition for disbursements. These would apply to non-arable treatments in each individual state during the expansion phase. Finally, during negotiations the Bank received from the state governments an initial list of the specific umbrella and local-level NGOs with whom they plan to work in the project under contractual arrangements. In addition, agreement was reached on the type of activities that such NGOs might carry out in the project, including how they will be funded. 3.29 Monitoring and Evaluation IM&EI (Annex 8). The pilot nature of the project requires that a set of monitoring cum evaluatiGn activities be included as an integral part of the functions of the projec-. management entities. Given the complexity of M&E a modular approach will be introduled in the project. Accordingly five modules will be introduced, namely i) project implementation monitoring which will track works' progress; ii) immediate results (adoption) monitoring to track change in land use patterns; iii) project b.nefit assessment to monitor on a continuing basis the improving productivity over time in different type of land uses; iv) project sustainability assessment which will evaluate the social and economic dynamics of the new production systems and v) assessment of the impact of watershed rehabilitation including effects on wider geographical areas, particularly downstream (e.g.,stream flow and ground water replenishment). The commencement of the work for these modules will be staggered, with the project implementation module monitoring starting as soon as project activities begin. Project's M&E would be overseen by the M&E cell at state HQ level (para 3.23) and apart from the first two modules which would be carried out internally, all others will be contracted out to local universities. Results derived from - project activities will be reviewed continuously to extract lessons of experience. Mid-term evaluation will be conducted to assess results of the pilot phase. During negotiations agreement was obtained that as a condition of disburseme.-t for each individual state, consultants would be employed to carry out M&E. 3.30 Raporting. MTR and PrXoeet Completion Re4ort. Each WPCO would not only fulfill the internal reporting requirements of the State and GOI but would also maintain records of the project's progress regarding the implementation of physical and financial targets to meet Bank/IDA reporting requirements. Annual progress reports would be submitted to Bank/IDA within 90 days of the end of the financial year and would draw heavily on information generated by the M&E cell so that reports also elaborate on the constraints and problem solving aspects of the project. The detailed reporting requirements would be finalized during the Project start-up review mission.  - 18 - 3.31 A joint State Govt/GOI/Bank MTR would be carried out by September 30, 1993. The review would particularly focus on the experiences regarding the treatment technology, incentives, consultative planning and beneficiary participation and organization and management, including NGO involvement. It would also review the strategic plans for other priority watershed areas to be developed under the project. Assurances were obtained at negotiations that the MTR's recommendations would be implemented by the states to adjust or fine tune the project during the second phase, if required. 3.32 A project completion report would be prepared by each M&E unit for each state sub project on the basis of Bank guidelines and an overall project PCR by MOA, both within six months from the closing date of the Credit. Proiect Benefits and Justification 3.33 Most project benefits would emanate from the introduction of low cost technologies emphasizing soil and moisture conservation aspects in rainfed areas in conjunction with the introduction of improved land resource management practices on about 120000 ha of arable lands and 60000 of non arable lands. The most direct beneficiaries under the project would be the rural poor, marginal, small and large farmers, landless laborers and members of the tribal groups, amounting to a total of about 95,000 rural families. Not only will they benefit from additional employment on public lands, but also from the additional output generated by the project at farm level and output from the I communal and forest lands, such as forest products, particularly fuel wood and timber, NTFP and fodder products. Indirect benefits would flow from m environmental enhancement and reduced degradation both in the watershed to be treated as well as to some of the natural resources in areas immediate downstream of the watersheds. 3.34 Production I=act. The project would increase the production of fooderops, fruits, fodde., wood products and NTFP. Production on private, arable land would be increased through the introduction of in-situ vegetative soil and moisture conservation techniques in combination with contour planting and other improved cultural practices such as early ploughing, early sowing and improved varieties, including mixed and relay cropping. These land treatments would also enhance the prospects for successful rabi crops and thus increase the cropping intensity. Project treatments on non private land would mainly increase yields of forest products, including fuel wood, small timber and poles but would also generate fodder and improve NTFP. 3.35 There is still considerable uncertainty about the increase in crop yields that can b-.e expected. Hence, yields will be verified as a main objective under the M&E components, the broad magnitude and value of annual incremental production of the four major representative food crops (sorghum, pearl millet, maize and wheat) at full development (about 10 years) under the assumptions given in the farm budgets Annex 10 are given in the table below: Present Yields Puture Yields with Project