India - Shrimp and Fish Culture Project

* ~ ~~D_cmu of The World Bank FOR O1ICIAL USE ONLY RepotNo. P-5664-IN MEMORANDTJM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT EQUIVALENT TO SDR 62.9 MILLION TO INDIA FOR A SHRIMP AND FISH CULTURE PROJECT DECEMBER 16, 1991 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY AND EQUIVALENT L.4ITS ('as of June 1991) Curncy, Unit --Rupee (Rts. US$ = Rs 25.0 (at appraisal) WEIGiTS AND MEASURES The metric system is used throughout the Report. ABOREVYIAT NS an ACRONYMS BFDA - Brackish water Farmers Development Agency CICEF - Central Institute of Coastal Engineering for Fisheries CMCC - Central Monitoring and Coordinating Committee CPU - Central Project Unit DEA - Department of Economic Affairs DOF - Department of Fisheries FFDA - Fish Farmer Development Agency GOI - Government of India ha - hectare ICAR - Indian Council of Agriculture and Research IFP I - First Inland Fisheries Project IQF - Individual Quick Freezing Units MOAC - Ministry of Agricultural Cooperatives MPEDA - Marine Products Exports Development Authority SMCC - State Monitoring and Coordinating Committee SPU - State Project Unit FISCAL YEAR Government of India, State Governments - April 1 to March 31 Commercial Banks - January 1 - December 31  FOR OFFICIAL USE ONLY SHRIMP AND FISH CULTURE PROJECT CrAdit and Project Summary Borrower: India, acting by its President Exeneutin Aagencies: The Departments of Fisheries in the Government of India and in the states of West Bengal, Orissa, Andhra Pradesh, Bihar and Uttar Pradesh. AenAficiarias: About 14,000 households mainly from the poorest sections of the coastal and rural population in the states of West Benc"l, Orissa, Andhra Pradesh, Bihar and Uttar Pradesh. AmQunt: IDA Credit SDR 62.9 Million (US$ 85 million equivalent) Terms=: Standard, with 35 years maturity On- Lnding Terms: Government of India (GOI) to the states of West Bengal, Orissa, Andhra Pradesh, Bihar and Uttar Pradesh as part of central assistance to the states for dev lopment projects on terms and conditions applicable at the time. GOI would assume the foreign exchange risk. Financing Plan: Local Fonreign ToQtal ------- US $ million ------ GOI 2 - 2 States 2 - 2 Beneficiaries 6 - 6 IDA 27 1Q Total Al Economic Rate of Return: 30% Staff A=praisal Report: Report No. 10046-IN IBRD Nos. 23344, 23345 This document has a restricted distribution and may be used b) recip;>ri only in the performance of their official duties. Its contents may not otherwise be discloseu *i1ho t World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMFNT ASSCCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR A SHRIMP AND FISH CULTURE PROJECT 1. The following memorandum and recommendation on z proposed credit of SDR 62.9 million (US$ 85 millior. equivalent) to India is submitted for approval. The Credit would be on standard IDA terms with 35 years matuxity. The Credit would help finance a Shrimp and Fish Culture Project in the States of West Bengal, Andhra Pradesh, Uttar Pradesh, Orissa and Bihar. The procaeds of the * Credit would be passed by the Government of India (GOI) to the Governments of the implementing States in accordance with the standard arrangements for development assistance to the States. GOI will assume the foreign exchange * risk. 2. Backarjund. The Fish (including shrimp) subsector contributes about 2.6% of the agricultural GDP and less than '% of total GDP. However its importance lies in the fact that it provides employment to an estimated 9 million people mainly from the poorer coastal communities, contributing to increasing the nutritional standards, .nd as a foreign exchange earner. The growth in the industry over the past decade has been rapid at nearly 6% per annum. While India has been one of the world's largest producers and exporters of marine shrimp since 1987, its position in the world market has been eroded as catches of marine shrimp have stagnated while the production of cultured shrimp in the Southeast Asian countries has increased tremendously. There is, however, tremendous potential for the development of brackish water shrimp culture in India wi;h Its long coastline, its tropical climate and large iver deltas. At prasent, shrimp culture is based on traditional extensive culture, as a result of which yields are extremely low, averaging about 200-300 kgs per hectare (ha). For inland fisheries, there are abundant water areas for production. Government estimates show over 25,000 kms of rivers and tributaries and ovar 2.5 mill-on ha of reservoirs, lakes, swamps and ponds. Freshwater aquaculture is undertaken in ox-bow lakes and rescrvoirs, which are exploited by fishermen cooperatives. At present, productivity in ox-bow lakes and reservoirs is low due to poor management and inadequate stocking, in addition to siltation and weed infestation in ox-bow lakes. 3. LAssons from Past sank Lending. The previous project in the subsector was the First Inland Fisheries Project, which successfully increased carp production in ponds through scientific fish farming including the introduction of hatcheries as the basis for a fish seed industry. The project had positive results with fish farmers achieving an FRR of 100% (55% estimated) and an ERR of 65% (42% estimated). However, project implementation took three years longer than planned due to delays in: (a) securing project sites and in agreeing the design of fish hatcheries, and (b) arranging collateral for credit to the poorer beneficiaries. During the period of delay, the private sector, who were not planned in the project, provided hatcheries. The lessons learnt were taken into consideration in project design: (a) sites have already been secured; (b) private sector participation has been promoted throughout the project; and (c) collateral for credit has already been agreed. 4. Rationale for IDA Involvement. The Bank Group's strategy to India is to support policies and investments that encourage economic growth and poverty alleviation in a context of macro-economic restructuring. The emphasis is on efficient resource allocation, increased efficiency of the public sector and appropriate targeting and delivery of support systems for the poor. The proposed project fits well within this framework. An important element of the  2 strategy is to support sustainable programs, especially in agriculture, that would promote and enhance the natural resource base. The Bank with its resources, wide experience and availability of expertise in the shrimp and fish sector would support institutional development, and impact policy development including the encouragement of the private sector. 5. Proiect Oh'e tives. The project would help India to maintain its position as a majcr world exporter of shrimps for which it has a comparative advantage because of its low labor costs and conducive climate. The project, through increased shrimp and fish production, would improve the economic and social welfare of some of the poorest sections of the conmunity, also ensuring that appropriate benefits accrue to women. The project would also increase foreign exchange earnings, improve the use of low productivity land, combined with the protection of ecologically vulnerable areas, create employment and foster rural development. The project would improve the livelihood of some 14,000 very poor kouseholds with few alternatives, 90% of whom currently earn below Rs 3,000 (US$110) per annum with some earning below Rs 1,000 (US$ 37), with all practicing some form of subsistence fishing in which men, women and children are involved. 6. Project Description. The Project, which would be implemented over a seven year period, comprises: (a) a brackish water shrimp component supporting shrimp aquaculture on about 3,800 ha in the states of West Bengal, Orissa, and Andhra Pradesh, representing about 80% of project cost; (b) an inland fisheries component supporting fish culture in reservoirs, 46,000 ha &nd ox-bow lakes, 5,000 ha in West Bengal, Orissa, Andhra Pradesh, Bihar and Uttar Pradesh, representing about 8% of project cost; and (c) project management including environmental management and training representing about 12% of proje(t cost. For shrimp aquaculture, the project would bring together entrepre.eurs to work with beneficiaries from the weakest socio-economic sections of the country (30:70 ratio). Semi-intensive brackish water shrimp culture would be introduced increasing shrimp production from 250-300 kg/ha to 2,000 kg/ha. Tho State Governments would construct the development on owned lands and recover its cost, including interest, through lease charges. Credit for related activities such as hatcheries and feed plants would be provided to private sector investors. For the fish component, the state Governments would provide the infrastructure development necessary, with credit provided to private entrepreneurs for hatcheries and ice plants, and to cooperatives for rearing ponds, cages, pens and stocking of water bodies. The development of fish cooperatives including technical assistance and training would also be important aspects of the Project. 7. The total project cost, net of taxes and duties, is estimated at US$95 million equivalent with a foreign exchange component of US$10 million (11%). The proposed credit would finance about 90% of total project cost net of taxes and duties. To facilitate an early start to the project, retroactive financing up to US$2 million would be provided to cover eligible project expenditures incurred before signing but after the date of the appraisal mission (July 31, 1991). Project completion would be December 31, 1998 and the closing date would be June 30, 1999. A breakdown of the costs and the financing plan is in Schedule A. Amounts and methods of procurement and the disbursement schedule are in Schedule B. A timetable of key project processing events and the status of Bank Group operations in India are in Schedules C and D, respectively. Maps, IBRD Nos. 23344, 23345 are attached. Staff Appraisal Report No. 10046-IN, dated December 16, 1991 is being distributed separately.  3 8. aImlemtAttAo'. To implement the proposed Project, a Central Project Unit (CPU) would be created within the Fisheries Division of the Ministry of Agriculture and Cooperatives (M&A) and, a State Project Unit (SPU) w_thin the Department of Fisheries in each of the States. Consultants would be recruited to assist the CPU in providing technical know how and project monitoring. Extension services would be provided at the state level by Brackish water Farmer's Develooment Agency (BFDA) and the Fish Farmer's Development Agency (FFDA) for the shrimps and fish components respectively. The BFDAs would also operate the common facilities in the shrimp pond clusters at a cost to the beneficiaries. In addition, non-governmental organizations (NGOs) would be encouraged to provide and assist the beneficiaries from the poorer sections in group dynamics, the absorption of technical know-how, and to be responsive to the commercial aspects of shrimp and fish farming. Credit for such sub- projects would be provided by the states at their own risk, channelled through participating banks on commercial terms. Sub-projects would be evaluated by the commercial banks, with the credit equal to 80% of investment cost, and repayable over 10 years with interest at commercial rates. In addition, the participating banks would also act as agents to recover lease payments. 9. Ag7eed Actions. Agreements rea',x>d with the GOI and the participating States at negotiations include: (a) project sites selected would be acceptable to the Association; (b) hatcheries and feedmill3 constructed by the States would be managed by autonomous private entrepreneurs, and would be divested as soon as possible; (c) the beneficiaries would be selected in accordance with the procedures agreed with the Association; (d) the lease and credit arrangements agreed with the Association would be adhered to; (e) the arrangement for the selection of Project cooperatives including the adoption of the revised by-laws would be adhered to; and (f) appropriate envircnmental management plans would be implemented by each state. As a Condition of Zffectivenes=, Participating Agreements between the states and selected banks, incorporating their participation in the delivery of credit and recovery of sub-loans and lease charges would be submitted to the Association. 10. EZnvironmental Aspects. For the shrimp component, the Project would convert some of the most marginal coastal saline soils to productive shrimp ponds. To prevent, reduce or eliml.nate potential negative effects of the project on the environment, a comprehensive Environmental Management and Monitoring Plan was prepared. This plan included interventions such as revegetation with mangrove trees of selected sites, monitoring of wild shrimp seed stock collection, training and extension in shrimp and fisheries conservation and management, construction of sluice gates for effective water management and assay of shrimp flesh for potential contamination from heavy metals. 11. Tmnact of the Pro ject on women. For women, who play a large part in the fisheries sector, the Project would require their participation in ownership and management of shrimp ponds and in participating fish cooperatives. Training programs would require women to be included from the earliest stage and women officers would be engaged in the BFDAs and FFDAs. In addition, women would be encouraged to participate as small entrepreneurs to receive credit. 12. Private Sertor Development. The Project would promote private sector participation and entrepreneurs would own ponds (para. 6). While the common facilities of shrimp farms would initially be managed by BFDAs, beneficiaries' owned Production Groups would assume management responsibilities within 5 years. 2roject investments for infrastructure support facilities such as  4 hatcheries and feed mills would be for private entrepreneurs only. Cooperatives in the inland fisheries component would all be required to operate au'onomously as private sector entities. 13. Projlct Sustainahility. About 75 percent of project costs would be recoverable through lease payments. The unrecoverable portion would relate to cyclone protection dykes, part of infrastructure for ox-bow lakes, access roads, electricity connections, and project management and extension. Project beneficiaries wouli have adequate income to finance their own operating costs and after full development, extension and training. 14. Prg4Ct aenAfitg .dikj. The main benefits of the Project would be increased shrimp and freshwatur carp production. Total annual production of shrimp from the project is estimated to be about 7,600 tons. Fish production is estimated to increase to about 7,800 tons, of which 38% would be from ox- bow lakes and 62% from reservoirs. Employment and higher income would be provided for over 5,200 families in the brackish water areas and for nearly 9,000 households througa over 200 fishermen cooperatives. The economic rate of raturn for the shrimps component is estimated at 31% and for the inland fisheries component 25%. ard the overall economic rate of return for the Project is estimated at 30%. 15. The main risks of the project are associated with the shrimp component and would be related to: (a) institutional difficulties associated with project implementation; (b) the introduction of suitable technology for site design and the development and phasing of appropriate hatcheries and feed facilities; (c) the States' resolve to implement and enforce the features of the lease and credit programs; (d) a decline in the price of shrimp; and (e) an increase in the price of feed. The above risks would be mitigated by: (a) the incentives created by the high financial returns expected under the project, and the substantial attraction to investors for the opportunity to earn much sought after foreign exchange; (b) the provision for experienced technical consultants, and the inclusion of an independent management organization to assist in project monitoring; and (c) linkages with the collection agencies, the sale of produce and the sale of inputs from hatcheries and feed mills, in addition to provisions to utilize production as security for sub-loans. Sensitivity tests show the risks associated with the price of shrimps and feed to be acceptable. The major risk for the inland fisheries component relates to the ability of the participating cooperatives to absorb the institutional development provided. However, revised by-laws increased member participation, the greater involvement of women, and the support of NGOs should mitigate the risk. The significant success of the First Inland Fisheries Project (para. 3) must also be considered a positive. 16. Rammendati=. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed Credit. Lewis T. Preston President Attachments Washington, D.C. December 16, 1991  Schedule A IDA SHRIMP AN FISH CULTURE PEROJECT Estimated Costs and Financing Plan Estimated Project Costs Local Eoreign lOtal Local EOgalaz TOtal -- -Rs m--------- -----------US m---------- INVESTMENT COST A. Brackish Water Shrimp Pond site development 1,040 77 1,117 40 3 43 Credit for hatcheries, mills, and other services. 241 71 312 9 3 12 Initial working capital 87 .1A 101 3. .1 -A Subtotal 1,368 162 1,530 52 7 59 B. Anland Fisheries Reservoirs and oxbow lakes development 48 2 50 2 0 2 Credit for hatcheries, rearing ponds, ice plants. 17 2 19 1 0 1 Initial working capital 27 11 ii i A Sublotal 135 15 150 6 0 6 C. ProieCt Management including Consul- tanacies and Tra4i.nng 213 37 250 8 1 9 Total Base Cost 1,716 214 1,930 66 8 74 Physical Contingencies 133 9 142 5 1 6 Price Contingencies 684A 80 i I 1 Total Project Costa/ 2,533 303 la la 19 a/ Excluding taxes and duties equivalent to about US$4 million. Einancing Plan: Local Foreign TQta.