Mali - Issues and options in the energy sector

M447Rs 3 L I IEEw AMMUN PPM!o 1- IJUNI!] LI t4 I E W IfI 1 Wd hdU ILI LI LNo L LI L LILI H LI L H iIi W-.y a eAd A I MICROFICHE COPY Report No. 8423-MLI Type: (SEC) GILLING, J/ X33230 / S-2105/ IENEE M ali Issues and Options in the Energy Sector Report No. 8423-MU  JOINT UNDP / WORLD BANK ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP) PURPOSE The Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) was launched in 1983 to complement the Energy Assessment Programme, established three years earlier. ESMAP's original purpose was to implement key recommendations of the Energy Assessment reports and ensure that proposed investments in the energy sector represented the most efficient use of scarce domestic and external resources. In 1990, an international Commission addressed ESMAP's role for the 1990s and, noting the vital role of adequate and affordable energy in economic growth, concluded that the Programme should intensify its efforts to assist developing countries to manage their energy sectors more effectively. The Commission also recommended that ESMAP concentrate on making long-term efforts in a smaller number of countries. The Commission's report was endorsed at ESMAP's November 1990 Annual Meeting and promnpted an extensive reorganization and reorientation of the Programme. Today, ESMAP is conducting Energy Assessments, performing preinvestment and prefeasibility work, and providing institutional and policy advice in selected developing countries. Through these efforts, ESMAP aims to assist goverrnents, donors, and potential investors in identifying, funding, and implementing economically and environmentally sound energy strategies. GOVERNANCE AND OPERATIONS ESMAP is governed by a Consultative Group (ESMAP CG), composed of representatives of the UNDP and World Bank, the governments and institutions providing financial support, and representatives of the recipients of ESMAP's assistance. The ESMAP CG is chaired by the World Bank's Vice President, Operations and Sector Policy, and advised by a Technical Advisory Group (TAG) of independent energy experts that reviews the Programme's strategic agenda, its work program, and other issues. The Manager of ESMAP, who reports to the World Bank's Vice President, Operations and Sector Policy, administers the Programme. The Manager is assisted by a Secretariat, headed by an Executive Secretary, which supports the ESMAP CG and the TAG and is responsible for relations with the donors and for securing fimding for the Programme's activities. The Manager directs ESMAP's two Divisions: The Strategy and Programs Division advises on selection of countries for assistance, carries out Energy Assessments, prepares relevant programs of technical assistance, and supports the Secretariat on funding issues. The Operations Division is responsible for formulation of subsectoral strategies, preinvestment work, institutional studies, technical assistance, and training within the framework of ESMAP's country assistance programs. FUNDING ESMAP is a cooperative effort supported by the World Bank, UNDP and other United Nations agencies, the European Community, Organization of American States (OAS), Latin American Energy Organization (OLADE), and countries including Australia, Belgium, Canada, Denmnark, Germany, Finland, France, Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Sweden, Switzerland, the United Kingdom, and the United Statrs. FURTHER INFORMATION For further information or copies of completed ESMAP reports, contact: The Manager or The Executive Secretary ESMAP ESMAP Consultative Group The World Bank The World Bank 1818 H Street N.W. 1818 H Street, N.W. Washington, D.C. 20433 Washington, D.C. 20433 U.S.A. U.S.A.  FOR OFFICIAL USE Report No. 8423-MLI MALI ISSUES AND OPTIONS IN THE ENERGY SECTOR November 1991 This is one of a series of reports of the Joint UNDP/ World Bank Energy Sector Management Assistance Programme. Finance for this work has been provided, in part, by the UNDP, and the Government of the Netherlands, and the work has been carried out by the World Bank. This report has a restricted distribution. Its contents may not be disclosed without authorization from the Government, the UNDP or the World Bank.  ABSTRACT This study is based on the information available in late 1998 and early 1989. It carries out a diagnosis of the Malian energy sector, assesses options that could contribute to improving its operation, and proposes a series of recommendations to the Government. A technical assistance program has also been designed and is proposed to the donor community. These recommendations relate to the woodfuel and charcoal subsector, the electricity subsector, the hydrocarbons subsector, new and renewable energies, and to the de elopment of energy conservation strategies and globally to improving the overall management of the energy sector, parficularly through the development of Malian expertise. The diagnosis and the associated recommendations deal with (i) the supply and marketing of woodfuel, charcoal, and other new and renewable energies; (ii) demand, pricing, and substitution strategies; and (iii) management and institutional setup in each subsector. About 90% of the energy consumed in Mali is provided by wood, a resource whose exploitation is largely uncontrolled. In a situation rendered even more difficult by recent droughts, this exploitation poses a significant threat to the environment. Hence, with respect to household energy, a strategy is proposed taking into account the management of forest resources, rational use of existing deadwood, improvement in the efficiency of cookstoves, an adjustment in prices to producers, and energy substitution. With respect to petroleum products and electricity cousumption, costs and prices are very high; Mali should therefore give the highest priority to reducing the economic and financial costs, reviewing the pricing mechanisms, arnd improving subsector planning and management. The Energy Assessment particularly focuses on institutional reforms, on energy pricing, and on improving and reorganizing existing national expertise in the areas of energy planning, project evaluation and supervision, and energy management. The study also recommends the promotion of the role of the private sector, still largely not involved in the Malian energy sector, with particular emphasis on investing in and managing specific energy projects. The study also recommends increased competition between private enterprises.  ABBREVIATIONS bbl barrel b/d barrels/day b/y barrels/year CIF cost, insurance and freight GWh gigawatt-hour GDP Gross Domestic Product GNP Gross National Product ha hectare hl hectoliter HV high voltage kcal kilocalorie kg kilogram km kilometer Im2 square kilometer koe kilograms of oil equivalent kv kilovolt kVA kilovolt-arpere kW kilowatt kNWh kilowatt-hour I liter LPG liquefied petroleum gas LV low voltage m3 cubic meter MW megajoule MV medium voltage MVA megavolt-ampere MW megawatt p.a. per annum pW peak watt t ton toe tons of oil equivalent  ACRONYMS AFME Agence Francaise pour la Maltrise de l'Energie CEES Cellule d'Entretier des Equipements Solaires (Solar Equipment Maintenance Unit) CIUSS Comite Permanent Inter-Etats de Lutte contre la Secheresse au Sahel (Permanent Inter-State Committee for Drought Control in the Sahel) CMDT Compagnie Malienne de Developpement des Textiles CNH Commission Nationale de Hydrocarbures CRES Centre Regional de L'Energie Solaire DNAE Direction Nationale des Affaires Economiques DNGM Direction Nationale de la Geologie et des Mines DNEF Direction Nationale des Eaux et Forets DNHE Direction Nationale de l'Hydraulique et de l'Energie DNSI Direction Nationale de la Statistique et de l'Information EDF European Development Fund EDM Energie du Mali EEC European Economic Commuoity ESMAP Energy Sector Management Assistance Program FAC Fonds d'Aide et de Cooperation (France) FFN Fonds Forestier National GPP Groupement Professionnel de l'Industrie du Petrole du Mali GTZ Gesellschaft fir Technische Zusammenarbeit (Federal Republic of Germany) IDA Intenational Development Association IDRC International Development Research Centre (Canada) LESO Laboratoire de l'Energie Solaire MIHE Ministry of Industry, Hydraulics and Energy NGO Nongovernmental organization OERHN Office pour l'Exploitation des Ressources Hydrauliques du Haut Niger OMVS Organisation pour la Mise en Valeur du Fleuve Senegal ONT Office National des Transports OSRP Office de Stabilisation et de Regulation des Prix PASEP Programme d'Adjustement Sectoriel des Entreprises Publiques PMRL Programme d' ventaire des Ressources Ligneuses (Fuelwood Resources Inventory Program) PNWD Programme National de Lutte Contre la Desertification (National Desertification Control Program) RCFM Regie des Chemins de Fer du Mali (Mali Railways) RCFS Regie des Chemins de Fer du SEnEgal (Senegal Railways) SAR SociEdt Africaine de Raffinage (Dakar) SEP Special Energy Program SIR Societe Ivoirienne de Raffinage (Abidjan) WHO World Health Organization  CURRENCY EQUIVALENTS Currency Unit - CPA franc (CFAF) US$1 - 280 / ENERGY CONVERSION FACTORS Eus Catorifc Value (million kcal/ton) CtuJe oil 10.2 1 LPG (butane) 10.8 1.059 Gasoline 10.5 1.029 Jet fuel 10.4 1.020 Kerosene 10.3 1.007 Gas oil 10.2 1 Fuel oil 9.7 0.951 Fuelwood 4.1 0.405 Charcoal 7.0 0.690 t.lectricit 4000 kWh = 1 toe, thermal equivalent of hydroelectricity (with a thermal efficiency of 34.4%) 1 GWh =86 toe (equivalence in terms of calorific power supplied) Nod 1 stere = 0.6 m3 = 0.42 kg wood Al Exchange rate at time of mission. This is the rate used in the report, unless otherwise stated. This report is based on findings of an Energy Sector appraisal mission that visited Mali in November/December 1988, and on inonnfotion avaflable at mid-1990. The mission comprised Messrs. Joseph Gilling (Mission Leader, Pdncipal Energy Economis.), Philippe Durand (Household Energy Specialist), Marc Heitme (Consultant, Hydrocarbons Sector Institutional Questions), Willem Kupper (Consultant, Electrical Ener:y), Gerard Madon (Consultant, Fuelwood Resources), Wiliam Matthews (Consultant, Hydrocarbons Supply and Distribution), and Peka Soinen (Consiutant, Energy Rationalization). The report was drafted by Michel Layec.  TABLE OF CONTES PMg PREFACE MAIN FINDINGS AND RECOMMEDATIONS .............................. i Summary of Recommendations and Priority Actions ....c ti o n s.............. xiii I. ENERGY IN THE MAUIAN ECONOMY .1 Socioeconomic Context .1 Introduction .1 Economic Reforms and Prospects ............. .................. 1 Overview of the Malian Energy Setor. 2 Energy Resources and Constrains. 2 Energy Balance and Final Energy Consumption (1987). 3 Past Trends in Commercial Energy Consumption .5 Probable Evolution in Demand for Energy (1987-2010). 5 Organization and Management of the Energy Sector. 7 The Main Thrusts of Malian Energy Policy. 8 i. FUELWOOD RESOURCES AND MEETNG HOUSEHOLD ENERGY NEEDS. 9 Principal Issues, Options and Recommendations for the Subsector. 9 Resources and Supply Channels .10 Forest and Biomass Resources: Projects in Progress .10 Euelwood and Charcoal Supply Systems .12 Control of Exploitation of Fuelwood Resources .12 Recommendations .13 Taxation Policy and Price Structures .16 Current Taxation Policy, Price Structures and Subsector Self-Financing .16 Recommendations .18 Current Organization .19 Recommendations .19 Subsector Adminis....on 20 Availability and Quality of Data .20 Recommendations .20 Consumption, Energy Substitutions and Equipment Efficiency .21 Presen and Potental Consumption .21 Energy as an Item in Household Budgets and Cooking Costs .22 Improved Stoves Program and Energy Substituons .23 Recommendations .24 Household Energy Project: Short-Term Investment and Technical Assistance .26 mI. THE ELECTRICITY SUBSECTOR .28 Principal Issues, Options and Recommendations .28 Production and System Development .28 Desciption of Subsector .28 Demand .29  Inves vmPt Program ............................................ 31 In tro d u ctio n .......................................... . 31 Transmission and Distribution Systems ........................... 32 Manantali Project ........................................ 34 Options to be Considered in Light of Delays with Manantali .............. 34 Transition Strategy - Recommendations ............................... 35 Other Reommended Actions ................................. 36 Pricing .................................................... 36 Introduction ............................................ 36 Recommendations - EDM Tariffs .............................. 38 Recommendations - Pricing of Selingu6 Production ................... 38 Demand Management ........................................... 39 Potential Energy Savings .................................... 39 Recommendations ........................................ 39 Subsector Management .......................................... 39 Present Management Policy and Organization ....................... 39 Recommendations ........................................ 41 Management Information System ............................... 42 Recommendations ........................................ 42 Short-Term Investmeht and Technical Assistance Program for the Subsector .... 42 IV. THE HYDROCARBONS SUBSECTOR ............................... 44 Principal Issues, Options and Recommendations .......................... 44 Organization of Supply .......................................... 44 Current Consumption and Outlook .............................. 44 Petroleum Resources and Supply Sources ......................... 46 Recommendations ........................................ 46 Storage and Intermediate Depots ............................... 47 Recommendations ........................................ 48 Distribution ............................................ 48 Recommendations ........................................ 49 Subsector Management .......................................... 49 Current Organization of Subsector Management ..................... 49 Petrostock ............................................. 51 Recommendations ........................................ 51 Availability and Quality of Data ............................... 52 Recommendations ........................................ 52 Pricing and Taxation of Oil Products ................................. 52 Price Levels, Official Price Structures and Pricing Mechanisms ............ 52 Recommendations ........................................ 55 Short-Term Investment and Technical Assistance Program ............... 56 V. NEW AND RECNW %BLE ENERGIES SUBSECTOR ....................... 57 Principal Issues, Uptions and Recommendations .......................... 57 Development of the Subsector ..................................... 57 Current Resources and Constraints ............................. 57 The Ethanol and Pourghere Oil Projects .......................... 58 Recommedaitions ........................................... 59 Management of the Subsector ...................................... 61  Current Organization ...................................... 61 Recommendations ........................................ 61 Short-Term Investment and Technical Assistance Program .................... 62 VI. ENERGY RATIONALIZATION .................................... 63 Principal Issues, Options and Recommendations .......................... 63 Introduction of Energy Rationalization: Potentials and Activities ................ 64 Current Organization and Past Achievements in Energy Rationalization ....... 64 Potential and Ongoing Activities ............................... 64 Proposed Energy Rationalization Action Program ......................... 66 Prerequisites for Improving Energy Rationalization and Principal Obstacles .... 66 Data ................................................ 66 Recommendations for an Energy Rationalization Policy ................. 66 Recommendations for Energy Rationalization ............................ 68 Household Energy Subsector ................................. 68 Modern Industry and Buildings ................................ 68 Transport Sector ......................................... 69 Electricity Subsector ...................................... 69 lnstitutional Organization .................. ..................... 70 Technical Assistance for Energy Rationalization .......................... 70 VIi. MANAGEMENT OF THE ENERGY SECTOR .......................... 73 Main Issues, Options and Recommendations ............................ 73 Administrative Organization of the Energy Sector ......................... 73 Present Organization ...................................... 73 Recommendations ........................................ 73 Definition of Responsibilities ...................................... 75 Present Situation ......................................... 75 Recomnendadons ........................................ 75 Human Resource Training ....... ... ............................ 77 Technical Assistance Program for Sector M nagement ...................... 77 TABLES 1. Summary of Recommendations and Priority Actions ....................... xiii 1.1 Summary of Malian Energy Balance in 1987 ...... ..................... 4 1.2 Western Africa: Commercial Energy Consumption ........................ 4 1.3 Commercial Energy Consumption Trends in Mali ......................... 5 1.4 Comparative Summary of Final Energy Consumption Balances (1987-2000) .... ..... 6 2.1 Summary of Household Energy Consumption (Using Trend-Based Sctnario and Diversification Strategy) ................................. 22 2.2 Energy Costs and Annual Expenditures on Cooking in Bamako ................. 26 2.3 Household Energy Program: Additional Investment and Technical Assistance .27  3.1 BasicSubsectorElectricity Data(1987) ..... ........ 29 3.2 Interconneced System Consumption and Output Forecasts (1989-2007) ...... . . . . . 30 3.3 Electricity Subsector Investment Program, 1989-1994 ....................... 31 3.4 Main Investment Program Components ................................ 32 3.5 Proposed Additional Interconnected System Generating Facilities ................ 34 3.6 Simplified Present Tariff Structure . 37 3.7 Subsector Investments and Technical Assistance. 43 4.1 Ol Product Consumption (1980-1987) ................................ 45 4.2 Product Origins (1987) .............. . ............................ 45 4.3 Price Levels and Simplified Price Structures of the Main Oil Products (Before the 1989 Reductions) ............................................ 53 4.4 New Ex Depot Prices (1989) ...................................... 54 4.5 LPG Prices as of End 1988 ....................................... 55 6.1 Consumption of Petroleum Products in Mali by Mode of Transportation .... ....... 65 6.2 Summary of Potential Energy Savings in the Short and Medium Term ............. 66 6.3 Duties and Taxes on Certain Energy-Saving Equipment ...................... 68 6.4 Main Components of Mali Energy Rationalization Project .................... 71 ANNEXES 1.1 Enegy Balance for 1987 ......................................... 79 1.2 Main EDM Electrical Data ....................................... 80 1.3 Past Petroleum Product Cons umption ................................. 81 1.4 Comparative Energy Balances (1987-2010) .............................. 82 2.1 Forest Resources in Mali and Fuelwood Inventories ........................ 83 2.2 Agroindustrial Residues ...... 89 2.3 Forestry Projects in Progress in 1988 . ............................................ 90 2.4 Major Urban Area Fuelwood Supply Systems ............................ 92 2.5 Fuelwood Price Structures for Supply by Truck ........................... 93 2.6 Second Forestry Project (World Bank) - Forestry Department Organization Chart .... .. 94 2.7 Responsibilities of Fuelwood Resources Group, Other DNEF Groups, and the Private Sector ..................................... 95 2.8 Energy Consumption and Expenditure in Households and in the Informal Sector ......................................... 96 3.1 Energy Sector Evaluation ....................................... 108 3.2 MainEDMElectricalData ...................................... 110 3.3 Demand and Production Requirement Forecast .......... ................ 113 3.4 Second Power Project - Summary Investment Program ....... .............. 114 3.5 Investments and Production Costs of the Hydroelectric and Thermal Alternatives .... . 115 3.6 Marginal Cost Estimates ........................................ 116 3.7 Main EDM Financial Indicators ................................... 118 4.1 Oil Product Consumption Analysis .................................. 119 4.2 Summary of Oil Exploration Results in Mali ............................ 123 4.3 Detailed Structure of Oil Product Prices .............................. 124  4.4 Administrative Organization of the Hydrocarbons Subsector .................. 131 4.5 Proposed Role of the New Hydrocarbons Subsector Management Institution .134 4.6 Administrative Mechanisms for Setting Prices at the Pump ...... ............. 137 4.7 Reorganization of the Hydrocarbons Subsector - Proposed Terms of Reference for Technical Assistance .138 5.1 Summary of Mali's Experience in New and Renewable Energies ............... 141 6.1 Main Companies, Buildings and Transport Fleets.. 154 6.2 Energy Rationalization Project - Draft Terms of Reference for Technical Assistance . 155 7.1 Proposed DNHE Organization Chart ................... 159 7.2 Energy Sector Management - Simplified Functional Organization Chart ....... .... 160 MAPS IBRD 22069: Mali Energy Assessment (with chief towns) IBRD 19169R: Mali - Population Distribution IBRD 22070: Mali Energy Assessment - Power Facilities  PREFACE Since the discussions of the draft final report on Issues and Options in the Malian Energy Sector, various events have occurred at the political and macroeconomic levels as well as in the energy sector itself. This preface will give a very brief overview of the most striking changes, focusing in particular on the principal measures taken by the Government in the energy sector since publication of the draft final report. Political and macroeconomic environment At the political level, the internal social pressures for introduction of a multiparty political system culminated in 1991 in a coup d'etat, the establishment of a Transitional Government, the organization of a National Conference, and the preparation of general elections, scheduled for early 1992. The Transitional Government confirmed Mali's adherence to the adjustment and reform program undertaken in collaboration with the principal donors, in particular the World Bank and the International Monetary Fund (IMF), and in May 1991, Mali, the World Bank, and the IMF came to an agreement on a new macroeconomic framework and an Action Plan designed to continue th4 adjustment measures. World Bank and IMF strategy is still geared to increasing national income, by means of: (a) institutional and general policy reforms, (b) improved efficiency in the use of public funds, and lastly (c) improved management of human resources, natural resources and infrastructure development and management. Fuelwood and domestic energy suoply In this area, the Government has continued its work of preparing a strategy echoing the principal themes of this report, designed to: (a) promote household access to domestic energy sources, in particular modern energy sources (principally LPG and kerosene and light photovoltaic equipment), also introducing more efficient energy infastructure equipment, and (b) reduce the forest cover degradation resulting from the production of fuelwood to meet urban energy requirements. An integrated strategy has been prepared to achieve these objectives. Three of the components of this strategy relate to household energy demand, rAmely the search for and introduction of energy products for low-income groups, promotion and marketing support for those products, and the design of producer and consumer credit mechanisms. Five other components relate to measures in the area of fuelwood supply, specifically the preparation of master supply plans, assistance to suppliers, modernization of the charcoal sector, recovery of deadwood reserves, and classified forest management. As a first stage, the Government has decided to set up a Steering Unit for the Household Energy Strategy, which will coordinate the activities of a Household Energy Unit, part of the National Water and Energy Directorate (DNHE) of the Ministry of Water Supply and Energy, and a Fuelwood Unit, part of the National Directorate of Water and Forestry (DNEF) of the Ministry of Agriculture, Livestock and the Environment.  Electricity subsector In 1990 and 1991, given the limited availability of installed hydroelectric capacity, the sustained growth of production (around 8%) and demand (around 9%) entailed a substantial increase in thermal production. Overall, despite the efforts made, the situation of the electricity subsector remains very disturbing in terms of infrastructure development, management, financial results and the institutional context. For the situation to improve, the appropriate decisions must be taken and acted upon without delay. Development of production and transmission facilities. The rehabilitation of the existing thermal sets at Dar Salam and the expansion of the power plant (addition of a 6-MW set) has been completed, as has rehabilitation of the sets at the Sotuba hydroelectric facility and the raising of the dam, Financing has been requested to cover installation of an additional thermal set, so that the peak power demand of the interconnected system should be covered through 1993. Lastly, work on the 150-kV Bamako-Segou line has been completed (with EIB/CIDA financing), and this should enter into operation by the end of 1991. One of the main issues in the electricity subsector is the future development of the means of production, in particular the installation of the electrical and mechanical equipment at the existing dam at the site of the Manantali hydro-electric plant and the interconnections to the load centers. This site should be developed by OMVS, as a source of supply for Mali, Mauritania and Senegal. The economic viability of installing generating capacity at this site and the possibility of building a regional transmission network among the three countries were confirmed by a World Bank study carried out in 1991, which also showed that the development of this site would be extremely profitable for Mali. The World Bank study estimated that the project would not be able to enter into service before 1996. To take into account further delays in bringing Manantali on stream, the Government is preparing to solicit bids in 1992 for a feasibility study of the Petit Kenie hydroelectric project (48 MW). The Government also envisages carrying out a study to determine the optimum uses of the hydropower generated, which will also make it possible to validate the guaranteed energy level at Selingue. A plicing stuy was also undertaken in early 1991, and the results should be available toward the end of the year. Beyond this study, however, little progress seems to have been made toward management of demand for electricity. Lastly. at the institutional level, although the reform of the subsector and implementation of the performance contract between the Government and Energie du Mali (EdM) reflect an understanding on the general principles of institutional reform and have brought about a substantial improvement in operation of the subsector, the transfer to EdM of subsector planning and feasibility study preparation is not yet fully completed. Moreover, EdMs financial situation has deteriorated, owing, on the one hand, to an increase in fuel costs, and, on the other, to the size of the technical and nontechnical losses and of the existing arrears, for which no significant or sustained recovery campaign has yet been implemented.  'Hydrocarbons subsecto Following a study carried out in 1991 on a revision of the pricing system for oil products, several of the principal recommendations appearing in this report on the Malian energy sector have been approved, some of them having already been implemented by the Malian Government. In this subsector, the Government should modify its activities considerably, assuming a role where it regulates private sector activities and develops competitiveness basically through pricing, as a means of improving the subsector's operating efficiency. Edcine .W taxation. With respect to pricing and taxation policy, a decision in principle has been taken by the Government regarding total liberalization of pump prices, and the adoption of a simplified gystem of tax collection at the Customs, incorporating into a single tax heading all of the many different taxation components originally payable to the Office de Stabilisation et de Regularisation des Prix (OSRP). The mechanisms for establishing the tax on each product must, however, reflect the tax revenue projections of the national budget. A number of safet-guards and controls will also have to be set up to ensure healthy competition among distributors, supply the country's remote locations at affordable prices, and minimize smuggling and non payment of taxes. Subsector management. In parallel with pricing and taxation reform in the hydrocarbons subsector, the Government has adopted reorganization of the subsector management as one of its basic courses of action, combining all oil product supply and distribution activities in an Office National des Produits P6troliers (ONPP), which could be an "etablissement public I caractere administratif" (EPA), with management autonomy. This new establishment would replace both the OSRP and Petrostock, an 100% government owned company, whose function was to construct and manage storage facilities for the Govenment and to participate in oil product supply and distribution. Ihe measures affecting the hydrocarbons subsector should be implemented in early 1992.  MAIN FINDINGS AND RECOMMENDATIONS SQcpe of Suy 1. This report assessing energy issues and options summarizes the conclusions of a mission that visited Mali in NovemberlDecember 1988 and information obtained in mid-1990. The aims of the report are: (a) to assess the situation of the energy sector in terms of supply, demand, and energy and human resource constraints, and (b) to submit recommendations on the possible options in the fuelwood, hydrocarbons, electricity, renewable energy, and energy rationalization subsectors. Recommendations regarding the organization and management of the energy sector as a whole are also presented, together with a technical assistance program. Constraints. Main Problems and Recommendations Overview of Energy Sector and of the Economy 2. With a per capita GNP of the order of US$230 in 1988, the structure of energy consumption in Mali is characteristic of the Sahelian countries. Nearly 90% of the country's energy requirements is met by fuelwood (total final energy consumption of 1.7 million toe in the form of wood, charcoal and other biomass) while the modern energy sector is largely undeveloped. Thus, of a population of nearly 8 million in 1987, only 5% was using electricity and the peak power demand on the interconnected system was around 34 MW. Hydrocarbons consumption in 1987 was of the order of 171,000 tons, the cost of which represented 27% of exports and 14% of imports. 3. The future growth rate of fuelwood consumption is estimated at about 2.0% p.a., while for commercial energy sources (petroleum products and electricity) growth of 4.5-5% p.a. between now and the year 2007 is expected, coupled with population growth of 3% p.a. Constraints and Main Problems 4. Mali's energy sector is subject to constraints over which the country has virtually no control, the chief ones being: (a) total dependence on and high cost of oil product imports, due primarily to the country's landlocked location and lack of economically producible oil deposits; (b) a high present and fiuture demand for fuelwood resources in a difficult climate context and hence significant risks of permanent soil degradation; and (c) despite the existence of a considerable technical potential in Mali, the cost of developing national hydroelectric resources and new and renewable energy sources is high.  - ii - S. Other difficulties are connected with factors specific to Mali and can therefore easily be reduced, the main ones being: (a) dispersion of national responsibilities and jurisdictions among a number of ministries and institutions, which contributes to the weaknesses of public management, such as lack of adequate coordination, planning and control, exacerbated by a lack of resources, advisory services and reliable data; (b) inadequate wood and charcoal prices, which do not reflect the economic cost of the wood, provide no Incentive for adoption of energy-saving measures and do not permit self-financing of the fuelwood subsector; and (c) limited size of the domestic energy markets and lack of development of private service enterprise in the energy sector. Action Strategy for Fuelwood and Household Energies 6. For the fuelwood sector, which currently represents over 80% of energy consumption and will still account for 80% in 2010, actions are proposed in the form of a Household Energy strategy focusing on: (a) management of existing fuelwood resources; (b) retail prices, through amendment of taxation and existing control arrangements; (c) acceleration of programs to promote and popularize improved wood stoves; and (d) reduction of demand by means of substitution in cases where replacement of one form of energy for another is clearly economically advantageous. The availabiity of firewood and charcoal at relatively low and stable prices, consumption of which represents about 3-5% of urban households' budgets at current prices, suggests that there would not by any overall shortage of firewood in the short term. In the medium and long term, improvement of resource management, increased use of improved stoves and substitution by kerosene and LPG would reduce the demand for wood and make it possible to bring the supply of and demand for fuelwood permanently into balance in the long term. Resources and Suply System 7. The Fuelwood Resources Inventory Program (Programme d'Inventaire des Ressources Ligneuses - PIRL) using satellite images is under way in the Kayes, Koulikoro, S6gou and Sikasso  - Iii - regions. The data provided by the PIRL are essential for resource management and future planning. It is vital that this inventory work be completed by covering as soon as possible the ecologically fragile regions of Mopti, Tombouctou and Gao. Using the data from this inventory, it is therefore recommended that master fuelwood supply plans be drawn up for Mali's chief towns, in order to bring about a certain geographic reorientation of felling by determining: (a) the areas where felling can be done profitably compared with the present extraction areas, and (b) the areas where the present rate of extraction is already or will become a threat to the environment. 8. As regards wood extraction, which is presently largely uncontrolled and too heavily dependent on costly reforestation projects, it is recommended that efforts be reoriented toward management of existing resources and of deadwood reserves and that the strategy adopted reflect the fact that the State cannot by itself alone perform the management of the natural forests. The Government must therefore shift its emphasis to technical assistance to local communities who could participate in managing these resources. This would make the wood trade more financially attractive for rural dwellers, operators and traders. These changes will have to be instituted gradually, giving priority to curbing the overexploitation of the forest areas around the six main urban centers and along the main highways. In addition, as regards the transportation of and trade in wood and charcoal, it is recommended that steps be taken to control the geographic distribution of extraction by strengthening the mechanisms for controlling fuelwood supplies brought into the towns: setting up of checkpoints at the entrance to the five main towns of the interior and improvement of the operation of the existing checkpoints for Bamako. ConsuMmp Substitution and Equipment Efficiency 9. Fuelwood represents nearly 85% of the primary energy in Mali's energy balance and charcoal consumption is rising very rapidly. With regard to consumption of these fuels, the fbllowing strategy trcing primarily the urban centers is proposed, starting with Bamako: t (a) progressive raising of taxes, with the deliberate intent of increasing wood and charcoal prices; (b) condtnation of programs to popularize improved metal wood- and charcoal-burning stoves in the urban areas by artisans and organized groups such as women's committees; (c) promotion of kerosene and LPG in the urban areas vis-a-vis groups with a certain level of purchasing power; and (d) in the northern cities, promotion of kerosene, the most economical energy source after wood for cooking and, in certain circumstances, LPG. For the kerosene strategy to bear fruit, Malian consumers will, however, need efficient and cheaper stoves. Mali ought to seek to benefit from other Sahelian countries' experience in this respect.  - iv - Taxation and Price Structures 10. The present taxation and retail prices of wood and charcoal are inadequate: they do not reflect the economic cost of using the resource and permit neither satisfactory self-financing of the subsector nor producer prices sufficient to encourage rational management of the resource. ILi accordingly recommended: (a) that a new tax system be instituted that would include a development incentive component to remunerate the people's work in developing and managing the resource, and (b) that the collection of the second component, paid by the transporters to the State at the checkpoints on entering the towns, be strengthened. The details of this system will be spelled out when the plan of action for the household energy strategy is drawn up. This modified system should be managed by the proposed DNEF Fuelwood Unit. Administrative Management 11. Governmental supervision of the forest subsector is performed by DNEF, which has 15 sections directly or indirectly concerned with firewood. As a general rule these sections operate independently and the lack of any consistent overall strategy results in inadequate planning characterized by excessive controls. To remedy this situation, it is recommended that the national responsibilities in this sphere be grouped into a Fuelwood Unit in DNEF that would centralize and analyze data regarding supply and, in general, all activities connected with the administrative management of fuelwood, including the checkpoints at the entrances to the towns. The operating policy of DNEF and of the regional forestry services in particular should be reoriented toward advice on resource development for the rural population and monitoring of proper resource management. 12. It is also recommended that all actions concerning fuelwood be coordinated and supervised in tR context of an overall strategy for the sector covering both supply and demand and including, therefore, the completion of the ESMAP Household Energy project as soon as possible. Since the ecological risks are significant, a degree of interventionism in this subsector - at least in the short term - - appears called for. Strategy and Actions for the Electricity Subsector 13. The electricity energy subsector is one of the most capital-intensive and currently absorbs about 7% of the rolling three-year investment program. With a peak demand of 37 MW in 1988 in the interconnected system, a firm installed capacity of 40 MW during the dry season, and a demand trend growth rate of about 9% p.a., generation facilities will have to be increased in annual steps of about 5 MW to meet demand prior to the entry into service of the Manantali regional hydroelectric plant, planned for 1996. 14. The Organisation pour la Mise en Valeur du Fleuve Sen6gal (OMVS), a tripartite organization set up by Mali, Mauritania and Senegal, will handle execution of the Manantali regional  - v - project comprising installation of: (a) 200 MW installed capacity (about 50% of which will be al. 3cated to Mali) from the multipurpose dam already built on the Bafing in Mali, and (b) transmission lines to Bamako, Nouakchott and Dakar. Further studies are being undertaken and financing is being sought; meanwhile, OMVS is proceeding with preparation of the project. 15. In this context, the action priorities for the Malian electricity subsector relate to: (a) the strategy to be adopted in view of the delayed entry into service of Manantali, originally planned for 1993, but currently put back to 1995 or even 1996; (b) the adjustments in EDM's tariff structure to prompt more rational use of electricity; and (c) improvement of management of the subsector through implemenltion of the institutional strengthening program agreed on as part of the Second Power Project. Development of Generation and Distribution and Management of Demand 16. In view of the successive delays in bringing Manantali into service, EDM and the Government will have to decide very quickly on a transition strategy and it is recommended that this strategy combine both steps to increase supply, such as the addition of diesel units, and also measures to enhance energy efficiency, which are justified in all cases. These energy-saving measures would include: (a) acceleration of the program to reduce distribution losses in Bamako and the secondary centers, as envisaged in the Second Power Project; and (b) instituting of an energy rationalization program supported by modification of the structure of the tariff matrix. Slowing of the growth of the distribution networks would be advisable if it becomes evident that generation capacity would fall short of demand prior to the entry into service of Manantali, in order to prevent appreciable economic losses due to possible deterioration of service as a result of excessive demand. Electricity Pricing 17. EDM's tariffs were raised by 35% in 1985. This made it possible to align tariffs on marginal costs and restore EDM's financial position. However, the planned adjustments to the tariff structure, in particular elimination of the disortions between the low and medium-voltage (LV and MV) tariffs, increasing of the power premium for MV users and introduction of a fixed premium for users have not been implemented. I is therefore recommended that the tariff study included in the Second  - vi - Power Project be carried out as soon as possible in order to be able to update the earlier proposals and also propose concrete measures regarding: (a) seasonal pricing; (b) demand-based pricing, particularly for air conditioning or subscribed power; and (c) power factor penalties. Management of the Electricity Subsector 18. The general management policy for the subsector was formulated during the preparation of the Second Power Project and is presenty in place. Its principal components are: (a) entrusting of general subsector policies and regulation, and responsibility for controls, to the Ministry of Industry, Hydraulics and Energy (MIUE); (b) assignment as a general rule of all technical responsibility for the planning, construction and operation of power infrastructure in Mali to EDM, with the exception of regional (e.g., Mananti, which is under OMVS) or multipurpose projects. The State could, however, authorize activities by other producers and distributors of electricity; and (c) strengthening of EDM's technical and management capacities and implementation of formance contracts. 19. This redistribution of responsibilities is a very important step toward improvement of the subsector's functioning, but its effects on EDM's and the subsector's performance will probably only became apparent very slowly. It is therefbre recommended: (a) that a core technical planning teamn be formed in EDM and that DNHE's capabilities in the financial and economic appraisal of projects be strengthened; and (b) that a reliable statistical system be designed and put in place to form the basis of the management infrmation system. Strategy and Actions for the Hydrocarbons Subsector 20. Very significant progress in the efforts to reduce hydrocarbons import costs for Mali was achieved in 1989 with the two agreements on the formulas for price setting ex-depot SIR Abidjan and SAR Dakar, under which the ex-depot prices wfll henceforward be set on the basis of the Plats Mediterrnean FOB prices. Compared with the 1988 sitation, the State will save nearly CFAF S  - vii - billion/year (US$17.9 million). However, further savings can still be made and Mali ought therefore to resume the talks. For the hydrocarbons subsector, priority must be given to the options fnr direct supply through the international markets, distribution, strategic stocks, public management of the subsector and prices. Organization of Supny 21. The main supply problem concerning petroleum products is that as a result of the storage constraints in the coastal refineries and depots, Mali cannot purchase petroleum products in the international markets. It is therefore recommended that the discussions with C6te d'lvoire and Senegal be resumed to enable Mlali to assert transit rights and rights to access to the Abidjan and Dakar storage facilities. 22. In addition, a strategic stocks program involving a fivefold increase in storage capacity to 73 days' consumption has been proposed by the national oil company, Petrostock. It is recornm that this program be very quickly reviewed with a view to its reduction by examining the need to stock 73 days' consumption, the capital and operating costs entailed and product losses. 23. Finally, there needs to be better supervision of operating safety among the smanl independent distributors in order to curb dangerous practices and verify product quality. I is accordingl reconunended that as a minimum the existing regulations be applied and that a permanent product quality control program be instituted by the proposed new institution to manage the Hydrocarbons subsector and by the existing DNGM laboratory. Subsector Managemen 24. Management responsibilities are presently spread among numerous public services with poorly defined areas of jurisdiction, with the result that they are dispersed among units that are too small to have a significant impact on a key sector for the country's tax revenues and operation. It is therefore reconmended that all activities pertaining to public management of hydrocarbons and all national authorities be consolidated into one single structure (a Hydrocarbons Directorate or an Office of Petroleum Products). This new agency could be part of OSRP, MIHE or ONT. As regards P6trostock, it is also recommended that its role be reassessed in the context of the study under way of the 22 public enterprises not covered by the Public Enterprise Structural Adjustment Program (PASEP) and that at the same time the allocation of responsibilities between the State and the private sector be reviewed. Some proposals have already been formulated to this end and the liquidation of Pftrostock and, if justified, the transfer of its personnel to the new agency appear indicated. 25. In Mali, as in a number of French-speaking African countries, the prices of petroleum products and the various components of the cost structure are fixed and controlled by the State. An equalization factor is then added to keep prices uniform throughout the country, together with a  -viii - stabilization fund to ensure the temporary stability of prices. Tax accounts for a large proportion of prices at the pump (at least 40%) and keeps prices well above import parity. Moreover, current petroleum taxation is complex and involves numerous beneficiaries who at times have no iaiore than a very indirect connection with the subsector, which complicates verification of tax revenues. At the same time, the present mechanisms for setting prices at the pump, in particular the fixing of distribution margins as a percentage of costs, do not give distributors any incentive to hold supply and distribution costs to a minimum. Finally, LPG costs are high and could be brought down nearly 20% by action on various cost items. 26. In order to improve the present hydrocarbons pricing, it is accordingly recommended that: (a) taxat on be simplified by applving one single tax per product, to be collected direcuy by the Customs upon entry into Mali and paid into the Treasury; (b) the price-setting mechanisms be modified by fixing ceiling prices that are sufficient to ensure distribution of petroleum products to the rural centers together with proper functioning of the market in the well-served urban centers, by eliminating the fixed and approved prices; and (c) the structure of LPG prices be analyzed and negotiations undertaken with COte d'Ivoire and possibly Senegal as soon as possible in order to reduce its ex-depot cost. Strategy and Actions for the New and Renewable E-nergies (NRE) Subsector 27. Although after nearly 25 years of research Mali can point to more concrete achievements in this sphere than any other Sahelian country, NREs ondy play a very minor role and their medium-term prospects are limited. There are a number of factors holding back development of these technologies: Mali's economic and financial constraints, insufficient technical maturity and the fact that these technologies are currently at an economic and financial disadvantage due to the prevailing low conventional energy prices plus the initial capital costs entailed. In addition, the work currently under way is spread over a number of technologies and is being conducted by many different parties. 28. In light of the present situation and medium-term prospects for NREs, it is thrfor dthat: (a) public resources and agencies be focused on a limited number of applications such as photovoltaic pumping for rural water supply and solar-powered lighting and battery- recharging systems, and possibly semi-industrial solar-powered dryers; (b) the pourgWere oil projects be thoroughly reassessed, since the fuel production costs appear to be distinctly higher than for imported products; and  - ix - (c) a rapid technical and economic appraisal be made of other applications such as biogas, solar dryers, wind pumps, etc., in order to determine whether investment in them should continue. 29. With regard to management of this subsector, iis r that: (a) DNHE, particularly the Energy Division, clearly set priorities in this area; (b) LESO be restructured into research and development sections focusing on specific operational goals (e.g., testing of improved stoves) and support for existing NRE projects; and (c) the private sector be encouraged to market and provide after-sales service for equipment. Strategy and Actions for Imnroving Energy Rationalization Propoed Euer= Ratioalizationl Straeg 30. Mali currenly does not have any formal energy rationalization program and no Malian institution is responsible for this question. However, programs are under way to develop inproved stoves and reduce power distribution losses. Theoretical potential energy savings are between 20% and 30% for fuelwood and 12% and 25% for commercial energies and the economic reurn obtainable from actions in this field is generally high. 31. World experience indicates that there is a general need to adopt an energy rationalization strategy based on the following principles: (a) establishment of an autonomous agency responsible for formulating and implementin energy rationalization programs; (b) provision of information to consumers regarding potential energy savings and applicable technologies; (c) energy price setting based on economic cost of supply; (d) consumer access to the necessary technologies and financing; and (e) the fact that in the majority of cases the measures adopted should allow recovery of the initia investment within two years, to make them attractive to consumers.  lfisttutional Organzatio 32. For reasons connected with the limited size of the market, especially the industrial and tertiary markets, costs, and the lack of national capabilities in this field, establishment of an autonomous agency specializing in energy rationalization does not appear warranted in the Malian case. " recommended InLstead that the DNHE Energy Divisi-i establish policy in this field, but that the technical resources of the individual subsectors be used for the promotion and follow-up of specific measures. Tbis action would be supported initially by technical and financial assistance which would then be able to perform audits and finance the implementation of energy-saving measures. Propoed Energy Rationalization Action Proaramn 33. The energy rationalization programs have already been referred to in the case of the fuelwood and electricity subsectors, with regard to price setting and rational energy use, including improved stoves, reduction of distribution system losses, installation of condensers, etc. In addition to the general policy guidelines already discussed, the following concrete measures are remended: (a) For industry and modern buildings, a series of specialized audits made by a mobile technical squad, with immediate implementation of their findings. Establishment of an Energy Rationalization Fund for this purpose should be proposed to the donors; and (b) In the transport sector, which consumes almost two thirds of the country's petroleum product imports, information and training workshops should be offered to the managers of the main truck fleets while the vehicle tax scales should be revised to penalize fuel- gulping vehicles and reduce the relative cost of the main parts affecting fuel consumption. Sre and Actons for Global Manaedt of the Eegy Sector 34. Although the recent decisions in the electricity subsector will help to improve its management, the fundamental problems in the energy sector still remain. They derive in part from Mali's present constraints, but also and particularly from the lack of a clear strategy. Any proposal for improving the management of the sector must, however, take into consideration the reform of the Malian public sector ihat is curently under way, especially the staffing freeze and the policy of having the State withdraw from commerce. Organizatio and Definition of Responsbilites in tlte Energ Sector 35. The general coordination of the energy sector's various activities ought logically to be perfomed by DNHE, while basic decisions should be evaluated and their execution monitored by an interministerl committee. In order to enhance DNHE's capacity to play its role and cope with materil and humn resource constrants, it is recomm tnded at:  - xi - (a) policy coordination and planning responsibilities be redefined prior to being assigned to DNHE and an interministerial energy committee; (b) technical planning and implementation be placed under a single subsector agency, such as: (i) the DNHE Household Energy Unit for the Household Energy Strategy (to be sot up); (ii) the DNEF Fuelwood Unit for fuelwood (to be set up); (iii) EDM for technical planing for Electricity; (iv) the National Hydrocarbons Directorate (to ae set up) for petroleum products; (v) DNHE for NREs, and (vi) various institutions for energy rationalization questions; (c) the nature of LESO's research and development mandate be redefined; (d) Petrostock be liquidated and the transfer of its personnel, where appropriate, to the new instition proposed for the subsector be considered; and (e) promotion of the private sector be pursued, especially in the hydrocarbons subsector and for solar-powered equipmer.t. These institutional adjustments have to be effected without any increase in staff, by reassigning personnel in post. Investnent P_M in r usm 36. The additional investment requirements of the energy sector for the period 1989-95 are of the order of CFAF 84 billion (US$300 million). A part of this financing has already been secured. Apart from technical assistance, the chief actions still to be financed are the following: (a) Fuelwood subsector, excluding the improved stoves programs: about CFAF 3.6 billion (US$13 million) for the implementation of master supply plans for the main towns, forest inventories in the Mopti, Tombouctou and Gao regions, development of forests and village plantations to supply Bamako, Sdgou, Mopti and Koutiala, recovery of deadwood reserves, improvemea and increasing of checkpoints at entrances to towns, modernization of the charcoal subsector and promotion of substitute equipment, especially kerosene cooking stoves; (b) Electricity subsector: EDM's 1989-95 investment program is estimated at CFAF 800 billion (US$285 million). Additional investments in diesel units are probably also to be expected on account of the delays in bringing Manantali into service; (c) Hydrocarbons subsector: all investments should be financed by the private sector, including strategic storage facilities; and  - xii - (d) Energy rationalization: Implementation of an Energy Rationalization Project including establishment of a fund for financing energy-saving measures is proposed; this project would cost about CFAF 840 million (US$3 million). Technical Assistance 37. Well-coordinated technical assistance is essential for the efficient resolving of Mali's main energy sector problems. In addition to the technical assistance programs already financed in the electricity subsector in particular, donors should therefore give high priority to the following needs: (a) Fuelwood subsector: to set up and support the Household Energy Unit (HEU) proposed in DNHE for coordination of implementation of the different components of the Household Energy Strategy, involving (i) technical assistance, as and when needed, from several national and international specialists over the period 1991-96; (ii) the financing and equipping and part of the operating costs of the HEU and the Fuelwood Unit (in DNEF), and the checkpoints of entrances to towns. In all, the cost of this assistance, including contingencies, is estimated at CFAF 323 million (US$1.155 million); (b) Hydrocarbons b ltor: In order to set up a new institution entirely responsible for managing this subsector, periodic technical assistance over two years appears necessary, at an estimated cost of CFAF 185 million (US$660,000); and (c) Ene rationalization: this assistance would also be used for improving DNHE's energy project and program appraisal capacity. The cost of this assistance and of the related training programs is estimated at CFAF 182 million (US$650,000), to which must be added CFAF 70 million (US$250,000) for the cost of an Energy Bus (used in the context of a Regional Program), CFAF 84 million (US$300,000) for procurement of equipment and basic materials, and an Energy Rationalization Fund estimated at CFAF 560 million (US$2 million).  Table 1:- SUMMARY OF RECOMMENDATIONS AND PRIORITY ACTIONS Recommendations Adions Ppd Assistance Amoumt Te* U thousa) Reference A. Fu and Househol Es Hoe Engy Progrm Table 2.3 1. hrotwe w tbeo managmt Esabli Uni to guide dte Technical assince and equemen 1,050 2.33 Hol Enry Shategy (DNHE/DE 2. Formulate a household energy srtegy a. Manage sing felwood -Complete resource iwnodes in Continuto of PIRL 2,500 2.5 resources Mopti, Tombo and Gao gions - Defne supply m plns for Studies equpemt, and 1,750 2.20 the 6 mAin twans tehical si Fored delopnt wth p -aE Sudi, equ npen, and 2950 2.21 ymdrai Gp q d y tecdical asastonce ~dod x b. hcreesector sef -dng Set up ddhe at etance to Equlpement adtn andssiance 700 2.28 - COpadI nstR.InsWule ood p*lng madn tcre and increase kta- t =hdeiwo ec cd colletidn capacty - Moderize tw crcoal ubsesdor Equ ipme and ednial assisance 500 - bIease taon fiewood wth 2.29 devMpmt -pp cmonen c Ruce demand for fwood - Purse preset impoived gae pgams Contnatio of acren praeds 2.42 d. Subsiute other kh whom - Pomote osene and LPG, Condtatin of arrent protec 2,200 2.46 ~enamicafutled; - epeal in th nwihem towm an establishments of a mreohng kn equ*mert and ohr energy products 3. Contngence - Oe. Husehold Energy Stategy 1,165 EW i~~~dH'hold fd 12,'8'1'''  Table 1: SUMMARY OF RECOMMENDAONS AND PRIORITY ACNO_ . Rem _Medat Adions Prposed Asiae Amnumt Teit i US$ thousamd Serence IL SellySador 1. Adopt a sregy fat aoving - Redue grwtah neie of demn and the daeys In eatwy to seice geertomne of Mani"t - reducing Aibisiatin 6smes Second Powe Pro$ed - X nowy o p Regwna .rwgy Raiaain 3.20 a ccelerction of caonder ipro - hndal disel ts CCCE hng pland 3.13 2. Restiw OEHltN and EDM - Make pcing Includ im Secd Power Poed 3.18 tds to pnomt moe nal th Send PowerProec and elecrcy u analy what is obkinable from 3. hpoe subsedor magent b - bypentw 1h6 measures 4aed Second Power Proed 3.27 msm of Intoa dngthing m ih Second Pried C. HNydrow_bns Sew 1. ImprVe ubsedor m gemn - Regroup national usdict Technical as and 350 4.21 ino one Ntionl yoa bon DMdon eapemet 2. Resume dcusions wih GSl - Obtain aco to storage fdes Spec d consuemny s"m 5o 4.6 dlvte ad Senegal wth a view to in Abidpn and Dalw to red.dng the ot if hydrocabon pemnnited pation of 3. Reexraie pokJ on rtegic Entus mainteance of stc6 to Spedalzed cansubyy sevkes 60 4.11 doc6 th & rle xof PNeto tpdrwate, #dor -iqudae Petrotc 4.24 4. Smphiy hdocbom picgk - Mae pi and el Study ad echnil asance 200 4.31 study planned in the cont4 of the proposedm IDA Structurl Adjuswtmn C"rUdi ____________________________________________ _______________________________________:_______ '________.___ ____:________.___  Table 1: SUMMARY OF RECOMME?NAHONS AND PRIORIY ACnONS Recommendations _________________________j 'A"Pa td Ass "Amo Ted D. NOWow R _wvdoEnw S_~ 1. lcs eft and c4paks - Reapprie porn In he6 &mmw F dh asIsance 5.6 an a limited swather ci applications appears marginal hi tight of Pr" pooed in Sedon E. -Ase ad eabl +h dmtagy 5.9 rewding te p teroly ne amat such as , solar dres and d ils 2. Resaictue LESO bno rearch and - Set priorie hi conuntion VAh DNHE 5.12 deve6pnt sdion and =wppaot for edtng po 3. More NREs that are prest Encoraeugthe pie sector to do 5.8 vwbe the madohq& and pow& afier-sles L Energ RatInaRzation 1. Etb"h an enegy rwiknatzatan - Fmnwlae a polic h DNIE and deAne Techial assitce Iih 650 6.21 Plogr. a pram olenegy-f seng measares pel. dc eao and - harge w t technical agencis Aeady nted for eoch subsedor wIh eeatlan of dte prom 2. pement the eneW raanizatln - Pe&frml a sdes of er Veide, equpewen mderia and 550 6.22 prngra hI hkiduy, ildings and aud and see thd bodes, air opeg coas Ohc"Wasp canloeandsWA id" Reek, eti., ame bned to mnndmum 3. GIve conumes 1adal icentive - E"abl an Ener Ratonalao 2,000 6.23 Fund - Make eequpme n ed for en rtla n ta a4 fatal Ener9y :otlana~zcd1on 3,2X0 6.24  Table 1: SUMMARY Of RECOMMENDATIONS AND PR1ORITY ACSN Recommenatio Amons Proposed Assiste Amournt Tod ____________ _____________~~~~~~~~~~~ ~~~~~~~~~~~~~~ US$ Iowanldj Rekernoe F. Enwm Socw M _nag.mw 1. Impro codination of sedor - Form intemnied energy 7.6 actis ComMiee 2. Rede reabt In he -Asi energy ycoorbn Iuded in th asstnce oposed 7.8 energe sedor an plni to DtHE for Ihe Househd Enegy rogram 3. Deine and spedfy respon and -Aign tednklm p6nnbVi and 7.10 a reduce dispersal of nonl e _afenergy programs uidion to one sgle agency - Redefine LESs earch and 7.10 devpmet mandate 4. DIvsiture by wthdr&ol of Stae - lkqudte Petmsdock 7.10 d promotion of prwe sedor 7.10 adves - Promote role of private sedor in h r, nergy raixkto ar HEmseo  I. ENERGY IN THE MALIAN ECONOMY Socioeconomic Context Introduction 1.1 Located in the heart of Sub-Saharan Africa, Mali has an area of about 1.2 million square kilometers of which only one quarter is cultivable. Three quarters of its population of 8 million live in the south of the country; I/ only the capital, Bamako, has more than 500,000 inhabitants while a further six towns have between 50,000 and 100,000 (map IBRD 1916R). On the basis of a demographic growth of 3% p.a., World Bank forecasts put Mali's population at over 11 million by the year 2000 and about 14 miilion by 2007. Although some degree of urbanization will take place, around 70% of the population will still be living in the rural areas in that year. 1.2 Mali is a very poor country with a per capita GNP of the order of US$230 (1988) and the majority of its socioeconomic indicators are in the lower range for low-income countries. Although for 20 years now Mali's real economic growth has been of the order of 4% p.a., it was only 2.7% p.a. in the 1980s. As a result, the real increase in per capita income was limited to 1% a year during the same period. The country has received massive external assistance, representing 20% of GNP in 1987. Economic Reform and Progecs 1.3 Because of its growing fiscal and external deficits, ever since 1982 Mali has been implementing a series of stabilization programs and economic reforms designed to reduce its budget deficits, the losses incurred by public enterprises and the public sector's arrears, and to liberalize its markets, bring about divestiture by the State and promote the role of the private sector. These actions have been supported by the International Monetary Fund, the World Bank and other donors. 1.4 As regards the energy sector, these macroeconomic actions are designed to support: (a) the process of State disengagement and rationalization of the management of sector agencies and enterprises; (b) reviews and adjustments in the area of pricing policies (evels and structure), particularly for petroleum products and electricity; and (c) the introduction of strategies and pursuit of specific measures to reduce energy production, transportation and distribution costs. LI Ihe emiuw nonhw parr f the coouny, i.e. about 60% of iu area, is desert.  1.5 Although its basic resources are relatively limited, Mali's economic potential nevertheless seems better than that of most Sahelian countries. A real increase in per capita income of 1-2% p.a. appears possible, provided the economic programs and reforms are carried out and that demographic growth is limited. Economic growth of the order of 4% p.a. appears attainable in the 1990s. Agriculture, Z/ which presently accounts for 50% of GDP and two thirds of export earnings, should remain the principal economic activity and industry's share in economic activity should rise from 13% in 1987 to around 15 l in 1997. Mineral resources are limited; however, gold production offers some attractive possibilities. Finally, since the domestic market will offer little in the way of opportunities for creation of new industries, for example for import substitution, the anticipated industrial growth will probably be based on agricultural and livestock products. In light of these potentials and the present state of the economy, MJali's domestic economic policy should focus on improvement of the public management of the country's resources in order to progressively provide the people with essentiatpublic goods and services and lessen the constraints related to human and natural resources in order to support development of the private sector. Overview of the Malian Energy Sector erw Resources and Constraints 1.6 Like a number of low-income countries, Mali is confronted with a threefold energy crisis: total dependence on imported petroleum products, uncontrolled exploitation of fuelwood resources in a physically fragile environment and high development costs for hydrocarbons and new and renewable energies (NREs). 1.7 Assessment of the results of an oil exploration project financed by IDA in 1981 to gather and compile geological and geophysical data has led to the conclusion that Mali does not have any economically producible deposits at present crude prices. At the same time, these prices make resumption of exploration unlikely. Mali's landlocked situation also entails very high transport costs. 3/ The absence of producible oil deposits and of economic substitution potential, and the burden of oil import costs, which represent 14% of total imports and 27% of merchandise export earnings in 1987, therefore make hydrocarbons management one of the energy sector's priorities. Moreover, consumption of petroleum products is expected to more than double in volume over the coming 20 years. 1.8 Fuelwood resources represent more than 90% of primary energy consumption. The climatic environment is conducive to erosion and rapid reduction of soil fertility, while the forest cover '/ OiWIy cofon, rice, maize and stodraising. / Bamdako is about 1,300 nn Jfm Abdjan and 2,000 bn,from Lomo by road, and 1,200 kb from DaAar by rafl.  is under severe pressures from largely uncontrolled exploitation due to the demand for firewood but also the needs of agriculture and stockraising. It should further be noted that this exploitation is proceeding without any precise knowledge of the existing resources and potentials of each of the ecological zones. However, on the basis of the findings of recent forest inventories (which only cover the most ecologically fragile zones of the country), fuelwood resources available for energy appear sizable in ove all terms compared with the needs. 'here is a stock of dead wood which in the short and medium term will continue to satisfy the demand for fuelwood. The localized overexploitation of the periurban areas and current management deficiencies nevertheless pose a significant risk to future supplies and to the environment, a risk that should therefore first be contained and then eliminated. 1.9 Mali also has a hydroelectric potential that is quite considerable compared with its needs. Utilization of all the sites would provide nearly 5,700 GWh/year and a guaranteed power of 800 MW. This figure should be compared with the present peak demand of the order of 50 MW.J/ However, this is a technical potential; the cost of developing the facilities and their size in relation to present and expected demand i/ reduce the economically usable hydro potential. Moreover, certain of the sites, particularly Mantali, are regional in nature and can only be developed in collaboration with other countries. 1.10 The potential in terms of new and renewable energies is also considerable, especially as regards solar energy, which is available country-wide and for the greater part of the year. Wind regimes, on the other hand, are very variable from region to region and depending on the season. Finally, although the volumes of agricultural, agroindustrial and livestock residues are large, with a few exceptions XI they are already used for energy generation or nonenergy purposes, or are very scattered, which lessens their economic value. As for the hydroelectric potential, mobilization of these resources with existing technologies will be very costly and their contribution to Mali's energy balances is bound to remain very limited even in the medium term. Energy Balance and Final Energy Consumnion (1987) 1.11 Energy consumption data are sparse and of poor quality, especially for the traditional energies. 2/ However, total primary energy consumption in 1987 is estimated at 1,800,000 toe (Table 1.1 and Annex 1.1). Nearly 90% of the final energy is obtained from wood and biomass; the modern component of the sector in terms of final energy is therefore no more than 10%. The residential sector consumes nearly 89% of this while about 70% of petroleum products are used in transport. A i/ Including the interomnected system, the isolated ctente,s and private generation. u/ By 2007, peak pow demand Is expeted to be of the order of 200 MW. d/ Sukala sugar miU residues for ethanol production. ZI Dfined in hir study as wood, duwrcoal and agricukral and agroifrial residues. Commeria e is dfined as awmprising eeCtity and rtocbow.  -4- comparison of commercial energy consumption (1986) in some West African countries is presented in Table 1.2. Table 1.I: SJULA1Y OF MALIAN ENERGY BALANCE 1N 1987 (thousands of toe) Firewood Crop Charcosl Electricity Petroleum TOTAL residues products Production 1.786 111 --- 40 --- 1,937 Imports 174 174 Final consumption 1.601 111 38 13 166 1,929 In X of final consumption 83 6 2 1 9 100 Source: Annex 1.1. Table 1.2: WESTERN AFRICA: COMIERCIAL ENERGY CONSUNPTION Per capita GNP Per capita Energy imports Growth of energy in 1986 energy as X of consumption tX) consumption merchandise exports (1986 USS) 1965 986 1965 1986 1965/80 1980/86 (koe) Kali 180 14 23 16 27 7.0 2.3 Burkina Faso 150 7 18 11 7 10.5 0.2 CMte dlivoire 730 101 175 5 5 8.6 2.7 Ghana 390 76 131 6 1S 7.8 -4.9 Guinea - 56 59 - 2.3 0.6 Liberia 460 182 166 6 10 7.9 -12.4 Niger 260 8 42 9 9 12.5 3.3 Nigeria 640 34 134 7 2 12.9 6.5 Senegal 420 79 116 8 25 7.4 -2.3 Source: World Bank: 1988 World Development Report. 1.12 Electricity represents less than 1% of final energy demand and 7% of commercial energy consumption, but absorbs nearly 10% of public sector investment. Less than 5% of Mali's population has access to electricity; in Bamako, the capital, this proportion is of the order of 30%. For 1987, electricity consumption is estimated at 147.5 GWh. The interconnected system represents 90% of this  -5- demand E/ and low-voltage sales make up 48% of consumption (Annex 1.2). In 1987, petroleum products represented 9% of the final demand for energy but 93% of commercial energy consumption. The transport sector accounts for more than 70% of the consumption of petroleum products, among which gasoline (37%), gas oil (28%) and diesel fuel (12%) predominate. Past Trends in Commercial EnerDy Consumntion 1.13 For the period 1983-87, demand elasticity for commercial energy with respect to GNP was 1.1; however, this conceals the substantial differences between demand elasticity for petroleum products, put at 1.0, and that for electricity, estimated at 2.0. It is essential to bear in mind that as far as electricity is concerned, the growth of consumption has reflected the rate of development of the distribution networks, the capacity of new power stations and the relative amount of load-shedding rather than the country's rate of economic development. Between 1980 and 1987, commercial energy consumption rose on average by 1.1 % p.a. and by 5.0% p.a. after 1983, though this average conceals significant differences between petroleum products and electricity (Table 1.3). In the electricity subsector, following the entry into service of the Selingue hydroelectric plant in 1980, which considerably increased generating capacity, demand for electricity has risen very rapidly by an average of 13 % p.a. notwithstanding tariff adjustments to reflect economic costs more fully. As regards petroleum products, however, consumption has only increased on average by 0.3 % p.a. since 1980; this is due essentially to the significant price increases in 1980 and 1981. Since 1983, with a drop in prices in real terms and a resumption of economic activity, consumption of petroleum products has risen by an average of 4.6% p.a. Table 1.3: COMMERCIAL ENERGY CONSUMPTION TRENDS IN MALI Tvey of anergy 198? Value Growth rate (X ar Elasticitv (toe '000s) 1980/87 1983/87 iwith respect to GNP Electricity 13 10.7 9.5 2.0 Petroleum products 166 0.3 4.6 1.0 Comercial energy 179 1.1 5.0 1.1 GNP growth 4.7 Source: ESNAP estimates - Amnexes 1.2 and 1.3. Probable Evolution in Demand for Enery (1987-2010) 1.14 The development of energy demand in Mali will depend on the usual socioeconomic factors (demography, urbanization, global economic growth and structural changes in the economy, etc.) and on energy policy (especially energy prices and taxation, substitutions and energy rationalization measures), but probably also on the availability of funds for investnent and imports through which supply can be increased, of electricity in particular. Altogether, if past trends and linkages are maintained and no 8/ For a maximum power demand of 34 MW in 1987.  -6 - sustained energy rationalization policy is applied, total energy demand can be expected to grow by about 2% p.a., representing 1.8% p.a. for traditional and 4.0-4.5% p.a. for commercial energies respectively, with a rapid rise in electricity consumption (Table 1.4). !abte 1.4: COMPARATIVE SUMMARY OF FINAL ENERGY CONSUMPTION BALANCES (1987/2000) BASE (1987) Trend-Based Scenario Energy Rationatization Scenario '000 toe Structure 87/2000 '000 too Structure 87/2000 '000 toe Structure X %/year X %/year % Fuatuood and biumass 1,751 90.70 2.27 2,343 87.99 1.83 2,215 88.49 Electricity 13 0.67 8.10 36 1.34 6.00 28 1.11 Petrotewm products 166 8.62 4.20 284 10.67 3.50 260 10.40 Final energy 1,930 100.00 2.51 2,663 100.00 2.02 2,503 100.00 Comiercifa energy 179 9.30 4.55 320 12.01 3.71 288 11.51 Source: ESNAP estimates and Annex 1.4. 1.15 These general prospects are based on the following assumptions: (a) Long-term economic growth of the order of 4% p.a. is achievable (para. 1.5), corresponding to a real increase in per capita income of the order of 1-2% p.a. This growth would be based essentially on development of agriculture and processing of agricultural products and on the mining sector (gold); and (b) Up to the present, few resources have been devoted to enhanced energy rationalization in Mali, apart from the improved stove popularization projects and the projects to introduce LPG for household uses. Although precise data for Mali are not available, the experience gained in other countries indicates that the theoretic potential for energy savings in Mali is of the order of 10-15% of present consumption. Conversion of this theoretic potential into real savings is relatively difficult, but the return obtainable on effbrts in this field is generally excellent; a ratonalization policy of this type should theref;re be implemented by the Government in order to cut energy costs, improve enterprise competitiveness, cut the trade balance deficit and also ease the pressures on the environment, in particular the overexploitation of fuelwood resources.  - 7 - Organlzatioand Managemlent of the Energy Sector 1.16 The constraints connected with the availability and mobilization cost of the different energy resources (para. 1.6) are aggravated by the absence of an energy strategy and the involvement of numerous institutions whose efficiency is limited by the dispersion of responsibilities and lack of coordination, inadequate capabilities and the paucity of technical and financial resources. In addition, the almost complete lack of reliable data is a fundamental obstacle to development of more effective management. 1.17 The main institutions involved with energy are: (a) At sector level, the Ministry of Industry, Water Resources and Energy (MIHE) is the supervisory authority for the sector, acting chiefly through its National Directorate of Water Resources and Energy (DNHE); (b) At macroeconomic level, the Office de Stabilisation et de Regulation des Prix (OSRP), handling the taxes on petroleum product sales, the National Directorate of Economic Affairs of the Ministry of Finance and Trade for prices, the Interministerial Prices and Incomes Commission for the setting of petroleum product and electricity prices, and the Ministry of Planning for investment programming; and (c) At subsector level, the main institutions are in the fields of: (i) Fuelwood: the National Directorate of Water Resources and Forests, which coordinates various projects, the Directorate of Social Affairs, the Union des Femmes du Mali and the small-scale manufacturers who produce and market improved stoves; Cii) Electrity: Energie du Mali (EDM), which since the institutional reform of 1988/89 has had sole responsibility for planning, constructing and operatiig public facilities, and the Office pour l'Exploitation des Ressources Hydrauliques du Haut Niger (OERHN), which owns the Selingue hydroelectric plant. 2/ However, EDM does not have a monopoly of production. The regulation and control function for the subsector is performed by DNHE. At regional level, the Organisation pour la Mise en Valeur du Fleuve Sendgal (OMVS) is currently developing the Manantali project; (iii) Hyrocarbons: the National Directorate of Geology and Mines (DNGM) of MIRE for petroleum exploration, the Office National des Transports (ONI) of 2/ Following dte recem reform ofthe elekcrty subsector, operation of the S.0lingui plant has been tranfend from OERJN to EDM.  -8- the Ministry of Transport and Public Works for transport permits, OSRP for the management of price structures, equalization and stabilization funds, Petrostock for storage installations, the Groupement Professionnel de l'Industrie du Petrole du Mali (GPP) J10 and the independent distributors, and the DNGM laboratory for quality and the certification of installations; (iv) New and Renewable Energies: the Solar Energy Laboratory (LESO) essentially for research and development and support for various projects supervised by DNHE: the Special Energy Program, the Solar Equipment Maintenance Unit (CEES) and the Mechanized Agriculture Center; finally, at regional level, the Regional Solar Energy Center (CRES) is concerned with promotion of and training In solar energy. The Main Thrusts of Malian Energy Policy 1.18 Taking into account the present energy situation and the 20-year prospects presented in the preceding sections, Malian energy policy should he based on the following principles: (a) Protection of existing fuelwood resources, which are presently being devastated, probably irreversibly, and more generally of Mali's ecology, by better management of existing resources and modernization of firewood supply activities, since for the coming 20 years firewood will continue to furnish over 80% of the country's energy requirements; (b) mrovement of public management of the various subsectors by simplifying the present procedures, reducing the dispersion of jurisdictions and utilizing private sector capabilities to the best advantage; (c) Acceleration of the rationalization of traditional and commercial energies through a cost- pricing policy, expansion of the improved stoves programs and introduction of an energy- saving program in industry and trade; and (d) Enhancing Mali's energy independence by optimizing and guaranteeing supplies of petroleum products and exploiting national energy resources. 1Q/ Mobil, Total, Texaco, BP and SheU but exding the independent distribwor.  -9 - H. FUELWOOD RESOURCES AND MEETING HOUSEHOLD ENERGY NEEDS Principal Issues. Options and Recommendations for the Subsector 2.1 In 1985, the Government, recognizing that desertification was the outcome not only of droughts but also of poor natural resource management, poor coordination of remedial actions, and a scarcity of financial and human resources, adopted a plan for a nationwide campaign against desert encroachment. By 1987, eight priority measures had been decided on and were grouped together as the Programme National de Lutte Contre la Desertification (PNLD), for which support was obtained from several donors. One of these measures concerns fuelwood resources and focuses on three objectives: (a) Reducing the consumption of fuelwood through distribution of improved, fuel-efficient cooking stoves (energy component of PNLD); (b) Rationalizing forest exploitation by organizing and training loggers, demarcating felling sites, and specifying the conditions under which production operations may be conducted (forestry component of PNLD); and (c) Promoting other energy sources as substitutes for fuelwood (energy component of PNLD). 2.2 The recommendations of this study on issues and options in the household energy subsector dovetail with the objectives of PNLD. Meanwhile, on the basis of the findings of the 1989-90 ESMAP household energy strategy study, the plan finally adopted should incorporate PNLD's (1) forestry and (2) energy components. In other words, the PNLD forestry component should be emphasized in the Kayes, Koulikoro, Segou and Sikasso regions, the energy component in the Tombouctou and Gao regions, and both components in the Mopti region. 2.3 In overall terms, the action strategy recommended in this study is designed to: (a) Ensure better use of fuelwood resources through the rationaliz*ion of forest exploitation and marketing operations, so that adequate supplies can be made available without harm to the environment; (b) Meet the needs of the rural population as fully as possible by developing forestry operations, stockfarming, and environmental protection measures; (c) Promote and support sound management of fuelwood resources - by rural communities themselves wherever possible;  - 10- (4) Rationalize fuelwood consumption through coherent policies on improved stoves and energy substitutes; and (e) Make the subsector self-financing eventually, by instituting a new fiscal policy, improving the collection of forest tax revenues, and, when necessary, bringing fuelwood prices up to the level of their economic cost. Resources and SuplI Channels Forest and Biomass Resources: Projects in Progress 2.4 To pave the way for this strategy, an action program, partly in the institutional sphere and pardy in the investment and technical assistance spheres, is recommended. The components of this program, detailed in the following sections of this study, would focus on fuelwood resource management, improving sector administration, and curbing growth in demand, particularly for fuelwood. The total cost of the investment and technical assistance subprojects in the Household Energy Program is estimated in Table 2.3 at approximately CFAF 3.6 billion (US$12.8 million). Of this amount, US$1 million is currently allocated under the Second Power Project (para. 3.6). 2.5 Although the Fuelwood Resources Inventory Project (PIRL-FAC) has yielded precise SPOT satellite data on such resources in the Kayes, Koulikoro, Segou and Sikasso regions, inventorying activity must be continued until Mali's entire territory has been covered, since it is precisely the noninventoried regions where shortfalls might be most serious. Unfortnately, financing is still not available for an inventory of the Tombouctou, Gao and Mopti regions (Table 2.3). Annex 2.1 provides full details as currently available on Mali's fuelwood resources, which are now summarized in the following paragraphs. 2.6 Koulikoro and Sika egions: In the light of data on other Sahel countries, the volume of wood available in Koulikoro and Sikasso can be estimated at over 4 million tons/year plus approximately 5 million tons of dead wood. Since present consumption in these regions and Bamako is estimated at under 2 million tla, there would be a sizeable surplus. This remains true even if Bamako is assumed to have a radius of supply of 150 km, as it could be supplied for a period of 3-5 years from the Banamba cerde. These, however, are overall esdmates; meanwhile, a significant degradation around the cities is apparent. 2.7 Kaves and Sgou regions: Although there would appear to be no immediate problems in these two regions, which contain 70% of the Malian population, long-term deterioration is to be feared unless a better forest cover management system is put in place. 2.8 Mopti. Tombouctou and Gao regions: In these three regions, there is greater cause for concem, although precise data are not available. There are frequent shortages, particularly in the towns  - 11 - in the Niger delta, which result in intensive use of crop residues and cow dung and the spontaneous setting up of supply channels from other rural areas in Mali. 2.9 Other biomass resources: The limited volumes of agroindustrial residues available II/ are already used as energy sources or in the manufacture of animal feed. Crop residues 12/ are fairly signiflcant in volume, accounting for 1,150 toe/a (Annex 2.2). They are generally left in the fields, and burned on the spot or used as litter (cotton stems). Attempts have been made to produce charcoal from cotton-plant stems, although with not very encouraging results. 13/ 2.10 Pourghere oil: The Special Energy Program (SEP) is also studying the possibility of developing pourghbre plantations in the form of hedges by fostering demand for the seeds, from which an oil can be produced that is usable as fuel for small stationary engines employed for production purposes or even as a fuel for vehicles (para. 5.6). 2.11 Forestry projects in progress: Assessment and lessons: Since 1972/73, Mali has spent roughly CFAF 15 billion (US$50 million) on forestry projects, all of them financed by international agencies (Annex 2.3). Reforestation activities include two rainfed plantation projects being executed by force account that absorb 75% of the funds allocated to forestry programs, 141 but the results make it clear that this type of project is too costly and should not be repeated in Mali. Some irrigated plantations have also been created: 1I/ although the yields from them are twice as high as those obtained from the rainfed plantations, this approach does not appear to be economically justifiable either, because of the opportunity cost of the land areas taken up. Finally, a number of village-scale reforestation projects have been started; however, owing to a lack of local technical expertise, high costs, and little interest on the part of the local communities, this type of project has gradually been replaced by privately owned plantations, where the chief concerns are soil protection and forage production, with fuelwood production no more than a secondary objective. Although private plantations may be able to meet the fuelwood requirements of scattered rural communities, they will be incapable of meeting demand from urban areas over the long term. Where fuelwood supplies are concerned, therefore, the conclusion would appear to be that future efforts should preferably concentrate on the development and rational management of existing forestry resources. J1/ Bagasse, groundnut cake, cotton seedfrom the Conpagnie Malienne de Diveloppement des Textiles, and rice dchfffrom Office du Niger. 12/ Milet, sorghum, maize stalk* and cotton stems, rice straw, groundnut shells. Although thepotential of this area is ittle known, a closer study does not seem necessary at this time. 13 Special Energy Program (SEP- ). The raw materiaks are too light and burn too quickly, and the charcoal produced was not oparabk with wood charcoaL 14/ OpOration Aminagenent et Production Fore~tiire, a part of the Second Forestry Project, for the supply of Bamako, and Op*atfon AmEnagement et Reboisemnent de Sikasso, a part of the Mali Forestry Operation Suppot Program ,S/ By IDRC (Jnternational Developnwnt Research Centre, Canada), in the Segou region.  - 12 - Fuelwood and Charcoal Supply Systems 2.12 The rural population appears to have no serious problems in obtaining firewood, except in the Mopti, Tombouctou and Gao regions. Reliable data on collection zones, distances, time spent, types of wood, etc., are not available. .16/ Only a few surveys, focused on consumption, have been conducted in rural areas. 1l7 In urban areas, on the other hand, situations vary considerably. Several studies have demonstrated how supply systems vary from town to town and even in the same town, 181 but have generally concluded that they are effective, given the ready availability of wood to consumers at comparatively low prices (Annex 2.4). 2.13 As far as charcoal is concerned, trading is still conducted on a small scale and is limited to urban centers, although consumption is growing very rapidly. 12/ It is produced in medium-size or very small earth kilns (the largest being able to produce no more than 60 bags, of 75 kg each, per operation) in the Banamba region and around Koutiala. Kiln efficiency varies from 10% and 15% of original weight. Control of Exploitation of Fuelwood Resources 2.14 Forests in Mali are the property of the State and their exploitation is governed by the Forestry Code. 20/ Before beginning logging operations, an entrepreneur must obtain a felling license, Wj/ pay the related tax charges and, before transportation begins, obtain the necessary 11/ Supply syst are generaly of the noniformal tpe. As a rule, each family colkcts its ownfirewood, work that is done mainly by women and children along the borders of paths and tracks, infields or in woodland areas. For the most pae, it is dead wood that is collected. 1Z/ Bamako and Mopti (1978), by Institut Polytechnique Rural de Katibougou (FAO); Sikasso, Koutiala and Bougouni (1985), by Op4ration Aminagement et Rebolsement de Sikosso; and Kayes (by UNSO project now in progress). WAi There are three main types of supply system: nonmotorized, motoried, and transportation by train or pirogue The scale of each systen or network dpends on a number offactors: demand volume, distances, traffic volme, relatve prices of alternative fuels, etc Annex 2.4 provides a breakdown of the transportaon medhods used to supplyfive towns. 1a/ In Bamko, 39% of howeholds were using charcoal as their mainfuel in 1978 (lRANSENERG report), 8% in 1987 (SEP surweys) and 11% in 1989 (SAIAP household surveys). 2Q/ The Forestry Code (Law of March 1986) specipes that the collection of wood for personal use is a traditional right exercisabk by every individual except in the case of reserveforests and certain species. Only loggers registered with DNEF's regional branches are authorized to engage in extraction activities on a commercal scale. 2L/ Indicating tpe of product, quan y,felling site and period of validity of the permit.  - 13 - permit 2/ on presentation of his felling license. Infringements of these regulations may result in fines. However, only a very small percentage of the data available from the issue of licenses and permits and from other records kept by the forestry authorities is centralized and analyzed by DNEF. Consequently, systematic monitoring of forest exploitation, specifically of felling sites and quantities of timber extracted, is impossible, and there is also little to motivate rangers. In addition, administrative control in the interests of tailoring forest exploitation to firewood and charcoal demand is inadequate. In 1987, the DNEF recorded production of 122,400 t of fuelwood and 5,240 t of charcoal - in other words, between 10% and 20% of estimated total urban consumption throughout the country (para. 2.39). 231 Despite the new checkpoints that came into operation at the beginn-ng of 1988 at entrances into Bamako, volumes recorded are still well below estimated actual consumption. WI Recommendations 2.15 Development of a better data base and its utilization in daily management are first necessary in order to obtain a true picture of fuelwood production potential and exploitation methods. Subsequently, efforts should be directed at rationalizing management of this resource. If these advances are to be achieved, the DNEF unit which is to specialize in the fuelwood subsector (para. 2.33) must be provided with the staff and physical resources it will need to create and administer such a data base, complete the national inventory of fuelwood resources by covering the Mopti, Tombouctou and Gao regions (PIRL program), and begin implementing the strategies X/ to be proposed on completion of the ongoing studies. 2.16 Any actions taken in the spheres of forest exploitation and fuelwood marketing arrangements should adhere to two principles: (a) The Government alone cannot attend to management of the country's natural forests. It should therefore concentrate its resources and capabilities on technical assistance and delegate the management and monitoring of exploitation activities to the inhabitants of the rural areas in question, logging operators and wood merchants. However, it should conduct periodic inspections to ensure the type of management recommended is being applied; and (b) The changes proposed should be made gradually. Reducing over-exploitation in areas adjacent to urban centers and major traffic arteries should be the first concern (through ZZ/ Specifying products, quantities, type of vehicle, destinaion, and period of vaidiy of the permits. X/ Annual report of the Directorate of Forests for 1987. 4/ This is largely explained by thefact that the authorities concerned display little interest in thefindings, as wel as by thefailure to make use of data that are actuaUy coUeaed. g/ In itsforest products market study completed in March 1990 and its household energy strategy planing study begun in the second half of 1990.  - 14 - measures to move fuelwood collection out toward less fragile zones). Subsequently, a mode of forest exploitation should be instituted which is based on systematic rural community participation, so that eventually all management responsibilities can be transferred to the communities and private operators. 2.17 Forest resource management and tree-planting programs should therefore be reoriented: village communities themselves should be encouraged to protect extraction sites and develop their own nurseries; and management responsibility should gradually be handed over to villages or, even better, to families. This will necessarily involve providing incentives, principally financial, either in the form of rights of usufruct or ownership regarding forest resources, access to a stable market, and, over and above reimbursement in respect of felling activities, a payment to remunerate villagers for the work involved in managing fuelwood resources. This payment, which might be called a "development premium," would be conditioned on satisfactory exercise of the management function. 2.18 As to actual management of the supply of fuelwood, although various types of organization might be considered, the following key elements should be present in all cases: (a) The new management practices should be based on supply master plans drawn up for each geographic zone (para. 2.20); (b) Wherever possible, producers should organize themselves into local producer associations centered around local rural fuelwood markets so that collective responsibility for management of this resource may have the opportunity to develop; (c) Regulatory and taxation requirements should be modified to make producers accountable and enable them to receive a development premium; and, right away, (d) Checkpoints at the entrances to urban communities should be selectively reinforced to serve both as tax collection offices and the key element in the new management system. 2.19 Detailed proposals on the best means of paying a development premium and/or allocating to producers a proportion of the tax revenues received on fuelwood cannot be formulated with currently available information. Even if the principles and benefits of making rural communities accountable for the management of fuelwood resources are clearly apparent, the organization and operating rules of such a system will have to be formulated carefully if the goals in view are to be attained. 2.20 upIy master Wpans: The current system of wood collection to cover requirements in rural areas does not appear likely to cause further deforestation. However, supplying urban zones is another matter (para. 2.12). Fuelwood supply master plans for major urban areas should therefore be drawn up to provide a basis for designation of extraction and conservation zones, control of their exploitation, negotiations with local resource management groups, writing of regulations to govern the assignment of land and resource ownership, rationalization of transportation arrangements, and identification of the intermediaries involved. Where classified forests are concerned, another formula  - 15- could be envisaged, possibly Involving the sale of management and extraction concessions to logging entrepreneurs. 2.21 Amendment of present regulations: This new management approach will require changes in the current regulations: fixing and acceptance by producers of collection quotas for each zone; introduction of a system of surveillance and penalties at the production level; 2&/ obligations for transporters to prove the origin of the wood they are carrying, the payment of development premiums to producers, and their own membership in a professional association; prohibition of buying/selling along roads lying outside authorized felling areas. As a transitional measure, the present system of felling licenses should be replaced by one of vouchers issued to loggers at the beginning of the year for their zone and certifying payment of fees due for the period. As mentioned above, it remains to determine how a system of paying communities a development premium in respect of their resource management work can be set up. Lastly, additional checkpoints should be established at entrances to major urban areas so that possession of the vouchers mentioned and payment of taxes can be verified and required data collected. The necessary studies, the ensuing proposals for action, and their eventual implementation should be the responsibility of CCL (Cellule de Combustibles Ligneux) proposed as part of DNEF (para. 2.33). 2.22 Reorientation of the role of regional forestry services: In view of these changes, the work of the regional fbrestry authorities should be geared more toward providing private producers and logging operators with advice and training, particularly in fire prevention/fighting measures, felling methods, grazing, etc. 27/ 2.23 Prrtv activities: The following priority activities are designed to pave the way for necessary improvements in resource management and rationalization of the networks through which urban centers are supplied: (a) Drafting of supply master plans for Bamako, Segou, Mopti and Gao which define production orgaization, fuelwood collection, surveillance systems, taxation policy, and financial administration. This set of activities should be initiated quicldy by CCL as part of the proposed Household Energy Program (para. 2.4); (b) Development of production/collection zones, (starting with inventories) and then the creation of such infrastructure as firebreaks, access roads, etc.; and (c) Applied research into forest productivity by ecological zone and into forest exploitation and management techniques through which the master plans can be implemented. 311 Initial stps to organize logging entrrenew in Mali have been under wayfor more than a year. ZZ/ 2Izs approach has already been taken as part of certain projects (the World Bank project in southern Mall and the vage-levelforest delopmnt and rsforestation sdcme in the Koulkoro region) and by a number of MalUan organiations (e.g. CMI).  - 16 - Taxation Policy and Price Structures Current Taxation Policy. Price Structures and Subsector Self-Financing 2.24 Present taxation policy and firewood and charcoal retail prices are as a general rule inadequate, since they neither reflect the economic costs of fuelwood resources nor allow either satisfactory subsector self-financing or reasonable remuneration for producers. 21/ Unfortunately, fuelwood cost structures and price movements are poorly understood, never having been studied in any rigorous fashion. 22/ Retail prices depend on such factors as: (a) the season (prices are 15-20% higher in the rainy season); (b) the geographical location and size of the population center supplied; (c) the type of wood; 3Q/ and (d) the supply system. Throughout Mali, 1988 prices varied between CFAF 12 and 20. 3I/ Over the last 15 years, annual increases in fuelwood prices have roughly matched the rises in the general price index, apparently reflecting the existence of a stable production/supply system. However, it should not be concluded that a crisis is not in the making: in some cases, for example, forest reserves may already be exhausted although no immediate and significant change occurs in the cost structure of fuelwood production, transportation and distribution. Taking the data available on transportation by truck (more frequent in Mali than other modes), the following conclusions can be drawn (Annex 2.5): (a) Retail prices vary very widely from one town to another, mainly reflecting resource availability and transportation distances; (b) Transportation costs account for 20-30% of retail price and 33-60% of cost (except if a truck returns empty to Bamako); and (c) Gross profit margins, which represent 25-40% of retail prices and 50% if a truck travels empty to Bamako, appear comparable to margins on other products when wholesalers, retailers and chopping of the wood are taken into account. 2.25 The felling licenses logging operators are required to pay for currently cost CFAF 2,000/stere for wood (CFAF 0.7/kg) and CFAF 250/100 kg for charcoal (CFAF 2.5/kg). These charges 28/ the 1988 economic cost of wood delivered to consumers is estimated at CFAF 20-30/kg, whereas retail prices were in the range CFAF 12-20/kg. 29/ Athough the National Directorate of Statistics conducts monthly surveys, it does not allowfor wood quality grades and takes no weight readings. LO/ In this study,firewood Is defined as: air-dried wood with densty of 0. 7, moisture content of 15 %, and minimum calorific waue of 15 MJ/kg. 31/ the price of wood in Bamako and Mopti is twice as high as in Sikosso.  - 17 - are set arbitrarily and do not represent the economic value of fuelwood. 321 To reflect actual economic costs they ought to be raised again, although this was done in 1986 (para. 2.27). ESMAP estimates put the economic cost of fuelwood production in Mali between CFAF 3/kg (natural forest managed so as to give long-term sustained production) and CFAF 12/kg (cost of replacing natural forests with industrial-type plantations); in other words, it is at least four times the present charges for felling licenses. Where charcoal is concerned, since it takes 7-10 kg of wood to produce a kilo of charcoal, the tax on this material should be roughly CFAF 500/100 kg. The fact that the present charge amounts to only CFAF 250/100 kg is likely to encourage an activity dependent on very high wood consumption. Moreover, the charges payable by transport operators 33/ are monthly flat-rate payments calculated on estimates of monthly volumes and number of journeys, which tends to reduce the revenue collected still further. 2.26 Under these circumstances, present subsector self-financing is inadequate. Tax revenue amounts to less than CFAF 100 million p.a. (US$360,000) on annual firewood sales estimated at CFAF 6.5 to 7 billion (US$23-25 million). 3A/ In other words, the revenue obtained is equivalent to 2% on sales volume, which clearly falls far short of subsector investment requirements. Present financing for the subsector comes from: (a) the jeneral government budget; (b) the National Forestry Fund (FFN); and (c) loans and subsidies from tft international community. The total annual budget required to cover execution of projects and operat' a of forestry services is close to CFAF 2 billion (US$7 million). In 1987, the funding put up by Mali itself totaled some CFAF 600 million (roughly US$2 million), sufficient only to cover forestry service operating costs; approximately 60% of this sum was allocated from the general government budget and mainly covered payroll costs. 2.27 The National Forestry Fund therefore finances current capital spending and other expenditures, while external aid amounts to roughly CFAF 1.4 billion/year (US$5 million), or 70% of subsector financing requirements. Since 1987, FFN has been funded with the proceeds of taxes and penalties collected; 35 the felling license fees paid by logging operators probably account for less than 25% of this amount. Since 1984, FFN has contributed only about 10% (CFAF 200-220 million/year) to the domestic financing appropriated to the subsector. However, these funds, which are administered by the Ministry of Finance, are not necessarily available for subsector activities. 32/ Which in any event is iffcult to estimate accurately. I/ It isestimated that such dhairges are curently paid on only 10-20% of wood conswned and 5% of dcrcoal 1/ That Is, 433,500 tons at an aeage price of CFAF 15/kg. 11 Sut up in 1967, the Fund was allocated 50% of these receipts util 1982, and has received 100% since that date  -18- 2.28 A new tax policy and improved management arrangements should be put in place gradually as part of a clear substitution strategy (paras. 2.45 and 2.46) so that: (a) Retail prices may reflect the economic costs of firewood and charcoal better; this would involve providing consumers with accurate information on the prices of these necessities, thereby promoting economically warranted substitutions. However, differential tax rates must be used because costs and prices vary greatly from one town to another; (b) The subsector itself may (progressively) finance more of its own activities; this would mean that payment of the fees and charges due to the State would have to be monitored more effectively by the forestry authorities; (c) The business of resource management may be handed over to local communities; as the communities would need to be motivated for this change, it would have to be accompanied by adequate financial incentives and the introduction of a resource management monitoring system, ideally one for which the communities themselves would be responsible (para. 2.17-2.19); and (d) Zone-to-zone differentials in felling license fees and development premiums may be introduced as a means of encouraging the exploitation of production areas at greater ditnces from urban centers, all within the framework of the supply master plans adopted. 2.29 The prestnt taxation system should be reworked and reinforced so that the following two components may be included: (a) A new development premium (para. 2.17) to remunerate communities for their development and management of their local forest resources; and (b) Reinforcement of the arrangements for collection of the "second payment" to the State (earmarked as general budget revenue) by transport operators at checkpoints located at the entrances to major urban centers. This would involve strengthening existing checkpoints and adding new ones. This new fiscal system should be administered by CCL and the charges payable increased gradually so as to bring retail prices up to the level of the economic costs of production, transport and distribution of firewood and charcoal. Details of the system should be worked out at the same time that the plan to implement the Household Energy Strategy is being drawn up.  19 - Current Orgnizatgion 2.30 Administrative supervision of the forestry subsector is the responsibility of DNEF (Direction Nationale des Eaux et Forats). fi This is the agency which sees to the formulation and implementation of Mali's forestry and environmental policies, the organization and monitoring of forest exploitation activities, the marketing of forest products, the management of classified forests, and the protection of flora and fauna. It also supervises hunting, fishing and fish-farming matters. DNEF consists of 20 divisions, 15 of which are concerned to varying degrees with fuelwood matters. These divisions are grouped as follows: (a) at the national level, the Direction du Service, which consists of seven divisions responsible for the formulation, implementation and evaluation of policies, for associated regulatory matters, and for financial, personnel and technical management; (b) at the regional level, eight divisions execute projects and enforce regulations, each in its particular region; (c) four 'operating' divisions, which manage specific projects and a training center. Li/ 2.31 Generally speaking, these divisions operate independently, and the lack of any coherent overall strategy has led to poor organization and monitoring of the subsector. For instance, forest exploitation activities and the associated marketing system is the responsibility of the Industry and Exploitation Section of the Development and Reforestation Division, although the Section is without either the financial or staff resources for such a task and has no administrative jurisdiction over the regional services, which actually issue felling licenses and monitor operators' activities. 2.32 Several donors are providing technical and financial assistance for the improvement of subsector management. For instance, through its Second Forestry Project, the World Bank is involved in institution building, while the PAFOMA-FAC (France) Project is focused on upgrading the functioning of DNEF and its divisions and their capacity to formulate a coherent national policy and to deal with the design, appraisal and execution of forestry projects. 2.33 (Cellule de Combustibles LimieuxZ : Where Mali's fuelwood resources are concerned, institutional reorganization is needed to (a) expand DNEF's operational capacity by upgrading its infrastructure and logistics, and (b) build up coordination both within DNEF and between the forestry service agencies and other entities working in the rural development and energy fields. Establishment within DNEF of a unit to specialize in fuelwood resources (CCL) should be considered by the Govermnent. It would be responsible for centralizing and analyzing data on supply and demand, and in general for all activities arising out of the adminitaton and management of fuelwood resources, particularly for making a reality of supply master plans (para. 2.20). CCL would also be responsible for the checkpoints located at the approaches to urban centers. As far as possible, it should be staffed with ,M/ Part of MEE (MLU&&re de l'Environnement et de 1 lkvage) (Annex 2.6). 1JZ/ Pracical Foresy 7h-ining Center, Tabacro.  -20 - personnel already in the civil service ranks who form the right kind of multi-disciplinary team. 3f/ Annex 2.7 suggests a sharing of responsibilities among CCL, the other units of DNEF, and other competent entities. Subseor Administration Availabiliy and Oualitv of Data 2.34 The data essential to sound administration of both biomass consumption (fuelwood, in particular) and the resources present in each geographic zone are either not available or unreliable. Efforts are under way to improve this situation as regards both biomass consumption by households and consumption of other energy resources. A household energy study was begun by ESMAP in 1989 to obtain data on household consumption in Bamako, Segou, Mopti, Koutiala and Gao and on the supply networks serving these population centers. R%commed ai ons 2.35 Data mame A modern system for the management of subsector data should be brought into operation by CCL. It should be a system which allows the collection and processing of all available data on consum',tion and supply of fuelwood resources, including tax data, data recorded at checkpoints, and data gathered through DNEF's regional branches. It will be vital to successful implementation of supply master plans, and could also be used for the analysis0and maintenance of data obtained through the forest product market study of major urban areas to be carried out as part of the Second Forestry Project. In addition, a full stocktaking of the country's fuelwood resources and potential production levels must be completed at the earliest possible date, which will mean conducting an inventory of the Mopti, Tombouctou and Gao regions - at an estimated cost of CFAF 700 million (US$2.5 million). 2.36 Technical assistanc: As part of the preparations for launching CCL, technical assistance should be obtained in the form of short-term missions over a two-year period by experts on the economic and technical aspects of fuelwood reserves. In addition to these arrangements, to benefit CCL managers, the experts should take part in training other CCL personnel and in setting up a system for the monitoring and analysis of fuelwood flows. 'Te cost of this assistance, and necessary logistical support for the effective functioning of CCL, is estimated at CFAF 230 million (US$850,000). 18/ At the miniomn, a forsny engineer, an economit, a sociologist, and a statistician, provided with c=&ome and means of mnw&port.  - 21 - Consumption. Energy Substitutions and Equipment Efficiency Present and Potential Consumption 2.37 As in most Sahelian countries, fuelwood provides almost 90% of the energy consumed by households in Mali (Annex 1.1). 32/ Most firewood is used for cooking purposes, but the traditional stoves (three-stone type) generally used are inefficient, pose health risks, and are difficult and even dangerous to use. On the other hand, the acceptance rate for improved stoves, which partially eliminate these inconveniences, is excellent. 2.38 In rural households, in addition to its widespread use for cooking and numerous traditional activities, 4Q/ wood is also used for lighting when either supply difficulties or high prices mean that kerosene purchases are cut back. For a great many other activities, it is human energy that is used. In urban households, the main fuel is also firewood; charcoal is utilized by only 11% of households in Bamako but its use is expanding very rapidly (para. 2.13). LP<G, a relatively costly fuel, is used by only 1% of households in Bamako as their main fuel and by 15% of them as a secondary fuel. As to electric power, fewer than 30% of households are connected to a supply network; they use electricity mainly for lighting. 41/ 2.39 Estimated present consumption and projected future consumption figures, based on the current trend and on a strategy of diversification, are shown in Table 2.1 and Annex 2.8, which gives a detailed analysis. However, the changing pattern of household consumption could be very different if energy substitutionprograms were accelerated, if energy prices, particularly for fuelwood, were modified significantly, or if there were an improvement/deterioration in supply networks. For instance, given the current prices for LPG and the household equipment it requires, adjustment of the taxes on kerosene could make kerosene a more frequent substitute fot firewood (para. 2.45). Detailed evaluation of the options available and drafting of a strategy were undertaken in 1989 as part of the ESMAP Household Energy Study. 391 Surveyfindings (the LESO surve in 1984-85 of 20 vWUages in the Gao, San, Bougouni and Noro disticas; the LESO suvy in 1986 in Bamako; and the SEP survey in 1987 in Bamako and SAgou) indicate a wood consuwtion figure vayg between 0.9 and 1.3 kg/inhabitant/day in urban households and between 1.3 and 2 kg/nhabitant/day in rural areas. IQ/ Brewing of mdiet beer, making of shea butter and soap, drying of agricultural producs, smoking offish, firing of poneiy, dyeing, etc. 4LI Monthly elearic power consumption rarely exceeds 100 kWh/compound/month.  - 22 - Tle 2.1: SiUARY OF HCWEHOLD ENERGY COSUPTION Using (a) Trend-Based Scenario and (b) Diveraiffcation Strategy Dlversification Trend-based scenario - Strat2av '000 *000 Tom aer Year a Growth -a Iornes/war X Growth Rate 1987 2000 198712000 2000 1987-2000 Firewood Urban 614 1 093 4.5 909 3.1 Rural 3,331 4.141 1.7 4,099 1.6 Total ,234 2.008 1.8 Charcoal Urban 53 130 7.1 78 3.0 Rural - Total 53 130 7.1 78 3.0 Other bfomass Urban -- Rural 247 329 2.2 329 2.2 Total 247 329 2.2 LPG Urban 0.5 6.2 21.4 22 33.8 Rural -- Total O6 21.4 233 Kerosene Urban 5.2 7.2 2.5 15.2 8.6 Rural 7.3 8.8 1.5 12.8 4.4 Total 12.5 2 'f Z8.0 6.4 Source: E9MAP estimates. See Annex 2.8. Energy as an Item in Household Budgets and Cooking Costs 2.40 Expenditure on energy is not a large item in the average household budget. According to 1987 surveys by DNSI (Direction Nationale de la Statistique et de l'Informatique), energy and water absorb between 3.3% of the household budget in Smkasso and 6% in Kayes, whereas food costs may account for between 50% and 73% of exendre (Annex 2.8, Table 7). Although reliable data are not availkLble, it is clear all the same that energy costs have a much greater impact on the budgets of urban low-income households, since this expenditure is difficult to cut back. Distribution of household spending by type of energy demonstrates that in urban areas purchases of fuelwood absorb between 60% and 90% of the household energy budget, averaging roughly CFAF 2,500/month (US$8.5).  -23 - 2.41 It is for their cooking requirements that households use most of the energy they consume. In terms of both present retail prices and real economic costs, wood is by far the cheapest fuel. In Bamako, where substitutions are possib'_, kerosene is competitive in terms of economic costs, while LPG and charcoal are significantly dearer than firewood. Since urban consumers' costs of cooking with wood (assuming an improved stove is used for cooking and allowing for its depreciation) are at present 1.3-2.3 times less than with other types of energy, current price levels and structure mean that no rapid and significant degree of substitution can be expected. 42/ Furthermore, as regards increased substitution of kerosene for wood, consumers must first of all have access to stoves which suit their cooking practices and are available at affordable prices; they must also overcome their preconceptions as to the possibly disagreeable taste of food cooked by kerosene. Unfortunately, little is known of the preferences, motivations and expectations of the various groups of consumers in Mali. In addition to questions of income level and relative cost of the different types of energy, other factors may also enter the picture: ease of use, modernity, a guaranteed supply, time saved, etc. If a successful substitution policy is to be introduced, and if it is to be clear what degree of energy substitution can be expected and exactly which substitutions should be fostered, more thorough knowledge of consumer preferences will have to be obtained. A body of key data has already been put together as a result of surveys undertaken for the ESMAP Household Energy Study. Improved Stoves Program and Enery Substitutions 2.42 Two types of more fuel-efficient stove have been promoted since the 1970s: an improved three-stone stove (the Louga) built of a material known as banco and an improved movable metal stove. Each of them is designed for a single cooking pot of a particular size and gives fuel savings of 30% if used correctly. In March 1986, the Government introduced legislation requiring households to use improved stoves if they cooked with wood. Whereas only 15,000 stoves had been distributed prior to this legislation, between 1986 and 1988 some 300,000 new stoves were distributed and are generally being used as prescribed. This provides an alustration of the impact of such legislation and (especially) the associated extension programs. 421 2.43 The Improved Stoves Program is carried out by DNAS (Direction Nationale des Affaires Sociales), under the supervision of CNCFA (National Advisory Committee on Improved Stoves) and with technical and financial assistance from SEP. The Program provides for the small-scale industrial manufacture of well-priced movable metal stoves, the setting up of saes outlets, and arrangements for information and awareness training for housewives. The early results are encouraging: for instance, 6,000 stoves were sold in Bamako in the second half of 1988. UNFM (Union Nationale des Femmes du Mali) and to a lesser extent LESO (Solar Energy Laboratory) have contributed actively to the wider use of improved stoves. I/ The theoretical economic cost ofpetroleum produts is determdned by the internationalpricespaldfor them, whkle their actual economic cost is a mater of sources and cwrent cost of supplies obtainedfiom rfineries in Senegal or Cote d'lvoire. 43/ It is estinated that between 25% and 30% of Malian househokis have the improved stoves, which often replace radier than merely conplement the traditional stows.  -24 - 2.44 As far as substitution programs are concerned, in 1986 the taxes and duties on LPG were reduced and distributors of petroleum pwoducts encouraged to promote it as a cooking fuel by means of incentives incorporated into the Investment Code. Shell and Total/Texaco have introduced two new types of portable stove (the Demeba and the Guateli) which operate on 3- and 6-kg bottles of gas and are suited to Malian cooking customs. These two companies have built gas-bottling plants in Bamako and construction of another unit is planned in Mopti. In addition, plans are being made to import Algerian LPG for distribution in Gao and Tombouctou. However, at the present time, only 1% of households in Bamako use LPG as their main fuel. A new project, supervised by DNHE and CILSS, and financed by the European Community, is also planned and includes activities for the promotion and partial financing of the cooking equipment itself (stove and gas bottle to be partially financed by the Gas Fund). Rlecommendations 2.45 Regarding programs focused on improved wood or charcoal stoves, the following recommendations are made: (a) Current programs should be continued in Bamako and extended to other major towns. Measures for quality control of stoves made by blacksmiths should also be continued, but LESO could perform the tests if the promotion project managers so request; (b) Since there is cause for concern over the very rapidly growing use of charcoal in Bamako, immediate steps are recommended to raise the retail price of charcoal by increasing taxes on it, as proposed (para. 2.28). In addition, an efficient model of charcoal stove should be offered for sale through the Improved Stoves Program, which could subcontract the necessary R&D to LESO. As far as improvements in charcoal- making techniques and technology are concerned, an action strategy should first be developed (as part of the ESMAP study), although it will doubtess have only a limited impact since Mali's numerous charcoal burners are widely scattered and follow their occupation on a seasonal basis; and (c) Within the context of a strategy to promote the use of improved stoves, firewood and charcoal prices should be raised on a differential basis, according to region, so that they are brought gradually into line with their economic costs. 2.46 Regarding programs for the replacement of firewood and charcoal as cooking fuels, the following recommendations are made. It should be noted that pricing policies must take account of the prices of substitute energies in the subregion in order to minimize any undesirable effects. (a) Promotion of kerosene u: More widespread use of kerosene for cooking is warranted from the economic viewpoint (para. 2.39), and experience in Niger, for example, demonstrates that it can be successfully substituted for firewood for cooking purposes. However, greater acceptance of it in Mali is hindered first of all by its retail price (including a combined tax rate of 34%) and to the lack of a satisfactory type of stove.  25 - A comprehensive promotion strategy must therefore be devised, combining actions by the State and the oil companies. As an initial step, LESO, taking advantage of the experience of Burkina Faso's Energy Institute, should develop a cooker for the Malian market. Subsequently, an extension effort to promote kerosene as a cooking fuel should be undertaken by the oil companies, while the taxes on it should be either eliminated or at least reduced. In addition, its use should be heavily promoted as a priority in such urban centers as Mopti, Tombouctou and Gao; (b) With respect to LPG as a substitute for firewood and charcoal: its economic cost is currendy estimated at CFAF 275/kg (Table 2.2) and even if its price were reduced by 20-30% (paras. 4.30 and 4.31), its economic cost as a cooking fuel would be considerably higher than any alternative. This is a very general statement, however, since the relative economic costs of the different forms of energy in Mali vary significantly from one geographic zone to another. Promotion of the use of LPG and such substitution projects as the EC/CILSS program should therefore be very selective and adhere to rules which will assure: (i) that LPG promotion be coordinated with efforts to promote kerosene use in zones where the economic costs of firewood are or will become higher than or comparable to those of LPG - i.e. most probably in the Mopti, Tombouctou and Gao areas and in Bamako and S6gou, where there is a trend toward modern amenities, but perhaps not in the southern region of the country; and (ii) that consumers have access to a cheaper and more efficient stove. 44/ 44/ Taidng the cwiwnt prices of stoves in Senegal as a basisfor omnparison, their prices in Bamacko coud be reduced by 20-30%.  -26 - Xntgia2.2: ENERGY COSTS AND ANNUAL EXPENDITURES ON COOKING IN OAKAKO FIREWIO CHARCOAL KEROSENE LPG A. FUEL PRICES (CFAF/kg) Current price 18 66 250 320 Price excluding taxes 17 63 112 300 Theoretical economic cost 17 (a) 63 Ca) 94 275 Cb) B. COST OF UTILIZABLE ENERGY At current prices (CFAF/NJ) 5.3 9.1 12.8 14.0 Relative cost compared to wood 1.0 1.7 2.4 2.6 Relative cost copaqred to charcoal 0.6 1.0 1.4 1.5 At prices exct. taxes (CFAF/NJ) 5.0 8.7 5.7 13.1 Reloative cost comared to wood 1.0 1.7 1.2 2.6 Relative cost compared to charcoal 0.6 1.0 0.7 1.5 At theoretical economic cost (CFAF/NJ) 5.0 8.7 4.8 12.0 Rolative cost compared to wood 1.0 1.7 1.0 2.4 C. ANNUAL COST OF COOKING (from Household Surveys) Cost of fuel (CFAF/year) 37,W0O 51,100 73,000 86,000 Price of a stove (CFAF) 1,250 1,500 7,000 16,000 Life of a stove (years) 2 2 4 5 Anmual payments on stove (CFAF/year) 650 800 3,000 2,600 Total cost (CFAF/year) 38,450 51,900 76,000 88,600 Cost as compared to wood 1.0 1.3 2.0 2.3 Cost as compared to charcoal 0.7 1.0 1.5 1.7 Notes: (a) Minimun cost (for zone with sustainable extraction). (b) Uithout takIng account of a possible major increase in the tomage consumed. Family of 8 persons Nests: rice with sauce, midday meal Vood consmwption: 0.9 Kg/person/day, of which 0.72 for cooking, of which 40X for lunch. Charcoal consumption: 330 g/person/day, of which 265 9 for cooking, of which 40X for lunch. Kerosene consumption: 0.15 L/personlday, of which 0.125 for cooking, of which 40X for lunch. LPG consutption: 115 g/person/day, of which 92 for cooking, of which 40X for lunch. Source: ESMAP estimates. Household Energy Project: Short-Term Investment and Technical Assistance 2.47 Implementation of the proposed Household Energy Project will cost an estimated CFAF 3.6 billion (JS$12.8 million) in public funds over the period 1990-1995, in addition to the funding required for projects now in progress. The latter consist of the butane gas promotion program (CFAF 300 million, or US$1.1 million) and the improved stoves program forming part of PSEIGTZ Phase II for the period 1990-1993. As part of the Seco'd Power Project, a component of US$1 million has been allocated as partial financing for the Household Energy Project, but the balance will have to be obtained elsewhere. Details of the components of the Program are given in Table 2.3, which does not include expenditure by the private sector and oil companies in Mali.  - 27 - TabLe 2I.: HOUSEHOLD ENERGY PROGRAM: ADDITIONAL INVESTMENT AND TECHNICAL ASSISTANCE (1990-1995) CfAF US$ (mi tions) (thousand)s Forestry Resources: Inventories of fuelwood resources in the Mopti, Tombouctou and Gao regions 700 2,500 - Drafting of master plans for supply of the the following urban centers: Bamako, Segou, Moptil Koutiala, Tombouctou and Keyes 490 1,750 - Develop mnt of forest stands for supply purposes within the context of the master plans; strategy to collect dead wood. 826 2,950 - Upgrading and increasing the number of checkpoints; support to wood suppliers 196 700 - Modernization of charcoal production (studies, equipment, technical assistance) 140 soO 0. Demand-Side Measures - Promotion of energy-efficient stoves (market studies and setting up of a working capital fund) 616 2,200 C. Technical Assistance - Steering unit for the Household Energy Strategy. to include the Cellule Energie Domestique (ONHE) and the Cellule de Combustibles Ligneux (ONEF), equipment clogisticat and data-processing) and operatIons support. 294 1,050 0. Continsencies (10X) 326 1,165 TOTAL 8128-1 Source; Estimations ESNAP.  - 28 - III. THE ELECTRiCITY SUTBSECTOR Principal Issues. Ontions and Recommendations 3.1 This part of the study examines the main problems of the electricity subsector in Mali and makes some recommendations for their resolution. The actions to be undertaken in the subsector should focus on: (a) adoption of a transitional strategy to cover the delays in entry into service of the Manantali hydroelectric plant; (b) modification of Energie du Mali's tariff structure to reflect costs, influence demand (especially during the dry season) and prompt more rational use of electricity; (c) managing demand and reducing losses in order to make better use of existing infrastructures and defer new investments in the subsector; and (d) strengthening EDM's capabilities in accordance with the technical assistance program for the Second Power Project and those of the Direction Nationale de l'Hydraulique et de l'Energie (DNHE). Production and System Development Descrition of Subsector 3.2 In 1987, the interconnected network in Mali produced 173 GWh and peak demand was 33.8 MW; 45/ in addition, 17.3 GWh was generated in 10 isolated centers (IBRD map 22070 - Map of Mali's Electrical System and Table 3.1). Approximately 4.7% of the population used electricity, the number of interconnected network customers being about 27,000 4/ plus a further 10,200 users in the isolated centers. In 1987, the Selingue hydroelectric power station generated nearly 73% of the interconnected network power; installed capacity was 67.5 MW and base load capacity 39.5 MW. 45/ 188.9 GWh and 385 MW, respeciwlwy, in 1988. 46/ wf W*kh 25,000 in Bamako, the capial, i.e., an elearification rate of the order of 30-35%.  - 29 - Tabte 3.1: BASIC SUBSECTOR ELECTRICITY DATA (1987) INTERCONNECTED ISOLATED SELF NETWORK CENTERS PRODUCTION Power stations Installed capacity (MW) 67.5 a/ 11.1 19.0-23.0 / Base load capacity (KW) 39.5 of which: hydroelectric 29.5 d/ 0.5 S) thermal 10.0 g/ S/ 10.6 19.0-23.0 Transmission and distribution system Transmission (km) 150 kV