India - Andhra Pradesh Forestry Project

7X- /A/ Document of The World Bank FOR OFFICIAL USE ONLY Report No. 12193-IN STAFF APPRAISAL REPORT INDIA ANDHRA PRADESH FORESTRY PROJECT JANUARY 24, 1994 MICROGRAPHICS Report Nlo: 12193 IN Type: SAR Agriculture Operations Division Country Department II South Asia Regional Office This document has a reshicted distribution and may be used by recpients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authoizaion.  CURRENCY EOUIVALRNTS (as of April 1993) Currency Unit - Rupees (Rs.) US$ 1 = Rs. 30.7 WEIGHTS AND MEASURES The metric system is used throughout the report ABBREVIATIONS AND ACRONYMS AWP - Annual work Plan DAH - Department of Animal Husbandry EFD - Energy and Forests Department ERR - Economic Rate of Return FD - Forest Department FDC - Forest Development Corporation FPC - Forest Protection Committee FRR - Financial Rate of Return GCC - Girijan Cooperative Corporation GDP - Gross Domestic Product GIS - Geographical Information System GOAP - Government of Andhra Pradesh GOI - Government of India ICB - International Competitive Bidding IRR - Internal Rate of Return ITDA - Integrated Tribal Development Agency JFM - Joint Forest Management LCB - Local Competitive Bidding MIS - Management Information System NGO - Non-Government Organization NPV - Net Present Value NTFP - Non-Timber Forest Products PMU - Project Monitoring Unit SOE - Statement of Expenditure TDP - Tribal Development Plan TOR - Terms of Reference VSS - Vana Samrakshana Samiti FISCAT YRAR GOI, GOAP - April 1 to March 31  FOR OFFX0L US ONY I. T14KOSSF-CI~ ............................................. 1 Forestry in the National Economly *....................................... 1 Forestry Development in Andhra Pradesh State . 3 Lessons from Past Bank Lending . 9 II. u...EaQzE . . 11 Country Assistance Strategy Rationale for Bank Involvement . . . 11 and Origin Project Area .11 Objectives and Strategy .1.1................... ll The Reform Program ....................... 12 Project Investment Components .12 Project Costs and Financing .15 Procurement .16 Disbursement ......................... . 19 Project Accounts and Audits .19 ,III. p.oJT.MP.t4.MAT.N .21 'Organisation and Management .................. . 21 Pricing and Marketing ..................... . 26 Annual Work Programs; Monitoring and Reporting .27 Project Benefits and Justification . 27 Environmental impact .30 institutional Impact . 30 Impact on Women ....................... . 30 Tribal Development ...................... . 30 Project Risks .32 XV. ami!ENRWI,R................... 33 Annex 1 Agreed Sector Reforms ..................... . 35 Annex 2 Tribal Development Strategy .................. . 42 Annex 3 Project Cost Tables . .................... . 54 Annex 4 Schedule of Estimated Disbursmeents .56 Annex 5 Criteria for Selection of Forest Land for High-yield Plantations 57 Annex 6 Criteria for Selection of NGOS .60 Annex 7 Financial and Economic Analysis .62 Annex 8 Supervision Plan, Development Impact Indicators and Implementation Schedule .75 Annex 9 Benefit Sharing Arrangements under Joint Forest Management . . 86 Annex 10 Contents of Implementation Schedule .88 Annex 11 Documents Available in Project File .90 IBRD No.24929 The report is based on the findinqs of a Bank Appraisal mission which visited India in April 1993. The mission consisted of Messrs./Mmes. A. Clark (Task Manaqer), A. Contreras, P. Gubhthakurta, M. Jansen, N. Jones. C. Roil, V. Kumar, M. Mitra, N. Rman (lank) and 0. Ralu (Consultant) Additional contributions were made by Ms. T. Estoque and Mr. B. Singh (Bank). The report is endorsed by Mr. H. Vergin (Director) and Mr. S. arqhouti (Division Chief). Assistance was also provided by peer reviewers Messrs./Mhes. 0. Baykal (Forestry), A. Sfeir- Younis (Econo0Mcs) and S. Shen (Environment). This document hS a resictod distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclsed without World Dank authoizaion.  CREDIT ADI PROJECT SUMaRY rnQxayzm India, acting by its President Uimtn*lng A *t nflf: The Forest Department CFD) of the Government of Andhra Pradesh (GOAP). hmmmtL: IDA Credit of SDR 55.6 million (US$ 77.4 million equivalent). 5Zama: Standard, with 35 years maturity. 6ft-1.in 44w"g YwIwa: rrom GOI to GOAP as part of central assistance to the state for development assistance on standard terms and conditions applicable at the time. flhnelina iazsa: About 700,000 households of fringe forest dwellers and small farmors, including about 150,000 tribal households. ED= : Catomss-o Program of Targeted Interventions. The population of project main beneficiaries, fringe forest villagers and tribals, belong to the poorest sections of society. These beneficiaries consist to over 50% of scheduled casts and tribes, who are poorer than the State's rural population as a whole. The project also has a set of specific measures so that project activities support the interests of these groups and those of women, such as statutory safeguards for their participation in village forest protection committees, employment preference, training targeting women of fringe forest or tribal villages, and gender-sensitive monitoring. 3mira4 nosThri: This project would finance a 6-year program to support: (a) forestry works on about 355,000 ha. This would consist of regenerating or afforesting degraded forest areas on about 173,000 ha with multi-tier coverage under participatory management arrangements with local populations; plantation forestry on 104,500 ha including silvicultural operations on 15,000 ha of teak plantations; and e3panding coamunity and farm forest coverage by about 77,000 ha: (b) alleviation of poverty through employment and a stream of sustainable forest benefits targeted mainly to fringe forest dwellers, tribals and small farmers: (c) special action programs geared to: improve forestry research and plant propagation, support the joint forest management process through training and some funding to BOOs, improve biodiversity conservation and protected areas manaement, undertake collaborative fodder development with the FD and other organizations, and a tribal development plans  - ii - and (d) buildings, vehicles, equipment, training, studies, ineremental staff and operating costs for the forest administration. g4aka: The main project risks would be: (a) the degree of commitment within some parts of participating departments of GOAP to make the necessary institutional and policy reforms; (b) the effectiveness of people's participation in forest management and development; and Cc) parts of northern Andhra Pradesh experience unrest from naxalite groups which may make project activities there more difficult. atimat-ed Project Coats: - - - US$ Million - - - - kwdL Eami= Total Forest Management Participatory Forest Rehabilitation 17.6 0.9 18.5 Production Forestry 19.6 1.2 20.8 Conmunity & Farm Forestry 7.9 0.4 8.3 Special Action Programs Research & Plant Propagation 8.2 .8 9.0 Joint Forest Management 4.6 0.6 5.2 Biodiversity Conservation 6.0 0.5 6.5 Collaborative Fodder Program 0.2 0.2 0.4 Tribal Development Plan 5.7 0.3 6.0 Forest Administration Support L.5. L 9. Base Cost 78.3 5.8 84.1 Physical Contingencies 5.3 0.4 5.7 Price Contingencies -1-4 D_1- Total Project Costl 82.2 6.9 89.1 1 Including taxes and duties equivalent to US$ 3.1 million. inannning Plan: - - US$ Million - - acz Fgrega Tnta1 Government 11.7 - 11.7 IDA 70.5 6.9 77.4 TOTAL 82.2 6.9 89.1 Etimted: (USS million) EzX9 Euai mY9 FY97 za uMM Er ix Annual 5 6.7 10.6 13.8 15.6 15.7 10.0 Cumulative 5 11.7 22.3 36.1 51.7 67.4 77.4 ngnnnig Rate of R^turn: 20% pa=: IBRD No.24929  I. THE FORESTRY SECTOR ForRtry in the National eoaonmy 1.1 In 1991, the recorded area of forest in India was 77 million hectares, but only about 64 million hectares, or 19 percent of the country's total geographical area, is actually covered by forests. The distribution of forest cover is uneven, with more than 50 percent in five states: Madhya Pradesh, Arunachal Pradesh, Andhra Pradesh, Orissa ancd Maharashtra. More than 80 percent of Arunachal Pradesh is forested, while the forest cover amounts to less than 4 percent in Rajasthan and Punjab. Forest cover is concentrated in the northeast, the Himalayas, the central and Western Ghats and in patches of mangroves in coastal areas. The nation's per-capita average forest area is 0.07 ha, which is among the lowest in the world. 1.2 Forests in India play an important role in maintaining environmental stability mainly through soil and moisture conservation and amelioration of microclimate. They are also depositories of rich genepool resources and biodiversity. They play an important role in the economy by providing a variety of wood and non-wood products. The national consumption of timber and wood in 1988 was estimated at approximately 260 million m3; more than 90 percent of the harvested wood is used for fuelwood. Forests are also the main single source of fodder and other non-timber forest products (NTFP). In most areas local people have free access to forests to meet their fuelwood and also fodder or grazing needs for their livestock. Part of the fuelwood collected by the rural people is sold in the urban market. Particularly poor farmers and the landless depend on the forests for their own subsistence needs, whilst many also derive their income from the sale of fuelwood and NTFP. The contribution of the forestry sector to GNP has been estimated to be less than 2 percent, but this does not take into account the numerous non-monetary and external benefits, nor the unrecorded harvests of fuelwood, timber and NTFP. Nor does it reflect the great importance of the forests to supporting the enormous cattle population. 1.3 The average productivity of the natural forests as well as that of forest plantations is poor, being well below capacity. The degradation of the forest resource due to over-exploitation and clearing is proceeding at an alarming rate. Between 1950 and 1980, about 4.3 million hectares of forest land was diverted to non-forest use, mainly for agriculture including irrigation, hydropower projects, industry and mining, etc. Encroachment and shifting cultivation also cause forest destruction in some areas. Almost half of the recorded area of India's remaining forests are badly degraded or denuded. Forest degradation and deforestation are a direct consequence of the acute land scarcity in India, which is increasing with the rising population, and is exacerbated by the effects on vegetation and soil from India's livestock population, totalling an estimated 450 million head. Practically free and unregulated grazing in forest areas impedes natural regeneration because the soil becomes too compact for seeds to germinate due to livestock movement, or the regrowth is destroyed through animal browsing. Other important pressures on the forests are the state governments' demands for revenue from the forests and for timber, pulpwood and fuelwood to supply industries and urban consumers. The large demand-supply gap in forest products is causing a continuous scarcity situation, and this results in the over- cutting of forests to meet the demand. Despite extreme pressures on forests, it is to the credit of the states' forest departments that large areas of forests are still maintained. However, the depletion of the resource has been outstripping its conservation and development.  1.4 Historically Indian forests were primarily managed for generating maximum revenue for the states mainly from the sale of timber. The emphasis of forest management has recently been shifted tc resource conservation and development. In 1980 the Forest Conservation Act was promulgated, according to which the State Governments cannot divert forest land to non-forest purposes without the prior approval of the Central Government. The Act was amended in 1988 to restrict clearfelling of natural forest and the leasing of forest land, making them conditional to approval by GOI. In December, 1988 the new National Forest Policy was adopted to meet the challenge of the continued depletion of the country's forest resources. The principal aim of the forest policy is to ensure the ecological balance, and the derivation of direct economic benefits has been declared a secondary aim. The objectives of this policy are: first, conservation of biodiversity, and checking of 9oil erosion and decertification; second, iiicreasing the forest cover; third, meeting the needs for forest-derived goods and income of the rural and tribal population; fourth, increasing the forests' productivity to meet essential needs of society at large; and the involvement of local people to achieve these objectives. The policy encourages farm forestry as a source of commercial timber products and discourages the supply of such products from public forests at concessional prices. The government has made efforts to increase the country's forest cover through its social forestry program, implemented on a large scale from the early 1980s, which has promoted tree planting on degraded private agricultural lands and public lands (wastelands). Total wastelands are estimated at about 90 million hectares and include degraded forests, marginal agricultural land and uncultivated non-forest public land. Officially reported figures of areas planted and actual areas of successful afforestation are at variance as effective monitoring has not been undertaken. An estimate of about 5 million hectares has been presented for the area of non-forest wastelands that have so far been afforested with some success. The Eight Five-Year Plan (1992-97) further emphasizes investments for rehabilitation of degraded forests and farm forestry. However, much of the above-mentioned, large area of wastelands is being used by local populations for other purposes, particularly seasonal grazing. 1.5 Forestry used to be a state subject until 1977 when it came under the concurrent list; this means that both GOI and the State Governments have shared responsibility and control over the forestry sector. However, the management of the forests remains the responsibility of the states and it is up to them to decide on the strength and deployment of the staff and other resources for implementation of the National Forestry Policy. Notwithstanding the conservation-oriented forestry policy the State Governments are faced with political pressures for forest products, land to satisfy a growing population and industrial interest groups, and revenue compulsion. While investments for forest*y development are financed both from state resources and from GOI, forest maintenance and protection, including staff costs, are financed by the states. 1.6 During the last one and a half decades the investment emphasis in the forestry sector has been shifted from natural forest management to social forestry and afforestation programs with the people's involvement. While these activities have received ample funding and have been implemented with varying success, the state forest departments' normal activities, which relate to the management of the vast majority of the natural forest areas, have been continuously neglected in most states due to inadequate funding. The forest departments have also expanded their staff particularly to implement externally supported social forestry projects. But there has been no re.aarkable change in their organizational structure or human resources  development so as to meet the new challenges to their mandate in the changed socio-economic and technological scenario. Such change has also become necessary for the successful implementation of the new forestry policy and the participatory approach to forest management advocated by the policy. 1.7 Although many forestry programs that were taken up worked reasonably well and forest departments have shown significant resilience and a capacity to adapt, the Government is still facing some major issues in the sector. These issues vary from state to state, depending on a state's agro-climatic and socio-economic conditions. The immediate issues required to be addressed, as also recognized in the recent Forest Sector Review (para 1.30), can be grouped into five categories: (a) local people have not been cufficiently motivated to cooperate in forest protection and development, and the staff of forest departments needs to be oriented to work closely with the local people for this purpose; (b) goverament rules, regulations and procedures that discourage villagers from engaging in farm forestry and agroforestry and make these activities less profitable than they could be, need to be relaxed; (c) technological development in forestry operations has not kept pace with the heavy inflow of investment in afforestation programs and consequently the productivity of the plantations is much below the optimux level; (d) the traditional institutional structure of forest departments and arrangements for human resources development of forest staff need to be changed so as to make the departments more efficient; the lack of technical specialization among staff needs to be addressed; and (e) the prominent position of forest departments has tended to discourage other public and private sector actors from sharing responsibility for the forestry sector's development. - Issues which pertain more specifically to the situation in Andhra Pradesh are discussed below. Forestry Davelopg=nt in Andhra Pradesh State 1.8 VFreat Ranoure-a. Many types of forests are found in Andhra Pradesh and most suffer from degradation. The state has a recorded forest area of about 6.4 million ha or 23% of the geographical area but the actual forest cover is 4.7 million ha. About 45% of the forest is degraded (25% is devoid of tree cover) and there are another 2.9 million ha of wastelands outside the classified forests. All forest lands are owned by GOAP. Most forests in Andhra Pradesh are deciduous (70%) or thorny (25%), with the remaining 5% taken up by other forest types. Andhra Pradesh covers seven agro-ecological zones but can physio-geographically be divided into three main areas -- the coastal plains in a relatively narrow band to the east with rich agriculture; the eastern ghats in the middle which consists of a narrow strip of hill ranges running northeast to southwest; and the western peneplain with a rolling topography which covers the rest of the area. The rainfall ranges from 750 mm in the south to 1300 mm in the north. Part of the western peneplain receives only 650 mm of rainfall annually. 1.9 The forests serve many different needs but are not evenly distributed. The northern coastal plains have degraded, previously rich, forests while the eastern Ghats still contain some very good forests. The northern part of the peneplain has the largest area of high value forests (north Telangana region) while the southern part (Rayalaseema region) has tropical deciduous and thorn forests. The most important species from a revenue point of view is teak (14% of the tree area) and large areas of bamboo are worked on a rotational basis to supply local needs as well as part of the raw material requirements of the state's major wood based industries. Beedie leaves, a non-timber forest product, is another important source of revenue. The total forest area  - 4 - amounts to 0.10 ha per capita which is close to the national average. in addition to meeting the local fuel, timber and industrial raw material needs the forests also provide grazing to a large proportion of the state's 33 million livestock (1987 Livestock Census). 1.10 The forests in Andhra Pradesh, like the forests in other parts of India, are under serious threat from many causes. The first is what in India is commonly called "biotic pressure". This term includes: (1) unregulated harvesting of fuelwood, charcoal, building materials, forage and forest products for self-consumption and sale; (2) uncontrolled grazing by livestock that spend part or all year in the forests; and (3) clearing forest for sh fting cultivation or permanent encroachment. The effects of these activities go beyond the removal of trees and other plant cover: forest regeneration is also seriously reduced by the widespread practice of burning the forest floor to promote fresh grass growth and by compaction in heavy- grazing areas. In addition, past policies that encouraged industries to cut but not plant trees, certain logging practices, inadequate funding for forest maintenance operations and timber smuggling, are all cited as causes for the degradatior and clearing of natural forests. The same forces, plus technical problems such as poor quality seed and outdated nursery practices, have kept the productivity of plantations low. The forest administration's mostly inadequate arrangements to monitor the development of the forest resources make analyzing the true extent of the problem and suggesting effective remedies very difficult. More details on forest resources in Andhra Pradesh are available in Annex 1 of the Imple'entation volume. 1.11 Bindivermit3 Conservation. Biodiversity conservation requires improved manaqement of resources within and outside the protected areas network and further study. There is one national park and 20 sanctuaries in Andhra Pradesh covering nearly 1.2 million ha. This is equivalent to 4.3% of the total area and 18% of the forest area in the state. in most protected areas settlement of existing rights have not been completed. This has constrained proper management of the areas. Other problems include inadequate biogeographic coverage of some important eco-systems, little provision of corridors between areas, inadequate consideration of socio-economic needs of communities living in and around the reserves, and administrative weaknesses in the wildlife wing of the FD. Besides the gazetted reserves, there are many smaller areas of biological interest. These include a number of conservation areas, sacred groves, deer parks and three zoological parks. Over 5,000 plant, 100 mammal, 500 bird and 100 reptile species have been recorded in the state. A number of the mammal and bird species are considered endangered. Species conservation depends mostly on successful habitat conservation which in turn requires remedies to problems that threaten the survival of all forest areas. Many of the wildlife concerns need further study before effective management plans for the different areas can be defined. 1.12 RaL^ gf Forest Sactor in the REonam=. Forestry plays a vital role in village economies but a less prominent one in the state as a whole. The revenues from forests contribute now only about 1% to state net domestic product. However, the increased emphasis on forest conservation embodied in the National Forest Policy has greatly reduced harvesting operations. In 1990 the recorded timber harvest was 51,600 m3 while the corresponding annual output until 1985 was over 100,000 m3 per year. Nowadays receipts from beedi leaf collection (for local cigarettes) make up almost 40% of forest revenues. As a whole the forest-based industry generates over 60,000 jobs in the state. The larger wood based industries include paper and pulp, rayon manufacturing and saw timber. Forest raw materials are also the base of a large artisanal  industry. Basket making using bamboo is organized in 550 societies with 23,000 members and there are over 400 beedi manufacturing units. Additional jobs are created in collection of NTFP and private forestry. More than 100,000 persons are seasonally involved in the collection of beedie leaves alone. Another important benefit from forests (albeit heavily overused) is livestock fodder as mentioned in paras. 1.9-10. 1.13 W ld emnand anid S 1yg. There is insufficient infotmation about the "wood balance' but recorded supply of forest produce is far below demand. The requirements for fuelwood - 75-80% of total use - are estimated very generally, as are those for the informal sector small sawmills, while wood requirements of varioua industries are easier to estimate. Recorded production data is incomplete as it excludes illegal felling, household usee and removals of wood from non-forest lands. Therefore, accurately assessing the gap between wood production and requirements is difficult. However, a rough demand estimate shows a total requirement of about 19 million m3 of wood annually increasing to 25 million m3 by the year 2000. FD estimates of supply for fuelwood and pulpwood suggest that 13.4 million tons (about 21 million zn3) are removed annually (0.2 million tons recorded, 4.4 million tons unrecorded and another 8.8 million tons from areas outside the forests). A part of the industrial wood and timber comes from other Indian states and from imports. More details on supply and demand of forest products in Andhra Pradesh are available in Annex 1 of the Implementation Volume. 1.14 IJ